Broo Buys Mildura Brewery

For the second day running, we've received news of a buyout in the Australian beer industry. Broo has announced via the Australian Stock Exchange (ASX) that it has purchased Mildura Brewery.

Broo was launched by Kent Grogan in 2009, then in 2011 offered shares in the business to anyone that bought a slab of its beer. Last year, the business, which boasts a kangaroo on its logo, successfully raised $10.5m via the issuing of 52.5m shares before listing on the ASX.

Broo has made remaining 100 percent Australian owned part of its publicity campaign and, having added the Australian Draught brand to its original Broo Premium Lager, has looked to highlight the foreign ownership of mainstream brands produced by the likes of Lion and CUB.

Mildura Brewery, which was founded by well known chef Stefano di Pieri and Donata Carrazza in the city's iconic Astor Theatre building in 2004, was put on the market last year. It was sold to Broo for $1 million.

UPDATE


According to Kent (pictured above in a video produced for Broo's IPO), this purchase is set to be the first, with more to follow. It's part of a multifaceted strategy for Broo, which will see them enter the Chinese market with local partner Jinxing, which brews Kingstar beers, look to ramp up production of Broo and Australian Draught in Australia for the mainstream beer market, and also pursue a push into the craft sector that includes the purchase of brands like Mildura and the construction of brewpubs across the country too.

The purchase of Mildura is "all about having a home", with all Broo beer contract brewed to date, although it's not a home that will take on its new owners' name; it will remain Mildura Brewery, with many Mildura beers continuing to be produced and, he hopes, benefiting from new marketing campaigns. The intention is to upgrade and expand the brewery and start brewing existing and new Broo beers there for the domestic market too.

"I just fell in love with the building," says Kent. "They've done such a beautiful job. They were one of the first brewpubs in Australia; Don Carrazza had great vision. 

"Anything we do in the craft area will have to stand the test of time and have credibility. Getting our own production facility was always on the agenda. We will spend a fair bit of money on upgrading it and a little bit on expansion. 

"We always wanted to get into the craft foray and have been developing a model behind the scenes for a brewery pub operation."

He says these wouldn't be developed under the Broo or Mildura banner but would "work within the local community", adding that each would reflect the "tastes, flavours and environment [the local community is] looking for". Kent says his company's research tells them there is room for more such developments and he also feels people are moving away from going to "dark pubs" as they become more educated.

As for last year's successful fundraising operation and subsequent listing on the ASX, he says he was always confident due to the partnership with Jinxing, who will brew Broo beers in China for the Chinese market.

In typically colourful language, Kent describes securing the partnership as "to say the least, being kissed on the dick". He says the deal took close to five years to seal – "That's what it takes over there" – and that Jinxing is "literally the last independent brewery with any scalability over there."

"What we have done [with this deal] is shut the door on any other beer brand," he says.

Alongside the plan to become a significant player in China is one to take the fight to the duopoly at home too.

"We absolutely have our eyes focused on the bigger picture," says Kent. "I've had tough times and plenty of opportunity to exit, but I've got a vision that will take me to retirement. 

"It's bloody exciting times. We've told the big boys that that's where we're playing. We've got some pretty aggressive growth strategies we'll be pushing in the next two to three years.

"The big guys are demanding big margins and their price points are very similar. They're very comfortable with their pricing, but it's globally proven that, when there's a duopoly, there's always room for a third player to come in."

With his broader strategy including the pointier end of the local beer world, craft beer drinkers with long memories may remember the early days of Broo, when Kent appeared in a video and ruffled feathers by appearing to disparage craft beer.

"You know what, it wasn't intended to do that," he says. "Our differentiation in the marketplace is that our main products are mainstream products. What we do do is we take the foundational footprint of craft and only use natural ingredients.

"I've got complete admiration for the craft beer industry. I've met a lot of guys and have copped a bit of flack from guys saying, 'Your beer is shit.' But I'm in a different segment and our beer isn't shit. We're very proud of these beers."

With a successful start on the stock exchange and now the purchase of a craft brewery under his belt, it's little surprise Kent sounds so chipper on the phone. Indeed, following Brexit, the Doggies and Trump, it feels like we're living through a period of seemingly unlikely successes.

"I've had naysayers since day one who've said shit to me, said I'm a joke," he says. "But we're absolutely not that. We're building something special."


Broo's statement to the ASX:

Broo Ltd (ASX: BEE) (the Company) is pleased to announce that it will acquire, through its wholly owned subsidiaries, the Iconic Mildura Brewery located in Mildura, Victoria.

The Mildura Brewery, located in the former Astor Theatre, is a unique, locally operated beer production and brewery pub business in Mildura, Victoria, which has been in operation since December 2004.

The Mildura Brewery was one of the first Craft Breweries and contract brewing facilities in Australia. It has played a significant role in the establishment and growth of the Australian Craft Beer Industry.

The acquisition of the Mildura Brewery beer production business will provide the Company with a commercial brewery facility to immediately commence its own beer production, providing the Company with the opportunity and capacity to expand distribution of its beer products nationally. This facility will significantly reduce current production costs in turn providing increased profitability across sales of existing brands.

As part of the acquisition, the Company will also be acquiring the various Mildura Brewery beer brands currently being produced at Mildura Brewery, and which the Company will add to its existing product portfolio.

The acquisition of the Mildura Brewery pub venue provides an exciting extension of the Company’s existing business by providing a micro – brewery hospitality venue for the Company to showcase and realise retail margins for the Company’s suite of beer products. This model is in line with the Company’s domestic growth strategy with additional sites currently being evaluated for further expansion.

Completion of the acquisition to occur on 28 February 2017 subject to liquor licences being in place with a sunset date of 31 March 2017.

The Company is thrilled for this upcoming venture, which represents yet another exciting stage in the growth and development of the Company’s operations within Australia.


You can read about the Dixon Hospitality Group's purchase of Hawthorn Brewing Company here.

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