Dan Szor is the founder of the Cotswolds Distillery and a pioneer of English whisky. Alex Oldroyd reports
A Wall Street financier whose career took him from New York to Paris and London, Szor seems an unlikely candidate to build a distillery in the heart of the English countryside and he freely admits the patience required for whisky can be challenging in comparison to the instant gratification of currency trading. He characterises himself as an expat foodie who indulged his love of wine and whisky with visits to vineyards, distilleries and food-and-drink events where he talked to the people behind the products.
Meanwhile, his dalliance with the Cotswolds began with a weekend home that enabled him to escape the stresses of London. The perfectly natural idea of bringing these two things together came to Szor one summer weekend when he was watching the barley undulating in the wind in the field behind his house, thinking about how the amazing resources of the local area could be captured in his favourite liquid, whisky.
He initially dismissed his ‘barley epiphany’ as a bit ridiculous but gradually began to float it with friends, only to find that some of them really liked the idea. He also took inspiration from the Bruichladdich Distillery on Islay, as well as from Lady Bamford’s successful Daylesford organic farm concept that was quintessentially Cotswolds.
The catalyst that finally spurred him into action was a visit to a whisky trade show in New York where conversations with some US craft distillers and other world whisky players started to suck him into the camaraderie of an industry where people take pleasure in the sharing of ideas and generously offer up contacts.
It was a complete contrast to the hypercompetitive world of finance, infamous for its self-centred, cut-throat culture. Szor knew he was ready for a career change.
Start of the journey
Armed with the names of a number of potential advisors and suppliers, he set out with his whisky-tasting best buddy for a tour of Scottish distilleries. Szor was particularly excited to secure a personal tour of Bruichladdich with the legendary master distiller Jim McEwan. McEwan provided inspirational conversation about whisky and Bruichladdich’s experimentation with terroir, a topic of particular interest to Szor. He sent Szor away with a loose endorsement of his idea, telling him to follow his dream and connecting him with some people who could help to make it happen.
A year later, in 2014, the Cotswolds Distillery was established. It had a beautiful building, high-quality equipment designed by Speyside coppersmith
Forsyths and commissioned by whisky veteran Harry Cockburn, and liquid influenced by the late Jim Swan, a chemist by training who had helped many successful new players in whisky and other aged spirits. The distillery team had relatively limited drinks industry experience. Szor had expected to hire an experienced distiller but managed instead to pick up a couple of recent graduates from Heriot-Watt University (one of whom was poached by Ki No Bi after about a year) and a whisky devotee with a background ranging from cage fighting to coffee shops (but not actual distilling).
Szor and his team continued to tap into the expertise of a number of well-known characters from the Scotch industry. His enthusiastic recruits learned quickly from the experts and were supplemented at the outset by similarly inexperienced but keen locals who helped with manual operations like bottling and peeling fruit for the gin —the bottling line has since been upgraded, but the citrus fruit is still hand-peeled.
The original idea was English whisky and the liquid for the flagship product was meticulously crafted, distilling local barley to be aged in a mixture of carefully sourced barrels, put together with the help of the experienced consultants. Szor spent a lot of time thinking about what a whisky from the Cotswolds should taste like. With richer soil and gentler terrain than Scotland, he settled on a “softer, fruit-forward liquid that would showcase the barley that had been used to make it”. This would be enhanced by the use of a combination of ex-Bourbon barrels and “shaved, toasted and recharred” (STR) ex-red wine casks.
This all comes together in the distillery’s flagship Cotswolds Single Malt Whisky, a 3yo expression made from 100% locally grown, floor-malted barley. This release is supported by a more premium range of higher-strength cask expressions —led by Founder’s Choice which is aged exclusively in STR American oak red wine barrels — and a number of limited editions, some of which are only available online. The whiskies were first released in late 2017 and have won numerous awards.
In line with many other startup whisky businesses, Cotswolds has a gin to get the brand in front of consumers and drive cash flow while the whisky matures.
The decision to make a gin was one of the “sliding doors” moments for the business, says Szor. It was created rather differently from the whisky, through an iterative and rather competitive research and development process involving his three young distillers experimenting with different botanicals and methodologies.
The immediate success of the resulting super-premium craft gin, packed with fresh, predominantly local, botanicals, unfiltered to give it a signature cloudy appearance in a glass and launched into a booming UK market, upended the business plan. Within two years, Cotswolds Dry Gin had won some big awards and Szor was running out of capacity, so he doubled down on gin, adding a bigger still. This
was a key moment, as it involved taking in more money and becoming more ambitious for the business as a whole.
The success of gin was not the only surprise that caused Szor to double down on a strategy. The distillery concept always had at its heart “a place that you would want to visit” and the visitor centre, located in pretty rolling hills on the tourist trail between Blenheim Palace and Stratford-upon-Avon, was always intended as a critical aspect of the business. With enough outside space to hold events with local celebrities, the distillery visitor centre’s success surpassed all expectations.
Szor extended it and added a couple of standalone outlets in tourist/weekender towns. In 2019, the three venues received around 100,000 visits between them.
When Szor lived in Paris, a French distiller friend had joked with him that he would be most at home selling whisky in his own outlet. “He was right,” says Szor. “I love it so much, I’ve got three now.”
Connecting with consumers
Cotswolds Distillery makes various other gins and speciality products, including a cream liqueur, two whisky amaro liqueurs, vermouth, limoncello and a couple of cocktail bitters. Their role is largely to cater for different tastes and sustain interest from regular visitors to the retail outlets and website. Szor says that having its own retail outlets with exclusive products help to enhance the brand’s craft credentials and anchor it in the Cotswold community. However, he adds: “It is not enough to proudly display your craft credentials, you need to be able to make a better product too.”
The retail strategy was going well until Covid-19 hit. Although production has only been slightly interrupted, the retail outlets and visitor centre have been closed for most of the last year. This, combined with the loss of the on-premise, meant the outlook was bleak as the pandemic took hold in March last year. However, Szor had already established a strong online presence and whisky lends itself particularly well to this channel. A renewed focus on web sales centred around Szor’s earliest desire for the Cotswolds Distillery brand — to connect directly with consumers, and they responded.
The company had a more off-trade bias than many craft players, partly because Szor didn’t feel particularly comfortable with the unique and energy absorbing mechanics of the British pub trade.
Fortuitously, he had hired an experienced commercial manager in 2019 who had already engaged more intensely with the off-trade. A couple of new supermarket listings, coupled with a 400% increase in web sales, enabled the company to increase sales and profitability year on year significantly in 2020.
Plans are in place to build on the success of these two channels to sustain momentum even if tourism and pub sales begin to slowly rebuild. Further off-trade listings have already been secured and Cotswolds has shifted to a third-party service provider to facilitate a scale-up of online sales.
The biggest operational challenge for the business has been scaling up in terms of the organisation, brand awareness and production capacity. Szor says: “As a founder you have to come to terms with trying to do everything yourself and then realising it’s too big to get your arms around it all, so you have to create a structure.”
Cotswolds adopted a management system specially designed for entrepreneurial businesses, which Szor says transformed the management team within six months by improving transparency and accountability. It is now being rolled out more widely across the organisation.
As for the brand, Szor says: “Though the brand resonates and gets strong sell-through, you never reach the point where you are known enough.” He points to production scale as the thing he would do differently if he were to have his time over again. “It doesn’t take much more capital to install a bigger distillery at the outset,” Szor says. “We didn’t set out with big-enough equipment; the hand bottling was fun but not sustainable, and we needed a bigger gin still.”
Luckily, Szor has been able to buy a neighboring piece of land for further expansion, but he adds that, apart from one cash crunch in 2016, the only thing that really gives him nightmares when he looks back is planning — planning applications represent a particular challenge if, like Szor, you choose to build in a designated Area of Outstanding Natural Beauty.
Angel investors, founders and crowdfunding fuel growth
Cotswolds has secured funding from a very wide range of sources. “Building a whisky distillery is way more expensive than you’d ever expect, you go from £70k for a still, which seems quite manageable, to over £1m for a full turnkey distillery,” says Szor.
Obviously, there’s the little matter of ageing inventory as well. At the outset, Szor invested his own money, including using his self-invested pension for the property, although he has since refinanced this with a company mortgage. He fuelled expansion through angel investors, one of whom turned out to be an important sounding board for him, and he raised money three times through crowdfunding, using a slightly different methodology each time.
Sitting somewhere in between these is the Cotswolds Distillery Founders Circle aimed at high-net-worth individuals. It is a combination of a bond paying a coupon, preference shares with a rolledup dividend and ordinary shares. The combination provides a slightly lower-risk exposure for the investor while limiting dilution for the existing shareholders.
Founders Circle investors also get early and/or exclusive access to some of the distillery’s products. The scheme provides a steady flow of funds as further packages are sold when money is needed, often through introductions from existing investors. The second iteration, Founders Circle 2, began in January with the goal of raising at least £1.5m ($2.1m). Since its launch in 2014, Szor has raised over £12m through crowdfunding and the Founders Circle. He says he likes to maintain a comfortable level of cash, but is also constantly investing ahead of growth having just secured a neighbouring piece of land for future expansion and building whisky inventory in anticipation of sales growth.
The decision to set up the Cotswolds Distillery has changed Szor’s life, of course. His wife, happy to move out to the country, fully embraced the project, despite the early financial risks. She talks as enthusiastically to consumers at trade fairs as any of the employees, but then she goes back to her rather contrasting day job as a neurologist. Meanwhile,
Szor’s mind is constantly churning around ideas for the business. “Had I not done this, I would never have believed work could be a passion that you live for, although it can be difficult not being able to switch off when you get home,” he says. Rather ironically, the couple now ‘escape’ to London for the occasional weekend for theatre, food and a different social scene. The distillery itself is every bit the creative and social hub Szor had hoped for at the outset. The social life of the Cotswolds had drawn them in as weekenders, but their immersion has been accelerated by the distillery as it has put them at the centre of a wider community.
He says: “It’s great to be the guy that brought whisky to the Cotswolds. A distillery in the Cotswolds is a fantastic legacy when whisky is associated with so many good things and happy times.” ●
