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 Distillery. And, 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.
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!”
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.”
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.