Tuesday, November 24, 2009

More re: Tamdhu Distillery Closure from the Malt Advocate Blog

OK, Over at The Malt Advocate blog, John Hansell, Publisher and Editor of that fine publication that published my article on the George Washington Distillery, posted the story about the Edrington Group's decision to mothball the Tamdhu distillery, and it has sparked an interesting and ongoing discussion. Per usual, I have written way to much. You can check it all out in situ by clicking here.

For posterity, here it is (from the Malt Advocate blog):
Edrington mothballs Tamdhu distillery
Posted by John Hansell

Sad, but given the current economy, not surprising. You can read about it here.

1. Luke says:
November 22, 2009 at 6:36 am
Bad news, but we can almost certainly expect worse in the New Year.
I won’t tempt fate by naming names, but expect some well-know casualties in 2010.

2. [Here is what I had to say]:
November 22, 2009 at 12:45 pm
Very sad indeed. Edrington has been doing well too…just imagine how other players in the industry will handle the projected slimming of shareholder’s profits. This is a hell of a Christmas gift for roughly 30 families and the local Moray economy. Very, very sad.

3. Red_Arremer says:
November 22, 2009 at 3:22 pm
Tamdhu 10, the only distillery offering, was clearly conceived of as a “bang for the buck,” which it really was. It represents a time before the price-jacks on Macallan 18, when the idea of a value-product with distinctive character was thought to be a pretty reasonable brand concept. There were a lot of items like that back then and I’m sure to marketing people right now, the rationale behind all of them looks unintelligible. This discontinuation of this one goes right along with the price-jacking with arguable improvement of tomatin 12, auchentoshan 10, laphroaig 15, glen garioch 8, and many others. It’s too bad.

4. Todd says:
November 22, 2009 at 8:53 pm
Sad, but there may silver lining behind this closure if Edrington sells the distillery to someone who will love it and promote it. Why should Edrington work hard on developing a hidden gem like Tamdhu when they can continue to coast on Macallan, the default Xmas present for the boss and valued clients?

While the OB Tamdhu 10 has always struck me as Glen-like-whatever, I’ve tasted some outstanding Tamdhu indie bottlings over the years both young and old. A 1985 Tamdhu 12 yo bottled at 59.5% in 1997 by Adelphi, cask 9048 was a stunner, and Duncan Taylor released a number of vintage 1969 Tamdhu bottlings about 5 years ago that were excellent, showing that this spirit can age well. So I am certain this distillery is capable of excellence.

It’s worth reflecting on resurrection of Bruichladdich or the terrific job the Walkers are doing with Benriach and Glendronach in unfortunate circumstances like this.

5. John Hansell says:
November 22, 2009 at 8:58 pm
Todd, you have a very good point. This may be the best thing for Tamdhu.

6. [Here is what I had to say]:
November 22, 2009 at 11:16 pm
Todd and John, yes, hope springs eternal that someone will swoop down and save or even revitalize Tamdhu distillery.

On the other hand, Scotland is littered with the corpses of closed distilleries – true gems among them. For every Ardbeg or Bruichladdich there is a Port Ellen, for every Bladnoch there is a Rosebank and a St Magadlene.

I would hazard to guess that Edrington probably has enough stock aging to keep the Tamdhu-generated revenue flowing for 5-10 years before they really feel the pinch, much less re-think or second-guess their strategic planning. Indeed, given that the major part of the production from the Tamdhu Distillery is used in the Famous Grouse, J&B and Cutty Sark blends, it is not too difficult to imagine that Edrington might have zero plans to unload the distillery, thinking that it will eventually need to bring it back online for blending needs down the road…in the fullness of time. Might even happen too.

Then again, it might just as easily stay mothballed indefinitely. Time will tell if this will be a Benriach or a Dallas Dhu (or a Banff, or Ben Wyvis, or Braes of Glenlivet, or Caperdonich, or Coleburn, or Convalmore, or Glen Albyn, or Glencraig, or Glen Keith, or Glenlochy, or Glen Mhor, or Glenugie, etc., etc.).

Don’t get me wrong, I’m a knuckle dragging, fiscal-libertarian-leaning free market warrior. Edrington can do what it likes with its assets. I have no stake in the risks, costs or profits. I’m just a consumer in a foreign market with an armchair quarterback’s view of the game, and an idealist’s sense of what ought to be. Yet I can’t help but feel that a little bit of Scotland’s heritage has taken a beating here.

I also can’t help but think of the 20-30 families that are most directly affected by this decision. Moray is not exactly a booming center of employment at the best of times. Edrington might not feel the loss of Tamdhu’s production for the better part of a decade (or more), but the same may not, I suspect, be said of the dozens of soon to be unemployed members of Edrington’s corporate “family.”

As you said, John, at the start of this thread — not surprising, but very sad.

7. sam k says:
November 22, 2009 at 11:32 pm
And what will be the effect of Diageo’s gargantuan Roseisle distillery on some of the smaller plants under their care? If the fallout is already occurring elsewhere, why would we not think that this would be a factor in the new economy?

I’m not really a scotch guy, but I am concerned, so I’m asking those of you who are…Joshua?

8. [Here is what I had to say]:
November 23, 2009 at 1:52 am
Good question, Sam. One that has come up on John’s blog before, like back in July when Diageo announced plans to close a distillery and bottling plant, and to lay off hundreds of employees. I’m sure plenty of others will have a more intelligent and concise answer than whatever I hammer out here.

For what it is worth and at the risk of unleashing yet another long, rambling missive… Yes, I am concerned. I think most Scotch drinkers are, or would be (keep in mind that most folks take no interest in the business side of this industry).

[Let me pour myself another dram of Tamdhu – I suggest anyone choosing to read on do the same.] Now like I said earlier, I’m a capitalist, free market kind of guy. I get it that business is, well, business.

Strategic commercial decisions are made to benefit the company, not destroy their investments. Companies like Diageo, or Edrington or Whyte & Mackay, etc., are doing what they think is for the best.

Certainly I’m in no position to second-guess anyone’s economic decisions with any authority. Still, business decisions, like economic forecasts, are hardly infallible and the future of our beloved tipple potentially hangs in the balance of such decisions.

I’d like to believe that there is some happy middle ground between misty-eyed, tradition-loving whisky conservatives (like myself), and the industry number-cruncher accountants charged with making cold, cost-benefit, profit-loss calculations that eventually inform the decision makers. Though this is easy for me to say, as my only “loss” or “risk” here is as a consumer coping with rising costs and relative scarcity (in one section of one region of but one market).

At a certain level it is obviously presumptuous for a non-player/outsider to second guess a local small businessman, much less a multinational conglomerate – much less the world’s largest multinational drinks company. On the other hand, who’s to stop me.

So, yes, I am concerned. Yet, all of that said, I remain at least blandly optimistic that, on balance, the Scotch whisky industry is still essentially going from strength to strength.

Don’t forget that the history of the Scotch whisky industry is generally a story of growth, acquisition and diversification, with all the usual boom/bust and expansion/contraction cycles. This history is rife with all the myriad positives and negatives of amalgamation, corporatization and entrepreneurship.

Further (and at the risk of getting even more tedious here), Diageo has been helping to shape the industry, both as dynamic juggernaut and as sluggish behemoth, for over 130 years. That is, ever since the 1877 formation of the Distillers Company Ltd (DCL; an amalgamation of six lowland grain whisky distilleries). By the 1920’s DCL was so large that it soon swallowed up the three major blending firms of the day (James Buchanan, John Dewar, and John Walker).

Then, when Guinness bought DCL in 1986(or 87?), it became a player so monstrously huge as to boggle the mind. Yet even this set of conceptual parameters was smashed to all hell when Guinness plc merged, in 1997, with Grand Metropolitan plc. Together they formed Diageo plc, which, as we all know, became and remains the largest multinational beer, wine and spirits company in the world.

Diageo has thus helped shape and create much of the current Scotch whisky market that we enjoy and sometimes decry. So if and when Diageo chooses to cut whisky jobs or close distilleries, it is only business, and Diageo will simply be trying to maintain its competitive edge and long-term commercial health.

This is little solace, obviously, to any employees, and their families, facing unemployment in a down-economy, or to a region perennially in non-to-slow-growth mode at best. Sometimes life is very hard indeed…what can one say, but pass the whisky.

Tonight, I’m drinking Tamdhu and thinking of those folks sadly being chucked out and kicked off to the side.

[Wow..sorry to be such a bore here.]

9. patrick says:
November 23, 2009 at 6:01 am
What is found surprising, is that they don’t INTEND to close only the distillery but also the maltings.
So far, I understood that the maltings at Tamdhu were profitable.
Let’s wait and see.

10. Red_Arremer says:
November 23, 2009 at 10:23 am
1. That would be really nice, if Tamdhu were sold to and rehabilitated by some passionate whisky entrepaneur. I’ve tasted quite a few Tamdhus– all distinctive– Imagine maybe a 15 year old Tamdhu with a port finish!

2. Johsua, The “happy middle ground” that you are looking for, between “misty eyed” and “number crunching,” is to be found in a genuinely critical attitude toward the industry– an attitude that is all too often invoked only so that it can be carefully put to rest.

The question isn’t whether or not an Edrington-Group-outsider is qualified to second guess the excrutiatingly well informed survivalist machinations of an insider. It is whether or not you, or I, or any interested person judge the Group’s market strategy to be good.

How do you like it? How do you like the closing of Tamdhu? How do you like where the prices have gone on Macallan, where they probably will go on Highland Park? Will you take a critical stance or chasten yourself, raise the flag of the “free market warrior” and subordinate your interests to those of some over-paid higher ups in the world of corporate business?

11. Lew Bryson says:
November 23, 2009 at 3:59 pm
As long as people continue to come up with reasons to pay the higher prices for these whiskies, and the whiskies continue to sell, critics of the practices will have little effect. A ‘free market warrior’ can mostly only do two things: buy or not buy, and encourage others to do likewise. The options of those who are not free market warriors…look starkly similar.

12. [Here is what I had to say]:
November 23, 2009 at 5:39 pm
Hi Red,
I think there is an important distinction between raising prices to increase profits and closing distilleries and laying people off. The two issues are more constructively handled sperately, I think. Also, following up on Lews’ comments, I’m not sure I understand what you mean by “critical stance.”

I suspect that Edrington cares not a whit about a few folks balking at paying such high prices for The Macallan or for Highland Park as it seems plain to me that their “luxury” marketing strategy has worked a charm. That is, there are more than enough folks who are indeed willing and able to pay such prices – and who do so frequently. Also, keep in mind that not ALL of the price rises are examples of greed or whatever (the pound remains much stronger than the dollar for one thing; also the costs of production are hardly static).

The most important or critical reception of any marketing plan is economic performance, however, not non-economic static by whisky aficionados. Sure, if enough of the bad-press or bad-rep static by dissatisfied whisky aficionados actually damages or drowns out the company’s branding, the corporate bigwigs would surely take notice…but so long as they are selling more whisky than not, why would they mess with a good thing?

IF or when sales falter, the producers may or may not determine that the price-point is the issue and that it needs to be adjusted downward. As Lew very concisely put it, the choices are really just to buy, or not to buy (and encourage folks to follow you).

Glenmorangie, for example, totally devalued their brand in the UK a few years back by being consistently the cheapest malts in the grocery stores. Sure they sold a lot of whisky initially but they also earned a reputation for being “cheap” and “common” rather than “classy” and “special” and sales grew flat instead of climbing. This is why LVMH rebranded soon after taking over – the packaging changed, the price went up, and the experimental output increased – all to their benefit in terms of profits, sales, and “brand value.” Edrington’s “The Macallan” is exactly the sort of “luxury” branding that many producers seek for their own brands. This is just good business sense. Would you rather your product be “the best” or “decent value” or “cheap”? You are only ever “overpriced” when the market consistently tells you that you are so (through economic performance).

Also, just as an aside, I didn’t mean anything too lofty with the “free market warrior” talk. I’m not especially ideological about this stuff. I was merely trying to strike a colorful balance to my genuine sympathy for those who are made worse off by shifts in the whisky market. Otherwise I was afraid I’d come off as a pitchfork waving socialist revolutionary type.

As Laphroaig US brand ambassador Simon Brooking’s motto has it — I’m merely trying to promote “world peace thro’ whisky, one dram at a time.” Amen to that.

13. [Here is what I had to say]:
November 23, 2009 at 5:40 pm
Yikes. Sorry for another long, rambling post there. I gotta get out more.

14. Red_Arremer says:
November 23, 2009 at 5:56 pm
“…only do two things: buy or not buy, and encourage others to do likewise.”

Lew, your reduction of whisky blogging and appreciation to economic functions can’t possibly be meant seriously. I understand your desire to deflate writing that aims to clarify thought, value, and expression (writing, which may be economically dysfunctional). But I believe that the possibility of such talk is one of the many things that makes whisky blogging valuable.

Josh, all I’m saying is that I notice that you second guess yourself a lot. You’re a knowlegeable and intelligent person. Give yourself more credit. Don’t take back so many of your insights on account of modesty and your fluctuating commitments to one or another economic systems.

15. Red_Arremer says:
November 23, 2009 at 5:58 pm
btw, Josh, I hadn’t seen your new post @12 when I wrote mine @14. You must have published it while I was writing mine

16. sam k says:
November 23, 2009 at 6:11 pm
Don’t worry about rambling, Josh! I for one appreciate your perspective. Well done!

17. Joshua_Bacarolle says:
November 23, 2009 at 6:12 pm
Interesting discussion…it’s sad to see Tamdhu shut down. The only point I’d like to make right now is related to Lew’s observation, that the only options we really have are to “buy or not buy.”

If you are not engaged with a product or service, then you might not care that your actions and feelings about a product or service could be reduced to “to buy” or “not to buy.”

However, this is a whisky blog, full of individuals who are passionate about the whisky. In this context, reducing yourself to a passive consumer, who is left with the “stark” binary choice in the influence they could exert over the industry is a disservice to the potential for a complex and passionate engagement with whisky, even in terms of how ONE individual could affect the “business” side of whisky.

Regardless of the influence you could have on large corporations’ business practices, a thoughtful, critical stance on the state of the whisky industry is important in its own right. I think everyone could agree on that…

But here’s the real beauty: one person CAN exert influence over the industry. Take John Hansell, for instance. He’s taken his active engagement with whisky to the extreme and I’m sure his public thoughts on whisky affect both industry insiders and consumers alike. His choice isn’t JUST to “buy or not to buy” but to inform, provide insight, and advise on a variety of whisky-related topics. It’s a complicated responsibility, but I think he does have the power to influence consumers and businesses. Of course we don’t all aspire to be or have the resources to be a high-profile whisky critic. But the point is, is that the potential does exist and this fact should be celebrated.

Another case in point: take John Glaser’s Compass Box. Whether or not you enjoy Compass Box whiskies, you can’t deny that Mr. Glaser took his passionate engagement with whisky and turned it into a business that offers a unique and successful product. In other words, an individual didn’t have to choose between “to buy” or “not to buy.” He created an interesting selection of vatted malts, and, as a result, gave whisky consumers a unique choice. Again, not everyone wants to or can achieve this level of influence over the whisky industry. But the potential does exist.

I certainly agree with Lew, that if a product is selling to its intended market at the best profit possible, then businesses will most certainly adopt an “if it ain’t broken, don’t fix it” attitude. A few irate comments from whisky-lovers on the malt advocate blog probably won’t influence managers’ pricing strategies. However, the potential for individual whisky lovers to engage with and influence businesses individual criticism does exist.

18. John Hansell says:
November 23, 2009 at 6:45 pm
A very interesting, passionate, discussion going on here. Thanks for taking the time to comment everyone.

It’s tough to see this happen to a distillery, isn’t it? Even if it is something we should expect at this time.

19. sam k says:
November 23, 2009 at 7:40 pm
Sticking up for Lew…he did say that the “‘free market warrior’ can MOSTLY only do two things: buy or not buy, and encourage others to do likewise.”

It’s true…MOSTLY it’s all we can do. There is certainly the occasional shining exception, and I’m sure Lew would agree entirely with the passion side of the argument, but at the end of the day, mostly all we can can do is buy or not.

20. Scotty Freebairn says:
November 23, 2009 at 10:28 pm
I had the pleasure of visiting Thamdhu in 1984 and again in 1990. Charming distillery and an ingredient in The Famous Grouse. I have several bottles, and one or two 15 year olds, and find them quite excellent. Edrington seems to know what they are doing but I regret that such a fine distillery is being “mothballed.” Maybe worldwide demand will improve and the distillery yet may have a bright future. Let’s hope so!

21. [Here is what I had to say]:
November 23, 2009 at 11:23 pm
Red and Sam, re: post #14 and #16: Aw-shucks guys, your making me blush

Joshua (from post #17), I actually agree with much of what you say, though I think you’ve glossed over one profound aspect of your point. I think we do all agree that deeper engagement with whisky, through discourse like this, and through taking a “thoughtful, critical stance on the state of the whisky industry is important in its own right.” Indeed, I couldn’t have said it better myself.

On the economic side though, I think your examples of John Glazer and John Hansell are spot on, but in support of a slightly more nuanced point.

The binary choice of “buy” or “not buy” is not a limitation of the capacity of the individual; it is a reality of consumerism. That is what a consumer does – buy or not buy from among competing products. It is not that consumerism is passive – far from it actually, which is why competition can be so fierce and, in part, why the marketing industry emerged. But in economic terms, the product engagement of blogging, talking passionately to one’s friends and acquaintances, reading up on every little factoid, etc., amounts to little more than “static” or background noise except insofar as such voices can shift consumer preferences. This is a part of why marketing exists – and why whisky brand ambassadors and the like help craft pre-packaged stories and present sometimes simplified, air-brushed histories for us to savor. It is soft attempt to manipulate our natural tendency to positively engage and to form preferences out of such positive engagement.

What makes John Glazer or John Hansell different is that they effectively decided to not limit themselves to playing the role of “consumer,” but to enter the market with product – Glazer with whisky, Hansell with whisky media. That is, they elevated their interest from the limited consumer role to one of active market participant. This is a different, more dynamic role than the consumer.

Like I said before, “non-economic static by whisky aficionados” will not dramatically affect the market, but becoming a viable market player is different and can, indeed, change the market. Glazer not only added competition with some damn fine whiskies, but he also brought a dynamic and passionate entrepreneurialism that the more conservative SWA members were not wholly prepared for (e.g., the Smoke Tree controversy). The whole process adds greatly to the whisky industry, whether everyone likes it or not.

Likewise, John Hansell isn’t merely an anonymous whisky aficionado who started a blog; he is an entrepreneur who started a magazine which offers a constructive, honest and independent voice. Likewise his putting together of WhiskyFest offers a social/economic forum which helps to bridge the gap between consumer and producer, and allows us greater or expanded access to products – and we all have a great time in the process of this engagement. This blog, like WhiskyFest, is a direct extension of the market role he has built. It is because John (and Lew and the rest of the Malt Advocate team) maintain this role with such vibrancy and positive energy that the industry has responded accordingly with embrace rather than rejection or avoidance. Thus our discourse on this blog, more than on most blogs, is read by industry folks because of their engagement with John Hansell and the Malt Advocate

So yes, individuals can make a HUGE difference, even to the Scotch whisky trade. Market actors do so with economically viable activity. Consumers do so by voting with their pocketbooks — whether it is with or without passion is more immediately important to the consumer than it is to the boardroom executive (who generally has only spreadsheets, market research and gut instincts for guidance).

Phew! OK, enough from me for now. Another dram of Tamdhu is in order.

22. Red_Arremer says:
November 24, 2009 at 2:44 pm
Who cares if this discussion can have any impact on the whisky industry. The question is can it have any impact on us.

The “put your money where your mouth is” attitude that only big market players are qualified to have critical perspectives on events like the closure of a Tamdhu is positively villainous.

Anyways, you all don’t know me, but I am in fact a billionaire tycoon. If I wanted to reopen Tamdhu I could. But I’m not going to. Instead I’m going to do a bunch of things that you won’t like with my money and you had all better recognize that you can’t do anything about it and refrain from discussing or criticizing me at all.

JK guys, it’s all good

23. [Here is what I had to say]:
November 24, 2009 at 5:56 pm
Red, I agree with your first point – I probably wouldn’t bother otherwise. Your second point though, is misplaced — you are confusing “is” with “ought.” Straightforward description of the way something IS should not be taken as a value judgment or argument about the way it “ought” to be. [It isn’t a matter of qualifications, and no one here has yet expressed the view that "only big market players are qualified to have critical perspectives."]

Critical perspectives are important, but the old saw that “actions speak louder than words” is directly relevant here. Until pontification of this sort affects sales, there isn’t space for it on most Excel spreadsheets. That isn’t, perhaps the way it OUGHT to be, but it IS, at present, a fact.

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