'Time will tell' on Moa's value
New Moa brewery owner Stephen Smith says “only time will tell” if the $1.9 million he paid for one of New Zealand’s biggest craft brands was foolhardy or genius.
Smith’s family-owned company Mallbeca took over as the new owner when the publicly-listed Moa Group changed its name to Savour and cut-free the brewery operation.
The move was designed to allow Savour to focus on its hospitality business.
In less than a decade Moa has gone from a high-profile brewery that debuted on the NZX at $1.25 a share and a valuation of around $38 million to a hospitality business trading at around 20 cents a share.
The initial valuation was largely hype-driven as it was the first New Zealand brewery to be publicly-listed in decades.
The recent sale price has sparked a wide discussion with the sale figure low compared to the sales of Emerson’s ($8 million), Panhead ($15 million) and Tuatara ($30 million).
Moa’s price reflects its failure to turn a profit since that launch as well as production issues in 2020 that resulted in a drop in production.
The usual models for working out value such as a multiple of EBITDA were not applicable for a loss-making company so the value is likely to be based on forward sales, assets such as its Blenheim brewery and goodwill.
“I understand people’s opinions on the price and only time will tell if it’s a good price or not,” Smith told Brews News.
“We are buying an historically unprofitable business and that comes with a bit of pressure for us.
“People are saying it’s a courageous and bold move considering Moa’s history and that’s the way I see it.”
That said, Smith’s presentation to the shareholder’s annual meeting in September painted an improving picture for the business.
He noted then margins had improved 6 per cent, an EBITDA improvement of 68 per cent and cash consumption down a third from the same period in the prior year.
Board determined Moa’s value
Smith had an 18-year career at Lion, as marketing director and in sales. He worked in the dairy and drinks business for Lion in Australia before coming back to work for fledgling drinks business 1Above.
He said he met Moa CEO Geoff Ross a few years ago and joined the company, initially part-time. After going full time, he eventually took over as the brewery CEO when Ross moved into a wider role with the expanding Moa Group.
Smith said because he wasn’t a director of Moa Group he had no insight into how the price was set.
“The board determined the price not me,” he said.
“I know that they were trying to find a buyer for the brewery but it hadn’t worked out and they came to me mid-November last year to see if I was interested.
“I said ‘of course I’m interested but it depends on the price’.”
Strong base in supermarkets
Smith’s task is now to steer Moa to profitability and he believes that in his two years at the helm he’s put the company in a strong position to do that.
“We believe we have the right model going forward and it will take a few months to work through,” he said.
“We’ve worked on margins in the past 18 months and we’re looking a lot stronger.
“We knew that unless we made changes to the classic [core] range it was always going to be hard going from a margin point of view. So, we took some costs out of those products.”
Since taking over he’s signed an exclusive deal with Foodstuffs to stock Moa in New World, PAK’nSave and Four Square supermarkets and in a range of bottle stores including Liquorland.
Smith declined to discuss in detail the impact of a lactobacillus infection at its contract brewing partner in July and August last year.
The infection forced Moa to recall large volumes of stock.
He said the matter was now settled and that Moa left on “amicable terms”.
Moa’s core range is now brewed at McCashin’s in Nelson, while the original Marlborough brewery focuses on 440ml cans and 500ml bottles of more specialised beer.
Smith says while Moa has yet to turn a profit it has built a large customer base in the supermarket channels where they are now the biggest independent brewery behind Mac’s, Monteith’s and Boundary Road, respectively owned by international giants Kirin, Heineken and Asahi.
“People talk about how the business has failed, which is quite a harsh view. Most people are surprised to hear how successful the company has been,” he said.
“Most of our drinkers don’t know anything about our financial performance but they are connected to the brand and the beer so there’s a lot of equity there to be leveraged.”
Moa’s campaigns “inappropriate, ignorant, and arrogant”
Smith’s other critical job is to change the perception of Moa as a sexist business – a tag that has dogged the brewery since 2012 when its overtly sexist marketing cost support in what was then a tightly-knit craft beer community.
He said the early campaigns were “inappropriate, ignorant, and arrogant” and because the company was publicly-listed it intensified the focus.
“By positioning the brand that way and doing an IPO you become a very public target and I think they got it wrong,” he said.
“It’s one thing to be disruptive – and sometimes you need to be disruptive when you have big players in the market – but to take some of the positioning and tone that they did I think was a mistake and we’re absolutely moving on.
“Since I’ve been involved we’ve never gone anywhere near that kind of thing. It’s history and you can’t erase that. We’re all about looking forward.”
He is now focusing the brand story on the brewery’s Marlborough roots, and its historic connection to the famous wine-making area.
The brewery was started by Josh Scott – son of noted winemaker Allan Scott – in 2003. The brewery was sold to Ross in 2010.
Smith also intends to modernise Moa’s portfolio by venturing into the spirit-based seltzer business.