Proprietary sales volume data, page-3

The margin numbers I posted above are for margins generated on proprietary product sales only (25% of sales volumes in FY16). It doesn't account for contract brewing sales for WOW and other brewers. That is why they may appear at face value to be high when compared to margins reported by management in the financial accounts.

When I have plugged the margins above into a model for FY21, in combination with the volumes mentioned in management's 16 May 2016 presentation for each proprietary product channel, I can get to the forecast GM% of 70%. In order to do that margins on contract brewing are around 48%.

From blending the margins and making some assumptions it appears there would need to be a >8x increase in on-premise and independent liquor sale volumes in 5 years for the budget GM% to be achievable. If this is correct I think achieving the FY21 budget would be quite a stretch especially considering the number of on-premise venues that would be locked into exclusive supply agreement with major brewers and everyone seems to be jumping onto the craft beer production market at the moment as the market really started to take off back in 2012-13.

The difficulty I have is that management don't provide breakdowns of the actual sales volume of on-premise and retail sales in their reporting (they mix sales volume and sales $ and tend to report proprietary sales on an aggregate basis only) so it is difficult to reconcile the model numbers back to present volumes to get a sense check on whether the numbers I am working with are correct.