Lark Distilling Boosts Sales 7% in Q2 Amid Strategic Brand Revamp

Sales Growth Amid Mixed Channel Performance

Lark Distilling Co. Ltd (ASX: LRK) has reported a 7% increase in net sales revenue for the December 2024 quarter (Q2FY25), reaching $4.5 million. This growth was primarily driven by strong performances in the direct-to-consumer (D2C) segment, global travel retail (GTR), and export sales, which collectively offset a decline in domestic business-to-business (B2B) sales.

The D2C channel, encompassing both ecommerce and hospitality venues, contributed an additional $0.3 million in net sales compared to the prior corresponding period (pcp). Meanwhile, Lark’s presence in Australian airports through GTR expanded, with sales up 12% to $0.5 million in Q2 and an 18% increase for the half-year. Export sales, particularly a replenishment shipment to Singapore, added $0.2 million in the quarter.

Challenges in Domestic B2B and Distribution Transition

Domestic B2B sales declined by $0.3 million in Q2, impacted by the transition to a new distributor, Spirits Platform, and industrial action at Endeavour Group’s distribution centres. The company has removed its domestic sales team, achieving operating cost savings that partially offset the margin impact. Despite these headwinds, management views the transition as a strategic move to streamline operations and improve long-term efficiency.

Brand Restage and Market Expansion Initiatives

Lark is progressing with a comprehensive brand and portfolio restage scheduled for completion by the end of FY25. This initiative aims to reinforce Lark’s position as a leader in new world whisky, with Tasmania positioned as the epicentre of this category. The company has also appointed an Asian Brand Ambassador to support increased activation plans in key Asian markets during the second half of the fiscal year.

On the production front, development continues at the Pontville Distillery, which is becoming Lark’s primary facility. The company is also decommissioning older pot stills at Cambridge, reflecting a focus on modernising operations.

Financial Discipline and Cash Position

Lark maintains a strong cash position with $23.6 million in cash and term deposits as of 31 December 2024, alongside an undrawn $5 million bank facility. The company’s whisky inventory remains steady at 2.5 million litres, underpinning future product availability. Operating cash outflows increased to $1.6 million in Q2, reflecting planned higher marketing investments aligned with the brand restage and the timing effects of the distributor sales model transition.

Management is also progressing the sale of the Bothwell Distillery, with a conditional offer under consideration, which could further support capital discipline.

Outlook

CEO Sash Sharma expressed optimism about the company’s trajectory, highlighting the momentum in D2C, GTR, and export channels. The upcoming brand restage and enhanced trade activations, particularly in Asia, are expected to drive growth in the second half of FY25. However, the company remains cautious about domestic B2B sales volatility amid distribution changes and external disruptions.