In this episode we meet Derek Charge, who is CEO of Hellyers Road Distillery in Tasmania.
Hellyers Road was founded in 1997 by a group of dairy farmers who decided to diversify their business into the production of whisky.
At the time of this episode going to air, the company is in the final stages of an equity crowdfunding campaign that has already generated almost $3.5 million worth of investment.
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I’ve never known much about Hellyers Road beyond what I’ve heard anecdotally from people.
This juncture seemed like the perfect opportunity to catch up with Derek and satisfy my curiosity about a significant player in Australian whisky that up until now, has flown a little bit under the radar.
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Whisky nerd turned pro, Rod Berry of Amber Lane Distillery
Dr Rachel Barrie, First Lady of Scotch whisky
Hellyers Road Whisky with CEO Derek Charge: Full transcript
JAMES ATKINSON: We met down in Tasmania didn’t we?
DEREK CHARGE: I think we did. We met at the TWSA conference in… I think it might have been the end of 22.
JAMES ATKINSON: Yeah. And I think I remember you telling me that you were kind of new to whisky. Like, you’ve obviously got a background as an executive in business, but the whisky industry was fairly new to you. Maybe it’d be interesting for people just to know a little bit more about how you found your way to Hellyers Road.
DEREK CHARGE: Yeah, so, I mean, I’ve had an association with it, or been aware of it through connections on the northwest coast since it started back in 1997. And, my wife is from Tasmania, so we’ve always had a long association with Tasmania and particularly the northwest. I started out, as you say, as a lawyer, back in the nineties. And then around 2000, I set out and studied viticulture at Charles Sturt with a view to starting a pinot noir vineyard in Tasmania. Life and kids and all sorts of things got in the way. And I had a career mainly in running operational businesses, particularly, manufacturing businesses, before, I was then on the board of, Hellyers Road or Whisky Tasmania, the parent company of Hellyers Road, for a period of time.
JAMES ATKINSON: When was that?
DEREK CHARGE: That started in about early ‘21, I think. And then, when the role became vacant for managing director, some of the board members asked me to consider it because I spent quite a bit of time looking at the business and the opportunities within the business. So that the board then went through a full process, a selective process, and I ended up being appointed to the role. So for me, it’s been a very long route back to joining the liquor industry in Tasmania, albeit in whisky rather than in wine as I’d originally thought. And frankly, whisky’s got a lot more levers to pull, and is a lot more fun than wine, in my view.
JAMES ATKINSON: I think that that process of appointing a new CEO… I mean, there was a predecessor to you, I think. Andy Bower, who I’ve known as a drinks industry executive. And so he came down, I think for a year or something like that. And then did you follow him?
DEREK CHARGE: Yeah, there was a gap of about six months between us and he was there for a bit over 18 months, I think. That was during COVID and he was semi-commuting. You know, a lot of people found the roles that would otherwise have been ideal quite difficult during COVID with separation from family, etcetera.
JAMES ATKINSON: Going back before he joined, was that a conscious decision by the owners to bring in someone from outside to run the business?
DEREK CHARGE: Yeah, absolutely. And in both instances the board. So certainly when Andy was hired, that was before my time on the board. But with my time, the board looked at opportunities within the business, but definitely went through a full process outside the business as well.
Hellyers Road whisky distillery
JAMES ATKINSON: It’s had a really interesting history, Hellyers, hasn’t it? So tell us just sort of the brief history of Hellyers and how it’s kind of evolved from a dairy business into whisky.
DEREK CHARGE: Yeah, well, it’s pretty difficult to do the brief version because it’s such a long history, but I’ll try. So back to 1950. In 1967, there was a company founded as a dairy cooperative called Betta Milk that was a group of local dairy farmers. And if you can imagine, even today, northwest people on the mainland think about Tasmania as being quite a small, discreet place. And, all the same, it’s still 4 hours from our distillery to Hobart. And if you can imagine back in the 1950s, it’s a day’s travel to get to Hobart. So it’s quite a remote part of the country in a remote state. That dairy farmers cooperative was very successful. It became one of the most beloved brands in dairy in Tasmania. And then in the 1990s they were looking to diversify. They looked at fruit juice, they looked at water and they looked at whisky. And when you look at those couple of options, there’s one that’s always going to win out, isn’t it? So they invested in building a distillery at a time when there wasn’t an Australian whisky industry. There were two other, whisky brands producing at that time, and they built what for the time and what for the decades afterwards was a very large distillery. It’s not large on a global scale, but until recent times, it was by far the largest whisky distillery in Australia. So that continued and there was some great successes throughout Hellyers Road’s history exporting from early on, 2012, I think we started exporting into Europe, and there were some excellent whiskies being released over the decades. And that foundation is really the basis of the business today. In 2019, the whisky business was such a central part that they actually exited the milk business. So we’re exclusively a whisky business now. We don’t have any interest in milk other than, of course, our, whisky cream liqueur, which is a really lovely nod to our dairy history. And frankly, without that dairy history it would have been just about impossible to make it. Even with the dairy and whisky making history, it took them three years to work out how to make a whisky cream liqueur, actually with fresh cream, as opposed to what most others are made with.
JAMES ATKINSON: Yeah. And there are currently, prior to the crowdfunding offer, there are 125 shareholders. So it’s quite a complex shareholder base, I guess.
DEREK CHARGE: Most of those shareholders, nearly all of them, are the second, third and fourth generation or partners of those original 1957 dairy farmers. So as you see with some other companies that manage to stay within that ownership group over a long period of time, the ownership group gets broader and broader. But you’re right, it is a complex ownership structure for what is fundamentally still a reasonably small business. To have that diversity of ownership with audited accounts and a board and so on. And that’s one of the reasons having that infrastructure and that governance in place already is one of the reasons that, an equity crowd fund was attractive to us, because it wasn’t going to add any additional governance costs that weren’t already there in the business.
JAMES ATKINSON: When I look through the offer document, one thing that really strikes me is that there’s obviously been a decision made in 2023 to really aggressively start putting down a lot more stock. The stocks really go up in that year. So maybe, let’s kind of talk about the decisions that have been made since you took on the role.
DEREK CHARGE: I think that’s right, but if you look in the offer document, there’s a ratcheting from 2014 upward, there’s an increase in production each year up to what’s getting closer to the natural capacity of the distillery. We have quite a different operating methodology to a lot of distilleries in Tasmania, which no doubt we’ll come to, the size of our stills and so on. But, that decision to increase production in 2021 was pretty significant as well. And in 2023, it’s really a natural extension of the growth in production that’s been occurring since 2014. And the production, although there’s only a proportion of it left, the production in the early years of the distillery back in 1999, 2000, 2001, 2002, 2003, was also substantially higher than it had been in later years.
JAMES ATKINSON: Well, it looks like there was a few years there where no whisky would have been made.
DEREK CHARGE: No, there was whisky made every year, but very small. Between 2008 and 2013 were quite small quantities. So I think there was a view taken at that point in time, and remember, this is before there was an Australian whisky industry in terms of a market. There was a view saying, well, there’s a lot of whisky in the bond store, so let’s just tick along at a much lower rate. But then from 2014 onwards, it’s been a steady increase.
JAMES ATKINSON: Yeah, for sure. One of the key things we’ve seen also is a rebrand, new packaging. Is that something that you led?
DEREK CHARGE: That was started under Andy. That was started before my time, and a lot of the design work had, or at least the concept design work had been done. It’s a long process, as I’m sure you know. And, those in the industry understand how long it takes to, to bring new packaging to market. The reaction that we’ve had from consumers, from trade, has just been fantastic. It really, was time, I think, for a refresh and a rebrand. And not just a rebrand, but also release of entirely new whiskies. That’s been, incredibly well received.
JAMES ATKINSON: So when did you hatch the idea to go down the crowdfunding path? And actually, I should probably congratulate you because the result has been quite spectacular, hasn’t it? The response that you’ve had?
DEREK CHARGE: Yeah, it’s been fantastic. We’re still in it as we speak. There’s still a week to go, but in the first couple of days, I think in the first 24 hours it was $1.7 million worth of investments. That thought of crowdfunding started last year. But we really didn’t want to go down that crowdfunding route until the rebrand and the new products were embedded in the market and were well understood. And the rationale for approaching a crowdfunding was that, as I said earlier, we already had this infrastructure of governance and we were already used to operating with a diverse, shareholdership. So there’s no disincentive from going from 125 to say 1500 shareholders, which is probably where it looks like we’ll end up. And if you look at the different sources of capital that are available, the opportunity for a consumer facing business like us to raise funds from people who are going to become ambassadors and who are going to be passionate about their whisky, the distillery that they own made it really attractive and it’s an unconventional approach to fundraising, not necessarily in beverages, but it is an unconventional approach for a nearly 70 year old company with very substantial assets. But it’s been brilliant. The reaction has been fantastic. The type of shareholder, even the amount that people have been subscribing has been different to most crowdfunds. We’ve had a lot of people in that $7500 to $10,000 range, over 250 investors. Which really signifies I think for us that there’s people who want to be genuinely invested in being ambassadors for our brand.
JAMES ATKINSON: Are they predominantly Tasmanians?
DEREK CHARGE: No, all over the place, all over Australia.
JAMES ATKINSON: Do you feel like they’ve already been among your customer base?
DEREK CHARGE: So when people register for EOI, for their expression of interest, initially they flag how they became aware of it or what their interest is. So it’s about 50/50 between people who see it as a good investment, who primarily see it as a good investment, versus people who have a familiarity with the brand, which is great.
JAMES ATKINSON: It’s particularly a spectacular result just considering the economy that we find ourselves in at the moment. It’s not really a great time to be raising money, whoever you are, is it?
DEREK CHARGE: It’s not a great time to be raising money, but I think investors always see opportunity where there’s a good sound investment. And we’ve intentionally priced this raise to recognise the existing value that people are investing in and to make sure that there’s plenty of headroom for them to grow value with the company.
JAMES ATKINSON: Looking at the numbers, there’s a couple of things that sort of jump out at me, like an employee benefits expense each year that’s like $2.5 million to $3 million, which seems quite a lot. What does that amount to?
DEREK CHARGE: We have about 35 employees. Remember, we have a full seven day a week restaurant and visitor centre. So a lot of those team members are actually in our customer facing and visitor experience. Our distillery itself is pretty straightforward and we’ve also increased our sales presence. We’ve taken the approach that we have salespeople on the ground in Tasmania, Victoria, and New South Wales. And that they are going to be able to tell trade and consumers the story and the background to Hellyers Road better than anyone else.
JAMES ATKINSON: So you don’t use a distributor, you’re going direct.
DEREK CHARGE: In those states we use wholesalers and we have distribution arrangements. But in terms of our promotion of our product, yeah, it’s direct.
JAMES ATKINSON: Yeah sure. Well that is quite costly but it’s got its benefits I guess.
DEREK CHARGE: Yeah, yeah, yeah.
JAMES ATKINSON: And then it just mentions that there’s this big spike in trade receivables this year and it says that that was due to a large sale. Was that sort of like a one-off sale to a customer or something was it?
DEREK CHARGE: We have large sales from time to time, be they export or domestic. And there was one particular one in that month that resulted in a large receivable that’s actually been paid already.
JAMES ATKINSON: Can we say who that was? Because I know you do particular work with one online retailer, that’s very well known in Australia.
DEREK CHARGE: Look I won’t go into specifics about individual contracts but we also have great relationships with export customers as well as domestic. And they tend to be lumpy in terms of the revenue because it’s a single shipment generally a couple of times a year.
Hellyers Road Single Malt Whisky
JAMES ATKINSON: How has the production methodology evolved? You mentioned those big stills, but with the style of the whisky that you’re putting down and the approach to maturation and the wood that you have there, has there been any evolution of that or has that been pretty constant? It’s just a matter of scaling it up.
DEREK CHARGE: It has stayed fairly constant. That said, it’s very difficult to look say, ‘well what did the new make taste like in 2002?’, for example. And unfortunately none of those original distillers are with us anymore. I mean they’ve passed away, that’s I guess the nature of a business that’s been operating as long as we have. The maturation policies and the oak that we’re using has been consistent right since the outset, always with interesting opportunities around the edges. But as we’ve always used full size American oak ex-bourbon barrels as our baseline for the production of whisky. There is some full maturation in Oloroso casks and full maturation in very, very old tawny casks. You know, 50 to 70 year old tawny casks. But principally we’re producing using ex-bourbon casks. And that’s really one of the distinguishing features for the business, is that right from the outset, unlike many others, we’ve been able to use full size casks, which means that the whisky’s always been ageworthy. And so we’re reaping the benefits of that in the 2022 years onward. The production methodology has stayed pretty much the same and it is unusual. So when we mash it’s five and a half tonnes per mash, our ferment is between three and four days. So it’s not a long, slow ferment, but in those enormous stills, so our wash still is 60,000 litres capacity, but it’s only filled to 24-26,000 litres. So we have an enormous amount of reflux within both the wash still and in the spirit still. Sorry, the other thing I should say is that it’s a very slow distillation, 50 hours. Whereas most stills you might be looking at five to eight hours, we’re distilling over 50 hours. So, that slow runoff of spirit means that we get very high contact, in the vapour phase, in the condenser.
JAMES ATKINSON: Do you kind of think that there’s a signature profile that Hellyers has at the end of that process?
DEREK CHARGE: Definitely. There’s a tropical note to it. Because of that level of reflux, we have very precise control over cut points. We tend to take all the flavour, so we do cut fairly deeply into our, into our feints. But that process has. And you look at it, you can look at it in different casks over time. There is definitely this sort of a tropical character to the new make that transfers through and as it matures, it changes quite fundamentally. And taking those deeper cuts is intentional because we’re looking at ageing that whisky. Even our non-age statement whiskies are six or seven years old.
Equity crowdfunding campaign
JAMES ATKINSON: And you mentioned in the offer document that this was the last opportunity that you would have had to do the crowdfunding just because of the scale of the business. What’s the cut-off there?
DEREK CHARGE: With crowdfunding, it’s $25 million worth of consolidated gross assets. So that’s balance sheet valuation of assets rather than market valuation. So in our case, our distillery is significantly depreciated because it’s older, but we have a large volume of inventory on the balance sheet, recorded at cost in accordance with accounting principles. And as we continue to lay down more whisky, we would have exceeded that $25 million worth of consolidated gross assets in about, probably next month.
JAMES ATKINSON: Oh, wow.
DEREK CHARGE: So it was tight.
JAMES ATKINSON: So there’s no way you can go back to the market and do this again, basically.
DEREK CHARGE: No, not through a crowdfund. This is it, the opportunity for those who want to come in. And we intentionally went out in this way to give the opportunity to those investors, both because of that ambassadorial role that I mentioned earlier, and also to improve the liquidity in the shares for our existing shareholders, so that if they want to sell shares to someone else within the group, there’s, maybe 1500 instead of 125 people.
JAMES ATKINSON: Right. Because liquidity and equity crowdfunding are two words that generally haven’t gone too well together. So is there sort of some particular scheme, or something that you have in place that allows those transfers to occur?
DEREK CHARGE: So shareholders can transfer shares between… There’s a long structure, and this has been in place for decades, for shareholders to transfer between each other. And if they’re unable to transfer between each other, they can sell outside. Now, obviously, there’s not a freely traded listed market, and we’re cognisent of that and very open about that in the offer document for the crowdfund. But we are looking for a liquidity event in the two to four year horizon.
JAMES ATKINSON: Which means you would sell the business?
DEREK CHARGE: Look, there’s a range of ways, and that’s one of the options, is that we sell the company, or it could be a listing. It could be a number of options, but we’re pretty confident that what we’re doing in building value in the business now will be attractive to create the opportunities for that liquidity event in that two to four year horizon.
JAMES ATKINSON: Equity crowdfunding, I think in this industry has had a bit of a chequered history. There’s certainly been quite a few that haven’t worked out very well for the investors. But it does sound like the circumstances of your business and the kind of offer that you created are actually very different to the way that most businesses have tended to use it.
DEREK CHARGE: I think that’s right. We’re sitting on 5700 full size barrels, or more than that, actually, but over 5700 full sized barrels of whisky. We’ve got a very modern, large distillery, despite its age, that would have a replacement value in excess of $20 million. When I say distillery, I mean including the automated bottling line, the whisky cream plant, the restaurant. It’s a very unusual crowdfund to have an asset rich company. But then, by the same token, we’ve had an unusual history. And you started with the comments around our structure. And that really is what gave the opportunity to go down this route, which we’re delighted with the reaction.
JAMES ATKINSON: You said, there’s been this ratcheting up of the volume that you’ve been putting down each year. So was it sort of a recognition that it’s kind of now or never if we want to grow this business to a bigger scale and be one of the companies that is the beneficiary of the upswing, of the industry and the upswing of sort of consumer acceptance of Australian whisky and so forth.
DEREK CHARGE: That’s definitely seeking to take advantage of the fact that we have that aged inventory and that inventory is growing and we have more and more whisky maturing each year as we go forward. And when I’m talking about maturing, I’m talking about turning seven to ten years old. So, that’s definitely part of the recognition. The other part of it is that desire to invest in the future of this business. To make sure that we’re not just using the investment that’s been laid down by invest by the owners of the business beforehand, but we’re continuing to invest. So, that in seven to ten to 15 to 20 years’ time, we will have those volumes of whisky available as the Australian whisky market, and particularly the Tasmanian single malt market, becomes more mature.
JAMES ATKINSON: This capital that you’ve now raised, what are you going to be deploying that to do? So that will be to continue to increase what you’re putting down each year?
DEREK CHARGE: For starters, it’ll be continuing to produce at around the same level. So two thirds of it will be essentially invested in the cost of production, which are barrels, malt and yeast, in that order of expense. And, sorry, electricity is in there because we’re entirely electric, we don’t use gas, which is great from a carbon footprint point of view. And one third of it will be in sales and marketing and bringing that message of Hellyers Road to a broader audience because those volumes of maturing whisky are increasing as we step forward into the next seven to ten years. So we need to be making sure that there’s a really strong awareness of that brain.
JAMES ATKINSON: You’re winning some really good awards and so you’re obviously making some great whiskies. The perception sometimes among whisky enthusiasts seems to be a little bit polarising. Is that something that you’re aware of? And do you know, kind of what to put that down to?
DEREK CHARGE: I’m definitely aware of it. I think, there’s a number of factors at play there. We’re very happy with the whiskies that we’re releasing now, we’re very conscious of making sure that they’re very approachable, but they are different to what people necessarily expect from a Tasmanian whisky too. We very proudly talk about our provenance in North West Tasmania and the fact that we are using larger format casks and with a predominance of American oak. So there’s an element there of people not necessarily expecting a Tasmanian whisky to taste like ours does.
JAMES ATKINSON: So do you think that’s the bourbon cask maturation or is it the reflux component of the new make? Or what do you think is particularly different that some people might not be used to when it comes to a Tassie whisky?
DEREK CHARGE: I think it’s a combination of those. I think the bourbon cask, the large format cask, the longer maturation, in some cases, the less bold, upfront, oily character that’s used in description around Tasmanian whisky, all of which are delightful characters. They’re just not what we focus on. There are always whiskies that are polarising. We want to make sure that the whiskies we release are absolutely delightful. But we’re also going to continue to release some whiskies that are going to be exciting and interesting and get people talking and not in our core range, necessarily, but other whiskies. For example, some whisky lovers are not enamoured of beer cask finished whiskies because they see it as a departure from a tradition. We’ve been doing a small run last year, this year, and we’ll continue into the future of our Dark Harmony series, which are, absolutely delightful, beautiful whiskies. But there’s 400 bottles, 500 bottles at most, because we want people to have that opportunity to try it. And then, that adds excitement and interest to the industry.
JAMES ATKINSON: Yeah, maybe you could give us a little taste of some of the innovative or new releases that you’ve got in the pipeline.
DEREK CHARGE: I think in Tasmania, I think I’m right in saying this, that we were the pioneer of using Tasmanian pinot casks to finish or secondarily mature whisky. We tend not to use them for finishing so much. Now, we’re really doing a secondary maturation. And so our double cask, which is a broadly available, whisky throughout on and off premise venues, has a secondary maturation in Pinot Noir casks for a couple of years… two to three years in pinot casks after four to five years in ex-bourbon casks. And that brings a real richness and fullness to it. Our Journeyman, which is a marriage of American oak, currently between twelve year old, but that some of that will be becoming sort of eight to ten year old, and seven to ten year old tawny casks. Matured for seven to ten year old in full size 300 litre, very, very old tawny casks. That’s probably our most popular whisky at whisky shows and so on. Some of the stuff coming up…
JAMES ATKINSON: You’ll keep under your hat.
DEREK CHARGE: I’ll keep under the hat. But suffice to say we have sourced some fantastic French and Italian dessert wine casks from.. a whole range of things that most people have never even heard of. But they’ll be a little while away yet because again, we’re not looking at just a quick finish, we’re looking at a secondary maturation to bring out the real character of those casks. We also later this year will be releasing a ten year old fully matured Oloroso cask. So a 250 litre, old Oloroso cask that was laid down in 2014. And that’s a sensational whisky. It’s not a classic Australian sherry bomb, it’s not terribly sweet because it’s Oloroso, not Apera. And that full long-term maturation has really changed those characters quite markedly.
JAMES ATKINSON: Exciting. What’s your perception of how the industry’s going in Tasmania at the moment more broadly? There’s quite a lot of investment that’s happening at the moment. But then at the same time there’s still a very large percentage of the distilleries that are very small.
DEREK CHARGE: Yeah, I think that’s actually quite healthy. I think my first point on it is, coming into this industry, and as you might note, having worked in other industries, this is the most collaborative and cooperative industry I’ve ever come across that people genuinely believe in the rising tide lifting all boats. And I’m one of them. I think that as an industry, as a Tasmanian whisky, we need to be looking to examples like Japan to follow on that path. And we’re not going to do that as easily individually as if we are, not necessarily collaborating with each other, but actually ensuring that everyone in the industry is doing the right thing and getting the right lift. I think the investment in the larger distilleries is extremely important for the much longer term. We’re in a unique position just by virtue of the depth of the bond store and the aged and the fact that we are very much about aged whisky, aged single malt whisky. But the colour and the smaller distilleries, they’re really important to the industry as well. They may not necessarily be going to drive the export revenue for Tasmania, or even significant export to the mainland, but the way I see that industry developing is that more and more people will become aware of and be able to develop an affinity for Tasmanian whisky by exposure to Hellyers Road and to the other larger distilleries around Tasmania. They’ll visit Tasmania and that’s then when they get that opportunity to also visit us and see our full range and to come into the bond store, but also to go to tiny micro distilleries. And I think it adds positively to the experience for whisky consumers.
Hellyers Road whisky price
JAMES ATKINSON: And you’ve certainly got some whiskies that are pretty competitively priced for Tasmanian whisky, that’s for sure. See yourselves potentially even adding whiskies that might be even more accessible.
DEREK CHARGE: I’m very happy with where our pricing is at the moment. We’ve taken a very deliberate view of being competitive in a global sense. I mentioned Japan, obviously Japanese prices are crazy at the moment, but over the longer term, I think that’s an excellent model that Tasmania as a whole should be looking towards. And I think that’s a very reasonable thing for us to be assuming our pricing is set to make it approachable for people at a reasonable return when the advantage that we have is frankly that we were supported by a dairy company for a very long time. So we’re not facing some of the cash flow pressures that many other businesses who are starting out trying at the same time to lay down whisky, but also release whisky quite young to generate cash. We’re through that phase. And so that means that we can make a good return for our investors, but bring out whiskies that people are going to be prepared to try compared to their other international options.
JAMES ATKINSON: Fantastic. Well, Derek, great to chat with you on the podcast, and congratulations on the results so far, with the crowdfunding. And I think this will be coming out hopefully, on Tuesday of the final week of the campaign.
DEREK CHARGE: Really appreciate it, James. Thanks for your time and love to see you at the distillery. And we can crawl into the back rooms of the bond stores and find some of those 21-year-olds to source samples from barrel.
JAMES ATKINSON: Pretty hard to say no to that offer. Thanks, Derek.
DEREK CHARGE: Okay. Cheers. Thanks, James.
