How to open a Scotch whisky distillery in the 21st Century

It begins with a beautiful dream, writes Ian Wisniewski for WhiskyInvestDirect, that will end in a very special dram.

But in between there lies an extensive ‘to do’ list. This includes: find a site to refurbish or build on; obtain planning permission and distilling licenses; commission equipment; lease or build ageing warehouses; hire personnel (to run production, sales and marketing, administration and a visitor centre); develop a brand concept; design packaging; establish a supply chain for ingredients, casks, bottles, labels, etc, etc.

Oh, and there’s also the question of funding.

Meanwhile, there are only two certainties throughout the process: it will take longer than originally planned; and it will be more expensive.

The first step is a business plan. Whether it proves to be viable depends on money, which can buy time and expertise, and also solve numerous problems. So long as it’s available in sufficient quantities, that is.

“When I was starting out people used to tell me: whatever you think your budget is double it. I’d roll my eyes, but it’s true.  It actually ends up being more than double what you thought," says Daniel Szor, Founder, Cotswold’s Distilling in England, operational since 2014. "I had enough funding of my own to get to a commissioned, functioning distillery, and that made it possible to get investors.” 

Needless to say, a business plan looks ahead, but it can’t predict the future.

“There will always be operational surprises – the costs of barley and fuel for example, go up and down – so you’ve got to be sure you can accommodate this, and have patient investors who will stump up more cash,” says William Wemys, Founder of the Scottish distillery Kingsbarns, operational since 2015.

The inevitable question for anyone investing in a new distillery is, how long will it take to recoup the cost?

“Typically you should plan for more than 10 years to break even after the initial costs,” says Stuart Urquhart, Operations Director at Gordon & MacPhail, the whisky specialist which re-opened Benromach distillery in 1998 and is planning to build a new distillery in Craggan, Speyside, this year (subject to planning permission).

While there’s plenty to get on with, where do you start ? If there was a chronological order in which everything should be completed, establishing a distillery would be more streamlined. But there isn’t a time-line to follow. Numerous application forms, searches and commissions have to be actioned simultaneously, in an on-going, multi-tasking fest.

So, let’s begin with one of the vital factors: finding a site. How this process unfolds depends on the criteria involved.

Alex Wolpert, founder of East London Liquor Co, began looking in July, 2012, with a particular motivation. “How do we make a quality whisky, in an urban environment on a scale that makes it meaningful? The distillery had to be in London, where space is the main issue and only available at a premium.”

Finding the site took Wolpert 18 months, followed by 6 months negotiating the lease. This came with its own costs. Even before signing the lease, designs for the branding were finalised (a 6 month process), and all the equipment was ordered which entailed paying a 20% deposit.

Which brings us onto another vital question: how do you want your whisky to taste?

“The biggest decision for us was the character of the spirit, and how long it would need to be aged. That was our starting point once we’d decided to open a new distillery,” says Stuart Urquhart.

This helps to determine the choice of equipment, as the shape of a pot still influences the style of the resulting new make spirit, and consequently the mature whisky.

Selecting and commissioning equipment, from a specialist company such as Forsyths in Scotland, means benefitting from extensive knowledge and experience right from the start. However, the growing number of new distilleries placing orders, in conjunction with the time required to design and manufacture production equipment, means that time is a vital factor.

“I contacted Forsyths in June, 2013, to commission the equipment, but they had a three year waiting list. In July I made an offer for a site, and shortly before we completed on November 15, Forsyths called to say they’d had a cancellation, and the waiting time had come down to eight months. Building work began in February, 2014, and we were operational later that year,” says Daniel Szor.

Equipping and staffing a distillery also entails numerous Health & Safety regulations. But there’s no single source or manual containing a definitive list, so it’s a case of compiling the regulations relevant to each individual distillery on a DIY basis. Another option is appointing a consultant(s) to handle this, and various other aspects.

“Appointing the right contractors and designers to make sure we have the right advice is vital. If we were starting from scratch we’d have to know all of HMRC rules, for example. Re-opening Benromach gave us valuable experience, and established a supply chain. Our new distillery will certainly benefit from this,” says Stuart Urquhart.

Establishing a distillery is a significant achievement. In many ways, however, it is just the first step of a much longer journey.

“I’m asked for advice on a regular basis, and give as much advice as I can, but I always tell people it’s much easier to make whisky than to sell it,” says Daniel Szor.

William Wemys continues: “The first thing I say is how are you going to sell the whisky? You must have a compelling sales and marketing strategy, and find the right sales distributor. You could spend months or years looking for the right distributor.”

And if there was an opportunity to do it all again, with the benefit of hindsight?

“I’d start with a lot more money. We ran a lean start up, but you’ve got to cut your cloth to suit your resources. The business is now five years old, but we’ve only had a full time, in-house accountant for the past 18 months. I should have had someone in far sooner. Good counsel is expensive and so it should be, as it can save you a lot of time and money. What really adds value to a business is advice,” says Alex Wolpert.

With so many decisions to make when opening a distillery, sage advice can prove to be the most important asset of all. And while advice usually comes at a (significant) price; it can also prove to be priceless. 

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