World By Anne-Sophie Bigot / April 22, 2016 As may or may not know, I’ve teamed up with Craft Whisky Club for a series of interviews to showcase the talent of craft whisky workers, from business strategy angels to the crafts-people themselves that make the magic happen! Today, I decided to discuss the current state of the “craft” spirits industry with Daniel Szor, Founder and CEO at the Cotswolds Distillery. And as Daniel will also be gave a presentation on this same topic during this year’ edition of the European Whiskies & Spirits Conference (which took place on March 17 at The Grand Connaught Rooms in London) – it was a perfect timing to ask him some questions (I’m also thinking about the unlucky people – like me – who weren’t able to attend this great spirited event) First of all, could you please quickly introduce yourself and the idea behind the Cotswolds Distillery – how and why did you decide to start producing artisan spirits? My name is Dan Szor and I am originally from New York City. I’ve lived in Europe for nearly 25 years, most of the time working for a NY-based investment management firm specializing in currency trading. I was their European marketing guy and after 30 years selling very esoteric investment products I yearned to make and sell something I was truly passionate about. Whisky certainly fit the bill. I first fell in love with single malts about 20 years ago while living in Paris (France is the biggest export market for Scotch whisky) at a meeting of the Scotch Malt Whisky Society, and through my subsequent membership in the Whisky Club of the famous “La Maison de Whisky” emporium in Paris. This, along with frequent boys’ trips to Scotland with my best friend, hooked me on the culture, tradition, and art of making single malt whisky. In 2006 I moved to London, and a few years later my (English) wife and I bought an old farmhouse in the North Cotswolds as a weekend getaway. We fell in love with the area, and decided we wanted to live in the country full-time. My firm had fallen on hard times, leading me to start thinking about my next career move. One day in the summer of 2012 I was looking out of my bedroom window at the fields of barley planted near my house and asked myself why, in an area with so much barley (and lots of other grains and fruit), no one was distilling? The Cotswolds seemed a perfect place, with its 40 million visitors a year, for an artisan distillery – by creating one in this much-loved region, we would become the closest “destination distillery” to both London and Birmingham, the #1 and #2 cities in the UK. According to you, what does “craft” mean? Has this definition changed over the years? Does “craft” has the same meaning nowadays that it used to have a few years/decades ago? Knowing very little about whisky-making I hired some of the best Scottish whisky experts in the world to help me set up and commission the Cotswolds Distillery. One of them, Harry Cockburn, has been in the whisky business for over 50 years and used to run the Bowmore distillery in Islay. Harry hates the word “craft”, and told me the only word to put in front of our distillery should be “wee”, to refer to our small size. Perhaps he’s right, since “craft” has become a bit of a marketing catch-all that means less and less the more it is used, overused and abused. In certain circles it’s become synonymous with spirits that promise more through their marketing then they deliver through their quality. So…craft, or wee… either way, our distillery is defined by the following properties: Small volume, lack of automation (123 valves, no computers), commitment to quality at any price (particularly regarding wood), commitment to innovation through new products in our shop and an ability to do so through small size and lack of corporate hierarchy, a high degree of community engagement (for example, our volunteer “Bottling Angels” programme), a commitment to regional sales, production and hiring, financial independence (lack of institutional investment, founder is the majority shareholder) which allows us to remain long-term in our focus while remaining agile in the short-term. Craft spirits have become increasingly popular – first in the USA, then in Europe – how would you explain this trend? In my view this is due to the increased interest in and awareness of how food and drink are produced and at what level of quality, as well as the growth of the “locavore” movement, i.e. people looking increasingly to source their foods locally. Demographics are also responsible – the rise in importance of “millennial” consumers, a group which attaches great importance to “narrative”, i.e. the story behind the products they buy, leading to the growth in “experiential selling” which is a big part of craft spirits. Finally, changes in legislation and regulation have made small stills more accepted; also, in certain countries there are increased financial incentives (excise tax breaks, for example) which put smaller producers on a more level playing field with the big companies. Many huge firms are now willing to take their share of this growing market, developing craft brands or investing in existing artisan spirits. Do you see this as a threat or an opportunity? Both. It would be foolish to completely disregard what the big guys are doing as they can throw a significant amount of money around to boost their share of what is, in reality, a market that cannot grow indefinitely. I am probably like many craft distillery owners in that I enjoy the dynamics of owning and operating a distillery more than the vagaries of the business of selling drinks. To the extent we are offered support helping us to grow our distribution I suppose I might consider an investment in our firm as an opportunity, however we’d have to look very very carefully at how sincere the offer was in promising to allow us to retain our independence and our ethos. According to you, what will be the future challenges for the craft spirits industry? Any concern the market could soon be overwhelmed? In certain categories like vodka and gin, the lack of barriers to entry will mean the risk of complete saturation in which case only the best at their “craft” will remain standing – the ones with the best liquid, packaging, backstory, funding and business model. Other categories, like whisky, will take a bit longer to get to that point – but even then the same combination of assets described above will determine who stays and who goes. Given the continued profusion of new products the trend to “drink local” will probably grow, which means that makers of craft spirits will be well-served to further develop their local presence including shop sales, visitor experiences, etc. Do you think some “craft-labelled” products have now become more of a marketing gimmick? Where does the frontier sit between marketing and real craftsmanship – how can the consumer not be mislead? Craft-labelling has most definitely become a marketing gimmick. Let’s not forget that the spirits business is 1) extremely competitive and 2) all about marketing, so this is to be expected – and because of this it will become increasingly difficult, from simply reading a label, to distinguish between real craft and fake craft. And that is what makes ‘destination distilleries’ and the visitor experience so important – it’s a way to connect intimately with your clients and future brand ambassadors and to show them directly what it is that’s different about you, your distillery and your products. Which is why it’s such a key element for us and a central tenet in the growth of our business.