Tasmanian whisky prices soar as distillers can't keep up with demand

Patrick Maguire is standing in his Sullivans Cove distillery on the outskirts of Hobart looking at the barrels stacked all around him. He shakes his head and sighs.

"Two years ago I was standing here wondering how I'd ever sell it all. 'What have I done? I've made too much,' I said to myself ... now I just wish I had 10 times more."

That was before March, 2014, when Sullivans Cove's French Oak Single Malt was named the world's best single malt whisky. According to Maguire, things have been crazy ever since, with the distillery running almost 24/7 in a bid to keep up with demand.

Of course, when demand exceeds supply, prices start to climb, to the point where respected Melbourne establishment Whisky & Alement is now charging $300 for a nip from the winning batch of French Oak.

Supply and dram-and

Even before picking up the award, Maguire says the Sullivans Cove distillery was selling everything it could make and was having to meter out the whisky to avoid running out. Nowadays, the 18,000 bottles he produces each year don't come anywhere close to what he needs.

It's a problem felt in almost every whisky distillery across Tasmania, where distillers are struggling to produce enough product to satisfy a growing thirst.

Bertie Cason, founder of and marketing manager at Sullivans Cove, says although Tasmanian whisky production has increased two-to-three-fold over the past four years to around 400,000 litres per annum, it's still not nearly enough to keep up with worldwide demand.

"The problem is, we started out as a cottage industry; aware of the high costs involved in making whisky and with a high degree of trepidation regarding the risk," Cason says. "Our success caught us by surprise and so we're all sitting on too little stock. We're making as much as we can but it will take many years to fill the gap. At Sullivans Cove we're pretty much buggered for the next decade, because our whisky needs that long to mature."

Too little of a good thing 

Not even the addition of six new Tasmanian distilleries in the next 12 months is expected to make an immediate impact, because of the time needed to make high-end single malt. Currently there are 14 distilleries, spread from Port Arthur to Devonport.

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One of the newest of these distilleries is Redlands Estate in the Derwent Valley, about 45 minutes out of Hobart. Redlands launched its initial batch in August this year (a meagre 20-litre barrel) with the first bottle selling to a whisky fanatic for $2600. The other 29 bottles went for an average of $550 each.

Testament to the small scale of Tassie whisky, everything at Redlands is done on-site – from growing, harvesting and malting the barley to the distilling itself, making Redlands the Southern Hemisphere's first paddock-to-bottle single malt whisky in nearly 200 years.

When Redlands released its fourth 20-litre barrel online, the 30-odd bottles it yielded were sold within just four minutes.

And it will be another four years until Redlands can release its larger 100-litre barrels.

Cobbled together

If there was ever any doubt that Tasmanian whisky was still a cottage industry, a visit to Belgrove Distillery, north of Kempton, would put an end to it. Sheep farmer Peter Bignell cobbled together his rye whisky distillery from bits and pieces he found lying around his property, including a $10 Sunbeam Mixmaster to drive an oil pump, and a rusty old clothes dryer for malting.

Bignell even made his own 700-litre still, teaching himself to TIG weld so he could join the copper pieces together. And his entire operation is run by the cooking oil he collects from pubs and cafes around Hobart. Not surprisingly, his Belgrove whisky is also a bit thin on the ground.

"At the moment I make around 10,000 bottles of whisky a year," he says. "There are several distributors in the US who want to sell my product for me, but I just don't make enough."

Rationing the goods

Overeem, one of the pioneering distilleries in Tasmania, is also having problems with supply. The distillery is located in founder Casey Overeem's shed, in the front yard of his suburban Hobart family home. His Bourbon Cask Matured Single Malt is out of stock until 2020 and is expected to sell so quickly, it will unavailable again by 2021. Overeem's Port and Sherry Cask Single Malts are also in short supply.

"It's at the stage where we have to restrict the bars and restaurants who stock our whisky to just one or two bottles per month," says distillery marketing manager Jane Overeem. "There's simply not enough to go around."

One of the only Tassie distilleries that has an adequate amount of barrels in the bond store is Nant.

"We've got plenty of stock," says Nant operation manager Ryan MacLeod. "If we stopped production today we'd have enough to see us out for the next 10 to 15 years at the current rate of sales."

Nant's secret was to develop a very successful business model based around an 'investor club'. This sees punters purchase a barrel of whisky, with a guaranteed buy-back at the equivalent of 9.55 per cent per annum return. "This provides us with capital so we can buy more grain to make more whisky," MacLeod says.