There are some industries that seem more of a hobby than a business, and for some, whiskey is a prime example of this. Yet for the operators of distilleries, it is not just a hobby but also their livelihood that is at stake, and so careful management is required to ensure that the produce is saleable and generates a healthy profit margin.
My Business chats with Mark Littler, general manager and master distiller at Tasmanian producer Hellyers Road Distillery, about operating a lifestyle business, marketing your small operation to a global audience and how the business is diversifying its sources of revenue, plus loads more.
Hellyers Road Distillery has a rather interesting history and unique ownership structure. Can you explain how that works?
Hellyers Road Distillery is a fully owned subsidiary of Better Milk [which in 2016 is] celebrating 60 years in business. 60 years ago, 30 dairy farmers started the milk company. The distillery, it has one shareholding, and that is Better Milk.
Does the distillery operate as its own business or is it considered a division of Better Milk?
We've set the distillery up to operate on its own identity. We're a very small company. We've created a separate business entity with the vision of creating a world class whisky business but standing on its own two feet in terms of financials as well. The reason we've been able to establish quite a nice sizeable business in the single malt whisky industry is because of the support that we have had from a small a dairy cooperative of 60 years.
That initial investment has been made some time ago now, 20 years ago. We're now operating the business and growing the business with its own financial revenue, but it's nice to have the comfort of the milk factory there as well.
Despite having a global brand and exporting your whiskey around the world, it’s interesting that you still call yourself a “very small company”. How many employees do you have?
Currently, the peak of the year is 25. There are four or five people that work within the distillery; we also have a couple of people now working in administration. Also at the distillery, we've got a Visitor's Centre, which [welcomes] in excess of 35,000 people each year … and those numbers are growing.
It’s an interesting example of business diversification, where Better Milk has gone into whiskey distilling, and Hellyers Road has expanded into tourism now with the Visitor’s Centre. Where do those tourists actually come from?
Probably 70 per cent would be returning locals from within our district, or within our region that come back to enjoy our hospitality and the food and the whiskies. The remainder are people travelling from all around – other tourists coming from Australia, and from around the world – to take our tours and to see the home of Hellyers Road Distillery. In that environment is where the majority of our employees are: in tourism and hospitality, and working with the tours.
So the tourism/hospitality side of the business has the bulk of your employees, but is that also the case in terms of production and revenue generation?
Overall our business in the 12 months up to June  grew 25 per cent, and growth was coming from all areas, both the Visitor's Centre as well as our trade from bottle sales into the market in both Australia and overseas. The Visitor's Centre would be currently … at 25 per cent of our revenue. That 25 per cent of revenue from the tourism centre also includes whiskey sales from our Cellar Door as well as our tours, café stores and the night functions that we do.
The other 75 per cent would come from whiskey sales that we dispatch for the market through our distribution channels. Last year, we dispatched or we moved out of our warehouse the equivalent of 120,700 new bottles.
"Going into tourism and hospitality was a new set of skills that we had to learn, and we just did. We committed to it; we continue to learn all the time."
What skills has the business had to learn by branching out to the hospitality and tourism sector, and how did you develop them?
Initially our sets of skills coming from the milk plant were very much quality control, processing, appreciating handling ingredients and converting that into premium product, and running a business around all that. They're our strengths. On milk, if you get that wrong, you can have some serious quality defects and also potential health situations, so our sets of skills are very high and are very good in that regard and our attention to detail. We simply applied that thinking into our brewing and distilling.
Going into tourism and hospitality was a new set of skills that we had to learn, and we just did. We committed to it, we continue to learn all the time, but the big learnings were in the first couple of years. We sought help through hospitality centres that offer support and training. We have front of house training in that regard. We employ fully-trained chefs for our Visitor's Centre, which all worked extensively around the country and parts of the world. We hit the ground running with those types of skills.
We meet as a team – the whole business including the tourism and the hospitality staff, everyone across the business – we meet as a team several times throughout the year, because they're thirsty for knowledge because they're getting asked all the questions from people visiting the centre, and so they like to be well armed with what's happening in the distillery, how many casks we're brewing or filling each week, what are some of the unique stories with some of the casks we're releasing, and we build up a lot of good camaraderie too.
Are revenues quite seasonal, or is cash coming in fairly constantly?
No, it's quite seasonal. What's occurred for us, most of our sales start ramping up in about July and August after the lead-up to Father's Day. Then it continues all throughout the Christmas period, right through to about January/February, then it starts to tailor back a little bit. That also coincides with the tourism side of our business.
With that in mind, how do you manage cash flow during, particularly, the down time?
These are some learnings which we've had to take on. Only in this last 12 months have we talked about managing our cash flow and making it a little bit easier. Obviously, when you first start, you're still working it out really.
We've landed in this place that our brewing and distilling season starts at the beginning of April. What that allows us to do is to be able to structure a brewing and distilling program on the back of when most of those bales have come in. We've received a cash flow from the Christmas period, but most of the money that is out there in the trade is starting to come in, and that then supports us doing what we want to do in the brewing and distilling.
We manage that accordingly to get us through with a bigger thinking over the 12 months through September/October when the sales start to climb again, but then we bring all those thought processes back to our 90-day planning. We revisit that every 90 days.
"The world is thirsty for those legitimate stories. They're interested in what's going on behind it."
Hellyers Road is very big on brand messaging, and conveying its story from a dairy farming co-op to distillery selling around the world. What impact has your brand messaging had on your bottom line?
I believe that, I guess it's off the back of coming from Europe, I shared my story here in the office this morning. Okay, for example, in Whisky Live Paris, it's one of the most prestigious whisky events around the world. Part of our story, and part of my story, is obviously talking about … [why] we got into whiskey making, and we talk about our dairy. Part of my story is that I report to the second- and third-generation dairy farming members.
This year, I had my chairman and my deputy chairman with me behind the stand. They're 70-year-old men that are retired. One's from on the farm, one's not. Those are the guys that invested in creating this whiskey business: people love it, they just connect. The world is thirsty for those legitimate stories. They're interested in what's going on behind it; it doesn't matter where you are. I found that a big learning, and quite intriguing.
What are the plans for the future?
The business continues to grow. We've been maintaining the people that we recruit for the summer period. We've just purchased a neighbouring property [and] we're now looking at building a dedicated bottling hall on that property. We're [also] looking at doubling our brewing and distillery.
Business: Hellyers Road Distillery
Industry: Whiskey production
Location: Burnie, Tasmania
No. of employees: 25 during peak season
Customer base: Predominantly local; products exported Australia-wide and to more than 20 countries globally.