Demand outstrips supply for Top Shelf's agave spirit Act of Treason

Demand outstrips supply for Top Shelf's agave spirit Act of Treason

Top Shelf's agave tequilana farm in the Whitsundays. Photo via Facebook.

After reporting a 28 per cent lift in gross margin to $1.9 million in the March quarter, Melbourne-headquartered distiller Top Shelf International (ASX: TSI) has touted the early success of the launch of its agave-based spirit Act of Treason this year.

The spirit, which legally cannot be called tequila as it's not from Mexico and is produced from a plantation of 600 agave plants in the Whitsundays, has received "exciting recognition" through on-premise seeding locally and select "high-image" accounts in Australian east coast capital cities.

The initial market launch outpaced available supply, according to Top Shelf, although the agave team has been "diligently" focused on increasing harvest volume and throughput ahead of a more widespread release into retail and on-premise channels by the end of June.

“The market launch of Act of Treason in January 2024 was an incredibly exciting milestone for the Company and the response from customers and consumers has exceeded all expectations to date," says Top Shelf's chief executive officer Trent Fraser.

"From initial sold out DTC (direct to consumer) and on premise sales, the team is eagerly preparing for a broader market release of Act of Treason during the fourth quarter for FY24.

“With completion of the capital-intensive platform build phase in the company’s rear view mirror and high quality Australian Agave spirit now in bottle, the business focus has pivoted to execution and realisation of Top Shelf’s world-class premium spirits portfolio."

Top Shelf International's agave spirit Act of Treason.


Related story: Just don't call it Tequila: Top Shelf launches Aussie agave spirit Act of Treason


This departure from the capital-heavy phase of production is evident in a $1 million reduction in business investment for the agave division in the March quarter alone, with Top Shelf's EBITDA loss for the period cut from $4.6 million to $2.8 million.

"The business model focused on value creation is working evidenced in continued gross margin and EBITDA improvement in Q3 over the prior comparative period," says Fraser.

"The team is actively pursuing a number of opportunities across our NED Whisky, Grainshaker Vodka and Act of Treason portfolio with domestic retail and on premise partners in addition to international market opportunities to finish the financial year strongly and set the Company up for success in FY25."

Top Shelf reported $419,000 worth of net cash outflows in the March quarter - a figure that pales in comparison to the $9.17 million for the nine months to 31 March 2024 - a date at which its cash and cash equivalents stood at $1.975 million.

With its $25 million worth of loan facilities completely drawn down, Top Shelf estimates its current funding will last for 4.7 quarters.

The group is also set for a $5 million liquidity boost following a term sheet a couple of weeks ago to sell the farmland and structural improvement assets at its Whitsundays agave farm, which it clarifies is through a sale and 10-year leaseback transaction with an additional five-year option.

The group emphasises the transaction, still subject to shareholder approval, does not include the agave farm’s distillery plant & equipment assets or agave plants, so Top Shelf will still retain full ownership and control of the agave agronomy activities and distillery operations.

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