Day to Day problems in running a small distillery.

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Bladnoch
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Day to Day problems in running a small distillery.

Message non lupar Bladnoch » 03 févr. 2007, 16:34

One of the difficulties of being a small business is that you lack buying power and consequently have to pay more for everything. It soon becomes obvious why ultimately distilleries become more profitable if they amalgamate.
Last year at Bladnoch we paid £215 per tonne for our malt, this year they say there's a shortage of malting barley, so the small distiller if he wants to distill must pay £365 per tonne.
Many malting plants are closing down .. surprisingly in recent years they have been making losses. Diageo who previously made and used their own malt took a decision a few years ago to sell it to other distilleries and indeed to exchange it for new-make spirit. Naturally they took some customers from the other commercial maltsters who were closing plants and reducing capacity.
Farmers were getting such a small price premium for growing the low nitrogen barley necessary for malting that in recent years they have planted less. In addition for every 1000 tonnes that they took to the malting plant perhaps only 750 tonnes was considered of suitable specification.
Tired of this situation farmers found it easier just to use their barley for cattle feed. Growing wheat was becoming more profitable. Add to that harvest failures last year in Australia and in Europe and with a number of factors coming together next year prices may be even higher. Diageo is increasing production of spirit, so this year has had no malt to sell.

The price of oil has settled at around 36/37 pence per litre. A few years ago it was as low as 15 pence. At Bladnoch because we're not distilling continuosly we are less efficient. We require almost a litre of oil to produce a litre of alcohol, although we are currently looking closely at re-use of hot water. Transportation costs are up because of high oil prices.
Bourbon barrels have not really increased in price .. 6 years ago we were paying £50 per barrel, now it's £45.
There is significantly less new-make spirit available for whisky brokers to trade in the market place and prices are higher. Indeed pick up the telephone book and you will find fewer whisky brokers than ten years ago. This is simply because as companies become bigger, they can provide all the spirit for their blends from within their own organizations.
At some stage a few years down the line all this I think this will start to be reflected in the cost of whisky. Closer in time is the liklihood of an increase in the price of casks of new-make spirit.
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jmputz
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Message non lupar jmputz » 04 févr. 2007, 13:24

Thank you very much for this very important "insider" information.
The situation seems to be very difficult, and your explanations are very clear. I hope you do not mind me using information from your post for my next newsletter I am preparing.
Price evolution of whisky was the main subject of this newsletter, and you helped me greatly to understand some facts I am studying at the moment.
Slainte Mhath
Bladnoch
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Cost of new-make

Message non lupar Bladnoch » 04 févr. 2007, 18:46

re
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Message non lupar Bladnoch » 17 mai 2007, 11:22

When the price of something rises, so too does our willingness to shop around.
I mentioned above that since the beginning of this year it was becoming more difficult to source barrels and prices were rising and so I was forced to look at getting casks directly from America.
This was not as difficult as I at first imagined. Although the big distilleries are able to order vast quantities, the fact remains that even the barrels they buy still have to cross the Atlantic by boat and in steel containers about 13 metres long which hold 210 barrels.
So it's not too difficult to put the address of Bladnoch Distillery on a container.
210 barrels at $49.50 total $10395 or approximately £5300 sterling Add freight and delivery charges of approx £2000 and the bourbon barrels are costing about £35 delivered from Kentucky to Bladnoch.
New wine barrels from the same source made of French oak cost $600 New wine casks again from Kentucky but made of American oak cost $240 and Used wine barrels cost $60
You can see the financial attraction of using bourbon barrels.
The difficulty is that the time taken for delivery can vary between 4 and 8 weeks. At this moment in time our spirit tanks are full (approx 300 barrels of new-make spirit) therefore we are unable to distill. 210 casks scheduled for delivery on 5th May have not yet arrived although they are expected within the next few days and a further container hopefully is somewhere in the Atlantic.
Small businesses have greater difficulty ordering ahead. At the present moment we are having to enter into contracts with the maltsters for next years malted barley. Each week when distilling we use 20 tonnes of malt at £370 ... approx £7400.
Our oil usage to convert this into spirit is about 8800 litres costing £3250.
The 20 tonnes produces about 8000 litres of alcohol which requires 63 barrels costing a further £2200
In addition we have labour and overheads and insurance costs.
For those of you who have met me when you've visited Bladnoch, that's the reason I'm poorly dressed and poor.

Slainte

Raymond
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Message non lupar jmputz » 17 mai 2007, 18:11

Thanks Raymond for this very interesting post again.
There is one thing I'd like to know.
You explain us regularly the difficulties you have for the production of your whisky. We all understand the situation is easier for greater groups, as they have much more financial power and can easier produce their whisky at lower costs. It is not really "moral" but we can understand this from an economic point of view.
There is also another part in business, apart from producing. It is selling...
I imagine you also have some problems to distribute your production.
I did not see any Bladnoch for months in Holland for instance. Which is a shame, considering the high quality bottlings we use to know.
Another question is when will you sell the whisky you are distilling, as I imagine most of the bottles which are on the market now have been distilled before you started distilling yourself.
Slainte Mhath
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Message non lupar Bladnoch » 19 mai 2007, 15:33

Hi Jean-Marie

PROBLEMS

Re "You explain to us regularly the difficulties you have"
Perhaps I should also try to convey not just the problems of my work but also the immense pleasure it gives. I consider myself to be more of an optimist than a realist, certainly not a pessimist.
Marketing is a problem but I should speak of it as a challenge. We are trying to interest people to taste and buy what is a little known Lowland whisky .. not nearly as well known for example as Auchentoshen or Glenkinchie .. ours is anon -peated whisky and therefore is less likely to attract the attention of the malt maniacs who are usually the people who write most about their passion.
Having said that a lot of people who do not regard themselves as whisky drinkers enjoy our product. these folk buy a botte in the shop either for themselves or a friend and a high percentage telephone or email a few months later and ask for another bottle.
Among malt enthusiasts there is also a genuine interest in our survival.
Whisky writers are also prepared to do articles on us. This is an excellent form of free publicity.
I also think that the larger members of the whisky industry are happy that it is still possible in a huge multi-national industry for us to do what we have done, that is, essentially to rebuild a small distillery, restart production, and to survive and I think it has helped lead others to consider doing the same.
You mention for example that our bottles are not widely available. Sometimes trading conditions make it more difficult for small companies. Because the wholesalers and trade buyers usually purchase only small amounts of our product they can sometimes demand payment periods of 3 to 6 months and sometimes take even longer to pay. Often we decide it's just simpler not to supply and to try instead to concentrate on the UK market.
We do realise that in a few years time we will be selling our own product and money will start flowing back in. This is money which of course will be required to fund increased production. We are also aware that we will need to have an effective distribution structure in place. It will not be possible instantly just to start selling significant volumes of Bladnoch.
In addition at the moment we are discussing opportunities to produce and sell new-make spirit. Initially when we first started production no one had confidence that we would survive and buyers of new-make for blending require consistency and continuity. This demand is fuelled by an overall scarcity of new-make in the market place, the price of which has now risen to about £2.65 per litre.
In addition we are looking at bottling small amounts of our 6 year old, some peated, some sherried and some bourbon. These we regard simply as work in progress, but hopefully it will be possibly to sell them with confidence as an 8 year old. Their sale is unlikely to contribute any significant finance but they may keep us in the public eye. In any case not everyone likes the same age and style of whisky and indeed there almost appears to be national differences.
I also think we should make more use of internet selling.
So although I don't under-estimate our problems, it's only when suffering fatigue or stress that I underestimate the opportunities.
Hosting a web-site is surely not without it's problems.

Raymond

I put the challenge directly to your forum readers, if you've any good ideas how I can market Bladnoch better in France, Belgium or Holland post them here .... and enjoy watching me get rich.

Raymond
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Serge
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Message non lupar Serge » 19 mai 2007, 17:14

Hello Raymond,
It's funny that I'm reading your latest post whilst I just tried my oldest Bladnoch ever, a 1958, right this afternoon. Brilliant whisky.
I've always liked Bladnoch a lot and I'm a fan of its lemony notes and usual cleanliness and freshness, although Bladnoch can get very big and very complex with age it seems (check old Cadenheads or old bottlings for Italy).
Now, as for France, and notwithstanding all distribution aspects, I think that ‘freshness’ should do wonders under rather hot climates like we have, provided the public knows what’s inside the bottles and how it tastes beforehand. That’s communication and I’d probably stress those aspects rather than letting a ‘we’re one of the very last lowlanders’ line go on (not to mention ‘we’re the southernmost distillery in Scotland’)
I’m pretty sure not all whisky lovers seek only raging seas and wham-bam peat (nor sherry infusions or quick aromatizing with wine) and that Bladnoch’s very precise and clean profile should represent aces on our market – again, provided the public is aware of Bladnoch’s style (I’d dare to say by far the best lemon-favoured matured vodka on earth – sorry about that, Raymond ;-)).
Serge
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Message non lupar laphroaig c moi » 20 mai 2007, 09:17

A few months ago, I talked about Bladnoch with Jean-Marc from la Maison du Whisky, and we agreed that it was better than most speysides, and that many Islay lovers (included me) liked this distillery. Concerning Serge's message, I completely agree with him.
Bladnoch
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Message non lupar Bladnoch » 20 mai 2007, 11:58

Hi Serge and laphroaig c moi.

Your comments are interesting. In my opinion, a heavily sherried or a peated Bladnoch is not really Bladnoch. We've distilled some peated malt and I'm sure we'll have no difficulty selling it but it's not the message of Bladnoch.
I was going over some casks of 14 yo the other day and of the 60 we nosed 5 or 6 were not really representative of Bladnoch. They didn't have the lemony freshness which I associate with the month of May in Scotland (or indeed Ireland). No we don't grow lemons here but towards the end of spring and before the start of summer all the rain has washed everything clean and there is a certain vigour and energy about the place. We also nosed a few 20 year old casks which were more tame, reminders of the song, Mellow Yellow.
I've often thought of Bladnoch as being a particularly refreshing summer time whisky which I suppose is not surprising coming from a distillery in whose gardens palm trees grow.
Your comments are re-assuring and thankyou for them.

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