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

Thank you for standing by, and welcome to the Top Shelf International Holdings Limited FY '23 First Half Results Presentation and company update. [Operator Instructions]. I would now like to hand the conference over to Mr. Adem Karafili, Executive Chairman. Please go ahead.

Thank you very much. Thank you. And welcome all to the Top Shelf International FY '23 Half Year Results and Company Update. First of all, I'd like to thank you all for attending the call and for our investors on the call for your continued support. But today, as mentioned, I have in the room, Drew Fairchild, CEO; Trent Fraser, our President of Agave; Ben Kennare, our CFO; Matt Slade, our Head of Investor Relations; and of course, myself, Adem Karafili, Executive Chairman. As part of today's presentation, Drew and Ben will largely walk through the presentation and the financials. And as just mentioned, we'll take questions at the end either by phone or by written query. So without much further ado, I'll hand over to you, Drew to start walking through the presentation.

Thanks, Adem. And again, thank you to all shareholders for their continued support, both you and I should take interested. We're obviously sharing the presentation that has also been uploaded onto the ASX website. It was also largely shared either through half year, the release of the 4C. And of course, last week with the placement itself. I think just from a process perspective, we'll talk to K5 key points, et cetera, and then obviously, the opportunity to take questions. We'll largely take those questions at the end, I think, to make it as efficient as possible. Just coming back to the third slide, and I'll step through these and obviously key call-outs. We presented the results dashboard, again, it's obviously accompanied our 4C release in late January, February, early February. The key call out here, of course, was the growth in revenue and the continued growth in branded revenue, obviously, is the key focus for us in the business, and that was very pleased to see that performance for the first half. Of course, shareholders and investors will be aware that really, it was the first summer season that we had with all brands in market, obviously, with Agave to come into that sort of October, November, December period, particularly being in a position to activate those brands very successfully in the festivals and events mainly on-premise trade was a key underpinning if you like, of a very good result for the half from a branded revenue perspective. We've continued to grow out our distribution points, and we'll talk a little bit about that in more detail. And obviously, from a funding perspective, we'll go into that in more detail in terms of around the placement capital and capital strategy as well. We've obviously shown here the #1 whiskey brand as of the end of the half. And of course, we're really pleased then since we produced this slide that, that we've had further affirmation, external affirmation about the strength of our brands, whether at the World Whiskies Awards for NED and winning a gold medal in that. And only just last week, winning a World Vodka Award for Grainshaker, labeled Australia's best vodka. So clearly, from a product perspective and a brand perspective, from that dimension, it's really pleasing to see how the world stage that we've had some success there. And obviously, that in itself we believe is underpinned growth in branded revenue and indeed the [ velocity ] of course, distribution sales, sales velocity and sales growth and it becomes somewhat of a circular model in terms of the go-to-market. That was a really pleasing outcome to have that extended recognition. We then go to the executive summary, I'll spend a little bit of time on the executive summary before going into some detail and also passing to my colleagues, particularly Ben's around part of the capital pathway, et cetera. But in terms of where we're at, obviously, the business, we now have line of sight in terms of Act of Treason coming to market. We're working back from the November launch date in terms of the reveal of that brand. Now of course, in terms of being in market, we will have limited agave spirit available. So it's really around the seeding phase. I should say, given the interest, if you like, in bringing that agave spirit to market, it's fantastic to be in a position that the sales team are fueling those inquiries around the opportunity to partner with different people in terms of the go-to-market strategy, and we'll say a little bit more about that in a moment. And we certainly have trends on the line that can talk about the go-to-market strategy, whether it be domestically or internationally for agave. But that's a pleasing position to be. And obviously, for that to happen, we have to have the distillery functioning and supporting the go-to-market strategy. We have to be in a position that we've actually mechanized the harvest in order to be able to harvest the pinas and process those and in order to be able to distill them. And of course, the agronomy needs to be up to scratch, so to speak. So working through those series of outcomes. And obviously, this is in many ways sort of 4-plus years in the making, I'm pleased to say that across each of those elements that we're on track in terms of working back from that November '20, obviously, in anticipation of an Australian summer having agave market through that seeding phase. In terms of -- and of course, we've just made a mention there that in 2021, it was called out as one of the top 10 new stores from the Spirits business magazine globally. And I should say that the level of interest in what we're doing is only continue to rise. And of course, as has the popularity of tequila, both domestically and internationally. Some other key call-outs. We're pleased that given the success that we had, we have had to date, we've met and the arrangement within Coles that the number of SKUs, particularly from a glass perspective, has been quadrupled. So we've gone from 1 to 4. Obviously, off the back is, again, the callout that we made around NED being in a position at line of sight, if you like, on chasing down some of the major international brands. That's a particularly gratified position to be in. And to see that further support for range extensions, including Green Sash 1 liter 200 mL has been a good outcome. On broader ranging decisions, which is obviously top of mind, it's that season, so to speak, in terms of ranging season. So Coles was the first one to give us acknowledging if you like, of that range extension. We are waiting, having made submissions with both particularly LMG, which is Bottlemart. We're actually already in about 40% of their stores. So the team have done an unbelievable job building our own presence into that market without actually having ranging. So we're confident that, that conversation will bode well. And from an Endeavour perspective, again, we wait to see the outcome of meetings since it's just the range, the glass range in conversation, RTDs in the middle of the year but very pleasingly from both the category management level right through to the CEO, we've had strong engagement with Endeavour as well. On the international front, there's obviously a lot of work that goes into getting to the start line in terms of international, clearly, COVID in China, delayed some of those plans. But pleasingly, we have shipped our first orders to China. And so that container left last week. Obviously, as part of that is navigating trademark, navigating again, labeling requirements, et cetera. So that's a pleasing position to be in. And we've also -- we've got 2 key contracts there, both into the balance of Asia and China that we've now executed and again, well advanced, if you like, in terms of our go-to-market model in Europe and indeed in the U.S. And again, I can ask Trent to talk a bit about that with, particularly with regards to Turquoise Life and Southern Glazer’. So that's clearly a new phase of the business is getting to the stage we're actually to have both the advantage, the spirit available, line of sight in agave in the market and tapping into those international markets in addition to building distribution domestically. From the brand perspective, again, I called out some of these things on the previous slide just really around, again, evidence of brand success, whether it's been the product itself, revenue growth, distribution point growth and, of course, in ranging. I won't spend a lot of time on the brand side. The capital pathway piece. Again, we've mentioned around the distillery itself. I think it must be in the next week or the week after, Ben, that all distills will arrive on site. And so that's a pleasing position to be in terms of the component parts coming together. As mentioned, we have actually completed a trial harvest in terms of the actual mechanization of the cut and distill that spirit again. So we're very pleased with the quality of the spirit and the direction. Again, we've been -- we haven't stopped distilling since we actually did the first harvest. So further work to do in his quest for perfection, I should say, but well on track. And of course, given the success that we've had with both NED and Grainshaker from a product perspective, we are confident that we have the skill, and we're unashamedly working to that ambition of having a world-class agave spirit in market. In terms of capital pathway, we'll talk through the next couple of slides in a bit more detail just around the capital pathway. I have called out here, and I haven't given the name as yet, but very pleasing to say that production has commenced with a nonalcoholic energy drink. The really pleasing dimension of that is that we have simplified our business immensely when it comes to operations at our Campbellfield site. So clearly, third-party canning and bottling has always been part of the business model. Now you've got to build capability and credibility in order to be able to win some custom with a multinational of this ilk. And so very pleasingly, we've now been producing for over the last month, running that site 24/5, producing 1 SKU. And so the great thing about that, of course, is what is then, therefore, transpire. It not only provides us access to revenue or margin, but the pleasing thing it just simplifies our business immensely, given that we are a brand business, but we do leverage that asset in support of the brand. So that puts us in a great position from the back of half perspective, from a production perspective in terms of an underpinning for the execution of the brand strategy. And pleasingly, we've also again receiving numbers of queries around access to and use of our distillation assets in addition to the canning and bottling, which further would effectively cover the cost, if you like, of running out our Campbellfield production facility. So that's been a significant change for the business. And as part of that, when we think about our capital needs over the last 6 months. What we did have to do in order to be able to onboard that customer was produce a large amount of branded inventory into that. And of course, that in itself underpins cash flow. And of course, in the next phase in the business, that's obviously been released. So part of that is obviously talk to the working capital needs. But very pleasingly, that call out is [indiscernible] simplifies our business and underpins that part of the business moving forward. I should say that the CEO presentation to the AGM, we spoke about our assets and using those assets. I'll just mention the distillery and I should also just mention needless to say, there's been a lot of interest, obviously, in what we're doing from an agave perspective, given the scale of that investment. And indeed, the encouragement, if you like, from, particularly from major retail around a broader category play. So that's been interesting to engage with prospective players around the build-out of whole category for an Australian Agave Spirit, not just obviously our brand. So just part of that thinking, of course, has been a long part of our rationale. And of course, we have done things such as, obviously, building out a world first when it comes to mechanization to harvester. We have done things such as register from a trademark perspective Queensland dry topics. So there's a number of things, if you like, to support deleveraging of that asset base as well, which is topical to raise that to now, obviously, in the context of the sale and leaseback strategy as well. And of course, the unique nature of that agave position is obviously the basis by which we are looking to execute the capital strategy around the sale and leaseback. So I'll just pause that and show to my colleagues to see if I've missed anything in particular on the executive summary before we get into the next pages, particularly around revenue and margin growth, et cetera, and realization of operating leverage. I've probably touched on most of the elements in this slide, but I think probably one of the key call-out there is that we do have a strong track record of selling out the inventory that we've had access to. Again, it was only less than 12 months ago that we effectively found ourselves in a challenging situation being able to support the supply to market from a whiskey perspective. And of course, that was saving, if you like, every bottle available to make initial ranging conversations with Coles. Now pleasingly, we're beyond that. And we now have enough inventory available to entertain ranging conversations with obviously, the balance of domestic retail but into international as well. So that's pleasing. As I said, we've got a track record of selling it out. And as I said, line of sight in agave as well. And as you know, we're largely unconstrained from the bottling perspective. When we go to the next slide around the investment in the platform. Again, we've obviously used capital to compress time. Now again, we acknowledge and recognize certainly the change in capital markets. And clearly, the shift has gone from growth to profitability, and we're certainly aware of and responding to that. I guess the pleasing thing for us is that we have invested the capital in the business and the platform over the last 6 or 7 years. And as a consequence of that, we're now in a position that we have a unique set of assets that I would suggest that given the increase in the cost of capital that those assets and the value of those assets only continues to rise. Of course, the last dimension, if you like, is really around bringing to market with the agave spirit. And of course, that talks to the distillery at the farm. And obviously, that's been therefore the focus around the placement itself. Just from an asset perspective, you can see here at the bottom around the tangible assets, I'll talk a little bit more about agave at the back of the deck just in terms of the available yield would, what does that actually mean in the context of, you call it from a cost perspective. And again, why does that being there for gives confidence around the execution of the sale and lease. Let me just move to the next slide, Ben. I think this next slide around capital deployment really looks back 18-plus months ago to when we completed that last capital raising. And obviously, provides a waterfall chart in terms of where the capital was invested. And then on the right-hand side, it gives -- should give shareholders a sense as to the next juncture of our business and where we have arrived. So obviously, to get to the start line, we've had to invest in whiskey, we've had to invest in barrels, we had to invest in racking. We now have one of the, if not the largest whiskey holdings in the country. I suspect that probably is the case. As I said, we're now in a position that we can service the domestic market in terms of the demand for the brand. And of course, we've done the same thing with agave in terms of planting regime that commenced way back from 2019 into the start of '20. And as we sit here today, in January, which is not far away, of course, all our plants will actually -- or the plants, I should say, that are available for harvest, will reach 4 years of age and mature in the context of an agave play. And then interestingly enough, when you look at the growth of that, of course, as we get through to the middle of next year, and that's indeed now having seeded the market this year, looking to service international markets into their summer and obviously, the domestic market thereafter. Pleasingly, we'll have enough agave in order to be able to deliver on that particular ambition, which, obviously, talks that the investment that we've made there. Inventory, again, you've got to be able to get inventory market. That number is higher than would otherwise need to be simply around, as I said, creating production capacity for the onboarding of multinational contracts. So that inventory balance rolls out, which, obviously, talks to release of cash. And then when we get to the right-hand side of the business, obviously, brand. There's been a number of key contracts around brand investment that have, that has rolled off and those brand investment contracts did, indeed, serve the purpose in terms of winning ranging, supporting and getting cut through in terms of go-to-market around brand. But pleasingly, you get to a juncture that they have served their purpose and we know longer have to invest that level of brand investment or the nature of the brand investment should changes as we get to this juncture. So you can see there's a substantial step down, if you like, in terms of brand investment. And of course, whiskey and agronomy, yes, we can continue to lay down whiskey and leverage that capacity of our distillation assets to its fullest potential. But of course, again, we now have effectively enough whiskey to support that $60 million of retail sales, and it's very much our focus is really around growing distribution, harvesting the cash, for want of a better term, that now forms part of that whiskey bank as opposed to investing ahead of the curve in anticipation of future international growth, et cetera. So that option in the future will be available to us, but there's no need for us to continue to lay down whiskey like we have in the past in order to be able to deliver on domestic distribution aspirations and indeed [indiscernible] international because we have that available to us. On the agave side, again, the pleasing thing now is that effectively our existing plant stocks, we plant in ground and indeed in nursery. We've reached the point that farm self-sufficient. When you talk about to 750,000 plants in the ground, including those in nursery, arguably, there's probably many millions when you look at the actual pulp stock that [ term ] has produced at the farm. So again, there's a step change down in terms of that level of investment. And then obviously, for agave distillery itself in terms of being able to support the seeding and then the expansion of the spirit itself. And so as I mentioned, that's pleasing but that is indeed on track in terms of being able to support that initial go-to-market base. When we look at the capital pathway, again, obviously, top of mind from a shareholders' perspective in terms of basis for the placement. Again, questions around coming back to the market, et cetera. We have a mandate in place with Findex around execution of the sale and leaseback strategy for those that aren't aware, Findex did provide a key role when we last extended our borrowing base facility with Longreach. And that was pleasing that they actually ran a competitive process and received a number of responses, if you like, RFQs in terms of moving to final forms of financing, and we went with Longreach again. So Findex is well known to us in terms of having completed that process. And what we have done is given them a mandate were working particularly with not only the existing players that work with us last time, but you also had the [ added ] leaders around the undertaking of the sale and leaseback. From a sale and leaseback perspective, just to give a sort of sense of numbers. At the start of the deck, we talked about the value of the farm. And so it's approximately $15 million was certainly by the middle of this financial year, it's approximately $15 million in land and infrastructure and the balance in terms of the biological asset itself. And of course, that in itself is what we're looking to effectively provides an underpinning in the execution of the sale and leaseback strategy. It obviously is important to the capital pathway for the business. It's important in terms of access to capital and pay down of debt. And obviously, it is a top priority for the business in order to be able to execute that particular strategy. I'll just pause there Trent, Adem and/or Ben, any other point that I' may have missed on capital pathway, particularly around sale and leaseback that you'd like to talk about or indeed the previous slide on what's changed in terms of the capital needs of the business?

I think you summarized it well, Drew. Obviously, the prior page, we sort of summarize that the inflection point of where the company is at. Prices now being heavy in investment mode as we called out through investing in our brands, a tangible assets in our whiskey and establishing our agave position. And now other than finishing off the agave project in the next 4 to 6 months, we're moving to a different phase of the business, where we're looking to leverage the platform and assets that we have established over the last few years and put that to work effectively in terms of growing our revenue and margin profile.

So I think just to reiterate the point that coming out of the investment phase and then purely undergo to marketplace is not too far away, but it's really important for all our shareholders to understand that and even to the extent when we think about the half year and the expenditure to that in brand building as well. When we think about investments in brands, we've been able to win distribution without being able to win -- a lot of favor on both on and off-premise. But at the same time, that level of investment in order to launch isn't necessarily what is required to sustain at this stage. So again, it's slightly different phases, particularly around their Grainshaker in the timing market as well. So I think as we look forward, obviously, the Capital Pathway is key and is the key focus of the organization to ensure that we continue to provide the opportunity for ourselves to continue to grow at a really sustainable level.

Thanks, Adem, we'll just move through to the next slide. In the same vein, just around as mentioned, both Ben and Adem just spoken about sort of step change down, if you like, in terms of the requirement from brand investment to sustain. I think the other really important point I spoke at length at the start just around the role that third-party canning and bottling and winning key contracts that will effectively, as I said, the multinational contract we've got the existing contract with Pinnacle, which, of course, is part of the Endeavour Group, really puts us in a strong position, particularly with the entertaining of other inbound inquiries around access to installation that the production side of our business. Certainly, cover fixed costs and prospectively puts us in a position in all our branded volume, if you like, is marginally costed. So we're on the cusp of doing just that. And as I said, we've been running that site 24x5 over the last month. So that's a really pleasing to mention. Just around our channels in terms of our sales channels. Now of course, the most intensive channel that we actually have is indeed the independent channel. You don't get to where we have got to without actually investing in that independent channel. And of course, that started way back in 2015 in terms of hand selling, and it's growing obviously into key relationships with sub wholesale groups and then went to national relationships. And of course, as mentioned, we still have to continue some of that hand selling activity as we've built relationships with key franchisees to enable us to have the conversation with the likes of LMG and Bottlemart, et cetera. We don't get ahead of ourselves in terms of the outcomes of those conversations. But we've had to do with the heavy lifting in that particular channel in order to be able to win ranging, whether it be Coles and indeed to have those conversations. The pleasing to mention is actually, as you start to access, whether it be major retail, major independent channels, even being able to point to the success of products to open up international conversations, we don't have to have the same level of intensity, if you like, from a selling perspective that we've had to have to date. So in addition to, obviously, what we're doing in the production side of our business, we are at a tipping point, if you like, in terms of having a low cost of acquisition from a distribution point, which I think is a really important call-out. And that indeed does simplify our business. And of course, as you build scale and there's some of the key evidentiary points here around -- as you build scale, of course, despite inflationary challenges within the business. And of course, we're not immune to that, but we do see a step change down, if you like, in the cost of production across our major SKUs. And of course, part of that is the automation of indeed NED on to the bottling line. And part of that is, of course, being in a position to have minimum order quantities as it talks to, for example, Grainshaker. And so all of those actually talk to a significant step down, if you like, in terms of a cost per case. And so the team are very much focused obviously on executing those elements as well in terms of realization of operating leverage. So clearly, the disciplines around operating around investment in brands, rightsizing that investment, again, responding to, if you like, the challenges in the market and not investing too far ahead of the curve because we are in a position to demonstrate brand success. And of course, as I said, being in a position that we've really got the only significant capital investment left has been the distillery, we're well placed, if you like, to see a change in the capital requirements for the business moving forward with the sale and leaseback, if you like, playing key dimension in terms of both de-risking the business. And obviously, it's a well-worn path, I should say, in terms of most on wineries are actually owned by superannuation companies. So again, we're not doing something necessarily new here, but what it allows us to do is to obviously release the equity that we have put into the farm and the associated assets. And obviously, that is in itself a key part of the placement strategy. The placement itself might go to Adem in a moment just to talk a little bit about the placement itself. But effectively, again, we successfully closed out the $10 million raise. We talk about what's the purpose behind that. And obviously, it was really around the distillery go-to-market in terms of active treatment, supporting international growth, et cetera. We think, obviously, the shareholders that participate in that placement. And so I'm not sure and Adem, do you want to pick up anything else on that particular mechanics.

Look, I think there might be some conjecture around the method in which we degrade month, but I just say it was on the best advice their [indiscernible] placement was the best way to go. And as Drew just mentioned, we thank the team and we also thank our incumbent investors were able to participate for the support. Ultimately, it does [indiscernible] some disappointment occasionally around people who weren't able to participate. So we absolutely recognize that, and we do value the support of our retail investment bank. They're key to the success of the company, and we've been very well supported in the past. So I think we'll just acknowledge that and also recognize that we feel that someone was required and sort of it before...

Yes. Thanks, Adem. Before we open up to questions, obviously, there's a broader number of slides that we did include within the deck. For those, of course, that have been shareholders in Top Shelf for a long period of time, and they'll be well familiar with who we Top Shelf for those that are new to Top Shelf, again, I encourage you to obviously look at those slides in terms of understanding who we are in the positions and markets within which we play. What I'd like to do hear in a moment is like [indiscernible] Trent's to touch on a little bit about our agave, where we are from the go-to-market. You might pick up, certainly, again, these initial comments just around the strength of the NED and the Grainshaker brands. Hopefully, from a technology perspective that the call allows us to do that. But before I do throw to Trent, again, I'd just encourage investors to have a look at the back part of the deck, particularly around Slide 20, just around, again, if you like, the underpinnings of what we've invested in terms of the farm and of course, that in itself talking to the sale and lease back. And of course, Trent when he's talking about agave and wants to also touch on part of our go-to-market on international as well with respect to whiskey, et cetera. And the conversations that we've had there. So Trent, I might throw to say to you, mate, to briefly pick up those elements?

Yes. Thanks, Drew. Yes, I might just touch on a couple of things throughout the presentation and not specifically going to each one of the slides. I think, if you do look at Slide 12, just around the power of the portfolio now because it's not a singular discussion or a dual brand discussion, it's obviously a 3-way discussion with obviously, the inclusion of agave in Act of Treason, when you are having these distribution discussions whether it be here domestically or with international distributors. It's quite powerful because we are. Again, we do joke. We're not necessarily coming to people with the least exciting categories. We have obviously the 3 most buoyant and exhilarating with agave category. And it's really earning us an exciting seat at the table, from, as I say, domestic but also international perspective. I won't go too much into Slide 19, but we are excitingly getting into that, into the detail of the launch strategy around super focused in terms of the domestic win, but also international around U.S., and that really is the start of the deployment of both Australia and the U.S. as a strategy winning the flagships, both on and off, winning cocktail and obviously, programming in education is going to be absolutely critical to making noise with our new brand launch. Drew did allude to where we're at in terms of agave. So I'll just give a little bit of comfort and confidence to people that we did harvest, I think 15 to 20 days ago, I forget which day it is. But excitingly, the agave are exceeding health expectations, and what that means is mostly around bricks and sugar levels. Unlike wine getting a vintage every year, you basically relying, not necessarily just timing ground, but the growth and development of the sugars with the agave puts out, which fructans and [ Seven ] and the team have made some fantastic trial in R&D. I'm not saying we're perfect yet. We've still got some room to grow. But with the mission clearly to craft stunning regionally expressive Australian [indiscernible] spirits to bring to market, we are well on our way and excited to actually be tasting product, our estate grown owned product, and things are looking really exciting there, and then it will only continue to get better as the agave is continue to grow. Distillery is on track. So obviously, it will be a modest build in terms of making a spectacular liquid. That's all we care about. It does not need to be [ palacio ]. It's very much focused around making a world-class spirit that hopefully will stack up with the very best of them. So all in all, we're at a very exciting junction because we're actually in the planning of a launch strategy. It will be a staggered rollout, as Drew alluded to, just in terms of the availability of the allocation. We're not going to have hundreds of thousands of cases at day 1, although that will come quite quickly, but it is sequenced quarter-by-quarter going to the end of this year, getting ready for the next Aussie summer and into next year when we have a more robust international launch. But all in all, things are going quite well. Back to you, Drew.

Thanks, Trent. What I might do is just try to check with any members of the team, if there's any particular points I've missed or then try to Adem to make some closing remarks before opening up for questions. Ben?

[indiscernible]

Adem?

Thanks, Drew. Look, I think that was a fairly comprehensive review, I guess, or an update of where we currently are. I think just to circle back. Obviously, the priorities right now are, obviously, getting the agava distillery be completed and agava in market maintaining the range, I guess, in market with NED and Grainshaker, albeit off the highs of winning distribution and continuing to do that and to continue to see that perform really in market. I think overall, the team -- I just would like to acknowledge our broader team. They've done extraordinary job, whether it be the team at Campbellfield on production with [indiscernible] team up in Queensland and the sales team all around the country. It's been a massive effort really to stand the business up from scratch and to be just where we are today to be the leading Australian spirits company. It's no mean feat. And so I just would really like to close on acknowledging the effort of the team and again, thanking our shareholders and investors for their patience and their time and their money, of course. And so we look forward to further update as we come through and look forward to releasing some more positive news as it comes to life. So thank you all. I think on that note, perhaps you can go to questions. Matt might be able to read some out here or if there's someone on the phone.

I think we will go to the phone.

Go to the phone?

[Operator Instructions] I'll now hand over to Mr. Matt Slade, Investor Relations to answer any webcast questions.. Please go ahead.

Thank you. We've got 3 questions that have currently come through. First is from James Bisinella from Shaw and Partners. The question is, with your spirit inventory build-out in Gold 79,000 9-liter equivalent cases by FY '27, across which of your brands are you seeing the greatest long-term demand profile and opportunity for the group?

Thanks, James. Great question. I'd like to make some initial remarks and perhaps Trent also throw to you. I think Trent made the point when we actually spoke to the brand side which is obviously, talks to Top Shelf being in a position that's actually playing in the key categories. And of course, that's on Slide 12 and the way in which the brands and the brand portfolio plays off each other. I mean our investors should have little doubt that this is an incredibly unique position without effectively peer when it comes to Australian spirits. So that's really pleasing to mention. When you think about the context of the portfolio, obviously, the strongest barriers to entry are clearly in agave NED whiskey. And I would suggest that we'll even take through agave instead of 5 to 6 years, at least and of anyone being able to effectively replicate what we've set out to achieve, and we have every confidence and we always have around our ability to craft in a stunning agave spirit that would be demanded obviously, domestically and internationally. And so we've obviously had a great track record of selling out the inventory we have available to us. We are under no illusion that it takes time to build brand, but of course, we do have significant inventory available in order to be able to ensure that, that particular part of our business is meaningful, both domestically and internationally in the context of that volume. Early in the deck, we talked about that being capacity of greater than 120,000 9-liter cases. On vodka, again, that plays a significant role within the portfolio around whether it be underpinning our events and festivals. And of course, we have a significant market share, obviously, in the context of Victoria is well in the on-premise. And of course, those channels, if you like, provide great foundations for us to sell-through our agave spirit, too. So it's an interesting question in terms of the portfolio.

I want to add to that, Drew, if I may. I think I've got the benefit of actually rereading the question. The -- what I would say by 27, both -- we'd be very, very confident that both the brands that are currently market are well on track to reach that level. They'd be close to half of that each right now and just in the distant block before we even get to [ RTD ]. And so the NED and Grainshaker performing extraordinarily well, and we've still got large distribution gains to win over the next period in that intervening years. We are literally in less than half of the market still in terms of retail and certainly much less than that on-premise. So there's massive opportunity to continue to grow just through distribution even before factoring velocity wins. So I'm confident the entire portfolio would be getting to those levels at that time.

Second question is from Andrew Bud. What way your annual brand investment dollars can now be reallocated back into the business? And how will they be reallocated?

So without talking of the dollar specifically, I think it's important just to note is that when we talk about some of those brand investments, it's big things like the investment in things like the Australian open and other brand activations that just roll off, right? Because we're very, very key in driving awareness, and not just with consumers but importantly, with the retail of our customer. And so doing things like that were very important for us to actually gain ranging. And so of course, that gets to roll off now. When we think about reallocation of resources, it obviously goes into things. We do have another brand coming online. We see some reallocation into the agave plant into Act of Treason. And of course, we have helping on getting to that breakeven point sooner rather than later as well. So with that in mind, we're looking at all our costs and our cost lines and determining whether it's a permanent saving or whether it is a reallocation. So -- and we'll take it on its merits with a view that we have a goal to get breakeven as soon as possible.

Another question from James Bisinella. With your international ambitions you pointed to a Chinese distribution contract and relationship with your importer. Are these exclusive relationships? Or is it possible we see further international distribution over time.

I'll jump in there. Just specifically on that, they are separate. Most countries and markets are obviously very specific and specialized, so from that perspective, it is a country-by-country or region-by-region approach at the moment, so they are separate. So the second part of the question, yes, do we expect to hear some good news. I think Drew alluded to the fact that there's a long lead time line. And just with the U.S. right now, we just went through a NED formula approval process. Anything to do with tobacco, firearms, drugs, the alcohol is heavily regulated. So you have to go through all of these [indiscernible] alone TTB and pricing approvals, et cetera, by state. So it is very much separated, and good news is coming because we're not sharing that at the moment because a lot of that setup stuff is actually happening in the background in terms of administration. So separate and yes, more good news to come.

I've got 3 questions on agave now. Andrew Bud asked what's the latest agave distillery in production capital budget forecast? And how much cash has been spent today?

Do you want to kick off, Drew, and I'll chime in?

I might just throw to Ben in terms of what we've actually spent today in the context of our agave plant anything there to go.

Yes. We sort to set that out on the capital bridge page, Page 6 in the presentation where we referred to the $8.6 million spend today, that spend across the agave capital, tangible assets of the distiller itself, the agronomy development and then also some of the brand development work.

And of course, that was only in July '21.

Correct. Correct. Sorry. And so that's the spend across the last 18 months, we'd call that, Drew. And then on sort of to the right-hand side with the distillery spend of $7 million to go to be incurred across the next 6 months to have that commissioned and operational in time for brand launch later in the year. And the recurring agronomy spend is spend between 1% and 1.5% on an ongoing basis.

Next question comes from Adam Hunter with Bell Potter. Can you give an indication of what you believe the agave found to be worth, i.e., how much capital can be released with the sale and leaseback?

Thanks, Adam. I might just draw people's attention to, well, probably 2 elements, but I'll go through to Slide 20 in the deck. I did touch on this, but just to restate again, we're obviously carrying the farm on the balance sheet, and we spoke about what that number was at the half on slide -- sorry, slide in the deck in terms of the land and value, et cetera. And then of course, what that doesn't do is actually in terms of the carrying value, give you sort of a sense of what the value of the farm is worth even in the context of what we've shown here is a Mexican commodity price Findex with pina. So obviously, pina being from which we distill the sugars to make the spirit. Obviously, Mexico is different to Australia. Of course, it is indeed a -- they do indeed have farms and services 140-odd distilleries. And of course, there is an Findex of price in which they pay for pinas. And you can see there, of course, what's happened with demand for tequila itself, but that price has obviously increased over time. What we have done is give an indication, if you like, of the value of the asset that we have using a MXP 10 equivalent, if you like, and that in itself talks to $45 million, if you like, just in terms of farm gate value of pina prices went alone. Obviously, the distilled spirit over and above that, of course, all and/or the brand value. So from our perspective, just splitting if you like, that notion value that we've identified $25 million to $35 million in the placement slide. Effectively half of it, we're prescribing to land and infrastructure, which, of course, is quite easy, if you like, for people to get their head around those particular assets that are obviously agricultural assets by its nature. The other dimension, of course, is then the biological components. So clearly, [ 15 ] relative to what we think is the value of the investment that we have made is if you're looking at sort of an LCR ratio, LTV ratio, then it's a fraction, if you like, of the 45 or a fraction of the value over and above that. So key for us is obviously to be able to demonstrate to the prospective financial of the sale and leaseback that biological asset value. Now, of course, one of the fundamental reasons why our investors who have invested in Top Shelf has been around the agave plan. To [ address ] comments, we do continue to entertain a number of inquiries in relation to the Australian agave play. We're encouraged to pursue a whole category play and not just obviously agave in support of our brands. So there's lots of reasons why we believe against that notional 15 that there's a clear understanding as to why a financer can understand the value that we've actually created, if you like, and therefore, the 15 and the 15 talks to what we're hoping to release back into the business in terms of sale and leaseback.

And just a paradigm for shareholders just in terms of the $45 million [indiscernible] asset value on this page versus the $19 million that we carry on our balance sheet. So the $19 million only talks to the envisage of takeover the next 5 to 6 years from our own brand, where the $45 million talks to effectively the available offtake the total opportunity from our plantation [indiscernible].

Thanks, Ben.

Our next question is for Trent from Andrew Bud. It comes in two parts. Trent, how are you targeting and dividing resources between the on-premise and off-premise channels to the launch of agave? And the second part of the question is, is brand #2 for agave is still in the works to be announced soon?

Great question, Andrew, because we're, as I mentioned, we're knee deep in the construction of the launch model at the moment, which is a fair way advanced, which is great, which we won't share until a close date. But fortunately, we've got a bit of lead-up time. The quick answer is that the balance between on and off-trade is actually relatively balanced. And I also mentioned to the fact that it's going to be sequenced quarter-by-quarter as we start to ramp up in terms of scale. Coming from a more classic model myself and mentality is the importance in criticality of winning in the on-trade, the on-trade specifically because of the advocates that exists in that channel, not only the owners and the proprietors, the GM, the mixologists, the bartenders and the influencers will basically hopefully do the job on Act of Treason, for us and on our behalf. We do also understand though that retail plays a critical component to that in terms of a lot of entertaining at home. But competing when we are looking for that scale in the successive years to come that you need to be a dual approach. The Australian and U.S. model is quite, is a little bit different as well. U.S. will be very much more on-trade focus, one, in terms of actually having a better opportunity to succeed in the on-trade in terms of the model that we're building and also very well understanding that tequila much like vodka, but specifically tequila and Australian agave is more of an on-trade play if the consumption and the point of purchase is very much geared towards social occasion, we joke that it's not necessarily a Netflix and chill moment at home. So winning in the on-trade in those cool bars, roof tops, hotels, et cetera, is critical. The second one is more sensitive around the question. So there is been a lot of peak interest, a lot of considerable interest around, let's just call it, Australian agave at large. So the importance of a second brand is very much ever present. We're not sharing that in the near term, but it's definitely critical to our strategic thinking. And what Drew also mentioned in terms of a larger category build in play, we understand that Act of Treason hopefully will do exceptionally well, but it could do with the support of some friends to its left and right.

We don't have any further questions via the online portal. So I'll now hand it back to the moderator.

Thank you. As there are no further questions, that does conclude our conference for today. Thank you for participating. You may now disconnect.