Once a shining beacon in the alcoholic beverage industry for independent operators that could gain distribution through alternative channels to supermarket chains, Mighty Craft (ASX: MCL) has come crashing down to the point of insolvency and entered voluntary administration.
Calling in restructuring firm Ankura to oversee an orderly wind up of the business, the move was deemed the only responsible option left by Mighty Craft’s Board of Directors after the Company failed to recapitalise the business through a proposed merger with Better Beer, of which Mighty Craft is a minor shareholder.
While Better Beer has thrived as one of the first zero-carb beers to market in Australia, Mighty Craft’s other brands have not been as successful. Some of the better known brands still in production include Jetty Road Brewery, Kangaroo Island Spirits, Ballistic Beer Co and Slipstream Brewing Company.
Mighty Craft’s business model centred on acquiring and growing a variety of beverage brands, but this strategy proved unsustainable in the long run. At least outside of Better Beer which was launched in 2021 in collaboration with comedians The Inspired Unemployed.
Mighty Craft’s ambitious expansion plans led to significant debt accumulation. The Company’s attempt to restructure and reduce its debt hinged on a proposed merger with Better Beer Holdings Pty Ltd, in which Mighty Craft held a significant stake. It was seen as the last valuable asset in Mighty Craft’s dwindling portfolio which has been reflected in MCL’s share price last closing at $0.005. It was a long way from the $0.50 IPO Offer Price when the Company listed on the ASX in 2020 under its previous name, Founders First Ltd.
The proposed merger was meant to revitalise Mighty Craft by leveraging Better Beer’s market position to raise capital and restructure debts. However, the merger required unanimous support from MCL’s senior lenders and Better Beer’s shareholders – a consensus that ultimately proved elusive. The lack of agreement among stakeholders dashed hopes of a capital raise essential for Mighty Craft’s survival.
Mighty Craft’s board concluded that placing the company into voluntary administration was the best course of action. The administrators will now evaluate options to continue the business or maximise returns for creditors and shareholders which will inevitably see the Better Beer stake sold off.
Just last week, Mighty Craft confirmed it had sold off all of Lot 100’s business and assets, such as the leasehold for the Lot 100 cellar door venue in South Australia, for $1.5 million cash to a buyer led by a consortium of experienced pub owners.
It followed an earlier asset sale last month when Mighty Craft offloaded Mismatch Brewing Company and The Hills Distillery for $5.2 million cash.
In a statement, the administrators assured that the company’s operations would continue as usual during the administration period.
The collapse of Mighty Craft highlights the challenges faced by companies in the competitive craft beverage industry, where rapid expansion and heavy debt burdens can quickly lead to financial distress. As the administrators work to chart a course forward, the fate of Mighty Craft and its once-prominent brands hangs in the balance and can likely be bought on the cheap.
In its last set of audited financial statements, Mighty Craft reported $28.8 million of revenue for the Half Year ended 31 December 2023. The Company, however, logged at $53.1 million net loss after tax attributed to asset write downs and the loss of major customers.
Alfred Chan is a Business Reporter at The Sentiment specialising in ASX-listed small cap companies, a bloodstock enthusiast and former equities analyst.
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1 Comment
Shraddha13
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