“Why two London wine merchants decided to buy a Scottish whisky distillery in Bruichladdich” -Real Business
The 29 August 2017
When Simon Coughlin and Mark Reynier took a punt and bought the historic Bruichladdich whiskey distillery on Islay in 2002 they couldn’t have imagined the roller-coaster journey they’d go on.
To say Simon Coughlin has a career immersed in booze might sound like an insult, but it’s a journey which has taken him through wine, to whisky and ultimately has involved gin.
His alcohol education began with a London-based wine business – delivering to restaurants, hotels and small businesses and learning the trade as he went. After that operation was taken over by a brewery, he had the chance to work for the wider organisation, selling to buyers all over the UK.
However, his entrepreneurial trappings began to show themselves and Coughlin used what he’d learnt to open a wine company with his friend, and ultimately long-term business partner, Mark Raynier.
It was through the duo’s wine merchant operations in the capital that they first became involved with whisky. The first step here was to set up their own independent whisky company, trading other people’s products.
“During that time it opened our eyes to single malt whiskys, the higher end of the industry,” Coughlin told Real Business. “We could just see all of these bigger companies moving away from the heritage of it all. With wine, we’d been doing well with the hand sell, building relationships with customers and growers and thought, why should it be any different with spirits?”
In wanting to grasp this opportunity, Coughlin and Reynier came across the Bruichladdich distillery on Islay – the southernmost island of the Inner Hebrides of Scotland. While it would be eight years before the two managed to close a purchase of the historic operations, they knew there was an opportunity in returning to traceability and provenance.
A long pilgrimage
“Mark would write to the owners every January, asking if we could buy the distillery. One February or March they actually came back to us – so there were thoughts a sale might actually be achieved.
“We went to see our bank, but it wasn’t interested unless we could raise £4-5m of private equity. So we had to persuade about 40 individuals to invest £100,00 each, which we did over three to four months using a variety of sources.”
With those promissory notes, Coughlin and Raynier were able to secure a further £2.5m from the bank and kickstarted a roller-coaster ride that has spanned 15 years so far.
Getting £100,000 from 40 people inside four months sounds like an impossible task, but the two wine merchants used their credibility and trust, alongside the story of a return to putting provenance at the forefront of whisky distillation, to do just that.
“We were hand picking the right individuals, those that could afford to lose £100,000. It was a risk for sure, but we had the Business Expansion Scheme [now the Enterprise Investment Scheme] which meant high tax payers could get some of that back.
“However, getting them to say yes over a glass of wine and then getting that money were two very different things.”
Coughlin and Raynier ended up falling back on that investor pool twice in the next two years, something most backers saw coming, but that allowed them to put in place a team with great whisky experience and restore all of the original machinery that had helped Bruichladdich produce whisky before the doors were closed in at the end of 1993.
The Bruichladdich way
Being based on Islay, with the full force of the Atlantic battering the island for much of the year, brings with it a host of logistical challenges. While other whisky distillers shop product off island for barreling and bottling, Coughlin and Raynier had a desire to do everything on Islay – making their lives much more difficult.
“We managed to get our own lease line put in so we could run things like webcams, but there were power cuts constantly. We’ve changed the wiring now, and have the odd one, but back then we could be off for days,” Coughlin remembered.
“We were bucking trends in doing what we were doing all in the same place. But it makes it more authentic, and we’re now at full employment on Islay when before it was really struggling.”
One of the big challenges Coughlin encountered at the beginning was balancing the desire to retain the heritage of the brand and how it maintained whisky with a modern approach to business.
“Keeping up to speed with customers and excise was very hard. The amount of returns you have to do, and all the time. This was all pulled together manually – production, packaging and bottling, a huge task every month.
“Often we were a month or two behind, which you can only do for a few years before HMRC has a sense of humour failure.”
To get round this, a big decision was made to implement a new technologically-led way of thinking. “The stress level in the company was really high, there were big consequences of getting it wrong,” he remembered. “Looking back, it was pretty horrific.”
Modern meets traditional
Bruichladdich decided to invest in a software service called Epicor Tropos, an offering for manufacturing firms that provides recipe-based production, materials traceability and regulatory compliance – the kind needed by the business due to its dealings with HMRC.
“Bruichladdich invested in Epicor Tropos with the understanding that it didn’t immediately need all the advanced features incorporated into the system. However, with ambitious plans for future growth, it knew these features would prepare the business to take advantage of Industry 4.0 technologies as the distillery inevitably becomes ‘smarter’ and more connected,” said Sabby Gill, executive vice president international at Epicor Software.
“By creating scalable processes, the business will be able to support its long-term goals. Like Bruichladdich, companies should be doing all within their means to invest in, and embrace, the right technology as part of their growth strategies in order to stay one step ahead.”
This sentiment was echoed by Coughlin, who was feeling the strain of scaling up with insufficient processes and systems in place.
“I was at the top of the company, making decisions, but was also very hands on,” he remembered. “I was on the line in the bottling hall, so knew all about the pinch points. We had a vote on the new software, and concluded that if we don’t adopt it and jump in with both feet what we wanted would never work.”
Introducing the kind of technology needed to grow sustainably suddenly meant Coughlin and his team suddenly had “thinking time” again, with weekends not spent reconciling everything.
The growth story of Bruichladdich, from a dormant distillery on the windswept Hebrides to one winning industry awards around the world, was crystallised when the company was sold to Remy Cointreau in 2012.
While Coughlin and Raynier weren’t looking to sell the business at the time, and their investors weren’t applying much pressure, they still felt it was an opportunity worth looking more into.
“Mark didn’t think we bought by a whisky business, as we wouldn’t fit neatly into a portfolio. So, someone coming in without a whisky operation was a much more interesting prospect,” he said.
Since the acquisition, Reynier has departed and left Coughlin in control. Remy Cointreau has stayed true to its word and not attempted to meddle in the Bruichladdich way of making whisky. Alongside the continued success of its single malts, the business continues to capitalise on the success of its Botanist brand of gin – which now sells more units than the whisky.
“Back 17 years ago we were challenging everything. We were quite loud and got a lot of coverage, which helped us get know,” Coughlin said.
“These were deep-seated views and we felt the industry had lost lots of that. It was more about big yields, as fast as you can get them, and as cheap as possible.
“Someone the other day said we had grown up, that we don’t need to shout and scream any more. Our views have been taken up by other companies, and people openly talk about provenance.”
Full article by Hunter Ruthven in Real Business.