Monday 19 December 2011

John Teeling comments on sale

Update 21 Dec 2011: Ronan Morris kindly pointed me towards a new video interview with John Teeling, conducted by (the place, not the whiskey). Worth a look.

The Sunday Business Post carries some revealing comments from John Teeling, founder and chairman of Cooley Distillery, regarding the acquisition by Beam. The most interesting points:

  • Sales of Cooley whiskey are up 50% this year, a trend that will see the warehouses run dry by 2014.
  • To cope with the forecast growth, an investment of €50m over the next 5 years is required. This drove the decision to sell now.
  • There were approaches from five potential buyers in the last year (including from William Grant, noted here last May). Cooley favoured Beam, with whom they have been in talks for four years.
  • Teeling believes Beam's top priority is building the Kilbeggan brand in the US.
Some numbers were disclosed too: Cooley buys a ton of maize for €300 and converts it to 1,200 bottles of whiskey which fetch €6,000 in export sales. That implies Cooley sells a bottle of whiskey for €5 at the factory gate.

The mention of maize indicates a grain-heavy blend - let's say for a supermarket's own label - that might sell for €15 or €16 in the UK. That's the high-volume, low-margin end of the business. What is fascinating about the whiskey trade is that there is also a low-volume, high-margin end based on the very same spirit. Leave it in the cask for a few more years, after all, and you can flog it for €95 a bottle (Kilbeggan 18yo, Irish retail price) or even for €250 a pop (Connemara Bog Oak).

It's a really neat business challenge, how to edge the average margin up without driving down volume. That would be the task of the branding and marketing alchemists, I presume. I think Cooley have already nailed the branding. Marketing, however, scales with budget and the Beam deal will help there.