The Fork in the Road
As the whole whisky world knows by now the fiercely independent, iconoclastic, “progressive Hebridean distillers” at Bruichladdich have entered the corporate embrace of the French Remy Cointreau.
An offer – some would say a startling offer – of £48m for the shares, plus clearing outstanding finance of £10m persuaded the owners that independence had its price. After a 10 year journey Bruichladdich has come to a fork in the road.
Just to recap, the distillery had been shuttered and idle for some years prior to December 19th 2000 when founder and MD Mark Reynier finally got the keys. Just raising the finance and securing the deal had been a complex, time-consuming and challenging task. Most of the whisky industry doubted whether this self-confident, ebullient London wine merchant could carry off a successful recommissioning of the distillery and scepticism was quite openly expressed as to the wisdom of the deal. Many commentators questioned if he fully understood what he had done or was doing.
When a cash call to shareholders followed just a few weeks later the sceptics seemed to have been justified.
But Reynier had put a strong team in place and, even if others couldn’t see what he had in mind, he had a clear long-term strategy. Backed by a hand-picked Board and with the day-to-day assistance of Operations Director Simon Coughlin and distilling legend Jim McEwan the team came together.
The initial stocks were carefully eked out in a series of releases: exciting, bewildering, irreverent and opportunistic by turn. All the while production had re-started and stocks were being built for the future. Throughout it all, Reynier maintained a high profile – criticising the industry, castigating corporate giants, maintaining that Bruichladdich was different and would be following a very different path from the overwhelming majority of the Scotch whisky industry.
It won him few friends in the corridors of power but enthusiasts flocked to support Bruichladdich, snapping up limited releases, visiting the distillery and sharing Reynier’s opinionated but always lively tweets and blog. Bruichladdich experimented with locally grown barley and opened a bottling line. Despite the added cost they always maintained the quality and local commitment shone through and added only a few pennies to the final shelf price of a bottle. They were, they claimed, a different type of distillery – deeply committed to a place and their people and determined to explore the nuances and subtleties of provenance and terroir. This was a vision informed by a very different view of the world – a winemaker’s whisky, if you will, crafted and artisanal in style.
Having known him since the beginning of this bold project (I was a very early purchaser of a private cask of Bruichladdich) I was keen to sit down and talk about his journey; the sale and how he sees his future. This, in fact, is the first one-to-one interview he has given to any writer since the acquisition and his most honest and in-depth response to the many anguished whisky fans who question what has been done. We spent several hours together. This is what he had to say.
Ian Buxton (IRB): Mark, immediately the deal was announced you seemed to disappear and your Twitter account went silent. What was that about?
Mark Reynier (MR): It was simple co-incidence, nothing more. We already had a family holiday booked with tickets for the Test Match [international cricket match, England vs. South Africa] and then on to the Olympics in London. That had been booked months ago, so I was always going to be away at that time. The sale process was a very busy and demanding one and I owed my family some time. Nothing more sinister than that.
IRB: So tell me about the sale itself. What happened?
MR: Over the years we used to receive 2 or 3 takeover approaches every year. Mostly they were pretty casual or absurd but occasionally we would get an enquiry that we knew was serious. These were followed up by the Board, as we were legally obliged to do but there was never anything that interested the shareholders. In fact, we were working towards providing shareholders with some exit route options in 2014. One being that we would be in a position to pay a dividend then; we had the option of a listing on AIM or looking for a trade sale. There was a clear and agreed plan.
IRB: So what happened?
MR: What happened was that in March we received a serious, high-level enquiry from Remy Cointreau which made it clear that they had been tracking our progress for at least three years and had a clear strategy on how they wanted to take the company forward. They indicated that they understood the kind of premium that would be required and requested some more detailed information. The Board agreed to provide that. Because our IT systems, reporting information and management information were so strong and detailed it took less than a month for Remy to undertake their due diligence and they came back with a very strong offer on in April.
The Board were looking for a high price that valued the business – its complex stocks, brands and future potential – appropriately and Remy’s offer well exceeded that. Our founder shareholders – who have waited 11 years, never taken a dividend and who have met three cash calls (two economically necessary and one strategic) remember – saw a very healthy return on their original investment so it was an offer that was hard to refuse.
IRB: Despite that, and despite your personal gain, it’s rumoured that you voted against the deal?
MR: That’s true. Frankly, this sale makes me a (modestly) rich man but I wanted to continue for at least another two years. Obviously I am a shareholder – as are all the staff – and will benefit from the sale but I wanted to continue to 2014 as we originally planned as I felt there was unfinished business still to deal with as regards my original vision. Our sales show a very healthy year-on-year organic growth and the company is poised for turbo growth over the next couple of years.
All the hard work of the past 10 years is now coming to fruition and I wanted to continue that process and deliver the results I had envisaged.
I don’t blame or criticise anyone for accepting this offer. Several of our Board members have strong personal reasons for taking the money and I understand that. For many of the distillery team the pay-out will transform their lives. All of that is great, and welcome and very good news for Islay. But I’m conflicted. On the one hand I’m saddened by the sale but I recognise that it would eventually have happened. Without the original shareholders we could never have saved Bruichladdich, created 50 jobs and produced something really unique.
IRB: How would you sum this up?
MR: We’ve done something very special, in a very special place, and without the resources of a big company or government grants. We’ve challenged whisky orthodoxy, restored a near-derelict distillery, built a business and brand, created jobs and given Remy an incredible basis on which to expand and grow. So mixed emotions for me to say the least, but proud of it all too – all at the same time.
IRB: What’s next for Mark Reynier?
MR: To be entirely honest, I don’t know. I still have the opportunity to contribute in one way or another but I’m 50 now and there were going to be some changes anyway. I’ve enjoyed building, creating and producing something. Life goes on…we’ll see…but it may be time to move on.
IRB: Thank you.
In fact, after the formal interview, Mark and I continued talking late into the night on a great range of subjects. It struck me afterwards that Mark was almost in a state of bereavement and that it will be some months before he can think clearly about what has happened and where he goes next.
I can’t see him remaining happy in any kind of corporate structure and I can’t see any kind of corporate structure that would give Mark room to be Mark. So something will come of this. There will be a new beginning, a new adventure.
With their money Remy have bought into a dream, but a dream founded on a well thought out philosophy and sound business principles. They have the scope (and the finance) to double production and drive Bruichladdich’s sales through their international distributor network. They own most of this, so brand profitability will increase dramatically. Those two factors plus the love of its fans for the brand and whisky’s global fashionability explain the premium that they have paid.
If this works, Bruichladdich’s days of boom and bust should be over. Its prized independence may have gone forever (though note that Remy is largely family controlled) but a new era beckons.
I will watch with interest.