The challenges of starting a new whisky brand

When new businesses are founded and launched, there are numerous financial and business models that help get the product to market.  There might be schemes to raise capital; funds assigned to support marketing and promotion; and then comes the down-and-dirty process of actually selling the goods.  It’s obviously a very diverse and varied minefield to tread.  If you’re wondering how to start a new whisky brand, or even how to start a new whisky distillery, the minefield is particularly tricky to navigate…

The whisky industry is an example of a sector where that diversity and variation is most evident:  There are brands and businesses that go large scale and are backed by investors who put up millions of pounds/dollars, and there are – quite genuinely – “mums and dads” businesses that are launched off little more than sweat and elbow grease in combination with passion to create a craft, artisan product.  And, in more recent times, there are distilleries that get established off the back of crowdfunding or barrel investment schemes – with mixed degrees of success.

A question often pondered is whether or not the process of getting a whisky business off the ground is easier or harder than it was in the past?   There’s a multitude of different factors and considerations.  William Grant, together with his family, spent over a year physically building Glenfiddich with his bare hands and started distilling on Christmas Day in 1887 to establish his own brand.  In contrast, if you’re armed with a website, a social media account, and access to some spirit distilled at Cooley, it seems you can quite easily launch an Irish whiskey brand overnight – complete with an impressive backstory!

In the harder basket, distilleries setting up today have planning and environmental controls that their predecessors didn’t have to worry about.  Council and municipal applications and approvals can take years to get through, and the days of casually discharging distillery effluent and by-products back into the river downstream are long behind us.

In the easier basket, as we’ve seen already, the internet and social media marketing means you can broadcast and promote your brand to a wider audience than ever for relatively little money.  Online sales via your own website mean you don’t even have to fight anymore with wholesalers or distributors to get your product on to the shelves of retail liquor outlets.   The days of Tommy Dewar hopping on a ship and spending months sailing around the globe to get sales are also well and truly behind us.

Let’s look at a few distilleries and brands from around the world that have forged very different steps in very different landscapes to see how the process unfolded….

Scotland

One of the key aspects to setting up in the Scotch industry is that there is a strong and well-established blending market.  In contrast to start-ups in most other countries, you don’t need to sell and market every drop you produce as your own-branded single malt, since the many blending companies take bulk orders of fillings.  In other words, there is a market beyond your own market.

Even the smaller of the newer distilleries established in Scotland in recent years can get investment and capital on the basis of producing fillings for other companies.  Of course, for your own-branded single malt, there’s still the minimum wait of (at least) three years until you’ve got your own whisky to sell, but distilleries are getting better at managing that process with careful and clever use of quality casks and maturation techniques.  Smaller barrels and the inclusion of virgin oak in the equation have allowed some smaller distilleries to bring surprisingly mature and full-flavoured single malt to the table within five years instead of ten.  (Ardnamurchan and Glasgow Distillery come to mind).

Several new distilleries have raised capital from Joe Public in their early years by selling private casks at filling stage – some with the prospect of buy-back schemes once the whisky reaches full maturation.  Ardnahoe, Ballindalloch, Ardnamurchan, Lagg, and Glasgow have all offered such schemes.

Some of the newer players have even cashed in on the world’s rekindled interest in gin, choosing to also produce gin and other spirits that don’t require maturation – thus enabling them to generate immediate cash flow – not to mention brand presence.  Glasgow Distillery has been particularly successful in this regard with its award-winning Makar Gin, as well as its vodka and spiced rum releases.   Eden Mill in Fife has also sustained itself in this manner.

One of the more interesting case studies to look at is the Borders Distillery in Scotland’s south.   Like many of its new-generation peers, the distillery also produces gin and vodka, but it’s the scale of whisky production that is more impressive.  When firing on all cylinders, Borders has a production capacity of 2,000,000 (two million) litres per annum, which makes it a decent player.  (Compare this with, say, Glasgow at 270,000 litres and Eden Mill at 100,000 litres.  Even long-established distilleries like Oban and Springbank fall well below one million litres).

Borders, then, is very much founded on the presumption of supplying whisky for the blenders, as well for its own branded malt.  Given the distillery was founded by former William Grant & Sons personnel, the pedigree and knowledge was in place, and a reported £10M was raised and spent in restoring the old buildings and getting set up.

Another important aspect that often forms part of a new Scotch whisky distillery’s financial plan and business model is the tourism angle.  A dedicated visitor centre and distillery tours become part of the brand’s outward facing persona, and also become self-sufficient revenue streams if the distillery is well located and things are done “right”.  It is no accident that the distilleries to recently set up in high-population and tourism areas (e.g. Edinburgh) have invested heavily in making their visitor experience all it can be.  

Ireland

We hinted at what many now call the “Irish model” above, which has helped launch brands like Hyde and Teeling.  Hyde remains just an independent bottler, however, Teeling is a more interesting business model, because the long-term plan was always to build a new distillery.  However, whilst the distillery was being built, and whilst the spirit was serving out its time to legally become whiskey, Teeling established a brand by selling third-party whiskey under its own label.   It is an interesting prospect:  Being a distillery that is just five years old, yet selling someone else’s spirit under your own name – noting that some of those early Teeling releases were 15, 21, and 24 years old!    How do you make the transition then, once your own-made whisky is ready to go?   Will fans come along for the ride when you flick the switch from 15yo Cooley spirit to 3yo Teeling spirit but keep the same brand name?   In the meantime, are these distilleries/bottlers being transparent about where their whisky actually came from if they didn’t distil it themselves?  The practice attracted mild controversy a few years ago, prompting this article by respected writer Dave Broom.  Whilst the issue has perhaps since blown over in Ireland, similar questions are now being raised in Australia, as we’ll explore in a moment.

The more interesting player on the Irish scene is Waterford.  Waterford has been a fascinating project for Scotch whisky fans and spectators to watch, as it is – to a small extent – Bruichladdich v2.0.   Mark Reynier, the man who brought Bruichladdich back from the dead, ran it for 12 years, and then sold it to Remy Cointreau for £58M, has applied much of the acquired knowledge to Waterford’s establishment and operation.  The Bruichladdich philosophy – extolling the virtues of terroir and single-origin barley – are also being directly applied at Waterford, albeit to an even greater level of terroir and origin separation.   There was thus much fanfare and interest when Waterford launched its maiden whisky (yes, that spelling is correct!) releases in June 2020.  The brand was as much about the story as it was about the liquid in the bottle.  And, in truth, it’s a damn good story.

It will be interesting to watch consumer response to Waterford’s releases:  If the terroir and barley is as influential and dramatic to the final whisky as their philosophy espouses, we can expect very different and diverse whiskies to be produced.  Will consumers embrace that variability or pine for a house style and consistency they can hang their hat on? 

Australia

When Bill Lark (Australia’s godfather of distilling who re-ignited a lapsed and dormant Australian whisky industry), started distilling in 1992 and subsequently went to market his spirit a few years later, there was not exactly a textbook or a series of case studies he could refer to to aid him in his endeavours.  “Pioneering” is an apt description of the steps he took, and it would take more than a decade for him to refine his operation to best suit the Australian frontier.

The irony in this is that the “Lark model” has subsequently been adopted by more than 30 distilleries around Australia, particularly in Tasmania.  Mind you, that caused all manner of issues, as we explored in our article here.  Of course, it’s at an altogether different scale in Australia, as there is no real Australian blended whisky industry – yet.  The majority of new players to start up in the last five years are craft distilleries, relying on small-batch production and website sales.  Despite there being over 60 Australian whisky distilleries with mature (legal) whisky, you’ll find only a handful on the physical shelves of the big chains’ bricks-and-mortar liquor stores.

Several new ventures have adopted the sourced whisky practice of acquiring third-party spirit (spirit distilled at another distillery) and maturing it under their own regimen to then bottle as their own brand whilst playing the waiting game for their own-make to reach maturity – Craft Works Distillery and Highwayman being two examples.   Derwent Distillery is another interesting case point:  The distillery has not even been built yet, but is selling spirit distilled at Old Kempton under the company name “Derwent Distilling Co.”  Whilst they’re very transparent about their whisky’s origin on their website, the branding of their operation (particularly on social media) as Derwent Distillery has raised a few eyebrows.   With the likes of the White Label Distillery (a contract distillery supplying third parties) now operating in Hobart, the Australian independent bottling scene looks like it’s in for a busy period. 

However, such a strategy faces the same risks and challenges as some operators in Ireland discovered:  You’re building your brand with whisky you didn’t make, from a different distillery whose spirit might have a very different character to the whisky you’re subsequently producing yourself.  The transition from independent bottler to self-acclaimed distillery needs to be handled carefully.

Barrel investment or even just private barrel schemes should be a valid way for distilleries/brands to help source capital and fund the early start-up phase, although everyone is understandably gun-shy after the Nant fiasco. 

USA

The USA shares some parallels with Australia, albeit in a much bigger dimension.  There has been a massive explosion in craft distilling, and there are over 1,500 small-scale distilleries (not all of them producing whisky, obviously) that ply a fine line between small business and hobby.  Occasionally, some brands or individuals rise above the pack, even reaching a point and size where big business steps in to acquire a stake and inject further capital.  However, that’s not always a good thing or a smooth process, as Chip Tate and Balcones Distillery in Texas subsequently discovered.  Meanwhile, successful brands like Westward and Westland increase in size, production and presence, and both these have gone on to establish international markets and distribution.  A key to their success has been their exploration and experimentation with specialty malts, different grains, and even different yeasts to create new flavours and styles that set them apart from the rest.  Free somewhat from the more restrictive regulations that limit, say, Scotch whisky production (and even Bourbon production), there is a liberating sense of adventure and pioneering as the new-wave distillers play with both pot still and column still distillation; new and innovative mash bills; creative fermentations; and then flavour-driven thinking in their blending labs.  It’s malt whisky, Jim, but not as we know it….   

– – – – – 

Returning to some of the themes explored above, a successful whisky brand is about two things:  The quality of the whisky, and the story behind it.  A good story can compensate for mediocre spirit or poor cask selection initially, but that’s not a recipe for sustained success.   Similarly, you can be making the best spirit in the world, but it’s a bit pointless if no one knows about it or the story isn’t captivating to generate product interest.    One thing the Scottish distillers know and appreciate is the importance of consistency.   It’s hard to build brand loyalty (and sustained sales) if your releases bounce and lurch from stunning to disappointing.  This is also the challenge for the small-scale producers who rely on single cask releases, yet are often victims of single cask variability.   Independent bottlers also have to play this game carefully – diversity and uniqueness are the main appeals in independent bottlings, but if the quality amongst subsequent releases is variable, consumers will look elsewhere. 

In the meantime, the serious players invest in their production, invest in their operations, invest in their casks, and invest in their whisky.   The others invest in their Instagram and Facebook posts. 

Cheers,
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