In the last issue, we completed construction planning of the distillery. Now we'll look at producing spirit or, new make in malt whisky vernacular, before it spends time in a cask to become whisky legally. During construction, you've probably started conducting test batches of yeast strains against a range of malting specifications. You may have begun assessing regional grain cultivars to amplify your product's provenance. Every year new barley hybrids are released. These add differing malting parameters and kilning styles, plus with more than a thousand proprietary yeast hybrids to experiment with, the opportunities to produce small variances in flavour are endless. It is an exciting flavour playground where you may discover your distillery's sensory point of difference. Put distillation and wood maturation in the mix, and it's a huge adult playground. There are more than 400 flavour compounds in malt whisky.
Think of them as keys on the piano where an infinite variety of melodies await discovery. Established distilleries have built their house flavour style by ensuring their distillate uses the same fermenting processes, same still shapes and distillation techniques, even wood programmes and maturation conditions. Throw in wood finishing, and you've got even more tunes and flavour harmonies to rift with. It takes time to find your stride, so start your search systemically to find your flavour profile. The research and development process is more about what you don't want - elimination. By focusing on your desired flavour course, you'll start to shape the whisky that one day could make you famous. Your business strategy may not even require you to brew your wash, preferring to contract a local brewery to supply it in bulk for distilling. If you're making Bourbon or rye whiskies, you've probably formulated your mash bill recipe or replicating a traditional formula you hold in high esteem. You've probably determined a direction for your desired wood policy, or charring level if using new wood, to deliver your idealised whisky flavour profile. You'll need to have contracts and supply agreements with maltsters, yeast suppliers, cooperages, or cask wholesalers. It is prudent to have alternate sources to manage vagaries of cost, competitive demands and possible disruptions to the supply chain. The next few years you'll be devoted to distilling and laying down inventory for maturation. Production brings a new set of management skills that needs to be quickly mastered. Including a business culture dedicated to pursuing continuous improvements in quality, efficiency, innovation and bettering your competitive difference.
Your business plan will have forecast sufficient working capital to produce whisky spirit for some years and being able to lay it down for years of maturation. Your production plan may include contingencies to generate immediate cash flow from ready-to-sell white spirits: vodka, schnapps, even unaged spirit (the oxymoron 'moonshine' as you must pay excise), or compounded spirits like gin and liqueurs. If you have a licensed bar and tourist facilities, your marketing plan will be to attract foot traffic to sell branded spirits, conduct tastings, offer food, tours and merchandising. Your business plan may have a short term objective sourcing second party whisky to sell under your label while your whisky matures.
Many start-ups fail to adequately factor into their business planning the working capital requirements to underwrite years of production and market introduction expenses. The four production centres that can adversely impact on your cost of goods (COGs) are: production economies, packaging materials, proof and to market costs. Managing your production economies requires focusing on raw material costs, alcoholic yields to effluent disposal and energy usage. Each component and stage require careful benchmarking for quality and measurement. As an example, an important metric that impacts on COGs is the litres of pure alcohol per tonne of malted barley. Large distilleries achieve levels more than 450LPA, if you are less than 300 this needs attention, to improve yield without jeopardising quality.
If your distillery is the only one in town, this may be your commercial advantage. If a competitor arrives, you'll need to claim first or the original. Meaningful consumer points of difference could be your historical uniqueness, unusual packaging, a variety of grain, etc. Ideally, it's best to have a small point of difference so you can build your brand strategy and stories tactics.
Wood deserves a special spotlight as 60 to 80 per cent of whisky's flavour comes from cask maturation. Some start-up distillers employ cask-by-cask release programmes, marketing the individuality of each ex-Bourbon barrel, ex-wine hogshead, new wood cask. During start-up, this experimentation may form part of your R&D as you develop your house style. If you intend to build a successful brand, consumers seek liquid consistency bottle to bottle. Rarely do they want variability or unpredictability from a brand. Think of the globally successful whiskies in malts, blends and Bourbon, they have built their businesses on the consistency of product, packaging and positioning. Now is also time to think about your long-term maturation programmes to deepen your future inventory. Many start-ups employ smaller casks to enhance the flavour through the liquid to wood ratios so as to expedite speed-to-market. The US, Canada and Australia have two-year ageing minimum before grain spirit is classified whisky. UK and Ireland are three years. Young whiskies from smaller casks are wood extractive offering different and forward flavour profiles. There are a variety of accelerated maturation techniques claiming to collapse the ageing process. None have proven to outsmart Mother Nature and Father Time.
Your new stills should last a decade or two before the copper is slowly eroded away through frequent exposure to the rigours of distillation. But breakdowns, repairs and maintenance will become an operational issue. Ensure you have an essential replacement and spare parts on hand, and reliable contractors who can quickly respond to a shutdown.
When you start distilling you will start to generate significant biomass as by-products. Notably, spent grain (draff) after sparging sugars from the malt and spent distillers wash (pot ale). In fact, you'll have a lot of pot ale, more than 90 litres per litre of pure alcohol. The draff is excellent livestock feed, high in protein and carbohydrates; however, removal costs could be a disposal expense. Pot ale, if you are a large distillery, is a source of methane for renewable energy. Otherwise, you have the cost of treating the pot ale (wash still) and spent lees (spirit still) before releasing it into sewers and waterways (reducing temperature, acidity, copper residual, and reducing the biological oxygen demand to permissible levels). Larger distilleries have led the way in sustainability by converting effluent into assets, also halving their fossil fuel usage through biogas generation and other recycling and waste reduction practices.
Staff & suppliers
Assuming your distillery's scaled for growth, an organisational structure with employment agreements should be adopted. Do you include stock options or share schemes to reward talented, loyal employees? Recruitment for distillery workers is currently served by a small reservoir of skilled labour. Even a one or two-person nano distillery will need a network of smart, reliable vendors in support, from lawyers, accountants, electricians, plumbers to designers and printers. Larger scale micro distilleries will need specialist brewers, a distilling team and hands on the floor to handle the physical logistics, especially when working shifts. Tourism and hospitality services will add to your bar and sales staff.
When the whisky is ready for bottling you will probably be disgorging multiple casks to ensure flavour consistency of your finished liquid. You'll need filtration to remove any cask charcoal. You may now want to chill filter. Whisky exposed to single digit Celsius temperates under 46% ABV will cause fatty oils to precipitate. This flocculation makes the whisky appear cloudy. Some consumers may find this visually disconcerting, even though it has no effect on the whisky's palatability.
At this point, you may need to invest in a small hand operated bottling machine (cleaning, filling, capping, sealing, labelling) or paying a co-packer, that will add significantly to your cost of goods. If you're bottling many dozens or hundreds of cases a day, this will necessitate an automated bottling line.
Your perennial production objectives should be to make the best whisky in the most cost-effect manner. This is an on-going quest, whether you're the world's largest or smallest distillery. Even economy brands that serve more utilitarian needs cannot afford to stand still against competitors and changing consumer tastes and expectations. Every segment, from economy to ultra-premium faces this turbulence. Quality control procedures, laboratory analysis to sensory training and tasting panels will ensure at each stage, every day, that every batch and barrel adheres to your standards - grain to bottle.
The hallmarks of a successful whisky and brand are consistency, quality and good value. Next issue we'll delve into the exciting, creative and robust world of market planning when we take your whisky to the consumer.