Distilling the Shetland dream

Caroline Whitfield believes a unique location, an innovative marketing strategy and hard graft will seal Blackwood Distillers' scotch-making reputation, says Richard Lofthouse.

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Last Updated: 31 Aug 2010

As whisky drinkers across the globe will testify, if you want good scotch, you've got to wait. It takes at least 10 years for a top-quality single malt to mature. This means that any small business wanting to bring a new malt whisky to market faces a decade-long hiatus in its main revenue stream - hardly the best start to commercial life.

Caroline Whitfield, founder of Blackwood Distillers, near Lerwick in the Scottish islands of Shetland, has come up with an ingenious way of negotiating this potential mother-of-all-cashflow crises. She is selling the less obviously Scottish beverages of gin and vodka, plus a vodka liqueur, while she waits. Having entered competitions in 13 different countries and garnered seven international prizes in just two and a half years, the three first-born brands of Blackwood Distillers are feathering the nest for their future whisky sibling. And doing it rather well - the fledgling company turned over £7 million in 2004 and should break even by the middle of this year.

But waiting for the first batch of scotch is still a frightening prospect. The company does not even have a distillery yet - construction, backed by £1.53 million of EU grant - can't begin until the summer because of harsh weather conditions for the rest of the year. If all goes according to plan, the stills will be up and running by the end of this year, so the first three-year-old whisky should be ready by 2008, followed by the single malt in 2015 or thereabouts. The gin and vodka sold under the Blackwood label are bought in - made to individual recipes by a mainland distiller whose identity is a closely guarded secret.

Whitfield - whose impressive CV includes an Oxford law degree, Insead MBA, and spells with US tech incubator Idealab and corporate heavyweights Hasbro and Unilever - insists that innovation is the key to consumer marketing, and that in company terms innovation results from a diverse workforce.

The 19 employees are drawn from countries ranging from Poland to South Africa, and 12 are women. Whitfield herself has a Norwegian father and an English mother, and underwent a Canadian upbringing in remote Labrador; she is married to a Scot.

'I consider myself less an expert in drink than an expert in innovation and consumer marketing,' says Whitfield.

'You can be successful in any consumer segment if you understand the consumer. The greater challenge for me has been everything else: I've had to draw on every single facet of my character and former business experience - from corporate finance one minute to down-and-dirty details the next. The highs and lows have been much greater, and the experience more intense than anything before.'

In addition to diversity, the company has no centralised office. Not only does this save money, but it accommodates employees with family commitments.

Whitfield sets the tone by regularly taking her two-year-old on international trips. So the Blackwood story is not just about a new spirits business taking on the corporate big guns of Diageo et al, but of how a fleet-footed, predominantly female company has successfully launched in a traditionally male-dominated world.

Whitfield breaks her success down into a combination of one objective and two main strategies. The objective is to produce a premium malt whisky from a unique location (there are no other distilleries on Shetland).

The strategies are, first, to build an export-led white spirits business to fund the whisky; and, second, to crack the international marketplace using innovative methods and exhaustive sampling directly to the public at open-air events - 349 of them last year in Britain alone.

The story of how Blackwood was born illustrates the spirit of its founder.

Living next to the MI5 building in London, with a new-born baby and constant reminders of the terrorist threat, Whitfield pondered the future late in 2001 and decided that it might be time to escape the metropolis for a more secluded hideaway. Having read a Sunday paper feature about a wrecked cottage on the Shetland island of Yell, she flew up to investigate the ruins and came away with another, entirely unrelated thought: why were there valuable, mature whisky distilleries all over Scotland but none in Shetland?

Her international success - exports have driven growth in more than 13 countries, including the US, Canada, Scandinavia, Iceland, South Africa, New Zealand and Germany - is testament to what can be achieved by a combination of an entrepreneurial flair for new markets and hard-headed corporate instincts.

Export countries are chosen according to the 'Blackwood innovation index'.

Compiled using unorthodox market evaluation criteria such as iPod penetration, internet and mobile phone usage and alternative restaurants, the index is designed to highlight places where new products will be best received.

'We go to where people are willing to try things,' she says.

Whitfield's curiosity as to why Shetland had not achieved the whisky-fuelled greatness of Islay and Skye merited a trip there in the summer of 2002, accompanied by a posse of industry experts. The party's tramp around sodden peat bogs and freezing burns was accompanied by apparently doom-laden whines and grumbles, recalls Blackwood's finance director Joanna Dennis. 'The distillery experts were muttering and cursing. We assumed the worst, but it turned out that their curses were self-directed - as in why had no-one thought to do this before, given the well-nigh perfect conditions for whisky distilling.'

For Shetland, it turns out, ticks all the right boxes - the climate is mild and damp, thanks to the salty Gulf Stream air, there are ancient peat stocks aplenty, and exceptionally high-quality spring water.

It became clear that setting up a white spirits business to fund Whitfield's whisky ambitions was the way forward - outsourcing gin and vodka would contain costs and allow complete production flexibility. But connecting these products to a distinctive Shetland provenance posed a problem. Whitfield knows that the ultimate prize - tapping into Asia's considerable and growing thirst for expensive whisky - rests on locality.

'Provenance is everything. It's what Japanese connoisseurs of malt whisky care about. When the distillery is complete, the white spirits will also be produced on-site. But until then, we've been careful to say where the products are made.' Every bottle carries the same wording: 'Blackwood Distillers, Lerwick, Shetland', followed by 'Produced on mainland Scotland'.

The trouble is that white spirits don't rest on locality but on starch-based, usually grain, alcohol that is easily and cheaply produced, a fact that every drinks business in the world has woken up to in the past decade.

Absolut has sold more than a billion bottles of its iconic vodka since its famous marketing campaign in 1979, yet its very success has paved the way for enormous competition. With 130 new vodka products launched in the past three years, what chance does Blackwood's stand?

The Blackwood vodka is triple-distilled over 'Nordic birch charcoal', uses Shetland water and is 'ice filtered'; the result tastes like Finlandia.

It's very good stuff but insufficiently 'different' in a market where difference is largely a function of marketing budgets - the one thing Blackwood doesn't have. Whitfield acknowledges the difficulty and plans to relaunch the vodka later this year.

The gin is a slightly different proposition. She has reversed the Bombay Sapphire formula of coloured glass, clear spirit, with a coloured spirit in clear glass. The gin carries a tincture of violet flowers and turmeric to give it a claimed green tint in a clear glass bottle, described by Whitfield as 'eau de nil', and indeed it is the very pale green of the water around Shetland. The recipe also features local botanicals grown on Shetland and picked by crofters.

But these gimmicks are nothing compared with the more controversial claim that the gin is 'vintage', a move guaranteed to irritate the competition.

The term is more often applied to cognac, which is grape-based and, like good scotch, improves with age. But gin is grain-based, isn't matured before sale and doesn't age in the bottle.

'There are bourbon producers who have done this,' says Whitfield. 'The US authorities insist that the use of the term vintage is fine as long as the drink is organoleptically distinct from one year to the next.'

But who defines 'organoleptically distinct' for global markets, and why was MT's request for different vintage samples ignored? Whitfield's justification is that the taste of Black- wood's gin will differ subtly from year to year, using fresh coriander instead of dried, iris root instead of oris root, and so forth.

As for Jago's, named after one of the originators of Bailey's (the UK's biggest seller in this market), it is a brassy, international vodka liqueur that can be likened to an alcoholic ice cream. 'It's seen as a crossover brand that is more modern due to its vodka base and visual styling - not in small dumpy brown bottles, as with Bailey's.' Sold in a tall, opaque, cream-coloured bottle, labelled in a metallic copper font, it has already attained cult status on Scottish backbars, drunk presumably by real men who can't hold their whisky.

Whitfield planned to export her brands right from the beginning, citing market diversification as a source of competitive strength and explaining that successes have so far been driven not by contacts but by 'picking up the phone and not giving up - chutzpah and horsepower, nothing else'.

The other tactic, apart from identifying horseriders and oyster-eaters as big vodka drinkers, has been hard graft: sampling to the public. It's a thankless task, but Whitfield has managed to achieve better than average sales-to-samples ratios, especially for the liqueur. All vital if the planned doubling of white spirits sales (and consequent fattening of slender margins) from 2004's 13,000 cases is to be achieved this year.

Blackwood is an admirable example of cheeky-monkey capitalism, living proof that a new business with a fresh approach and plenty of get-up-and-go really can find a place even in the most crowded and competitive of landscapes. Let's hope the company will still be around in 10 years to enjoy the first precious dram of Shetland's only single malt.

TAKE ON THE BIG GUNS WITHOUT GETTING BLOWN TO BITS

Caroline Whitfield offers the following advice to brands that see themselves as David pitted against Goliath: 'Be brutally honest about finding a highly distinguishing competitive edge, sticking to it and not wavering.' This means innovating - but not at the cost of compromising the integrity of the product. In this case, Shetland water is shipped to the mainland to sustain the Shetland link despite mainland distilling.

Sometimes you have to go to Newcastle by way of Edinburgh, in this case via gin and vodka to malt whisky. Comparable examples are Linda Bennett, whose shoe emporium was realised on the back of a cash-generative accessories boutique, and Horacio Pagani, Italian maker of the fabled Zonda supercar, who funded the vehicle by first founding a highly profitable design consultancy.

Innovation requires a diverse workforce. Whitfield says: 'Diversity means resistance to group-think and is critical to a successful organisation.'

Hand out the Smarties if you want passionate employees. Most of the Blackwood team have an equity stake, though Whitfield is majority owner.

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