Whisky Advocate

Mossburn And Mathieson: a different distillery startup story

June 27th, 2014

Author - Gavin SmithAnother day, and another Scotch distillery project appears. No doubt funding will come from an issue of founders’ bonds or future cask sales, and a diverse group of private investors, while early income will be predicated on sales of gin and new-make spirit. You get the picture.

So we look at the case of Mossburn Distillers Ltd. with a slightly seen-it-all-before eye. We chat with chief executive Neil Mathieson, who outlines two distillery projects, one on the Isle of Skye and another near Jedburgh, in the Scottish Borders. Talk turns to likely expenditure; and Mathieson mentions that the Borders plans involve spending between £35 and £40 million ($60 to $68 million), and that no external funding will be required.

Did he say £35 to £40 million? More or less what it cost Diageo to build its largest and most state-of-the-art distillery to date at Roseisle? Yes, he did.

Clearly we need to know more about the man and his plans. Mathieson was born in Scotland into a family with over 100 years of involvement with Scotch whisky. Moving to London, he trained as a chef, also getting involved in law, accountancy, and hotel management. He then opened a restaurant with his chef wife.

For the past 30 years he has been running Eaux de Vie, which he set up in 1984, growing it into the UK’s leading independent importer of spirits. Eaux de Vie now in the hands of Marussia Beverages BV, which ultimately belongs to the privately owned Swedish investment company Haydn Holding AB. Marussia operates vineyards in Europe and a brandy distillery in Eastern Europe, while additionally working with Caribbean rum producers.

Neil Mathieson points out that, “We started looking at having our own involvement in whisky distilling in Scotland five years ago, so we’re not jumping on a bandwagon.” In order to further these distilling ambitions, Mossburn Distillers Ltd. has been set up to create and operate the two new distilleries.

Proposed designs

Proposed designs

“At Torabhaig on the southeast coast of Skye, more than £5 million ($8 million) will be spent building a new malt distillery in a listed farm steading,” notes Mathieson. “The aim is to produce half a million liters of spirit, using traditional pot stills made for us by Forsyths. The restoration of the buildings has commenced and the first distillates will be produced in 2016. We expect that the flavor profile will be confirmed over the next year as we work on the still shape and height, malt sourcing, and wood program.”

By coincidence, distilling guru and former Diageo production director Alan Rutherford already had an existing interest in both the Jedburgh and Skye distillery projects. He was involved with the Torabhaig distillery venture before Mossburn came along, when all permissions were in place ready for work to commence. At an earlier stage Rutherford had identified the Jedburgh site as an ideal location for whisky-making in the Borders. Joining forces with the Mossburn team as technical director, it was decided that both ventures should go ahead.

“At Mossburn, our aim is to produce up to 2.5 million liters of malt and grain spirit per year,” says Neil Mathieson. “The design of the distillery buildings is currently subject to gaining planning permission, although work has begun on the other buildings at the site we own, based around the former Jedforest Hotel. We hope to start on the production buildings next year with distillation commencing in 2017. As with Torabhaig, we have yet to confirm the flavor profiles for production.

“It’s going to be a unique, statement building, which will incorporate a malt plant, a grain plant and a ‘hybrid’ plant; three distilleries under one roof, in effect. Ultimately, there will also be maturation facilities, a bottling hall and 1,000 square meters of hospitality space. We aim to have the largest whisky shop in Scotland and conference space for a spirits academy. If all goes to plan, we are talking about a 2015 build, while in 2016 the equipment will be put in place, and during 2017 the distillery and visitor center will open.”

Given that both distillery ventures are being “internally” funded by a clearly cash-rich enterprise, there are fewer pressures to obtain short-term returns for Mossburn Distillers Ltd than in the case of other fledgling whisky distillers. “We are working on a 25-year fully-funded business plan, just as we would for our other vineyard and distillery enterprises,” explains Mathieson.

Torabhaig plans

Torabhaig plans

“There will be no founders’ casks or sales of new-make spirit. We will market single malt, single grain, and blends, and the aim will be to build brands and create international sales prospects. The first limited release bottlings will probably be of five year old whisky before a standard ten or twelve is chosen. This will depend on the flavor profile the team decides on, and the development over the first five years.”

Some observers of the Scotch whisky scene foresee problems when all of the emergent ‘craft’ distilling operations begin fighting for their slice of the market. After all, each is likely to be offering consumers pretty much the same product, namely three of four year old, ‘limited edition’ bottlings from a predictable variety of casks, all with price tags of $120 and upward.

It appears that Mossburn is in the position to avoid such a situation, but what does Mathieson suggest for others embarking on their whisky-making dream? “I would advise them to concentrate on the costs of grain, wood, and cask storage over their aging plan, rather than the initial outlay on distilling equipment, and not to consider unrealistic retail prices or expect them to continue increasing,” he says. “Also, forget the U.S., as our distribution and retail models are different. Perhaps if we all took the initial expected financial requirement, doubled it, and then doubled it again, we would all be securely funded for the future!”

 

7 Responses to “Mossburn And Mathieson: a different distillery startup story”

  1. Danny Maguire says:

    Thanks, Gavin. When I heard about the amount of money they were proposing to spend I was gobsmacked, they were talking about £40M when most people building a new distillery were talking of about £6M. When you put it all together it makes more sense though it still seems a bit on the expensive side. Fot that price I’d expect everything to be the height of luxury.

  2. B.J. Reed says:

    Wish them well and if they are as heavily financed as it appears then they can be a survivor in what I anticipate will be a survival of the fittest, one where under capitalized efforts will likely flounder.

    • Gavin says:

      Thanks for the feedback, gentlemen. I agree that some of the more financially marginal start-up distillery ventures across Scotland may struggle in time. It doesn’t seem to deter people, though!

  3. Kenneth says:

    2 facilities at $6m and $8m each. 3 years of construction, 1 year for distilling, 5 years for aging. That’s 9 years before they can even start selling for profit. 14 years for the 10 year old and 16 years for the 12 year old batch.

    $60m – $14m construction costs = $46m

    $46m / 16 years = $2.875m a year for opporating costs. Carry that out for the 25 year plan and it’s ~$2m a year. So they are funded to well after their 12 year old bottles start selling.

    As most distilleries would just be fund for the initial start up the numbers for Mossburn do not seem so outrageous.

    • Danny Maguire says:

      Shouldn’t think it would take 3 years to build, I’d allow one for that, getting all your permissions could take longer. One work startsI’d expect them to be in production 12 months later.

  4. Neil Mathieson says:

    Danny, thanks for your comments. We view the two projects as having their own building timelines; the first, on Skye, involves the rebuilding of a ruined historic listed building and the second, a greenfield site, has no previous permissions. These hurdles will take time to clear and we hope to do both buildings justice prior to commencing the commercial aspects… …hence the longer term programme. As we progress we’ll be looking to put up more information and images, hopefully before the end of this year!

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