Third-party producers ride ‘craft’ wave
For all the talk about terroir and producers being fiercely independent, a large number of brands rely on the expertise of third-party distillers to provide them with their liquid.
*This feature was originally published in the March 2019 issue of The Spirits Business
In January two lads from Manchester appeared on BBC TV show Dragons’ Den to pitch for investment in their Didsbury Gin. It was not the spirit’s first appearance on the show, and Deborah Meaden, the Den’s ‘terrifying Queen Komodo’ as she’s known, feared the pair had missed the gin boom and were on “the tail end of the comet”. Meanwhile, dragon Tej Lavani had spotted a possible fatal flaw. “Is it sourced in Didsbury?” he asked. “At the moment we’re outsourcing,” came the reply. Cue: pregnant pause, sombre music and a shot of Meaden’s furrowed brow. She soon declared herself ‘out’, as did Peter Jones, who explained: “The moment you said you didn’t have your own distillery, the authenticity dissipated for me.” Didsbury Gin did eventually secure investment, but the issues around outsourcing go to the heart of a sizeable, if largely hidden, side of the spirits industry.
Among the UK’s top suppliers of third-party spirits is Alcohols Ltd, whose group commercial manager, Natalie Wallis, says: “People want to work with distillers that have the knowledge, capability and access to the best products on the market. We’ve been around for 200 years, and we’re integral to many of our partners. Some of them shout about us, and some don’t. In terms of consumers, I think it was true that two or three years ago, they absolutely wanted to know where their gin was made. The consumer has moved on. A lot of our customers are reporting that back to us, and there isn’t perhaps the same importance on where it’s made.” What really matters today, in her view, is simply ‘is it the best quality?’
Alcohols Ltd is part of the same family business that owns the Langley Distillery in the West Midlands, and supplies gin, vodka, rum and whisky, as well as non-alcoholic distilled ‘spirits’. Its gin customers can choose from 300 recipes, or collaborate on something unique. The off-the-peg option is cheaper, but has won brand owners a stash of awards, says Wallis. She believes that talk of ‘peak gin’ alluded to by Meaden is premature. Pink gin – which she calls “a phenomenal trend that doesn’t show any sign of slowing down” – is keeping the market buoyant. But she sounds less convinced about flavoured gin, and suspects: “It might go the same way as flavoured vodka.”
Charles Maxwell, master distiller and founder of Thames Distillers, is another leading third-party supplier surfing the gin boom. “Ten years ago we were chasing business. Now we’re being chased,” he says. “We have an enquiry level that averages more than one a day.” His advice to potential clients is not to approach him saying: “Charles, I want the best gin you ever made. That suggests the 170-or-so gins that Thames has created were only a learning basis,” he says. “You’ve got to have the marketing story, the reason for your gin to be there, which you believe in and understand and that you can propagate. Then we need to make the gin to match that story.”
Maxwell also talks about the positive impact of pink gin, but adds a note of caution for wannabe gin barons: “There’s still room for growth, but it can’t go on at the current rate, that’s for sure. Anyone who is building a business on a plan of the market growing at 20%-25% per annum is going to be severely disappointed.” He explains that while some customers progress to running their own distilleries, “others, like Fords Gin, have absolutely no intention of doing the production themselves. They don’t see that as their area of expertise. Their expertise is getting the product to market.”
Key part of the supply chain: barrels resting at MGP
NEW BREED OF FARM DISTILLERS
Third-party distillers have a long history of supplying the neutral grain spirit for gin in the UK because traditionally companies were not allowed to distil and rectify on the same site. The new breed of farm distillers such as Arbikie in Scotland make a virtue of being ‘grain to glass’, but most craft gins still import their base alcohol because, in Maxwell’s words: “You can’t make it to the same quality at the same price that you can buy it in.”
Aside from gin, Thames Distillers and Alcohols Ltd deal in rum, though more in terms of blending and creating spiced rums than actual distillation. “People seem to think that rum is going to be the next big thing, though whether it will have the boom that gin’s enjoyed we will have to see,” says Wallis. Both are also involved in the brave new world of non-alcoholic ‘spirits’ pioneered by Seedlip in 2015. Maxwell calls the sector “a young stallion ready to come out of the gates”, though is quick to point out the challenges involved in production. Thames spent almost two years developing the gin-inspired Driver’s Tipple for ex-British racing driver Hamish Gordon that was launched last September.
“It’s an area of the market that is going to grow significantly,” says Maxwell, referring to all those non-alcohol-drinking millennials thirsty for grown-up alternatives. “It’s an interesting trend that I’m keeping my eye on,” says Wallis. “There are brands out there that are doing phenomenally well in terms of volume and placement behind the back bar. In supermarkets, there needs to be more brands coming through to make the category grow.” While product development is tricky and time consuming, margins would appear pretty juicy given Seedlip’s current UK price of £26. Whether drinks that are “in effect, water”, to quote Wallis, can continue to charge gin-like prices, despite paying no duty, remains to be seen.
One of the world’s top third-party spirits producers is MGP Ingredients in Kansas, US, whose president and CEO, Gus Griffin, sees a market for Seedlip-type brands in the US, but not one he’s particularly interested in. “Where we add value is in creating outstanding distilled spirits,” he says. Foremost among these is American whiskey, in all shades from rye to corn and Bourbon, which is offered in a wide variety of mashbills. The clients, who range from local craft spirits producers to multinationals, can also create their own unique recipes. The minimum order for this bespoke service has been reduced to help encourage innovation.
When Griffin joined the company in 2014, there were issues among consumers and craft distillers over ‘sourced whiskey’, along with a misconception that MGP supplied everyone with the same mash bill. “That has completely changed,” he says. “We now have big and small customers who very proudly say that they’ve sourced their whiskey from Indiana.” This is a reference to the old Seagram’s distillery in Lawrenceburg, now known as MGP of Indiana, which the firm bought in 2011.
“People now view us as a partner and a key part of the supply chain,” he says. “One other benefit we offer is that as consolidation happens and brands get bought out, we have the scale to supply the new owners with the volumes they need.”
Among trends, he points to a growing understanding of how to blend multiple whiskeys from different mash bills and even different sources. Apparently some customers like to distil their own mash and blend it with spirit from MGP. Griffin’s firm handles production from sourcing the grain through to the initial stages of maturation, after which there has been a lot of recent innovation in barrel finishing by the customers themselves. MGP also produces its own brands such as George Remus Straight Bourbon and Till American Wheat Vodka, but “we’re very careful not to step on our customers”, says Griffin.
FrieslandCampina, the world’s largest dairy cooperative, set up its Creamy Creation subsidiary in 1979
CREAM OF THE CROP
Moving to the world of cream liqueurs, the key third-party supplier is Creamy Creation, a subsidiary of giant dairy cooperative FrieslandCampina, with production facilities in the US and the Netherlands. Clients discuss everything from mouthfeel and abv to target audience at an initial meeting, before the firm’s product developers create a prototype in the lab. Samples ping back and forth with constant tweaks, and “we continue this process until the liquid is perfect, and the customer gives us their approval”, says North America sales director Matthew Benny.
“We are driven by innovation, as we want to create as diverse a portfolio as possible,” Benny continues. “Our product developers are continuously working on new concepts, with new ingredients, and pushing the boundaries of the cream liqueur segment. They work closely with our marketing team to turn trends into new concepts that fit the customer’s and the market’s needs.”
The group’s communications manager, Georgia Dina Konstantopoulos, sees a big retro trend among millennials. “Anything that’s vintage-looking is now back in the game,” she says, pointing to the Espresso Martini and Moscow Mule revival. Looking ahead, she predicts further innovation such as vegan-based natural cream liqueurs, incorporating grains. Maybe one day such a brand will penetrate the Dragons’ Den.
