EIS & SEIS note: tax treatment depends on an individual’s circumstances and is subject to change in the future
The Cotswolds Distillery
Tax relief
The Cotswold Distilling Company Limited (trading as The Cotswolds Distillery) was founded in 2013 and is, in its director’s opinion, well on the way to becoming a leading producer of world class ultra-premium whisky, gin and other branded spirits, as well as a premier tourist/visitor experience in the Cotswolds.
About The Cotswolds Distillery
The Company, which began operations in September 2014, was created to capitalise on the significant opportunities in the ultra-premium craft spirits market, already very much in evidence in the USA, and now increasingly in the UK [1]. It is situated in an ideal location in one of England’s wealthiest [2] and most visited areas, the Cotswolds (http://cotswolds.com/). The Company is producing maturing stocks of whisky at the rate of 175,000 bottles equivalent per annum and have introduced a range of other branded spirits to the market including gin, espresso martini, liqueurs and fruit brandies. These products are being sold already through some of the UK's most important retailers and distributors such as Majestic Wines [3], Fortnum and Mason [4], Oddbins[5], Harvey Nichols [6], and The Whisky Exchange [7], and also into numerous export markets including the US, Germany, France and Japan. The onsite visitor centre has proved its worth even quicker than expected, drawing nearly 1,000 visitors per month this summer.
The Company’s product strategy is to lead with a flagship super-premium single malt whisky, rounded out with a range of other unique branded craft spirits. The whisky is expected to be the Company’s crowning glory and the other products are intended to give the Company the opportunity to build its distribution channels and brand, and generate additional early cash flow, while its whisky matures. The Company has a strategy to sell experiences such as tours, classes and events, alongside its spirits. These two aspects of the business are mutually reinforcing as they immerse its customers deeper into the mystique of its products and brand.
Sales volumes of the Cotswolds Dry Gin, the first entry on the market, were over 13,000 bottles in the first fiscal year (to June 30, 2015), approximately double the Company's expectations. Strong interest in its whisky led to pre-sales of over 1,000 bottles and 13 barrels in the same time period.
In its first fiscal year, with 9 months of trading, the Company's revenues were £280,000, approximately 80% over plan. In the first 5 months of FY 2015 the Company has already recorded revenues in excess of the entire previous year. At its current rate of production, the director estimates that the Company's annual output of whisky would have a retail value of over £4.5 million (net of VAT and Excise) at the price it is selling in the onsite shop.
[1] Craft Spirits, Introducing the Nielsen definition and reviewing performance, Nielsen 15/08/2015
[2] http://www.virginmedia.com/money/features/britains-richest-areas.php?ssid=1
[3] https://www.majestic.co.uk/Cotswold-Gin-zid50829
[4] https://www.fortnumandmason.com/products/new-cotswolds-gin
[5] http://www.harpers.co.uk/news/cotswold-dry-gin-wins-listings-in-oddbins/527854.article
What sets Cotswolds Distillery apart?
While the Cotswolds Distillery is not alone in the UK craft distillery movement, the director believes his strategy puts the Cotswolds Distillery in a very strong competitive position and that it will drive exceptional growth through a series of differentiators:
- Absolute commitment to quality: The Cotswolds Distillery utilises processes and materials that, the director believes, many of its competitors cannot, or choose not, to do. These enable to Company to produce products of the very highest quality.
- Leveraging location: The Cotswolds area is one of England's favourite destinations; famous for hundreds of honey-colour limestone villages in a beautiful rural setting [8]. With 38 million visitors a year [9], the director believes that it is an ideal location for a “destination distillery”.
- A Whisky led full-scale distillery: The Cotswolds Distillery provides a fully built-out whisky and spirits distillery and visitor centre. Its on-site retail operation provides, according to the director’s view, superior margins and cash flow as well as a superior brand aura.
- A diverse range of products: A wide variety of products, including the award winning Cotswolds Dry Gin [10] and “Distillery Exclusives”, are priming the market for the Company’s flagship whisky launch in two years.
- Selling both “products” and “experiences": The Cotswolds Distillery’s tours, pop-up distillery events and classes are already providing significant revenue and, have the additional benefit of introducing more people to its products.
- The Company’s ethos: Company’s personnel are fun, welcoming and environmentally aware; engaging with the Company’s fan base and customers through creative use of social media.
How does the Cotswolds Distillery generate revenue?
The Cotswolds Distillery generates revenue from both products and experiences. Its spirits are sold in numerous channels, including through its on-site visitor centre, through mass market and specialist retailers, the bar and restaurant trade, wholesalers and into export markets. In its shop the Cotswolds Distillery also sells branded clothing and accessories. Alongside its products, the Cotswolds Distillery generates additional revenue from its distillery tours and events such as distillery dinners, promotions and classes. The tours drive additional buyers into its shop. In addition, the Company has been very successful in pre-selling its whisky in both bottles and barrels for delivery in 2018 and beyond, which provides welcome up-front cash flow.
What is the Market for its products?
The director believes that there is a revolution occurring in the global spirits industry and that consumers are turning away from traditional branded spirits to higher priced ultra-premium products from a new breed of artisanal craft distillers that have been springing up in the US, the UK and across the world (Nielsen report) [11]. According to Nielsen estimates, while the overall demand for spirits in the UK grew at 3.61% pa over the 12 months period ending August 2015, consumption of craft spirits grew at 47%. Premium spirits brands are growing despite slow economic growth [12] because, according to the director’s opinion, they offer consumers an affordable luxury.
The director believes that there is a tremendous appetite for locally-produced, high quality consumables produced by local companies sharing their values and backstories with their customers. The Company is targeting upwardly mobile, aspirational consumers with disposable income and an ability to favour products based on quality, image and the "story" behind them.
Provenance, quality ingredients and production methods are all key elements as the director believes, consumers seek true authenticity and differentiation from mass market products, favouring those that are produced using premium ingredients in an exacting production process, and sold by those with an authentic, engaging story of provenance. In order to stand out from the crowd, humour and creativity are increasingly necessary.
[11] Craft Spirits, Introducing the Nielsen definition and reviewing performance, Nielsen 15/08/2015
[12] http://www.theguardian.com/business/2015/oct/05/uk-economic-growth-slows-dramatically-latest-survey-suggests
Why invest in The Cotswolds Distillery?
Although the Company has only been trading since 2014, it is now a well-established business that is well ahead of its initial plan on all key metrics: whisky production, gin sales, export sales and overall revenues. The Cotswolds Distilleries’ products have achieved very strong reviews from customers [13] and expert reviewers alike, with noted whisky writer Jim Murray recently awarding its young single malt 94 out of 100 points and classifying it as “Liquid Gold” [14].
The Company’s founder, Daniel Szor, has made a significant investment of over £2.5 million in the Company. This has been followed by subsequent investment of over £1.5 million from a group of angel investors, most of them local. Dan brings a wealth of marketing experience to the project, and has gathered round him as advisors some of the world's renowned experts on whisky production and ageing.
The Company's director believes there is potential for significant value creation as the Company takes full advantage of consumer interest in craft premium spirits in the UK and around the world.
[14] http://www.cotswoldsdistillery.com/jim_murrays_2016_whisky_bible_scores_our_new-make_single_malt_spirt_94_out_of_100
What is the Company's plan for growth?
In the coming three years the Company believes that growth will be driven by several key elements: 1) launch of its whisky onto the market in October 2017, 2) building on the early success of its gin and other spirits with further market penetration across all sales channels, 3) increased visitor traffic through the distillery and onsite shop. Underpinning this is the extraordinary level of demand growth for premium craft spirits, reported at approximately 50% for the 12 months period ending August 2015 [15]. The capital raised in this crowdfunding round will enable the Company to fund all these elements of its growth plan. Additional growth opportunities for a later phase are planned through: 1) a low cost doubling of whisky production, 2) expansion of the visitor centre and 3) opening of a satellite storefront in a nearby Cotswolds town.
[15] Craft Spirits, Introducing the Nielsen definition and reviewing performance, Nielsen 15/08/2015
Investment Offer
The Company is now seeking additional equity funding of a minimum of £500,500 and a maximum of £1,001,000 to allow for the next phase of growth after which it expects to be self-funding prior to an eventual public listing. The investment is EIS eligible which allows early investors to benefit from significant tax relief on income and capital gains on what the director believes will be a very profitable exit at the time when Company achieves a public listing.
Exit Strategy
The Company believes it would make an ideal candidate for listing on an exchange such as the Alternative Investment Market (AIM). This would offer liquidity to its investors as well as a potential source of new capital for further growth investment. Alternatively, the Company will consider buying back a reasonable number of shares each year once it has become strongly cash generative. Lastly, with the very strong growth in consumer interest in premium craft spirits[16], the major spirits companies have bought a number of brands at very attractive prices[17], as noted above, and the Company would be open to this possibility under the right circumstances.
[16] Craft Spirits, Introducing the Nielsen definition and reviewing performance, Nielsen 15/08/2015
[17] http://www.just-drinks.com/analysis/just-the-facts-spirits-acquisition-multiples-2001-to-present-day_id112526.aspx
Rewards
| Amount | Offering | Availability |
|---|---|---|
| £1,000 | 1 bottle of limited-edition "Inaugural Release Cotswolds Single Malt Whisky" (delivered in October 2017) or 1 bottle of Cotswolds Dry Gin (immediate delivery). Plus "Complementary Distillery Tour & Tasting for Two". Plus 10% discount on all purchases in the Cotswolds Distillery shop. | 500 |
| £5,000 | Case of 6 bottles of limited-edition "Inaugural Release Cotswolds Single Malt Whisky" (delivered in October 2017) or Case of 6 bottles of Cotswolds Dry Gin (delivered immediately) or mixed case of above. Plus "Private Distillery Tour & Tasting for Two". Plus 10% discount on all purchases in the Cotswolds Distillery shop | 100 |
| £10,000 | A bottle of special limited-edition cask-strength single malt every year, for the first five years following the Company’s first bottling (October 2017). Plus "Private Distillery Tour & Tasting for Two". Plus 10% discount on all purchases in the Cotswolds Distillery shop. | 50 |
| £25,000 | A distilling class for the investor (4 people max.) and private tasting hosted by our distillers and a bottle of special limited-edition cask-strength single malt every year, for the first five years following the Company’s first bottling (October 2017). Plus "Private Distillery Tour & Tasting for Two". Plus 10% discount on all purchases in the Cotswolds Distillery shop. | 10 |
| £50,000 | A 50-litre cask of whisky filled by the investor, along with 3 years’ storage in the Cotswolds Distillery’s warehouse (does not include VAT, excise taxes and bottling charges). Plus "Private Distillery Tour & Tasting for Two". Plus 10% discount on all purchases in the Cotswolds Distillery shop | 5 |
Investors should not consider investing so as to obtain a "reward" unless the size of the investment is suitable for them
| Raised | £1,001,000.00 |
| Days to go | Completed Funding period ended on 31 January 2016 |
| Target | £500,500 |
| Min. Investment | £350 |
| Equity on Offer | 5.70% |
| Investors (124) | |
Business Contact
Phillip’s Field, Whichford Road
Stourton, Shipston-on-Stour
Warwickshire
CV36 5HG
www.cotswoldsdistillery.com [email protected] 01608238533
