Gage Roads Brewing Co has announced a three-year extension of its supply and distribution agreement with Pinnacle Liquor Group, a subsidiary of the recently re-named Endeavour Drinks Group (formerly Woolworths Liquor).
The agreement provides for a stepped reduction in minimum volume commitments from Pinnacle over the financial years of 2017 through to 2019 as Gage Roads continues to prioritise the supply of its higher-margin proprietary craft beers.
The minimum volumes committed to by Pinnacle for the initial term are: FY17: 1,000,000 case equivalents per annum (7.9 million litres) FY18: 950,000 case equivalents per annum (7.5 million litres) FY19: 850,000 case equivalents per annum (6.7 million litres).
“Under this agreement we maintain certainty over volumes through the continued support of Pinnacle, while also providing us with the scope to pursue our strategy of growing Gage Roads’ higher-margin proprietary brands nationally,” said Gage Roads managing director, John Hoedemaker.
“Pinnacle’s continued support and ranging of Gage Roads’ products, while accommodating a reduction in contract brewing volumes, provides us with the capacity to focus on higher-margin craft products and the flexibility to open up other channels to market.”
Sales of Gage Roads’ craft beers have increased more than 86 per cent in the past 12 months and now account for 28 per cent of YTD total sales, compared with just 13 per cent in FY15. By 2021, Gage Roads’ anticipates its higher margin, proprietary craft beer brands will make up 70 per cent of its total sales.
Endeavour Drinks Group is Gage Roads’ biggest shareholder, with a 25 per cent stake in the WA brewer.
Pinnacle has an option to extend the agreement for a further two years beyond 2019.