Tuesday, May 3, 2016

Jim Rutledge Lays an Egg


For the past decade, Jim Rutledge has enjoyed a privileged status among bourbon lovers. Serving as Master Distiller of Four Roses at a time when it was reintroduced to the US after a long absence, Rutledge is respected for the uncompromising quality of his product and his disdain for flavored whiskeys. Four Roses has been one of the highlights of the bourbon revival and much of the credit for that has gone to Mr. Rutledge (though the Kirin Corporation, which purchased Four Roses in 2001 and saw it through the revival, certainly should share in the credit). In 2015, Rutledge announced his retirement from Four Roses.

Last week, Rutledge unveiled a new project, the J.W. Rutledge Distillery. Rutledge announced plans to build a "world-class," mid-sized Kentucky distillery where he will make bourbon and rye. Rutledge has formed a limited liability corporation with two business partners.

So far, it all sounds great, but here's where it gets a little weird. Rather than do what most businesses do and seek out investors, Rutledge is planning to raise the initial $1.9 million through the Indiegogo crowdfunding site. This initial amount will cover start up costs such as legal fees, consultants and property costs.

Now, I've contributed to crowdfunding campaigns before. They can be a great way to support an artist or craftsperson who needs some initial cash to realize a project they could not otherwise fund, but this is very different. This is an industry veteran with many contacts who wants to build a large and presumably profitable factory, and rather than rely on investors who will be rewarded with equity in the project, he wants us to give him these initial funds for free.

Well, not exactly for free. The benefit of contributing to crowdfunding campaigns is you get rewards, but Rutledge's rewards are downright crappy. For a $50 contribution, you get a t-shirt; $100 gets you a commemorative coin which gives you "first access to special releases through the gift shop" (i.e. you can use it to pay them more money!); $175 gets you two commemorative coins plus 15% off of non-alcohol merchandise from the distillery gift shop (most crowdfunding sites do not allow you to offer alcohol as an incentive); $400 gets your name on a brick at the distillery; all the way up to $1,250 which gets you an invitation to the grand opening.

On top of those lackluster prizes, Rutledge is using "flexible funding," which means that they get to keep your money even if they don't reach their goal.

I love the idea of a Jim Rutledge distillery and I hope it is a success, but this campaign is seriously uncool. Jim Rutledge has earned himself a great reputation, and now he is using that reputation to take advantage of whiskey lovers...some of whom will get their name on a brick.

But hey, if you are the type of person who is into giving money to a for-profit venture and getting little in return, please consider the Sku Store.


16 comments:

WhiskeyGears said...

Could. Not. Agree. More. And I am a total 4R PS junkie, love Jim's work. No reason he can't put together a private placement and raise real equity funding with Jim contributing sweat equity for a reasonable percentage stake. That's the way this should work.

D said...

Is the distillery a 501 (c)3? I've been looking for a good tax deductible whisk(y)(ey)(ie) charity.

Anonymous said...

With investors, Rutledge would have to give them partial control and a say in daily matters. By going to crowdfunding he is attempting to raise the money he needs from fans without having to give up any control. As you have pointed out Sku, these folks get next to nothing for their "donation."

Anonymous said...

Big fan of Mr. Rutledge. His work at Four Roses was superb and definitely influenced this bourbon renaissance. I was initially excited to hear that he is starting his own distillery and I wished him well.

This crowdsourcing scheme is completely wrong-headed and skewed (pun!). I hope that Mr. Rutledge reviews this program and revises it now that it's been called out for the error that it appears to be.

Dan

distilledopinion said...

I saw this campaign when it broke and looked it over. This will be a very small or a micro distillery. Either his retirement package allows him to compete if he builds and operates a micro distillery, or he is intentionally going for a very small build-out. The problem with that small size is that it is really tough to break even if you have to get traditional funding. The accounting, regulatory, and lawyer fees will be out of proportion to the gallons generated. But it is still entirely possible to build a very small distillery for $2M. I'm talking about a really small distillery. Good luck selling T-shirts for $50 though.

forego is my witness said...

Imagine, if it were legal in all 50 states to do so, one of the perks involved were bottles of the first batch. He'd probably already have half his goal at this point!

sku said...

DistilledOpinion, Rutledge says he will need $25 to $30 million, which he will presumably raise from investors. The $2 million he is crowdfunding are just for some initial start-up costs.

Wnsnearly said...

The bigger question is - where is he sourcing the juice?
You can't just build a new distillery and magically start selling bourbon. Investors won't want to wait for 4 years (or more if done right) to start making money.

Anonymous said...

Well at least this answers Loyd Christmas's (or should I say, Howard Levinson's) question of "Where is Jim Rutledge"! BourbonTruth - according to who? Just because you print it certainly doesn't make it the truth...or, anywhere close.

Good luck with the crowd funding...

Anonymous said...

Oh they'll wait...especially if they get a t-shirt or 15% discount at the "gift shop".

Anonymous said...

But that goes against his remarks on his video regarding corporate structure. I find it hard to believe investors are going to guess $25+ million and have a say in what happens, how things run, what is produced, how it is marketed, etc...

Anonymous said...

Well anonymous this is Howard Levinson and you have your head up your ass. It's not me and you need to get better info.

Carlton said...

This is sad, really. They have raised a bit over $10 thousand as of this morning. Could be that Jim is just planning a really nice vacation.

Anonymous said...

Obviously, there's legal issues, but...if it was $40 and get a "straight" whiskey or $80 and get a four year old whiskey, I was going to be excited. Also, unfortunately, he's probably not going to be around in the 8-10 year old period of "awesome" potential whiskey...just saying, that dude, is O-L-D!

Sam Komlenic said...

Ah, youngster Anonymous above, your ignorance of the lengthening longevity of your fellow man is apparent.

I just covered the coming-out-of-retirement of Dick Stoll, last master distiller of Pennsylvania Michter's, at the age of 82 for another blog, and I have no doubt he'll be around in four years to share some of his four year old whiskey with us.

Live long and prosper, Jim Rutledge!

Anonymous said...

No more crowdfunding...

Back to "corporate structure".