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Warning About Irish Whiskey Renaissance

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Warning About Irish Whiskey Renaissance

Warning About Irish Whiskey Renaissance
September 10
21:41 2014

The global Irish whiskey market is expected to expand from 7.5 million cases in 2013 to 24 million cases by 2013 and 21 new distilleries are currently either being planned or considered. However, Irish whiskey entrepreneur John Teeling (pictured) has warned that the vast bulk of these envisaged new ventures will struggle to make money.

John Teeling has been successful in building from scratch an international Irish whiskey business, having founded Cooley Distillery in 1985 before selling the company to US spirits group Beam (now part of Suntory of Japan) for $95 million in 2011. John Teeling’s latest business venture, Irish Whiskey Company, is now planning to spend Eur35 million over the next four years transforming the Great Northern Brewery site in Dundalk into a distillery.

Irish whiskey is a very attractive market with regions such as Asia offering huge potential as consumer incomes increase. On the downside, Irish whiskey has to mature for at least four and half years. This demands high working capital to distill the spirit and to buy the maturation casks and invest in warehouse storage capacity. Economies of scale are also crucial, which will put small distilleries at a serious disadvantage.

In addition to the high barriers to entry in the form of capital costs, “Irish whiskey is also a marketing and brand intensive business,” he cautions. A further challenge is the difficult route to market with the large spirits giants dominant, necessitating the need for smaller players to seek out partnerships to gain distribution.

“If you survive, you can do really well,” he says, pointing out that a tonne of grain costs Eur400 and after “adding water, time and air, you can sell it for Eur3,600.”

John Teeling was speaking at the ‘Innovation for Sustainable Growth’ Conference and Exhibition held on Wednesday, September 10th at the Aviva Stadium in Dublin.

While the surge of interest in Irish whiskey distilling is understandable, it remains a challenging business. “I think you will see a lot of fallen angels,” he remarked. “I think a lot of money will be lost.”

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