Massachusetts Beverage Business


Article By: Liza Weisstuch

Andrew Cabot has been sailing his whole life. In the last few years, he and his uncle have sailed around Europe, down the Arctic along the west coast of Norway, and then some. You might say a penchant for the seafaring life is in his blood. His ancestor six generations back, also named Andrew Cabot, had oceanic leanings. During the Colonial Era, he helped his young nation’s cause during the American Revolution as an owner of 25 privateers – warships dispatched to thwart the British on the high seas. When privateers auctioned the merchandise they looted from enemy ships, they profited. The original Andrew Cabot also co-owned a distillery in what is now Beverly, Massachusetts. Like many other entrepreneurial types in this region during the Colonial era, he produced rum.

Today’s Andrew Cabot discovered his heritage while doing genealogical research. He even turned up an advertisement for the sale of the distillery and documents with the signature of his ancestor Andrew Cabot. A self-professed history buff, he developed a deep understanding of rum’s role in American history. Cabot got an idea: to carry out his legacy he would build a distillery. In addition to the history aspect, he was “drawn to the alchemy,” he said. Also, privateers were strongly represented by Massachusetts; about one-third of those in the country came from the Bay State.

Cabot chose Ipswich as the location for his distillery, as he determined it would have to be in Essex County, just like his ancestor’s was. He started distilling rum in April of this year. His white rum was available as of early June. An amber rum is in the works for an unveiling later this year.

Launching a product produced by a brand new distillery in a fiercely crowded marketplace is hardly an easy task. In fact, it’s quite an expensive gamble. But with his legacy to shore up his endeavor, he set out to make Privateer Rum distinctive, both in terms of his business model and the spirit itself. “I wanted to make a rum with slightly different qualities – something less sweet and more savory,” he said. “I started asking, ‘Can we do something different with rum without violating the category?’” The answer, of course, was yes, indeed. Since there are no rigid legal regulations to which rum must adhere, and no terroir factored into rum’s classification, the only rule to follow is the base ingredient. He figured that New England rum in the late eighteenth century had to be among the most efficiently produced in the world at the time, given that it was the dawn of the Industrial Revolution. Today, by Cabot’s count, there are 84 distilleries producing rum in the United States. Privateer is the only one in New England that’s producing rum exclusively. It’s just like old times.

Cabot has a varied resume that includes 2O years in the software industry and jobs in business, during which he did a stint researching genomics for Harvard Business School. Lately he’s been working in the education sector, playing a strategic role at public, private and charter schools. Thus, Cabot took pages from a business playbook, which is not necessarily standard reading material within the distilling community. Instead of enlisting investors willing to take a blind leap of faith, he instituted a barrel program. Through “good old-fashioned word-of-mouth networking,” as he puts it, friends, family and business acquaintances purchased barrels as a sort of futures investment.

“I was looking for an interesting way to seed capital without getting into complex ownership of the company,” Cabot explained. “Instead of making vodka or gin to turn a product around quickly, I thought ‘let’s see who’s interested in owning the contents of the barrels.’ There’s a club quality to ownership. It feels like having a contract in line before the business launches.” Of course, the spirit would have to be bottled to be sold legally. He found many willing to buy in bulk. After all, many of those who expressed an interest already have wine cellars, he said, so a bulk purchase is not unfamiliar territory.

The unconventional business plan has been invaluable. “There’s a monetary advantage. We work on actual tasting notes of the barrels, which helps us direct the flavor one way versus another. It’s given us a chance to see what we wanted. The target was something less sweet, a more round rum. We develop experiments. We had a certain number of people buying barrels, so we could take a number of shots at a target [flavor profile]. It’s been helpful for product development. People express what they like, and it gives us the ability to try things, and arguably, it puts us on track for the flavor profile we want. [The barrel purchases] also offset a tremendous amount of capital expenditure and operational expenditures.”

Naturally, it engendered a loyal following and the organic growth of a squad of unofficial brand ambassadors, of a sort. “People come up, visit, brand their barrel. It got a community going in a way we hope encourages people to participate in what we’re doing,” said Cabot. “It’s fun to do something that involves a lot of people. It’s helpful to start with friends and family because you want to make something perfect.” And it helps if there’s an interesting story behind a product.

“It’s one of the most exciting investments I’ve made,” said Brace Young, the CEO of a hedge fund and a barrel owner. “It’s part of the history of his family and that’s a smart way to brand it. I know about the wine industry and what he’s doing resonates with me. It’s fun to learn from him. I enjoy growing with him and living vicariously through his excitement.”

But wait – there’s more! The 53-gallon barrels they’re using typically yield at least 22 cases. Cabot devised a program through which owners of a barrel are sent samples of their rum as time progresses. The owner instructs Cabot when to case off the barrel, on a case-by-case basis, so to speak. “We write up tasting notes and handwrite other details on the labels. It’s a vintage experience – they can end up with a rum that’s five-years-old, a three-years-old, a four-years-old.” Also, Privateer offers mini-barrels so that people can transfer their rums from the bottles to the barrel and continue to age it on their own time. So if, for instance, a barrel buyer wants to give out gifts, it’s an added novelty.

When Cabot made the decision to move forward with his distillery, there was one significant logistical detail he had to attend to: learning the art of distilling. He eventually hired a distiller, but he needed a basic understanding of the groundwork. He attended an American Distilling Institute conference. Since its establishment in 2OO3, ADI has fostered the growth of the craft distilling movement through education and networking opportunities.

In November 2O1O he traveled through the Caribbean to interview distillers. He ended up meeting Eric Watson through ADI, then went to visit him in the Grand Caymans, where he was making Seven Fathoms Rum. Cabot was struck by the lean, complex, smooth quality of the spirits. A kinship developed. “He understood the opportunity in the rum space – raisin, prune, more round, less artificially sweetened. With rum, you’re working with something simple; it’s not like working with grain. You’re doing your best to create complexity.” Under Watson’s direction, Cabot worked on a prototype in California. Next, he was enlisting barrel owners and firing up the stills in Ipswich.

And the insurgent element of the back story only enhanced the fascination factor, not least because it’s an aspect of history that’s generally skipped over in history books. “The part that’s well known is the fact that Cabot and his brother, John, were successful owners of privateers. Those ships that engaged in legalized piracy during the American Revolution were allowed to attack English ships,” he explained. “When they captured a prize – cargo – they could auction those goods and take the profits. Owners would take more than half of the profits, and the captain and crew took the rest.” And since privateers were merchants at their core, it seemed natural to produce rum to honor their role Americana.

But that still leaves the issue of how a newcomer expects to compete in a marketplace dominated by titans. Considering his experience in the software sector, he looks at Silicon Valley as the quintessence of how an industry cycles in extremes, especially a relatively young industry, like craft distilling. “You have to look for bubbles. Nothing can grow this fast this long and not have future correction. The byproduct is that there are larger vendors that come out of this,” he said, referring to William Grant’s recent purchase of Tuthilltown, the Hudson Valley distillery. It ends up with bigger competition.

Craft distilling is commonly said to echo craft brewing, which came about as a reaction to the pent up demand and interest for artisanal American beers beyond the reliable but hackneyed lager. Essentially, there was a whole genre that was poised to emerge. But the more important exercise, Cabot said, is to consider how the craft distilling movement is different, which would ultimately help spirits companies navigate the marketplace. “What’s missing is not as apparent in spirits as it was with beers. What’s the true definition of market opportunity? That’s become a bit of an intellectual exercise – what void are we filling?” he inquires. “It gets more complicated with more players and inherent upheaval. The lesson to learn is that it’s not about being small batch; it’s about being a brand, making a great product. We don’t want to get wrapped up in a movement at the expense of what the movement trying to do. We have to establish a brand in a way that allows consumers to find us. We’ll get lost if we’re small, so we must be good.”

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