Lark Distillery has a fascinating backstory, a promising brand, and a special place in my family’s history.
My father has been collecting their single malts since their first commercial release in 1998 and has amassed a collection that is now highly sought after by collectors.
Having followed the story closely for years, it became clear to me after the appointment of Geoff Bainbridge as Managing Director in 2019, coupled with the divestment of Overeem and the end of the disastrous Nant Whisky barrel scheme, that something special was brewing.
Bainbridge has an impressive track record of brand building, most notably as the co-founder of Grill’d, but he’s no stranger to running Liquor brands either. He spent 9 years as MD in charge of Spirits at Fosters Asia, so brings with him an established network he can leverage for large distribution. These same connections give him access to a larger company that might be interested in a takeover at some stage too, which is what I think will happen here longer term.
He has also been doing a lot of on-market buying, most recently 200,00 shares at $1.65 a share, and near a 52-week high. He owns ~16% of the company now, which is no small amount of skin in the game etiher.
But my bull case is primarily focused on their brand.
Brand
Lark has three brands under their umbrella and all have great commercial potential, but Lark is the one that has me most interested.
The full history can be read here but suffice to say, Lark Whisky has all the hallmarks of a Penfolds like brand-in-waiting. Of all the Tasmanian distilleries that have popped up over the last decade or so, it’s really the one with a genuine shot at becoming a household name.
Though he no longer runs the company, the founder, Bill Lark, was bold enough to embark on a journey to rekindle the distilling business in Australia almost single handedly. This one thing gives Lark the most precious first-mover advantage, both in terms of provenance/brand, but also in terms of inventories.
The balance sheet carries their current inventory at about $10-15m or so, but the retail value is much higher, at perhaps $115m. The current market cap at time of writing is about that, putting the business at 1x retail value – but I think the market vastly underestimates the brand value this liquid carries with it.
Design
The tipping point for me was a recent Twitter post from a colleague at another Design firm (a very highly respected firm in Adelaide) who said, “we had the pleasure of spending part of this week in #Tasmania, exploring the waterfront and getting to know a new client. #Hobart” Accompanied by photos of the distillery.
This means one of two things. They are either producing a one-off label for a new line or brand (most likely), or rebranding Lark altogether. Either way, this firm produces amazing results, so that alone is enough to get me excited.
This may not seem like much, but hiring this particular firm signals to me that MD Geoff is extremely serious about getting the packaging right for one or all of the brands. This could just be a pet project for a special label, but to me, this signals to me a serious investment in brand – they would not hire this firm otherwise. My guess is that we should see this design work roll out within 3-6 months.
Value
I think Lark stands on the precipice of tipping into a household name here in Australia, and cementing itself as the premier Whisky brand in Australia.
Run by a management team with an established track record, impressive revenue growth in the last half, and boasting a sleeping giant of a brand, I think there’s still plenty of value in the current valuation and I would expect it to appreciate over the next 5-10 years into an enormous enterprise, especially if Bainbridge stays on and works his magic.