Alcohol consumption is dropping in Australia but there’s one market that’s booming nationwide
As Australians develop a taste for craft distilleries — and their products — the local industry is meeting the growing demand with exceptionally good drops
6 min
From the Winter issue of Kanebridge Quarterly magazine, on sale now.
It never used to be this complicated to order a drink. Less than 10 years ago, requesting a whisky, a gin and tonic or even a vodka martini was a fairly straightforward affair with a choice of international brands, from Glenfiddich single malt whisky to Absolut vodka and Bombay Sapphire gin.
Now, the drinking landscape is somewhat more complicated — and that’s good news for locals who like a dram of whisky or a cocktail or two.
The Australian distillery industry has gone through rapid growth in recent years, from 30 distilleries nationally less than 10 years ago to more than 600 now. And that’s despite the overall levels of alcohol consumption falling over time across Australia.
CEO of the Australian Distillers Association, Paul McLeay, has a simple explanation.
“Australians are drinking less, but better — and patterns are changing,” he says. “Cask wine sales are down. They’re drinking less boring beer and more interesting products.”
While the distillery industry was already growing, McLeay points to COVID as the impetus for the increasing appetite for flavourful spirits.
“Tastes changed after COVID,” he says. “That home cocktail culture took off as people realised they could make interesting drinks at home — and post photos of them on Instagram.
“That notion of drinking less but better, the idea of fewer drinks on fewer occasions made it feel more special.”
While the Australian wine industry was valued at $5.7b last year, the distillery market is making headway, coming in at $2.5b. However, McLeay says it differs from the wine market, especially in terms of production profiles. For starters, without the need for vineyards, he says the distilleries are equally split between city and regional areas. This is a key advantage for small craft distilleries looking to connect with their local market.
“If you live in Marrickville (in Sydney), you’ll be proud to be drinking a local gin,” he says. “When someone comes to visit, you want to give them something to take home. Spirits allow you to give them a taste of the locality — you can buy it in a bottle.
“For travellers, if people remember the Hellfire Bluff Gin they had on a night out in Hobart, that’s a positive association with the area as well.”
At the moment, he says there are about 500 gin and vodka distilleries around the country, about 100 whisky producers and 50 making rum. With each product having its own flavour profile influenced by local conditions, from the region’s botanicals to its barley, the quality of its rainwater and even the way it is aged, it is good news for consumers seeking variety. McLeay says most distilleries are making multiple spirits to increase commercial opportunity and get product to market quickly.
“The ‘brown’ spirits have had more time,” he says. “Whisky looks clear like gin and vodka initially but over three or four years of maturation, it turns brown. It only takes about a month to make gin, which is why a bottle of gin is generally less expensive than whisky.”
While it might seem as though the homegrown whisky, gin and vodka market has appeared out of nowhere, credit for the modern distillery industry in Australia largely falls to Bill and Lyn Lark from Tasmania who lobbied their local MP in 1990 to change antiquated federal laws that outlawed distilleries that were smaller than 2,700L.
Following the change, LARK Distillery opened in Tasmania in 1992, capitalising on the state’s reputation for growing high quality barley, its clean water, as well as providing the perfect climate for ageing single malt whisky. Support for the Larks’ efforts also followed from government, as well as mentorship from John Grant from Scottish label Glenfarclas, with their first whisky sent to market in 1998.
Bill Lark says while he knew it was a delicious drop, it wasn’t until the early 2000s that the business kicked up a gear.
“The early 2000s was a period where we and the few other distilleries had to prove their credibility to the market,” he says. “When LARK first won a major award in the World Whisky Awards in 2009 I think it gave the confidence in others to get involved. From day one, inspired by such greats as John Grant from Scotland, I encouraged as many new distillers as possible to become a family of distillers where hopefully we would all be producing a world class product in sufficient numbers for eventually Tasmania and Australia to be recognised as a significant whisky producing region.”
In March this year, LARK was recognised by the World Whiskies Awards in London for crafting Australia’s Best Single Malt and Best Blended Malt.
In the intervening years, Australian distillers far and wide have heeded the Larks’ call to create their own spirits, from small family operations focusing on a single product to larger businesses with their eyes firmly set on the world stage.
Fellow Tasmanians Suzy and Cam Brett from Spring Bay Distillery share a passion for whisky and were inspired by their travels and the Larks’ example to start their own business.
“We remember very clearly being told by Bill Lark to make sure you make bloody good whisky!” says Cam. “I think there has definitely been a change in consumer habits.
“People are more engaged with what they are drinking, how it is made, where it comes from and that has increased the popularity of all spirits.”
Suzy says she first experienced whisky while working in Edinburgh in the 1980s. She’s been a fan ever since.
“Whisky is the king of drinks because of the complexity, the ageing and the romance,” says Suzy. “The time it takes the whisky to mature is influenced by barrel size, bond store, location and climate. The larger the barrel, the longer the maturation.
“Some of our large barrels may take 10 years or more to mature and it is a case of ‘it’s ready when it’s ready’ and won’t be rushed.”
Jake and Tess Eagleton started their Wagga Wagga label, Riverina Gin, in February 2023, after years of discussions, as well as travelling around gin distilleries in the Scottish Highlands, where Jake grew up.
“There are lots of gin distilleries popping up in the Scottish Highlands — I was surprised to see so many,” Jake says. “We started visiting them and often they were on people’s farms and you’d get the chance to meet the maker.”
The couple, who now have three children, were inspired by the notion of a family-run business and, with the help of local winery, Borambola Wines, who offered them a shed, focused on a one-shot distillation method. They have a simple philosophy of making one product really well.
“We try to stand out by not standing out too much — we use fresh organic oranges from the local region so the flavour is citrus forward,” says Jake.
They have also called on connections in their local community, partnering with Paper Pear Gallery in Wagga Wagga to host the Riverina Gin Club events. Expansion will be slow but steady.
“We made sure people knew we were a family-forward business,” says Jake. “We have seen a lot of peaks and troughs with the economy and we have been adaptable because we do a lot of the work ourselves. We have one gin that has been well received.”
Brand director and co-founder of Never Never Distilling Co Sean Baxter has bigger ideas for the business he started with friends George and Tim, with plans to further its expansion into Asia and Europe. Unlike other distilleries that sell via bottle shops as well as online, Never Never is focusing on the hospitality industry to reach bars and hotels. It’s not a surprising strategy given Sean’s former life at Diageo, the peak company for brands such as Johnnie Walker, Tanqueray, Guinness and more.
“I worked as a contractor for Sweet&Chilli as a national brand ambassador for Johnny Walker,” Sean says.
“That gave me access to so many amazing venues and bars and I met a lot of people. I was standing in front of so many people telling incredible brand stories and it sunk in — I wanted to do my own.”
The Adelaide-based business now offers more than a dozen gins and sees the relationships with bartenders and hospitality providers as key to their success.
“We collaborate with international bartenders to promote the brand in Hong Kong and Singapore, and over the past 12 months we have moved into France,” he says. “That’s been a real eye opener, taking our oyster shell gin to the French — it’s an exciting push.”
The ultimate goal is to create a global brand.
“We didn’t build Never Never Distilling to be small.”
Mirzaian is a senior director within CBRE’s Development NSW business, operating across the company’s Western Sydney and North Sydney offices
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Wall Street’s hottest momentum trade has reversed sharply, as former winners tumble and heavily shorted stocks surge.
3 min
Wall Street’s hottest trade has gone ice cold.
For years, it paid off to buy stocks that were rising in price—and bet against struggling shares. The momentum trade was especially profitable this year, as investors piled into hot stocks including Micron Technology, Nvidia, Advanced Micro Devices and other artificial-intelligence darlings while wagering against those likely to be hurt by the embrace of AI.
The S&P 500 Momentum Index soared 44% in the second quarter, its best quarterly performance on record, and it surged 133% over the past five years, nearly double the broad market’s performance.
Mega funds and rookie investors alike piled into the trade, some using leverage and options contracts in an effort to amplify their returns, propelling the underlying shares higher.
“It is a self-fulfilling prophecy,” said Matthew Tym, managing director at Cantor Fitzgerald, of the trade.
Suddenly, the trade is a loser. The momentum index has tumbled more than 9% since July 1, lagging behind the S&P 500’s 2.8% gain. The index—which tracks stocks in the S&P 500 based on a “momentum score”—is on track for the biggest quarterly underperformance in 25 years. July was the second-worst month for the momentum trade in around 40 years, according to Bank of America estimates; the only month worse was April 2009, in the teeth of the global financial crisis.
Hedge funds that bought momentum shares while shorting low-momentum stocks suffered even more. At the same time, a basket of the most popular stocks held by hedge funds tracked by Goldman Sachs recorded its biggest one-month underperformance in July relative to the S&P 500 in more than 20 years, according to the bank’s analysts.
Momentum trading is based on a rather simple observation: Investments that go up tend to keep outperforming; those that underperform often remain laggards. This kind of trading might seem too simple a stock-picking strategy to work. Yet it often has.
“For decades, it didn’t take a lot of sophistication to run a momentum strategy and make a decent living at it,” says Agustin Lebron, senior researcher at EquiLibre, a trading firm.
Part of the reason: It takes a while for corporate and other information to spread to various investors, so they slowly build positions, producing buying momentum.
“A huge pension fund can’t flip around its positions in a day,” says Lebron. “Behavioral biases also account for some of the effect, as well—people tend to sell their winners too early and hold losers too long.”
Fans of the strategy point to the human tendency to extrapolate from past results—and chase investment returns—noting that momentum patterns have been evident in markets for decades, even centuries. They also say that some of the worst months for momentum strategies are during longer periods of outperformance.
Some have been doing the trade by buying the strongest investments in a sector while shorting the weakest; others lean in to rising markets or asset classes. Still others use a quantitative approach or turn to banks or others who sell ways to make distinct wagers on momentum as a “tradable factor” or a “thematic basket.”
The fans remain believers. “Any strategy has disappointing periods,” says Antti Ilmanen, global co-head of the portfolio solutions group at AQR Capital Management.
The surge in Moderna and other biotech stocks helped crush the momentum trade. These shares were among the most heavily shorted in recent years, but positive news on a cancer vaccine from Moderna and Merck sent those stocks flying, crushing some quant and other hedge funds. Moderna is up around 150% so far this month.
These traders had an especially rough day on Aug. 19, which Goldman Sachs told its clients was the worst day for “systematic long-short managers” in more than two years. About half of the losses were because of momentum trades, the bank said.
Some traders have begun to short, or bet against, the very stocks that propelled the momentum trade earlier this year. Net short positions in futures tied to the Nasdaq-100 index among speculators recently climbed to some of the highest levels of the past two decades, according to data from the Commodity Futures Trading Commission.
The about-face is a sign of how markets have become more treacherous for investors, even as indexes keep climbing. Part of the issue: the recent meltdown of Situational Awareness, a hedge fund that had piled into some of the most popular momentum shares, including chip stocks. After a period of market tumult, Nvidia shares rocketed almost 9% after its earnings, showing how quickly sentiment can shift.
Some investors say the run-up in share prices driving tech stocks higher reminds them at times of the dot-com frenzy decades ago.
Mike Ogborne, the founder of San Francisco-based Ogborne Capital Management, said he has grown more cautious on technology stocks and is keeping more of his portfolio in cash than he typically does.
And he is nervous about the surge in spending by technology giants and quarterly capital expenditures that keep rising.
“It is a little bit like Cinderella and the clock striking midnight. You don’t know when midnight is going to come around,” Ogborne said. “They don’t send a memo around telling you when the capex cycle is over.”
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