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Why Gage Roads Brewing Co Limited is going gangbusters

Shares in craft beer company Gage Roads Brewing Co Limited (ASX: GRB) charged 25% higher today after the WA-based group reported better-than-expected sales growth for the quarter ending March 31 2018.

In fact Gage’s sales of draught beers were up 445% over the prior corresponding quarter, with sales to independent retail channels up 183%.

Sales to national retail chains were up 58% and the group managed to grow total sales of Gage Roads’ (higher margin) own brands to 39% of the total sales mix, compared to 32% for the financial year-to-date period last year.

The news might lead shareholders to crack open a Gage tonight after a tough five years that have seen the stock lose 40% of its value to trade at 8.8 cents today.

Gage’s management singled out sales of its Single Fin Summer Ale as especially strong, while Red Rye IPA is also being pinned as a sales growth driver thanks to its reported quality.

For the quarter net operating cash inflows were $2.1 million and the company has cash on hand of $5.6 million.

Moreover, Gage is also now debt free and I expect the share price could get a wriggle on through the rest of 2018 if its operational improvements continue, although it’s not my cup of tea as an investment.

Other listed-liquor-merchants include Treasury Wine Estates Ltd (ASX: TWE) and Australian Vintage Group (ASX: AVG), both of which are benefiting from strong overseas demand for Australian wines.

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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia has recommended Treasury Wine Estates Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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