Distillery Focus

Room for a few more

Elsewhere in this issue we've looked at four distilleries a couple of years after they were given a new lease of life. Here Ian Buxton updates in tow new faces
By Ian Buxton
There’s something of a renaissance going on amongst small distillers. Not only have a number of Scotland’s distilleries passed back into private hands, but a few brave pioneers are starting out from scratch.Though many of us dream of starting our own distillery, in the cold light of day it doesn’t seem quite such a good idea. It’s a hard road. After such trivial problems as finding and securing the site; completing the design; getting planning permission and raising the finance have been overcome, you still have to actually build and commission your new baby, then run it.There’s always a honeymoon period, of course, and initial sales of casks and your various opening offers will probably go well but making whisky is a long-term game. With no reciprocal business to offer other distillers you will soon begin to worry about exactly what you’re going to do with all the spirit you’ve made, as it sits slowly evaporating. Unless you’re bankrolled by some very generous and patient investors, it’s at about this point that the doubts start to creep in. So in this distillery focus, I’ve taken the opportunity to look at two distilleries of the future. Dreamers, though they would no doubt prefer the term ‘visionaries’, who have taken the big, bold and brave steps and started from scratch.We’re all familiar with some ambitious plans that, once announced, seem to disappear into the Scotch mist but at least one of these projects really is happening and production anticipated within weeks.The Kilchoman distillery on Islay (it’s over the hill from Bruichladdich) has been in the planning stages for some five years now. When I visited 12 months ago it was hard to believe that anything would ever happen but the first new make will run in May this year.Kilchoman is a labour of love – a detailed recreation of the farm distilleries of the 19th century. Everything is sourced locally.Barley is grown on the farmland around the distillery; malting will take place on site, using Islay peat; the water comes from the nearby hills; there are warehouses on site and in time a small bottling line will complete the story.Founder, managing director and principal investor Anthony Wills stresses that this is a completely local effort. “I’ve relocated with my family to Islay,” he says, “and our new distiller, Malcolm Rennie, is a local man, trained at Bruichladdich and at Ardbeg.”Work is now well underway on what, amazingly, will be Islay’s first new distillery since 1881. The basic buildings are complete and the two stills – from Forsyths of Rothes – are installed. Last year’s barley harvest, Chalice as it happens, is lying in the silos waiting to be malted. There will be an official opening, scheduled for June 3rd, as part of the Islay whisky festival. If you can’t make it it’s still possible to watch progress, with new photos being posted almost daily on Kilchoman’s website: (www.kilchomandistillery.com).The design of the new distillery lay with the renowned Jim Swan and engineering consultant Ron Gibson (formerly of William Grants), so Kilchoman’s credentials are very strong.Recognising the cashflow problems inherent in distilling Anthony Wills plans to start out on a very small scale and then grow slowly. “We’ll distil no more than 35,000 litres annually to begin with,” he told me, “building up to 90,000 litres a year by 2012, though our capacity exceeds that. Everything will be reserved for our single malt, and premium quality and complete authenticity will be the goal.”Funding for the project, estimated at around £900,000, has come from Anthony himself, other private investors, a Small Firms Loan Guarantee and a grant from the local enterprise company.If you wanted to invest in this project, however, the doors are not closed. You can contact Kilchoman through their website, but think in terms of a minimum four figure sum and be advised: these projects are not for widows and orphans!Initially, cashflow will be sustained by the café, shop and visitor centre. The site does not at first glance seem a promising one but, as Anthony Wills explained, the trekking centre at the farm and the presence of the popular beach at Machir Bay will make the difference to numbers. Of course, there will be an initial sale of first fill casks.Around 25 per cent of the first year’s production will be available to enthusiasts, and this will be filled into ex-bourbon barrels. The price remains to be determined, but expect a premium over other comparable offers to reflect the handcrafted, bespoke nature of this offer. However, so small is Kilchoman that only some 60 casks will be offered in this way and demand is bound to be high.Kilchoman is planning to produce a distinctively Islay style, with its malt peated to 50-60 ppm of phenols. No doubt then of this distillery’s provenance and its place in the market. Kilchoman will always be a boutique operation, of compelling and romantic interest to enthusiasts and Islay fanatics but their horizons are quite deliberately limited.The same could not be said of our second brave pioneers. Blackwood Distillers is also on an island, in this case Shetland. Its innovative plans call for the first distillery on Shetland but the scale of the prospective operation is very different from Kilchoman.Blackwood isn’t lacking in ambition. In fact, you might detect just a hint of hubris in a company mission statement that begins “it is our aim to be THE most innovative spirits company in the world.”Well, some rather more established businesses might lay claim to that title, so what’s different about these upstarts? Its cunning plans to achieve this lofty goal are also disclosed on its website, so I’m not giving away any secrets that Diageo, Bacardi and other competitors haven’t already worked out.Blackwood’s recipe for success involves “attracting new drinkers into old categories by stunning products and compelling brands that consumers around the world adore.”That’s that, then! Who would have imagined it was that simple? This from a company that, in the finest dotcom tradition, employs a ‘customer happiness manager’ and a ‘creative-in-residence’.Unusually in a spirits marketing business the founders’ children feature on the website, sharing their dream that the company “makes some money so we can spend more time together as a family.”It doesn’t seem too cynical to suggest mummy and daddy might have had a hand in that.Few spirits brands see fit to use five year olds in their marketing, but perhaps that’s what “attracting new drinkers” means..Whatever the source of the junior Blackwoods ambitions, the company can clearly ‘talk the talk’, but does it all add up? After all, their November 2002 announcement promised distilling on Shetland by “Spring 2003” and in Whisky Magazine issue 39 CEO Caroline Whitfield talked confidently of “whisky in barrels by Christmas.”That should have been last year. Since then, we’ve seen a stream of products: vodka, gin and a vodka cream liqueur Jago but, as the small print coyly admits “while Blackwood Distillers use as many local Shetland ingredients as possible, we currently produce our spirits on mainland Scotland.”It’s been meeting with high acceptance levels though, and the list of stockists is impressive. The great plus of this type of product is that they are cash generative: there’s no tiresome waiting around for gin or vodka to mature and no-one has yet launched a 12 year old cream liqueur (don’t bet on it however).Funds earned by selling these products are immediately available to support the growing company; they start to build the brand and they get the Blackwood name into the mind of trade and consumer alike.There’s clearly a slick marketing machine behind this operation. Blackwood’s glossy sales brochure, entitled ‘Pure Scottish Spirit’, refers to a sampling exercise involving three million consumers in what it modestly titles “Britain’s Largest Spirits Sampling Programme.”And it doesn’t stop there. With little sense of traditional Scottish reserve or understatement, Blackwood claims its attendance at the Tartan Day celebrations in New York makes them “the key attraction”.Did anyone tell Sean Connery or the thousands of pipers, I wonder? So actually, it is quite a cunning plan, but what of the jewel in the crown, the Shetland distillery? A Shetland office has been established now and staff appointed on the island. However, calls to this location were referred back to London where I was able to speak to finance director Joanna Dennis.Local enquiries reveal that work has yet to start on the site. However, Ms Dennis explained that this was due to adverse weather and a decision to relocate the distillery site further back from the sea than originally planned, which required new planning permission.Blackwood now expects building will start in June or July and distilling by December this year. And the company has shown admirable humour in its marketing campaign in support of finding a distillery manager.The distillery will have a capacity of 200,000 litres per annum initially, though capable of expansion. Around £2 million will be invested in the first phase of still house, bonded warehouse, boiler house and cask storage. Foundations will also be laid for the roads and other infrastructure.A visitor centre will follow later, with early visitors being entertained in a redundant school across from the site. Eventually, the vodka and gin production will also be located on Shetland, a location that only a premium brand could afford to sustain.Blackwood intends to reserve its entire output for sale as single malt and has announced a sales target of 40,000 cases a year.Even allowing for growth in the market by the time its spirit is mature, that’s an ambitious figure but this is clearly an operation that thinks big.If you are excited by all this, it’s possible for small independent investors to subscribe for shares in Blackwood, though the share price has shot up from its initial offer price of £4.Joanna Dennis told me that investors are primarily individuals, with shareholdings ranging from a few hundred pounds to more than £400,000.Details can be obtained via the company’s website. However, I’ll be warning our mystery visitor – it’s clearly too early to schedule a trip to Shetland, though there will be something quite fascinating to see on Islay soon enough.It just goes to prove that delivering dreams is harder, and takes longer, than you might imagine.Let us hope that neither of these turns into a nightmare. Information