Boutique gin and whisky boom spooks big spirit brands

Period of ‘explosive creativity’ in gin and whisky fuelled 50 new distilleries last year in UK as artisan newcomers grab market share from industry giants

More than 50 new distilleries opened in the UK last year, showing the “explosive creativity” of craft spirits, according to a study.

The number of “boutique” distillers is pushing big brands off the shelf, as artisan drinks brands continue to take market share from the global giants, said accountancy group UHY Hacker Young.

There was a 25% increase in new distilleries in England over the last year, from 28 to a record 35, with UK sales of gin breaking though the £1bn mark for the first time in 2016. In Scotland, 12 distilleries opened in 2015, and a further 18 in 2016.

James Simmonds, of UHY Hacker Young, said: “Both the craft spirits and the craft brewery sectors are going through a period of explosive creativity.

“You can see that in everything from the logos, branding and advertising of these products. The quality of the product is streets ahead of their big brand competitors.

“It is no wonder that the global drinks giants are worried, and the best way they have found to deal with that new competition is get out chequebooks and buy them.”

The boom in the sector is also being fuelled by a flurry of merger and acquisition activity, as the global giants attempt to get in on the artisan market.

London gin maker Sipsmith was bought up last December by the Japanese giant Beam Suntory, which owns the Jim Beam, Teacher’s and Courvoisier brands.

Suntory, the world’s third-largest spirits company, is thought to have paid £50m for the Sipsmith brand, which was founded less than 10 years ago. The company’s founders, Sam Galsworthy, Fairfax Hall and Jared Brown, have stayed on to run the business.

Other deals last year included the Scottish-based Spencerfield Spirit Company, owner of the Edinburgh Gin brand, being snapped up by Ian Macleod Distillers, Scotland’s 10th largest whisky producer.

Along with Edinburgh Gin, Spencerfield makes a range of whisky under the Pig’s Nose, Sheep Dip and The Feathery brand names.

UHY Hacker Young says the £1bn valuation put on craft beer brand Brewdog is likely to spur more activity, both in the craft distillery and craft beer segments. Earlier this month, San Francisco-based TSG Consumer Partners agreed to buy a 22% stake in the “punk” beer maker in a deal worth £213m.

New gin and whisky distilleries that opened last year include The Distillery in Notting Hill, London’s first gin hotel, where there are 100 gins on the menu and the mini-bars are stocked with freshly made cocktails.

Outside London, new distilleries included the City of Manchester Distillery, which makes Three Rivers Gin, and in Scotland the Toulvaddie Distillery in the Highlands, maker of a single-malt whisky.

However, not all artisan distilleries succeed, cautions UHY Hacker Young. “For every winner there will be many more losers,” says Simmonds.

“Some of the business plans we have seen for start-ups in this sector suggest a nasty hangover for some.”

Staff and agencies

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