Good Drinks Australia adds Stomping Ground to beer brands

Good Drinks Australia (ASX: GDA), the drinks company behind beer brands including Gage Roads, Atomic and Matso’s, is adding Melbourne-based brewery Stomping Ground to its portfolio.

Under a binding term sheet, Good Drinks will acquire 100% of the company for $7 million cash, 4.5 million Good Drinks ordinary shares and a trailing five-year performance component.

In its announcement to the market, Good Drinks said the transaction will bring “strategic benefits” of developing national brands relevant to key markets and is expected to accelerate growth opportunities for the Victorian market. The brand experiences strong consumer loyalty and is considered complementary to Good Drinks’ existing beer range.

Stomping Ground is forecast to contribute $1.5 million to Good Drinks earnings in its first year, with a target to growing annual volume to 4 million litres by the 2027 financial year.

Good Drinks confirmed the transaction will be funded using debt facilities and ongoing operating cash flows from the business and will not require an equity raising. As such, this earnings expectation combined with the debt-funding structure makes it an earnings-per-share accretive transaction for Good Drinks shareholders.

Good Drinks managing director John Hoedemaker said combining the two companies’ skills, experience and resources with their shared value of growing independent beer across Australia will help to fast-track goals.

“We know how to integrate established brands into our portfolio and with our strength of people, sales, marketing and distribution expertise we expect to grow the Stomping Ground brands to their full potential.”

He added that he is looking forward to working with Stomping Ground founders Steve Jeffares, Guy Greenstone and Justin Joiner to help “super-charge” Stomping Ground and see it achieve its goal of becoming Victoria’s leading independent beer brand.

The acquisition is expected to be completed around November 2022.

Stomping Ground adds production capacity

Founded in 2016, Stomping Ground is one of Victoria’s leading independent breweries and hospitality venue operators. It has a flagship venue in Collingwood, The Local Taphouse in St Kilda and its latest Stomping Ground branded ‘brewpub’ in Moorabbin.

The company is currently producing about 1.5 million litres to meet existing sales demand, although its Collingwood venue has the capacity to brew and package more than 2.1 million litres annually. This could even be extended to 2.8 million litres with the installation of additional fermentation vessels.

Good Drinks taking the brewing company under its wing is a “win for fans” of Stomping Ground’s beer, according to co-founder Mr Greenstone.

“With Good Drinks’ help, our beers and brand will be more visible and available than ever before,” he said.

Stomping Ground’s beers include the Stripes, Smash, Into the Woods, and Playground ranges.

Shared skills, experience and resources

Stomping Ground’s founders were initially seeking to raise capital to fund a major expansion in their sales team. At the same time, Good Drinks was looking to increase awareness and branded sales growth in Victoria through its existing venue strategy.

“During this process, it became clear that the joining of the two businesses would achieve both objectives faster and more effectively,” Good Drinks head of strategy Aaron Heary said.

According to the company, the sharing of skills, experience and resources is expected to benefit both brands while Good Drinks’ sales and marketing team aims to fast-track Stomping Ground’s sales growth.

Stomping Ground founders to join executive and management teams

While there will be no change to the current Good Drinks board of directors, the Stomping Ground co-founders Mr Jeffares, Mr Greenstone and Mr Joiner will become significant shareholders and join the company’s executive and management teams.

In addition to a cash consideration and 4.5 million shares, Stomping Ground could be eligible for further deferred consideration based on sales volume and venue performance over the next five years.

Completion of the acquisition is subject to Good Drinks board approval, the execution of a share purchase agreement, transfer of licences and other third-party, Stomping Ground shareholder approval and regulatory consents.