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DB pays $30.5M for Tuatara in year of small sales growth, flat margins

Friday 1st June 2018

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DB Breweries paid $30.5 million for Kapiti boutique beer maker Tuatara Brewing Co last year as the country's major liquor companies beef up their craft beer credibility to reach consumers with a taste for high-end brews.

The Auckland-based brewer paid cash for the boutique firm in January last year in a deal attributing $16.5 million to the Tuatara brand and $12.8 million to goodwill, DB's 2017 financial statements show. That trumps the potential $25.1 million price rival Lion - Beer, Spirits & Wine (NZ) put on Upper Hutt brewer Panhead Custom Ales, of which $15.1 million was up front and a further $10 million based on hitting earning targets. 

Tuatara was set up in 2000 by the Vasta family, who stayed on through Rangatira Investments' stake in the brewer and have carried on under DB's ownership. The former shareholders rejected an offer of $16.6 million from a large player in the industry, but are now in dispute with Rangatira on whether the sale to DB triggered earn-outs. 

Craft beer consumption has been on the rise in recent years, even as total beer drunk has dropped, with 194 small breweries operating at the end of 2016, and selling beer faster than they can make it, according to an industry report by ANZ Bank New Zealand. Government figures show those consumption trends remain intact, with consumption of beer with an alcohol content of 5 percent-plus rising 9 percent to 27.8 million litres in the year ended March 31, while total beer consumption shrank 1.3 percent. 

That dynamic showed up in DB's accounts, with the brewer's sales rising 2.7 percent to $513.5 million, lagging behind a 3.3 percent increase in the cost of duty, raw materials and packaging to $294.1 million. Gross margin shrank to 42.7 percent from 43 percent. 

Still, DB's profit rose 12 percent to $30.4 million, with the brewer trimming its advertising spend 1.1 percent to $31.6 million and registering a gain on foreign exchange contracts of $613,000, having posted a loss on FX of $1.2 million a year earlier. Writing off bad debts edged up to $40.6 million and the brewer's wage bill rose 7.1 percent to $48.4 million. 

It's not plain sailing for all boutique brewers, with Moa Group repositioning itself several times since going public in 2012, and this week reported a 2 percent increase in annual sales to $10.5 million while widening its loss to $2.5 million spending more on distribution. Moa is raising $1.9 million through a placement and will follow that up with a share purchase plan on the same terms, having $987,000 in cash at the March 31 balance date, about half its operating cash outflow in the year of $1.8 million. Moa shares last traded at 52 cents. 

(BusinessDesk)

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