Louise is a drinks industry veteran, having held senior global marketing and commercial roles with Moet Hennessey, Pernod Ricard and Diageo. In 2013, she left the corporate world to found the Chapel Gate Irish Whiskey Co. Her goal is to bring true innovation back to the Irish Whiskey Category. This latest blog article is superb.
One of the best parts of being involved Irish Whiskey at the moment is the huge plain of potential that spreads before us. The new guard big and small are inventing new styles and resurrecting lost methods for creating Irish whiskey and will ultimately shake things up beyond recognition. One of the concepts I find utterly spine tingling is that of Regional Styles of Irish Whiskey. This is something scotch nailed down quite a long time ago. Anyone who is into their whiskey will have seen a Scotch flavour map. Scotland realised they needed this because there are a few hundred distilleries up there. In on order for the consumer to be able to grasp the category they invented a guide which visually delineated the various styles of Scotch. A simple and effective concept which translates nicely the effect that locality can have on whiskey styles.
We don’t have such a thing in Ireland YET for many reasons. Most of us newcomers are no-where near releasing a regional expression yet, as we are only getting started. The Dingle guys are closest to this, but its still early days. Honestly this really won’t emerge for about a decade or so, if it emerges at all and I’ll get to why it may not in a moment.
Waterford Distillery have taken the concept of Regionality to its ultimate conclusion which is HYPER LOCALISATION. In my opinion this is how all whiskey actually should actually be made in a Utopian society. Go into a field, choose a strain of barley that suits the soil type, plant it, harvest it, distil in together in one batch and then mature it locally in one batch. Then release this whiskey as Mr. McMahons Back 20 Acres Whiskey 2015 or whatever. Single field, single origin grain to glass whiskey. This is the absolute ideal. Good Lord we should all be making whiskey like that, I would LOVE to do this.
To do this though takes three things
Most of the guys i know in the Indie Irish whiskey crowd have the first two, not everyone has the latter. The announcement this week that Mark Reyiner has raised an additional £5m in private equity on top of the approx £20 million that has already gone into the business is illustrative of this. Waterford ain’t making no Gin or Vodka to keep the lights on. They will come out of the gate in several years when they feel they have a whiskey worth releasing and when they do it is going to be like a Bomb going off in the category, which I am very much looking forward to. The amount of capital going into this venture shows what it takes to pull off something as brilliant as this.
Ok, you ask Why can’t the smaller guys just do that on a smaller scale? Here’s a key reason Why Not.
What is a bond? In order to store whiskey for maturation you need to be a Bonded Warehouse keeper. This means your whiskey is tax exempt whilst its sitting in your bonded warehouse.
A bond is an archaic means of assuring the Revenue Commission that they will get paid their duty should your whiskey get stolen. If all my whiskey gets stolen, I have to pay the duty on it to the Revenue within 7 days, as they consider the whiskey to be on the open market so they want their duty. Ok, so you just get an insurance policy so what right? Wrong. You have to get an insurance policy but you ALSO have to get an an ASSURANCE in the form of a Bond. Here is how you get a bond. Let’s say if you have a tiny bond of 250,000 euro (this would be small).
- Deposit the €250,000 bond in a bank account and leave it there forever. The bank will then write you a bond note for the Revenue. You will never see this €250,000 again its just sitting there and you can’t touch it.
- Go to a state certified Bondsman and convince him that you have 20-40 times the value of the bond in assets which you could sell to cover the bond if you need to. You’ll need a minimum net worth of €5000,000 to acquire a bond this way, and even so you might need to put a deposit down of €100,000, just to be sure.
That is it, those are your options, good luck with that. This goes back to my point about capital. Anyone opening a €25 Million euro distillery here in Ireland does not have this problem, because they’ll have the backing of someone somewhere who can cover the bond, or maybe the bank will write it for them anyway. I don’t think Pernod even HAVE a bond as they are a multinational and the Revenue figure they are good for it, and they are. It’s the small, indie guys who struggle with this, also there is no duty relief for small producers, we pay the same amount of tax and duty on our whiskey as Diageo, Pernod, Beam & William Grant. This is different in beer craft producers have relief.
A horrible solution to this has been floated around this problem which is CENTRALISED WAREHOUSING. This is bad solution to this problem. With centralised warehousing you get homogenised maturation. You also remove a potential competitive advantage from a small producer. If you are making whiskey in a 500 liter still up the side of a mountain in Mayo, you want to be able to tell people that you are maturing it there too, not shipping it to Cork to mature with everyone elses whiskey in a big Airplane hanger with concrete floors on stacked pallets.
The actual solution to this is to CHANGE THE LAW by making an exception for small producers. In Scotland if you are a distillery and you need to take out a bond no matter what size you are, you just get an insurance policy on it. job done. Why is that not enough here? I have an insurance policy on my insurance policy and I had to sign my life away to get my tiny, tiny bond. I am not even joking when I tell you I had to list my, house, car and horse JJ as my assets to get my bond…all my investors and my husband had to do the same. The messed up thing is that the bond will NEVER be called upon, because if I do get robbed then the insurance policy pays out. It is a moot point but I could not put my whiskey into the rackhouse without going through the whole rigmarole.
Whiskey takes its regional style from a few key elements. The Barley or Grain used to make it, The in-house distillation method and water used in same, and a core factor that I’ve focused on here is the environmental maturation conditions. Take for example Talisker, Ardbeg, Oban Bowmore, these are often classified as ‘SALTY’ scotch whiskies due to the coastal climate where they are matured. This is a well established trope in whiskey. Waterford have built big bonded maturation facilities which will have a unique effect on the maturing whiskey. I am betting on this too, my whiskey is maturing nicely less that a half mile from the Atlantic Ocean on our family farm, where your whiskey matures MATTERS when it comes to regional styles.
So, what is being done to address this issue? Nothing yet, but something needs to happen. some form of relief for small producers is necessary on all things tax related. The craft drinks bill does not address any of this stuff. This issue around securing a bond has the potential to stymie the category and the insane duty we pay does too, why are the craft beer producers getting a break and we are not?
We might have a regional map in a few years but it will be populated by 5 or 6 multinationals and 3 or 4 indie BIG distilleries who can afford massive bonds. But wouldn’t it be so much more interesting if it resembled more the Scotch map? I think so and I think the category would be better off for it.