Australian beer company Broo (ASX: BEE) has inked a contract brewing agreement for the nation’s biggest brewer, Carlton & United Breweries (CUB), to produce its Broo Premium Lager and Australia Draught products.
CUB operates leading breweries in Victoria, Queensland and Tasmania and was acquired by Japanese beer company Asahi Beverages in June in a $16 billion deal.
It commercially produces and supplies brands including Asahi Super Dry, Carlton Draught, Corona, VB, Pure Blonde, as well as Vodka Cruiser, Somersby Cider, Woodstock Bourbon, and craft beer brands such as 4Pines and Yak Ales.
Broo, which currently produces its beers at its own brewery facility in Mildura, Victoria, said its agreement with CUB will allow for increased production and supply capacity for its Broo Premium Lager and Australia Draught products.
The deal will also enable Broo to meet and capitalise on market demand for those brands through its various retail distribution channels.
The deal commenced this month and will continue for 24 months, expiring on 31 August 2022. Either CUB or Broo can terminate the agreement at any time during the term without cause by giving the other party a minimum of 120 days’ written notice.
During the term, CUB will produce and package Broo Premium Lager and Australia Draught beers in accordance with Broo’s product specifications, including technical brewing recipes and packaging artwork.
Broo said it anticipates placing orders with CUB for a minimum of 48,000 cases (made up of 24 x 375ml bottles) on a quarterly basis.
Its first order with CUB for the production of Broo Premium Lager is expected to be placed in October.
Broo has been operating on a scaled down basis since March due to COVID-19, reporting a drop in customer receipts from $509,000 in the March quarter to $420,000 in the June quarter.
The company said it remains focused on increasing domestic sales and distribution and has temporarily closed its hospitality businesses, Sorrento Brewhouse and Mildura Pub, due to the current lockdown measures currently in place across Victoria.
Accordingly, Broo has forecast a “lesser level of trading cash flow” for the September quarter.
In the meantime, some of its cost-saving measures include reducing staffing numbers at hospitality venues and utilising the Job Keeper program, reducing overheads, and reviewing non-core assets.
At the time of releasing the results – before announcing the CUB deal – Broo also said it is was “assessing a range of longer-term sources of capital of a strategic nature that can assist it to expand its operations”.