22 Mar Traditional production process creates classic tastes and bestselling original whisky brands
Ian MacLeod is one of the finest and most respected names in the Scotch whisky industry, with its rich expertize as an independent Scottish family firm stretching back four generations. Leonard Russell, Managing Director, Ian Macleod Distillers, shares some of his company’s secrets.
Please give us a quick tour of the company, with perhaps a couple of key facts and figures to illustrate the importance and performance of Ian Macleod over the past few years?
My grandfather started as a whisky broker in the 1930s. He bought and sold whisky between the many family companies that existed back then. We were essentially whisky brokers, and we then started bottling our own whisky in the late 1950s. Single malt was traditionally a small part of the Scotch whisky industry, only 3-4 percent of sales volumes of whisky when I joined in 1989. To fast forward a bit, it is now over 10 percent. Demand for single malt has grown significantly.
We bought our first distillery, Glengoyne, from Edrington distillers who own Macallan and The Famous Grouse. Luckily, we bought Glengoyne in 2003, just as the single malt market really started to take off. Edrington had another distillery, Tamdhu, that we bought in 2011. Then, more recently, and what I am particularly proud of, is the acquisition of Rosebank. This was a distillery very much loved by whisky drinkers around the world. Sadly, it was closed in 1993 for a variety of economic reasons. It was not the most efficient, but then again; I do not worry about efficiency so much. I want to simply make the best whisky. The distillery was sold to the British Waterways Board as it is beside a canal, it is very rare to find a distillery in a city center: the middle of Falkirk – not far from Edinburgh on the way to Sterling.
We managed to acquire the site in 2019 and are now rebuilding it. We are replicating the stills and putting it back just as it was, maybe slightly differently because the layout is different to facilitate visitors, but we are following the original drawings. Rosebank was known as the “King of the Lowlands”, so I’m particularly pleased and proud to be bringing that back. It’s a big responsibility, because there are a lot of whisky connoisseurs out there who will have their beady eyes on what we are doing. But it is coming along really well, it is going to be great and I’m confident that we’ll do the distillery justice. We started three years ago, but had to pause building works during COVID-19. Fortunately, we have resumed and it should be distilling in September. You can look it up at rosebank.com.
There is a severe shortage of old single malt at present. A lot is being collected and the auction houses are going crazy for it. The old Rosebank bottles for example, just the 12-year-old that was bottled in 1993 or so, sells for something like £400 a bottle now, which is a lot for a 12-year-old. Bottles of the remaining 30 years old are selling at auction for over £2,000. I think it’s a shame if it’s just collected, as whisky is for drinking!
How has the company changed and evolved over the past 80 years, and since your generation came on board? What in its DNA have you preserved, and what other values or strategic transformations have been introduced?
We are still whisky blenders. When I joined, a large amount of our business was supplying private label to supermarkets. We used to make good quality whisky under supermarkets’ own labels. Here in the UK at that time in the 1980s, early 1990s, the supermarkets were building their own reputations as brands, and just as people are happy to buy Marks & Spencer own brand, consumers were willing to try own label spirits from leading supermarket groups. We supplied a lot of the premium end of own brand spirits and still do. I think we started selling Sainsbury’s “Finest Old Matured” to them in around 1975.
Nowadays, we are also spending more of our time and effort concentrating on building our own brands including Glengoyne and Tamdhu single malts. We also still sell just as much blend as we always did. In 2015, we bought Edinburgh Gin, the first gin to bring in flavors, and we created Edinburgh rhubarb and ginger gin. That became very popular and went into all the supermarkets and again we were very lucky. We entered the gin market just at the time when the boom was happening and consequently Edinburgh Gin has done pretty well here in the UK. That required us to improve our infrastructure and our abilities. We increased the sales team; added a lot of marketing people, and it has been great fun. The gin boom is continuing. We’ll start building a new Edinburgh Gin distillery in the heart of Edinburgh this summer. It should be great as it’s going to cost over £10 million.
We have grown significantly, particularly over the last five or six years. As a family company, we are not really reporting to the City, so we can take quite a long-term view, which is really very helpful in the whisky industry. For Rosebank, for example, although we will start distilling in September this year, it will probably will not be bottled and sold until around 2030! It is a long-term business that requires significant investment, but it is a fabulous industry. We make the most amazing drink out of essentially water, barley, yeast, time and wood and the great skill of the distillers and blenders. That is what makes it such a great industry. Within it, consumers are interested in discovering different single malts and the tastes from various single malt distilleries. What makes single malt interesting to consumers is it comes from one single distillery, so you can go on the internet, have a look at the distillery, see pictures of the people making the whisky and where it is stored. It has just got so much history, provenance, and magic about it. That is why single malt is increasingly enthralling to spirit drinkers around the world.
Since 2003, we have been reinvesting all our profits back into building up our stocks of whisky and to adding distilleries to our business. We have been very lucky over the last decade or so in that interest rates have been low and banks have been supportive of us because the whisky itself is an asset. This asset-based lending has greatly facilitated us to grow faster than we ordinarily could have.
How do you manage to preserve that quality and tradition of processes while growing multiple bestseller brands, at such high speed, dealing with ever-increasing production output?
I am the major shareholder, so I cannot really be fired. Since my job is secure, I am more than happy to recruit the best people I can find. I always recruit people who are better than me and with whom I would enjoy having lunch. If you can pull together a team of talented people that are amusing and engaging to be with, you have come across the secret. We all get on really well.
We have expanded, particularly with all the social media. In my early days, media choices were the sides of buses, posters, and press. Now, when I look at how our advertising and promotion budgets are allocated, so much goes into social media and online. It is amazing how the whole business landscape is changing. I recruit people who have the insight into looking forward and working out how and where we should be positioned.
We expect the markets of Asia, particularly greater China, to grow. India, with their one and a half billion people, are predominantly brown spirit drinkers, so there are opportunities there. By recruiting the best people, we can easily set up teams in markets to give them deserved attention.
How has the COVID-19 pandemic affected sales and distribution logistics, and what strategies – including e-commerce sales – did you develop to overcome losses?
When COVID-19 first hit, our main priority was the health and wellbeing of our staff. We ceased production, and all ended up working from home quite early on. It was a scary time for me personally because of the uncertainty of what was going to happen. However, we have an amazing team and everyone pulled together. It was remarkable how Microsoft Teams facilitated our meetings. I had hardly ever done video calls before that. Our IT department was miraculous, our shipping department was miraculous, and although trading was down in 2019, we coped. It was sad to see the whole hospitality and on-trade industry being hit so hard, and that continues today. They have had a terrible time. Throughout the world, the on-trade, restaurants, bars and hotels were badly hit and our hearts go out to them. I’m relieved to see business picking up again.
One of the consequences of the pandemic is that consumers did a lot more online shopping. Subsequently, our online business grew dramatically, as did our own online store. Brexit has been an immense hassle really in that we can no longer send a bottle of whisky from here to France, for example, from our online shop. It is extremely annoying. The supply chain has caused the whole world issues, but certainly for our dry goods, for bottles and outer cases. Just the corrugated cases at times can take 10-12 weeks when normally we would get them in two or three days. Our bottling complex also suffered as we socially distance people, and we are still operating under social distancing measures for the health and wellbeing of our people, and to avoid any outbreaks at our premises.
Long-term, the consensus is the hybrid way of working is going to take over. Most of our employees appreciate the flexibility of being able to work from home for two or three days a week and go into the office for team meetings. I like to have happy employees. We are building a new head office, and the interior layout and design will probably be different from what we were anticipating pre-COVID-19 on the basis there will be more team working activities. Fortunately, good things have potentially come out of the change in the way that we work.
Which markets do you see as having the most potential across the whisky and gin segments?
With gin, the gin boom seems to be happening in Australia, a couple of years behind the UK. Edinburgh Gin has a portfolio of flavors that will suit them. We are thinking that watermelon and lime gin is what the Australians need and want!
In terms of the future potential, it must be the two most populous markets in the world, China and India. They will both evolve in different ways. Chinese people generally drink a white spirit made from sorghum, which is a kind of cracked wheat. However, they are also quite brand conscious and like to celebrate in style, so single malt or old blends are ideal products. The growth of Scotch whisky in China is going to be extraordinary, particularly for the more prestigious aged single malt, and within that, for sherry matured malt. Our brand, Tamdhu, is the only single malt that is only ever matured in sherry casks. Sherry casks are very expensive. The whisky we distill at Tamdhu is, in my opinion, exactly what the Chinese consumer is looking for, so I see growth there. Indeed our stocks are already having to be allocated as we don’t have enough stocks to keep up with demand.
Equally, in India where they traditionally are brown spirits drinkers. I see the demand for blended Scotch whisky, and also for premium malts that they like to buy through Duty Free, will continue to grow. The way I think about it is that Scotch whisky is a symbol of success. I always find it disappointing when our politicians in the UK drink champagne to celebrate a trade deal. They should be drinking Scotch whisky.
If you can afford a scooter and a television, you can probably afford a bottle of Scotch whisky. The number of people in the world coming into that group is increasing. All around the world, there is growing affluence in developing economies and that makes me feel quite enthusiastic about the potential for our blended Scotch whisky as well as for our single malt.
How important is the US market for Ian Macleod, and how has performance been in the wake of the 25 percent tariff increase?
The US has, for a while, been the largest Scotch whisky market in the world by value. By volume, it has traditionally been France. Indeed, it was very unfortunate to get caught up in a trade dispute between airlines. I am not sure why Scotch whisky got dragged into that. It did indeed cause us some issues. Scotch whisky shipments into America dropped by somewhere around 30 percent. Happily, that tariff has been lifted. American consumers continue to be our friends! As a company, our business in America has been growing nicely over the last few years, albeit with the tariff bump in the road.
How do you communicate with the American consumer? What branding or product features are they most sensitive to?
In America, we like to do tastings, working with whisky clubs and retailers, and we have become particularly adept at doing online tastings and tutoring. We have brand ambassadors in America who equally do the same thing. A lot of time and effort has gone into maturing our whisky and storing it for so many years, and we like to encourage consumers to try our whisky and gins because they generally like them, fortunately. Again, we do social media marketing and promotions. We work through two or three importers with our different brands.
What responsibilities does your company have vis-à-vis its operating climate? How are you working to integrate the environmental dimension into the business and operations?
As an industry, we create a lot of carbon dioxide because we are fermenting. When you ferment something, yeast turns sugars and starches into alcohol and carbon dioxide. That is the formula. To mitigate that, the industry is looking at all the areas where we can improve. Our employees are all pretty sustainability minded, so we had already started a number of initiatives to mitigate our carbon emissions. We are not perfect, but step by step, we are doing things to become better. Every year for the last nine years, we have improved our energy efficiency by one percent. It does not sound a lot, but one percent a year compound is making inroads.
There are many initiatives out there and we are exploring many of them. All the electricity we use is green. We are looking at solar, and we have put in reedbed technology. Reedbed technology is fantastic for filtering out the effluent water. We also work with the Wildfowl & Wetlands Trust (WWT). In fact, we won an award because we have a lot of bees, butterflies, and birds around our facilities. Glengoyne was also just named Sustainable Distillery of the Year at The Icons of Whisky and World Whiskies Awards.
The Scotch Whisky Association (SWA) has been very good at bringing us together and discussing what targets we could realistically aim for. As an industry, we have set ourselves some lofty targets, but the intention is really there and we are working hard to achieve them. We are looking at lightweight bottles. Narrow neck press and blow is a process which produces a lightweight container by pressing the glass in the blank and neck ring to form a parison. It makes a bottle still quite strong but with much less glass. We are still also offering heavier bottles and decanters because often consumers are looking for heavier weight bottles in the older premium blends. We can’t ignore consumer demand but we’re reducing the amount of glass we use overall. We’re also now using glass which is more than 50 percent recycled. With Glengoyne, for example, we use all recyclable packaging.
It used to be that the metal base on a tube a malt whisky would come in was permanently stuck onto the cardboard, so you could not recycle that. Fortunately, the people working in our sustainability team are really on board with this, and it was their idea to start with before it became an issue. We are no longer using them, and we are looking after our carbon footprint much more. We are going to import far less packaging material from far away and do a lot more locally. It means that our cost of materials has gone up but, so be it.
Do you have any final comments for the readers of Newsweek magazine?
If you are interested in whisky, try them. There is a remarkable array of smells and flavors, and just outright enjoyment to be had from sipping single malt whisky. A good one to start with would be Tamdhu because it is sherry matured and very easy to drink. Then just follow your nose – and tastebuds!