Is Arran’s latest plan beginning to slip?

Every year, in my January-beginning breweries to watch post, I tip Arran as one to follow over the twelve months ahead. This is based purely on the number of schemes and ideas that the island brewery put out there; projects, pleas, plans for the future. Providing it keeps overall production under the 500,000 litre duty threshold, it seems as if nothing is off the table for Gerald Michaluk and Co. Since rescuing the troubled producer in June 2008, Mr Michaluk and his MMSI concern have rioted the flipchart, with a succession of ideas and press releases. Yet, seemingly, a few months down the road things take a turn against them, and the plans change. Just last week, a release plopped into my inbox that suggests yet another setback.

For Arran, 2014 hinges almost totally on their share offer, which was officially launched in November of last year. This was something they had talked about doing for a considerable while; back in early 2012 the initial hoped-for crowd-funded figure was estimated at £10m. In recent announcements, Arran seem to have quietly scaled back the projections to a target of £4m – presumably as a direct consequence of the Scottish Government turning down Mr Michaluk in his FPMC grant application, which lead to the cancellation of the projected merger with the Isle of Skye Brewery. Had the money come in at that point, acquiring another brewery would have given potential investors much more to get their teeth into.

‘Bouncebackability’ is a (fabricated) word that clearly holds sway on the island off the Ayrshire coast, and Arran dusted themselves down and thumped ahead with the next series of projects. The crux of the scheme was to open two mainland breweries – one at St Fillans on Loch Earn, and one at the old Rosebank Distillery in Falkirk, to which Arran had acquired the lease. The former looks to be a hotel/resort type thing, and the latter a destination for beer and whisky lovers, with a micro-distillery alongside the new brewery in the refurbed buildings. So far, so great – renovating Scotland’s industrial legacy should be applauded, particularly if the conversion is faithful to the original usage (i.e. not more Grand Designs-esque pseudo architecture porn).

Yet, again, a snag has occurred. In the press release that arrived last week (copied here on Beer Today), it was announced that the owners of the Rosebank building, Scottish Canals, have revoked the lease and are looking to sell the site. Reading between the lines, it looks to me as if Arran have run out of time – the lease was option to purchase, and taken out in November 2012. It seems as if Scottish Canals have decided to try for another bidder. They have, though, sent Mr Michaluk a first refusal note, that if Arran can find the money prior to any sale to a third party, Arran’s offer will be accepted, and any project can go ahead. However, others can now step in. Falkirk is a growing town, a tempting target for property developers with their deep pockets and oversized chequebooks.

Arran certainly weren’t at all helped by the decision of Falkirk Council to classify the buildings as ‘abandoned’, and therefore necessitating a full planning application for the work to be done, rather than a simpler renovation. But, the Rosebank distillery dates from 1864, and has been lying empty for over twenty years, so presumably MMSI would have performed a feasibility study prior to applying for the lease. As it stands, they have spent (according to the release) close to £100,000 on the project, and even with a £500,000 grant from Historic Scotland, are still well short of halfway to the £2m figure they state the project will require. Mr Michaluk sums it up like this:-

“Scotland is going to lose out to the micro-distillery boom which is already sweeping across the USA as brewers turn to this lucrative market to expand operations into. The fact that our English brewers are even ahead of us is rather a disappointment. It is now imperative that we raise the money from our share flotation to save Rosebank and enter this market. There is now a new sense of urgency as at anytime the site could be lost to a developer for alternative use.”

Micro-distilling is an interesting point, and one that other breweries are starting to look into. The English brewers Mr Michaluk refers to are Suffolk powerhouse Adnams, who released their whisky just prior to Christmas. On top of that, last week BrewDog announced they would be looking at installing a small still as part of expanding their Ellon brewery. It’s interesting that Arran’s press release of last week was entirely related to this part of the Rosebank acquisition – the word ‘beer’ wasn’t even mentioned. I think it’s a change of tack, a widening of the net; appealing to those who might see whisky as a potential investment, and the idea that there could be a booming market for small-scale, bespoke distilling.

Rosebank is a grand gesture, much like the merger with Isle of Skye was last time around. A statement of intent. It’s Arran’s Tactical Nuclear Penguin. This push for the remaining £1.4m investment to make it happen reveals just how critical the Rosebank project is for Arran’s development plans. If Barratt Homes step in tomorrow with a cartoon-esque bag of cash, bang goes one of the key components of Arran’s mainland expansion, once again. Time will tell as to whether this latest press release is a sign that the brewing part of the flotation needs some buoyancy from the ‘water of life’, but it certainly underlines that as they seek to raise investment, time could be running out.