There will never be as many distilleries as there are craft breweries – there will be a lot less of us and not all of us will survive.”
IN CASE YOU’VE missed the hype in recent years, the long-sleeping giant that is the Irish whiskey industry has slowly been stirring back to life.
Over the five years to 2013, the copper-coloured liquid was the fastest-growing category of spirits in the world and there are now at least 31 distilleries either operating or in various stages of planning across the island.
But many, including one of the most senior figures in the whiskey industry, have warned that some may barely sell a drop before they drown under a wave of bills.
All Irish whiskey needs to have been aged in wooden casks for at least three years to be marketed as the product, planting a huge cash-flow hurdle in front of anyone expecting an easy path to profits.
TheJournal.ie asked three of those setting up independent distilleries with with very different approaches exactly what it took to get a whiskey business off the ground.
Glendalough Distillery, Wicklow
The Glendalough Distillery was set up by Barry Gallagher and four friends in 2011, initially selling the traditional Irish spirit, poitín, before adding lines in whiskey and gin.
“We all had different skills, but we came together and decided to give it a lash,” Gallagher said. ”We just raised money from friends and family and few other people.”
Those other people include former rugby star Brian O’Driscoll, who sank €60,000 into the business, and Kenny Neison, finance director at Bulmers cider maker the C&C Group.
While it will be at least another 18 months until the company’s own-distilled whiskey is available on the market, Glendalough has taken the path of many other new distilleries of buying older batches from one of the country’s three major distillers before adding its own maturation touches.
What we are doing with the older whiskies is finishing them in our own casks and with Wicklow water, and we’re blending them ourselves,” Gallagher said. “Everyone’s kind of in the same boat, everyone does it.”
Although some of the larger players, like Dublin’s Teeling Whiskey Distillery, have spent €10 million-plus on complexes including tourist centres and bars, Gallagher said the budget for Glendalough wasn’t “anything like that”.
He said the success or failure of the many new craft distilleries would depend on having a great product – and the ability to get out and market it.
“Craft isn’t always better. For you to sell your product someone else’s needs to come off the shelf – you’ve got some big, big drinks company with some great whiskies as competition.”
Nevertheless, Gallagher’s advice for new entrants to the distilling business was to “just go for it” and to “try to do something unique”.
I don’t know how big Irish whiskey is going to be, but there are five of us and we’re employing eight people now. I think if you work hard and you have a good story, I think maybe you will make it.”
Nephin Irish Whiskey, Mayo
In the village of Lahardane in the heart of County Mayo, there is still plenty of work to be done on what will be one of Ireland’s largest distilleries when complete.
The Nephin Irish Whiskey distillery will cost an initial €5 million with that figure to at least double within five years, according to founder Paul Davis, a DCU Business School lecturer.
“It has been an exciting project and stressful as most projects are, but we took a lot of time to make sure we have the capacity to expand,” he said.
The complex, which will be open to visitors, is due to be commissioned in early 2016 and Davis said about four-fifths the necessary funding had already been raised from private investors.
But despite the huge up-front investment and the at least three-year wait for saleable product, its owners have refused to buy in another distillers’ whiskey for maturation and sale under the brand.
We want to sell a premium whiskey and people want to know what the product is and its provenance – that’s really valuable for us,” Davis said.
The distillery will also incorporate a working cooperage, enabling the company to control every part of the production process, from the barrels used for maturation to a local supply of water and barley.
Even with the sudden boom in new distilleries, Davis doesn’t believe there is a risk the market will suddenly be over-saturated with Irish whiskey.
Rather, the danger would be to those who hadn’t planned out every step of their business: like reducing the huge energy costs involved or how to ensure a sustainable supply of raw materials.
It’s not a quick-win business, you’re talking a 20-to-30-year horizon, not a one-or-two-year horizon, and I’m not sure if everyone understands that part of it,” Davis said.
Blackwater Distillery, Waterford
At the smaller end of the production scale, Peter Mulryan’s Blackwater Distillery has already been trading for six months after around a year in planning.
Instead of jumping straight into whiskey, the distillery has instead been producing only gin and poitín, both of which were recently recognised with awards. However Mulryan said the focus on gin wasn’t about cash flow, rather because he just “really, really” liked it.
Branding is very important; you’re up on the shelf against all of these products from multinationals with huge marketing budgets, which you don’t have, so you need to be smart about how you do it.”
Mulryan said the distillery’s first phase had cost around €250,000, which came from investors, while its second phase would involve adding extra stills and buying in the equipment needed for whiskey production.
“The main barrier (to getting started) is capital, it’s not cheap, you’re talking a six-figure sum,” he said.
It’s cheaper to set up a little brewery; this is technically more demanding, it’s more dangerous and it’s more expensive. There will never be as many distilleries as there are craft breweries – there will be a lot less of us and not all of us will survive.”
However Mulryan said he didn’t see craft distillers as being in competition, rather as building on one another’s work. With that in mind, he ran a one-day distilling course in April and plans a second next month.
“You should follow your heart if it’s something you feel like you can do, but be prepared to be in for the long haul and that you won’t make a lot of money,” he said.
The costs are very high and the market is going to get saturated quickly. You need to have a really, really good product, that’s the bottom line. You’re playing with the big boys and if you’re stuff isn’t as good or better than theirs, you aren’t going to get very far.”
First published 10.30am
This month, as part of TheJournal.ie’s ongoing startup and small and medium enterprise (SME) focus, we are looking at the drinks industry.
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