Better Beer seeks $20-million for expansion
Better Beer is looking to raise $20-million in investment to fund its next stage of growth.
The rapidly rising beer brand has this week appointed investment and advisory firm Jarden Group to manage the raise.
Brand co-founder Nick Cogger said the company has no set valuation to take to market but was looking to test its value through the process.
“We are going to out to the market and see what they come back to us with,” Cogger said.
“Our advisors have told us that it’s probably the best way to do it instead of just demanding a valuation.”
While Cogger is unwilling to set a valuation, on a recent investor call to announce its recent half-year results, Mighty Craft – which owns 37 per cent of Better Beer through its investment in Cogger’s Torquay Beverage Company – gave some insight into its initial investment and current valuation.
“One of the interesting things about Better Beer is the very low carrying value [on Mighty Craft’s balance sheet],” CFO Andrew Syme said in the call.
“So, you know, the original investment into that brand is only $250,000, so it’s a very capital-light brand.
“And I think at 10 million litres already, if you look at some of the comps in the market around value per litre, and what brands are generally acquired for over the last 10 – 15 years [which is] anywhere from 20-25 dollars a litre, is what some of the bigger acquisitions have gone for.
“So that just gives you an idea of what it could be worth, which is obviously not reflected on our balance sheet.”
Cogger said he was going to market rather than seeking additional investment from Mighty Craft given the size of the raise.
“Mighty Craft might invest in the round, however, we are looking for $20 million so we need to increase our investor base,” he explained.
He said that while the possible sale of up to ten per cent would see the founder’s share diluted, he felt the benefits would outweigh that.
“We’ll all get slightly diluted if we’re raising around $20 million, but that additional capital we think is going to make the business worth, double or triple what it is today in the next couple of years,” he said.
Cogger said the brand used the celebrity owners for less than a quarter of its marketing activities and was looking to outgrow them further.
“We have been consciously scaling back the use of Matt and Jack in our campaigns and the Day For it Campaign this summer did not feature them.
“We think we are on the path of converting more and more drinkers to Better Beer that haven’t come through social media.
“We need money to be able to spend triple the budget on marketing over what we did this year and, to do that, we need a raise.
“We can’t fund everything out of cash flow, like we’ve done so far.
“Our next group of customers is going to be more expensive to reach, and that’s what we will be investing in with above-the-line marketing spend,” he said.
He said the company’s focus was to next expand into the UK, and ‘double-down’ in New Zealand.
“One of the big ones is New Zealand for us,” he said.
“Heineken is really putting us as a focus brand in that country heading into next summer.
“We’ve had some amazing results already so, if one of the biggest beer companies in the world are backing a brand that they don’t own, we want it to support them as much as we can so that we can compete over there like we are competing over here against the incumbent big brands.”
Mighty Craft will be watching the capital raise with interest. The company’s numerous investments in craft breweries have failed to generate any meaningful scale and the company appears set to exit its ‘non-core’ brands at a loss.
The accelerator recently wrote down the value of its investment in Ballistic Beer Co by $2 million, as well as writing off its convertible note and other debts to the company. It is pursuing the sale of other craft breweries.
In a statement to the ASX, Mighty Craft noted the raise was being undertaken by Better Beer and sought to reinforce the value Better Beer brings to the company.
As it sells down its ‘non-core assets‘, the one-time craft accelerator that had a heavy investment in non-scaling breweries, has amended its language to describing itself as an ‘asset-light’ business model.
“We’ve consistently highlighted the key attributes of Better Beer as a truly unique asset, capable of competing with the leading beer brands both domestically and in New Zealand,” Managing Director and CEO Mark Haysman said in a statement.
“Already one of Australia’s fastest-growing beer brands in almost a decade, we are optimistic about the outcome of this fundraising round, particularly as Better Beer continues to accelerate and scale, which we expect will be reflected in our future earnings profile.
“This capital raise will allow Better Beer to take on the big national beer brands and continue to establish itself as a company in its own right.
“Ultimately we believe this process can not only validate our initial investment into Better Beer but is certainly capable of a significant valuation uplift, especially as Better Beer will now be fully funded to further accelerate growth.
“This, in turn, would help validate our unique asset-light business model at Mighty Craft,” Haysman said.
Hear Better Beer co-founder Nick Cogger discuss Better Beer on the Beer is a Conversation podcast