In this episode I’m joined by Dale Meddings, joint CEO of Bintani, Australia’s leading supplier of brewing and distilling ingredients, and a long-term sponsor of the Drinks Adventures podcast.
Last year I reported on the worrying spate of insolvencies in the drinks industry, particularly among craft brewers.
And things have gotten even worse so far in 2024. Dave Padden of Sydney’s Akasha Brewing was pretty open with us last year on the show about the difficulties his business was confronting.
Advertisement
- Click here to open episode in your podcast player
Sadly, Akasha last week became the latest brewery to enter voluntary administration.
Dale shares with us the impact this brewing industry turmoil has been having on his business, and we get a health check on the emerging craft spirits sector.
Dale reveals what are some of the hottest ingredients currently on the market that will shape the drinks of the future.
And you’ll hear why, in spite of everything that’s going on, he is still optimistic about the future of independent brewing in Australia.
Dale Meddings podcast interview: Full transcript
JAMES ATKINSON: Well, Dale, what’s been the impact on Bintani of some of the industry turmoil that we’ve unfortunately seen recently?
DALE MEDDINGS: It’s been a really tricky period in the industry for a lot of people. And for us, as Bintani personally, probably the biggest impact has been… We’ve had a downturn in the craft beer industry that has had an impact on our bottom line.
And then on top of that, we’ve had this sort of rash of voluntary administrations that have hit the industry and at this point really show no sign of abating.
That’s been another piece of the puzzle that’s sort of hurting us as a supplier to the industry. Receiving 10 cents in the dollar on some fairly significant debts, that does sting.
Like as a standalone piece, most of them, they’re not a huge impact, but when you start piling them on top of each other, it certainly does add up and it becomes a real consideration in the way we run our business and how we deal with customers.
JAMES ATKINSON: And what does that look like? It means that you must just have to manage your risk, I suppose, by really being a bit tighter on credit terms. Is that correct?
DALE MEDDINGS: That’s exactly what it is. It’s all risk management. And for us, I think we haven’t stopped credit to customers and we haven’t changed our terms and our conditions, our credit limits or our trading terms in any way.
Probably what we’ve done is just tighten up a fair bit on how we apply those terms and those limits. Whereas in the past, the industry was in very, very good shape and we probably had the confidence to be a bit more lax and a bit more relaxed about how we applied those.
But at the moment, we’ve really just got to reign our debtor book in and make sure that we’re being as fiscally responsible as a business as we can be without spreading too much unnecessary pain into the broader industry.
JAMES ATKINSON: And when you say it’s showing no sign of abating, does that kind of mean that you obviously would have a pretty good sense of whether people are having trouble staying on top of their accounts?
So you sort of know that there unfortunately is worse to come?
DALE MEDDINGS: Not always. We don’t always see who’s struggling and who’s in trouble on that front. I’d love to have a bit better vision on that, but for us, it’s not always… Our debtor book doesn’t always tell the true story.
So often the suppliers are the last ones to know because as a brewery, as a going concern, you don’t ever want to give a hint to your suppliers that you’re in strife.
So we don’t always hear the great deal, but the rumour mill is pretty active. And to this point, it’s been fairly accurate.
And from what we’re hearing, there’s a few still waiting in the wings to fold.
JAMES ATKINSON: When you actually go and look at the financial position of these businesses that have gone into administration, is it a different story each time?
We keep hearing this story about people deferring ATO debts over COVID and so forth. Is the stance that the ATO has taken, is that kind of what’s responsible for what’s happened here?
Or is financial mismanagement also playing a role? Is every brewery sort of administration different to each other in terms of the viability of the businesses?
DALE MEDDINGS: We get imperfect information on this. So we don’t know for sure, but my feeling on it is that every one of them is entirely unique, in the same way that every business is entirely unique in the way it’s managed and run, its financial position, its debt load and all those sort of things.
The message coming back from the administrators each time is strikingly similar. And it is that in the most part, these businesses are viable going concerns and they are profitable.
It’s just that they are buried under an ATO debt load that they can’t dig themselves out from underneath. It’s a fairly similar story, but how they all ended up there is probably a very unique path for each of the breweries that find themselves in this position.
So it’s impossible to say whether it’s mismanagement or market conditions. I would say it’s, in every instance, it’s a little bit of everything just to varying degrees.
It’s not a pleasant process for anyone, I wouldn’t imagine. And for us in particular, it certainly stings. And for suppliers and the ATO, there’s a real true cost to it.
Often the VAs are sort of put forward in the media as a fairly victimless process and a ‘reset’ and a ‘refresh’ and all these sorts of terms that get thrown around a bit.
JAMES ATKINSON: ‘Restructure.’
DALE MEDDINGS: A restructure. But there is a very serious and a very true cost to businesses that in a lot of instances can’t afford to lose that money.
JAMES ATKINSON: Yeah. So, what’s your view on the hardline kind of approach that the ATO has taken on this issue?
DALE MEDDINGS: If you believe the story that’s coming out of the breweries and the administrators through the VA process, they are profitable, viable businesses because the recommendation in every instance has been to continue the business, take the 10 cents on the dollar, leave the current ownership and management in place and continue on.
So if that’s the case, then underlying, they are good, strong businesses. And if you take that as the case, then it does feel as though it’s the ATO who are forcing the hand of these businesses to have to go down this path.
It does beg the question, if there was a bit more cooperation, maybe a payment plan or something with the ATO, would that enable these businesses to get out to the other side without going through this process?
But on the other side of that, to administer and manage the interaction to that level with these businesses, to manage a payment plan for them, I don’t know if the ATO is resourced to be able to do that.
Because like we know ourselves even, debtor management is a hugely costly and resource heavy part of our business.
JAMES ATKINSON: But that’s the ATO’s job, isn’t it, debtor management?
DALE MEDDINGS: Yeah, it is. But it feels to me as though they do take a very blunt instrument approach to this, where they’re either giving you some sort of a pause on your excise payments or they’re asking for it all tomorrow.
It just, there is no grey area in the middle there with them it seems.
JAMES ATKINSON: Whereas there was for a couple of years there and that’s all changed recently.
DALE MEDDINGS: Yeah, it did. It flipped around and the music stopped and it’s caught a few of these guys off guard and put them in a real pickle.
JAMES ATKINSON: And so what does that mean for, you know, when these companies come out of administration and then turn around and then want to order hops and malt and everything again, where does that leave them with Bintani?
I mean, like it must be pretty hard for you to stomach writing off that debt and then just moving on and fulfilling another order.
DALE MEDDINGS: Yeah, it’s a tough one. We do have endless internal conversations about this and it works out that each one of them is assessed on a very much a case by case basis.
We don’t have a set playbook for this. You know, the hope is that these breweries that do emerge from the other side of the VA process are in a really strong position.
They’ve written off and retired a great deal of debt. So you would think that if their underlying business is strong, then it puts them in a very good position. So, you know, you hope that they are able then to carry on.
And a lot of these guys who have gone through it have been important and a very big contributors to our industry. So you want them in there.
You want them brewing great beer, contributing in a fun, constructive way to our industry. And yeah, we hope that we can see them come out the other side and get back to that spot.
But it’s not always the case. And we will have a separate approach for every one of these that goes through the process.
JAMES ATKINSON: I noticed Phil said in The Crafty Pint article, your brother Phil, who’s, I think your co-CEO, is that right, together with the business?
He just made the comment that there were some cases where, or a case where a brewery had put in a big order, a bigger than normal order for ingredients, which was fulfilled. And then, five seconds later, they call in the administrators.
I suppose there must be some circumstances where the behaviour of the customer has left to be desired, to say the least.
DALE MEDDINGS: Completely. And I mean, it’s the same with everything. You can do, like it’s not, as I said before, it’s not a good process that anyone really wants to go through, but there’s a good way to do it and a bad way to do it.
And a couple have taken a fairly cynical, opportunistic approach to the process, I’d say. It’s no secret. They’ve done it widely across the industry and it’s well known.
JAMES ATKINSON: And they would find it hard to come back and put in another order for ingredients after that’s happened.
DALE MEDDINGS: Yeah, yeah, that’s certainly a tough business to go back and do business with.
JAMES ATKINSON: It’s the same administrator that’s been involved in a lot of these administrations.
What do you sort of think about the ethics of the template approach that they seem to be taking around to breweries and sort of saying, ‘look, here is your get out of jail free card’.
What do you think about the ethics of that approach?
DALE MEDDINGS: It’s… in the broader industry, there’s a fair bit of anger about it. It seems too easy.
And it seems like just giving a company a free kick for failing, it doesn’t seem like a great way to encourage strong business performance or business ethics in an industry.
So I think in the broader industry, there is anger and frustration around the process and the seeming lack of cost to the breweries that go through the process.
It is… a voluntary administration process is a necessary path for businesses to be able to take when they get into trouble. Like it’s undeniably necessary, but it does feel like a template approach.
Like every time we get the document, the same typos are in it. It feels like, and it’s the same recommendation. It’s the same everything. It’s the same 10 cents in the dollar.
It’s an easy payday for the administrators and it’s an easy way out for the breweries to retire some debt with minimal impact on them personally it seems.
So there is some anger and frustration in the industry about it, but at the same time, a lot of these breweries who do go through it are probably at a point where this is their last resort and they need to go through it.
So it’s a difficult one to, I don’t know, take too much out of. It’s, I wouldn’t think Bad Shepherd or Hawkers or Wayward would ever have dreamed that they’d be in this position to have to utilise this tool, but there we are. And hopefully they get back.
JAMES ATKINSON: And going back again to The Crafty Pint article, which I’ll link to from the show notes, I think Phil also, he just, to the points that you’ve just made, I mean, he basically just said that he didn’t really think that enough of an effort was being made to sort of shop the assets round, effectively, and see where there might be a new buyer for them that might be an alternative?
This 10 cents in the dollar approach seems to be a bit too, as you say, a bit too easy and a bit too fast. But is it the best outcome for the shareholders and the creditors, which is what the point of an administration should be to find?
DALE MEDDINGS: Yeah, potentially. It is fast, but to try and find another buyer for a brewery at this point in time, it may be tricky. So yeah, it’s not a good process and it’s a tough one for everyone.
JAMES ATKINSON: Have you been surprised by how things have unfolded over… You guys have been in this industry for a long time and your dad must be a bit shocked as well, I would have thought, at seeing how things have kind of unfolded over the last year or so.
DALE MEDDINGS: It happened quickly, actually. There has always been the talk about reaching saturation and having some kind of a ‘day of reckoning’. It’s inevitable that in a fast growing industry it will happen.
I think we all thought COVID might have been the trigger, but everyone got through that well and seemed to come out the other side in pretty good shape for the most part. Beer sales went up and consumption went up.
Post that COVID period with the cost of living pressures, interest rates, all the macroeconomic factors that we’re all well aware of, that has really hit hard and fast.
I think it’s that piece that the music stopped very quickly. It didn’t really give a lot of these businesses a chance all the time to resize, restructure, refinance their businesses in a way that might have enabled them to keep moving forward.
I think the speed of it is what really caught people, I think.
JAMES ATKINSON: Yeah. And as you said before, it’s the craft beer industry is kind of where the biggest percentage of your customer base lies.
But I know that the distilling industry has kind of been a growing industry segment for Bintani supplying yeast and malt and ingredients like that to the distilling industry, which is at a different stage, like a different stage of its cycle.
Has that kind of offset any of what’s been happening in craft beer or are you kind of sensing that perhaps there’s a bit of a softening happening in that category as well with some of the orders that you see kind of coming through?
DALE MEDDINGS: It definitely hasn’t offset… It’s not as though what we’ve lost on this hand, we’ve made up for on this hand. That’s not the case.
The distilling segment does seem to have softened to a degree and they’ve probably been hit by exactly the same cost of living purse tightening pressures that every other discretionary spend has been hit by.
But you’re right, it is in a different phase of its development and cycle. And for me, we don’t get as good a data on the distilling industry as we do with beer. So it’s a little bit harder to spot.
But from our orders, it hasn’t softened to the same degree as craft beer has, that’s for sure. So it seems to have been a little more resilient.
JAMES ATKINSON: But do you get the sense that potentially distilleries are kind of going, oh, I’m not going to put down quite as much whisky now because we don’t quite have the capital? Is that something that might be happening?
DALE MEDDINGS: Yeah, I think people have taken the foot off the gas a little bit. It was fairly bullish for a while there. And definitely there’s been a degree of conservatism creeping into it, which, you know, it makes sense in this environment.
JAMES ATKINSON: Yeah, but obviously that’s going to have implications in the future with the product pipeline, the ability to fulfill consumer demand, I suppose.
DALE MEDDINGS: Yeah, correct. Because a lot of the distilleries were on a fairly steep growth trajectory and the demand was really there for what they were making.
JAMES ATKINSON: Yeah, exactly.
DALE MEDDINGS: So hopefully it doesn’t bite them in a couple of years’ time.
JAMES ATKINSON: Yep. And Bintani has really been at the forefront of bringing some really innovative ingredients to market. Have recent events changed the appetite of your customers for innovation and bringing new products to market?
Or is that sort of still very much… Is it moreso? Perhaps people are trying harder to try new things.
DALE MEDDINGS: I don’t think it’s changed the appetite of the producers to try new and innovative products and develop new flavours.
I think probably the biggest impact that’s had on innovation is there’s been a real reduction in the access to market through the major bottle shop chains and the reduction in access to tap points for a lot of our customers.
That’s probably the biggest point that’s stifling innovation and new product development at this stage.
There’s just been a huge reduction in the level of access to market, which that’s probably the piece that’s stopping new product development to a degree.
The appetite is still there from our suppliers are still developing new products, the brewers want to use them and the consumers want to consume them.
So to me, it’s purely an access piece.
JAMES ATKINSON: Well, let’s just talk about some of the products that you’ve really been focusing on recently. I know that the Certified Sustainable Malt is something that you see a big future in.
Tell me what stage that product has reached and is there a lot of demand for in the market?
DALE MEDDINGS: That is a really exciting one. That’s one that between Certified Sustainable Australia, Joe White Maltings and ourselves, there’s been a huge amount of work done.
And it’s a little bit embarrassing to say, but we’re… Well, it’s a good and a bad story, but we are sold out of it at this point. So, yeah, it’s a real sore point. I wish we had more.
We’re really hanging out for the next harvest so we can get some more Certified Sustainable barley into the sheds and some malt into our warehouses.
JAMES ATKINSON: How far off is that likely to be? Because you’ve got to go through that process of kind of assessing the quality of the harvest in all of the different farms that are available and then go and choose which is going to be supplying the Certified Sustainable malt this year. Is that right?
DALE MEDDINGS: Yeah, correct. So all the barley’s been harvested. It’s all in. And we are at the moment going through that assessment process on the various parcels from around the country.
The barley has a period of dormancy before it’s viable to be malted. So that’ll probably come good around April, May this year. And we’ll start seeing the new season malt roll through around that point.
JAMES ATKINSON: And what’s the typical customer that’s pursuing Certified Sustainable? Are they making, are these companies that kind of tend to make virtue of their sustainable practices?
Do they talk about it in products they’re bringing to market? And is it just breweries? Or are we seeing these products used by distilleries as well?
DALE MEDDINGS: Just breweries at this stage, we haven’t had the volume to really get into the distilling market just yet. We hope that turns around really quickly.
The types of customers, it’s a fairly broad customer base for this one actually. There’s definitely that leading group who are really conscious of the sustainability and the environmental impact of everything they do, who are very excited about this.
For us, where we see this going, eventually we’d love every bag of malt that goes through our warehouse from Joe White to be Certified Sustainable. The beautiful thing about it is that the cost differential isn’t that great.
And we think that we can keep working with the growers, with the maltsters, to keep reducing that differential between conventional malt and our certified sustainable malt, so that in time, everything we sell has been farmed in a certified sustainable fashion and really does carry that huge reduction in carbon contribution.
JAMES ATKINSON: And tell me about a couple of the other innovative products that you’re excited about at the moment. I know there’s some particular lager yeast strains that Fermentis, one of your partners, has brought to market.
And also another one, interesting one, that I’m aware of is the Flavoured Malt Innovation. Would they probably be a couple of the others that you’re most excited about at the moment?
DALE MEDDINGS: Yeah, Fermentis has been absolutely hot on the innovation trail recently.
The number of new products that they’ve brought to market over the last couple of years, the pace has never been quite this frenetic.
There’s definitely been a huge uptick in craft lager production. So that’s an area where we’ve been pushing to try to see some more development.
And there’s a really exciting new E30 strain that’s about to hit the market, which amongst the existing suite of Fermentis lager strains, it’s quite an outlier in that it does have a really unique ester profile that is something that will work, I think, very well with some of these new world lagers that tend to have a slightly different hopping regime.
The fruity esters that it does produce, they’re not overblown, they’re subtle, but I think we’ll see that they interact extremely well with hops. And we’re just waiting on a report on the thiol interaction of this particular strain. That’ll be an interesting piece with it.
There’s a whole range of new blended bacteria that Fermentis are bringing to the market, which is, while it’s not a huge part of the brewing volume, it’s a highly technical, highly innovative little space that a lot of brewers love playing in, and a lot of consumers really do enjoy the sour beers, the beers produced with a really interesting mixed culture profile.
So I think that’s another piece that, while small, it really does highlight the innovation that Fermentis is bringing.
And then also, this is one that sort of gets me a little bit excited, because to me it’s almost like a homecoming.
Fermentis have just released the Weihenstephan wheat beer strain in a dried format, W68, which is one that we have been pestering them for probably 20 years now. It’s finally hit the market, which is wonderful.
And I don’t know if a lot of people had the same experience as me, but in the early days of my craft beer journey, wheat beers and wit beers were a really big part of it.
I still remember the Feral White that was Feral’s flagship beer before Hop Hog came along and stole all the limelight. But those wheat style beers, witbiers and hefeweizens, I think to see those coming back would be wonderful.
I think they’re visually stunning, they’re complex, they’re absolutely spectacular. It’s a style that I love and I’m excited to see what people do with that one.
JAMES ATKINSON: Bit of your own bias coming into play there, I think, Dale. I don’t think we’re going to see a… We always hear brewers say, ‘you can’t sell wheat beers’.
DALE MEDDINGS: I know, but they can sell them to me.
JAMES ATKINSON: Anything else you wanted to tell us about?
DALE MEDDINGS: The hop pipeline certainly hasn’t closed. The two that we deal most with at this point in time, New Zealand Hops, Nectaron and Superdelic, have absolutely hit the market with a bang and really changed the way I think people perceive New Zealand Hops.
For what they’ve brought to that NZ Hops portfolio is really a nice addition in a different space from what went before. It’s really filled out a great line up of hops for NZ Hops.
They’re terrific. They’re making some absolutely spectacular beer. That’s really exciting.
Indie Hops out of the US have just… We’re trying to get our hands on as much of it as we can, the new one called Luminosa, which to me, it’ll work very well in the current beers that are becoming more and more popular.
The sort of lighter style, XPA beers and New World Lagers that are hitting the market, it’s a very traditional US style hop, but without any of the dankness, without the really heavy, oily flavours that you can sometimes get with the US hops.
So it’s a really bright, light, zesty style hop. I think that one will find a lot of favour.
On the malt front, Weyermann keep pumping out some extremely interesting heritage malts that, for anyone wanting to do an Italian lager, they’re subtle, the differences are subtle, but they’re definitely there and they’re incredible. The palette of flavours available is certainly not shrinking.
You mentioned the Infusion malt from Joe White that they’ve developed. That’s been a really interesting product to try to bring to market that one. It’s such a departure from how we traditionally think about malt.
To have the flavours, the herbs, the spices and whatever they’ve put in the various product lines infused into the malt is a real, it’s something out there. That’s been quite interesting to see how brewers utilise that.
JAMES ATKINSON: Has there been a lot of interest in that and uptake?
DALE MEDDINGS: No, to be really frank, it’s a difficult one at this point because it’s a very expensive product and it’s probably hitting the market at the wrong time.
Yeah, so it’s a shame because it is something that’s really, really pushing the envelope to a big degree in an area that’s been fairly staid, to be honest.
Like malt, there hasn’t been a tonne happening in malt, so to see this one hit the market was exciting. I’d love to see a few more breweries take it up and do a bit more with it, but at the same time, it’s a set flavour that may not be what the brewery is looking for.
A brewer tends to like to pull those levers themselves. It won’t be for everyone, but it works well and it brings something new to the table.
JAMES ATKINSON: So with everything that’s going on, are you still enjoying coming to work and are you optimistic about what the future holds?
And Bintani’s future as well, are you comfortable that the business is in an okay position to be able to ride out what happens over the next 6 to 12 months and hopefully the economy recovers a little bit and things just start to look a little bit brighter?
DALE MEDDINGS: Yeah, it will. The economy will definitely recover. Bintani will be fine. I’m not at all concerned about that.
We’re in a slightly different position from other parts of the industry in that we’re fairly diversified in where we supply.
So we do a lot of work with distilleries, with the food industry, both domestically and internationally.
So we’re a little bit covered to a degree. But having said that, the bulk of our trade is with Australian craft breweries. So we do feel it for sure.
But I’m not overly concerned about most of our brewing customers either. We do speak to a lot of them regularly on how they’re going. They call us and discuss the position that they’re in.
And the market has definitely matured. And it’s not the situation where brew it and they will come anymore. The breweries have got to work a bit harder to capture the interest and capture the dollar of the consumer.
There’s a lot of our customers who are still in growth and still doing very, very well. So it’s certainly there are some black spots in the industry, but there’s also some extremely bright spots.
And I would say the bulk of the industry still is a very, very solid business. And there’s huge reason to be optimistic.
This point in the market where the consumer is quite demanding on quality and innovation, we have a mature brewing industry where there are a number of… There are hundreds of world-class breweries in this country with extremely experienced, qualified, successful brewers at the helm.
And making some of the best beer in the world. So it won’t be forever. And there’s huge reason for optimism from what I can see.
And it’s all driven by the consumers too, because people aren’t going backwards in what they want from a beer. They want flavour, they want innovation, and craft brewers are still in the best position to deliver that to their consumers.
JAMES ATKINSON: Well, Dale, thanks heaps for taking the time to have a chat. And let’s hope 2024 is a better year.
DALE MEDDINGS: No worries, James, thanks very much. It would be really great to catch up again. And yes, 2024 will be the turnaround point for sure.
More:
Phil Sexton: Wine and beer entrepreneur – S9E3
Chuck Hahn’s 50-year global brewing odyssey: S11E2
Mountain Goat Beer turns 25, with head brewer Alana Rees: S14E7
