Published on 17/02/2017 by Punchmedia

Green Beer for Ballarat

ASX-listed beer group Broo Ltd is aiming to construct a $100 million brewery in the Victorian regional centre of Ballarat which it is positioning as the world's "greenest" brewery. Broo Ltd launched its plans for the facility this week and aims to produce 480 million bottles of beer annually on a 15-hectare parcel of government land it has acquired on the western outskirts of Ballarat. The site is adjacent to the Ballarat Western Link Road which Broo chief executive Kent Grogan said made it ideal for transporting the finished product to customers in Australia and in Asia. Mr Grogan said the plan to become self-sufficient in electricity and to cut water usage to 1.2 litres of water for each litre of beer produced compared with global benchmarks of a 5 to 1 ratio, would provide a serious point of difference in the marketplace. The brewer's main products are Broo Premium Lager and Australia Draught Beer with construction on the new brewery earmarked to begin in February 2018. The announcement comes on the back of a huge amount of growth experienced by the Craft Beer Production industry over the past five years. Consumer tastes have shifted towards more premium and sophisticated beers, which has encouraged a surge in the number and variety of craft beers produced in Australia. Industry revenue is expected to increase by an annualised 11.7% over the five years through 2016-17, to total $454.2 million. This includes expected growth of 14.0% in the current year. The increased participation of larger companies in the industry has led to increased profit margins as larger breweries create economies of scale in craft beer production, leading to lower per unit fixed costs.

Industry Consolidation

Backyard brewing hobbyist experiments brought about the craft beer movement. However, as overall beer consumption falls and craft beer increases in popularity, larger companies have increasingly looked to become involved in the industry. Due to the importance of craft beer being seen as product that is uniquely crafted and not mass-produced, it is difficult for major players to effectively establish craft beer brands. The major players have therefore largely entered the market by acquiring existing popular craft beer brands.

Beer Consumption Trends

According to the ABS, per capita beer consumption declined by 14.3% between 2009 and 2014. However, consumption of mid-strength beer grew over the same period, reflecting changing consumer preference trends in the sector. Consumers have become more discerning in their alcohol consumption due to factors such as the increased awareness of the dangers of binge drinking and greater government efforts to moderate societal drinking (primarily through increased taxes).

Export Markets

Craft beer is generally produced in small batches and often has strong regional ties. These characteristics have discouraged industry participation in export markets. Major players Lion and SABMiller have access to larger breweries and extensive worldwide distribution networks. As these major players have acquired craft beer producers, prominent Australian craft beer brands such as Little Creatures and James Squire have been exposed to export markets. The success of Australian Brewery’s export initiatives has encouraged other small craft brewers to consider installing canning lines in their brewing operations. * With AFR

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Curtis is a leading expert in the business-for-sale industry, serving as a senior content creator at anybusiness.com.au.

With a career spanning over fifteen years, Curtis has accumulated extensive knowledge in the domain of business sales, acquisitions, and valuations. His deep understanding of market dynamics and his ability to translate complex industry jargon into accessible insights make him a trusted resource for entrepreneurs and business owners looking to buy or sell businesses.

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