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As well as concluding a long-term trade agreement in South Korea, Belfast Distillery Company is in the process of building a distillery in a Grade A building and has hired its first head distiller, Graeme Millar.
Drinks only we caught up with CEO John Kelly about the news and his strategy. Kelly joined in 2021 after 30 years in the industry, including heading Diageo’s Middle East and North Africa business. Hailing from north Belfast, his career has already finished him as the distillery is over the wall from his primary school.
JD: So how did the South Korea opportunity come about, was the market always part of your plan?
John Kelly: The opportunity came about through our links with Invest NI. I’ll just take a step back… Belfast Distillery Company is funded by three sources – a group of US investors who have raised a US$20 million investment fund, local banks and the Northern Ireland Government, specifically Invest NI.
South Korea – and Asia in general – was already in our plans. If you look at emerging markets, China, Hong Kong and South Korea are good opportunities for Irish whiskey brands.
Invest NI was instrumental in introducing us to this distributor called Goldenblue. They have people on the ground in Seoul, and in Asia that kind of relationship is very important. We were able to work through Invest NI to build a commercial partnership with Goldenblue and the result was what we hope will be the first of a number of orders.
The first deal is for 10,000 bottles, so in simple terms, that’s one 20-foot container. This we decided was necessary to get the market and Goldenblue was launched. We hope to have a similar order in 2023 as we continue to build the business. My sales manager and I will be going there in June to work for a week. Part of our commitment to them was to hit the streets from here in Belfast to help build the brand.
JD: What is it about South Korea that makes it an attractive market?
JK: There are a lot of swinging drinkers out there. If you look at the data, Scotch whiskey has by far the largest market share (about 69%), followed by American and Japanese. Irish will be fourth but is growing fastest as a subcategory. Scotch is actually losing some share.
What’s happening is, and you see this in many different markets, the younger generation is rejecting current brands or categories and looking to make decisions, form an opinion and do something different. And this is where brands like ours and categories like Irish whiskey become relevant.
JD: The deal was backed by funding from the Northern Ireland New Deal (the UK government’s post-Brexit business support package). How has Brexit affected the Irish whiskey category?
JK: Brexit has not affected our business in any way. We can export from Northern Ireland and the Republic of Ireland because we have a subsidiary there.
If there are any changes to the current protocol, it is worth looking at from an industry perspective. And the reason I say that is because right now there is freedom of movement on the island of Ireland for everything related to our industry, like liquids and packaging. We really want there to be no significant changes to what’s going on today because we’re all in Ireland’s industry.
Of the things that keep me up at night, the war in Ukraine has really caused significant problems from an export perspective. Ukraine, I think, was number five on the list in terms of Irish whiskey consumption. Russia was number two on the list. We don’t sell to Russia and we can’t sell to Ukraine, so this has affected our business.
You also mentioned the cost of living effect and the cost of shipping a container to the US literally tripled from January to November last year. A container that cost $3,500 became $11,000 within the same calendar year. The cost of shipping has gone through the roof. There’s been really significant increases in the price of glass and that’s going on, you know, plastic, cork, cardboard—that’s what we’re talking about as a cost of living crisis. Macroeconomics, which affects us all, is definitely a bigger factor than Brexit.
JD: And how did you strategically manage cost pressures? Have you had to raise prices?
JK: We’ve had to raise our prices, but not to the same extent that we’ve faced price increases ourselves, because eventually you’re going to drive yourself out of the market. We’re still working on it to be completely honest with you.
JD: Have you noticed a drop in consumer demand as the cost of living increases?
JK: No, is the short answer to that. When there is a crisis, people continue to drink alcohol. Their consumption patterns may be changing – during Covid people no longer consumed alcohol in shops. They didn’t buy bottles of whisk(e)y when they flew. But overall, alcohol consumption hasn’t really changed. People just consumed at home. In some cases, people excelled and experimented with making cocktails.
JD: What is Belfast Distillery Company’s biggest market?
JK: The US is our biggest market. That’s about 45% of our business. This is almost in line with the overall Irish whiskey category. We have a US subsidiary and are in all 50 states.
Canada is increasingly important, we are in four provinces in Canada and we are looking to expand further. So North America would generally be a major market. In addition, we are in over 1200 stores in Australia, we are also in China and Malaysia.
Closer to home, Northern Ireland is very important to us. I would say we punch above our weight in Northern Ireland because we moved the distillery to Belfast. There hasn’t been an Irish whiskey distillery in Belfast for almost 100 years, so we’re very keen to build our brand here.
We ended last year with sales in 31 markets worldwide.
JD: Which markets are you looking at next?
JK: Eastern Europe is definitely an area of interest, although we are already in Poland and the Czech Republic. Looking further into Asia, Taiwan will be next on our list in terms of major consuming countries, having secured China and South Korea.
JD: What are the other key areas for you right now?
JK: Building our distillery and our visitor experience is a really big focus for us. It gives us a brand home and that’s a really important thing. When people can come and visit, you take them on a tour, let them taste your whiskey and kind of send them off as brand ambassadors. So it’s a huge transformational step for us this year, it’s a bit of a game changer.
A lot of my time is actually spent thinking about the team and recruiting. There are currently seven people working for us, our business plan when we go live is for 50 people working for us.
So building the brand, building the distillery and building the team to bring it all together is how I would sum up the main strategies for myself.
JD: Can you tell us a little more about the distillery?
JK: Crumlin Road Gaol closed in 1996 and is one of the most iconic buildings in Belfast and Ireland. There is currently a visitor experience in one of the wings and we are building our distillery in another. When we open in the autumn of this year, we will be able to welcome over 130,000 visitors.
It also happens to be over the prison wall from my old school. I came back from the Middle East and this opportunity came up to run this business in north Belfast – you can hardly write the script.
JD: Was it difficult to set up a distillery in a historic building?
JK: Good question. I spent probably the first year of my time here working with the Northern Ireland Government and the various departments that have an interest in the prison because it’s a Grade A building. And the answer is no, it’s not easy to get planning permission and get through all rules and regulations for building a distillery. It’s not a wasteland – if you’re doing it from the bottom up and an open field, it’ll be much easier. But we are progressing with construction and having such a great facility will be phenomenal for Northern Ireland.
JD: Is this your first distillery?
JK: This is our first distillery. So, like many other independent bottlers in the Irish whiskey category, we currently source our McConnell’s liquid from another distillery. Until the 1990s, there were only three distilleries on the island of Ireland. This has changed significantly since the early 2000s, there are now around 40 distilleries currently selling products or under construction.
JD: Out of interest – why is McConnell’s whiskey spelled without the “e”?
JK: When I was approached for this role, the first thing I did was buy a bottle and I thought, “Gosh, these guys don’t even know how to spell whiskey.” But the reason we do it is because the brand is pre-existing the introduction of the ‘e’ to the word whisk(e)y in Ireland. Irish distillers in the 1800s introduced the “e” because they wanted to distinguish themselves from the Scotch whiskey that was becoming more popular.
But since J&J McConnell’s dates back to 1776, we stuck with the original spelling. So it’s not a typo or typo, it’s actually how McConnell’s has always been spelled.
JD: Do you think you will be adding new products when you open the new distillery?
JK: Not currently in the plan, we will focus on J&J McConnell’s. We have a huge anniversary coming up in 2026. The J&J McConnell brand will be 250 years old. We will be introducing variants within the portfolio similar to the sherry finish, but will not be adding any new brands to the Belfast Distillery Company portfolio.
JD: Can you give me an idea of what the production volumes will be when you get the distillery up and running?
JK: We’re in a closed period so I’m not allowed to talk about volumes on site right now, but what I can tell you is that we’re going to be what’s known as a one-ton distillery, which means we have to be able to produce 0.5 million LPA (litres of pure alcohol) of single malt Irish whiskey when fully operational. When you convert that back to nine-liter cans at standard ABVs, you’re looking at about 300,000 nine-liter cans.
JD: From a personal perspective, how did you move to a small brand where you only look after two products after working for two decades at a giant like Diageo?
JK: My time at Diageo was great, there’s a reason they’re number one in the industry. What you learn at Diageo is usually the benchmark for everyone else. Over 22 years I have learned a lot, given a lot of my time and energy, shoe leather and sweat. But, you know, being able to bring that knowledge to a startup like this — it really allows you structure and direction. It’s like you’ve spent 20 years at university and then you’re ready to strike out on your own.
JD: Was there anything that surprised you when you moved?
JK: The decision making process is much easier. Diageo is a huge multinational company with many levels of decision making. Here I answer to the Chairman of the Board of Investors. We call a few times a week, talk about things and come to a decision and then move on. So this type of decision-making speed is quite different and refreshing.
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