Behemoth crowdfunds as it eyes AU expansion

Behemoth co-CEOs Andrew Childs and Hannah Miller Childs

New Zealand’s Behemoth Brewing Co. is seeking to raise $3 million through crowdfunding as it releases plans to expand in Australia.

Behemoth, which generated $10.6 million in FY22 revenues, is looking to raise the capital through online investment platform Snowball Effect, and launched its offer publicly this week.

The crowdfund values Behemoth at NZ$35.9 million (approximately AU$31.6 million) with up to 7.69 per cent of the business for sale.

The NZ brewery is looking to expand the brewery’s canning lines, brew kit and capacity, with the aim of expanding production volumes to 2 million litres annually from its current 350,000 litres over the next four years.

It is not the first time that Behemoth has raised capital in this way. It raised NZ$1.8 million 2019 on PledgeMe, and the same again in 20 minutes in a crowdfund on Snowball Effect in 2020.

“We believe that our customers are our biggest advocates, so giving them ownership in Behemoth makes sense to us,” Behemoth co-CEO Andrew Childs said.

“Being capital raise #3, we have learnt a lot. The first one was so stressful we said “never again” but The Snowball Effect team is so professional. In terms of advice to others, do the prep work, you really need an audience and following to be successful, so I guess don’t try and raise capital too early on in the piece.”

In this round, retail investors can make a minimum investment of $1,000 and shares are being sold at $1.32, the same price as its last round of crowdfunding, which Childs said was a reaction to the difficult environment for everyone in a post-COVID world.

“We as the board decided on this as there were nearly 1,500 people who missed out in investing last time (we crashed the server and it was fully subscribed in 20 mins), also to reflect how hard COVID has been on the market in the last 2 years. We still grew throughout, but we had to really drive hard to do so.”

Expansion into Australia

Expansion into Australia is a key part of Behemoth’s growth strategy. It recently announced that it had launched into 150 stores across Vintage Cellars and First Choice, part of the Coles Liquor Group.

The NZ brewery also said it was moving to recruit local resources in Australia to lead sales and marketing initiatives and support expansion within the independent retail channel, as well as online dedicated store in Australia.

Potential sites for establishing a hospitality venue in Australia have also been identified, where there is a “strong Kiwi presence and demand for NZ made craft beer”.

Behemoth said it plans to develop brand recognition in key overseas markets by “creating a unique platform to scale the business into a large independent craft brewery, while maintaining the characteristics and spirit inherent in our identity”.

The launch of a new brand, Chur Brewing Company (based on its current branding at its venue homebase Churly’s Brew Pub) will allow it “to create and promote unique Australian-centric marketing content”.

In addition to its own production site, the brewery currently brews at Steam Brewing for large batch brews, and it has also signed an brew-under-licence agreement with California’s Ballast Point recently, which will see the brand expand in the US.

Behemoth also produces and distributes Heart of Darkness, a Saigon-based craft beer brand which was its first imported craft beer to be brewed under licence in NZ.

However, there are no plans to set up its own brewery or brew-under-licence agreement as Behemoth has with Ballast Point, explained Childs.

“It is not on the cards at the moment, Australia is close for shipping and we can still get beer there super fresh, who knows in the future though,” he said.

The crowdfund marks another period of growth for Behemoth, which could also lead to a potential listing on the NZX, which, much like Wayward Brewing Co. following its employee share scheme, it acknowledged was a way to create liquidity for shareholders. Also similarly to Wayward, a buyout is not currently an option.

“It is not something we are actively looking at, we are seeing how far we can take Behemoth on our own,” Childs explained.

Crowdfunding in NZ

Equity crowdfunding was legalised in New Zealand in 2014, and since then a raft of craft brewers have taken this route.

Much like in Australia, where crowd-sourced funding was only legalised much later, in 2018, there are limitations on capital raising from retail or non-professional investors.

NZ companies can raise up to $2 million in a 12-month period, which must be ordinary equity through a process facilitated by a provider with a crowdfunding licence, such as Snowball Effect, which was the platform on which crowdfunding was launched in the NZ market in April 2014.

New Zealand, along with the United Kingdom, has since been declared as having the highest crowd-sourced funding investment per capita. The UK however, unlike NZ, has had a “significant number” of failed crowdfunded companies.

David Curtis, director of growth capital at Snowball Effect, said that with the experience of nearly a decade under its belt, New Zealand had learnt from its experiences.

“Equity crowdfunding provides retail investors with the opportunity to invest in private companies and has been well received in NZ,” he told Brews News.

“Although the cap has not changed in almost a decade, we normally see a decent mix of wholesale and retail investors in our public raises.

“In our experience, companies with a strong brand identity/following and/or social benefit tend to have more success with crowdfunded raises – this has been particularly evident in the FMCG space, including the alcohol beverages sector.

Curtis explained that companies including Behemoth have benefitted from building strong community support.

But he acknowledged that the conditions can be an involved process.

“All companies raising capital on our platform undertake to provide regular business updates, including annual financial information,” he said.

“There are often ancillary marketing benefits with providing regular updates, as a lot of the shareholders are customers and advocates for the business.

“All companies that raise capital on our platform are required to engage us for a minimum period of 12 months following the raise during which we assist them to establish good communication habits with investors.”

In Australia, craft breweries have engaged in droves in crowdfunding. Wilson Brewing Co. in WA and the Sunshine Coast’s Your Mates Brewing Co. are the latest in a long line which will be launching soon.

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