Scottish Investment Bank case study: the Isle of Harris Distillery
Right from the start the Isle of Harris Distillery has been known as the social distillery. Launched in 2015, the business has the best interests of the local community at heart, bringing new jobs to the island and benefiting the local economy. Investment from Scottish Investment Bank (SIB) along with other public and private funding helped to establish the company, whose success has exceeded expectations in the first three years.
The distillery currently produces a multi-award-winning gin. Distillation, bottling and order fulfilment all take place at Tarbert on Harris.
Gin aside, the long-term plan is to focus on whisky, but right now it’s a waiting game. Casks of a single malt, The Hearach, are maturing in a warehouse by the shores of Loch an Siar.
A visitor experience provides the third element of the business, attracting over 80,000 visitors during last year, and rapidly establishing the distillery’s reputation as one of the Western Isles’ most popular attractions.
Harris in the blood
Ron MacEachran is a founding director, lead advisor, and one of the original group of investors. He led the funding and construction stages for the distillery, including liaising with the Scottish Investment Bank, working closely with fellow members of the core project team – Anderson Bakewell (Sponsor and Company Chairman), Simon Erlanger and Alison MacKinnon.
Ron has strong local links: “My family home is on Scalpay, just 5 miles down the road from the distillery. I’m the fourth generation of my family to own the house and I feel intimately connected with Scalpay and Harris. It’s in my DNA. The distillery has allowed me to contribute and given me a good reason to spend a lot more time on the islands than I would otherwise.”
Raising finance
Ron is positive about the support from SIB. “When we began discussions, late in 2011, we had around £2m of private investment. SIB’s willingness to consider matching this with a further £2m of equity made it easier for us to attract other investors.”
Isle of Harris Distillers went on to raise a total of £11m from a number of public and private investors. In addition to the £1.5m from SIB, the company was awarded a £1.9m grant from the Scottish Government’s Food Processing, Marketing and Co-operation scheme. It also attracted £1.2m in grants from Highlands and Islands Enterprise. The remaining funding of £8.1m came from private UK and international investors prepared to commit to a long-term project.
Ron comments, “SIB’s involvement was critical at two points – at the outset, and at the completion of fundraising. As we concluded the funding phase, dealing with the challenges of drawing investors together, SIB was pragmatic and supportive while ensuring its own interests were protected. This enabled us to close out the fundraising phase and move on to construction of the distillery.”
Major investment
“This is the largest inward investment in Harris for the best part of 100 years. It has, therefore, had an impact on the morale of the community proportionate to such an investment. From investment in 2014, we have created 22 full-time jobs for local people which has also created a positive and optimistic outlook.”
“To me, this project is a good example of how the public sector can align with the private sector to create a commercial vehicle that benefits a community and a range of stakeholders. We hope and expect to see the benefits of those investments continue over a very long period of time.”
Local Talent
Simon Erlanger is Managing Director of the distillery, joining the project at the same time as Ron. He comments on the versatility of the local community: “People are very used to turning their hands to what needs to be done and adapting to changing circumstances, which goes back to the crofting heritage.”
Employing young people has also been important. “One of our focus areas was to recruit the young Hebridean workforce,” Simon says. “So, we’ve taken two school leavers, with others to follow, into employment which has allowed them to stay on the Island rather than have to leave to find work.”
Ceilidh time
Ron concludes, “When we opened the distillery we launched with a ceilidh and extended an open invitation. Around 1000 people came (the island has a population of 2000). I think that demonstrates the community’s commitment to the project. And that hasn’t changed - the enthusiasm is still there in the community. Local people take a great pride in what we are doing. They see it as creating a bit of the island’s history.”