Coca-Cola Amatil to re-enter beer market

22 Aug 2012, 4:34 pm   -   Source: AAP
Coca-Cola Amatil has signed a deal that will give it access to a state-of-the-art brewery in NSW. (AAP)

Coca-Cola Amatil has signed a deal that will give it access to a state-of-the-art brewery in NSW. (AAP)

Coca-Cola Amatil has lifted its first half profit and established a new joint venture with Casella Wines for re-entry into the Australian beer market.

Beverages supplier Coca-Cola Amatil (CCA) says it could cater to up to 15 per cent of the premium beer market in Australia through a brewing joint venture with privately owned Casella Wines.

Casella Wines is best known for its hugely successful Yellowtail wine brand but started brewing its own boutique beer brand called Arvo in June this year.

CCA said on Wednesday that it would carry through with its intention to re-enter the Australian beer market after December 2013 via the Australian Beer Company, a joint venture with Casella.

CCA would lend up to $46 million to the Australian Beer Company to put towards the acquisition and expansion of a state-of-the-art brewery operated by Casella Wines at Griffith in NSW.

The loan would convert to an equity interest in the Australian Beer Company after December 16, 2013.

The joint venture would make premium beer and develop brands to be sold and distributed through CCA's existing network.

"This new agreement with Casella will give CCA the opportunity to access a world-class, low-cost brewery, which will enable us to re-enter the premium beer market in Australia after 16 December, 2013, CCA group managing director Terry Davis said.

He said the agreement would allow sufficient initial manufacturing capacity to cater to 15 per cent of the premium beer market.

CCA had been involved with Anglo-South African brewer SABMiller in a brewing joint-venture called Pacific Beverages, a rival of Australian brewer Foster's.

SABMiller took over Foster's in December 2011. CCA sold its 50 per cent stake in Pacific Beverages to SABMiller.

Under the terms of the sale to SABMiller, CCA was restrained from selling, distributing or manufacturing beer in Australia until the end of 2013.

Casella Wines managing director John Casella said Casella wanted to diversify and that a brewing operation could share much of the infrastructure attached to a winery.

Mr Casella envisaged that the Australian Beer Company would make overseas beer brands under licence and develop its own brands.

He said Australia had barley, hops and water to match anywhere else in the world and there was no reason that Australia should not make more premium beer locally.

CCA and Casella unveiled their plans as CCA reported a 60.9 per cent rise in net profit to $247.2 million for the first six months of the 2012 calendar year.

Underlying profit, which excludes one-off items, rose 5.6 per cent to $247.1 million.

Mr Davis said profits were boosted by productivity improvements and investment in product innovation, manufacturing and distribution capability.

CCA's Australian business sold fewer cold drinks in NSW and Queensland in the first quarter, after the wettest summer in over 50 years.

In the second quarter, the Australian business delivered strong volume and earnings growth on the back of strong promotion.

Mr Davis said the Indonesian and PNG businesses had the standout result for the half year, with volumes up by 12.9 per cent and earnings rising by 19.3 per cent.

Shares in CCA were six cents higher at $13.92 on Wednesday.

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