Simon Erlanger probably has the finest Scotch running through his veins. This affable and softly-spoken insider is steeped in the arcane world of malt whisky making and global brand-building. Scotland’s whisky industry has a close-knit group of alchemists and marketing veterans who have defined the success of our most iconic product. Simon is one of them.
Now the accumulated knowledge of Erlanger – who helped steer the £300m sale of Glenmorangie to Louis Vuitton Moet Hennessy (LVMH) – has been distilled to perfection for the creation of Scotland’s newest Outer Hebridean distillery.
Of course, there’s a plethora of worthy distillery projects dotted across Scotland these days, with the Adelphi at Glenbeg, at Ardnamurchan; the Gartbreck single malt distillery on Islay; the Shetland Distillery, on Unst; several in Fife, including Kingsbarns, Daftmill, Lindores Abbey and Glenrothes; and there is the reborn Glasgow Distillery and the Falkirk Distillery bidding to revive the famous Rosebank brand.
All great projects. Yet the Isle of Harris Distillery, which involved Erlanger, stands out for its originality and its aspiration to be a long-term contributor to a fragile rural economy, best known for its hand-made Harris Tweed fabric.
“One day I was on business for Penderyn [the Welsh whisky company] in Montpellier in France, sitting in the square. It was a lovely summer afternoon. I got a phone call from Ian Macleod of Odgers Berndtson, the headhunters saying, ‘Simon, I have a really eccentric remit here!’
He was looking for a managing director to put together a business plan, raise the finance and then run a distillery on the island of Harris. “It was one of those moments where you go: ‘Yes, obviously, why has nobody in the industry thought of doing this before! It was one of those ‘wow’ moments and just seemed like a fantastic thing to do.”
It took a guy with no knowledge of the industry – or how to make whisky – to come up with the left-field idea. The Isle of Harris Distillery is the brainchild of Anderson Bakewell, the founder and chairman, a musicologist, who has been connected to Harris for over 40 years.
“Anderson’s view was a distillery lasts. It could be here for centuries if it is done properly. This was sustainable. He just had in mind a very high quality distillery,”says Simon, sitting in his Charlotte Square office surrounded by maps, architects plans and whisky bottle samples.
It’s been a fascinating career path. A French and German language graduate, originally from the Cotswolds, he went into retailing for four years with Marks & Spencer, before joining Distillers Company as the European marketing manager for Johnnie Walker. [“It was a fantastic time, travelling around Europe selling whisky.”]
The company became United Distillers, and later Diageo, and brought in Bain & Company management consultants who developed the ‘portfolio’ strategy for the brands. “Instead of all the brands in silos they were brought together as a portfolio.”
Simon Erlanger looked after drinks for Austria and Switzerland, setting up a subsidiary in the latter. He moved to Lausanne as head of sales and marketing. “With my new wife, we sat looking at Mount Blanc. Skiing all winter and walking all summer. It was pretty heavenly.”
This idyll didn’t last for ever as they were called back to Edinburgh when Simon became the European sales director of Glenmorangie plc in 1993. The company, set up in 1843 by William Mathieson, and run by Alexander Muir, James Durham and Roderick Macdonald, was eventually 51% owned by the Macdonald family, although a minority of its shares were traded on the London stock-market.
“It was an interesting time. Within nine months of arriving, the managing director, Neil McKerrow, who had been there for many years, building the Glenmorangie brand, left the company and the first non-family chairman came in replacing David Macdonald.
It was the best of both worlds because we had the security of family ownership and yet we had the scrutiny of institutional investors and shareholders. We were take-over proof as long as the family wanted to keep the company.”
Peter Derbyshire, the managing director of Drambuie, became the new boss staying for three years until June 1998, when he was replaced by Paul Neep, who had been Glenmorangie’s marketing director. Erlanger, as global sales director, took over Neep’s marketing role on the board, and they worked together building value for the business.
“I always say the groundwork was done by Neil McKerrow. He obsessively built the Glenmorangie brand to be Scotland’s favourite malt whisky. He introduced the marketing concepts of the ‘Sixteen Men of Tain’ and the spirit of tranquillity. He was very brand focused. It was all about stability and continuity. That was the bedrock.”
Yet there was stagnation in the business and innovation was needed. The solution was the creation of wood finishes.
“When I joined it was 10-year-old and 18-year-old and that was it. The 18 had very limited availability. So we only had one bottle of the brand in a crowded sector. The introduction of the Wood Finish range with port, sherry and Madeira, suddenly increased the range and exposure. Glenmorangie invented this process and again Neil McKerrow instigated the research project into wood maturation, further developed after his departure by Dr Bill Lumsden, head of distilling.
We wanted to understand even better what impact the wood casks had on the whisky flavour. There was a lot of science in looking at the casks, for example whether they came from north facing or south facing trees.”
Money went into research, taking the whisky out of an Ozark mountain bourbon oak cask (90% of Scotch whisky is matured in bourbon casks) and putting it for up to eighteen months in a port, sherry and Madeira barrel. They experimented with oaks that were charred or toasted, and air-dried. The results were startling: the flavours were changing and the whisky found a new level of taste.
“We were the pioneers of this and the industry followed our lead.”
Alongside this was the purchase in 1997 and development of peaty-flavoured Ardbeg on Islay, then owned by Allied Domeq, which was a complement to the lighter Tain-produced Glenmorangie and Glen Moray from Speyside. “Ardbeg had been neglected somewhat, and it was a success story from the start.
We created new branding and a whole personality for it and every year it beat our forecasts. It became a cult brand with people even tattooing themselves with the Celtic ‘A’.“
Then the Macdonald family, including David Macdonald’s four daughters, decided it was time to sell its 51%. In 2004, the firm with its brands was sold to Louis Vuitton Moet Hennessy (LVMH), the French luxury brand business, for £300m, with the 15 Edinburgh family members sharing over £100m.
“They didn’t have a whisky portfolio, so there were no production synergies and they kept the whole workforce. The fit was ideal and has taken the whisky brands to the higher level luxury premium market and expanded into Asia/Pacific. They went to a different level. Premiumisation was the key, selling the stock at a higher price point.”
All of this wealth of experience has been channelled into the work with Isle of Harris. It is worth noting that further north, at Carnish on the Isle of Lewis, Mark Tayburn has been distilling the Abhainn Dearg Single malt since September 2008, but this is a different concept to the Harris project. From the start, the vision has been about the ‘Social Distillery’, creating a local enterprise on Harris that had the community at its heart.
Simon joined Isle of Harris Distillers as a consultant in May 2011 along with Ron MacEachran, former chief financial officer with Whyte & Mackay, who have co-led the £10.5m investment project.
“Ron has a superb financial brain. He and I put the business plan together and raised the money. We set a target of raising £10.5m. The duo had to work out the on-cost of building a distillery in such as remote location, where everything has to be shipped in, and all products will be shipped out.
“When we looked at the cost of labour and building we realised it was going to be a difficult sell. The return on investment for an investor is some way down the track, and it would be relatively low rates of return.”
The conclusion was that they needed public funding to bridge the gap and get the project moving. Of the £10.2m, £2.5m would be required from the public purse.
“We were very fortunate. We got the biggest ever food and drink grant awarded in Scotland from the FPMC for £1.9m. Highlands and Islands Enterprise (HIE) then stepped up to the plate and exceeded our expectation with another £900,000. They have since helped to fund some of the development costs. This helped us attract a very special group of 17 private investors, all of whom are in for the long term and are buying into the vision”.
“However, we are not just the creators of 25 jobs: we want to be the catalyst for economic growth on Harris. Hopefully, there will be spin-off opportunities and an increase in tourism as well. The Scottish Government and public sector agencies, such as HIE and Skills Development Scotland, have bought into this vision with SDS funding half of my team’s training.”
The distillery is now being built on reclaimed land in Tarbert, on the shores of East Loch Tarbert, where the CalMac ferry plies across the Minch from Uig in Skye. Two copper stills have been shipped over the snowy Alps from Frilli Impianti, a firm in Siena; the mash tuns supplied by Musk engineering, from Burton upon Trent, and then five 8,500 litre pine wash backs from Joseph Browns of Dufftown.
Once all of this is completed, test distilling will begin. There is no natural barley grown on wind-swept Harris, which is probably why a legal distillery was never sited here before, while the company has exclusive lease agreement to the water from the Abhainn Cnoc a ’Charrain.
“Chemically speaking, we believe, it is the softest water in Scotland. It flows over Lewisian Gneiss, a very hard and smooth rock so very little is picked up along the way. The spring water picks up a tiny part of peat and perhaps some salty sea water. There is a bit of mineral but it is very soft water,” says Simon.
“We can do almost everything on site. We malt the barley, which we receive from the mainland, then use our own water and the fresh Outer Hebridean air.”
The distillery has a 90-year lease on the site from HIE. Alongside is a warehouse for storing 200 casks, and a small bottling plant. A larger warehouse for over 4,000 casks is being built three miles away on the Island’s west coast.
The first ‘Hearach’ single malt is expected to be ready in four years, producing the equivalent of 300,000 bottles a year. Meanwhile, an Isle of Harris gin, developed in association with Heriot-Watt University in Edinburgh, will be made sourcing local botanicals.
“We’ve had an entirely positive reaction from Harris residents. Anderson approached the project with such sensitivity. Local people see it for what it is: a socially-orientated enterprise.”
The head distiller is Kenny Maclean, who is also a local Harris crofter. “I’m proud of this. Staying true to the ethos of the business, we have recruited a team entirely of local people. Nobody has come in from outside the island.”
The distillery team will be working alongside some seasoned whisky consultants, including Jim Swan, one of the geniuses behind the wood-finish whiskies at Glenmorangie, in Tain, as well as recent success story Kilchoman distillery on Islay.
“Jim is the guru of whisky-making and he’s helping with ‘spirit optimisation’ and he will be supporting Kenny. Jim will be helping with cask selection and process optimisation. What we have in this team is the most enthusiastic and passionate guys I have ever come across. There is no way this is going to fail.”
“We’ve allocated 200 barrels from the first year’s production for individuals, through our Cask Ownership Scheme. You are not allowed to buy for investment, just for pleasure. A cask is £2,500 which will give you 300 bottles of Isle of Harris malt. The figure does not include VAT, spirit duty and bottling which will treble the cost. But it’s still less than £30 a bottle.”
The sale of these early casks has been helpful in pulling in cashflow for the new distillery, and there are still a quarter up for grabs.
“Whisky is a long-term business: it’s not about instant gratification. This has brought in early revenue which is really important. Everyone has a personal story and I make a point of speaking to everyone in person who has bought a cask. It’s fascinating that people want a piece of island history.”
The Isle of Harris gin bottle has been designed by one of the leading drink designers, Stranger & Stranger. It is a herring-bone Tweed effect and is slightly imperfect – deliberately so – and feels like an ocean-washed pebble.
The whole project has delivered local work around the Highlands, for instance the local employment work was handled in Inverness.
“I needed an employee handbook, terms and conditions, and help with any future issues and challenges. I spoke to Malcolm Mackay [the chairman of United Employment Lawyers], who had done work for me in a previous role, and told him about our whisky journey on the Isle of Harris. He loved the story and wanted to work with us.”
Malcolm Mackay was able to recommend employment specialist Ewan Stafford of Macleod & MacCallum in Inverness, a member of the UEL network. Simon explained: “We met Ewan in Aviemore and briefed him on the ethos of the project. The application of best practice is central to our strategy. We explained the values of the ‘Social Distillery’ and its importance to the community.”
Ewan understood the task and was sensitive to the distillery’s human resource requirements. “He developed a contract and an employee handbook, all based on our values for the business. We’re very pleased with the results.
“It’s been about keeping as much of the work in the Highlands and Islands region.” For Mac&Mac, one of the Highlands’ largest law firms, this was also about helping to play its part in securing and sustaining employment on the islands.
Meantime, the operations have moved from the Charlotte Square offices where the concept and idea was matured to the full-time working on Harris. This whisky-making tale on the Outer Hebrides will be one to savour – along with a glass of Hearach.