Starting an on-site distillery may not be an obvious step for a potato farm, but for the 200-acre Colwith Farm in Cornwall it’s been a good move. The region’s first plough-to-bottle vodka, produced by Colwith Farm Distillery, has been named one of the best in the world after winning double gold awards for three years running at the San Francisco World Spirits Competition. It’s now stocked in Harvey Nichols and Selfridges, as well as at the Eden Project and local farm shops.
Distillery founder Steve Dustow, whose family runs the farm, had built a career in construction project management before starting the project. He says that being open to diversification opportunities as a business owner helped when the Covid pandemic hit.
In January 2020, the distillery had just opened an on-site tasting room and started offering vodka-making experiences and tours. “Our whole business model was pulled from beneath our feet,” Dustow says. “I put everyone on furlough. Then the phone kept ringing with people asking if we were making hand sanitiser. A week later I pulled all of our staff back in and we did 250,000 bottles that year. I bought solar panels with the profits.”
Creating ready-to-drink (RTD) cocktails such as espresso martinis using the distillery’s gin and vodka was another profitable addition to the product line. “We made them all from Cornish produce and they were designed to go through a letterbox. We sold a lot of those.”
For many SMEs, external pressures such as the pandemic, Brexit and high inflation have highlighted the need to be as agile as possible. Research by the Federation of Small Businesses found 15 per cent of SMEs that stayed open during lockdown diversified into new services, and 10 per cent produced new products or goods.
For many, that innovation is still happening. An exclusive YouGov poll commissioned by The Times and Lloyds Bank found 31 per cent of SME owners have grown their business by diversifying and identifying new markets over the past year. Four in ten say they plan to diversify into new markets, products or services.
Lee Reeves, UK head of agriculture for Lloyds Bank, says it highlights a real mindset shift, even in the face of adversity. “Pre-pandemic, there was a bit of fear of treading into the unknown. But when Covid came around, it accelerated people’s decisions to diversify to protect their livelihoods.
“There’s still a lot of volatility and uncertainty at the moment, but we’re seeing SMEs are happy to look at ways to diversify to become more profitable, more sustainable and more resilient. Some are even going back to do a second or third diversification project because they can see it de-risks the business model and generates extra income.”
While Colwith Farm and the distillery are run as two separate businesses, there have been benefits for both. As well as procuring all of the necessary potatoes from the farm (many of which are too small to be sold and would otherwise go unused), the distillation process produces waste that is then spread back onto the fields. And Dustow makes use of his brother’s tractors when needed.
For this farm, staying viable in challenging times has been all about diversifying
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A lot of bottle
Steve Dustow left a career in project management to establish Colwith Farm Distillery
Full steam ahead
Dustow is keen to diversify and develop a whisky next
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From spuds to spirits:
“I can’t afford a fancy £100,000 tractor but Chris has got one,” he says. “It’s very much a team effort. My dad bridges the two businesses – he’ll help me with deliveries, fixing equipment when it breaks. We’re established in the local community, so there’s an existing brand awareness too, although a lot of the relationships I manage day to day at the distillery are new ones. It’s a completely different product.”
He admits there have been challenges, not least getting the requisite licences to become a distiller before the site was built back in 2017. “Around 90 per cent of distilleries buy in pure alcohol and then secondary finish it, but to do it from scratch is really complex and very unusual,” he adds.
“It took two to three years to get all of the licences. But for a long time we were in a scenario where I couldn’t get money to build the distillery because I didn’t have the licence, and couldn’t get the licences because I didn’t have a distillery.”
In the end, Lloyds Bank provided the funding, which Dustow puts down to the existing relationship Colwith Farm had with the bank.
“The family has been with Lloyds Bank for a long time and it’s that relationship that meant they agreed to give money to a construction project manager to start a business in something he’d never done before. With hindsight, it was remarkable we had the support we did.”
Research source: YouGov, sample size 1,000 SME senior decision makers, survey dates August 14-21, 2023. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under Registration Number 119278.
The MTC also offers a number of support programmes to help SME manufacturing businesses achieve higher levels of productivity and innovation, while reducing costs.
On its free consultative line walks, MTC experts can address challenges such as sustainability and supply chain robustness, while also helping businesses to consider the adoption of new technology and digitalisation. More than 500 Lloyds Bank manufacturing clients have benefited from this free service to date, generating more than £5 million in additional benefits.
“The MTC can advise on how to remove waste, adopt new technology, and integrate robotics and automation into a production line,” says Lloyds Bank’s David Atkinson “It can also advise on sustainability.”
This was the approach followed by one business that manufactures and installs high-quality radiation-protection products, and which worked with the MTC to reduce its lead times by 50 per cent. By coaching and upskilling its workforce, improving planning and scheduling, and better leveraging its business data, the SME reduced its lead times from 16 to eight weeks, lowered production costs, and increased sales by 10 per cent.
YouGov data commissioned by Lloyds Bank found that 83 per cent of SMEs believe it’s important to invest in new technology, but many will need help to optimise that investment, says Atkinson. “Reaching out to the supply chain and making use of connections through the MTC can help SMEs see where they need to invest. With the right support, SMEs have the potential to be fantastic growth stories.”
TAILORED SUPPORT
FOR SMEs
of businesses have plans to diversify into new markets, products or services
32%
of businesses have experienced barriers when looking to diversify
17%
of SMEs don’t know what diversification looks like for their business
24%
How do you think AI will impact your business?
24%
40%
7%
9%
14%
19%
of businesses have plans to diversify into new markets, products or services
of businesses have experienced barriers when looking to diversify
of SMEs don’t know what diversification looks like for their business
Reeves says any diversification project has to start with detailed research – what is the business looking to achieve and why? Are there any underused assets that can be better deployed? What investment is needed? Are there any risks and mitigations that may have an impact on the existing business? Above all, he adds, be realistic.
“Often people underestimate how much time and money they need and budgets can overrun quite significantly. Speak to people who have already done it. Understand the journey they’ve been on, the risks they’ve had to think about and how they’ve made it successful.”
Back at the distillery, Dustow has plans to develop a whisky in the future. The farm already grows barley for animal feed so there is a ready supply of raw materials to hand. The team is also working on a trade solution for its RTD cocktails to support the local hospitality sector, which has been squeezed by a skills shortage and rising costs.
His advice to other SME owners thinking about innovation is to “use the resources you’ve got available, do as much as you can yourself and be super hot on the numbers”.
Dustow says both he and his brother are pleased by the legacy such diversification will create for generations to come. “We’ve got six kids between us. I had to go away, learn my trade and come back because the farm wasn’t big enough to support both my brother and me. We’ve now created something where there are opportunities for our kids in marketing, sales and accounts, as well as driving tractors. That’s really important.”