Westland Distillery – Crafting America’s Finest Single Malt Whiskey
Westland Distillery is boldly creating a truly unique product- an American Single Malt Whiskey
Westland Distillery was launched in 2010 in Seattle, WA with the customer promise to create a distinctly American-style single malt whiskey, using the Washington state-grown ingredients. I chose Westland as an excellent example of effectiveness. Westland creates and captures value by crafting a high quality, distinctly American Northwest product by using ideal geography, as well as innovative production inputs and process steps within its operation model.
Westland’s first step in achieving success of its business model is precisely focusing its operational model around only three products. While most distilleries take a broad approach, offering a host of spirits, Seattle’s Westland Distillery prefers to hone in on a very specific target: they make single malt whiskeys.1 Specifically, Westland’s three offering are American Single Malt, Peated Malt, and Sherry Wood whiskeys. Such specificity allows for greater attention to craft quality, as well as ease of scaling.2
Westland’s founders, Emerson Lamb and Matthew Hofmann, also crucially recognized that the geographic and climatic qualities found within the Puget Sound region of western Washington were conducive to the production process of single malt whiskey. The Puget Sound region is ideal for two key reasons. First, the proximity to an agricultural region suited to hardy crops, such as the barley used in Westland’s whiskey. Second, the region’s similarity to Scotland by virtue of its cool, temperate, and humid shoreline which sees relatively little overall temperature variation throughout the year, giving the whiskey a unique taste as it ages.3
The raw materials (ingredients) Westland uses in production further establish the distillery as innovative and distinct. First, while most American whiskeys are distilled from corn, rye and wheat, Westland, like old-world single malts, is made exclusively from barley grown in the Skagit Valley of western Washington.4 One of the most important decisions Westland has made within their operation model is to leverage the expertise of the Skagit Valley Malting Co. (SVM). SKM has designed precise, proprietary, (and very tightly-guarded secret) adjustable malt equipment which can customize every phase of the malting process to develop malt from many different grains even if their malting cycle times vary widely, effectively making SKM a uniquely “custom malt shop”.5 Westland saw the potential of the SVM’s equipment and process and signed contracts with SVM early within Westland’s existence to guarantee small batches of customized malt varietals. This operational relationship allows for unique, artisanal blending of Washington barleys to create such distinct whiskies.
To create their Peated whiskey variant, Westland, like all traditional Scotches, dries malted barley with smoke from fired peat. Unique to American whiskey distilleries, however, Westland built a 6-acre pond exclusively for the harvesting of local Washington peat. But Westland’s operational model goes one step further. To ascertain the perfect peat for the barley drying process, Westland uses tractors to dig much deeper into the earth (up to thirty-five feet under the lake). Each level of a peat bog has unique characteristics, including the burn rate, and flavor which the barley (and by extension the whiskey itself) will absorb. Westland blends peat from various levels within the bog to combine the slow-burning, cooler flame of the bottom-level peat with some of the more-flavorful compounds of top-level peat to increase the absorption of smoke, while creating a more dynamic set of aromatics and flavor.6 This process step has never been done before in the United States.
Once the whiskey is actually distilled in Seattle, the final process step is aging. Here again, Westland is innovative and unique. Westland’s whiskey is aged in new American oak barrels. The use of new oak barrels is almost unheard of in Scotland; most scotch is aged in used oak barrels, which allow the spirit to mellow and develop without imparting all that much flavor.7 By instead choosing to age its whiskey in new oak, Westland is creating a scotch imbued with a hint of bourbon in its bouquet. Westland’s whiskey is aged for 27 months in a non-temperature controlled rack house in Hoquiam, WA, allowing the colder and moister air to reduce expensive evaporation and influence the flavors of Westland’s ultimate profile.
Westland has become one of the largest and most successful single-malt producers in the country. The unique infusion of ingredients, location, and production processes allows for an effective marrying of business and operation models at Westland Distillery.
1 Tobias Carroll, “The Rise of West Coast Whiskey”, MensJournal.com, November 10, 2015, http://www.mensjournal.com/food-drink/drinks/the-rise-of-west-coast-whiskey-20151110, accessed December 2015.
2 Telephone conversation with Scott Fell, Distillery Manager of Westland Distillery, 07 December 2015.
3 J. Ryan Stradal, “Must You Know Scotch Lingo to Enjoy a Single Malt?”, Wall Street Journal, September 3, 2015, http://www.wsj.com/articles/must-you-know-scotch-lingo-to-enjoy-a-single-malt-1441293906, accessed December 2015.
4 Ronald Holden, “The best single malt in Seattle? Check Westland Distillery”, Crosscut.com, March 10, 2015, http://crosscut.com/2015/03/best-single-malt-seattle-check-westland-distillery/, accessed December 2015.
5 Aubrey Laurence, “‘Custom’ maltster Skagit Valley Malting Co. producing locally grown malted barley”, Tap Trail, March 18, 2015, http://www.taptrail.com/custom-maltster-skagit-valley-malting-co-producing-locally-grown-malted-barley/, accessed December 2015.
6 David Driscoll, “Westland Distillery”, K&L Wine Merchants, August 7, 2015, http://spiritsjournal.klwines.com/klwinescom-spirits-blog/2015/8/7/westland-distillery-day-3-the-building-blocks-of-industry.html, accessed December 2015.
7 Zach Gabelle, “The Bar Code: Westland Distillery Debuts a Delicious Single-Malt Whiskey”, Seattle News Weekly, November 19, 2013, http://www.seattleweekly.com/home/949857-129/the-bar-code-westland-distillery-debuts, accessed December 2015.
What are the barriers to entry in this industry? Is it drastically different than the craft beer business, where a influx of entrants have drove down market share and margins? Westland Distillery claims to be located in a prime location for distilling single malt whiskey, but can’t another distillery open up in the Seattle area, reaping the same benefits of climate and access to raw materials? Finally, I am not convinced that the Puget Sound area leads to better climate for the production of singe malts than the mountains of Colorado, equally close to raw materials, and home to Ten Mountain Whiskey. To further investigate this issue, a tasting of the various whiskeys may be required.
This is a good question. One key advantage Westland enjoyed over its competitors was financing; the founder, Emerson Lamb, is essentially Pacific Northwest timber royalty. His family has a large fortune and deep connections with other high net worth families who provided Emerson Lamb ad Westland with significant start-up capital which not only allowed him to reach a larger scale of production immediately, but allowed Westland the time to develop and perfect its production processes without generating cashflow. Many other start-up distilleries must produce tequila or, more commonly, vodka, while their first production runs of whiskey mature in order to generate much needed cash flow to “keep the lights on”.
Looks like a tasting will need to be setup next year. I like the write-up but am curious about their financial health and how that might change their operating model. This business is very capital intensive–do you see larger players (Diageo, Suntory/Beam, etc) coming in and giving them an offer they cannot refuse? Would the west coast ethos lead to a decision to remain private and local despite large financial offerings in this case? Scotland has seen a majority of their distilleries (90%+) bought up by the larger players over the years.
I honestly didn’t think Emerson Lamb would ever “sell out” and go public; however, according to recent Seattle press releases (see below), Emerson has left and the company is now being run predominantly by the Master Distiller, Matt Hoffman. This may leave the firm vulnerable to that “sell-out” temptation. Sounds like Westland is in desperate need of two ambitious HBS grads! Let’s do it, Tom!
http://seattle.eater.com/2015/11/12/9724422/emerson-lamb-is-out-at-westland-distillery
Nice write up Keith! I’m interested to see how Westland Distillery builds their presence in the whiskey scene in the coming years.
Evaluating the business model and operational approach of a distillery is an interesting exercise, due to the difficulty in answer “What does our customer value and want/need in their whiskey?” and then determining an appropriate customer promise for the firm to make. As you laid out, Westland Distillery has made several specific, and quite costly, choices in developing their unique whiskies (barley from Skagit Valley, where to place their distillery, harvesting Washington peat, etc.). At the end of the day however, people’s desired flavor profile in whiskey varies so greatly that it is incredibly difficult to know whether the specific choices they made result in a “superior” whiskey. However, what Westland Distillery has going in their favor, is the story behind their whiskies and the novelty of their chosen approach. For modern drinkers of whiskey, this is an incredible value-add, as whiskey is more of an experiential beverage than most, and the story and associations the customer has with the beverage are what set distilleries apart. In Westland’s case, they have the unique ability to resonate with a strong Pacific Northwest culture that is very much so a trend-setting demographic nationwide.