ASX Announcement 16 May 2016 New Strategy Draws on Gage Roads Craft - PDF document

ASX Announcement 16 May 2016 New Strategy Draws on Gage Roads’ Craft Beer Heritage Gage Roads Brewing Co (ASX: GRB) today launched an operational strategy to focus on growing its proprietary craft beer range and the production of high quality, higher margin products. Following a three-year extension (with a further two-year option), of its supply and distribution agreement with Pinnacle Liquor Group, Gage Roads is positioned to increase the supply and distribution of its craft beers, while maintaining overall production volumes. Pinnacle Liquor Group (“ Pinnacle”) is a subsidiary of the recently re-named Endeavour Drinks Group (formerly Woolworths Liquor Group). Changing Macro Beer Environment Gage Roads managing director John Hoedemaker said the macro environment of the Australian beer sector supported a shift in focus back to Gage Roads’ heritage and core competency – the development and brewing of quality craft beers. “The overall beer market is slowing, primarily due to the decrease in volumes in mainstream beer sales,” Mr Hoedemaker said. “In contrast, the higher-value craft beer sector has been improving year on year, as Australians’ tastes evolve and become more accepting of beers produced by smaller craft brewers. Gage Roads Brewing Co “We have a number of established and well-recognised craft beer brands in Limited has been one of Australia’s leading craft the market that have enjoyed extremely strong growth and we believe the breweries for over 14 time is right for us to focus on further growing our craft beer business, which years. is what we do best.” The Gage Roads craft range includes Atomic Craft Beer Sales Increasing Pale Ale, Sleeping Giant Sales of Gage Roads’ craft beers have increased more than 86% in the IPA, Narrow Neck Session Ale, Breakwater Australian past 12 months and now account for 28% of YTD total sales, compared with Pale Ale, Single Fin just 13% in FY15. By 2021, Gage Roads’ anticipates its higher margin, Summer Ale, Pils 3.5% proprietary craft beer brands will make up 70% of its total sales. and Small Batch Lager which have grown to become one of Australia’s Gage Roads entered into a new supply deal (see ASX announcement) that most popular suite of will see the brewer continue to supply Pinnacle with contract brewing brands. services. Through its contract brewing services division, “Pinnacle’s continued support and ranging of Gage Roads’ products, while Australian Quality accommodating a reduction in contract brewing volumes, provides us with Beverages, the Company the capacity to focus on higher margin craft products and the flexibility to also provides specialist open up other channels to market,” Mr Hoedemaker said. contract brewing and packaging services to brand owners throughout Australia.

“While maintaining our current production volumes, Gage Roads will ramp up its sales, marketing and promotion plans nationally for our craft beer products.” “Our strategy is to grow our high value in-house brands and become less reliant on the contract brewing of mainstream beers as we open up distribution channels in pubs and bottle shops across Australia,” Mr Hoedemaker said. National Brand Awareness and Engagement “A key pillar of our strategy to successfully make that transition is a big focus on building national awareness of our brands. We are currently in the process of expanding our sales team on the Eastern seaboard and opening up more opportunities for consumers to trial our products and engage with the Gage Roads brand values and ethos. “Our strategy will give beer drinkers nationally the opportunity to discover our craft beers and build a positive connection with our brand,” Mr Hoedemaker concluded. - END- APPENDIX : Gage Roads Brewing Co. Investor Presentation (May 2016). Further information: Marcel Brandenburg John Gardner Company Secretary Media/Investor Relations Gage Roads Brewing Co Ltd Citadel-MAGNUS Tel: (08) 9314 0000 0413 355 997

RETURNING TO CRAFT MAY 2016

THIS IS GAGE ROADS Gage Roads Craft Beer Sales BREWING CO. 2.5 million litres A Proven Track Record 2.0  One of Australia’s most established and awarded brewers of craft 1.5 beer be er (es (establi lished 2002)  Curre urrently ly pro producin ing 11 m mil illi lion lit itre res p.a p.a. com compris isin ing of of 2.5 .5 mill llio ion 1.0 litres pro proprie ietary ry craf craft bran brands and and 8.5 .5 mil illi lion lit itre res con contrac act bre brewing  Sta 0.5 tate-of of-the-art, worl rld-cla lass facil facilitie ies, $25m inv nvested ed in n capi capital l “Gage Roads is the strip of ocean that separates expe ex pendit iture re sin since e 2010, , up up to to 17.4 .4 mill llio ion lit itre res p.a. p.a. capac capacit ity 0.0 Rottnest Island and Fremantle off the coast of  Only nly bre brewer r lis isted on on Aus ustrali lia Secur ecurit itie ies Ex Exchange (A (ASX) FY10 FY11 FY12 FY13 FY14 FY15 FY16 Est Western Australia. It is home to surfers and  Sinc nce 2010, , Com ompany has has ach achie ieved ed 29% CAGR R in n rev reven enue swimmers, seagulls and sharks, ships and sailors. It’s a place where you can relax, escape, explore, or  Im FY15 Revenue Breakdown FY16 YTD Revenue Breakdown Improve ved pro product mix and and co cost con control l de deli liver ered ed int nter erim im EB EBITDA seek out adventure. $1.8 .8m in n H1 FY FY16  Gro ross marg argins mai aintain ined ov over er the the pas past 7 y yea ears rs (ci (circ rca 50%), ), chan change e in n We saw a lot of ourselves in that little spot. That’s GRB Product productio pro ion mix to towards pro proprie ietary craft craft be beers ers is s de desig igned to to furt further er why named our brewery after it.“ Sales inc ncrea rease marg argins to to 70% 16% GRB Product Sales Woolworths 32% Contract Brewing Woolworths Returning to Craft 47% Contract Brewing Other Contract 52%  Th The e Com ompany ha has anno announced ed a a str strategy to to impro rove sale sales mix aw away Brewing 32% from from lower er marg argin con contrac act-brewin ing to towar ards hi higher er-margin in craft craft Other Contract Brewing be beer er by by ope opening up up pre previ viously unt untapped mark arket seg segments 21% 2

THE AUSTRALIAN CRAFT Beer Market Product Segmentation (2015-16)* BEER MARKET Light Beer Low-carb Beer 3% 8% Full-Strength Beer 42% Craft Beer r In In Growth Craft Bee Cra Beer 9% 9%  The he Aus ustra rali lian Cra raft ft be beer r ind industry ry is is enjo njoyin ing st strong ta tail il win inds as as con consumers sh shif ift pre prefe fere rences aw away ay from from main ainstrea eam be beer ers to to craft craft bran brands, now now acco accounting for for 9%* * of of the the ind ndustry, up up from from (2% (2%* in n 2012)  Majo ajor bre brewer ers hav have e att attempted ed to to cl claw back back mark arket sha share re and and pro product relevan relev ance thr through acqu acquisit itio ion of of craft craft bran brands i.e. .e. Little e Crea reatures by by Total l Lion (20 (2012), ), Moun ountain in Goa oat by by Asah sahi (20 (2015), ), Byro ron Bay ay Brew rewing by by Lion (20 (2016) $4.3 .3bn  Org rgan anic and and non non-organic c gro rowth opp opportunities em emerg ergin ing in n the the Mid-strength Aus ustrali lian craf craft be beer er mark arket, nat natio ionall lly ov over er 230 craf craft bran brands Beer est establis ished* 14% Key statistics  Craf raft be beer er mark arket gro rowin ing at at 16.4 .4%^ (6 (6-yea ear CAGR) Premium Beer 24%  To Tota tal l Bee eer r mark arket $4.3 .3bn*, de decli clinin ing 1.1 .1%^ (6 (6-yea ear r CAGR) R) Market Share (2015-16)*  Craf raft be beer er mark arket ex expe pected to to gro row to to 12-15%* of of the the ov overa erall ll mark arket wit ithin 5 y yea ears (U (US Mark arket 17-20%) SAB Mill SAB iller, , Lion, Li , Ot Other, , 40.7% 40. 43. 43.0% 16. 16.3% *Source: IBISWorld 3 ^Source: Aztec Australia