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Small Business; Global Reach

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By: NMK Created on: January 12th, 2007
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Consumers are increasingly looking for the experience of buying from a small business, not a global superbrand. A new venture answers the challenge by offering the customers the chance to participate in the creation of a new single malt whisky.

Consumers are increasingly looking for the experience of buying from a small business, not a global superbrand. A new venture offers the customers the chance to participate in the creation of a new single malt whisky.

Whisky is one of the largest UK exports, with many distilleries having 30-40 export channels. The Johnnie Walker brand, for example, is as large as Coke and Pepsi in terms of global reach. The vast majority of whisky distilleries are consequently owned by large companies operating as multinationals. Fifteen years ago, there were only two independent distillers in Scotland.

Over recent years, though, consumers have changed, and there's something of a disconnection between consumers' desire to buy from a local businesses and the faceless multinationals that often appear to be their only alternative. In order to attempt to address this perception, large companies have launched community websites, blogs and forums to try to create the perception they are able to listen and value personal communications with customers.

It's against this background that James Thomson launched the Ladybank Company of Distillers, described as 'the first co-creation company in Scotland'. After looking at the way in which large whisky brands 'bolt on' community aspects afterwards: once they've built their distillery, produced and matured their product, established distribution and built up a customer base. Thomson decided to turn the business model on its head. The venture is run as a democratic, non-corporate community of whisky enthusiasts organised using the Internet:

By looking at the social side of a consumer business, and with an understanding of how consumers increasingly appreciate control of their everyday life, Ladybank has at its heart a private founding members club.

The distillery is still being built; the recipe for the drink unestablished and it may be ten years before any of the members are able to taste a drop. Ladybank's whisky will only be available to its members; whose numbers will be capped at a maximum of 1250 and production will be limited to a maximum of 35,000 litres per year, as opposed to the million litres produced by mainstream whisky producers.

Because such limited amounts of the drink are being produced, its value is assured, says Thomson:

Let's say your yearly allowance as a member is six bottles at Christmas-time. That might mean that your bottle is worth £60, as opposed to the £30 that you might spend on an alternative bottle in your local off-licence. However, if you then give one of your six bottles to a friend, its value suddenly leaps to maybe £200. Because you've given that friend something you have precious little of and can't be obtained anywhere else. That's quite a special gift.

But in many respects, it isn't the drink that has attracted members to join the venture. "Our real product is involvement. That's something that's very rare in modern life. There are many reasons why people join. For many, they appreciate that the limited distribution means the whisky will be valuable, but others want to join because of their interest in Scotland. Other members might be described as armchair entrepreneurs, or recognise the value of having involvement in the production of something that is quite unique."

Currently, around 10% of the members are Scottish, just over half from the rest of the UK, with the balance from overseas. However, as time goes by, the majority of membership enquiries come from abroad. While catering to the needs of UK members through face-to-face meetings has been feasible, the website is a very necessary tool for the remainder. "If you want to be bespoke [as a company], then you have to listen," says Thomson, "and the Internet, websites and email, is a very intimate form of communication". As well as the Ladybank blog, a forum has recently been installed specifically for overseas members. But communications can be difficult. The Ladybank community is very diverse in terms of age and location. The youngest member spent his student loan on the £3,250 membership fee. There are a number of relatively well-off members in their 30s in the London cadre, while the core group is aged between 45 and 65. Members have very different communications preferences - from phonecalls to videoconferences to wikis - and in order not to alienate members, Thomson has tried to allow for a full range of alternatives.

Members have active input into the way the business and the product is developed. "The collective IQ of our members is phenomenal," says Thomson, "but because they come to the community for all sorts of different reasons, you have to segment their interest. Some are interested in the business side; some are whisky fanatics, while others are investing in the product. We're still formulating where we can take and make use of the collective thought processes."

As for sustaining the business once the membership fees have been used up, plans for the Ladybank site, located in derelict farm buildings on the Bow of Fife, include provision for a whisky school, allowing for tastings, courses and group visits. Visitors, who will have to be guests of members, to the fully restored site will also be able to take away the vital asset that unites its members: a bottle of the single malt itself...

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