The tragedy of a leading New Zealand brewery is the latest cautionary tale for those seeking their fortune in craft beer.
On February 19th, the Moa Group announced it was selling its brewing operations for a paltry NZD 1.9 million (USD 1.4 million).
Moa Brewing Co. had reportedly been seeking a buyer of their unprofitable brewing operations for some time.
The move to sell is unsurprising to those watching New Zealand’s beer market: Moa had struggled to achieve profitability since going public in 2012.
However, the sale price underlines Moa’s drawn-out and painful decline.
Less than a decade ago, the brewer had been valued at NZD 38.5 million (USD 27.9 million).
In a move that may reflect the lack of market confidence in the brewer’s prospects, Moa Brewing Co’s saviour has come from within.
In what is effectively a partial management buy-out, a firm owned by Moa’s current CEO Stephen Smith and his family has bought the brewery on a “debt and cash free basis”.
Moa’s NZX statement highlighted that “Stephen with [the] support of his family is the right person to take the business forward and will be a true protector of the Moa brand”.
While the NZX announcement and extensive media reporting note Mr Smith’s purchasing vehicle as Mallbeca Limited, a recent check on the New Zealand Companies Register found no record of such a firm.
However, a similarly named company owned by Stephen Smith & Philip Smith – Mallbeca Holdings Limited – was incorporated on February 5 this year, only weeks before the official announcement on the NZX.
Whether this apparently last-minute registration reflects Moa’s desperation is in question. What is clear, however, is the challenging conditions facing Moa today contrast with early promise.
The brewery was founded in Marlborough, a picturesque wine-growing region in the northeast of New Zealand’s South Island, in 2003. Founder Josh Scott was the scion of a New Zealand wine dynasty and the country’s first Master Cicerone.
Mr Scott’s father, Allan Scott, is one of New Zealand’s better-known winemakers and a brand unto himself for those browsing supermarket aisles around the island-nation.
After a stint overseas (colloquially referred to as an ‘OE’ by Kiwis), the younger Scott – breaking with family tradition – switched from winemaking to brewing.
Despite initial opposition, the elder Scott also was an early investor in Moa. The family winery’s success in the mid-2000s helping fund the brewery.
By 2007, Moa hired New Zealander David Nicholls to become Moa’s head brewer, simultaneously scaling both production and reputation.
Nicholls, who had travelled overseas in brewing operations in countries like Papua New Guinea and St Lucia, achieved a level of praise amongst Kiwi outspoken and blunt beer critics.
The involvement of Mr Nicholls helped Moa established a positive reputation for their beers. They expanded internationally, helped by Alan Scott Wineries distribution relationships in Australia and the United States.
In 2010, 42Below founder Geoff Ross invested in the brewery, which represented a considerable opportunity for growth and publicity.
Mr Ross had built his vodka brand through loud marketing, rapid global expansion and reinvestment of revenue into business operations, a formula he sought to apply to the beer scene.
The acquisition of 42 Below by Bacardi in 2006 for NZD 138 million (then USD 91 million), an exceptional sum for a New Zealand firm, set the stage for Mr Ross to invest and become Moa’s CEO.
The Moa Group’s IPO on New Zealand’s stock exchange in 2012 had strong echoes of 42 Below’s strategy.
Indicative of Moa’s grand ambitions, Moa’s Letter To Investors in their IPO document argued that New Zealand lacked a beer tied to the country’s identity and that Moa could become ‘“New Zealand’s Beer, Globally”’.
At the time, local investors shared Mr Ross’ optimism. More Silicon Valley than Marlborough, the brewery’s listing party took place on Auckland’s swanky waterfront.
The audience featured bankers, investors and journalists – eschewing the quieter and more rustic traditions of New Zealand’s craft beer scene.
Then-NZX chief executive Tim Bennet (in attendance) placed Moa among “great New Zealand companies”, arguing it set a positive precedent to show the country was an “attractive place to invest”.
Sadly, fortune didn’t favour Moa after listing. Despite strong marketing, international distribution and even gimmicks like making a collaboration beer with Australian cricketer-celebrity Shane Warne, the brewery could never get their finances into the green.
Moa seems to have had not one but two Achilles heels: an appetite for self-inflicted reputational damage and an aggressive business ethos that oversold the firm’s prospects.
The brewery faced sustained and widespread criticism for its controversial brand and marketing activities.
Moa’s aforementioned IPA document – replete with Mad Men-style photography, talk of manhood and was described by beer writer Phil Cook as “needlessly, aggressively, and pointlessly gendered and bursting with wank” in 2012.
Moa’s target audience was those at “the super-premium end of modern manhood”; they also subtitled the entire Investment Statement as “Your Guide to Owning A Brewery And Other Tips For Modern Manhood”.
The document’s photographic direction emphasised their disregard for a female target audience: the front cover featured a photo of a woman in a short skirt walking up a flight of stairs, a ‘paid advertisement’ deep in the document showed a naked horserider, and much more.
It wasn’t a one-time complaint: at a shareholder meeting in 2012, one Moa shareholder told the firm’s CEO that some of their proposed advertising was “really unacceptable”.
The ad in question featured a feminised beer bottle that spoke with an American accent and talked about having botox injections.
Another investor shared that he’d heard a supermarket shopper call the Moa’s branding “very misogynistic”.
To dive into the range of misogynistic, homphobic and even racist advertising Moa deployed, the Bottle Neck’s Dylan Jauslin has written a well-researched extended piece that includes samples of the ads (plus his unique take on Moa’s overall failings).
Regarding the business’ strategy, profitability always seemed to ‘just around the corner’.
Despite claims in 2016 by management and financial researchers that the business would enter the green, the brewery’s growth (including their presence in markets like the United States, Cambodia, Singapore and Vietnam) never translated into profit.
The 42 Below model of reinvesting revenue into rapid international expansion, a strategy that clearly suited higher value spirits over premium craft beer, appears to have hit a snag by 2018.
The last blog post on the Moa website, by Moa’s Asia Market Manager in August of that year, shared a tale of bringing Chinese beverage professionals hunting deer in New Zealand. The last post on Moa’s Hong Kong Facebook Page was in October 2019.
The market gradually began to concur. Moa shares never again hit the highs they reached during the IPO. Share value trended downwards, hitting a nadir of just NZD 0.12 in March 2020.
To shore up the struggling brewing arm of their business, Moa shifted into hospitality through acquisitions.
The strategy intended to give Moa a guaranteed audience and drive volume growth in premium venues located around Auckland’s wealthier suburbs.
The Group purchased Auckland-based restaurant and bar group Savour in 2019 with much fanfare and later acquired restaurant Non-Solo Pizza, a premium Italian restaurant located in the swanky suburb of Parnell.
The shift in strategy appears to have paid off. The divestment notice to New Zealand’s stock exchange highlights hospitality operations to the Group accounted for 65% of revenue and 100% of profitability in FY2020.
Unfortunately, the expansion into direct ownership of bars and restaurants didn’t neatly integrate into Moa’s brewing arm.
Despite Moa’s range of beers (particularly their Belgian styles) being award-winning and received critical praise, this strategy is a deeper cautionary tale for those who seek to fuse their culinary and craft arms together.
The nail in the coffin for the brewery’s former model, besides COVID-19, was the departure of Head Brewer Nicholls (who has gone on to set-up his own brewery in a Blenheim-based vineyard).
However, with more focused leadership and a more realistic strategy, Moa’s grim situation may still be salvageable.
New owner Mr Smith is a seasoned veteran in the brewing business, having spent more than 15 years in marketing and sales at Australasian brewing conglomerate Lion.
A similar strategy of a serious brand refresh and refocusing on a scaled-down range of higher quality beers may be in order. New Zealand has no shortage of brewing talent, so even the departure of crucial brewing figures may not be as disastrous as it may seem.
The story of Moa is a reminder to all of us in the beer industry that great beer can’t be saved by a misguided business strategy, wherever you are in the world. Moa’s stakeholders failed to truly understand their market and adapt to the changing ideologies of consumers.
For readers not familiar with New Zealand fauna, Moa’s potential fate is richly ironic given their choice of name.
Moa were giant flightless birds that went extinct due to overhunting several countries ago.
The brewery’s new owners now face an upward battle to stop their brand from experiencing a similar fate.