Witchburn Distillery hasn't produced a drop of Scotch whisky yet, but owners are already valuing it at £30m ($40.6m).
At least that’s according to a funding round, which offers 20 investors the chance to buy a 1% stake for £300,000 ($406,000).
The offer comes with plenty of benefits, including 20 casks of whisky spread over five years and five cases of a founder’s bottling. Most intriguing, though, is the opportunity to sell your 1% stake back to the owning company, Brave New Spirits, after five years for a guaranteed £400,000 ($510,000).
It’s not exactly the gains you’ll get from an AI startup, but a compound annual growth rate of 6% is nothing to be sniffed at in today’s economy. The problem is, the whisky business may be just as risky as an AI start-up. Demand is weak, tariffs are changing as often as the wind, and growth forecasts are about as useful as a paper decanter.
Still, Witchburn isn’t just selling capital gains; it’s selling access to a club. And as far as clubs in whisky go, Witchburn may be the one you want to be in, as it will be the first new distillery built in Campbeltown in decades. The region once produced more whisky than anywhere else in Scotland, but today, there are just three distilleries.
Despite that, Campbeltown manages to have its own distinct style. Springbank is among the world’s most revered whiskies, while Glen Scotia’s reputation is growing at speed. Witchburn has some way to catch up to those established players, but if the queues outside Springbank’s distillery shop are anything to go by, there’s plenty of demand.
Flooding the market
Early-stage cash flow is a problem for a product that takes at least three years to make, and certainly longer to reach a marketable age. Indeed, by the time the first investors are weighing up whether to cash out, the whisky in casks will be just five years old.
But Witchburn has a plan. They aim to sell large portions of stock to foreign markets shortly after it comes off the stills. One assumes the casks will be stored on site and delivered at an agreed date, but it will nonetheless get the cash flowing at an early stage. That may seem far-fetched (why doesn’t everyone do that?), but Brave New Spirits is an established player in the field of cheap blends, otherwise known as volume brands.
Co-founder Alexander Springensguth told The World of Fine Spirits: “These are not new or untested markets for us. Through Brave New Spirits, we have spent years building relationships with bulk buyers across more than 40 countries. We know where the demand is and who the customers are — particularly in Asia and Eastern Europe, where demand for high-quality spirit stocks remains very strong. While Witchburn will contract directly with these buyers, our existing network provides immediate and well-established access to them.”
Still, the terms of this agreement mean Brave New Spirits may have to find £8m ($10.8m) to pay its 20 investors back in five years. That’s a huge amount of cash, and while the prospectus pushes hard on the ‘guaranteed’ nature of the buyback, Springensguth was keen to underline that there is no risk-free investment.
“The buyback amount itself is contractually defined,” he said. “To support this, the company builds up a significant inventory of maturing whisky, which serves as a tangible asset base. This stock can be used as collateral for industry-standard financing structures, such as asset-backed lending. This is a well-established practice in the Scotch whisky sector, where maturing inventory is regularly financed to provide liquidity.
“That said, the execution of such financing depends on market conditions and the underlying performance of the business. The structure is designed to provide a high degree of security, but it is not entirely without risk.”
Playing both sides
Witchburn isn’t going into the business lightly. It will start production with the capacity to produce 2.7 million liters of pure alcohol (LPA) per year. That’s more than Glen Scotia and Springbank combined (both approximately 750,000-800,000 LPA apiece).
Despite the romance of a new Campbeltown malt, a lot of its early alcohol appears destined for the blending market. This will be helped by the distillery’s ability to produce unpeated, peated, and heavily peated whisky, much like Springbank does with sister brands Hazelburn and Longrow.
But how will those sales affect the distillery’s ability to build its own distinct brand? Springensguth says: “The key point is that spirit sold for blending is typically not marketed under the distillery’s name, allowing for early and stable revenue while maturing stock for our own single malt.
“At the same time, the distillery is designed for differentiated production — enabling us to produce spirit tailored to the blending industry alongside distinct profiles for our own single malt range. These approaches are complementary, not contradictory.”
