IN this week's SME Focus, we hear from an entrepreneur who has developed a successful malt whisky distillery from scratch on an island famed for production of the spirit whose popularity has been booming around the world.
What is your business called? Kilchoman Distillery
Where is it based?
We are the only farm distillery on Islay and one of a handful in Scotland. Our whole operation is based on the west coast of the island. From the barley grown in the surrounding fields to the floor malting, distillation, cask maturation and, eventually, the bottling, everything happens on site – something that is quite unusual these days.
What does it produce?
We produce three main whisky ranges – Machir Bay, Loch Gorm and 100% Islay, along with a number of vintages and single cask releases.
Kilchoman is one of the smallest distilleries in Scotland.
Who does it sell to?
Our whisky is sold through specialist whisky and drinks retailers, bars and restaurants around the world.
In whisky terms, Kilchoman is a very new brand.
What is its turnover?
We have traded profitably since 2009 and had a turnover last year of £2 million. We're aiming for £2.4m in 2013.
How many employees?
We employ 16 at Kilchoman Distillery, including our team at the shop/cafe and a new local trainee stillman.
My wife, Kathy, has also been heavily involved in the business since the beginning. Originally setting up and running the distillery visitor centre, she is now the office manager.
My two sons, James and Peter, have now joined Kilchoman full-time to assist in the sales and marketing, so it feels very much like a family business.
When was it formed?
Kilchoman is the first new distillery on Islay for 125 years. The distillery started production in 2005, with our first bottling taking place in 2009 when we sold 2450 cases. In 2012, that had increased to 13,350 cases.
Why did you take the plunge?
The timing felt right. With demand in whisky sales, particularly single malts, on the rise across the world, I saw a gap in the market for a small farm distillery. My wife's family have lived on Islay for over 60 years and we spent most of our summers on the island while the boys grew up. Combined with the island's famed whisky pedigree it was the natural location for us to start this venture.
What were you doing before you took the plunge?
I've worked in the drinks business for over 35 years, originally setting up a wine business in Bristol before my move to Scotland in 1995, where I started an independent single cask single malt Scotch whisky bottling company, Liquid Gold Enterprises.
How did you raise the start-up funding?
Raising the funds proved the most challenging aspect of the project and having raised £1m from private individuals, the local enterprise board and bank, a further £3.5m was required within two to three years of starting the project.
We have been very fortunate that our shareholders have been very supportive and have dug deep to make sure the project became a success.
We also offered the chance to purchase a cask from our first fill, and 300 whisky enthusiasts took up the offer. It was quite an innovative tactic at the time and helped raise some much-needed revenue.
It was a great marketing opportunity for us to raise awareness of Kilchoman's launch and gave our supporters a real sense of ownership.
What was your biggest break?
Finally raising enough money to start the project.
What was your worst moment? The first three to five years while we waited for the whisky to mature was the biggest challenge as we continually ran out of funds. During that period the financial crash affected the banks' willingness to continue to support our new business venture, which had a huge impact on our cash flow. It was tough.
We had countless delays and issues to overcome in order to secure planning permission for our new warehouse, which was critical for our business development.
What do you most enjoy about running the business?
The satisfaction that our single malt is being so well received. For such a young whisky, we can hold our own and have already won a number of awards.
Most recently, we were named "Master Distiller of the Year" and "Whisky of the Year" for Machir Bay in the International Whisky Competition.
Also having the opportunity to work with people who are so passionate about whisky and the whisky-making process, like our distillery manager John MacLellan, is a real privilege.
What do you least enjoy?
The travel. As glamorous as it can sound, the constant commute across the world can be exhausting.
However, it's a crucial part of our marketing and sales strategy and spreads the word about Kilchoman.
Leading tastings, meeting distributors and attending whisky festivals and events are essential to secure exposure in our key international market – especially North Europe, Asia, US and Canada. I'm grateful to now have James and Peter on board to help share the work.
What are your ambitions for the firm?
To continue to produce a top quality, award-winning Islay single malt and steadily grow Kilchoman sales in mature single malt markets around the world.
What are your top priorities?
To use only the very best quality casks to mature our whisky; to build a recognised core range of single malts; to expand our bottling and warehouse facilities on Islay– the new warehouse is nearing completion, so reviewing our hand-bottling process will be next; to look after our great team at the distillery.
What could the Westminster and/or Scottish governments do that would help?
To not continually penalise the Scotch industry by raising taxes year on year.
What was the most valuable lesson that you learned?
Be true to your convictions. Starting your own distillery from scratch is not for the faint-hearted. There was a great deal of fire-fighting in the early years and if I knew then what I know now, I may not have even started the journey. But my belief that there was a place for a micro-farm distillery, producing a quality spirit drove me forward.
We got there and it's a pleasure to be able to run a successful distillery that I completely believe in. No regrets.
How do you relax?
Playing golf, fishing and walking. Islay is such a beautiful island a brisk walk along nearby Machir Bay is guaranteed to refresh and reinvigorate.