The malt whisky landscape is all set to change. Diageo is building a new distillery, with several others planned including Kingsbarns and Annandale. Additionally, Chivas Brothers is reopening Glen Keith distillery in April, 2013. While we savour these prospects, anyone opening a distillery faces an extensive ‘to do’ list.
The pre-requisites are to secure funding and produce a business plan. In the absence of funding, a detailed business plan can generate investment, so long as it delivers the required detail. This includes the overall concept, production capacity, staff numbers, visitor centre, running costs, and projected sales figures with profits for the next 10 to 15 years.
“Writing our business plan wasn’t straightforward as a distillery of our small size hadn’t been built for a long time, and being accurate without a template to refer to is difficult. Getting investors on the back of a business plan is also difficult, unless they understand the Scotch whisky business, as most people expect a return within three to five years, rather than 10 to 15 years with malt whisky. It took four years to get enough money to get going, but it was easier to attract additional investors once we’d built the distillery and they could see the operation,” says Anthony Wills, managing director of Kilchoman, which went into production in 2005.
Potential sites for a distillery are assessed on the basis of suitable road access for lorries, and crucially, a consistent supply of water. A licence is required from SEPA (Scottish Environmental Protection Agency) to draw and dispose of water, with SEPA also applying strict regulations on the disposal of effluent.
“The first thing we ask is what annual production you want to achieve, that determines a lot of things, and whether you’d like the option to increase production capacity in the future. The time scale to design, produce and install all the equipment is around 12 to 18 months, depending on the size of the distillery”
“We looked at seven different sites and there was only one that had enough water constantly available, from a spring and a river. We’ll also be able to use electricity from a hydro-electric scheme on the river, which already supplies a large part of the peninsula,” says Alex Bruce, sales and marketing director for Adelphi Distillery Ltd, which has a site on the Ardnamurchan peninsula in western Scotland. Building work is due to begin shortly on what will be called The Ardnamurchan distillery, which is planned to be operational by October 2013.
Planning permission to construct a distillery is down to the local authority.
“A lot of work went into submitting for planning permission in January 2010, which came through in February 2011. This was considered fairly quick for a major development. You need great people on-board who know what to ask for, and how to speak to the planning authorities,” says Doug Clement, founding director, The Kingsbarns Distillery, which is planned to be operational within a few years.
Additional planning consent from Historic Scotland was required for Daftmill to redevelop grade two listed buildings into a distillery.
“The distillery buildings were originally water-powered mills, with two date stones inscribed 1806 and 1677. Consent from Historic Scotland was relatively straightforward as the buildings were unused and in disrepair, and the process ran concurrently with planning permission from the local council,” says Francis Cuthbert, proprietor and distiller, Daftmill, which became operational in December, 2005.
To commission and install the production equipment, one option is going to a company that can provide a complete service, such as Forsyths.
“The first thing we ask is what annual production you want to achieve, that determines a lot of things, and whether you’d like the option to increase production capacity in the future. The time scale to design, produce and install all the equipment is around 12 to 18 months, depending on the size of the distillery,” says Richard Forsyth, chairman of Forsyths.
Applying for the necessary licences means a dialogue with HM Revenue & Customs (HMRC) should start during the planning stages. In addition to a distilling license, HMRC issues the license required to be an authorised warehouse keeper and operate aging warehouses.
Agreements with cask suppliers and commercial maltsters are also key factors in the count-down to becoming operational. Buying malted barley on the open market, for example, may entail paying higher prices, and difficulties sourcing the required amounts.
“We started talking seriously with cask suppliers at the beginning of this year, and started serious negotiations for our malt supply more than six months before the planned start up of Annandale in December, 2012,” says Professor David Thomson, proprietor of Annandale distillery.
A recruitment drive also begins at least six months before opening, particularly key appointments such as the distillery manager, as successful candidates may have to give three months notice.
Clearly, it takes a lot of determination and organisation to open a distillery. But that’s only the beginning.
“A lot of things tie in together that you need to think very carefully about. The key is funding, and getting the right consultants and range of experience around you. Then sales and marketing is key to bring your product to market and get the sales you need to sustain the business,” says Anthony Wills.