The futures of whisky Capital K Distillery seeks investors to sponsor a barrel of booze
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Hey there, time traveller!
This article was published 25/02/2020 (1192 days ago), so information in it may no longer be current.
When Capital K Distillery bottled its first batch of Tall Grass Vodka in December 2016, it became the first craft distillery in the province.
In three years’ time, the first batch of Tall Grass Whisky will be finished aging and Capital K will become the first Manitoba craft distillery to produce whisky.
In the meantime, the company is the first to offer investors the chance to invest in its whisky production — whisky futures, in effect.
Jason Kang, the founder and owner of Capital K, said the novel investment/marketing scheme is a way to attract capital and brand loyalty
The company is seeking investors, nominally, to sponsor a barrel for $3,000. They will receive a six per cent annual return for three years, when the principle will be redeemed. There are a couple of different options including leaving the money in the company for a couple of extra years with a slightly higher return rate for the additional years.
Investors will also be privy to a number of additional benefits like tasting opportunities and discounts.
Kang is always looking for new ways to get the word out about his locally made spirits. And since there’s always a financial struggle in starting any new business this program is a way to both help fund a three-year investment the company is making and hopefully create a whole new coterie of loyal customers.
“We are not looking for traditional investor who buy shares in the company. In this case the investor is just looking at one specific program, which is whisky barrel aging.”
– Jason Kang, the founder and owner of Capital K
“We are not looking for traditional investor who buy shares in the company,” said Kang, although he did allow that they would be open to that as well. “In this case the investor is just looking at one specific program, which is whisky barrel aging.”
There are significant technical and financial disclosures — and risk — when making investments in a company. That is not what Capital K is looking to do.
“The investor is just looking at whisky sitting in the barrel,” he said. “That speaks for itself.”
The novel approach may be just as much about the marketing impact as it about the financial consequences for the company.
Lindsay Gillanders, Capital K’s marketing manager, said it has always been a challenge to come up with a marketing budget. The company has to mostly rely on word of mouth, social media and doing promotions at events.
“In the original business plan we were going to take advantage of a small loan program that the previous government was offering but when that went away we were up and running but we were short our $250,000 marketing budget,” she said. “It has been a struggle. We’re not only competing against monster brands like Smirnoff, also it’s tough getting the word out. Marketing is not cheap.”
Kang has already run a successful test batch of his rye whisky in smaller barrels, so he already knows the recipe is a good one and he can embark on a commercial run confident that the result will be a premium whisky.
Smaller barrels cuts down on the time the whisky needs to age, but it’s too expensive a process to produce commercially.
Production is going to be phased in with the first 100 barrels (and hopefully the first $300,000) will start in March. Another 60 will be launched in December and another 40 the following September.
At this point the material regarding the investment can be found on the company’s web site is fairly simple. There are protocols that have to be followed to comply with securities regulations in the province. The Manitoba Securities Commission does allow for exemptions from producing a detailed prospectus like, for instance, if the investment is only being offering to accredited investors.
Martin Cash has been writing a column and business news at the Free Press since 1989. Over those years he’s written through a number of business cycles and the rise and fall (and rise) in fortunes of many local businesses.