Broo Ltd and East End Hotel Group have entered into an exclusive Queensland beer distribution agreement.
Broo and East End have collaborated on the newly created Broo Premium Lager 4.2%, which will be sold in 330ml packaged bottles. The mid-strength product has been developed specifically for the Queensland market.
Queensland accounts for $2.3 billion in the on and off-premise of domestically produced beer, dominated by 4.2 ABV and 3.5 ABV products.
The exclusive Queensland beer distribution rights granted to East End under the agreement are subject to the wholesaler meeting an annual sales target of two million litres of Broo product during the initial 12 moth term from August 2019.
The agreement may be extended for a further term of 12 months by mutual agreement.
East End is one of Queensland’s largest independent wholesalers.
The announcement follows the beer company placed itself in a trading halt on the ASX earlier this week, pending the announcement of a ”material supply agreement”.
Kent Grogan, executive director of Broo, said: “The agreement with East End is a resounding endorsement for the strength of our brand and the quality of our product range.”
There had been speculation that Broo was struggling financially and looking for a buyer for a 15-hectare site it purchased in Ballarat in 2017.
Broo announced plans in February 2017 to build a $100 million environmentally-friendly brewery on a 15-hectare site in Ballarat, including a 10,000-set event venue, zipline, museum and hospitality ventures.
But the City of Ballarat recently confirmed that no planning application for the site was currently in existence.
Grogan told Brews News that Broo is in fact in discussions with the Victorian government to purchase an additional 10 hectares adjacent to it.
“That’s just to really execute the full vision of the project and get additional land for tourism and things like that,” he said. “It’s a huge project and without any doubt, it’s beyond our financial capabilities at the moment. We’ve been engaged with numerous parties on discussions and opportunities. We need someone in on this. We need the right partner.
“We’re very motivated to see this project to fruition. We can get through those master planning components pretty quickly. I think it’s achievable to be turning soil within 12 months.”
However, he said Broo will sell its hospitality venue in Sorrento.
“We’ve got to focus on our core business of selling beer,” he says. “It’s time consuming to run any hospitality venue properly. We’re just too time-poor to do it.”
Broo will look to contract manufacturers in NSW and Victoria to help produce the beer for its East End deal, as its Mildura brewhouse only has an annual capacity of 1.6 million litres.
Shot in the arm for Broo
This week’s trading halt came as Broo’s share price hit at a record low of 2¢.
Broo Ltd first listed on the ASX in October 2016, giving a market update to the ASX in February 2017 announcing it achieved a 407% wholesale sales increase. It was trading at 39¢ in late November 2017.
The company was founded in 2009 by Grogan, who remains the group’s largest shareholder with a 67% stake.
Broo raised $10.5million during a six-week initial public offering, issuing 52,500,000 ordinary shares at 20 cents per share to achieve market cap of $121.6million.
The company also has a deal with a Chinese distribution group Beijing Jihua Information Consultants Ltd for a seven-year ”take or pay” agreement to sell 1.5 billion litres of Broo Premium Lager into China for aggregate revenue of $120 million.
However, Broo’s latest quarterly report, released on July 31, said that while outflows had been curbed, ”the company expects that it will continue to have negative operating cash flows in the short term”.