Cashing In

This pas252_New100front2t weekend, Bloomberg news reported that Utah-based High West Distillery has retained investment bank UBS Group to shop the company, and that Pernod Ricard is one of the likely bidders.  The potential deal size – a cool $100 million.

As a corporate and mergers/acquisitions lawyer by training, I’m not exactly jaded, but I’m also not entirely surprised to see 8 figure deals discussed in the news.  In fact, transactions in the hundreds of millions of dollars (and up – Bayer just bid $66 billion for Monsanto – that’s a lot of aspirin) aren’t all that uncommon.

But from the standpoint of a HoochLawyer who often works with very small producers – I’m quite impressed with this (potential) deal.  High West started in 2009, so it hasn’t been in business all that long.  And to be fair, Utah isn’t necessarily the state that first comes to mind when you think about hooch.  Furthermore, most of the big transactions that we’ve seen in the U.S. spirits industry in the past have quite naturally involved spirits from Kentucky.

So what makes High West so special that it can command this kind of a price tag?  The simplest answer is that High West isn’t really just a spirits company – it is a resort.  The distillery is only one part of a larger assemblage of ventures and properties – all conveniently situated near some excellent skiing – which include fine dining, a saloon, a general store, and a whole lot of gorgeous Wasatch range real estate.  High West offers its patrons something well beyond what is in the bottle.  They’re offering an experience.

There are some key lessons here for smaller producers who may be thinking about how to take their spirits brands to the next level of success or looking forward to a similar liquidity event in the years ahead.   One of the most important lessons may be that while the quality of your product is very important, it is also critical to understand that your product isn’t limited to the liquid coming out of the still or aging away in barrels.  Rather, your actual product is what you provide to your customer.  That includes the experience of sipping the hooch, but it probably doesn’t stop there.  It likely also includes the way your customers feel about your product when they look at your labels or sit in your tasting room.  You can’t get so focused on the craft in your spirit that you forget about the customer experience.  Most of High West’s whiskey has historically been sourced and not internally distilled.  That doesn’t mean it isn’t good whiskey.  It means that at some point High West figured out that they didn’t need to make their own whiskey in house in order to provide their customer with a great experience.

I should note that High West isn’t alone in having figured this out.  There are numerous smaller spirits brands that are pushing down this path on a smaller scale and finding success.  I had the pleasure to visit one of them recently – Bluewater Organic Distilling in Everett, Washington.  Bluewater is a combination distillery, cocktail bar and full service restaurant.  In addition, they regularly offer classes on the preparation of specialty cocktails as well as yoga sessions.  In short, Bluewater appears to be working to become an institution in their city and the region.  While I can’t say whether this is by design in the context of seeking a future liquidity event, I’m confident that if and when they begin looking for that potential transaction they’ll be better prepared to tell the story of their business and find a buyer as a result of this hard work.


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