Broo and CUB sign contract brewing deal

12 August, 2020 by Andy Young

Broo Limited has signed a contract brewing agreement with Carlton & United Breweries, which will see Broo Premium Lager and Australia Draught beers produced by CUB.

Broo said it is anticipating placing orders with CUB for at least 48,000 cases per quarter over the course of the two-year deal.

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In a statement to the ASX, Broo said: “The Company currently produces its beer products at the Company-owned Mildura brewery facility. The CUB Agreement will provide the Company with increased production and supply capacity for its Broo Premium Lager and Australia Draught products and enable Broo to meet and capitalise on market demand for those brands through its various retail distribution channels.

“The CUB Agreement commenced in August 2020 and will continue for a period 24 months expiring on 31 August 2022 (Term). Both CUB and Broo may terminate the CUB Agreement at any time during the Term without cause by giving the other party no less than 120 days written notice.

“During the Term, CUB will produce and package Broo Premium Lager and Australia Draught in accordance with Broo’s product specifications, including technical brewing recipes and packaging artwork.”

The agreement is latest move in a difficult 2020 for Broo Limited, after it issued $300,000 worth of unlisted options, facing a shortfall of funds to meet its financial commitments in opening quarter of this year.

In June the ASX paused trading in Broo Limited, with company saying in response that it was in negotiations regarding contract brewing, but no agreement had been reached and that there was no information the brewer should have given to the ASX regarding its financial condition.

At the end of July Broo issued a quarterly market update in which it said the company was continuing its operations, albeit on a scaled down basis, “until the COVID-19 restrictions are relaxed over coming months”.

The update said: “Broo has experienced a drop in trading activity during the June quarter due to the effects of COVID-19, however, the company is actively managing a very difficult economic environment and is seeking out new opportunities with potential strategic partners.”

Due to the restrictions in Victoria Broo’s Sorrento Brewhouse and Mildura pub are temporarily closed, with the brewer saying “measures are already in place to reduce costs of these businesses while restrictions remain in place”.

Broo said that in accordance with its agreement with CUB is intends to place its first order for the production of Broo Premium Lager in October 2020.