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AUSTRALIAN beer makers Broo (ASX: BEE) has hit its highest share price in a year on the back of a deal which will its products distributed in China.
Shares in the listed brewing company hopped up more than 30 per cent on Monday after announcing a pivotal agreement with Chinese group Jihua Information Consultant Ltd.
Jihua agreed to pay for 1.5 billion litres of Broo Premium Lager over the next seven years.
The Victorian brewer forecast the deal would generate $120 million in revenue, but the group won't start to receive the cash until 2020.
Founder and chief executive of Broo, Kent Grogan, says the brand will become a major player in the Chinese market over the coming years.
"I am delighted to have reached agreement with such a high-calibre Chinese distribution partner," says Grogan.
The company's brewery in Mildura has been operating at full capacity since early October 2017.
Jihua has interests in a wide variety of industries in China and has established key supply and distribution channels with major Chinese groups including COFCO, China's largest food processor, Chinese hypermarkets including Wumei Holdings, and Chinese restaurant chains including China Quanjude Group.
Jihua have committed significant upfront marketing and advertising funds to expedite the growth volume of Broo in the first three years of the distribution, and Broo has agreed revenue payments for that term can be accrued and paid upon completing of the 3rd year.
Shares in Broo rose nearly 4 per cent to $0.40 per share at around 11am (AEDT).
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