Lark has announced it has entered into a strategic partnership with Seppeltsfield Wines, which will secure the distillery access to, and exclusivity over, premium oak barrels to help provide certainty over its future maturation requirements.
In addition the distillery has announced plans for a $15m conditional share placement to Seppeltsfield Wines, an entity associated with Lark Director Warren Randall ($14.5m), Domenic Panaccio ($0.25m) and David Dearie ($0.25m).
Lark is also undertaking an unconditional institutional placement at $0.85 per share, to raise around $6.5m and a non-underwritten share purchase plan (“SPP”) intending to raise up to $1m.
The strategic partnership has been signed as a 10-year agreement with a 10-year option for extension by Lark. The deal will give Lark access to rare, fortified, Tawny, Muscat, Tokay, PX and Olorosso barrels, which Lark said will be central to its premium portfolio offering and ongoing expansion strategy, both domestically and internationally.
Lark CEO Sash Sharma said: “The strategic partnership with Seppeltsfield marks a significant milestone for Lark. This, in addition to the equity raise being undertaken, will equip Lark with the resources to continue to produce exceptional whisky while providing the balance sheet flexibility to invest in our brands, facilities and distilling production.
“Our goal is to accelerate our growth and drive increased shareholder returns through these strategic initiatives.”
He added: “In providing security of access to some of the world’s highest quality barrels, the strategic partnership with Seppeltsfield creates further competitive advantage for Lark in an integral part of our Whisky making process.
“The partnership also lays a solid foundation for Lark’s future portfolio and brand offerings. Upweighted brand and marketing spend will see Lark investing ahead to enhance Global appeal and build awareness, positioning us well for success in new markets and channels. Additionally, we plan to enhance our cellar door experience in Hobart to better engage with our consumers and trade partners.
“Finally, this investment also supports further development of the Pontville site, expanding production and storage capacity as we aim to establish Pontville as the long-term home of the Lark brand.”
In its statement to the ASX about the equity raise, Lark said: “Proceeds from the Equity Raising will provide Lark with balance sheet flexibility to invest in the Lark brand and facilities to drive the export strategy and accelerate growth. This investment includes further development of the Pontville site which will see increased production and storage capacity, along with enhancements to Lark’s cellar door offering in Hobart.
“Brand and marketing investment will be deployed against Lark’s brand restage and in export market brand investment including Global Travel Retail expansion, with distilling production scaling up to support increased future demand.”
The conditional placement raise of $15m is subject to shareholder approval at an extraordinary general meeting, which will be held in late August or early September.
Lark also issued a quarterly report for the fourth quarter, ending 30 June 2024, which stated net sales revenue of $3.3m for the quarter and $14m for FY24, which are down $0.7m and $3.1m respectively on the prior corresponding period.
Lark said sales for quarter were impacted by the known slowdown in the Chinese Indirect Export channel, soft trading conditions in domestic B2B market, and Lark hospitality venues, partially offset by stronger Direct Export, Global Travel Retail and Ecommerce sales.
Sharma said: “The fourth quarter was an important quarter for Lark, we achieved a number of important milestones for both our domestic and export businesses. Operationally our Q4 sales of $3.3m were in-line with our market update from 12 June 2024.
“Our direct export sales for Q4 and H2, were $0.3m and $0.9m respectively, with H2 sales offsetting more than half the shortfall in Chinese Indirect Export Channel of $1.6m from H2FY23. Additionally, for our direct export business, stock has now cleared customs in all four markets, with a planned reorder from Indonesia shipped in Q1FY25.
“We have launch events planned for Singapore and Indonesia in Q1FY25, where the focus is to build awareness both with trade and direct consumers as well as increase distribution. The performance of our nascent GTR business was another highlight for FY24, achieving sales of $1.1m.
“Domestically, transition work is progressing well in advance of the exciting ‘go-live’ on 1st August with our new domestic distribution partner, Spirits Platform. The Spirits Platform team are working closely, and very well with our existing Lark team to ensure a smooth handover.”
He added: “In line with our strategic priority to build long term brand value, work has a commenced on our Brand & Portfolio restage, we have appointed LOVE, a high-quality global creative agency, experienced in the Luxury alcohol space.
“This exciting workstream will support our global expansion ambitions, positioning Tasmania as the epicentre of new world whisky, with Lark as the differentiated leader. Finally, in relation to our Bothwell Distillery, we appointed a Sales Agent in July, with a sales and marketing campaign planned to commence in spring.”