Lark Distilling hits reset button on sales slump as it looks to be leader in new world whisky

The listed whisky maker has hit the reset button, using a partnership with Seppeltsfield Wines to strengthen its challenge to compete for the best single malt whisky globally.

Tasmanian whisky-maker Lark Distilling will use a strategic partnership with Seppeltsfield Wines to steer towards an ambitious target of being the world leader of whisky amid a sharp fall in sales.

The group is undergoing a reset as it moves into sustainable growth streams following a poor period for the business among challenging economic conditions and a slowdown in China.

Lark chief executive Sash Sharma said the company would lead the way in Tasmanian whisky and was confident the state would be the next centre of quality whiskey.

“There are plenty of reasons that give us this belief; over 30 years of history as Australia’s and Tasmania’s first single malt, our story provenance and incredible climate to create the finest whiskey,” Mr Sharma said.

“Our Central Highlands Tasmanian peat bog, which helps contribute to our wonderful house style, and access to some of the best casts in the world.”

Seppeltsfield Wines will pour $14.5m into Lark in a partnership that will provide the ASX-listed distillery with exclusive access to premium oak barrels for the next 10 years, with a 10-year option to extend.

Lark Distillery will make its site in Pontville, Tasmania its new long-term headquarters.

Seppeltsfield, owned by Lark director Warren Randall, will raise its ownership in the company from 3.8 per cent to 19.5 per cent.

Mr Sharma said the partnership, which forms part of a $25m raising, will provide certainty over Lark’s maturation requirements and offer it an advantage in a competitive market.

“The importance of cask can’t be underestimated in the whisky- making process. As new-make spirit is placed in cask, the cask and spirit interact over time, with the wood providing flavours, colours and aromas to the whisky while also removing unwanted traits,” he said.

“More than 60 per cent of Lark’s whisky product character is influenced by this interaction.

“The continuity of supply (from Seppeltsfield) of the highest quality cask creates a key competitive advantage for Lark and is one where there are notable precedents internationally, including the number one single malt in the world, the Macallan.”

The ability to have access to premium oak barrels will play an important role in creating more rounded whiskies. Picture: Mireille Merlet

Sales of its award-winning whisky slumped 18 per cent in fiscal year 2024 to $14m, following an 18.3 per slump in FY23. Mr Sharma said the pullback was on par with previous guidance and was driven by a combination of a slowdown in the Chinese indirect export channels and softer domestic conditions, including at its hospitality venues.

Lark registered a loss of $4.6m for the financial year, a fall of 6.9 per cent, as profit margins slid from 68.9 per cent to 67.8 per cent. Challenging trading conditions were expected to continue with consumers cautious amid cost-of-living pressures.

As part of the company’s reset, Lark will target growth in its global travel retail stream, which Mr Sharma said was a vital channel, one that allowed it to cut through as Australia’s No. 1 luxury single malt whisky.

The company has permanent visibility at airport duty free outlets in Sydney and Melbourne, which helped the stream generate $1.1m in sales. In addition, Lark has secured a deal with Qantas that will make Lark Classic Cask the exclusive Australian single malt whisky served on Qantas first-class flights and in first-class lounges.

“The partnership with Qantas gives us access to high-net-worth clients and building a brand and presence in premium settings,” Mr Sharma said

“What you can see from these partnerships is that they help to raise the profile and awareness of Lark while also driving relevance and including new audiences.”

Lark is undergoing a reset following difficult few years for the business. Picture: Chris Kidd

Lark will also migrate away from Cambridge as its primary production centre as it looks to move distilling operations to an upgraded Pontville site, which Mr Sharma said would be the long-term home of Lark.

“This measured, modular ­approach towards our distilling assets means that our Bothwell Distillery is surplus to our ­requirements, with a sales and marketing campaign to support its divestment planned to commence in spring,” he said.

“This transition will see focus, efficiency, effectiveness and collaboration – everything under one roof in time, and a site fitting for a future global whisky icon.”

Lark has also moved to its domestic distribution partner, Spirits Platform, for the Australian B2B channels, which will result in increased coverage in the wholesale and independents channel.

Barrenjoey analyst Nick McGarrigle said in the wake of the largely prereported result the company was in a position to propel its brand into offshore markets in order to build demand to take advantage of the significant whisky bank.

“We see the business clear of one-off and unsustainable channel sales now, and in a position to leverage that historic brand, award-winning product and substantial whisky bank to develop into a compelling domestic and international whisky brand,” he said.

Lark was founded by Bill Lark who no longer sits on the board but still represents the company at events including at trade launches in Singapore and Indonesia last month.

Lark shares were up 0.6 per cent to 92c on Tuesday, reducing total falls since January 1 to 27 per cent.

Originally published as Lark Distilling hits reset button on sales slump as it looks to be leader in new world whisky