So you want to set up a distillery: Part 2

August 30, 2015

Yesterday we had a primer.

Today let’s stick with opening a gin distillery. If you want to make whiskey it’s safe to assume you know what you are doing, as the cost and time-frames involved are enough to put off all but the insane. Gin however is another matter and right now it’s all rather bright and shiny.

Why? Well for a start it looks easy, after all it’s distilling-lite, all the heavy lifting has been done, you know the ethanol* you are working with is safe. Then there’s the vast sums of money waiting to be made… So while I roll a fat cigar off my thigh, you read on.

* If you have no idea what ethanol is, please stop reading now.

Hot from the still
Hot from the still

1. Get your gin recipe right!

There is no easy or fast way to do this. You just going to have to go to a health food shop, buy a load of botanicals and start cooking them up. I would recommend distilling each botanical on its own, you know to know what it tastes like, so you can spot flavours you like and dislike in other gins. Keep notes.

If you have enough money you can get someone to do it for you, but then what’s the point? Where’s the ‘craft’? If you are only in this for the money, again please stop reading now.

2. Drink gin.

It goes without saying, but I’ll say it anyway. If you don’t like gin, or see how you can bring a different product to market then forget it. You should gather a library of other gins, good ones and bad ones – get to know which is which and why.

Also if you think Cork Dry Gin is grand, give up. They’ve dropped the price so low and you’ve set the bar so low, you will bump your ankles as you limbo dance out the door.

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3. Get a USP.

What is your unique selling point? Why should I pick up your gin rather than someone elses? In the early days craft distillers chose to use local botanicals, the big guys weren’t doing it so it was an easy point of difference. Nowadays though you are going to have to try harder. We have now reached ‘local botanical’ over load, not helped by the fact that way to many gins use a fig leaf of ‘local’ just so they have something to say. It’s not original any more. We also have seaweed, single estate, apple base, grape base, Old Tom, sweet, navy, savoury, new American, aged and sweetened gins. There’s even a Paddy-whackery brand that uses that well known Irish delicacy shamrock. Just wait until they taste our new gin made with pulverised Leprechauns and cliches.

It’s a pretty crowded market.

4. Build a Brand.

What is your gin called and why? Have you Trade Marked your identity? Can you? Bear in mind geographical Trade Marks are very weak as any gin distilled in Cork could be called Cork Dry Gin, as it is a statement of fact. But let’s face it, who would want to be associated with CDC?

You may decide you don’t actually want to open a distillery, you may just want a brand. After all how many Irish whiskeys are there out there? Hundreds, but remember they all come from just four distilleries. Many UK ‘craft’ gins are actually produced to order by Thames distillery in London. You may want to get your gin to market while you go through the root-canal work that is opening a distillery.

berries blackwater picture

5. Label with care.

Labels are a mine field. Talk to the FSAI, if not you could land yourself in a mess like St Patrick’s Distillery did. A load of new labels will not come cheap and it’ll be a rushed job and will look like crap. So you’ll have to do it for a third time, which will cost even more…

Also where are you going to place your self in the market? Who are aiming your gin at? What is Premium? Super-premium? These words get tossed about as the idiots using them can’t read without moving their lips. So let’s be clear: those terms mean nothing. What is important to the consumer is a lot more complex than marketing BS. When they pick up your gin (will they pick up you gin?) how does it connect with them on an emotional level? You are not selling units of alcohol, you are selling a story. So what is it and how are you communicating that message? Does you product ‘feel’ like it’s worth €40+? Cork Dry Gin is now €20 for 70cl. You will be looking for twice that. You can whistle ‘super-premium’ out your arse all day, but if the consumer doesn’t ‘feel’ like your baby is worth twice a bottle of CDG, then they will take their business elsewhere.

6. Have a lucky penny.

You’re going to need one. Once upon a time a limited company took the personal risk out of running a business. Those days are gone. You will personally have to underwrite your bond, deferred payment guarantee, over draft and any company loans. If things go tits-up, the bank will come knocking on your door.

7. Duty will kill you.

Unlike craft breweries, craft distilleries don’t get 50% of their excise back. Distilleries also hold loads of money for Revenue in collected duty and VAT. So every month your company account is going to swell and shrink in a most alarming manner. Thus the overdraft.

Virgin's tears are hard to work with
Virgin’s tears are hard to work with

8. Victorian licencing laws.

Our licencing laws are a mess. With your licence to distil comes a wholesalers licence NOT a retail licence. So you can’t sell at the distillery, you can’t sell individual bottles and you can’t sell on-line. You are forced to hand your margin to a middle man. Distributors also ‘distribute’ they don’t necessary sell – that’s up to you. Also everyone in the chain between you and the consumer will add 15%-30% to the price. So do the sums.

8. Route to market.

What’s yours? The local pub will take a bottle (not that you are allowed sell them just one), but then what? The nearby off-licence will take a case (as long as it is not part of a chain). After that? SuperValu? Your local store should help, but what counts as local? We are based in Cappoquin Co Waterford but the SuperValu in Dungarvan won’t stock our gin as it is not ‘local’. But SuperValu in Fermoy in Co. Cork will. Go figure. Other supermarkets and off-licence chains will only purchase centrally and most couldn’t be arsed. Why? Setting up new accounts is costly and high risk, if your product goes in, something has to come out to make room for it. And what if your product sells less than the one it is replacing? The buyer will loose their job.

Route to market is everything, that’s how the  majors keep their stranglehold on the market, they control it. They have reps on the road, vans that deliver, they can under cut you and move your stock about so no one will see it. If you haven’t got your route to market sorted you are as good as dead.

Sally
Sally

9. Distilling.

At last, the sexy bit. But again our laws are a mess. The smallest still allowed in Ireland is 1800 litre. Which isn’t that small. If you want something a bit more boutique you have to make a special case to Revenue. They are being very generous right now, but all it will take is one eejit and its game over.

Distilling is also dangerous. Your raw material is a highly explosive rocket fuel. Do you know what ATEX is? Have you any idea how expensive ATEX lights are? How will you heat your still? Flame? Let’s see you get that past an Irish fire office. Electric? Do you have enough three phase power and you can’t have elements in contact with the spirit. Steam? Expensive and possibly even more dangerous than the highly explosive rocket fuel.

10. End of the World.

Ireland is on the end of just about every supply chain. You want botanicals, they have to come via the UK, so a Sterling transaction. Bottles? Italy and France are good. But allow a surcharge for a single pallet and an extra €250 to get the pallet over. All these costs will get added to the price of your gin, no wonder ‘craft’ costs. On a happy note ethanol is available locally, but if you want grain based again it will come via the UK.

Barry holds court!
Barry holds court!

But it’s not all glum. If you like standing around in the bitter cold watching gin drip out of a pipe, then this is the life for you. If however you think it’s party-central, think again. Although we do have the odd good party…

I didn’t get a chance to even talk much about distilling. About louching, cut points, licencing, bonds, deferred payment guarantee, EMCS, heads and tails, or even my favourite: scaling up. In fact there is so much to talk about I think I will just stop for now.