Mighty Craft confident as Better Beer sales impress
Mighty Craft has hailed success across the board in its latest quarterly results, but warns of “unpredictable” trading in 2022.
According to quarterly reports filed with the ASX today, Mighty Craft made $17.7 million from customer receipts for the three months to 31 December 2021, and it sold $12.6 million of wholesale products.
The company said this was a record and an increase of 179 per cent on the comparative quarter the year before.
Product manufacturing costs reached $10.5 million and other costs meant that it had a cash outflow of $1.6 million for its operating activities.
Despite the negative position for operating activities, this was a “significant improvement” on the previous quarter’s outflow of $5.5 million, and Mighty Craft said it reflected “the impact of increased scale on the Mighty Craft business and the near-term potential for positive operating cashflow”.
According to the ASX-listed business, in unaudited results set to be released in H1, it delivered a positive EBITDA for its second quarter – its first quarterly profit since the business was incorporated.
Mighty Craft also reported substantial growth across several categories. In beer and cider, sales grew 21.9 per cent compared to the comparative quarter in the previous year, whilst wholesale spirits and RTD sales grew 54.9 per cent to $4.2 million.
The accelerator said that its key growth drivers were Better Beer, Seven Seasons, Mismatch Brewing Co. and the 78 Degrees Distillery, which it acquired as part of the Adelaide Hills Group in June 2021.
Investing activities proved more lucrative, and the proceeds from the disposal of property, plants and equipment meant that it had $3.2 million in net cash. During the quarter, Mighty Craft announced the sale and leaseback of Jetty Road’s Dromana site for $3.5 million. It is also planning on selling its Hunter Valley venue.
Overall it was in a stronger cash position at the end of the quarter, with $10.7 million on hand at the end of the quarter, compared to $4.8 million in the previous quarter.
Better Beer and outlook
Mighty Craft’s second quarter results reported on the “runaway success” of Better Beer, which secured a top 10 spot on the GABS Hottest 100 Aussie Craft Beer Countdown list last weekend after less than three months on the shelves.
Sales of the beer reached $1.8 million during the period, and according to the accelerator, which launched the Better Beer brand in mid-2021, its success resulted in stock shortages in November and December.
An announcement last year predicted that 3 million litres of Better Beer would be sold in 2022, but it has now called this “conservative” and revised the estimate to 4 million litres. Better Beer is brewed at Australian Beer Co., now owned by Casella Family Brands after Coca-Cola Europacific Partners sold its share to its joint partner this week.
However, Mighty Craft made no mention of the ongoing legal action by Brick Lane against Better Beer or what that might mean for its future branding.
Mighty Craft estimated the beer category to be greater than 1.6 billion litres and suggested that Better Beer has the potential to be a “significant” national beer brand.
While Better Beer appears to be a success for the company, the accelerator has also been a loss-making business and, as a result, has employed profit improvement initiatives focusing on efficiency and cost-cutting in its logistics and warehousing operations.
The company has plans to relaunch its Kangaroo Island Spirits brand and develop its whisky production programme with the launch of Hidden Lake, its Tasmanian whisky label. It announced the move towards whisky at the same time as a $5.8 million capital raise last year.
Despite the progress in multiple categories, Mighty Craft warned that COVID interruptions are likely to continue to impact sales in venues and the on-premise channel.
The accelerator, owner or part owner of breweries including Jetty Road, Slipstream and Sauce, explained that hospitality venues are experiencing a drop in patrons and staff shortages due to Omicron.
However, Mighty Craft said that while trading conditions are expected to be unpredictable, it expects the impacts to be short-term.
“This was the first quarter where we have seen the impact of scale on the Mighty Craft P&L and bottom-line,” explained Mighty Craft’s managing director Mark Haysman.
“Given the runaway success of Better Beer, the company expects the trend to continue to improve. While COVID continues to present challenges across the business, we are confident in delivering a strong H2.”
Hear more about Mighty Craft’s strategy on the Beer is a Conversationpodcast with special guest Mark Haysman.