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Another Day, Another Distillery...

08/02/2016 16:44 | Updated 08 February 2016
  • Matt Chambers Whisky fanatic, having sought out whisky from countries all around the world, and writes about them at Whisky For Everyone.

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Ardnahoe distillery - image copyright of Hunter Laing & Co.

Recently, the news of a new single malt whisky distillery in Scotland was greeted with universal applause from whisky fans. The Ardnahoe distillery, which will be constructed on the north east coast of the famous whisky island of Islay, is hoped to be in production by the end of 2017.

This is the latest in an increasingly long line of such announcements, mostly in the craft/boutique sector. But is there a real danger of the whisky industry overloading itself with new distilleries and will all of these projects survive?

Hunter Laing, the company behind the proposed Ardnahoe development and one of Scotland's leading independent bottlers, has a good reputation within the whisky industry and roots dating back to the 1940s. The distillery will feature production and warehousing facilities plus a visitor centre and café, the now obligatory addition to any new development.

However, it makes me wonder - when will the industry reach a saturation point? New whisky markets continue to grow, but more established markets are witnessing flat or reduced sales. Can there ever be too much whisky? Will whisky go out of fashion and be replaced by something else? There is a real danger that this may be the case by time a whisky from a new distillery reaches the legal age of three years old.

Historical evidence indicates that this scenario is a distinct possibility. Previously periods of rapid growth have all been followed an industry wide slump and subsequent distillery closures - think of the 1890s and The Pattison Crash, the 1920s and 1930s when Prohibition took hold (Ireland was particularly hit badly here), the early 1980s and the early 1990s when demand for whisky plummeted.

The warning signs are there for the smaller producers as some larger Scotch companies have already recently shelved proposed distillery expansion plans indefinitely. Yet, in the last five years 15+ new Scottish distillery projects have been approved or proposed.

In Ireland the situation seems even more exaggerated than Scotland - there have been a staggering 30+ new or proposed distillery developments in the last four years. If all are approved and built then it will take the Irish industry almost back to pre-Prohibition levels of production.

Irish whiskey is enjoying a huge renaissance right now but it should be remembered that Ireland has successfully sustained just three distilleries - Bushmills, Cooley and Midleton - for almost three decades. There clearly needs to be more options but can the market sustain that huge number of new enterprises and influx of new products, especially as many are small craft operations? Is there really the demand?

So, can all of these new enterprises survive? No one can really predict this and inevitably some will and some will not. The individual companies responsible are not opening distilleries to fail but then neither were their predecessors throughout history. After all, such projects are expensive and time consuming with plenty of initial outlay and little obvious return.

The key to success these days seems to be in creating immediate streams of finance, which were not available in the past. This can be done through a visitor centre and facilities, tours and by selling new make spirit (in both bottle and cask) or whiskies from elsewhere. This allows a new distillery to make money before their product has reached legal age.

How will Ardnahoe do if the plans are approved? I think it has all of the ingredients for success - a good and iconic location, an owner with a history and legacy in the whisky industry (rather than some hipster who decided to set up a distillery because it was 'cool' or to 'make a statement to the big whisky companies') and they will be producing the popular smoky style of whisky. I wish them every success.

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