These ASX alcohol stocks partied with Covid and are now toasting the Federal Budget
Food & Agriculture
Food & Agriculture
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The pandemic has affected many aspects of Australian life, with alcohol unsurprisingly being the go-to stress reliever for many people.
According to data from the Commonwealth Bank (CBA), booze buying surged during the early period of the lockdown in 2020, as people began stockpiling necessities, most notably bog rolls.
That surge gradually waned over the following months, but the pattern towards higher alcohol consumption has not reversed.
From May 2020 until February 2021, CBA said spending on alcohol continued to be higher than the corresponding period for the previous year. In fact, the survey said that one in five people had reported increased alcohol consumption, and of those, half had an extra one or two drinks a week.
Those numbers have boosted the ASX alcohol sector for the past year, and it was further boosted this month when Treasurer Frydenberg announced a tax relief for small brewers and distillers in the Federal Budget.
From July 1, small brewers and distillers will be able to claim a full refund on any excise they pay up to $350k annually, up from the current $100k. This means that liquor producers can sell triple the amount before excise tax applies, which also means the price of beer would go down for consumers.
In case you missed that, the price of beer would go down.
Investors haven’t missed it. Over the past year, stocks in ASX alcohol stocks have all risen.
The biggest winner was retailer Digital Wines (ASX:DW8), who has returned 1,000 per cent in the last 12 months. The company struck two major deals this year with giant eBay and Bibendium Wine.
WineDepot is DW8’s platform. Its wines are now offered to eBay’s 12 million customers, with Bibendum also introducing thousands of its trade buyers to WineDepot.
The company has recently partnered with fellow ASX-lister, EarlyPay (ASX:EPY), to launch LIQUIDITY, a payment management solution for the wholesale beverage market, which it will integrate with the WineDepot platform.
The latest quarter saw the company generating an increase of 473 per cent in revenues to $768k, on the back of record order volumes.
Giant wine producer Treasury Wines became collateral damage in Australia’s political spat with China last year. China had introduced tariffs of around 200 per cent on Australian wines, practically killing most of Treasury’s export business.
The maker of such exquisite wines as Penfolds quickly began to look for other export markets, with the US now a likely replacement for the lucrative Chinese market.
The company laid out its new US strategy earlier this month, focusing on its three new company divisions: Penfolds, Treasury Americas and Treasury’s premium brands.
Treasury Wine also surprised the market when it told investors that its EBITDA for the full year 2021 would come in at $495 million to $515 million, beating market expectations.
Another big player, United Malt, has also performed well. UMG has just reported its half year results, with revenues down by 11 per cent to $590m.
The company says that its sales volume is currently tracking at around 95 per cent of pre COVID-19 levels, but is still higher than the guidance provided during the company’s AGM in February.
The small cap brewer, which was formerly called Gage Roads, said that its pandemic strategy had paid off, with the share price returning 100 per cent in the last 12 months.
The latest quarter shows the company delivering a 41 per cent growth in key markets across the business, including sales increases in brands such as Gage Roads Brewing Co., Atomic Beer Project, and Matso.
The company had focused on execution during the Covid period, securing new venue contracts including one with Optus Stadium, pushing the company to become the number one independent supplier to the national beer market.
Earlier this month, Lark received a certification from the Australian Government’s Climate Active Program, recognising its operations as producing practically zero net emissions.
The company has a wide distribution channel, supplying its whiskies to leading retailers such as Costco, Liquorland, and First Choice.
Lark had a fantastic last quarter, with net sales rising by 159 per cent to $3.1m.