Revenue up, losses continue at acquisitive Mighty Craft
Revenues grew but losses increased at craft beverages accelerator Mighty Craft after a huge year of growth, as the business looks to bolster its brewery portfolio in the coming years.
Total income for the six months to December 2020 rose to $12.9 million, which ASX-listed Mighty Craft said was an increase of 185 per cent on the previous corresponding period.
Mighty Craft said it had sold 900,000 litres of beer and 30,000 spirits bottles during the period.
Losses continued, however, with EBITDA losses increasing to $4.8 million from $3.6 million in the same six months the previous year, as it looked to launch more venues and acquire greater stakes in its portfolio of brewery and drinks businesses.
During the period, Mighty Craft invested $4 million in accelerating the growth of its portfolio of businesses, including the expansion of Slipstream Brewing Co.’s brewpub and Jetty Road Brewery’s move to Lorne.
It said in its investor presentation that “path to profit” initiatives were underway and it expected benefits from the plan in the second half of its financial year as normal trading begins to return.
Managing director Mark Haysman said the team were “extremely pleased” with its growth trajectory.
“Reported growth of +185% puts us in the top bracket of ASX listed growth companies and well ahead of our industry peers,” he said in a statement to the stock exchange.
“This is our aim; we are a growth company and over time we can see continued acceleration of growth leading to sustainable profit delivery.”
He did however say that Mighty Craft’s venues, which contributed $5 million in revenue in the first half, had been challenged by the pandemic.
“COVID-19 has been difficult to navigate in our venus and restricted growth and profit delivery. This continues to be unpredictable as we have just seen with the recent lockdowns.
“We continue to focus on the safety of our customers and employees and note that as restrictions are lifted will see further growth acceleration as we return to full capacity. The outlook is very exciting, and we look forward to providing further updates through the back half.”
Mighty Craft is targeting a breakeven point in the second half of 2022 and is aiming for 4 million litres of beer with around eight beer brands.
It currently has stakes in Jetty Road, Foghorn, Slipstream, Sparkke, Ballistic and Sauce, as well as a number of craft spirits producers, indicating that there could be acquisitive activity on the cards in the coming years.
By 2025, it aims to be producing 12 million litres of beer and have a portfolio of up to 12 beer brands.
Growing in a growth industry
According to a market report detailed in Mighty Craft’s investor presentation today, it suggested there were more than 1,000 independent breweries in Australia and more than 700 independent distilleries.
The accelerator said craft beer sales reached $842 million in 2020 and the category is expected to increase at a compound annual growth rate of 7 per cent over the next five years to $1.2 billion by 2025. This equates to a market share of 15.4 per cent versus the 25.2 per cent in the US today.
But Mighty Craft also described the craft market as fragmented, sub-optimal scale, inefficient and loss-making, saying it aimed to rectify these issues within its own business by increasing distribution to improve limited market access.
“Our job is to find and back the winners in this secular trend,” it said.
The next phase of its growth strategy is an investment in brand communication. It used Jetty Road’s integrated campaign on the Mornington Peninsula to illustrate its point, saying Jetty Road grew market share from 4.9 per cent to 8.9 per cent and reached 6 million people as a result. Additionally, it aims at growing brand advocacy with loyalty partnerships like that it has arranged with Upstreet.
Mighty Craft also announced an update to its distribution partnership with Bevchain announced last year.
As a result of this partnership, Mighty Craft has launched its Craft Hub brand today, which it said is aimed at “revolutionising the supply chain for independent craft” by “transforming the supply chain” for independent craft. It will leverage the “unique position” Mighty Craft has with retailers and Bevchain’s Linfox logistics network, it said.
The venture will establish a digitised supply chain solution to solve inefficient routes to market and solve retailer costs of doing business with independent craft.
“We now have an end-to-end logistics partner, a streamlined operation model and a very strong relationship with retail trade and our brand partners,” said Haysman.
“The Mighty Craft platform is now set for the next phase of growth.”