Whyte & Mackay paying price for switch to high-end brand growth

THE financial pain that distiller Whyte & Mackay is passing through as it switches from mass production to high-end brands was laid bare yesterday when its accounts revealed a 60 per cent fall in profits.

The Glasgow-based firm is shifting its focus from “bulk” output – making whiskies for other firms’ blends or as ingredients in other products – to aging its own label drinks that it can sell at a higher margin.

Whyte & Mackay was bought for £595 million in 2007 by Indian billionaire Vijay Mallya’s United Breweries following lengthy takeover talks.

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Pre-tax profits at the company slumped to £12.4m in the year to 31 March from £31.7m in the previous 12 months, according to accounts filed at Companies House, as the firm invested in its brands and marketing.

Turnover fell by 20 per cent to £169.5m as the it moved away from bulk whisky to focus on its own Whyte & Mackay blended whisky brands and its single malt labels, which include Dalmore, Fettercairn and Jura.

The company also has a malt distillery at Tamnavulin and a large grain plant at Invergordon.

Finance director Hemanth Menon said: “As a long-term strategy, Whyte & Mackay’s current focus is on growing its branded business and becoming more international. This obviously has an impact on the short-term profit and turnover.

“We are conscious of the short-term impact, but strongly believe the company should be ‘brands’ led rather than bulk business. Not to lose out the opportunities offered by the emerging markets, we are investing in these countries.”

Menon said the company had switched distributors in its priority markets to use firms that have more experience of marketing brands and that it will open its own import office in the United States on 1 January.

He said the strategy was beginning to show signs of success, with Jura ranked as the fastest-growing global malt brand, with Dalmore in third place.

The two brands are doing even better in the key travel retail sector – in which whiskies are sold at airports – with Dalmore listed as the fastest-growing malt, with Jura in second position.

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Menon added: “Recently a bottle of Dalmore 62-year-old was sold for $200,000 (£128,000) at the Changi airport, Singapore.

“This is a tremendous achievement and proves once again that Whyte & Mackay brands are the choice of uber-luxury consumers across the globe.”

He said the company’s lender had also been supportive of the switch from bulk to brands and that it had refinanced its debt on 25 July, following the year-end for the most recent accounts. The firm had £137m of bank debt at 31 March.

The headcount continued to shrink, falling to 479 from 533, while the firm booked £139,000 in redundancy costs. But that figure was well below the £3m posted in the previous year, when staff levels fell from 574.

The highest-paid director, thought to be chief executive John Beard, saw his pay package fall to £361,000 from £635,000.