The just-drinks interview - Cooley Distillery
While growth in Irish whiskey has been fostered by Pernod Ricard and latterly Diageo, the category's progress has also allowed independent producer Cooley Distillery to expand. In this month's just-drinks interview, Cooley's founder and chairman, John Teeling, talks with Olly Wehring about living in the shadow of the world's two largest spirits companies, and the options facing Cooley as it bids to progress to the next level in the world whisky market.
John Teeling is a troubled man. Cooley Distillery, the Irish whiskey distiller he founded in 1987, may have posted a rise in sales and profits for last year in August, but he knows that there is still a lot of work to be done. Typically gregarious and extrovert, however, the Irishman wears these concerns lightly and faces the challenges with a smile. After all, the future for Cooley, he says, is very bright indeed.
As Ireland's only independent distillery, Teeling chooses just one word to describe how Cooley is performing against the might of Pernod Ricard's Jameson brand and Diageo's Bushmills: "Struggling," he laughs.
"Irish whiskey was the dominant whisk(e)y 100 years ago, accounting for 60% of the world market," he says. "Then, around 1900, everything went wrong. Irish whiskey fell apart because Scotch got economies of scale. The Irish whiskey market then suffered thanks to prohibition and recession. By the time the Second World War had ended, it was absolutely gone. By the time I looked at it in 1970, it was down to 2% of the world's whisk(e)y market."
John Teeling, founder and chairman of Cooley Distillery.
A curious move, then, to found a distillery in a category that was struggling so badly. But Teeling believed there was huge opportunity when he founded Cooley in 1987, in a market dominated by Irish Distillers.
"The logic was where there's a monopoly, there's an opportunity," he says. "Had Irish Distillers stayed the way it was, I'd have done much better, because the opposition wasn't that strong. But Pernod have proven themselves to be serious competitors."
Teeling is keen to emphasise what he calls the "brilliant work" Pernod has done in revitalising the Irish whiskey category through Irish Distillers, the company which produces the Jameson brand among others and which Pernod acquired in 1988. "They really revolutionised it - good product, excellent packaging and good marketing. Then, they bought Allied Domecq, giving them good distribution in the Far East; they bought Seagrams, giving them distribution in South America. Twenty years ago, Irish whiskey didn't have this scale of distribution."
The turn of the millennium was the tipping-point for Irish whiskey, according to Teeling. "Around 2000, when Bourbon began being consumed (in greater volumes) in the US, then we started to see a phenomenal change in Bourbon, Irish (whiskey) and Scotch in the country," he says. "Bourbon and young Scotch are now in short supply. I use the phrase 'A trend is your friend'. The tide is dragging us all along. And the change is getting faster. Brown spirits look like they're going to have at least another ten or 20 years of growth, probably at the expense of drinks like beer and even white spirits further down the road."
This change confuses Teeling, but he's not going to question it too strongly. "Young men paying EUR11 for a cocktail in a cocktail bar instead of (drinking) beer like he should be - where did that come from? It's a different world - they're not what we were, which is good."
Cooley has stuck, however, at sales of around 200,000 cases a year for the last six years, and Teeling acknowledges that this needs addressing for the company to move forward. "For this business to work, we have to sell 500,000 cases a year. I've been distilling 600,000 cases a year since 2001. I have 24m bottles in stock - 7.5m litres. That should hopefully turn out to be an inspired decision, because I didn't realise the growth potential for Irish whiskey."
The million-dollar question, however, is how the company is going to push things forward in this direction. Teeling is clear on the options facing Cooley and appears happy to take his time.
"While the company is slowly developing, we need a sugar daddy," he says, "and that has to be somebody who needs an Irish whiskey, which we will make for them. We need one of about five companies to handle our worldwide distribution - Bacardi, Brown-Forman, Jim Beam, Rémy or Campari. I know them all and they know us. But the category is too small for them at the moment. Do they really want to enter a category and build a brand while up against Pernod and Diageo? There are probably easier things to do in life."
Option number two is to launch an IPO and float the company, something that has been considered - and shelved - in the past. "There's no pressure to go public," Teeling says. "My family have about 42% of the company, and we will probably increase that. I need 51% before I list, and that goes against everything I ever learnt. I know we'll be bid for - hedge funds, venture capitalists, they'll be interested. But first I want to have absolute control so I don't get a cuckoo in the nest should someone come along and buy a 30% stake."
The final option is to sell up and get out altogether. Naturally, considering the time and effort Teeling has put into Cooley, this is both the last and least favoured options. "The price would be astronomical," he notes. "And that's also unlikely because we don't want to sell.
"There is not a short-term need (to make a decision), as neither the banks nor my shareholders are putting pressure on us, even though we're not yet making any kind of a decent return. People who set up businesses don't do it for the money. It's the challenge - it's three-quarters of the way there, and it's going to work."
Teeling's optimism is to be admired, especially when his competition consists of the two biggest spirits companies in the world. And, while the company has been performing under the Irish whiskey radar, what's to say that one of the five companies named will read this and have a lightbulb moment?
Teeling certainly hopes so.
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