I am frequently asked for advice from people who want to start up distilleries and create a brand. One of the big questions is about whether they should source their whiskey to create a brand. My answer depends upon their business plan. Do they want to create the best whiskey they can or do they simply want to create a brand with a distillery attached to it? There are good points about both methods and I thought I would look at this issue.
To start a distillery without a brand that can be sold immediately is a very expensive plan. You will have all of the expenses of building the distillery and warehouses without a source of income from whiskey. You will be forced into the very competitive markets of moonshine or unaged spirits. Tourism can help raise some money but to be successful in tourism you need a reason for tourist to come and visit – i.e. they want to learn about your products. Whiskey brands are what attract the tourist. Tourism can aid brand building but brands are what attract tourists.
Sourcing whiskey today is not the same as it was twenty years ago. Back then you could get a lot of aged whiskey on the open market as distilleries had excess inventory to sell. That is not the case today. You can still get whiskey but it is not going to be the eight or ten years old that it was back then. It is more likely to be one or two years old because so many companies have already bought the older, bottle ready whiskey.
Your choices for four year old whiskey are much slimmer than it was in the past and you will really have to pay a premium price for any older whiskey. If you do find older whiskey you are limiting the size of your growth as the older whiskey dries up in the market. It is going to be hard to maintain the flavor profile as beggars can’t be choosers and what is available today may not be available tomorrow. Your bottle price is going to be higher and people will be very upset if the flavor drifts radically from what they purchased the first time.
This is fine if your business plan is not to be a million case brand and you want to be in the business in a small scale. However if you want to create a distillery and make the best whiskey possible and grow with the market then you need to look at it from a different angle. There is nothing wrong with sourcing some whiskey to sell while your distillery is getting built (a process that could take years from conception to actual distilling). Even when the distillery is built you want to make some money so your choices are to source aged whiskey and/or sell moonshine or some other white spirit. The world does not need another moonshine and that is not going to make you a lot of money. The completion is rough for vodkas and gin and the profit margin is not great for these products. Sourcing becomes more attractive.
So what should you source? My advice is to source a four year old product while the distillery is being built but also contract distill some new barrels based upon the mash bill you intend to make. Continue to contract distill the whiskey even when your distillery is finished and you are distilling so you have an even supply while waiting until your whiskey is ready for market. You need to be aging product but more importantly you can start to marry the two together for several years to keep the flavor drift to a minimum. Gradual change is less noticeable than drastic change. Creating the brand using four year old whiskey also cuts down the amount of time need to complete the change in flavor drift. You can always offer an older product ten or twelve years down the line with your own whiskey.
The whiskey business is a long term investment. Do not expect to be making millions in the first years or even decade. It is not like craft brewing where you can have a product out six weeks after you finish building your brewery. It takes years to make a good whiskey for the market so sourcing is a valuable tool for new distillers. Just take some time and give some thought to your long range goals for the business.
Photos Courtesy of Maggie Kimberl