• The alcohol sector has taken a hit in the past year
  • But things are looking up as bar and entertainment places start to reopen
  • Stockhead reaches out to Mighty Craft CEO Mark Haysman to talk about the opportunity in craft beer

Despite continuing shifts in consumer preferences, long term investors should find the alcohol sector quite appealing.

This is because alcohol tends to enjoy stable sales in both cycles of the economy.

During the pandemic downturn, the liquor industry saw an increase in demand as people turned to drinking to relieve stress.

Now that bars are open, on-premise sales (which makes up a third of sales in Australia) are on the rise as people start to socialise again.

In terms of what we drink, Aussies love their beers and they remain the top drinks category in the on-premise segment.

According to a Savvy report, beer is drunk by more than a third (35%) of visitors, putting it ahead of wine (29%), spirits (19%), cocktails (16%) and cider (14%).

Wine consumption around the world is also rising post-pandemic.

Insights firm IWSR puts the total value of global wine consumption at US$205 billion, an increase of 5% from last year. The main driver of growth in wine consumption is premium wines, those that are US$10 per bottle and above.

Speaking of premium wines, Penfolds maker Treasury Estate Wines (ASX:TWE) climbed last Tuesday after reassuring the market that its premium brand strength will ensure profitability in FY23.

“Demand for premium and luxury wine has remained consistent across all of our key markets throughout the first quarter, reflecting ongoing category premiumisation trends,” said TWE CEO, Tim Ford.

TWE has managed to boost its profit despite being shut out of China, and says that it’s now on track to be the world’s most admired premium wine company.

Time to buy?

The million dollar question for investors is then: is it time to get back on the liquor bandwagon?

Here’s how alcohol stocks on the ASX have stacked up so far in 2022:

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Apart from TWE, the rest of the field look rather sluggish, which could offer up buying opportunities.

The most disappointing performers however have been Digital Wines (ASX:DW8) and Broo (ASX:BEE).

Wholesale marketplace Digital Wines has been on life support after losing pretty much all of its market cap in the last 12 months.

The company has capitulated to headwinds which include economic uncertainty, ongoing poor weather and transactions leaving the digital platform.

Dean Taylor has stepped down as CEO and Steve Voorma has stepped in as the company looks to restructure its business around the Kaddy Marketplace, the company it acquired a year ago.

Meanwhile Broo (ASX:BEE), which sells Broo Premium Lager and Australia Draught, is in the middle of liquidating some of its businesses amid a strategic review. The stock is currently on an indefinite trading suspension since May.

Craft beers could be a bolter

One liquor category that’s seen a lot of action in the last few years is craft beer.

The Australian beer industry has always been dominated by two giant breweries: CUB (Carlton, VB, Great Northern), and Lion breweries (Tooheys, XXXX Gold).

Both are owned by Japanese brewers Asahi and Kirin respectively, and command roughly 90% of the domestic market share.

But now, new challengers are popping up in the form of small independent brewers.

In the last decade alone, the number of independent and craft breweries in Australia has multiplied to over 700 brewers.

“Better Beer”,  a craft brand co-owned by ASX-listed Mighty Craft (ASX:MCL) and comedian influencers The Inspired Unemployed, has been the fastest growing beer brand in the last 8 years according to retailer Dan Murphy. The brand was only launched in July last year.

Mighty Craft’s CEO Mark Haysman says the beer market in Australia is ripe for disruption and wants to see Better Beer crack the top 10.

“The big mainstream brands in Australia probably haven’t been challenged like they have been by Better Beer in the last 5 to 10 years, “ Haysman told Stockhead.

“So Better Beer would definitely be taking market share from mainstream brands like Great Northern, Hahn Super Dry and the like.”

Better Beer is zero carb and is brewed in the NSW town of Griffith, supporting the local community there.

Social media celebs Matt Ford and Jack Steele (together called The Inspired Unemployed) own a 42% stake and have helped the brand to grow rapidly.

“It’s such a hit because it’s been a digitally led launch on the back of The Inspired Unemployed.

“That has been a really disruptive way to enter the market and it’s captured the imagination of the drinkers out there very quickly,” said Haysman.

The brand will soon be launched in the UK and Haysman believes the key to cracking the top 10 is to compete in the mainstream easy drinking category.

“If we can start to access that, which what Better Beer is doing, the addressable market is significant. And that’s one of the reasons why we believe that it will be a top 10 brand in Australia.”

 

Get on board

Haysman reckons that investors should look seriously into the craft beer segment as more people are starting to experiment outside of the mainstream brands.

“Socialising together at home during COVID was when people experimented with different brands, whether it was beer or spirits,” Haysman explained.

“So I think the premiumisation and experimentation to support and try different craft brands is well and truly there.

“Now that premises reopen, they want to continue that and not just drink the big mainstream beers, but try the different local flagship products as well.”

As for Mighty Craft, Haysman reckons it might be a good time now to look at the stock.

“If you have a look at some of the parts of our business, it’s not really adding up at the moment given the value we’re building not only in craft beers, but also in spirits and whisky,” he said.

“I believe there’s a lot of value there that’s not being recognised in the share price.”

 

Mighty Price share price today:

 

 

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