Production

That's My Whisky!

Part One: Planning – putting the business on paper
By Chris Middleton
Ever daydreamed of owning a whisky distillery? Walking into a bar or a friend's home and looking at the bottles on the shelf and saying, "Hey, that's my whisky!". Then this four-part series is for you. Learn some insights and practical advice for what's involved in starting a whisky distilling business, from initial idea through to starting to build your brand.

The series will investigate planning, construction, production and marketing. It's not meant to be an operations roadmap. It's a general guide to what's involved if you are thinking or planning to venture into the whisky industry, focusing on malt whisky. Factors such as scale, location, even the range of spirits are some of the major variables affecting the business's scope and viability. So do regulations, which vary by country, state, down to town and local ordinances. While not prescriptive to everyone's distilling needs, the series will give you working ideas on many of the common issues should you decide to enter and operate in the industry, whether in the US, Canada, UK, Ireland or Australia. The five countries where micro-whisky distilleries have rapidly proliferated.

If you're about to enter the industry as a newbie, now is the time to start doing your homework. There are phenomenal resources today to get you started. Excellent books on whisky, whisky distilleries and production methodologies; as well as numerous brand management and marketing books, some focused on the spirits industry. Swot over books, subscribe to magazines to keep you abreast of industry news and reviews (especially Whisky Magazine). Online is a treasure trove of information and misinformation. The best sites will have links to other reputable sources, so trawl the net until you find trustworthy sites, forums, blogs and social media that furnish reliable information. Distilling conferences run by industry associations will fast-track your exposure to many of the facets involved in the business by people who are doing what you want to do. It's essential you understand this is more than just distilling. To survive and thrive, its business. The actual distilling constitutes only a small part of the operation. It's imperative you start visiting distilleries and talk with the owners and operators to gain first-hand knowledge. Each distillery will operate slightly differently, in aggregate, they bring valuable insights to help you formulate what kind of distillery you would like to build and the type of business you would like to operate. Many people are quite happy to share their experiences, so hit the road and start your field research. Some distilleries also offer introductory distilling courses.

This hands-on experience is a practical taste of what's to come. There are accredited courses in the UK, US and Australia, that offer diplomas to postgraduate degrees in brewing and distillation. Also survey liquor stores and bars to understand the competitive dynamics of price, presentation, demand and learn the retail trade's opinions about the category issues. In-depth market research where purchasing and consumption happens will yield valuable insights to serve the future needs of your consumers and customers. Forearmed with this knowledge may prove to be your competitive advantage as you write your business plan, produce your whisky and market your brand.

You may even decide to source a similar profile of whisky from another distillery, creating a scouting label while your whisky matures. You may elect to make part of your production white or compounded spirits to generate immediate sales. Exploring options available to you during your business evaluation stage will improve the business's fitness for survival.

Undertaking an industry investigation will also alert you to industry working conditions. Not being a nine to five job may not suit your work-life balance. Working with spirits requires some diligence and caution, from pressurised distillation to the storage of hazardous goods. Marketing demands responsible conduct and adherence to public policies. Also reams of paperwork. Transgressions can result in punitive penalties or worse.

To help you along this unfamiliar road there is an expanding network of specialist suppliers and professional consultants to tap into today, such as spirits business professionals, still fabricators, microbiologists, coopers, brewers, distillers, town planners, etc. The right advisory team will get you there cheaper, faster, better. It's not a guarantee of success but avoids costly blunders in a competitive industry where mistakes are unforgiving.

As you study these distilleries and spirits industry, retail channels and competition you will start to formulate ideas to feed into a business plan. You'll assess whether the dream is feasible as a commercial venture or more as a hobby. You may discover an opportunity gap by exploiting a geographic area, a new product development, market segment niche, or marketing innovation by serving an unserved consumer need.

As you envisage a grand plan of what your business can be in a decade or more, you will have a better appreciation of your product portfolio, operational footprint (size, capacity), costs, growth strategies and exit options. Here are some key pointers to be considered as you start formulating your business plan:


Purpose



This is the vision. What do you want to achieve? Being able to communicate your idealised future, what you stand for, why you will matter to the consumer. Advocating this ambition will help rally and galvanise the enterprise with excitement and purpose for investors, staff, vendors and consumers. The vision leads to the goals and objectives that will, in turn, formulate business strategy, distillery operations and market planning. The necessary actions to make the dream a reality.


Scale



Financial resources will determine your production capacity, the cost of the distillery, the working capital to put casks in storage. Then your marketing expenditure to take your brand to market to sell the whisky.


Premises



This will determine your operation footprint. Whether you buy or take on a long term lease, assume it's to be a one-stop facility (brewing, distilling, bond store, office, dry goods area). Will there be sufficient space for future expansions? Will hospitality be a key part of your business mixed with tourism, merchandising, licensed bar and distillery door sales? We'll look further into premises in the next issue.


Plant



Good processes, bad equipment = still bad whisky. Same with the raw materials, so ensure you use the best or optimal materials. Research should identify who makes the best apparatuses you can afford to produce the whisky and spirit styles you desire.


Products



Start-ups use white spirits to help fund early cash flow. Make sure you have the time, money and business resources to invest and market 'other brands' such as vodka or gin. Every brand is like a child. Each brand needs lots of attention and support to succeed.


Financing



How long is a piece of string?* Financing may be through personal savings, soft money, loans, private equity, crowdfunding, bottom line money is the business's lifeblood. Ensure after the capital expenditure there is sufficient longer-term working capital and funds for marketing expenditures. Business plans and spreadsheets will vary between 10 to 20-year horizons, so the business plan rests on having access to cash until you've reached profitability. Check for Government special grants for tourism, employment and industry development funds.


Business structure



Make sure legal, accounting and governance are in order: company and tax registrations, trademarks and IP, contracts to insurance, which will range from public liability, income protection, worker's compensation, property (later inventory), liquor liability, directors, etc. Spirits are a highly scrutinised industry ensure you cross the Ts and dot the Is.