Top Shelf International Holdings Ltd (TSI) Earnings Call Transcript & Summary

Good afternoon, everyone, and welcome to the Annual General Meeting of Top Shelf International Holdings Ltd. My name is Adem Karafili, and I'm delighted to address this meeting today as your Chairman. It's a great pleasure to be here, and I welcome all those that are here today. It's a bit of a change from the previous years. I'd like to take this opportunity to thank those that are present for taking the time to come and attend today's meeting. Your support and interest in the company's affairs is very much appreciated by the Board. Before commencing today, I would like to acknowledge the traditional owners and custodians of the land in which we each respectively meet today and pay my respects to their Elders past and present. I extend that respect to Aboriginal and Torres Strait Islanders peoples here today. Before we begin, there's a couple of housekeeping matters. Firstly, if you have not already done so, could you please switch your mobile phones to silent. And secondly, in the unlikely event of an emergency, we ask you to remain calm and follow the instructions of staff who will advise patrons of the necessary action and guide you accordingly. Today's meeting is being held in person and online via the platforms provided by the company share registry. Firstly, I'd like to introduce my fellow directors, Drew Fairchild, Michael East, Peter Cudlipp and Lynette Mayne, who are present in person and attending virtually today. Also present at today's meeting is our Company Secretary, Carlie Hodges; our CFO, Ben Kennare; and our FY '22 audit partner, Brett Croft, from EY. Representatives from our share registry, Boardroom, are also present and will be acting as returning officer and scrutineer. Before we commence the formal part of the meeting, I'll provide you with an overview of the business. I will then invite our CEO, Drew Fairchild, to provide an update on the company's recent performance. If you have any questions, please hold off until after the CEO's presentation. We'll then open the floor and online for questions. This year was one of execution and growth, one of delivering on our promises. We started FY '22 having successfully navigated challenging conditions in the first quarter and ended it with momentum and ongoing confidence in the delivery of our ambition to create a modern Australian spirits company. We could not be more pleased with the progress of NED and Grainshaker. Both brands are now being scaled nationally via Coles, in independent networks through Australian Liquor Marketers and across an increasingly broad footprint of festivals, events and on-premise accounts. They're also receiving recognition for their product quality via industry awards, including being named the whiskey and vodka brands of the year, while our investment in major sponsorships and media has helped both brands take share from international competitors. Our Australian spirits portfolio will be further enhanced with the launch of Act of Treason, our Australian agave brand during the next calendar year. I have no doubt shareholders are excited as we are about this milestone and the opportunity it presents ahead of us. Our confidence in the opportunity to create an Australian agave category has only been strengthened during the course of the last year. By every measure, the agave spirit category is exploding and shows no signs of slowing over the next decade. Due to the investment we have made at our Australian agave spirit farm, we are perfectly placed to capitalize on the surging demand for agave plants and concerns surrounding the ability of traditional growers to provide enough mature plants to meet demand. Domestic and international tailwinds continue to support our strategy. Spirits underpin the growth of the Australian alcohol category with consumer preferences continuing to shift from the incumbent international players to locally owned, premium spirit distillers. The Australian spirits industry is thriving and capable of growth similar scale to the wine industry almost 30 years ago. Employment in Australian distilling increased by 240% at the last census. While in October's federal budget, the government estimated that spirits will contribute 13% more in tax, around $400 million, than forecast this financial year. However, with twice yearly excise increase and the third highest spirits tax regime in the world, Australian spirits can't reach its full potential unless it receives some support to create the investment conditions needed to grow. We're currently talking with government around how they are able to support the ambition. Globally, Top Shelf is ideally placed thanks to a rising appetite for challenger spirits in the international whiskey and agave categories. The strength of our portfolio and scale of our platform, which is unique in Australian spirits, reinforces our credentials to be a global success. The investments we have made are only now starting to materialize. Our asset base allows us to compete at scale and to control our own supply chain. I have no doubt this will ultimately emerge as a critical differentiator as we continue to scale our brands here and overseas. At the core of our spirits platform is, of course, our people. And as part of a planned sequence of Board succession in FY '22, Ken Poutakidis stood down from the Board and was replaced by Lynette Mayne, who has been a fantastic addition to our team. Ken served as a Nonexec Director of Top Shelf for 2 years and was instrumental in guiding us through the IPO and our first 18 months as a listed company. As Chair of Rem and Nom, he was integral in putting in place a succession and resource planning structures to prepare the business for the next phase of growth. As we have in the past, we'll continue to ensure we have the best talent in dedicated roles across Board and management to meet the future needs of our business as we further build out our Australian branded spirits company, including the launch of Act of Treason in the coming year. So before handing to Drew, I just wanted to thank the Board and the entire TSI team for chasing down our goals with passion and commitment. As I mentioned, without your efforts, dedication, love, time, effort, we just would not be here today. So very, very grateful for that. And finally, but definitely not lastly, our shareholders. We're very highly ambitious and driven to succeed, but we cannot build this company with global scale and the global aspirations without your support and commitment. I'm sure you're as excited about the future as we are. I'll now pass over to Drew to present the company's activities in the past year and to provide an update on our plans for the year ahead. Welcome to you, Drew.

Thanks, Adem. Next slide. There we are. Thank you. It's with great pride that I arrived here today and of course, we arrived at our second AGM. Of course, a little bit different this year as Adem mentioned. Quite a few people in the room, for those who have joined us online. I think it's probably the opportunity to have a drink at the end of this presentation that has encouraged people to attend physically. And of course, that's always to our advantage. Of course, 2022, when we look back, it's quite amazing, obviously, how the year has unfolded. Thinking back -- and of course, it's now November, but we're looking at the results for last financial year, to think that we were getting out of lockdown in November. So clearly, quite extraordinary particularly, obviously, being based in Melbourne, the challenges that we faced last year. And of course, it's with great, great pride that we sit here today and can talk about the platform, the opportunity. But most importantly, we're now a branded Australian spirits company with a portfolio envy, I would suggest, of any multinational or certainly domestic player operating in this country. And of course, key to that has been all the work that's been done by the team in the brand architecture across all the brands, NED, Grainshaker. But clearly, it's underpinned by the reveal of our agave brand, Act of Treason. And of course, there will be another brand to come. When we look at next year, of course, it will also be another similar year. The distillery build, I'm pleased to say, is on plan. We're actually heading up there the week after next to look at the enclosed shed. I think our first still, although not connected, is standing in that shed. The team up there have done a great job in building out the new infrastructure. So we've relocated the site to, essentially, the middle of the farm because with a 4-kilometer end-to-end trip, it actually takes some time to get from one track into the next. So all the infrastructure is going in. So we're really pleased in terms of how that project is progressing. And of course, I'll say a little bit more about that when we talk to those slides. But certainly, internally, as Adem mentioned, our confidence on that project has gone from strength to strength. Clearly, the market opportunity has come to us. Tequila growing at 45% per annum. You think about it globally, it only accounts for about 3% share. It's gone ahead of American whiskey in America. You can only imagine what will happen to the extent that the rest of the world follows that trend. And of course, if you look at what's happening in Australia in relation to agave, it's clear to say -- or it's clearly evident, I should say, that, that is indeed the case. So to arrive at a juncture where we've gone from years to months and, arguably, now days where we've got line of sight on agave in the market, we sort of pinch ourselves in terms of right time, right place. And it goes back to the support we've had of shareholders in backing in that opportunity and of course, the management team and our ability to deliver on that. And of course, as we think about the financial performance of the share price, in particular, over the last 12 months, we're not immune to, obviously, the challenges that all small caps have faced. But I think we've fared better than most, to be perfectly frank. And of course, what we have done with absolute focus, with all the capital that we've raised, we've actually reinvested it all principally back into our balance sheet. And of course, that does talk to brands and brands value, but that's where it's actually been reinvested. Very sharp in our focus. We haven't gone out and acquired companies, et cetera. It's gone into building and executing the brand strategy for NED, Grainshaker and of course, now with Act of Treason. So we're delighted that when we sit here and we look at, for example, our net tangible assets, and some of those we don't report on the balance sheet, of course. We carry things at cost. But when you've got 1 million [ wells ], which for the lay person is, and we start to talk in 9-liter cases because that allows us to talk in global comparative terms, close to 250,000 9-liter cases of whiskey available, if you think about the margin available to us on that, you're gusting into the sort of $30 million or $40 million on the margin available. And of course, people will know that whilst we continue to premiumize our portfolio and we welcome Green Sash to our -- actually, last week, it was launched to our portfolio. Again, we typically are still operating on a maturation cycle of 3 Melbourne summers to get the optimum profile. So we turn over that inventory. When we then look at what's actually sitting in the agave farm, we'll talk a little bit about that in a moment, but if you look at an index in Mexico, which is pesos per kilogram, effectively, a farm gate price for agave, and we apply that to what we've actually invested in and the yield that's available to us, that takes you into the AUD 50 million, AUD 60 million in terms of the available yield that we've got. So we now sit here with those assets and that opportunity available to us. And of course, what we have been able to do is demonstrate that we can execute a brand strategy. And that's why we have every confidence that, without getting ahead of ourselves, that Act of Treason, in particular, as we bring that to market will be a slam dunk both domestically and internationally. So we thank our shareholders. Again, we don't accept where the share price is at. It's up to us to ensure that we can best articulate that message as to why we're undervalued. And as I said, raise a sharp focus on execution. And that scoreboard will look after itself. But certainly, as all our shareholders will know and those that are gathered in the room today, we don't accept mediocrity. Our ambitions are global, and we want to be a globally relevant business. I think key to building the platform, of course, is not only the fact that the shareholders have had, it's our staff. When you think about, again, going way back in time, of course, it's people work for this company for free for a long time. And now many years later, we look to repay the faith of those people. And of course, navigating a couple of years of COVID, not actually missing a rostered hour on at our Campbellfield production facility is pretty extraordinary stuff from our team today. And we call out, obviously, the effort from our team in terms of their investment in this business and their faith. And of course, in addition to that, to get to the platform, you've got to have systems, processes, data insights, brands, people, et cetera, et cetera. And I stand here looking at our friends from EY who, of course, shepherded Top Shelf through a business that was pretty formative when we first started and to look back and say that, that capability is now in the business is an amazing thing to call out. So we are now in a position where we've got a repeatable model. And of course, we know the focus of our shareholders is about demonstrating the repeatability of that model. And of course, that talks to revenue growth. It talks to holding cost base. And ultimately, it's show me. And I think what we can do now is clearly show the evidence on the brand growth. And of course, we are holding our cost base, and we'll talk a little bit about that in more detail now. But just one further insight to that is when we look at, for example, July from a seasonality perspective, probably being the last month of the year, and then you go through to, well, December, but really it's sort of an 8- or 10-week period and you look at the revenue and indeed the production requirements and the dispatch and so on and so forth, there's probably a factor of 1 to 7x in terms of our capability to deliver that. And of course, that underpins an even growing ambition in terms of the installed capacity and capability that we actually have in this business to realize that ambition. So we do look forward with great optimism. After those opening remarks, I'll just go through to the next slide. So of course, now, again, those who have been close to us have always had great faith in the products that we make and the brands that we take to market. But it is nice to get that validation, if you like, an external validation. Of course, Melbourne International Spirits Festival calling out NED and of course, next slide, Grainshaker. And what we're really pleased about now and when we talk in a moment, there's a slide that talks to quality, it's the repeatability of the awards that we actually win. And often, we're pretty harsh in ourselves when we say that NED OG, NED Original, it's won a bronze or it's won a silver and then we look at who it's actually competing against and it's a $250, $300 bottle of whiskey that it's actually competing against. So the team that are at it, obviously, under Seb and [ Dean ] and Ben and Jayden and [ Nick ], et cetera, the team at Campbellfield and Somerton have done an incredible job of having consistency of spirit. And it's not only NED. It's also with Grainshaker. And we continue to innovate and bring high-quality products to market, evident by Green Sash and even evident by further flavor additions that we'll bring to market for vodka. Next slide, please. I think some of our stakeholders and shareholders probably may get a little bit sick of, of course, seeing the same slides. But -- and I won't spend a lot of time on some of those same slides. But I think the key thing is, is you know that we're confident when we actually repeat the same message and we're ready to sharpen our focus. And the left-hand side of this particular slide talks to our operating model. So we're very consistent when we talk about our quarterly, our half yearly, our annual performance about how we're executing that operating model. We're growing distribution. We'll talk about revenue in a moment. But given the fantastic performance of, obviously, NED and Grainshaker, particularly NED competing against some of the world's biggest brands, we would have great confidence, of course, that extending that distribution or winning new distribution, for us, is just a question of time. And we are seeing that day in, day out with independent retailers, on-premise accounts that we're landing in terms of growing distribution. And credit to Ryan and his team who are leading the charge there. Channel velocity is about, obviously, selling more of our products. And again, there's a chart that demonstrates the great success we're having in growing particularly, for example, the leading marquee SKU, the NED 700 ml, is a great example of actually growing velocity. Premiumization. Now $76, I think, that the Green Sash is retailing for, $78. So again, that's good, better. Best is yet to come even at higher elevation in terms of price point. And so that obviously allows us to bring -- build margin. But of course, it allows us to build brand as well. And of course, when we think about activating the brand, the team has done an unbelievable job whether it be the TVC; executing our postcode strategy; low-cost investment but very targeted; how it's integrated into on-trade activities; how it's integrated into other sponsorships, for example, around the [ Morans ], et cetera. And of course, we get to December and of course, there's been some challenging wet weather weeks of late. But sort of sitting here saying that there's a couple of million people that will be exposed to our brands, had been in the last few weeks and will continue to be over the next 2 months, is just extraordinary. And particularly, playing in that festivals and events space where we've got 85 festival and events that we're, essentially, first pour, making great contribution margin in each of those events and having the opportunity for people to, obviously, enjoy our products, what a fantastic business that we've actually built in that space. And key to that is actually our supply chain. The team, particularly at Campbellfield, and their ability to service those events -- and of course, it's not only providing product in a timely fashion and so on and so forth and quality product. It's also about taking that product back. And so what we've done is build an operating model that's leveraged our agility, and we really are -- I'd hate to think what our market share is, but we really are without peer playing in that space, particularly in Victoria and increasingly, nationally. And of course, local industry tailwinds. Now, again, we have the advantage, of course. We now have whiskey. We don't have the challenges of international freight. We don't have the challenges of currency. There's an increasing appetite, clearly, for spirits, as we note, with declining sales in beer and wine. We're very much appealing to multi-generations but, of course, new consumers coming into the category. And agave, of course, fits absolutely into that wheelhouse. Next slide, please. The portfolio. It's a pretty compelling portfolio. And of course, the brand to brand positions very much complement each other and very much complement the ethos and attitude of the company. And so you can certainly see and we quite proudly look at them sitting in such a complementary manner. And of course, from a sales perspective, again, when we think about taking the Australian agave to market, particularly into the on-premise but also in the off-premise, we've got one sales team now selling a portfolio. There's no additional cost associated with that. And of course, any additional cost just talk to incremental revenue, but we have that team in place now that talks to operating leverage. And it's very pleasing to say that the agave spirit that we have distilled is exceptional. We, unashamedly, are working back from a position to say that we want to make a world-class agave spirit that compete with the best of the tequilas out of Mexico. I think we're probably up to our 30th, 40th iteration, and what we've made is exceptional. The key for us is now just scaling that. So of course, that allows us to sit across from a potential customer and share that spirit. They love the brand. They love the spirit. So again, we're starting to incorporate that into our portfolio as we look to next calendar year. And of course, it's sort of 9 months away from having that at scale. But nonetheless, it's now part of the ranging conversation, which is really a fantastic position to arrive at. Next slide, please. Again, we were talking before the AGM that sometimes, it seems a bit funny that you get to the end of November and you're still looking back at the results from last financial year. But of course, the purpose of the AGM is, indeed, to receive the financial statements and to take questions in relation to those results and just to call out a number of highlights. And of course, not only looking back to FY '22. Obviously, since then, we've provided the quarterly update, and we'll provide a little bit more of an insight just to where we are, particularly in terms of revenue in November. But when we look at these results and obviously, those that are on the call and in the room will recollect the earlier presentation that we did just after the finalization of the financial statements, and we really spoke about navigating the challenges of COVID. And just to sort of highlight that challenge, now when we looked at our second half revenue versus our first half revenue, it was up 98%. And even today, we were looking back at -- again, thinking back to the dark old days of being locked down between, essentially, July and November. So you could certainly see, again, that magical number of 100% growth evident in that second half versus first half performance. We also didn't have whiskey to sell, which clearly presented a challenge. And when we look back, again, you sort of start this journey and you think about, again, how do you navigate effectively acquiring whiskey, selling whiskey, maturing whiskey, building a distillery, bringing that to market, et cetera, et cetera, and the team have done an amazing job. But clearly, at some point, you're going to have to face that reality that supply doesn't necessarily meet existing or new distribution. And credit to the team, whether it be branding or indeed price point, working through a strategy right through COVID, July and August, and people will know the elevation in the brand, to be in a position that we get to March and finally we've got whiskey at scale and to wind ranging -- national ranging into Coles, we couldn't have done it better. It was just amazing achievement by the team. And then you sort of roll that out and of course, you're then very much focused on delivering customer centricity to those -- to Coles, in particular, and obviously restocking the independents. And we tested their patience. And then, of course, if you look at the data, 26 weeks later and NED 700 ml is sitting at #7 whiskey in Coles, incredible outcome. Really importantly, we've got, obviously, a lot of spirit to sell. Clearly, we demonstrated, I think it was through the quarterly graphic that we presented, we've always sold what we've had access to: high quality, premium spirit domestically and internationally with a stock turn of 2.5 years. We constantly are looking in the S&OP process about how much volume that we've got available and obviously, very much balanced in terms of winning new distribution. But clearly, we have more whiskey, as evident there, in order to be able to support not only domestic but that international aspiration. And of course, agave, we actually have even more available spirit than we do in whiskey. And of course, when you look at that number, I think from a net sales value perspective, it was about $353 million in hand. And we have, as I said, demonstrated, all the inventory that we've had, we've sold it out. And of course, that's what it talks to a growth rate of 100%, which we're happy to put up in headlights. Funding, of course -- again, it was interesting engaging with a number of investors. And one of the sort of key callouts and highlights of the conversation that Adem and I had was the best thing you ever did was deploy the capital that you did when you did. Now some shareholders might look at that and say, well, funding's a challenge and so on and so forth. But I can guarantee you, the moat that we have built for this business is extraordinary. Whether it be the ability to simply stand up a distillery at scale with currency challenges and so on and so forth or to get people or manage development applications and timing or to embark on, essentially, a journey of building a new world category around agave, the moat that we have created is extraordinary because we had the guts to deploy that capital. And we'll talk a little bit about, again, opportunities to further leverage the asset base that we have in a moment. And of course, I would suggest that often, it's the debt provider that is the best judge in terms of the quality of your business and indeed, the prospective quality of your earnings. And so we've been delighted that Longreach have been a key lender to us now in 5 years, going back to 2017 when half of our equipment that they were funding were sitting in Italy. And so they've seen us demonstrate time and time again our keeping our promises, if you like, and working systematically to actually build the platform that we've created and to leverage that in terms of revenue, et cetera, et cetera. And that, of course, was again manifest in the funding that they increased through the half. And so obviously, that talks to, if you like, access to capital, et cetera. We go to the next slide, please. Sorry, just before I do go to that, again, I mentioned it briefly but just to focus. There is a slide that we had in our annual deck, which I know is in the appendix that we've loaded. But if you had a look at that slide, one of the other key callouts that we focused when we talked about the accounts was the first half versus second half operating and group costs. And it went from, of course, challenging with COVID, 88% to 68%. We've held that cost base, and we're growing revenue at 100%. So again, you've got to have the platform in place. You've got to have the capability in order to be able to underpin that growth rate. Of course, it doesn't mean that we're immune. We're obviously very much focusing our resources in an efficient fashion, and we continue to do just that in terms of the way that we simplify our business. We continue to do it in terms of making sure that we've got the right team. And so we are very much focused on that. But we do ask a lot of our people, as I said, given the way in which we are, in fact, growing. Brand performance. I've touched on this in my introductory comments, et cetera. But again, we pinch ourselves to look at NED. I think we were talking about, Adem, when we were doing the non-deal road show, et cetera and, Pete, going way back in the day when we had a sample size, I think, of about 25 stores where we could get, essentially, the scan data relative to competition and that provided us with the validation, if you like, of how strong we thought the brand was. And of course, again, it's just that. It's a sample size. But now when you're looking at -- I don't know how many stores, Ryan, 700 -- 800 stores' scan data week-on-week, there's no hiding. So every Thursday, we get that information, and we're delighted to look at that information to see the performance of NED relative to those global brands. Extraordinary, absolutely extraordinary. And of course, Grainshaker. Again, essentially launched into COVID. Grainshaker, to see that at #10, only behind 2, 4 pillar SKUs in terms of Australian spirits brand, again, extraordinary with further opportunity to obviously grow that category. So that scan data is obviously, again, a validation of the brand strength. And of course, distribution. The next slide -- I think if we go to the next slide -- sorry, I'll just comment on this one. So I've already spoken about this, but it's about quality, quality of the product when I spoke about agave, et cetera. And it's really about consistency. And of course, that's really much evident. I think one thing that's really pleasing for us as we look to next financial year and calendar year is we'll now be able to participate in international awards, not just domestic. And so it will be certainly interesting to see how well we fare internationally. Arguably, some of those awards are easier to win, to be honest, than some of the Australian distillate awards. So that's a fantastic recognition for the team. And of course, it does help in terms of branding, marketing and indeed, execution to have that quality stamp on our bottles. Next slide, please. When you think about our business model, and credit to Jayden, who's here today, and his team, it was really about investing in canning and bottling capacity that would service our brand ambition into the years to come, would allow us to control our own supply chain and now it's entirely evident that that's a critical thing for us to succeed. I don't know how any other Australian spirits company can act at scale if you don't actually control your supply chain. And it's not only your distilling. It's your canning and bottling. When you look at some of the variances, if you like, in terms of Coles placing orders for numbers of cases and then the next week, it's -- they've missed their forecast and they need another 3,000 or 4,000 cases on top of what they've ordered the previous week, you can only do that if you can respond. And of course, the number one issue for retailers is making sure they don't have empty shelves. So we're in the best position possible to do that. So when we think about our asset capacity, we will be using our canning and bottling line for Act of Treason from a bottling perspective. When the glass is manufactured in Victoria, there's no sense in sending that up to Queensland and filling it. And of course, when you look at trade routes, most of them come out of Melbourne as well. So great opportunity for us to leverage that asset into Act of Treason as well. And of course, in time, we'll be looking at the opportunities around agave and of course, in a convenience format as it can. From a co-packing perspective, we do have this strategic asset capacity, and we have a great relationship with Pinnacle. We're looking -- today, I think we've done 252,000 cases in 2 years with Pinnacle. So they are a cornerstone customer. But we have had some challenges, of course, with the smaller end of the spectrum. Again, I'd hate to think how many SKUs that we've done for third party over the last sort of 12 to 18 months. It's probably in the 50s and of course, that talks to utilization and so on and so forth. But really pleasingly, given the quality of the asset, the people and the systems, we are very much confident that we can continue to simplify that particular capacity and monetize it while servicing our own brand ambition. And that will very much simplify our business as we look forward, and a credit to the team that have done just that. Next slide, please. Foundations to be a global success. Adem touched on a number of these points and of course, the next slide does indeed support this. But we have the portfolio. There's great evidence of new world whiskey appetite for different champagnes or sparkling wine, new gen, et cetera, et cetera. Brand Australia, Australian provenance story. We've got the portfolio. Now, of course, we've got the volume as well. So we're well placed to take that to the world. And we were invited to participate in a food and beverage trade show called SIAL in Paris, and we sent 2 of our key executives to that. Fantastic inbound inquiry particularly on Grainshaker given its sort of Eastern European challenges. And of course, NED has always been a feature, if you like, in terms of understanding of what we've sort of set out to achieve from a whiskey perspective with increasing knowledge globally of what we're actually doing from an agave viewpoint. So that provides great foundations as we have successfully rolled out our trademark strategy, and we continue to fine-tune that for all our brands. That's obviously a precursor to international business. We have some fantastic members of our team that have led international growth, whether it be Asahi and of course, Trent's own background. So we're very well advanced in terms of the pillars that we're actually putting in place from an international viewpoint. Green Sash, for example, that's actually the whiskey brand that we would take to the U.S. So we've been building our brand architecture in support of that international ambition as well. And of course, we'll continue to provide updates on that in the weeks and months to come. Global trends. It's even fascinating when you look at -- whether it be Endeavor's report, for example, or in the international markets coming across RTDs in terms of how they underpin growth. I mean we're probably now bordering on the most mature market in the world, and it's been a newfound item, I guess, in some ways to some international markets. And of course, that presents opportunity for us in terms of format and flavor profile and so on and so forth. And of course, trends talks to agave, talks to whiskey, et cetera, et cetera. So we are well placed, both in terms of capability, brand portfolio, to start to think about globalizing this business. And of course, that's not ignoring the domestic opportunity. We will more than double the size of our domestic business as well. Next slide, please. This slide is just really a validation of that. So I made the opening remarks about increasing confidence. Now we have had inquiries about our agave spirit from international people and access to it, not only the brand but the spirit itself. If you look at this, this is a great indicator in terms of, particularly the graphic down below, of the global appetite. I mean we increasingly, of course, operate in a globalized world with greater familiarity, if you like, of products and brands, et cetera, through social media, et cetera, et cetera. And of course, on the right-hand side, and people that follow our Instagram accounts or our LinkedIn account will recognize there's more or less an article every week about agave, about tequila growth, about opportunities for new countries, et cetera. Certainly, some of them we feel at times that we've been the ghostwriter for that. So we're very well placed to, of course, take advantage of that. We'll go to the next slide, please. A globally significant asset. We wanted to call out just the size and the scale in this presentation and indeed, the next couple of slides. Now, of course, when we're building and executing a brand strategy and of course, Trent coming back from having done that with Volcan and obviously with our existing team, we could not be better placed given the work that we've done around brands with [ Matthew and Hutch ] and so on and so forth to execute the Act of Treason brand strategy and to globalize it. But what we have found through the excellence that we've deployed in terms of agronomy and the scale that we've gone after is that this platform that we've built actually can underpin not only our brand ambition, of course, it gives us an opportunity to accelerate our brand ambition, but this asset can underpin Australian agave and taking it to the world. And it really is about the quality of the agronomy, the reproduction of the plants themselves, the mechanization of the harvest, the scale of the distillation. And indeed, we look back and we leverage some of the capability on our Board, for example, Michael East, et cetera, and what actually happened with the Australian wine industry, Trent's background when it comes to Penfolds. And essentially, that industry worked together to take Australian wine to the world. Fascinating to hear Adem engaging with the politicians last week just about this play, about agave and how it can stand alone. It gives us an opportunity to change the excise conversation away from one-size-fits-all when it comes to spirits; how we can build in a narrative around agronomy not dissimilar to, again, a vineyard. But if you actually control the vineyard and you're positioned effectively that the plants themselves reproduce, you've got to harvest them, of course, or collect them, I should say, at next to no cost, mind you, you're in a pretty strong position to actually own the platform when it comes to Australian agave. And of course, Act of Treason, followed by a second brand, that will be the breakthrough for people actually understanding that Australian agave spirit is an outstanding spirit that can be internationalized. So we are now at a juncture, given our confidence in the business and just where we are from an execution viewpoint, that we've got capacity that we can choose to monetize in many different ways. And of course, that's understated, again, in the valuation of Top Shelf. It doesn't sit on our balance sheet. I think it's probably also worth calling out that when we actually bring this spirit to market, of course, we bring -- we're recognizing our account is a biological asset. Most people look at that and say, well, that's a noncash item. It's a free kick. We'll just discount it. But guess what? 9 months from now, essentially, there is no product cost for agave other than the actual cost of harvesting it. So our cash margin when it comes to agave is actually quite extraordinary. So that, for us, is a key callout. There's complexity in how Ben articulates that. But we look forward to arriving at that juncture, of course, when we think about the profitability of our business. Next slide, please. And I guess here it is. Now on the left-hand side, 45% annual growth, extraordinary. We spoke earlier about the ability of Mexico to keep up. We clearly are leading the world when it comes to agronomy, the sensory experience, actually linking that into technology and drones, the work that we're doing with Adelaide University. And all of that, ultimately, talks to product quality, of course. We are literally leading the world. And so when we look at the spirit farm, this little graphic on the right, that doesn't talk to, as I said, a lack of confidence in executing our brand strategy. That's just a recognition that it takes time to build a brand. Now we think we can accelerate that. When we look at that capacity, there clearly is an opportunity when it comes to capacity. And prospectively, more Australian brands, the better, but we control the vineyard, for want of a better term. So there's an opportunity to leverage that in many different ways, and we certainly highlight that because given the capability of our team, as I said, and part of the inbound inquiry, we think that presents us a great opportunity as we look at the next calendar year. And essentially, we're not giving anything away in actually looking at that opportunity. Next slide, please. And there, of course, Act of Treason. Why? Well, again, it was deliberately chosen not so much about the Act of Treason in terms of it being a challenger, but really about the act, if you like, and what that may mean and how we bring that to life. But there was little doubt when we actually did the consumer research. And indeed, the research, with those in the know particularly in Los Angeles, et cetera, that, that brand resonated from day 1. So we certainly think that, that will be a great way in which to cut through and introduce, as I said, an Australian agave spirit to the world. Next slide, please. This slide is really the final slide in the deck in terms of providing our shareholders and stakeholders with an update on trading performance up to November. Of course, it wasn't long ago that we're providing the trading performance up to end of Q1. And of course, in that instance, we called out year-on-year growth from a brand perspective of 252%, which wasn't a bad outcome. When we look at the brand revenue last 12 months run rating at 23, of course, this is up to November. December is, arguably, our busiest month of the year. We're still putting foundations in place, of course, in winning distribution and growing at 100%, which we have consistently done, as I said, even first half -- second half last year, first half versus first half. That, for us, is, again, great validation that it's not only in Coles, independents, et cetera, where we execute on-premise in Grainshaker, festivals and events, that the combination, if you like, and the execution of that channel strategy is very much supporting that brand growth. And ultimately, it's the right price point, the velocity. We're always pushing margin. I think probably just on margin, as you build scale, you actually reduce your cost of sales. So it wasn't up until middle of this year we actually had NED 700 ml, for example, in our bottling line. So that really spoke to the fact that at 7,500 bottles per hour, we didn't need to previously put it on the bottling line to meet demand. We now need to put it on the bottling line. So the cost per unit for NED has dropped extraordinarily as we bring that to market. When we think about cost of production when we're standing up a distillery, probably $9 per [ well ] in terms of whiskey, again, [ well ], for those that maybe new to that term, 700 ml bottle of spirit, 40% proof equals 0.28 [ wells ]. So effectively, 1 [ well ] equals 4 bottles. If we look at that, it was about $9 per [ well ]. We're down to about $5 now. We've halved it. Yet the margin that we report, of course, is first in, first out, goes back to production that we did 2 years ago. So the team out at Campbellfield and Somerton, the way they're focusing on leveraging that asset, and of course, it goes back to that wedge and indeed, making sure that from a utilization perspective that effectively, third parties, if you like, are paying for the labor that we have on site. We continue to drive that cost down. We are embarking on -- and of course, we haven't spoken a lot about ESG in this presentation, but we will continue to talk about that particularly when we quantify, if you like, the carbon benefit of plants in the ground. And that will enable us to tell that story, of course, in a much more forthright sense. So that's a key action that we're working on at the moment. But clearly, having an agave farm with carbon sequestration and plants in the ground puts you in a pretty strong position to be carbon negative. But it's more than that. It's about the biodiversity and so on and so forth. But in addition to that, a key part of our strategy is actually moving to local glass. And so very pleasingly, we'll be bringing an update to our vodka bottle Q1 of next year that also has a dramatic reduction in cost. But of course, there's an ESG benefit as well. So all those opportunities, getting to a business that's now mature and focused, and we start to run all those opportunities to ground as we're very much focused, obviously, on the realization of that operating leverage. And of course, there's a few projects left to go at Campbellfield, namely, one, which is the multi-packer. Not a huge investment. We paid for that some time ago, but pleased to say that arrives and will be installed over this period. So that gives us flexibility in packaging as well. So we are focused on that cost of sales line while growing our revenue line, which ultimately talks to margin. And of course, if we can continue to grow at 100% -- we're only operating in, arguably, 30% or 40% of the available market in retail at the moment, confident that we'll have access to the broader market. Before agave comes, we're certainly well placed at this juncture to realize sort of global ambition for this business. And I hope shareholders, through this presentation today, can take confidence that we're singularly focused on delivering against that ambition and very well placed given the faith that those shareholders have had in us to date in the way in which we've deployed that capital to really make sure that we realize the outcomes that we've all set out to achieve, whether it be revenue, brand health and of course, ultimately, profitability. On that note, thank you.

Drew, I might ask you to just stay up here as we may have some questions. Okay. So we'll now open the floor to some questions, if there's any. No questions? Thanks, Drew.

[ Awesome response ].

Yes, I think you covered a fair bit of ground there, mate. So well done. So for the formal part of the meeting, only shareholders, their attorneys, proxies and authorized company representatives are entitled to ask questions and vote at this meeting. However, we will allow everyone in attendance to ask questions regarding the CEO presentation before we move to the formal part of the meeting. I've just gone through that, and we don't have any questions. So we can just move on. So the next slide. So ladies and gentlemen, this now brings us to the formal part of the meeting. The Company Secretary has informed me that we have a quorum present. I therefore declare this Annual General Meeting of Top Shelf open. Voting today will be conducted by the way of a poll on all items of business. There are 13 items of business, including 11 resolutions, which have been listed in the Notice of Meeting. The Notice of Meeting was sent to shareholders in October, and I'll take it as read. Before we consider the items of the business, there are a number of procedural matters to which I wish to draw your attention. For online attendees to vote at this meeting, please follow the instructions on the screen to enable you to vote at this meeting if you haven't already done so. For the attendees present today, if you are entitled to speak and vote at this meeting, then you will have received a green admission card on registration. If you are entitled to speak but not vote at this meeting, you will have received a blue admission card on registration. If you are a guest at today's meeting, you'll have received a white admission card. Today, voting will be conducted by way of poll. And for those of you present in the room, the poll will be conducted at the end of the meeting after each resolution has been put to the meeting for any discussion. For online participants, in order to provide you with enough time to vote, I now declare that voting is open for all resolutions. The final results of the polls will be available later today on the ASX and the company's website, and any voting restrictions have been set out in the Notice of Meeting. At the time of the discussion of each resolution, I'll disclose the way in which proxy votes have been cast on the resolution. [Operator Instructions] Please note that while you can submit questions from now, I will not address them until the relevant time in the meeting. Please also note that your questions may be moderated or if we receive multiple questions on the topic, amalgamated together. [Operator Instructions] Finally, due to time constraints, we may run out of time to answer all your questions. If this happens, we will answer them in due course by e-mail or posting responses on our website. I now move to the items of business to be considered at this meeting. Financial statements and reports. The first item on the agenda is to receive and consider the annual report of the company together with the declarations by the directors, the directors' report, the remuneration report and the auditor's report for the year ended 30th of June 2022. This item does not require a resolution to be put to the meeting but does provide an opportunity for the shareholders to ask questions or make comment on the company matters. The company's auditor, EY, is available to address questions in relation to the conduct of the audit or the content of the audit report. Any questions to the auditor should be directed to me, as Chairman, in the first instance. Are there any questions on the financial statements? No questions from the floor. Okay. As there are no further questions -- or no questions at all, I'll move on to the first resolution. Resolution 1. The first resolution on the agenda today is a nonbinding advisory vote for the adoption of the rem report for the financial year 30th of June 2022. The remuneration report is contained in the annual report -- it's a tough word to say. I'm going to stick with the rem report. Can I do that? It's always hard to say. The rem report is contained in the annual report -- I can say annual -- which is available on the company's website. It includes details of the company's policy on the rem of the directors and the executives, a discussion of the relationship between that policy and the company performance and the details of performance conditions associated with the rem of the Chief Executive Officer and other executives. As stated in the Notice of Meeting, this is an advisory and nonbinding resolution, although the Board will take discussion on this resolution into account when it is considering the future rem arrangements of the company. The resolution and proxies received are shown on the screen. Are there any questions on this resolution? There's no questions from the floor.

[ No questions online ].

Thank you. We'll move on to the next item of business. So resolution 2 is an ordinary resolution. This resolution seeks shareholder approval to reelect Nonexecutive Director Lynette Mayne. Details of Lynette's qualifications and experience are set out in the Notice of Meeting and in the company's annual report. The resolution and proxies received are shown on the screen. The Board, other than Lynette, recommends that shareholders vote in favor of this resolution. Are there any questions on this resolution? None from the floor. None online?

[indiscernible]

Thank you. Resolution 3 is an ordinary resolution. This resolution seeks shareholder approval to reelect Nonexec Director Michael East. Details of Michael's qualification and experience are set out in the Notice of Meeting and in the company's annual report. The resolution and proxies received are shown on the screen. The Board, other than Michael, recommends that shareholders vote in favor of this resolution. Are there any questions? None from the floor.

[indiscernible]

As there are no questions, we'll move on to the next item. Resolution 4. Resolution 4 is an ordinary resolution. This resolution seeks shareholder approval for the company to issue an additional 10% of the company's issued capital by way of placement over a 12-month period from the date of this meeting. Details of this resolution are set out in the Notice of Meeting, and the resolution and proxies received are shown on the screen. The Board recommends that shareholders vote in favor of this resolution. Are there any questions on this resolution? None from the floor.

No questions...

Resolution 5. Resolution 5 is an ordinary resolution. This resolution seeks shareholder approval for the Top Shelf International Holdings Ltd Rights Plan. Details of this resolution are set out in the Notice of Meeting, and the resolution and proxies received are shown on the screen. The Board recommends that shareholders vote in favor of this resolution. We have no questions from the floor.

No questions online.

Thank you. We'll move on to resolution 6. As resolution 6 and 7 relate to myself, I'll now pass over to our CEO, Drew, to chair this part of the meeting.

Thanks, Adem. Resolution 6 is an ordinary resolution. The resolution seeks shareholder approval on the issue of 142,963 long-term variable remuneration performance rights -- I didn't do too bad on remuneration -- to the Executive Chair, Adem Karafili. Details of this resolution are set out in the addendum to this Notice of Meeting, and the resolution and proxies received are shown on the screen. The Board, other than Adem, recommends that shareholders vote in favor of this resolution. Are there any questions in relation to this resolution from the floor? Carlie?

No questions...

Resolution 7. Resolution 7 is an ordinary resolution. The resolution seeks shareholder approval for the issue of 118,991 FY '23 retention service rights to the Executive Chair, Adem Karafili. Details of the resolution are set out in the Notice of Meeting. The resolution and proxies received are shown on the screen. The Board, other than Adem, recommends that shareholders vote in favor of this resolution. Are there any questions in relation to this resolution?

No questions.

As there are no further questions, I'll pass back to Adem.

Thank you, Drew. So we'll go to resolution 8. Resolution 8 is an ordinary resolution. This resolution seeks shareholder approval for the issue of 180,370 FY '23 long-term variable remuneration performance rights to the Managing Director, Drew Fairchild. Details of this resolution are set out in the Notice of Meeting, and the resolution and proxies received are shown on screen. The Board, other than Drew, recommends that shareholders vote in favor of this resolution. Are there any questions to this resolution?

[indiscernible]

No questions? Thanks, Carlie. Resolution 9 is an ordinary resolution. This resolution seeks shareholder approval for the issue of 154,520 FY '23 retention service rights to the Managing Director, Drew Fairchild. Details of this resolution are set out in the Notice of Meeting, and the resolution and proxies received are shown on the screen. The Board, other than Drew, recommends that shareholders vote in favor of this resolution. Are there any questions on this resolution?

[indiscernible]

Thank you. Okay. Resolution 10. Resolution 10 is a special resolution. This resolution seeks shareholder approval to amend the constitution of the company to permit the holding of wholly virtual general meetings. Details of this resolution are set out in the Notice of Meeting, and the resolution and proxies received are shown on screen. The Board recommends that shareholders vote in favor of this resolution. Are there any questions on this resolution? None from the floor.

[ No questions online ].

Thank you, Carlie. Resolution 11. Resolution 11 is an ordinary resolution. This resolution seeks shareholder approval to appoint BDO Audit Pty Ltd as the auditor. Details of this resolution are set out in the Notice of Meeting, and the resolution and proxies received are shown on screen. The Board recommends that shareholders vote in favor of this resolution. Are there any questions on this resolution?

[indiscernible]

Thank you, Carlie. As there are no questions, I'll move on to the next item of business, which is other business. So the final item on the agenda today is any other business that may be legally brought before the meeting. Are there any matters to be brought forward?

[indiscernible]

Thank you, Carlie. So ladies and gentlemen, as there are no further items to be brought to this meeting, that concludes our discussion on the items of business before this Annual General Meeting. So as set out earlier in the meeting, for those present today, a poll will be held on all resolutions at the conclusion of all other business of the meeting. If there is any person present today who believes they're entitled to vote but have not registered to vote, would you please raise your hand for assistance. Shareholders and proxyholders would have received upon registration a green voting card that provides for the holding of a poll on any of the resolutions put to shareholders. We will now hold the poll on the resolutions. The poll results for all resolutions effectively put to this meeting will be announced via a release to the ASX after this meeting has been concluded. So when a shareholder has appointed the Chairman of the meeting as a proxyholder and no voting instructions have been given to the Chairman on how to vote, I'll be taken to have been expressly authorized to exercise those votes and to intend to vote those shares in favor of each resolution. If you have any difficulty in completing your voting card, please raise your hand. No hands? Please now complete your voting cards and place the card in the ballot boxes being brought around by staff. [Voting]

Now has everyone completed their voting papers and lodged their votes? Thank you. If so, I declare the voting now closed. And after the votes on the resolution have been counted and reviewed, the results of the poll will be announced on the ASX via an ASX announcement and will also be displayed on the company's website. So thank you, all, for your attendance. I thank you all for listening online and for those actually in person. I thank you, Drew, for your presentation and for all the organization that's going to making today happen. As we mentioned earlier, we will be offering some drinks up, have an opportunity to try some of our brand-new agave spirit back in the office in South Yarra here. So we look forward to -- for those who are attending to that. So I now declare this Annual General Meeting closed. So thank you, guys. And on behalf of the Board, take this opportunity to learn about our business, and we're very grateful for the support for this year and also for the future. So thank you very much.