Lakes Distillery reveals secrets of success

Last month, it revealed it had secured a £3.5 million asset-based lending facility from Secure Trust Bank Commercial Finance.

It said the money will allow it to increase the quantity of single malt whisky stock it can produce at its Setmurthy site each year threefold from its current capacity of 130,000 litres.

In January, the distillery also secured a £4.25m investment from Comhar Capital to support its growth plans.

This month, it was listed at number 19 in the Alantra Food & Beverage Fast 50 list.

With compound annual growth of 34.7 per cent and revenue of £6.2m, the distillery was the only whisky company in the top 20.

Alantra identified a £3.75m investment from Gresham House Asset Management in the distillery in 2019 as a particular example of how it had raised funds in order to grow.

However, the recent investment is only the latest in a series of fundraising and investment programmes undertaken by the distillery.

To fund its initial start-up, the distillery, near Bassenthwaite Lake, raised money through the Government’s Enterprise Investment Scheme, which allows firms to raise up to £12m from shareholders who get a number of benefits in return.

It initially raised around £10m between 2012 and 2017, working directly with investors using the scheme.

“The first one was to encourage high net worth individuals to invest in the distillery through the Government’s Enterprise Investment Scheme,” said Nigel Mills CBE, the distillery’s chief executive.

“The benefits to the investor are that they get 30 per cent tax relief on their investment.

“If they hold the shares for three years, any capital gains are tax free and they are also inheritance tax free. If you have any capital gains you can also roll the gain into those shares and get a further 28 per cent relief.

“There was probably about 18 months between the middle of 2012 to the beginning of 2014 and we had raised enough money to order the stills which were about £2m and go ahead with the development of the site which was another £4m roughly,” he said.

In 2017 it raised a further £2m via crowdfunding platform Crowdcube, with investors still enjoying the benefits of EIS.

He says to entice investors it is important to have a compelling business story as well as a reliable business plan and personnel who can deliver it.

“The first thing is the business plan, then you need to have credible people that are going to deliver that plan and that’s everything from the board of directors through to your team,” he said.

For the distillery the credibility of the business came in no small part from its team, which includes managing director Paul Currie, who had previously been involved in founding the Isle of Arran Distillers in Scotland, and board member Dr Alan Rutherford OBE, who had formerly been in charge of whisky production at drinks giant Diageo.

Paul Neep, ex-chief executive of Glenmorangie, joined the board in 2018.

Nigel himself was a chartered accountant with PwC before building a chain of convenience stores, which he then sold to Tesco in 2011.

As well as appealing to investors, the distillery also raised funds by selling limited edition bottles of the very first run of its single malt in 2018.

It has continued raising additional funds via investors and investing in convertible loan stock. Last year it raised £3.85m via convertible loan notes and £6.6m from investors.

Nigel says the particular appeal of methods such as crowdfunding and auctioning the bottles is the ability to make money while also adding to the business story.

“We created a limited edition of 101 bottles called Lakes Single Malt Whisky Genesis and we put 100 of those bottles through a whisky auction platform,” he says.

“We broke the world record for the highest amount anybody has paid for a bottle of new single malt at £7,900. The first 100 bottles in total raised £80,000.

“It’s marking a milestone occasion and monetising something that you have. It was publicity and making a statement.”