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More buyouts on the way in craft beer

Simon EvansSenior Reporter

Sep 10, 2021 – 1.42pm

More buyouts are expected in Australia’s craft beer sector as large players look to bolster their portfolio with faster-growing brands when the pandemic has meant tougher trading conditions for many small brewers with a large hospitality venue presence.

The acquisition of Byron Bay-based brewer Stone & Wood parent company Fermentum by Lion, one of the two big mainstream beer companies, is a likely forerunner of more deals in a sector rife with buyouts over the past few years. More than 600 craft beer companies are operating in Australia, many of them small independent players.

Lion scooped up Fermentum, which also owns Melbourne’s Two Birds Brewing and the Sunly alcoholic seltzer brand, on September 9, but needs the approval of the Australian Competition and Consumer Commission for the deal to proceed.

John Hoedemaker, chief executive and managing director of ASX-listed Good Drinks Australia, which has a big West Australian focus through its Single Fin brand under the Gage Roads banner, expects more transactions.

Mr Hoedemaker said the Single Fin brand was the No.1 craft beer brand in Western Australia, while stablemate Pipe Dreams was making solid progress in the eastern states.

“The industry is an acquisitive industry,” Mr Hoedemaker said on Friday.

The company makes about 55 per cent of its revenues from WA, which has been a blessing in the pandemic because that state’s economy has been booming.

‘The heavy lifting has been done’

“We have been able to weather the COVID storm pretty well,” he said. It also has a large skew to retail and online sales.

The company is stepping up its national presence, and has been investing heavily in building a sales force in the eastern states and marketing presence.

“The heavy lifting has been done,” Mr Hoedemaker said.

Good Drinks Australia has a sharemarket capitalisation of about $115 million and also produces brands including Atomic and Alby. The company lifted revenues by 40 per cent to $54 million in the 12 months ended June 30, with earnings before interest, tax, depreciation and amortisation more than 10 times higher at $10.7 million compared with $600,000 a year ago.

Mr Hoedemaker said acquisitions would be assessed. “We’re open to acquisitions. It really depends on whether it makes sense for us and adds to shareholder value.”

He believes consumers like to buy independent brands rather than those owned by a large multinational. “Independence is very important to consumers,” he said.

Lion is owned by Japanese giant Kirin, while Carlton & United Breweries is owned by Japanese conglomerate Asahi. Lion makes mainstream beer brands including Tooheys, XXXX Gold and West End, and the Fermentum purchase complements a craft beer stable led by brands such as Little Creatures, White Rabbit, Kosciusko and Malt Shovel.

Lion has pledged to build a new $50 million Stone & Wood brewery at Murwillumbah in northern NSW, should it gain ACCC approval in a process expected to take at least three months.

CUB was acquired by Asahi for $16 billion in 2019. CUB has been active in recent years acquiring craft beer brands to try to offset a flagging mainstream beer business. CUB acquired 4Pines, Pirate Life and Balter Brewing in quick succession from 2017, and Asahi bought the Green Beacon craft beer brand in late 2019.

Another ASX-listed company, Mighty Craft, has also been on the front foot, buying Adelaide Hills craft brewer Mismatch Brewing and a spirits producer, the Adelaide Hills Distillery, in a $47 million deal in June.

But Mighty Craft warned in late August that lockdowns were making it tough in the early stages of 2021-22, with the group signalling that about 34 per cent of revenues came from five retail and hospitality venues the group operates in Victoria and NSW.

More craft beer buyouts ahead as Batch Brewing hits go

Simon EvansSenior Reporter

Mar 7, 2022 – 12.16pm

Sydney-based craft brewer Batch Brewing Co raised $1.5 million from investors last April as it readied for retail expansion of its own brand, but then COVID-19 lockdowns from July upended its plans.

Co-founder Andrew Fineran said the group and its 700 investors had been forced to play a waiting game, but made a sure-footed move last week when the group acquired craft beer group Bucket Boys.

“It is an opportunity for us to hit the ground running,” Mr Fineran said.

With hospitality venues starting to generate more momentum as people become more confident in going out, Mr Fineran said Batch Brewing, with the addition of Bucket Boys, had a more robust model across the two entities. It would be able to shift to a back-up plan more reliant on e-commerce and a bottle shop should a new COVID variant emerge.

If the pandemic faded, then Batch Brewing was in a very strong position in a competitive craft beer market where more than 650 companies are operating.

“We can have them all humming and singing at the same time, or we can shift back,” he said. “You have to have the back-up option.”

He expects there will be further consolidation across the craft beer industry as various players reassess their operations after extended lockdowns from July in Sydney and Melbourne, and the omicron wave in late December and January which caused “shadow” lockdowns as many households stayed at home.

“My gut feeling is that at some point there will be consolidation,” he said.

“That’s not just a COVID thing,” he said. While the pandemic had been a catalyst for some to reassess their position in the industry, craft beer brands were generally showing better growth than mainstream brands, albeit off a lower base.

Mr Fineran expects large brewing companies to be closely eyeing potential acquisitions.

He said a Darling Square venue in Sydney will be rebadged from Bucket Boys to a Batch venue, but a Bucket Boys retail store in the inner Sydney suburb of Marrickville will retain the Bucket Boys name, as will an online store. The combined group will have a baseline revenue of about $5 million annually, but expects to be able to ramp that up as the hospitality industry gathers speed.

Under the original plan in the $1.5 million raising, Batch Brewing Co had intended to expand its retail presence with new venues. But COVID-19 was a big roadblock. “We didn’t really progress anything on the retail side, primarily because people couldn’t really go anywhere,” he said.

Brewers large and small have been through a torrid time in the pandemic, and are also dealing with rising inflation now.

Batch Brewing Co was established in 2013 by Mr Fineran and his co-founder Chris Sidwa and operates from two main sites of Marrickville and Petersham in Sydney. Mr Sidwa agrees that more consolidation is on the way in the industry.

“There are many activities that craft brewers are all doing that could naturally and easily merge,” Mr Sidwa said. The distribution part of craft brewing is ripe for consolidation, he said.

A string of craft brewers have been bought out by the two big beer players in Australia, the Carlton & United Breweries business owned by Japan’s Asahi, and Lion, owned by Japan’s Kirin Corp.

Lion in November received approval by the Australian Competition and Consumer Commission for the $500 million acquisition of Fermentum, the owner of the Stone & Wood beer brand in Byron Bay in NSW, Two Birds Brewing in Melbourne and a host of other brands including the alcoholic seltzer Sunly. Fermentum also owns Fixation Brewing, Granite Belt Cider and Little Dragon ginger beer.

Carlton & United Breweries, acquired by Asahi for $16 billion in 2019, acquired 4Pines, Pirate Life and Balter Brewing in quick succession from 2017, and Asahi bought the Green Beacon craft beer brand in late 2019.

Another ASX-listed company, Mighty Craft, bought Adelaide Hills craft brewer Mismatch Brewing and a spirits producer, the Adelaide Hills Distillery, in a $47 million deal in mid-2021.