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Master of Malt Blog

Author: Ian Buxton

China’s baijiu giants: the most valuable drinks companies in the world

Looking for a hot share tip? Ian Buxton looks at whether you might be best off investing in China’s rapidly growing national spirit baijiu. The top three most valuable drinks…

Looking for a hot share tip? Ian Buxton looks at whether you might be best off investing in China’s rapidly growing national spirit baijiu. The top three most valuable drinks companies in the world are all Chinese, relegating the mighty Diageo to fourth place. Most of this growth is based on the domestic market but now baijiu is slowly taking off in the West.

Have you ever heard of Wuliangye Yibin Co. Ltd? No? Then perhaps you’re more familiar with the Jiangsu Yanghe Brewery Joint-Stock Co. Ltd.

As you’ve probably realised, they’re Chinese. What you may not know is that these companies are very large – some might say, huge. We’re hearing a lot more about Chinese businesses these days, whether it’s their impact on global supply chains, employment or environmental practices or their effect on their Western competitors and our economies.

Baijiu production at Ming River

Baijiu production at Ming River

The most valuable drinks companies in the world

In fact, if we look at the ten largest drinks companies in the world, ranked by market capitalisation, then remarkably three of them are Chinese. What’s more, they would have proved a great investment over the past year. Shares in the Jiangsu Yanghe Brewery have more or less doubled in the last twelve months, while investors in Wuliangye Yibin are toasting an increase of more than 130%.

By comparison, good old Diageo – well known to all readers for its Guinness, Johnnie Walker, Captain Morgan, Smirnoff, Gordon’s and a cluster of single malts, to name just a few of its brands – appear in a modest fourth place in the global ranking and its shares have managed to grow by less than 15%. Actually, considering what’s been going on recently, that might have been thought a reasonable performance until compared to the Chinese cohort.

A booming market

And I haven’t mentioned the world’s number one drinks business yet. Showing an annual growth in value of just over 100%; a market capitalisation of around US$450billion and assets of US$25.6bn, please give a big Master of Malt welcome to Kweichow Moutai Co. Ltd., with its headquarters in Renhuai, China. Even more remarkably, it’s not even located in a major centre: Renhuai is comparatively sparsely populated by Chinese standards, with fewer than 750,000 inhabitants in the relatively poor and economically undeveloped province of Guizhou.

Despite this, and despite the fact that around 97% of its sales remain within China, high-end bottles from Kweichow Moutai can and do sell for over $40,000. That’s Macallan pricing, serious money by any standards. A 1935 vintage bottle of Moutai, a brand that’s collected by investors and reportedly produced in small batches to maintain its air of exclusivity, has sold for £1.2 million ($1.7 million) at auction according to reports in Forbes.

Cocktail making with Fenjiu 10 Years Old

Baijiu companies like Fenjiu are using cocktails to appeal to Western drinkers

It’s baijiu!

So what’s going on? Well, it’s baijiu – the biggest-selling spirit you’ve may not have even heard of, let alone tried. For those who don’t know, baijiu is a clear, pungent high-alcohol liquid distilled from fermented sorghum, rice or other grains. It’s China’s national spirit, typically purchased by the bottle and drunk as shots. It appears in the home, at business dinners and state banquets and is widely employed in the Chinese tradition of gifting. Some adherents also hold that it has medicinal properties and can strengthen the immune system – handy right now, though not a view endorsed by conventional medical science.

Sales have rocketed recently. And while Western drinks companies try to build their small foothold in China, leading Chinese brands are now trying to take baijiu onto the international stage. Take Ming River Sichuan Baijiu, already available in European markets and launching soon in two dozen US states in a partnership with Sazerac. Others will surely follow – in fact, Master of Malt already offers seven different brands at prices from £30 to over £160.

Just as Indian beers and single malt whiskies initially gained a foothold in Indian restaurants and then expanded their reach to the wider market, expect to encounter baijiu first in Chinese restaurants where it can be enjoyed with food and shortly afterwards anticipate it on specialists’ shelves. But whether you develop a taste for baijiu’s unique charms or not, you might want to call your stockbroker.

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A warning about whisky investment

Ian Buxton returns to one of his favourite topics this week, the rapidly-expanding whisky investment market. It can’t keep going up forever, he warns, and there are signs that the…

Ian Buxton returns to one of his favourite topics this week, the rapidly-expanding whisky investment market. It can’t keep going up forever, he warns, and there are signs that the bust is coming soon. You have been warned!

There’s an old story, probably apocryphal but containing a great truth, about the Great Depression of the 1930s which was triggered by the crash of the New York Stock Exchange.  Offered advice by a shoeshine boy on a share to buy Joe Kennedy began selling his portfolio. “You know it’s time to sell when shoeshine boys give you stock tips,” he’s said to have observed.

A stuck record?

Now I realise that I’m in danger of sounding like a stuck record, having criticised the whisky ‘investment’ craze for a number of years now. And it’s certainly true that, even relatively recently, had I bought some whiskies for future sale that I preferred to drink I would be sitting on some handsome capital gains. The recent appreciation in the prices of the most sought-after bottles have been truly spectacular. Undoubtedly some people have made a great deal of money.

But if you’re expecting a mea culpa or tearful confessional, please look away now. As far as I can see the inflationary trend in whisky collecting and investment is silly and getting sillier, egged on by a group of advisers, auctioneers and, sadly, even distillers who have a clear vested interest in seeing the whole mad circus continue indefinitely. Call me cynical if you will but I fear that what are seeing are prices driven ever upwards by the Greater Fool theory of investment.

On The Nightcap this week we've got fancy Macallan!

Elaborate packing on the latest release from Macallan

Whisky is for drinking

Three points then:

Firstly, whisky is for drinking, not locking away in a vault. That’s not to say that a very special or rare whisky shouldn’t be reserved for a suitably special occasion but, eventually, all whiskies should be drunk. That is why they were made and to hoard them in the pursuit of monetary gain disrespects the people who made it and the convivial spirit of whisky itself.

Secondly, all that glisters is not gold. Great whisky does not need lavish packaging. It’s expensive and wasteful. Consider for a moment some of the most expensive wines in the world – the Burgundy grand cru Domaine de la Romanée-Conti or Château Cheval-Blanc from Bordeaux for example. They’re packed in essentially the same style as their everyday supermarket own-label equivalent – slightly nicer label, much better cork and heavier glass to be sure – but the bottles will be visually identical and the differences are marginal when the relative retail prices are considered. They don’t need a crystal decanter, silver stopper, hand-crafted oak box or leather-bound journal because the wine speaks for itself. The informed buyer has no need of the superfluous trappings that increasingly surround high-priced whiskies.

And finally, I maintain that this will end in tears. Rather like Joe Kennedy’s shoeshine boy the boom in prices is drawing in all kinds of speculators and ‘investment’ funds promising advice for a fee on what whisky to buy. I’ve been around this industry for longer than I care to mention yet almost every week now I’m seeing new firms that I’ve never heard of fronted up by slick ‘Loadsamoney’ City types offering alluring returns on whisky. They, of course, make money whether you win or lose. Beware of people contacting you out of the blue with apparently generous offers. If it seems too good to be true it almost certainly is. Question their motives in offering to cut you in – if it was that easy they’d certainly keep it to themselves.

On The Nightcap this week we learn the youths are investing in casks!

Pssst, wanna buy a cask of whisky?

What goes up, must come down

Whisky is now a traded commodity on the London International Vintners Exchange (Liv-ex). The purchase of single casks is once again booming but prices bear increasingly little resemblance to trade filling prices, suggesting that should the private buyer wish to liquidate their investment by selling into the blending market an unpleasant surprise awaits.

Having no wish to be sued I name no names but suggest you proceed with caution. There have been scandals and short-lived booms before. History teaches us to beware whenever whisky and investment occur in the same sentence. Be it the distillery investment boom of the 1880s and 90s, the Pattison scandal or, more recently, the Cavendish Hamilton Spirit Management cask sales fiasco, the end is the same – the unlucky small investor limps away nursing a substantial loss.

Don’t let it be you!

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Magical, mysterious mizunara oak

Thanks to the fashion for Japanese whisky, mizunara oak is highly in demand all over the world. But what makes it different from European or American oak? And is it…

Thanks to the fashion for Japanese whisky, mizunara oak is highly in demand all over the world. But what makes it different from European or American oak? And is it a suitable material to make casks from anyway? Ian Buxton investigates.

Why would you make casks from a tree that takes more than 200 years to grow to a sufficient size? Which is already highly demanded by makers of luxury furniture and thus more expensive than the alternatives? And which is ill-suited to making barrels anyway, being difficult to shape into staves and prone to leakage?

Tasting barrels of whisky at Yamazaki in Japan

Photo courtesy of Yamazaki

Water oak

Even the name might put you off. Mizunara comes from the Japanese mizu, meaning water and nara, meaning oak. In Latin it’s known as quercus crispula. You’d imagine that coopers and distillers would take the hint. But no, mizunara casks are the hottest name in wood and, splashed across a whisky’s label, almost a guarantee of a premium price and a rapid rate of sale. Some, in fact, are so keenly sought after that they become the subject of a lottery.

So what makes this timber quite so desirable? Is it, in fact, Japan’s secret weapon in the world whisky wars? It’s all about the taste, of course, the best mizunara casks offering the distiller delicate hints of sandalwood, agarwood, rich coconut, and a marked fruity note that characterizes the finest Japanese whiskies. The unique sweet and spicy flavour is apparently thanks to – science alert – the oak’s high level of lactones.

Rumour has it, though, that the use of Mizunara oak for whisky casks was an accident of history and due more to the lack of availability of other barrels due to import restrictions into Japan following the second world war than to any recognition of the native wood’s distinctive qualities. Time was also a critical factor. Extended aging of whisky is a relatively recent phenomenon but it appears that it takes time – some commentators maintain as long as fifteen to twenty years is required – for the initially more forceful mizunara wood impacts to dissipate and the full benefit be obtained. In a market where most whiskies were destined for, by today’s standards, rather youthful blends this was a problem.

Scottish distillers take an interest

Thus, with Japanese whisky rather looked down on in world markets until recently, it took the award-winning progress of Yamazaki in important international competitions to draw the attention of the larger global industry.

But even though Western whisky distillers came to appreciate mizunara’s unique qualities they still faced the problem that the wood was difficult to work and casks near impossible to source. So initially, to find sufficient casks, significant resources were needed which explains why early Scotch whisky releases such as Chivas Regal Mizunara and Bowmore came from companies with financial muscle and Japanese connections.

Yamazaki Mizunara 18

Yamazaki Mizunara 18 year old. If you have to ask the price, you can’t afford it

A unique flavour

Now smaller companies are getting in on the act. Kaiyo is a small Japanese blender specializing in mizunara-matured whiskies and they claim to have discovered an interesting shortcut to reduce the aging necessary for the full flavour impact. 

According to the company’s Jeffrey Karlovitch, while conventional American and European oak are at their best during the first fill, mizunara improves with time. “The second and third use: that’s where the magic really happens,” he says.

Another example from Japan comes from the Kurayoshi Distillery with their Matsui Mizunara Cask – the lack of an age statement suggesting finishing to me. Mind you, there’s something clearly different about Kurayoshi, whose website claims that “Kurayoshi’s water is soft and it has a condensed taste”. Condensed water – definitely a whisky first!

Buyer beware

Like ‘Japanese whisky’ in general my final point is, as ever, caveat emptor. There is a danger that mizunara is falling into the hands of over-enthusiastic PR and marketing types, eager to associate their product with this magical, mysterious wood borrowing some of its mystique and brand allure without allowing it the time essential to work its undoubted magic.

So, look carefully at your planned purchase and expect to pay handsomely for the real thing.

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The mysterious man behind Mossburn distillers

Following on from the excitement of the first release from the Isle of Skye’s newest distillery Torabhaig last week, Ian Buxton takes a look at the chap behind it all….

Following on from the excitement of the first release from the Isle of Skye’s newest distillery Torabhaig last week, Ian Buxton takes a look at the chap behind it all. It’s the low-profile Swedish billionaire Dr Frederik Paulsen, owner of Mossburn distillers. 

What connects Mozart Liqueur with two new Scottish distilleries, both quite modest in scale, an independent bottling company, a revived Japanese shochu distiller now making single malt and a very large Siberian vodka distillery?  Hint: the answer also involves the eradication of rats on South Georgia.

The Torabhaig story

While you think about that, let me divert you with a story about Torabhaig, Skye’s second legal whisky distillery, whose inaugural single malt was released last week.  Nearly fifteen years ago I stood in a derelict steading there, getting very wet, and having an increasingly heated argument with the then owner, Sir Iain Noble. I was helping his architects plan the proposed visitor facilities and trying slowly, carefully and politely to explain to Sir Iain that his ideas were dangerous, unworkable nonsense. He insisted that the visitor centre design must incorporate a working still over an open fire, producing clearic and refused to accept my argument that this would never be permitted by either HMRC or the fire officer at Skye and Lochalsh Council. 

A few weeks later he had declined to pay my fee and I was contemplating legal action. However, shortly after that he died, taking my hopes of reimbursement and any prospect of a distillery at Torabhaig to the grave. Or so I thought.

Torabhaig Distillery’s first whisky

Torabhaig Distillery, the Isle of Skye’s newest distillery

But a couple of years later the site was sold to Mossburn distillers then, as now, probably better known as independent bottlers. They took on the Torabhaig project with some enthusiasm and, after a four year’s restoration and the installation of two copper pot stills from Forsyths, began distilling in 2017. That first whisky is now about to be launched as a limited release, with continuing supplies anticipated to be available from the third quarter of this year.

Mossburn distillers, fingers in many pies

Mossburn is also behind the grain distillery in Jedburgh in the Scottish Borders, on the A68 Edinburgh to Darlington road, the first part of what will be a substantial malt and grain complex. Right now, says Mossburn Distillers CEO Neil Mathieson, “we’re taking things slowly, mainly due to the challenges of working around Covid, but producing rye-based spirit and looking to get warehouse space constructed by the end of 2021”.

Mossburn also pops up, along with more Forsyths stills, as the backers of Japan’s Kaikyo distillery, producers of the Hatozaki blend of Japanese whisky. Single malt is being distilled here now but meanwhile we have to be satisfied with the Hatozaki. Just be aware that, like many bottles carrying the description ‘Japanese Whisky’ it comprises, perfectly legally, a blend of whisky produced elsewhere. Perhaps it’s best thought of as ‘world whisky’. [See recent article on this thorny topic].

A mysterious Swedish billionaire

But who is behind Mossburn? And what are their links to Siberia, home to Mamont vodka, Salzburg’s Mozart Liqueur and South Georgia? Curiously everything relates to a Swedish biotech business, Ferring Pharmaceuticals, founded in 1950 by Dr Frederik Paulsen. Today, it remains in family ownership under the control of his son, Frederik Jr, and records multi-billion pound sales of infertility, obstetrics, urology, gastroenterology and endocrinology drugs in around 60 countries. Their Jersey-registered charitable vehicle, The Paulsen Familiae (sic) Foundation, makes extensive grants to support work in the environment, including a reputed $10m backing the South Georgia rat eradication project and many other sizeable donations to a variety of causes.

Dr. Frederik Paulsen Junior

Dr. Frederik Paulsen Junior doing his mysterious billionaire face

Dr Frederik Paulsen Jr himself is something of an adventurer – he was the first person to cross the Bering Strait from Alaska to Russia in an ultralight aircraft and first human to tour all eight of the Earth’s poles, including diving 14,196 feet to the floor of the Arctic Ocean in a bathyscaphes to reach the “true” North Pole. That cost $2m apparently, a major part of which he funded.

No comment

However, Paulsen himself, the family and their foundation adopt a curiously low profile, preferring (one assumes) to be judged by their actions rather than a slick PR front. I contacted a senior family member for comment and information but I received a reply saying they had no comment. The precise details therefore remain obscure, but Mossburn, Mamont vodka, Mozart Liqueur, Torabhaig, Kaikyo, a number of wineries and multiple drinks distributors all around the globe are part of his sprawling empire.

And there are two final, curious connections. Sir Iain Noble was obsessively interested in promoting Gaelic and was a keen supporter of Skye’s Sabhal Mòr Ostaig, the National Centre for Gaelic Language, Education, Culture and the Arts. For family reasons, the Paulsens are also concerned with the survival of minority languages and in July 2017 Sabhal Mòr Ostaig received a £50,000 grant from the Paulsen Familiae Foundation.

Finally, Sir Iain was a knight of the realm. How fitting then that, just over a year ago this month, Dr Frederik Paulsen Jr, OBE was appointed by HM The Queen a Knight of the Most Venerable Order of the Hospital of St John of Jerusalem. Two knights linked by one small Scottish distillery.

Still no open fire in the visitor centre though.

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Comin’ thro the rye whisky

Earlier this month, Ian Buxton looked at some of the unusual cereals that go into whisky. Today, he’s zeroing in on one particular grain that’s having its moment in the sun….

Earlier this month, Ian Buxton looked at some of the unusual cereals that go into whisky. Today, he’s zeroing in on one particular grain that’s having its moment in the sun. So, put your feet up, pour yourself a dram and join us for a tour of the wide world of rye whisky, or whiskey, if you prefer.

Back in 2012, I wrote a book on world whiskies which, despite being embarrassingly out of date, the publisher kept reprinting (they can do that). However, they’ve finally agreed to a new edition which, if you’re curious, you can pre-order here, [plug, plug] though you’ll have to be patient as it won’t be published until September. (Hint: good timing for Christmas!)

In the new book, I’m looking at the whole craft whisk(e)y scene alongside the dramatic growth of ‘world’ whiskies, outside the five main distilling nations. And one thing kept leaping out at me – rye whisky. It’s a style that has just exploded in the past decade and that, I think, comes down to an interesting combination of factors.

the stills at Arbikie Distillery

Rye made here: the stills at Arbikie Distillery

Reasons rye

Firstly, new small distillers have to stand out in the market so need a point of difference. What better than an unusual grain?

Second, new small distillers like to show off a little bit (apologies: that should read ‘explore heritage varieties on their authentic, handcrafted journey’) and what could be better than an unusual grain that’s technically quite demanding to distil? 

Then there is the whole explosion in interest in classic cocktails, like the Manhattan, many of which were traditionally made with rye. This began in the US, spread quickly to the hipper end of the UK bar scene but, with the COVID lockdown spurring drinking at home, domestic experimentation has soared. We’re all mixologists now.

And finally, it just tastes damn fine!

European rye

Once, of course, rye was confined to blue-collar drinkers in the USA. “And them good ole boys were drinkin’ whiskey ‘n rye” sang Don McLean in his 1971 hit American Pie. At the time rye was the perfect metaphor for the pervasive air of nostalgia and decline that saturates his lyrics. Rye was a drink on the skids in the ‘70s.

But almost everything in whisk(e)y is circular and by the early 2000s, American rye distillers were seeing explosive growth. The world quickly followed and now we can enjoy great rye not just from its traditional home but Holland, Denmark, Sweden – even Scotland.

Yes, Scotland, where the Arbikie distillery looked into the historical record to see rye being used in distilling whisky more than a century ago. Today, it produces two versions. The first, a ‘Scottish Rye Whisky’ in line with the Scotch Whisky Regulations 2009, consisting of over 51% Rye combined with Odyssey malted barley, both estate-grown at Arbikie, and an American version in line with techniques typically used in North America. Scandalous!

Arbikie makes Scotland’s only rye whisky (so far). Not so in the Nordics where the funky guys at Helsinki Distilling make a stand-out rye that. Our colleagues at That Boutique-y Rye Company have a Helsinki Distilling Company 2 Year Old bottling. 

The distillery is located in a frankly brutalist brick building that has previously served as an abattoir, power plant, soap factory, meatball factory (hope they cleaned it first), wine cellar and car wash in an old industrial area that’s now achingly trendy and expensive – think Hoxton and you’ve got a general idea.

And they’re not alone. Their rivals at Kyro have made its Kyrö Malt Rye Whisky from 100% wholegrain Finnish cereal – hard to believe if you believe Finland to be shrouded in perpetual darkness and covered in gloomy birch forests but considerable amounts of high-quality rye and barley are grown here.

Sticking with Europe’s craft scene, I’ve long been an admirer of Millstone’s 100 Rye ever since presenting it at a tasting in Amsterdam and my Dutch audience flatly refusing to believe that it could come from anywhere but America. Sadly, it seems to have sold out but the Boutique-y Rye Co. has come to your rescue with a delicious alternative, Millstone 3 Year Old.

American rye

So, to the USA we must return and from a cornucopia (cornucopia – see what I did there?) of very fine rye whiskies from rye whiskey’s ancestral home, I briefly give you these triplets.

Adam Spiegel from Sonoma Distilling raising a glass

Cheers! It’s Adam Spiegel from Sonoma Distilling

Pikesville is a revered name from rye’s history. Sadly their Straight Rye (an all-time bargain) appears to have been discontinued as rye moves upmarket but you can’t go wrong with Pikesville 6 Year Old 110 Proof Straight Rye from one of the truly great names.

From the new wave of US craft distilleries lookout for Catoctin Creek’s bottles and the distinctive Sonoma Cherrywood Rye where the spicy notes we look for in great rye are wrapped round with hints of smoke.

And there’s more to explore and, I suspect much, much more to come for the enthusiastic catcher in the rye.

In case you thought there was a typo in the title, it’s actually a reference to a poem by Robert Burns, ‘Comin thro’ the Rye‘. But of course, you knew that already.

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Going against the grain

As you’re reading this blog, we assume you’ve drunk whisky made from barley and corn, and probably had some things made from wheat and rye too. But these aren’t the…

As you’re reading this blog, we assume you’ve drunk whisky made from barley and corn, and probably had some things made from wheat and rye too. But these aren’t the only cereals: what about oats, millet or sorghum? And what on earth is triticale? Ian Buxton investigates. 

What’s whisky made from? Easy: barley, corn, rye and wheat. Custom, practice and legislation have led to the global dominance of these four cereals, and with the many wonderful whiskies that are created from them, we don’t need to look any further.

Well, apparently, we do and a new generation of distillers are asking, ‘what about oats, millet or sorghum?’ Some go even further. Take, for example, Australia’s tiny Adelaide Hills distillery where founder and head distiller Sacha La Forgia explores local varieties such as wattleseed and weeping grass. With his Native Grains releases, he’s aiming to start a debate around diversity, sustainability and the preservation of indigenous species requiring fewer inputs to flourish in their native environment.

Sacha La Forgia from the Adelaide Hills Distillery

Sacha La Forgia from the Adelaide Hills Distillery

La Forgia is part of a global movement that seeks to challenge orthodoxy and offer enthusiast consumers new taste horizons. While in Scotland a limited number of barley varieties have come to dominate production, distillers such as Bruichladdich have looked to whisky’s history to revive the hard-to-grow heritage strain known as bere (see header pic).

Going further into the records, field-to-bottle distillers Ardbikie, located in the fertile farmlands of Scotland’s east coast, have determined that rye was used in making Scotch whisky well into the 19th century. Though enjoying a revival in the USA, Ardbikie’s Highland Rye can proudly claim to be unique in Scotland.

But with the craft distilling movement most fully developed in the USA, it’s here we turn for some more radical experiments.  A number of distillers have released heritage corn varieties, first brought to us by Balcones with their Baby Blue Corn Whisky, amongst them Jeptha Creed Distillery (Shelbyville, KY) with their Bloody Butcher and Charleston, SC High Wire Distilling’s Jimmy Red. For a distinctive take on heritage corn, though, look no further than Mexico’s Abasolo with their use of non-GMO cacahuazintle corn and the 4,000-year-old nixtamalization cooking process (see article here).

Abasolo Mexican Corn whisky

The unique strain of corn that’s the basis for the flavour of Abasolo whisky

The Corsair Distillery in Nashville has pioneered a number of different grains, including quinoa from South America. For something even more off the wall from Corsair, known for its buccaneering approach, just try its Red absinthe: it’s not fairy juice! However, back to quinoa. It’s demanding to work with because of the small size of the grains and their bitter seed coating but almost because of the perversity of that challenge it attracted the attention of Australia’s Whippersnapper distillery who use a Western Australian variety for its earthy and peppery notes.

A vital food source across Africa, sorghum has also found its way into the repertoire of smaller distillers, possibly because of its appeal to the gluten intolerant. As well as High Wire Distilling, Sorghum whiskies include expressions from Still 360 in Saint Louis; Madison, WI’s Old Sugar Distillery and Jersey Artisan Distilling, NJ.

Virtually all of the distillers mentioned are small in scale and unlikely ever to break into the mass market.  But major players have flirted with the alternative grain option, most notably the limited run Jim Beam Harvest Bourbon collection released in 2014 and 2015. The whiskies included Whole Rolled Oat, Soft Red Wheat, Brown Rice and Triticale (a rye/wheat cross also distilled by Dry Fly Distilling in Spokane, WA). Oats, in particular, represented a radical approach for such a large distiller but the collection appears to have been a one-off, with any remaining supplies ironically now more sought after for investment than drinking.

But the drive to experiment cannot be denied and I anticipate unorthodox grains from craft distillers to trend in 2021 and beyond.

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How your taxes help small distillers

Ever fancied investing in a small distillery? Well, you might not realise it but you already have. Through various regional development funds, taxpayers’ money has been pouring into the drinks…

Ever fancied investing in a small distillery? Well, you might not realise it but you already have. Through various regional development funds, taxpayers’ money has been pouring into the drinks sector. Ian Buxton takes a closer look at what we are getting for our hard-earned cash.

Do you, in economic terms, favour more of a New Keynesian approach to government expenditure or do you lean towards Ayn Rand’s Objectivist view? Or, to put this in terms more immediately relevant to a drinks blog, do you believe that new distillery start-ups should be funded with taxpayers’ (i.e. yours and mine) money? Perhaps you’ve never thought about it, or perhaps you didn’t know but across the UK many of the new boutique distilleries that have been springing up in recent years have benefited from the largesse of our public sector. 

There are, of course, any number of ways of financing a distillery project. The promoters may be in the fortunate position of having all the necessary capital themselves in which case there’s no need for outside finance. Or they could seek angel investors, or borrow from a bank or other lender, or turn to crowdfunding. That’s been an increasingly popular route: from Burleigh’s Gin to Salcombe Distilling; Cotswolds to Glen Wyvis and Nc’nean to Sliabh Liag examples abound of enterprising entrepreneurs tapping a worldwide and growing community of drinks enthusiasts willing to back new distilling projects. And not just for small beer – some of these projects have raised over £1m from their backers, most of them hoping for a Sipsmith-style payday sometime in the future when the nascent brand attracts the greedy attention of an industry giant seeking some craft credibility.

Nc’nean distillery – you helped pay for this

But there’s another route open to the ambitious promoters of a new business, particularly in Scotland or some of England and Wales’ less prosperous areas. Here the secret is to find the relevant local economic development agency and plead your case for support. Their backing could come in the form of equity (i.e. a share of the business) or more probably a soft loan, outright grant or support for specialist consultants to help develop your business. There’s quite a lot of free money out there if you know where to look and if you don’t, an army of consultants are all too willing to help.

Unlike a venture capitalist, such an agency is not risking its own money. On the contrary, the business enterprise network is funded by the public purse; that’s to say from the taxes, on both income and consumption, which you (hopefully) have been paying, more or less willingly. Most, of course, pays for the schools, hospitals, roads, welfare system, defence and so on that we all rely on but a modest percentage finds its way to the enterprise agency network and a smaller part of that builds distilleries.

So what is the case that they can make for the cash? It’s hardly a capacity argument. The UK has more than adequate production volumes to make all the gin and whisky we need and it would be hard to argue a strategic requirement for making spirits – they’re hardly a coronavirus vaccine, tempting though the thought might be.

No, the magic words that unlock the loot appear to be job creation, tourism or exports – or, better still, a combination of all three. As their name suggests, development agencies are seeking to promote economic regeneration in their local area. Thus the boom in craft spirits and distillery tourism is seen as a lever to create sustainable businesses that attract visitors, creating employment for local people who spend their new wages locally, thus creating more employment in the immediate area. It’s a classic Keynsian multiplier effect and considerable numbers of new distilleries have benefited.

Holyrood Distillery manager Jack Mayo peers into a still

To take a few examples at random, Scottish Enterprise has put funding of various types into Isle of Harris Distillers, Nc’nean, The Clydeside Distillery, Holyrood Distillery and a number of others. The recently opened Annandale Distillery was helped to get off the ground with financial assistance from Historic Scotland and the Scottish Government through a Regional Selective Assistance grant and later enjoyed additional support from Interface, another agency funded by the public sector. As a leading Scottish accountancy practice Johnston Carmichael puts it, the “Scottish Government [is] very supportive, [via] Scotland Food & Drink [and] Scottish Enterprise Investor Ready assistance with business planning costs and other costs”. Their professional recommendation: “Max out on free money!” [That’s an actual quote from Johnston Carmichael.]

But the support doesn’t stop at Hadrian’s Wall. Situated in the Peak District National Park the tiny Forest Distillery were backed by Cheshire East Council’s Economic Development Service and went on to collect two separate double-gold medals at the San Francisco Spirit Awards. And from England’s south coast another example: a beneficiary of the Isle of Wight Rural Fund, HMS Victory Navy Strength Gin recently collected the ‘Best in Category International Navy Strength Gin’ accolade in the American Distilling Institute’s Spirit Competition.

However, it can be tough surviving in the global drinks industry and prospering is even more demanding. So, as it’s our money they’re handing out, let’s hope our civil servants are backing winners. Regardless of where you might place yourself on the political spectrum we can all drink to that!

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Jim Swan: a legacy of style

With the arrival (and swift departure) of the much-anticipated first single malt from Nc’nean, we thought it a good idea to look at the legacy of the man who consulted…

With the arrival (and swift departure) of the much-anticipated first single malt from Nc’nean, we thought it a good idea to look at the legacy of the man who consulted for the distillery before his death in 2017, Jim Swan. Ian Buxton looks back at one of the most influential people in modern whisky and ask whether there is such a thing as a Jim Swan style.

As many readers will know Dr Jim Swan, hailed as ‘the Einstein of whisky’ and arguably one of the most important figures in distilling engineering and design since J.A. Nettleton (author of The Manufacture of Whisky and Plain Spirit, published in 1913 and probably the single most influential technical book on whisky ever published, in case you didn’t know), died in February 2017. He’s far from forgotten, though, and with a number of the whiskies he was involved in creating now coming to the market, I thought it timely to look at his legacy and ask if there is such a thing as a Jim Swan style. First, though, a brief reminder of his exceptional career.

Starting in 1974 with the forerunners of today’s Scotch Whisky Research Institute he collaborated closely with more than twenty Scotch whisky distilleries. It was a unique ‘apprenticeship’ and introduction to the industry which is probably unrivalled and, during this period, working with Sheila Burtles, Paul Rickards and George Shortreed (the latter two both highly-regarded blenders), he developed the original flavour wheel. If he had done nothing else, he would be remembered for this alone.

In 1993, he became an owner-partner in R.R. Tatlock and Thomson, the well-known technical consultancy and, in 2002, branched out on his own to offer his services to spirit producers worldwide. And he was in high demand.  From Scotland to Taiwan, Israel to Latin America, he criss-crossed the globe trouble-shooting, advising new distilleries and cooperages (he was, above all, an expert on every aspect of wood) and serving on leading competition judging panels.  His clients – those that can be mentioned, because the work was often commercially sensitive – are a roll-call of the most distinguished companies across the spirits industry.

Dr Jim Swan (right) with Ian Cheung from Kavalan in Taiwan

But where Jim Swan will be particularly remembered is in his work over the past twenty years for new world and craft distilleries, notably Kavalan. Shortly before he moved on from that company I asked their then master distiller Ian Chang to assess Jim’s influence. “We will all be forever grateful and in awe of him” he said, adding that: “He drove the creation of a second wave, a New World in the world of whisky. He pushed the frontiers of whisky production right across the world. He opened up an industry that many people thought was untouchable and he innovated and adapted and created new philosophies. He used his decades of research and his sharp mind and flexible thinking in each project and in this way, he has deepened and enriched the entire world’s knowledge, understanding and appreciation of whisky.”

Others happily agreed. According to Cotswolds‘ head of production Nick Franchino “Jim will be viewed as someone who helped change the public perception of whisky and how to make it. His pioneering production methodology enables distilleries to greatly reduce the number of years it takes to create a wonderful whisky, allowing new and exciting distilleries to enter the industry and create a wider choice of high quality whiskies.” As to a style, Franchino had this to say: “His methodology was to create a fruit forward, clean spirit and so there will be that similarity between distilleries that he worked with. However, we all have different stills and local conditions for production and maturation, so there will be welcome variations between us all too.”

From Canada’s Victoria Caledonian Distillery, founder and whisky maker Graeme Macaloney paid generous tribute to Swan, crediting him with “creating a cadre of non-Scotch single malt producers who are making single malts in the traditional Scotch style which are as good as or even better than most single malt Scotches. In the long term, I hope this will lead those Scotch distilleries who make an acceptable but not stellar single malt to realise they will need to ‘up their game’ if they wish to contribute to Scotch’s domination of the global single malt market.”

Milk & Honey

Casks maturing at another Jim Swan-influenced distillery, Milk & Honey in Israel

While Anthony Wills at Kilchoman agrees that a Swan style can be discerned, he made a further important point: “Jim liked up-front fruit character with the new make and as far as I’m aware all the new distilleries he worked with had this character. This allowed for the whisky to mature relatively quickly if put into good quality wood.”

Now, Jim Swan was an acknowledged authority on cask selection. We were both involved in the early evaluation of the mature stock at Glenglassaugh when this changed hands and I vividly recall him assessing this as “undoubtedly gold medal winning”. Entered for the 2009 IWSC awards the whiskies we tasted that day collected the top trophies for both 30 and 40 Year Old single malt and the special IWSC 40th anniversary trophy – remarkable achievements for a then largely-forgotten distillery and a small testimony to Jim’s unerring nose for quality.

His early work on wood chemistry helped unravel how different parts of the oak tree contribute to flavour. In particular, he was a pioneer and advocate of STR (shaved, toasted and recharred) red wine casks seen at many of his consulting clients, such as Kilchoman, Annandale, Kingsbarns, Nc’nean, Cotswolds, Penderyn, Kavalan and Israel’s Milk & Honey

Lindores Abbey Distillery

Swan’s final job, Lindores Abbey distillery

Graeme Macaloney describes it as having “a style of its own whereby the heat-treated red-wine-saturated cask sweetens the wine through a natural caramelisation process yielding variously caramel, toffee, butter-scotch or other similarly related notes”. The innovative use of a previously under-exploited cask type was a trademark Swan innovation and undoubtedly something that he will be associated with long into the future.

Jim Swan’s final project was with Lindores where, fittingly, the records of Scotch whisky distilling begin. Co-founder Andrew McKenzie Smith remembers him thus: “his in-depth knowledge of maturation, his massive success with Kavalan (and others) will be long remembered as will his modesty in an industry not overly populated by modest, shy and retiring people.” He went one to say: “He was a genuinely nice man, a gentleman indeed,” and Graeme Macaloney remembers “an inspiration and amazing coach when it comes to making great whiskies, and a true gentleman and scholar, yet very humble.” What finer legacy might anyone wish for?

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Visitor centres without visitors

Many small distilleries have based their business models on direct to customer sales from their visitor centres. With tourism all but dead, Ian Buxton investigates what people are doing to…

Many small distilleries have based their business models on direct to customer sales from their visitor centres. With tourism all but dead, Ian Buxton investigates what people are doing to diversify and bring in the all important pounds, dollar, euros and yen, and what the government could do to help. 

“Overall the last 6 months have been challenging and unpredictable but we have strived to be flexible, nimble and think differently, something smaller distilleries can do well, to make the best of the situation and seize opportunities” says Deborah Carter of the Cotswolds DistilleryAnd, yes, from a cross-section of the smaller distilling community that’s a ‘can do’ attitude that is repeated time and again. Frankly, I was expecting some horror stories: after all, while larger, more established distilleries have deep-pocketed owners to fall back on, the same cannot be said for the burgeoning craft distilling community.

There’s one respect in particular in which I expected the coronavirus lockdown blow to fall especially hard on smaller businesses and that is in the effect on their visitor facilities and highly profitable direct to consumer (DTC) sales. For many, the income from distillery tours, hands-on experiences and bottle sales are a critical part of their business plan; vital cash flow to sustain employment while at the same time creating consumer ambassadors who will promote the brand to friends and family, having paid handsomely for the pleasure.

Worth a visit, the beautiful Cotswolds distillery

As Stephen Kemp of Orkney Distilling explains: “Here in Kirkwall, we expected to welcome thousands of tourists across our door during the summer of 2020,” noting that “with Kirkwall up until the pandemic being the busiest cruise port in Northern Europe, we had over 150 ships due to visit.” He went on to say: “The cruise tourists are generally really positive spenders during their limited time with us [and] retail sales during busy cruise weeks can be in the thousands of pounds per day, so the loss of the cruise tourist market alone has been a very substantial hit for us”.

In the USA, Philadelphia Distilling (makers of the lovely Bluecoat Gin) had a different problem. They’re located in a ‘control state’, where the State government controls all retail and trade sales of spirits yes, that’s correct, there’s nowhere in the whole of Pennsylvania to buy any spirits other than the 600 State Liquor Control Board outlets. And at the start of the pandemic the governor shut them all down! But there’s a tiny loophole: small craft distillers are permitted DTC sales.

Talk about an opportunity. “Within two days of the shutdown we had our online e-commerce site up and running alongside a ‘no touch’ drive thru in front of the distillery,” explains Founder and CEO Andrew Auwerda.  “Prior to the Covid-19 shutdown, we would get one or two orders, but within days of the State’s stores closing, we were processing two to three hundred orders per day!” While the Control Board outlets have now re-opened, as Auwerda notes “we are left with a very nice completely new revenue stream of consumers who are still ordering from us directly and we are planning a big online holiday push!”

Bluecoat gin, selling like hotcakes throughout the pandemic

Sadly, it’s not all good news. Nick Weatherall of the Piston Gin Distillery in Worcester told me that “Gin school and direct bottle sales formed a critical part of our growing business and accounted for around 40% of our revenue, so it was a massive impact to have to close the school and the shop.” He added: “While we’ve been able to re-open the school, social distancing has meant we can now only hold 50% capacity.” “Looking at monthly sales and attendance, it’s clear that Covid lockdown has set us back around 10 months and who knows what lies ahead.” Like so many others there was a silver lining though. “Fortunately we were able to quickly start making hand sanitiser and that undoubtedly saved the business,” says Weatherall who has been featured on the BBC’s local TV news  for his entrepreneurial approach

At Edinburgh’s Leith Distillery, due to start producing single malt whisky in 2021, Ian Stirling observes that “We normally host tours at our Tower Street Stillhouse, where we produce Lind & Lime Gin, but the loss of this business has paled in comparison to the remarkable growth in gin sales that we’ve experienced since May.”  However, he says: “We are certainly grateful that the Port of Leith Distillery is due to open at the end of 2021. 2020 would have been challenging to say the least,” adding “we have modeled lower projections for visitors to our whisky distillery in 2022.”

The Orkney Distillery visitor centre in busier times. What great taste in books they have, BTW

And the pandemic brought one unusual visitor to Orkney.  As Stephen Kemp recalls, in July “Prime Minister Boris Johnson visited Orkney to announce the Islands Deal. I was involved in the local meeting with him, and during a quiet moment it was enormously pleasing for me to be able to hand the PM a bottle of our ‘Angell’ hand sanitiser and thank him sincerely for the work that the Government put in to enabling craft distillers like us across the country to quickly diversify.  This not only enabled us to help protect our local communities, it also helped us to keep our staff employed and was a lifeline that kept many small businesses afloat.”

So what, I asked Stephen, would he ask the Government to do now?  “I would like to see a freeze or reduction in alcohol duty for spirits, as the cost of production is rising, but with constrained household incomes and consumer confidence very low we need to be able to avoid product price increases.  Continued support through trade deals with export markets is of incredible importance, and of course we need to understand what our relationship with Europe is going to look like so that we may begin to plan for future export to these markets.”

Sounds like a plan. Let’s hope the Prime Minister was listening.

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How to buy (a bit of) your own drinks brand

This week Ian Buxton explores how you can own a little bit of your own booze business through the magic of crowdfunding. You might even get in on the ground…

This week Ian Buxton explores how you can own a little bit of your own booze business through the magic of crowdfunding. You might even get in on the ground floor of the new Brewdog and get rich! But you probably won’t.

Did you get any Brewdog? Not pints of the eponymous beer but a bit of the company. The self-styled bad boys of brewing raised capital through crowdfunding. If you picked Brewdog as an investment in 2010 then well done – early backers saw huge returns. As James Watt, BrewDog’s co-founder, explained in 2017 when a US private equity company took a 22% share: “Shares purchased in Equity for Punks I are now worth 2,765 percent of their original value. Even craft beer fans that invested in Equity for Punks IV, which closed in April 2016, have seen the value of their shares increase by 177 percent in just one year.”

If you’d invested in Brewdog in 2010, you’d be rich. RICH!

Unlike schemes such as Kickstarter where your cash is effectively a pre-order for a product and you don’t own a share in the company, crowdfunding means you are buying equity and become a shareholder – a co-owner of the business.

Now, you can buy shares in the large publicly-quoted drinks businesses, such as Diageo. In fact, if you have any kind of formal pension fund you quite probably already do. But crowdfunding is different: it allows you to get in at an early stage of the development of a new company. It’s interesting, fun, and potentially more profitable than investing in a well-established company but – pay particular attention to this bit – carries considerable risk that you can lose all your money.

So why do it? Well, several reasons. You may know the founders or principals of the fledgling concern and be prepared to back their judgement; you might agree that they’ve spotted a genuine gap in the market; in the case of a community-based enterprise you might take an essentially philanthropic view or you might just fancy a flutter.

You’ve missed out on Brewdog but, on the basis that you’re reading this on a drinks site I’ll assume you’re interested in booze, so what opportunities are out there right now? I’ve taken a look at Seedrs.com, a UK crowdfunding site, and WeFunder.com based in the USA. Note that these sites operate by providing you with information on the company, funds to be raised, intended use of the cash and details on what percentage of the business is being offered. There will be a fundraising target and a date when the offer will close. Read all this information VERY carefully before you commit.

Burleighs gin raised over £100,000 through crowdfunding this year

No one can have missed the gin craze of the last few years. If you think it can carry on for a while yet, then £10 will buy you a piece of Burleighs Gin – they’ve already raised over £100,000 on Seedrs.com.   

On the other hand, you might consider that gin is already a little passé and have heard of the hard seltzer boom in the USA. In that case, premium non-alcoholic and alcoholic seltzer brand Something & Nothing could be a good fit for your portfolio. Investment, also on Seedrs.com starts at £20, but one bold backer has already pledged £96,000 so evidently someone believes in the proposition.

Perhaps something on the huge US drinks scene will appeal. Turning to WeFunder.com there are a number of opportunities, ranging from flavoured malt beverage HoopTea (a $1,000 minimum commitment though) to Kokoro Spirits ($100 and up). Starting with Tequila it aims to build a “collection of premium spirits and a brand that celebrates communities and cultures from around the world”.

It’s always a good idea to spread your risk by diversifying investments. With that in mind, Drifter Spirits is creating a portfolio of craft spirits for the US market, starting with cachaça and aquavit brands. The company has been trading for some seven years with an experienced management team  $500 gets you a place on its share register.

There are many more opportunities arising on a regular basis and there are other crowdfunding sites. These are simply examples of an interesting new trend.  Any of these companies could be the next Brewdog or all might crash and burn, taking your hard-earned with them. Caveat emptor!

IMPORTANT: Nothing in the foregoing constitutes investment advice or a recommendation. As with any investment consider the risk factors, do not invest more than you can afford to lose and seek appropriate professional advice. Disclosure: Ian Buxton may be an active investor in one or more of the businesses mentioned here.

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