Kathleen Davies joins us in this instalment of Drinks Adventures, for a chat about Australian craft spirits and her distribution business Nip of Courage.
Founded in 2013, Nip of Courage is the first ever distributor to represent exclusively Australian craft spirits, and the country’s first spirits distribution company that is female-owned.
Kathleen also founded and distributes the Aussie Tipple Company range of bottled cocktails, which includes a Negroni, a Dry Martini and an Espresso Martini, all made exclusively with ingredients sourced from Australian artisan producers.
So as long as you’re listening at an appropriate time, settle in with a nip of a fine Australian spirit and enjoy this chat with Kathleen.
Theme music ‘Sandbox’ by Rudists.
Australian craft spirits with Nip of Courage founder Kathleen Davies: Full transcript
JAMES ATKINSON: Well Kathleen Davies, thanks so much for joining me on the Drinks Adventures podcast.
KATHLEEN DAVIES: Thanks for having me, James.
JAMES ATKINSON: So Nip of Courage just celebrated its fifth birthday, didn’t it?
KATHLEEN DAVIES: We sure did, James, yeah. It was a huge milestone for us.
JAMES ATKINSON: Tell me about the last five years, what’s that been like for you? When you look back at your decision to embark on this Australian craft spirit journey, was it a good decision to go down that path?
KATHLEEN DAVIES: Yeah I think it’s still a really exciting time to be part of the industry and the whole emergence of Australian craft spirits. Back when I first started the business, it was only about 40 craft distilleries that were known throughout Australia. Now there’s over 180. So it’s grown significantly in the last five years.
JAMES ATKINSON: 180, that’s actually significantly more than I thought. I mean it must be a rate of one every couple of weeks at the moment then.
KATHLEEN DAVIES: Yeah, and look, there’s a lot more liquor licenses waiting to be approved as well and wholesale producer licenses with more distilleries trying to open as well and get council approval. So it’s been a mini explosion of small distilleries everywhere.
JAMES ATKINSON: And do you think, and this is something that you hear people ask all the time, you’re probably sick of being asked this question, but is it sustainable, the number of new distilleries we’re seeing on the market?
KATHLEEN DAVIES: I think so. What a lot of people don’t realise is, that Australians in terms of volume drink less than one percent of Australian made, Australian owned craft spirits. The rest of what we drink here in Australia is actually imported or foreign owned. So I think there’s definitely more market share for Australian producers to gain in the next few years, but I do believe that business acumen is key and marketing is also key to reaching out to the Australian market and the Australian drinkers.
JAMES ATKINSON: Tell us about the portfolio of brands that you’ve got currently. Has that changed much since you launched early on?
KATHLEEN DAVIES: It has actually. So we manage in our portfolio about 40 different lines. We’re currently working with five distilleries plus our own brand, which is the Aussie Tipple company, which actually promotes brands within our portfolio and other Australian producers – a bottled cocktail company.
KATHLEEN DAVIES: In the early days, we had as many as 12 craft distilleries in our portfolio. Obviously back then they had less lines per distillery, but it was still really difficult to manage that amount of producers. What we have now is quite manageable. We’re focusing on growing their businesses because market share is really important right now in Australia and trying to gain volume for the brands that we’re currently working with.
KATHLEEN DAVIES: I think what’s really made it challenging at the moment is, if you look at the alcohol market and break it down into different channels, there’s probably about 30 different channels that we can work with. And when I say, “Channels,” everything from Duty Free to cruise ships to small bars to retail bottle shops, all these little channels that we can be working with. At the moment, the Australian market or the Australian craft distilleries are all fighting for maybe four or five of those channels where we could be aiming for the whole 30 to grow our market shares.
KATHLEEN DAVIES: So that will come in time, I think the next few years, and that will also help us gain better market share I think as well against overseas players.
JAMES ATKINSON: What are some of the other challenges of running a spirits distribution business in Australia?
KATHLEEN DAVIES: Managing just Australian producers is extremely high maintenance. A lot of the guys that I’m working with are startups and a few of them haven’t been involved in the liquor industry before. If you look at my colleagues in the industry that have distribution businesses, they’re working with overseas principles or overseas brands, which have more experience in the industry and have worked with other markets before and generally understand distributor supplier relationships.
KATHLEEN DAVIES: And they might only step into the Australian market once a year to see how their business is going in Australia, whereas with the business model that I’ve got, because they’re all local, they’re constantly in the Australian market looking at their brand and yeah, sometimes that side of things, we might get a distiller saying, “Oh my mate was up in Timbuktu when he was in the pub there and our product wasn’t in the bar. What are you going to do about it Kathleen?” It’s sort of like, yeah, okay. So the overseas guys don’t really get that with the overseas principles, but we do with local producers.
KATHLEEN DAVIES: I’m trying to help the industry as much as I can by helping with sharing of information on how the industry works to help these new distilleries starting up in Australia so that they can make themselves more attractive to local distributors here as well.
JAMES ATKINSON: Have you noticed an increased appetite for Australian craft spirits among the customers that you’re dealing with?
KATHLEEN DAVIES: Yes, and I am finding that people becoming more focused around supporting distilleries that are closer to them as well, which didn’t happen in the beginning. I started in my hometown, Sydney. I pretty much started pounding the pavement for two months and did not get a single sale. It was really discouraging and I remember coming home one night to my husband and just saying, “What the hell am I doing?” I’d pretty much turn up at bars and say, “I’ve got these products,” and they’d say, “What brands are they?” They’d turn around and say, “Never heard of them before,” and pretty much, “Bugger off.”
KATHLEEN DAVIES: In Melbourne, people would say, “What products have you got? What brands?” When you told them what the brands were, they’d pretty much say, “Never heard of them, get your butt in here and show them to me.” So it was a different mindset in Melbourne and looking back, I think that attitudes come from … In Sydney, a lot of the head offices of the big global companies are based here. They tend to have a lot of influence around the Sydney market in general with bars. And so that was a huge thing for me starting out.
JAMES ATKINSON: What inspired you to launch the business and what’s your background in drinks industry?
KATHLEEN DAVIES: Yeah so I’ve been in the liquor industry now for just over 26 years. I’ve worked for a lot of big corporates and blue chip companies, Carlton & United Breweries, Lion Nathan, all the big companies, Coca Cola-Amatil. I think it got to a certain point where my opportunities were limited and I was looking at a bit of a glass ceiling in my career. So I ended up going back to working with small businesses because I was passionate about that. And the opportunity came up to start this and I thought it would be really easy. I was in export at the time and saw that the craft beer boom had already taken off years ago in the US and the UK and the next trend that was happening was craft spirits.
KATHLEEN DAVIES: And I thought, “Who is championing that in Australia in terms of distribution?” And there wasn’t anyone at the time that I could see that had a focus on it. When I started drilling down into researching what was going on, I realised that most of these distilleries were based in rural or remote areas. And that’s why a lot of people didn’t even know they existed. And I rang up a few in the early days and said, “Oh, I’d love to represent you. This is my business plan, would you be interested?” And they basically said, “No. You’re about the 10th or 20th person that’s asked us that and let us down and we’re not really interested.”
KATHLEEN DAVIES: So I realised at that point for them to take me seriously, I’ve got to go out in person and see these people, touch the flesh and show them my conviction and what I want to do and why I’m passionate about this. My grandfather told me years ago that you should look a person in the eyes, shake their hand, and do business that way. It’s almost like going back to the old days of doing business and a handshake agreement, that’s all how it sort of started rather than doing things electronically or over the phone.
KATHLEEN DAVIES: So I packed my bags and pretty much went around Australia and rounded up all of the distilleries that I wanted to work with and knew about at the time.
KATHLEEN DAVIES: The other thing that I really had to do was differentiate myself from other distributors and I looked at what the weaknesses and opportunities, strengths and threats were with these small businesses in the middle of nowhere and thought, “What can I bring to their business that’s a little bit different?” And I decided that I would use some of the things that I’d learned in corporate life and try to help them with their business by doing marketing plans and help them with their business plan to get more people through the door of their cellar doors and almost have turned my business into a brand itself by doing that.
KATHLEEN DAVIES: So it has helped open a lot of doors with different customers, just having Nip of Courage as a brand for Australian producers and I don’t just promote my own guys that I look after, I try to promote the industry. I keep a directory on my website page and things like that as well to try and help people find where distilleries are around Australia.
JAMES ATKINSON: I’m sure that the climate is vastly different now for Nip of Courage when early on, you had to make cold calls. A bit, the shoe’s on the other foot now and you’re getting a lot of approaches. Are you looking to build the portfolio and if so, what are the real things that are crucial for you in considering if you would take on a brand?
KATHLEEN DAVIES: I’ve had a lot of distilleries come and go. We haven’t seen eye to eye and that’s just life and that’s business. And we’re all small business owners working together, so it’s not always going to be the perfect bit. But we do get approached a lot now, and what we do look for are people that are willing to receive feedback, is a really big thing. We’re definitely not the biggest distributor in the marketplace and we’ve got a long way to go and grow, so we need people that are understanding of that. We also need people that make spirits in an authentic way that’s good quality and got a good story behind them as well. And as stupid as it sounds, we need to get on.
KATHLEEN DAVIES: When the distillers come to Sydney, they come and stay at my house. My husband and I don’t have any children but we’ve got lots of bedrooms. Instead of the pitter patter of children running around the house, we have the pitter patter of distillers when they come.
JAMES ATKINSON: Probably a bit of a heavier sound than pitter patter.
KATHLEEN DAVIES: Especially after a few drinks. But yeah, so we do that so that we can help each other’s businesses and generally when I go out to the regions and visit my distillers, I’ll crash on their lounge or their spare bed or whatever to save a bit of money as well because it is expensive when we all travel around Australia.
KATHLEEN DAVIES: One of the biggest challenges for distribution in general across Australia for any business, big or small, is just the cost of transport and logistics. So Australia being such a big land mass with small population, it’s a huge challenge in every business.
JAMES ATKINSON: Now you’ve said before there are 180 distilleries in Australia. There’s probably a lot of other brands that are being made that people might think are distilleries but are actually contractors. Still, you’ve been fairly outspoken I think about the importance of distinguishing these brands that really are distillery brands from these contract brands. Maybe you can talk about that.
KATHLEEN DAVIES: Yeah. And look, there is nothing wrong in my view with contract distilled brands. But they shouldn’t be claiming that they’re distilleries in my view. To actually have a distillery operation, there’s a huge amount of overheads and expenses involved. A lot of the distilleries that we work with, they have got their house on the line to fund their cellar doors, their distilleries in general and just the upkeep. Contract distilled brands don’t have the distillery upkeep or overheads, so there is a distinct difference. That’s why on our website, we just list, well a distillery’s a distillery and a cellar door’s a cellar door. So that’s why we’ve only listed those specific ones on our website. Independent bottlers and contract distilled brands is a very different thing.
KATHLEEN DAVIES: In fact, my own business, Aussie Tipple, is a contract distilled brand. You’ll see that that is not on the directory of distilleries either. So yeah, it’s just important that people understand the difference as well. That’s why sometimes you might see contract distilled brands being a little bit cheaper because they don’t have those overheads that the distilleries have.
JAMES ATKINSON: And you’ve chosen only to work with the brands that have that authenticity of having a distillery and having a cellar door that people can visit, is that right?
KATHLEEN DAVIES: Yeah. We look a the following things, exactly having their own cellar door that we can help promote, having their own still, even growing their own ingredients as well is important, having a really good story, having good quality products, and having a brand that we can help develop is really important in what I look for.
JAMES ATKINSON: There’s been a lot of media attention given to the gin boom, which, is gin a big part of what Nip of Courage does?
KATHLEEN DAVIES: Yeah, it is. There’s a great thing happening with gin in Australia and in Australia, I think there’s 22 thousand or 24 thousand native botanicals available that we have that don’t grow anywhere else in the world. Our gin distillers in Australia having access to these native botanicals is really great because it gives a point of difference in the overseas market as well. If we try and make a London dry with traditional London dry botanicals, it’s very difficult to compete with global brands that are already in the marketplace providing those products that are really good quality at a lesser price because they’re made on scale.
KATHLEEN DAVIES: So for Australian producers, it’s a no brainer to use elements of native botanicals in their gins. Gin in general is one of the fastest growing white spirit categories in the premium segment in the world.
JAMES ATKINSON: There’s obviously been probably just as much attention on Australian whisky. The problem is, no one can afford to buy it.
KATHLEEN DAVIES: Yeah, look, and I think you’ll see that change in the very near future because there’s more producers producing whisky in Australia and also, some really good quantities are being produced by distilleries as well. So I think at the moment, there’s, in terms of craft, there’s large scale distilleries like Limeburners, Starward, Archie Rose, who are yet to release their whisky but do have large quantities coming, and then you look at micro distilleries, which have significantly less in volume, which are attracting higher prices, I think you’ll start to see in the next few years people starting to fill in the middle gap in terms of volume and we’ll start to see more competitive pricing coming through.
KATHLEEN DAVIES: I think it’s going to be a challenge in the future for really small distilleries that are doing one off single batch releases and single barrel releases. I think that we’ve already seen a bit of a hay day with that type of product being released. I think for distilleries, they need to evolve a little bit and almost have a flagship whiskey, more or less, that is available ongoing. Similar to what Star would’ve done, I think what they’ve done is really smart, having flagship whiskey but also then just having experimental releases coming out, I think has been a really good marketing idea to get their brand out there.
JAMES ATKINSON: Not everyone can be like Sullivans Cove.
KATHLEEN DAVIES: No. Sullivans Cove have, and that’s great that you’ve brought that up, Sullivans Cove have been really important to the whiskey industry in Australia, especially when they won the global award. I think it was 2014. It really put Australia on the map and also opened up the eyes to consumers in Australia to start looking at Australian whiskey as well. So yeah, I think if you ask most Australians if they know of any Australian whiskeys, highly likely one of the three they’ll mention is Sullivans Cove, Lark or Starward even.
JAMES ATKINSON: Let’s talk about rum. That’s the category that’s been more linked with Australian history than anything else.
KATHLEEN DAVIES: Exactly, yeah.
JAMES ATKINSON: Are you working with any producers of rum and are you seeing any change in consumer attitude to rum?
KATHLEEN DAVIES: Look, rum is a really undervalued category, I think, in terms of premium rum in Australia. There are some fantastic producers out there doing some really fantastic things with rum. If you look at the East Coast for example, we’ve got players like Husk up in Northern New South Wales that are doing paddock to bottle fresh press cane juice rum. There’s Brix Distillers, which has just opened in Sydney, which is working on large scale rum. There’s also Stone Pine Distillery, which is one of our producers that we look after. He was doing some beautiful single barrel releases but it just didn’t take off. So what he ended up doing was looking at another category within rum that’s really taking off globally, which is spiced rum.
KATHLEEN DAVIES: So he launched a beautiful line called Dead Man’s Drop, Australia’s first Australian made, Australian owned black spiced rum and it’s been spiced with native botanicals and it’s a solera-style base rum. It’s been very successful for us and has been also a good introduction to people that are interested in trying Australian rum. There’s still a little bit of a stigma out there with the big white polar bear that is out there spruiking Australian rum. Consumers are scared off by Australian rum because of that. I know that they’re making changes in their own business to change that perception as well. So I think in the next few years, watch his space with Australian rums.
KATHLEEN DAVIES: Also, big producers like Archie Rose looking at getting into the rum category as well. There’s also some guys on the West Coast doing great things with rum. Obviously Hoochery up in Kununurra in Northern WA and also some other rum producers as well on the West Coast starting to emerge into the market. So there’s some really exciting things happening with rum.
JAMES ATKINSON: If you go back to the old work and the really established spirits brands, most of them if not all of them have focused on doing one thing. How hard do you think it is for some of these brands that are really having a bit each way on gin, vodka, whiskey, rum, is that a positive thing for you when you’re working with these brands? Or does that make your job more difficult?
KATHLEEN DAVIES: Yes and no, it just depends how well they do different things. I think in the case of Stone Pine, they have really strong gin range. It has a lot of diversity, there’s some beautiful styles, it’s been really well made. But Ian also makes a line of vodka and also rum. For me, I don’t see an issue with that.
KATHLEEN DAVIES: And then on the other hand, if you look at someone like Kangaroo Island Spirits, a lot of people don’t know this but they’re actually one of the first dedicated gin distilleries in Australia about 14 years ago, run by John and Sarah Lark. So John Lark is actually Bill Lark’s brother.
KATHLEEN DAVIES: I think some distilleries get a little bit wishy washy by having too many different categories. I do believe you need to focus on one particular category and then maybe have one or two secondary lines. But in Australia with things that are aged like rum, brandy and whiskey, you’ve got to wait a minimum of two years for the product to mature in wood. And so that can be challenging when you don’t have any money coming in and I think that’s why a few distilleries have gone off and made other products to help fund that little gap in waiting time. And that’s pretty much how Archie Rose set up their business as well. They’re wanting to make sure that they’ve got enough supply of whiskey for when they do release and they’ve become accidental gin distillery as well just by providing a really nice quality gin in the process of waiting for their whiskey to come along.
KATHLEEN DAVIES: I don’t see anything wrong with that and distilleries really need to be a little bit diverse and there’s also some really good cellar door experiences out there as well, which are really important. And by having those different categories within their portfolios that they produce does help with tourism and people visiting their distilleries for the first time.
JAMES ATKINSON: What do you say is the biggest challenges for the sector moving forward?
KATHLEEN DAVIES: I think awareness with the general public because a lot of these start up distilleries don’t really have the marketing or the dollars to reach out to the general public. There’s a lot of groundwork that they’ve got to do to make themselves known. And as I said a little bit earlier, I think business acumen is really important too, that they keep on top of trends and also making sure that their marketing and look and feel of the product is appealing to the general population. I think gone are the days where you just produce a product and people appreciate just the spirit itself and look past how crappy the bottle and the label are. I think nowadays with more and more producers coming on board, local distilleries in Australia really need to be business savvy. They need good quality spirit, good packaging, good marketing, and good distribution as well.
JAMES ATKINSON: Well look, we might leave it there. Thanks so much for joining me on the podcast.
KATHLEEN DAVIES: Thanks for having me, James.