As 2024 draws to a close, the pressures facing the global beverage alcohol industry have become painfully familiar: geopolitical tensions, interest rate and energy cost pressures, consumers feeling the strain, changing attitudes to alcohol among younger drinkers, ongoing pressures on international trade, with the looming prospect of tariffs from the US to Europe to the Far East.
Beyond declining turnover and dips in share prices, the real-world consequences of the trading environment are now being felt. The craft distilling boom of the 2010s, buffeted by the Covid-19 pandemic, has become, for many, an existential battle for survival.
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Higher-profile casualties have emerged, too. In August, Sweden’s Mackmyra distillery – one of the pioneers of the world whisky movement – filed for bankruptcy. On 27 November, not one but two businesses on opposite sides of the Atlantic followed suit: Stoli Group USA and Waterford Distillery in Ireland.
The Stoli story is a complex one, involving a devastating cyberattack that may or may not be attributable to the Russian State. But it should be noted the company also highlighted the broader issues facing operators in the US spirits market, including high inventory levels leading to destocking, and the consumer slowdown.
The Waterford announcement perhaps came as more of a shock – but perhaps, on reviewing the circumstances, it shouldn’t have done. Mark Reynier – the former wine merchant who led the resurrection of Bruichladdich on Islay in 2001 – transformed a former Guinness brewery in south-east Ireland into his personal vision of a whisky distillery, with a laser focus on deriving flavour from raw materials and origin – what the business called téireoir.
The concept – as Bruichladdich had done before – sought to reject the industry norms of reducing barley and yeast to commodities, rather than flavour drivers, and it took this to an uber-geeky level of detail: namechecking individual farms, delving into organics, biodynamics, heritage barley varieties.
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By GlobalDataThese ideas resonated with a certain type of whisky enthusiast who instinctively rejects ‘big whisky’ as a soulless exploiter of the category, churning out huge volumes of industrial alcohol with little regard for authenticity. According to this line of thinking, if there was a spectrum in terms of credibility, Diageo and Pernod Ricard would sit at one end of it – and Waterford at the other.
So Reynier’s application of ‘wine thinking’ in terms of terroir and flavour to the making of whisky attracted enthusiastic interest from the off. Supporters may have been more noisy than numerous but the project had no problems in garnering plenty of publicity.
Where did it go wrong? The timing certainly didn’t help. Waterford’s first whiskies were launched just before the pandemic, which hugely disrupted the vital early stages of its products coming to market and led to some questionable decisions in terms of market entry and distribution.
Since then, the business has suffered the same pressures as everyone else: soaring energy costs, rising interest rates that even now remain stubbornly high, less than helpful market conditions. A refinancing process in 2022, it seems, could only delay the inevitable.
There’s no doubt Waterford was hugely buffeted by headwinds beyond its control but – with the benefit of hindsight – I can’t help wondering if its particular business model left it disproportionately vulnerable to the change in the weather.
In rejecting the traditional, ‘commoditised’ approach to whisky-making, Waterford instead embraced a philosophy that – however admirable it may be – comes with a high price tag. Elevated production costs, coupled with the fact that the distillery was making a lot of whisky, necessitated high release prices for Waterford’s early liquid.
We can argue the toss about whether or not the Waterford approach justified a price premium for its products, but in the end, the discussion becomes largely academic. As Waterford released its ambitiously-priced, critically-acclaimed whiskies, other Irish whiskey newcomers bought up cheaper bulk stocks and undercut on pricing.
This factor was exacerbated by poor secondary market performance for early Waterford releases. I don’t believe that Waterford was particularly aimed at collectors or ‘flippers’ – people who buy whiskies with the intent of selling them on quickly for a profit – but it’s hard for consumers to justify spending $100 on a youngish Irish whiskey when they can buy the same distillery’s historic products for just over half that price at auction.
On this topic, I was also reminded of a conversation with Simon Coughlin, part of the team that resurrected Bruichladdich, and who stayed on to run the distillery following its £58m (then $90.3m) acquisition by Rémy Cointreau in 2012.
Speaking in 2016, Coughlin recalled the dizzying cadence of whisky releases from Bruichladdich in the 2000s, six different age statements at various times, cuvée bottlings, recasking into an array of wine casks: “The core range went pear-shaped; we did crazy stuff, the retailers told us to stop releasing stuff … Then we thought: we need to get a grip. It started to confuse the trade and customers and – quite frankly – us. The drams were great, but we started to wonder just what is Bruichladdich.”
I hear echoes of that approach with Waterford. You could argue that the distillery’s philosophy of micro-provenance and attention to the finest detail necessarily entailed a release programme that was either eclectic or haphazard, depending on your viewpoint. But, from the point of view of the consumer, what’s the message? Téireoir, sure, but what should they buy? What’s the flagship product? What is Waterford?
As 2025 dawns, let’s hope that receivers Mark Degnan and Daryll McKenna of Interpath can forge a new beginning for Waterford, whether that be with Reynier back at the helm or under new ownership. The concept remains an intriguing one that struck a chord with many whisky enthusiasts, and with a more coherent and solid production/maturation/release programme, it could yet survive and thrive, even in today’s still challenging marketplace.
There’s encouragement in the fact that Mackmyra was rescued from bankruptcy in October by principal shareholder Lennart Hero and Swedish investment company No. 1 Capital, and with any luck, Waterford will meet a similar fate.
At the same time, though, let’s not fool ourselves: the current trading climate for beverage alcohol remains as challenging as it has been for a generation or more. The high-profile casualties of that climate have so far been relatively few but they won’t be the last. Buckle up.
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