Mighty Craft To Buy Mismatch In $47m Deal

Mismatch Brewing are set to join the Mighty Craft group of Australian beverage brands as part of a $47m buyout that will see the ASX-listed investor acquire the Adelaide Hills Group (AHG), which also owns the Hills Cider Company and Adelaide Hills Distillery.

Mighty Craft, which launched in 2017 as Founders First, will pay $27 million and offer $20 million in shares to acquire 100 percent of the company as well as 75 percent of the Lot 100 venue in the Adelaide Hills, which is the impressive hilltop home of the group of drinks brands as well as the site of Mismatch's brewery.

The proposed acquisition is the biggest move to date by Mighty Craft, which is already invested to varying degrees in a number of other brewing companies – Jetty Road, FogHorn, Sauce, Ballistic, Slipstream, and Sparkke – as well as other craft producers of alcoholic beverages. The company operates two venues, The Mighty Hunter Valley (also home to FogHorn's second brewery, formerly the Hunter Beer Co) and The Mighty Moonee Ponds.

It comes just weeks after Mismatch added another major trophy to their impressive haul in recent years – AIBA Best European Style Lager for their Lager – and follows months of beer industry rumours swirling around Mismatch and Mighty Craft, who entered into discussions nine months ago.

The Mighty Craft team says the acquisition of Adelaide Hills Distillery, home of the 78 Degrees range of spirits, will also create one of the largest craft spirit producers in Australia and set them up to become "a leading player in the craft whisky market". AHG co-founders, including Sacha La Forgia, Ewan Brewerton, Steve Dorman, Toby Kline and Marc Huber, will all remain with the business.

 

Two of Mismatch's founders, Ewan Brewerton and Marc Huber (second right and right) collecting the AIBA 2021 Best European Lager trophy in May.

 

Mighty Craft managing director Mark Haysman told The Crafty Pint: “They are really strong brands that fit beautifully with our portfolio. And the guys themselves are really strong entrepreneurial businesspeople themselves and have done a great job building the four individual businesses in their own right.”

Mark says the 100 percent acquisition is the first of its scale for Mighty Craft, which also owns Kangaroo Island Spirits outright, but says the structure of the deal – providing $20 million in new Mighty Craft shares to AHG's shareholders –ensures the founders of Mismatch, the Hills Cider Company and Adelaide Hills Distillery remain at the forefront of their brands.

“It’s a very similar principle where we want the founders to stay in when they want to stay in,” Mark says.

“We want to combine the businesses and for these guys to stay on, and it’s just that they’re holding shares in Mighty Craft over their businesses.”

The acquisition also plugs substantial brewing capacity into Mighty Craft’s network, with Mark saying they're set to spend half a million dollars to bring the Adelaide Hills brewery to a capacity of 2.4 million litres per annum, with space to growth further.

And it's this potential to grow that appealed to the people that have built Mismatch from a contract brand to this point.

"We’ve got a lot less restraints now, and a lot more resources to achieve what we want to achieve," says Mismatch's Marc Huber. "It’s a really good feeling.

"It’s definitely an amazing journey to say the least, a hard one as well – to go from being at the mercy of someone else’s brewing schedule to trying to get your own brewery off the ground and finding the money to do that."

Talking of synergies with their new owners, he says: "We make great beer all the time but we’re not as great at communicating that to the masses. Mighty Craft have been really good at doing that with their brands. Ballistic did an amazing job with the Hottest 100 and getting their brand out there and we’re keen to learn from them.

"We want to be able to share information and resources [within the group] to be more competitive and grow that pie and bring more craft beer to everyone."

Mismatch co-founder and head brewer Ewan Brewerton said it had been "a long, long process" to reach this point, admitting they weren't sure if the deal would go through given the number of brands involved, and describing the current mood as one of "exhaustion and excitement – and just ready to get stuck into it."

He added: "We can get back to the key focus of making beer. We’ve got a pretty large brewery and a lot of capacity to grow into so we’re looking forward to filling that capacity and telling our story to everyone else."

 

Mismatch head brewer Ewan Brewerton sampling one of his earliest brews when Mismatch produced beers at Big Shed.

 

The move also continues the growth of what we've termed "Indie Families" within the craft beverage sector. The Fermentum Group set up by Stone & Wood's founders counts the likes of Fixation, Forest For The Trees and Sunly Seltzer among its homegrown brands and acquired Two Birds in January. Good Drinks, which was established by Gage Roads, also own multiple brands, including Atomic Beer Project, Alby, and Hello Sunshine Cider (all developed in-house) and Matso's, which they bought in 2018.

With the country's major retailers also expanding and promoting their craft style offerings – the Endeavour Drinks Group has launched a number of new brands featuring IPAs, pales and sours, while Coles have just relaunched Tinnies with a new look – the beer landscape continues to evolve rapidly.

Mighty Craft's latest beer brand launched in 2013, initially brewing at other breweries – Mismatch were Big Shed Brewing Concern's first in-house partner when they opened their first brewery in Royal Park. They went on to establish a reputation as a brewer of consistently high quality beers, with last month's AIBA trophy following previous awards success both in their home state and also at The Indies, where their Lager took out Champion Beer in 2018.

Following the move to Lot 100 in the Hay Valley region of the Adelaide Hills, their production and reach grew, as did their focus on developing a sustainable approach to brewing under the Beer With Care banner. They also produce beers for a number of other brewing companies.

Now they become part of a broader portfolio in a move that Mighty Craft's ASX announcement – in which they also outlined plans for a $29m capital raise – says will see the investor's overall projected revenues grow by almost 60 percent.

The future ambitions of Mighty Craft are laid out in a presentation that accompanied today's announcement. Their goal is to grow from five million litres of beer and cider across their brands in FY22 to 12 million by 2025, and to expand the number of venues from 15 to more than 20. They also plan to expand their aged whisky stock from 750-plus to more than 2,000 barrels over that same period.

Mark says while they’ll continue to look for other businesses to invest in – and there are some notable gaps from a geographical perspective – the key thing for them is to have beers that appeal to different types of drinkers and fit well into different breweries and venues.

“Probably ten to 12 [breweries] down the track feels like about the right number, and hopefully they’ll all be really strong in their own home market and some will have the opportunity to grow more beyond that. We think Mismatch can do that.”

 

AHG's Marc Huber, Sacha La Forgia, Leigh Morgan, Toby Kline, Steve Dorman, Vanessa Altamann and Ewan Brewerton.

 

The deal further commits Mighty Craft to the spirit side of their business too, with Adelaide Hills Distillery also collecting an impressive haul of trophies in recent times.

“In the early stages people probably saw us as a craft beer accelerator but we’re really a lot more than that and we’re building a fantastic spirits business and pushing into whisky.”

Mark says their plan is to keep building these brands and make them more available across Australia and globally.

“We’re a proud Australian-owned company, supporting and building great Australian brands and we want the founder of those business to be at the forefront.

“We want to create a business that has a bunch of brands in it where we’re backing the entrepreneurial spirit of Australian brewers and distillers and helping them achieve their dreams.” 


Today's media release

Mighty Craft Managing Director Mark Haysman is pleased to announce that the ASX-listed craft drinks accelerator has entered into an agreement to acquire three of South Australia’s celebrated craft beverage businesses including Adelaide Hills Distillery, Mismatch Brewing and Hills Cider.

The deal also includes 75% ownership of the LOT.100 venue, which is a destination distillery, cellar door, restaurant, and function centre located on an 84-hectare property in the Adelaide Hills.

As part of the $47 million transaction, the businesses’ co-founders Sacha La Forgia, Ewan Brewerton, Steve Dorman and Toby Kline will be retained as they continue to drive growth for the brands.

The combination will transform Mighty Craft into a scaled alcohol producer, wholesaler, and retailer, as well as create one of the largest craft spirit producers in Australia and poised to be a leading player in the craft whisky market.

Haysman is excited by the cross-market opportunities that will be created by the enlarged craft beverage portfolio, bringing the required scale, synergies, and profitability to the Mighty Craft business.

“The combination of the two businesses will mean Mighty Craft’s revenue is forecast to grow by 57% in FY22 with forecast EBITDA in FY22 to be $6 million, bringing immediate profitability to the Mighty Craft model.

“This increased scale and the opportunity to realise significant efficiencies will truly leverage our operating platform and enhance Mighty Craft’s ability to accelerate growth of new and existing craft businesses, as well as consolidating our market position, and making us a real competitor in the craft beverage industry,” he says.

The acquisition will propel Mighty Craft’s ambitious whisky acceleration program. With Adelaide Hills Distillery’s award-winning 78 Degrees range adding to the existing volumes, Mighty Craft will boast a diversified portfolio of whisky at differing price points, taste profiles and maturity.

Similarly, on the brewing side, the addition of Mismatch Brewing will bring significant economies of scale and increased geographic coverage to Mighty Craft’s craft beer portfolio. This high quality, low- cost production facility will enable production synergies as well as the opportunity to take this fast- growing and highly awarded brand beyond the local market and expand distribution to the eastern states.

Haysman says that having the highly specialised production and management from the Adelaide Hills based businesses in Mighty Craft to help integrate the brands, from a production, distribution, and sales and marketing perspective, was an essential part of the deal.

“This merger wouldn’t have been possible without the support of Sacha, Ewan, Steve and Toby and we warmly welcome them to the Mighty Craft team. They will guide us through this transition, ensure alignment of both our interests and people, and drive growth for all our brands,” says Haysman.

Adelaide Hills Distillery’s Founder and Head Distiller Sacha La Forgia is equally excited by the opportunities for growth and profitability.

“We’re thrilled to be part of an incredible team that champions the growth of the Australian craft beverage industry. Their knowledge and team will give us a unique position to grow; not only with our current portfolio but also our emerging whisky offer that will now be part of one Australia’s largest craft spirit producers.”

Toby Kline, Co-founder of Hills Cider, and Ewan Brewerton, Co-founder of Mismatch Brewing Co. & LOT.100, agree. “This next chapter marks our ability to supercharge our growth and better support our customers. The integration of our teams is exciting and between Mighty Craft and our business, we will be stronger together in growing the Australian craft industry.” 


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