Hard to make a buck in craft beer: Gage Roads
By James Atkinson
Small craft brewers face a big struggle to get their production efficiencies to a viable level, and that's where contract brewers could have an important role to play in the industry's future, says Western Australia-based Gage Roads Brewing Co.
Launched originally as a craft brewer of its own products, Gage Roads now focuses primarily on contract brewing, which enticed supermarket Woolworths to invest in the company in mid-2009.
Gage Roads CEO John Hoedemaker told TheShout that from the company's own experience, craft brewers' costs of representing and marketing their own brands were out of proportion to the revenues received from them.
Woolies launches 100 own brand liquor lines in six months
Dan Murphy's next to youth centre rejected
Bar licensee fails to overturn suspension
"We moved away from that sales representation and marketing expenditure model towards that contract brewing model, simply because the return on sales compared to the expenditure is out of whack and you can't make a buck out of it," he said.
"If you want to represent yourself to the independent trade you need about three people in WA and eight to 10 people on the east coast – that channel is expensive for us."
But Hoedemaker, who was speaking as the company announced its half-yearly results, stressed that he still believes there is a big future for craft beer in Australia.
"I think at the end of the day for the craft industry to survive in Australia companies like ourselves are important, because what we offer is contract brewing opportunities for other craft manufacturers like [Broome-based brewer] Matso's," he said.
"For a small craft brewer with a food and beverage offering, they've created some wonderful beers and they really have the drive and desire to market them."
"They can't ever get the cost of goods and the production efficiencies to a level where it makes sense on the shelf."
"That's where I see Gage Roads being an important part of the whole crust. We're actually a quality-driven craft brewer, and we have the production efficiencies available to help these guys get their product onto the shelf at a price point that's actually going to sell some volume," Hoedemaker said.