Mark: I have been thinking a bit about the show you had on The Pattisons’ Empire and in particular two questions - what have we learned and could it happen again. Putting aside the specifics unique to the Pattison’s including fraud, I believe the industry is destined to repeat the boom-and-bust cycle. It would be interesting if you were to assemble a small panel and have them discuss the topic, say a few small producers. I think it would make for a great show and create some useful material that users could mine for years to come. Some thoughts on potential line of discussion include the whisky industry is challenging, in particular if you wish to be involved in all aspects from production to retail sales. Challenges include: • It is very capital intensive to build production and storage facilities. • There is a long lead to first sales, 3 years, this requires additional financing. • If you want to have older aged product, you need to finance even more inventory. • Distribution is cumbersome, expensive and subject to changing politics. However, there are other options – just be a producer, make blends, think about your scale. The outcomes are different depending upon markets. In addition, the history in Scotland of retaining “silent stills” and plants means production can resume quickly following a shutdown. There is a lot of topics you could cover including what do you have to believe to start a distillery? (and conversely what could go wrong) For example: • General economic – stable to positive in markets you are targeting, stable input costs. • Social – alcohol consumption trends • Trade - No new trade restrictions • Unique product characteristics – four Ps of marketing • Availability of funding • How to manage slowdowns, etc. I would love to hear some experienced producers talk about it. Tyrone PS In the early 2020 a small group of us did a zoom call with Louis Reps, co-author of The Rise and Fall of Pattison Whisky of Leith. My notes from those discussions on what might have happened to Pattisions included: • They started by slowing building the business using supplier credit extensively. • They then brought in banks to fund the buildings and growth in working capital. • They then use pro-forma accounting to make the public company books look better. • They then took IPO money and either used it for marketing expenses, personal purposes and other. • Once sales slowed, they did not have the cash flow to keep paying lenders, preferred shareholders and suppliers. • The drop in values of inventories exasperated an already difficult situation with their inventory. • Contributing factors (not drivers) - incompetence within the company, incompetent auditors and fair value accounting, role of bankers, lawyers, press

Posted by tyrone.cotie at 2025-04-23 13:17:21 UTC