Billson’s Beverages - Case Update

Rob Smith and Matthew Hutton of McGrathNicol, the administrators of Billson’s Beverages, have revealed the reasons behind the collapse of the Beechwood-based craft brewery and maker of pre-mixed vodka drinks, and are recommending that creditors vote in favour of a DOCA proposed by a related party.

The brewery was established in 1865 and is one of the longest-running beverage manufacturers in the country. It was acquired by the current owners, the Cowan family, in 2017 and achieved great success in the following years — growing from generating $0.4 million in revenue in fiscal 2018 to $105 million in fiscal 2023, generating $17.6 million of EBIT in that year.

The company continued its growth strategy the following year, targeting $150 million revenue in fiscal 2024. As a result, it invested heavily in sales, marketing, new product development and overhead. However, from 2023, sales declined significantly against budget and the previous year, largely due to over-stocking, intense competition and the company’s relatively high prices in a market struggling with cost-of-living pressures.

Inventory quality issues only made the situation worse. Mechanical failures in the production process at a co-packer from around August 2023, as well as a separate canned drink leak issue from 2023, led to inventory destruction costs and contributed to the company’s liquidity challenges.

Further funding provided by the company’s shareholders and secured creditor National Australian Bank (now owed over $12 million) were insufficient to turn around the liquidity position, and the company’s director Nathan Cowan determined that the company was insolvent or likely to become insolvent on 31 July, the same day the administrators were appointed.

The administrators continued to trade the business and commenced a sale and recapitalisation process, entering into an agreement with Billson’s Holdings and Cowan Pty Ltd, which control most of the intellectual property used to operate the business and are not in administration, such that all of the business assets could be taken to market to allow for a going concern sale.

Seven non-binding offers were received, and since late October, the administrators have been negotiating with an unrelated (but as yet unidentified) bidder on finalising an asset sale and with Billson’s Holdings on finalising a DOCA proposal. The asset sale contemplates that the purchaser will acquire the alcoholic ready to drink beverages business and key intangibles. The sale is planned to complete in late January 2025. The majority of the proceeds of sale will be paid to Billson’s Holdings (which owns the assets being sold) and will be used to fund the proposed DOCA.

The proposed DOCA is intended to recapitalise Billson’s Beverages so it can continue to operate the business not subject to the asset sale under a new brand from the Billson’s Brewery venue. If approved, the DOCA is expected to provide a full return to priority creditors and National Australian Bank, while unsecured creditors are expected to receive between 7.4 and 9.6 cents in the dollar.

The second meeting is scheduled for today.

Read the report here.