Sullivans Cove Case Study
Sullivans Cove – World Class Whisky
Sullivans Cove, located on the River Derwent in Tasmania, is the home of one of the world’s finest single malt whiskies. It was at Sullivan’s Cove that the British established a settlement in 1804 that would go on to become the city of Hobart. The early days of the settlement saw a growth in population, along with a thirst for strong drink – so much so that in 1838, the Governor John Franklin outlawed distilling in the colony – and this ban lasted for 150 years!
The ban on distilling was finally lifted in 1990, and this provided a window of opportunity to utilise the superior Tasmanian water and other natural ingredients to create an exceptional single malt whisky. Sullivans Cove was established in 1994, and now just 23 years later has gained a reputation as a producer of one of the best whiskies in the world. Distilled by traditional methods and using only pure Tasmanian ingredients, each barrel is individually tasted and bottled to capture the subtle variations in flavour.
Head Distiller Patrick Maguire joined the company in 1999 and has been a driving force at Sullivan’s Cove ever since. Having worked in pathology for years, Patrick knew his chemistry, and along with a love of fine whisky, this lent itself to a new career in whisky distillation. He and a business partner grew the business in the 2000s, and established the Sullivans Cove brand in Australia and overseas over the last 18 years. When they started there was no whisky business in Tasmania. The only Australian whisky product on the market (called Corio) was of poor quality and had ceased production years ago. Certainly Australia had no reputation for producing whisky in those early days.
Breaking into the Australian market was tough, and Patrick and his partner had to prove themselves. As Patrick suggests, “you can’t expect just to get lucky, the product has to become known and stand on its own two feet.” Whisky production is a long-term proposition, which represents a big barrier to entry. There is a long wait for the product to mature, and it takes lots of time to build your market. For those who are willing (and able) to wait, there are definite rewards. The product is robust, it won’t spoil, and the longer it is in the barrel, the better it gets.
Sullivans Cove whisky was picked up early by Dutch and French specialist distributors in whisky. These European business connections were good, seasoned traders and experienced distributors. Patrick and his partner started by selling them a few cartons of whisky and it went from there. For example, the distributors arranged Paris and Holland masterclasses, which helped Sullivans Cove to establish brand awareness in Europe. European interest in their product developed very swiftly as a result of these marketing efforts.
As a company, Sullivans Cove received both state and federal government support, as well as help from Austrade for sponsored trips to Asian countries to meet distributors and other interested parties. During the period 2006-2007 they were selling to Europe and engaging with the Asian market through Austrade. At that time their whisky was 6-7 years old, but the Asian market in places such as Hong Kong, Singapore and Taiwan demanded 12 year old+ whisky. Canada started to show an interest in Sullivans Cove whisky at that time, which then expanded into the U.S. market. However, the Asians wanted a 12 year old product and an established reputation before they would commit to buying whisky from Tasmania.
For a long time, 80% of Sullivans Cove sales were to overseas countries. Indeed, it was easier to sell overseas, as no excise or GST tax payments were involved. For Australian sales, the problem involved the large excise tax payments that were required up front in order to sell the whisky in the Australian market (over $100,000 typically per shipment). Sullivans Cove had to pay this up front, and then then they wouldn’t get paid for some 3-4 months afterwards. It was a big ask for a small whisky producer from Tasmania. There was no sympathy from the Australian Tax Office, even though Patrick, as Chairman of the Tasmanian Whisky Producers Association was invited to make representation to the government on this issue. As whisky producers, they receive no rebate from government, unlike wineries (the biggest recipients) and craft breweries.
So for a long time Sullivans Cove continued to export their whisky, and stayed away from the big Australian companies (such as Coles, Woolworths, Dan Murphy’s). Finally they decided to go with Coles on a double cask promotion. As a backup they signed on with Sydney based distributors, which meant that the only way to get into Woolworths was on a distributor rate. The first order didn’t mean a lot to them because there is always some curiosity in the market with a new offering, but the orders kept coming. Despite a decreasing number of independent retailers in Australia, Patrick found that by 2008-2009 they could actually get the product out right across Australia, rather than just to Melbourne and Sydney. In order to build brand awareness in Australia, Sullivans Cove spent a lot of time in the marketplace, attending a lot of whisky shows and tastings across the country. As Patrick asserts, “the face to face stuff is really important”, and now 20% of sales are overseas, 80% of Sullivans Cove whisky being sold in Australia.
Winning the World’s Best Whisky award in London in 2014 really helped sales, as the element of quality drives brand awareness and sales. Sullivans Cove continue to enter award competitions, but only the ones that mean something. In conjunction with pristine natural ingredients, their old fashioned method of production ensures excellent quality. They don’t go for volume, there is no mass production, but the distillation process is characterized by heavy attention to detail. As Patrick suggests, it represents a balance between “science on the one hand, and human touch and taste on the other – in other words, art as opposed to science”.
The distillation operation continues to be very hands-on. Patrick and his team taste individual barrels and make decisions that way about what gets bottled – and when. Remarkably, Sullivans Cove only offers three products for sale – the Double Cask whisky is the least expensive of their range at $170 a bottle, followed by the American Oak (winner of several small awards) at $295 a bottle, and the top-of-the-line French Oak (winner of the World’s Best Whisky award) at $450 a bottle. The philosophy at Sullivans Cove is to keep it simple – “keep the range limited, as consumers get confused with multiple labels… people want consistency,” says Patrick.
In terms of sharing advice and lessons learned along the way, Patrick feels that building a strong and consistent business foundation that is of utmost importance. In terms of the export supply chain, having experienced traders and distributors in foreign markets is also critical. Building brand awareness takes time and effort, and this means spending time on the ground, attending whisky tasting and trade shows. As Head Distiller, it is really mportant for Patrick to be there in person to tell the story of Sullivans Cove, and he feels his presence, along with the provenance generated by the story behind the company makes all the difference to spreading the word that then is translated into sales. These are the things that the brand reputation hinges upon. Patrick also found the support from Austrade to be very helpful in establishing overseas contacts and setting up export opportunities. Initially the service was free of charge, but after a certain limit is reached, Austrade charge a fee for their services, which Patrick regards as very good value.
With some 16 employees on board and a swag of awards adorning the walls of the tasting room at Sullivans Cove, now is the time to experiment and have more fun, invent and innovate, says Patrick. Now they know the rules of making whisky, the team is curious and want to perhaps try and break the rules in developing new flavours and products. As Patrick points out, as an Australian producer, Sullivans Cove is able to experiment – whereas it is harder for Scottish distilleries to stray from ‘tradition’ by being different and trying new things.
Sullivans Cove will increase production volume in the future but not by much – this means they will continue to remain ‘exclusive’. Patrick feels he has done the hard work over the last decade or so, and now wants to be involved over the next ten years as they move forward – exciting times indeed for Sullivans Cove.