Hops to it and brew some expansive returns

WE’VE all heard of greenwashing, but how about craftbeer washing?

The phenomenon of Big Brewing hiding behind hip boutique brands has been evident for some time.

Owned by Japan’s Kirin, Lion Nathan took over Little Creatures while Japan’s Asahi owns Mountain Goat.

That said, there are thousands of brewers (and distillers) and the market for genuinely boutique lagers seems unquenchable.

Having listed in December 2019, Mighty Craft (MCL) is tackling the sector with a multi-pronged strategy of coinvesting in breweries and distilleries and operating branded venues. Its operations include Better Beer, Jetty Road Brewery, Ballistic Beer, Foghorn Brewery, gin distiller Seven Seas and Kangaroo Island Spirits.

CEO Mark Haysman describes Mighty Craft as the “fastest growing booze company on the ASX” – and a proven recession-proof play. Mighty Craft turned over $62.5m in the 2021-22 year, up 206 per cent, with the net loss extending to $20m from $15m previously.

In a seasonally subdued September quarter, the company recorded $20.7m of receipts and lost $2.7m. However, October sales are at record levels ($9m) and November is expected to be better than that.

Formerly Gage Roads and a white-label brewer for Woolworths, the Fremantle based Good Drinks Australia (GDA) is slightly bigger in terms of revenue and market capitalisation ($90m compared with Mighty Craft’s $69m).

Its orbit includes Matso’s (Broome), Taphouse in Melbourne and Atomic Brewing Project in Sydney. Under a recent compact, the company is also a local distributor for Canadian brewer Molson Coors.

Good Drinks posted revenue last year of $70.1m, up 30 per cent, and a $1.98m net profit (down 54 per cent), with underlying earnings sliding 22 per cent to $8.4m. Management targets ‘own beer’ output of 16 million litres this year, with plans afoot to expand to 30 million litres annually by 2025.

Management also targeted underlying earnings of $25m30m by 2025.

As a turnaround ‘tipple’, investors might want to try the $1bn market cap United Malt Group (UMG).

The company’s performance has left a flat and sour taste since demerging from GrainCorp, but it remains one of North America’s biggest malt producers. Last year’s 20 per cent fall in net profit to $11.6m reflected poor Canadian barley crop quality, as well as the usual woes of input costs and supply chain difficulties.

Management expects an earnings turnaround this year and with revenue of $1.4bn (14 per cent higher), there’s plenty of top line to play with. High debt levels remain an issue, though.

In August Good Drinks acquired the Victorian brewer and venue operator Stomping Ground and we suspect there will be many more such deals.

This story does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.