The founders of the Nine Rivers Distillery start-up reckon they have the measure of the Chinese drinks market, writes George Morahan
An estimated four billion bottles of spirits are sold in China each year, and 3.9bn of them are local spirits. The remaining 100m are imported western spirits such as gin, rum and whisky, but the local taste is for baijiu, of which nearly 17bn litres is produced.
China accounts for around 30% of global spirits consumption and whisky makes up just 1% of the Chinese liquor market, compared with baijiu’s 96%, according to consulting firm Ries.
Whisky sales in China peaked at €1.9bn in 2012 before a ban on entertaining at public expense as part of a major anti-corruption drive hit sales over the next decade, and they still haven’t recovered.
Euromonitor estimates that whisky sales in the country, which has a population of 1.4 billion, had a value of €1.7bn last year, and the market research company expect this to increase to €2.2bn by 2025 on the back of intense competition among western brands.
Jameson owner Pernod Ricard plans investment of $150m over 10 years in its malt whisky distillery in Sichuan province while Scottish distillery equipment maker Forsyth’s has kitted out a new distillery in Inner Mongolia.
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Elsewhere, Diageo has invested $75m to build its first malt whisky distillery in Yunnan province, and in total there are around 16 distilleries of note in China that are either in operation or under construction.
Among them is the 17,200 square metre site in Longyan owned by Nine Rivers Distillery, a venture established by western expatriates. After a ground-breaking ceremony in February 2022, the foundations will soon be poured, according to Stephen Alexander, one of the Nine Rivers founders.
Alexander used to live in Shenzhen and was working as a pilot for Hainan Airlines when Covid-19 hit China. The married father-of-three has since returned to Ryanair, working out of Poland while handling marketing, communications and social media for Nine Rivers and leading efforts in Europe to attract new investors.
The Kildare man explains that the Nine Rivers idea had its genesis in expat whisky clubs. Nine Rivers CEO Jay Robertson, who has worked in the drinks sector in China for 20 years, ran the tasting events that Alexander attended, and Robertson is very much the Nine Rivers main man.
The opportunity, Alexander says, is in undercutting established whisky brands that sell in China for €40 to €50 per 70cl bottle after shipping costs and taxes.
“From a commercial point of view, the market is there,” he says. “It definitely has huge potential to be very profitable. Our main focus will be single malt whisky to compete with the local Chinese spirits in terms of price,” says Alexander
Nine Rivers Distillery was initially funded with equity seed funding and convertible loan notes amounting to €2.2m. This went towards acquiring the 17,240 square metre land parcel for the distillery, architect fees, Environmental Impact Report and all of the other processes and procedures required to secure the building permits.
Other start-up costs include excavating the entire site, laying down 2,000 cubic metres of water storage, primarily for fire safety requirements, and to lay the foundations for the buildings.
According to managing director Hayden Zou, relationships with local stake holders are critical to the success of any project in China.
“Many people wrongly think that things in China happen naturally fast, and that if you grease a few palms things go even faster. Quite simply, this isn’t true for any serious business,” says Zou.
“China is one of the strictest countries in the world concerning construction and safety, with rules that are heavily biased towards the safety of staff and the general public.”
Zou adds: “This is doubly true for a distillery where fires and explosions are a possibility. There have been several instances where we wanted a specific design, but fire regulations wouldn’t allow it or the Feng Shui master would veto it. Fortunately, through concerted engagement, we have been able to build lasting relationships with important stakeholders in Fujian.”
Jay Robertson, CEO and founder of Nine Rivers Distillery, is known in China’s expat circles as ‘Mayor of Liquor Town’. This references Robertson’s decades of experience of importing western booze into China, as evidenced by the hundreds of whisky bottles on display in his office.
“In a way, he’s the glue that holds us together,” says Zou. “Jay has always said that the Nine Rivers Distillery project will always be about the people involved and not about him. But the fact of the matter is his vision and insane passion for the distillery are the reason we all got involved and invested in the first place.
“Jay is the most difficult person I’ve ever worked with, but he also happens to be the most talented person I’ve ever worked with.
“There’s method to his madness and he is a leader with vision, a nerd with a broad range of passions, and a good man who I trust with the future of this project.”
The venture has been seeking to raise an additional €14m since 2020, with €3.5m of that pledged so far. Venture funding is required to cover the cost of construction of the distillery, fit-out, and working capital.
The business plan calls for production of 1.3m litres of pure alcohol equivalent (or 7,000 casks) by the end of year one, rising to a maximum of 15m litres in 2016, which would make it one of the world’s largest distilleries.
The minimum investment in the venture is RMB25,000, equivalent to c.€3,650. The company says the shareholder’s agreement is structured to encourage people who are looking to invest for a minimum term of five years. And to stay in touch with progress, investors are expected to sign up for a WeChat account.
Main image: How the promoters envisage Nine Rivers Distillery when construction is complete
