In a series of announcements to the ASX today, Mighty Craft, formerly Founders First, has outlined several business changes as a result of a “more conservative approach” prompted by COVID-19.
The craft business accelerator said it was acquiring an option to move to a majority stake in one of its best performing breweries, Slipstream Brewing Co., and has made the decision to cancel plans for Jetty Road to move into South Melbourne, instead it will be opening a new venue in a Victorian holiday destination.
Jetty Road drops South Melbourne plans
It said it would be ‘pivoting’ to a “more capital-light venue strategy” more than a year after $3.5 million plans were announced for the brand to open a 250-capacity gastropub in South Melbourne.
Jetty Road has agreed to exit the lease on the site for a termination fee of $311,000.
Instead, Jetty Road Brewery will open a venue at 82-84 Mount Joy Parade in Lorne, Victoria, in early December.
It will initially be a pop-up summer taproom, but the company intends to sign a longer-term lease over the coming months and commit to a further upgrade of the site before peak season in 2021.
Mighty Craft said it was one of Victoria’s most popular holiday destinations and the venue was a “unique opportunity” in the centre of the town with a 1am liquor licence and capacity for 150 people.
It is one of only two on-premise licenses in Lorne, it said, with initial development costs of $165,000 and monthly rent of $15,000, making it the “capital light” option.
Mighty Craft said that Lorne has around 1 million visitors a year and that the development will allow the Jetty Road brand to reach outside of the Mornington Peninsula.
Mark Haysman, chief executive at Mighty Craft, said that COVID had proven an important learning curve.
“We’ve learnt a lot of lessons out of COVID and the importance of a business like Jetty Road to broaden its appeal,” he told Brews News.
“Particularly over the next few years, we see Aussies supporting local, not just craft, but travelling locally over holiday periods.
“As a result, we think the Mornington Peninsula and other coastal regions will be so busy and we think Lorne will be a great opportunity to bring Jetty Road to life over there.”
Mighty Craft’s experiences in other tourist destinations such as the Hunter Valley and Kangaroo Island have aided in the decision, he said.
“The venue in Hunter Valley is going very well now, and with Kangaroo Island Distillery as well.
“Those iconic Australian regions are what we love. These are places Aussies love to go and will be well supported going forward, and that is going to be good for our partners and Mighty Craft as well.”
In its statement to the ASX Mighty Craft said the decision reflected “the reality that COVID is presenting a number of opportunities in the venue space that are lower risk and require less capital to achieve the same outcome”.
Mighty Craft takes majority stake in Slipstream
Mighty Craft has also acquired an option to up its stake in Brisbane’s Slipstream Brewing.
The deal gives the accelerator the option to grow its share in the business to 61 per cent, with Slipstream’s financials becoming integrated into Mighty Craft’s, which are reported to the Australian Securities Exchange.
Mighty Craft, then known as Founders First, first became involved with Slipstream in November 2019.
The funds from the latest deal will be used to launch a new brewpub onsite in Brisbane, expand capacity at the brewery and invest in brand marketing and innovation, Mighty Craft told the ASX.
Haysman said that they were excited to be doing even more with Slipstream going forward.
“With Slipstream the key for us is that our model is quite flexible,” he told Brews News.
“With Deale and Elisa, they’re keen to continue to run the business and have a key role in it. They want to play key active roles and they are a delight to work with.
“Our ethos is to support founders and help drive their growth agenda. We want founders like that to have skin in the game and partner with us, so we don’t need to buy the business in full.”
The accelerator and venue business said that Slipstream was one of the best-performing brands in its portfolio, growing 69 per cent in the first quarter of its financial year, despite the pressures of COVID.
It will contribute $3 million in sales to Mighty Craft on a consolidated basis, the company revealed.
As part of the $1.5 million deal, $1 million of the funding for Slipstream will be advanced in exchange for the issue of a convertible note, which can be converted into fully paid ordinary shares in Slipstream Brewing Company.
Once converted, Mighty Craft will gain the controlling interest in Slipstream, accounting for an additional 16 per cent interest in the brewery.
Up to $500,000 will go toward debt funding, which Mighty Craft will charge at commercial interest rates. The loan would have a minimum two-year maturity, it said.