Good Drinks Australia sells gaming licenses, funds Queensland expansion

Flashing lights and clanking sounds—pokies is not for the faint of heart or money. Especially when it is complemented by a round of drinks at the pub. Aussie pubs often run a pokies side hustle to exploit degenerative gamblers. However some companies’ moral compasses are veering them in a different direction. 

Aussie beer company Good Drinks Australia (ASX: GDA) is one of them, having sold 15 gaming licenses, raising $4.9 million in cash.

It had acquired gaming licenses as part of its $5.3 million acquisition of “Joe’s Waterhole” in November 2021. However, due to the licenses no longer being required, the Company has decided to sell them, with the proceeds primarily funding the ongoing redevelopment project of transforming Joe’s Waterhole into Matso’s Sunshine Coast.

The transformation of Joe’s Waterhole into Matso’s Sunshine Coast is progressing smoothly, having received approval for development, and construction is currently underway. Matso’s Sunshine Coast aims to provide a unique and authentic consumer experience, serving as the flagship location for the renowned Matso’s brand in Queensland.

With estimated construction costs amounting to $5.5 million, the targeted opening date for Matso’s Sunshine Coast is set for October 2023.

In Q3 FY23, Good Drinks experienced notable growth in its own-brand packaged sales, which increased by 5.2%. Additionally, own-brand draught sales rose by an impressive 37%, contributing to an overall 13% increase in total own-brand sales. The successful integration of partner brands Millers, Coors, and Magners into the Good Drinks portfolio has resulted in a substantial 77% growth in national distributions.

Over the year, the Company made the strategic decision to discontinue the majority of its low-margin contract beer brewing services. This move led to a significant reduction of 5.7 million liters in volume on an annualized basis. The freed-up capacity will now be utilised to support the anticipated growth of high-margin proprietary brands under the Good Drinks umbrella.

And by that umbrella, it is referring to its new brand positioning as a lifestyle brand. In an attempt to shed its beer and gambling image, the Company is reimagining its products, aiming for wider distribution and increased sales volumes.

Flagship brands such as Gage Roads Single Fin and Matso’s Ginger Beer are expected to continue their robust performance as national distributions expand.

Sales and marketing expenditures for the fiscal year 2023 remained consistent with planned levels, largely committed prior to December. However, these expenses are expected to decrease relative to sales in the fiscal year 2024, aligning with the company’s growth rates and prevailing trading conditions.

As the cost of goods sold (COGS) returns to a normal level and prices increase, GDA feels that stronger margins and earnings for its proprietary brand business are in order in FY24. Plus, its growth in the hospitality sector and the continued expansion of partner brands, the Company foresees FY24 aligning closely with its long-term financial targets.