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SA spirits lift revenue for Mighty Craft but ‘business model needs to change’

The chairman of listed alcohol company Mighty Craft, which owns a stable of South Australian brands and venues, says its business model is not working following another earnings loss.

Aug 29, 2023, updated Aug 29, 2023
Photo: Supplied.

Photo: Supplied.

Mighty Craft, which owns local brands Mismatch Brewing, Hills Cider, Kangaroo Island Spirits and more brought in $82.5 million in sales in FY23, but earnings remain a millstone for the Victorian firm.

The company achieved 48 per cent organic sales growth in the period buoyed particularly by a 135 per cent increase in sales of its Better Beer brand as well as a 22 per cent uplift for SA spirits label 78 Degrees.

But underlying earnings for the financial year were in-line with FY22 at a $6.2 million loss.

Chairman Chris Malcolm told shareholders that the company was still ironing out issues.

“It is clear the business model needs to change,” he said.

“We need to reduce debt and we need to reduce the cost base. In order to do this, we need to divest some larger assets.

“Once we are through this interim period and divestments are clearer, we will outline a path forward for the business. Rest assured the management team and new board are working incredibly hard to stabilise the business and implement the outcomes of the strategic review.”

During the full year, Mighty Craft sold 13.3 million litres of beer and cider – up 83 per cent on FY22 – and 299,000 bottles of spirits which was a 19 per cent increase on the prior period.

Better Beer was the company’s star performer, selling $45 million of product equating to 10.4 million litres of beer and contributing approximately 60 per cent to total sales.

The company says other segments were hit hard by cost-of-living pressures and inflation impacting consumer spending, with craft beer sales declining by 5.4 per cent. ‘Mainstream’ beer grew 0.8 per cent for the full year, while the gin category declined by 7.4 per cent.

Of Mighty Craft’s portfolio, 78 Degrees and Hills Cider were the only South Australian brands to see a lift in revenue growth in the 12 months to 30 June. Sales of Mismatch fell 1 per cent and Kangaroo Island Spirits fell off by 8 per cent.

The company also owns a number of venues around Australia, including Lot.100 in the Adelaide Hills, Kangaroo Island Spirits’ cellar door and Mismatch Brewing Co at Whitmore Square in the CBD.

Though the company’s breakdown of how its venues performed during the year did not disclose individual venue performance, overall profitability was up delivering a 14.1 per cent earnings rise.

In order to reset the business, the company is embarking on a divestment program to reduce debt. This includes the already-announced sale of Victorian brewer Jetty Road, and the company says it may offload more assets in the future.

“The company will continue to consider offers for assets that are consistent with the outcomes of the strategic review and that make sense for Mighty Craft shareholders,” the company said.

Looking to FY24, Mighty Craft says growth continues to be driven from Better Beer, 78 Degrees and Seven Seasons – a trend it expects will carry on through the remainder of the current financial year.

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