Growth for Mighty Craft despite decline in craft beer
ASX-listed Mighty Craft has reported strong revenue growth despite also reporting a decline in off-premise craft beer sales in its Q2 results.
The drinks company reported $31.21 million in unaudited group revenue for the second quarter, an increase of 91 per cent versus the prior corresponding period.
It also reported a positive net cash of $600,000 to $6.3 million, which was the company’s first positive operating cash result since listing in December 2019, it told the ASX.
The company reported $25.1 million in wholesale revenue, a 93 per cent on the same period last year, while its venue performance achieved $5.5 million in sales.
Most of the company’s growth came from its unicorn, Better Beer, which has reportedly continued its growth trajectory, recording 3.2 million litres sold for the second quarter alone.
It is well on track to deliver 10 million litres sold in its first full year of trading.
“The source of volume for better beer is very much coming from mainstream beer,” Mighty Craft chief executive and managing director Mark Haysman said during an investor’s webinar.
“So really, that could be anything from Hahn SuperDry to Great Northern, to Corona to Carlton Dry. So it’s coming from those big mainstream easy drinking brands, which is where the market is and that is why this has been such a disruptive launch.
“And we’re seeing such stellar growth, it’s really hitting the mark as well as having that ‘better for you’ element to it as well.”
Haysman however also noted that the company plans to “transition” to more traditional marketing methods on social media for the brand.
The brand has been the subject of multiple ABAC complaints over the past year, with many relating to social media influencer marketing.
“We’re continuing to transition if you like from Matt and Jack [The Inspired Unemployed] fronting a lot of the social media and marketing of Better Beer to more traditional marketing styles to take the focus away from the boys and that remains an important shift for us over the next sort of 12 to 18 months.”
Despite Better Beer’s growth, the company also reported that off-premise craft beer and cider categories had declined 12 and 18 per cent respectively.
“I think for the full first half, their growth will be in excess of 10 per cent, which I think is a really strong result, given what we’ve seen happen in the category and given we’ve actually kept our price point up,” he said.
“We’re wanting to make sure that we retain our net revenue position and the drive to profitability within those businesses. So, we’re looking for them to do more in the second half.
“But they’ve certainly outperformed the category in the first half and Q2, and remain a real focus of ours, notwithstanding that Better Beer obviously gets a huge amount of focus.
“Jetty Road, Mismatch and Hills Cider, spirits aside, remain a key part of what we’re doing going forward.”
After announcing its plans to offload “non-core” assets last year, the company confirmed it would report any divestments in its H1 FY23 results in late February.
During the investor’s webinar, Haysman acknowledged the announcement and confirmed that it was not a priority brand for the accelerator.
“We see it as an exception, and a one off for us in terms of the financial health of that business,” he said.
“They’ve put it into voluntary administration so we’ll do our best to support where we can there, but they’ll do that work and hopefully bring the business back to market sort of mid-March.
Haysman chose to focus on Ballistic’s product recall in September last year as having an impact on the business.
“They did have a product recall late in the first quarter, which certainly had an impact, which is [that] they’ve found it hard to recover from in the short term.
“So yeah, we see it as an isolated case within the Mighty Craft portfolio and we certainly wish the team well in terms of bringing that business back to back to trading March, April time.
“We’ve invested circa $2 million into that and we will look at taking a provision against that in the first half, which you’ll see when the first half numbers come out.”