Less than 18 months after raising $2 million in crowdfunding, Auckland-based Behemoth Brewing Co. is looking for additional capital as it aims to expand its empire.
Behemoth opened its shareholder-funded brewery-restaurant in August before having to almost immediately shut thanks to Auckland’s second wave of COVID-19 community transmission.
Auckland was still under restrictions when Behemoth scheduled its first annual meeting, so husband and wife owners Andrew Childs and Hannah Childs-Miller hosted a virtual AGM.
In the meeting, the pair revealed to shareholders they would be going back to the well to raise up to $1.5 million for a brewery expansion as well as adding additional venues, including suburban venues in Auckland, fillery bars in Wellington and Christchurch and a West Auckland taproom and a barrel-aging facility.
Childs said the second capital raise will allow the brewery to grow capacity by adding more fermentation vessels as well as physically expanding into the next-door property which would become a conditioning and packaging hall.
Originally the brewery was going to be dedicated to smaller volume seasonal beers with the core range continuing to be brewed under contract at Steam and Deep Creek, but Childs now wants to bring some 80 per cent of production in-house including a number of core range beers.
Childs said they would also increase the capacity of their chiller to keep all Auckland-bound stock on site rather than using third parties.
He said the expansion “allows us to control our own destiny”.
“We’re going to be more efficient, more streamlined and increase consistency.”
The second capital raise will be done through Snowball Effect and existing shareholders get first right of refusal on the new shares.
Childs said the new premises in Auckland will be “storefront neighbourhood venues” – with both beer and food supplied from Behemoth’s central Auckland brewery and kitchen.
“Rather than running multiple kitchens we can make the food here and cold-freight it to the smaller venues.”
Childs said having multiple venues was always on the agenda.
“It was always part of our medium-term plan to have more small venues to shore up our route to market, and to make sure we’re pouring beers in environments we can control,” he said.
“When we crowdfunded in early 2019 we outlined that we needed $3.5 million in capital to activate all the things we wanted to do within our strategy.
At that time we raised $2.1 million, mainly from retail investors with New Zealand citizenship or residency.
“Additional capital is still required to move to the next phase of our strategy [which] directly provides economies of scale, cost savings and the distribution of beers.
“This time we will also open up the offer to our fans overseas, as strong interest has been shown from Australia, Singapore and Hong Kong.”
Of most interest is the decision to look for a barrel-aging facility and taproom in west Auckland, an area Childs said was “under-represented in terms of awesome beer” because of the distribution monopoly held by the two licencing trusts that operate in the area.
The Portage and Waitakere Trusts – collectively known as The Trusts – control the bottle stores and bars in the west Auckland area.
The trusts do not allow beer to be sold in supermarkets as happens in the rest of New Zealand. However, production breweries and wineries are outside Trusts control because their Customs-controlled areas licence allows the sale of alcohol on-premise.
“The way we get around the Trusts rules is to have a small brewery out there – around 600 litres – because if you’re manufacturing you’re allowed to serve alcohol so that’s how we get around that,” Childs said.
Behemoth recorded a net loss in the 2020 financial year of $287,455 on revenue of $4.4 million. However, in the year to September 2020 they returned a net profit of $457,550 on revenue of $6.5 million.