Our AGM finished up yesterday morning and I waved my Investors off to the airport so they could return to their respective countries of residence. We spent almost 4 days together going over everything J.J. Corry past, present and future. We talked through, overhead, portfolio line up, expansion plans, distribution, marketing, and most importantly FINANCING plans. I am very fortunate to have investor partners who are also now very good friends. We are deadly serious about our business, but we have a very good time along the way (it’s a whiskey business for god’s sake….we better be having fun). It means a lot to me that my brilliant capital partners took the chance to believe in me as a founder and believe in our whiskey business. Less than 2% of VC funding goes to Women Founded businesses. That sort of number is about right for programs like EIIS and all manner of Irish funding schemes too, however raising money for a whiskey business is NOT easy regardless of your gender.
We never read in the Irish media, about the knock down drag out difficulties of financing what is basically a cash dump business in for the first decade or so. Yet the most important element in Irish Whiskey right now for those entering the market is liquid acquisition and/or production and to do either of those things you need very serious capital if you wish to be a real player in the industry. There are a few ways to get very serious capital.
- You either have it yourself personally and are willing to invest it
- You have a track record in selling a similar business, you have some capital, but banks will extend you significant credit based on your history
- You seek external equity investment
- You are a multinational
There are a few examples of 1 and 2 in the Irish Whiskey world and wouldn’t we all like to be in their position, there are FAR more examples of No. 3 that you may or may not know of everyone else is in the 4 bracket. External investment means that you give up some ownership of your business, but you get access to the capital you need to grow it. The big issue about external investment is that you become accountable to your investor partners. You are taking their money after all. You had better be damn sure that they are in alignment with your business model and long term plans from the very beginning or you end up in a corporate divorce situation like Walsh has with IIlva Saronno, or a fatalistic shutdown like Quiet Man and Luxco.
The Walsh’s built a good business over the last decade or so and after starting off as an Independent bottler sourcing whiskey, went and landed strategic investment with multinational IIlva Saronno, the people who make Disaronno, Southern Comfort and all manner of other brands you have heard of. This was a smart partnership as it allowed them to raise the capital to grow the business AND to build their own distillery, solving several issues at once. It was starkly and surprisingly announced at the end of last week that Walsh Distillery is no longer Walsh Distillery, rather Saronno have taken control of the production facility and with immediate effect it will be re-branded Royal Oak Distillery and Saronno will now control all products coming out of there. Walsh retains all their brands and goes back to being an independent bottler with a great portfolio and a growing business but no distillery with their name on it anymore, which can’t be fun.
I think its really important to point out for our industry, that these two cases are NOT symptomatic of Attrition in Irish Whiskey. Rather they are simply individual cases where strategic investment deals or partnerships simply did not pan out. What we have here are growing pains around financing the demand for Irish Whiskey Globally, NOT the beginning of the end.
As a fellow whiskey entrepreneur I have great sympathy for both of those brand founders, I fully appreciate the daily WAR it is to build an Irish Whiskey Brand. Its hyper competitive, the big guys are not that enthusiastic about the small guys and are aggressive in rattling our cages. We have to fight much harder than any multinational ever had to win placements and expand our export markets. These kinds of setbacks are utterly devastating on a personal level, but whiskey entrepreneurs are a tenacious lot. You don’t get into the business or stay in it without being bloody minded. I wish both of these businesses and their people the very best for the future.
However, the reality here is that in the next few years, most wannabe players in the industry will HAVE to court strategic investment in order to grow. It is vital to aid in distribution growth and stock acquisition. Walsh may be the first corporate divorce we see in the industry but it won’t be the last in the coming few decades, partnerships come and go, but for now Irish Whiskey remains in growth.