Food & Drink Business editor Kim Berry takes a look at the week that was in Australia's food and beverage manufacturing sector. From another craft brewery going into voluntary administration, to Dr Craig Emerson's interim report into the Food & Grocery Code of Conduct, and out the other side with one of the very first plant-based meat companies having to close, this is the week that was.
A consortium of pub owners and other industry investors, led by ex-CUB boss Peter Filipovic, acquired more brands from the drinks accelerator, Mighty Craft, which is offloading them like sailor throwing things overboard to lighten a sinking ship. Two and a half years ago it bought the Adelaide Hills Group – Adelaide Hills Distillery (78 Degrees gin), Mismatch Brewing Co, Hills Cider Co, and venue Lot.100 – for $47 million. This latest sale means Mighty Craft has sold the lot for $10.2 million – Filipovic’s group acquired the cider business last year for $3 million. It also sold Jetty Road Brewery to Filipovic’s group last year for $3 million.
The Filipovic consortium – United Publicans Group – has 15 pub groups with more than 200 venues, handy if you’re wanting to grow a brand and build a loyal following.
And meanwhile, Mighty Craft has another four brands held for sale – Slipstream Brewing, Mighty Hunter Valley, Kangaroo Island Spirits, and Foghorn Brewery. It is desperately trying to reduce its debts to stay in business, but not have to sell its 30 per cent share of the Inspired Unemployed’s Better Beer brand, that is performing well.
Meanwhile, Grand Ridge Brewery is the latest craft brewery to apply for voluntary administration. We’re now into double digits for the number of craft outfits that have going into VA in the last year or so.
There is a narrative similar to what circles around alternative proteins – a crowded market, too many players, there had to be a correction. That might be true, but let’s not forget the perfect storm of doom that the industry has also had to weather.
Many are suffering a hangover of debt accrued during Covid compounded by the alcohol excise being indexed twice a year with the consumer price index. A CO2 gas shortage also hit the high energy using industry, with some having their gas prices rise 51 per cent. In the last 12 months the cost of raw materials has increased 37-40 per cent, freight costs are basically a dirty word, and then, the cost-of-living crisis hit. Already a premium product, rising the price of a pint is not really an option.
And while the Independent Brewers Association – along with the spirits industry, which is taxed on the same scale – is calling for the federal government to review the situation and give the sector some relief, the government is stuck in the supermarket aisle with one or all of the reviews into that sector underway.
Dr Craig Emerson presented his interim report this week for his review of the Food and Grocery Code of Conduct. There weren’t any big shocks in there, it seems everyone agrees the code should be mandatory, which makes one wonder, shouldn’t it have been mandatory from the get-go? I mean, the horticulture and dairy codes are mandatory, just not for the relationship with retailers… It feels like a “look, we know you shouldn’t drink and drive, but we’ll keep doing it until it’s illegal, ok? Ok.”
Support for the mandatory code has come from the ACCC, former ACCC Chairs Rod Sims and Allan Fels, the National Farmers’ Federation, AUSVEG, Australian Dairy Farmers, the Australia Chicken Growers’ Council, Fresh Markets Australia, and 16 other stakeholders including the major supermarkets.
Things get a little less chummy when it gets to penalties and who the code applies to, with the supermarkets warning against a one-size-fits-all approach. They also want other large retailers like Amazon and Costco to be included. That seems unlikely, but I’m not sure of the reasons why.
And finally – one of the first plant-based meat companies to come to market – Sunfed – has closed. Its founder Shama Sukul Lee said she was left with no choice, after running “very lean for far too long with not much resources for growth activities such as distribution and marketing”. Sunfed also couldn’t secure more investment beyond its initial raise in 2018, with Lee saying the VC market had moved on from the “plant-based gold rush”.
It was an interesting comment in light of a discussion I had with food futurist, Tony Hunter, this week for the podcast.
He was saying that sometimes the first mover advantage is not necessarily an advantage, particularly in high tech industries that require significant amounts of money for the initial development.
But I did love what Lee said about manufacturing, “[M]anufacturing and FMCG are in the physical world, with a lot more complexity and moving parts. It is generally a longer-term play where you have to build real things”. Indeed.
