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Inver House Distillers marks 50 years in the whisky trade

IT is a month of milestones for Graham Stevenson and Inver House Distillers.

Milestone: Graham Stevenson marked his 20th year with Inver House Distillers this month. The firm is soon to celebrate its 50th anniversary. Picture: Colin Mearns
Milestone: Graham Stevenson marked his 20th year with Inver House Distillers this month. The firm is soon to celebrate its 50th anniversary. Picture: Colin Mearns

The chartered accountant marked his 20th year with the distiller on June 6, two weeks before it toasts its 50th anniversary at a bash in Edinburgh.

The party, which will see senior executives jet in from its Thai-based parent, coincides with a golden age for Scotch, and Inver House itself is in a confident mood.

International Beverage Holdings, the international arm of Singapore-listed Thai Bev, has sanctioned a series of major investments to help Inver House prepare for what is expected to be sustained, global demand for Scotch in the years to come.

Evidence of that investment is visible to visitors as they approach the company's headquarters, located amid the fields just outside Airdrie in North Lanarkshire.

Construction is underway on new warehouses which, at a cost of £5 million, will lift its capacity from 480,000 to 600,000 casks.

"It's pretty significant," Mr Stevenson notes, sipping tea on a glorious early summer morning.

"It's the first time we have done that in a long time."

And the investment does not end there. Mr Stevenson said roofs are currently being replaced on warehouses dating from the 1960s, part of a rolling programme of expenditure totalling £500,000 a year, and elsewhere in Scotland expansion plans are underway at some of its key production sites.

Production capacity is in the process of being doubled at Speyburn Distillery, with the £4.5 million investment allowing it to produce more than 4 million litres of spirits a year. The spirit made at Speyburn is destined to be an entry level malt in the US market.

Meanwhile, a further £1 million is being spent to renovate Balmenach Distillery, which produces mainly for blended Scotch whiskies.

"We have always spent a reasonable amount on renewals, general capital on keeping the production assets in very good condition," Mr Stevenson said.

"[It] is something we have never had any difficulty in persuading our Thai owners to do. There is never any problem in investing in the fabric of the plants.

"They are long-term [in approach], they are very keen on what I would call touchy feely assets, which is land, property, distilleries and the maturing stocks."

Such activity harks back to the glory days of Inver House when, under the direction of original owner Publicker Liquor Industries (formed by the son of Ukrainian immigrants Harry Publicker in the US), it employed more than 1000 people in Airdrie.

Mr Stevenson, who joined Inver House from the North British Distillery Company, the Edinburgh-based grain distillery, in 1994, said: "This site in its heyday in the mid-70s was massive, it employed about 1200 people.

"We had a grain distillery, a lowland malt distillery, there was a maltings, there was bottling, and there were the warehouses getting constructed.

"And of course in those days you had umpteen customs and excise officers all over the place. It was absolutely jumping."

The glory days didn't last, though. Mr Stevenson noted the company went into "serious decline" in the late 1970s, early 1980s, when, in a perfect storm of developments, in-fighting among the Publicker family sparked by Harry's death coincided with a major downturn in the industry's fortunes.

As the family's interest in the whisky business waned, the maltings was sold off and the bottling hall and distilleries were closed down, after attempts to sell them off failed.

The seeds of recovery were sown in 1988, however, when a management buyout was staged by William Robison, Angus Graham, Graeme Thomson and Bob Boyle.

Mr Stevenson said the deal had been noteworthy as it did not involve a backing from institutional investors, meaning the four controlled the entire shareholding.

And he explained that, whether by "luck or judgment" it had been well timed, as it coincided with a spike in demand for Scotch stock, chiefly from Suntory, which was sold at "very good margins".

"Within a couple of years they had paid off the back and had a cleaned up balance sheet," Mr Stevenson said. "It was terrific.

"And in the meantime they had bought Knockdhu Distillery, a couple of brands - Catto's and Hanky Bannister - and they had bought Speyburn as well."

With the business back in good shape, Inver House changed hands again in 2001, and once more fate played its part.

As two of the four main shareholders neared retirement, they met a delegation from a Thai-based spirits giant, which Inver House had been courting as a customer for some years, on a visit to Scotland. They had made the journey with a view to investing in the whisky industry.

Mr Stevenson said: "They [previous owners] had made it known that they didn't see it becoming a family dynasty, which I think was very wise. Nor were they in any great rush.

"They put in place some incentive schemes for myself and one of the other owners to carry on running and building the company with a view to finding a nice, suitable exit within a 10-year window.

"No sooner had the ink dried than the Thais came to visit us.

"It was just one of those strange coincidences that all started off as a normal courtesy visit. At one point they got on to the fact there was a succession issue, and eventually the discussions moved to, why do we not acquire the company? So they did."

Mr Stevenson said the relationship with the overseas owner has worked well.

Noting that it "left us to get on with it" in the early says, partly because it was engaged in the process of uniting their various interests into a single entity, Thai Bev, to list on the Singapore stock exchange, it was some time before Inver House started to make inroads with its brands in Thailand.

"To be fair they have been great owners," Mr Stevenson said. "They have trusted us by and large to just get on with it.

"Given the dominance of Thai Bev, which has a market capitalisation of £7.3bn and made profits of £345m after tax on turnover of £2.8n, in its home market, Mr Stevenson said it has had to look internationally for growth.

This means that Inver House "gets quite good attention", even though, with profits of about £9m in its last year, the distiller represents a small part of the empire.

Asked whether Thai Bev might have the appetite to achieve growth through acquisitions, Mr Stevenson confirmed it is "always quite interested in increasing our footprint in Scotland".

However it recently ruled out a move for Whyte and Mackay, offloaded by Diageo to satisfy competition concerns in the UK, on the grounds it was "too much for us to take on".

Mr Stevenson said: "We would love to have, as would a few others I have no doubt, a significant international blended Scotch whisky brand. The trouble is that any of the half-decent ones are well and truly spoken for.

"Therefore you'd like to build one yourself, but that is quite a big challenge on its own.

"These big guys are so powerful.

"But again it's been before and can no doubt be done again as they emerging markets appear. You just need to get lucky in some way."

And Mr Stevenson remains very convinced of the long-term, global prospects for Scotch.

He said: "The great thing about Scotch is that it is genuinely global.

"There are always areas where you have difficulties but there are almost always compensated by other areas which are on the up.

"The long-term demographics of the emerging markets are to me irrefutable.

"It is going to happen."

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