Well-heeled raise a glass to Ned whisky
The wealthy group behind nascent local whisky Ned is keen to taste success in a new field.
Gerry Harvey has joined other wealthy investors and bankers to invest $20 million to build Australia’s biggest whisky company, which is planning to list on the ASX this year.
Top Shelf International, which is run by former financial and healthcare executives, has quietly launched the Ned whisky brand into independent liquor chains after building the country’s largest distillery over the past four years in the Melbourne suburb of Campbellfield.
The company survived a Federal Court battle over its brand and has just completed a $3.5m raising from its private investors that values the private company at $50m. The funds will be spent on marketing the brand and strengthening its management team with a view to an initial public offering by about October.
By then, sales of Ned whisky in ready-to-drink cans and 750ml bottles are forecast to reach $3.4m, up from $460,000 in the previous 12 months that served as a soft launch for the brand.
The executives behind Ned say the potential for the group is much higher. Founder Drew Fairchild, a former chief financial officer for Cleanaway and Shell, said the group aimed to capture 5 per cent of Australia’s $4 billion “dark spirit” market that is now dominated by North American brands such as Jack Daniel’s and Jim Beam.
“This is probably the last market in the world that has not been disrupted,” Fairchild tells The Weekend Australian. “So we think there’s an opportunity to build out a thriving spirits business in Australia. There’s such a large market for us to compete in, innovate and take market share with new products.”
Investors in the company include Harvey’s family office and another member of The List — Australia’s Richest 250 in Bruce Neill, who recently wrested control of the board at the ASX-listed Australian Whisky Holdings, which also has a shareholding in Top Shelf.
Other shareholders include Sydney investment firm Alium Capital Management, Aurizon chairman Tim Poole, Robert Mead of Endeavor Asset Management and Richard Pegum and Paul Henry of Bennelong Asset Management.
Top Shelf chairman and shareholder Adem Karafili is a former executive at vitamins giant Swisse, which was sold to Chinese company Biostime (now Health & Happiness Global) for $1.67bn in 2015. He says the investors were attracted by the challenge of building a big Australian brand in what has until now been a collection of small local operators based mostly in Tasmania.
“When you look at it, you ask, ‘Why hasn’t anyone done this before?’ Karafili says. “You’ve got distillers who are craftsman and essentially just about all of them are operating like that. Our background is commercial and financial … so when we started out the market opportunity was there.
“Then it was a fact-finding exercise and it was about how much market share we could win, given the Ned brand was a good brand as well.”
The business was founded in 2015, just as Karafili was planning to leave Swisse after the sale (he was earmarked to take over from Radek Sali as chief executive) and at first sourced whisky from third parties to sell in Ned cans.
Karafili and Fairchild, long-time friends, chose the Ned brand and picture of the bushranger Ned Kelly to be “daring” and appeal to spirit drinkers, but almost straight away they faced a legal challenge from a wine spritzer maker.
The matter went as far as the Federal Court, where Top Shelf had a comprehensive victory. “The real challenge is it took momentum out of the business,” Karafili says. “You’ve got a brand-business but we needed our brand. It took 14 months … but it was an emphatic win.”
The company has since spent $20m on the Campbellfield plant to support what has been $150m in retail sales, including a full automated spirit wash and beer brewhouse, Australia’s largest pot stills, and canning, bottling and kegging facilities to produce more than 70 million cans and 40 million bottles a year.
All of this has required patience from investors, says Fairchild. “The key is maturation time. To call it whisky in Australia it has to be two years. You can produce a good whisky after about two years.
“We thought ‘we need to overcome this barrier to entry’. So we looked at the market and through the Ned brand you could prospectively win 5 per cent market share. So we decided we needed to build a site capable of doing that. That’s our starting point. So that is what we have done. We had no ability to scale this brand unless we put in this infrastructure.”
Karafili says Ned is now for sale in about 300 stores around Australia as part of a deliberate strategy of building a following in independent liquor stores before hopefully being sold in bigger outlets.
Top Shelf has tracked data in 34 outlets that shows, on a like-for-like basis, consumers have been buying Ned at 75 per cent the rate of Jack Daniel’s sales, 65 per cent of Jim Beam and it is outselling Canadian Club cans by 150 per cent.
“In Swisse we grew out of independent chemists and then went into the majors. You can test your brand, your flavour profiles that way. We are very comfortable with that,” Karafili says. “We are not asking people to do much. What we are saying is here is an alternative to these big North American brands.”
As sales grow this year, Karafili and his management team will turn their attention to preparing the company for a stockmarket listing.
“We are actively working towards an IPO and will have the business and board structured that way. If we decided to raise money privately we could do so, but we are looking at an IPO. We could be looking at raising $20m.
“If we get this right, we’ve got an extraordinary opportunity.”
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