Mighty Craft Limited has established the Whisky Development Syndicate, a separate legal entity, to help achieve its ambition of 1.5m litres of maturing whisky by 2025.
Whisky is the number one spirits category in Australia, with a total value share of 43 per cent, and a growth in Australia of 6.9 per cent over the last five years. Nevertheless, the spirit also represents unique challenges for owners and producers, with a maturation period of between three to five years required before product can be sold.
This is where Mighty Craft hopes the Whisky Development Syndicate (WDS) will prove its worth, raising funds that will be used to assist whisky production, reduce overheads and increase asset utilisation.
The WDS will also provide immediate capital to Mighty Craft while the company waits for whisky inventories to reach workable age and scale. For investors, Mighty Craft believe that the WDS will allow the opportunity to invest in an appreciating asset class.
Mark Haysman, Mighty Craft’s Managing Director, said: “This is an exciting and unique opportunity for Mighty Craft.”
“Whisky is a unique asset class that appreciates significantly in value over the maturation cycle – the issue the industry has always faced is locking up capital for the maturation period, which can be three to five years or more,” Haysman continued.
“This collaboration will allow Mighty Craft to build its whisky inventory without using current cash reserves, and whilst retaining a significant portion of the value crated through the cycle for MCL shareholders.”
Funds raised by the WDS will also assist Mighty Craft in building brand awareness for spirits in its whisky program, including 78 Degrees and the Hidden Lake brand (which will be launched shortly). Kangaroo Island Spirits are also developing a single malt.
As part of the partnership, barrels will be acquired and owned by WDS, which will then contract Mighty Craft to fill the barrels with new make spirit. The filled barrel will be owned by WDS, with Mighty Craft managing the maturation and storage under contract. Finally, the filled barrel of aged spirit will be sold to Mighty Craft, at which point the product can be bottled and sold. There is a commitment that all WDS inventory will be sold to Mighty Craft, with the spirit then sold to customers through the company’s brands.
Nevertheless, Mighty Craft say that ‘WDS will be run independently of Mighty Craft, with costs and pricing to be determined on arms-length commercial terms.’
Hayman believes that this is the first time such a funding mechanism has been used in Australia, though it has previously been executed internationally with success.
WDS is headed by former Lark executive, Chris Malcolm, alongside a team of ‘globally and locally renowned experts.’ Malcolm is also chairman of the Spirits Advisory Board at Mighty Craft.