A start-up distillery and bottling firm, whose clients include Asda and M&S, has seen sales rocket by 900%. Father-and-son team Andy and Rhys Mallows, who founded Hensol Castle Distillery, set up Mallows Beverages in 2021.
The pair manufacture, bottle and distribute alcoholic beverages for national and global retailers and brands alongside producing their own range of spirits. In the last year it has seen revenues soar to £9m. Now, the firm expects to more than double its turnover as it looks to start moving into the production of soft drinks and tonic water from next month.
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“We expect to be producing 20 million bottles of tonic water a year that will go global. That production line will be at maximum capacity from day one. Then by July, we’ll be entering the soft drinks category. That will take our turnover to around £26m,” said Andy.
As a result, the company will be bottling around 1.7m units a week and is currently undergoing a recruitment drive to support the expansion plans and take its 35-strong staff to 65.
“What Penderyn bottle in a year, we’ll be bottling in a week,” said Andy, whose career has seen him work with major drinks brands Jim Beam, Jack Daniels and Barcadi. He was also the chief executive of Dutch spirits company Toorank where he was joined by son Rhys, a financial economics graduate of Exeter University.
In 2018, the pair, originally from Cowbridge, left Toorank and returned to Wales where they set up and ran Hensol Castle Distillery in a joint venture with the Leeke family, who own the Vale Resort and Leekes.
By 2021, the Mallows had sold their 25% stake in the distillery to the Leekes Retail & Leisure Group (who are now its sole owners) to start their own distilling and bottling business.
With seed-funding from the Welsh Government and financial backing from HSBC and HH Business Finance, they launched Mallows Beverages in August 2021 opening a £5m purpose-built facility at Coed Ely in Tonyrefail, which they rent from Rhondda Cynon Taff County Borough Council. The 30,000 sq ft bonded facility can accommodate 2,500 pallets, says Andy.
Today, contract bottling forms 95% of the output of Mallows Distillery by volume with national retail customers including M&S, Aldi, Lidl, B&M, Home Bargains, and Asda. It also has partnerships with international retailers and brand owners with the firm about to enter India.
The remaining 5% is made up of Mallows’ own-branded lines which they export to retailers in the USA, France, Australia and Poland. “Our calendar year is roughly 20 to 30% exports,” says Rhys. “Our skills are in international markets. We’ve got really good contacts internationally, at a national level we’ve got some but we’ve got none locally. We just happen to have our home in Wales.”
Its own-branded lines include a Welsh bourbon whiskey called Charlie Parry, in honour of Rhys’ late grandfather and Andy’s father-in-law. The firm also has a range of flavoured gins under the Mallows brand name and a rum brand, called Rummers, which is listed with French retailers Auchan and Carrefour.
“Those are the three main brands that we put out into the marketplace. They are designed to show what we can do as a business,” said Andy. “Our business concept is we can design a company’s labels and bottles with our in-house designer, and we can also develop the liquid. If a retailer wanted a peanut butter whiskey for example, we can do that. We can also manage the supply chain so we can buy the bottles, labels, caps, liquid as well as produce it, and then store it in our bonded facility and ship it.”
He added: “A retailer or brand can have all of that or choose an element of that offer. We become a one stop shop for a brand or a retailer to come to us.”
However, operating in south Wales does have its challenges. The pair said finding the ideal base to set up Mallows Beverages was difficult due to the lack of commercial developments in Wales.
They have also had to invest heavily in training staff due to the lack of skilled workforce. “Fundamentally, if you’re going to open a business in Wales, you’ve got to accept that there is a skills shortage. You can’t just beat your head against a wall, as an employer you’ve just got to change that fact,” said Rhys.
“To bring people into the business you have to hire on culture and train heavily. For us, we started with a set of values we wanted people to have before investing in the right training.”
The owners have also had to navigate wider economic challenges including inflationary cost price increases and post-Brexit trading obstacles. However, though they expected importing and exporting to be more difficult after the UK left the EU, the pair said the noise and media furore around these difficulties for British exporters exacerbated the issue.
“It became a self-fulfilling prophecy,” said Rhys. “Buyers would say to us that they weren’t sure they could take on British brands because of the issue with the ports and the lack of drivers. They said they couldn’t take the risk of the products not landing.
“That was tough. We had massive contracts but customers would say to us that ‘the optics for it don’t look great now’. It was really hard for us to rebuild our own integrity in those export markets to get buyers to trust us again.”
On navigating exporting products today, Rhys said: “It’s resolving itself now. It is harder to export post-Brexit but you can do it. It’s a change of red tape, and there is a lot of red tape, but we added one extra headcount to cope with it.”
The pair are also anticipating the incoming deposit return scheme, which they say will make it harder for drinks producers in an already tough trading environment.
Already in countries like Australia, the US, Canada, Germany and Norway, the scheme aims to increase the number of single-use bottles and cans that are recycled by adding a 20p deposit to all containers made of PET plastic, metal or glass. It applies to both alcoholic and soft drinks.
Wales is working with England and Northern Ireland to set up a joint scheme, with the Welsh Government hoping it can be introduced by 2025.
Scotland, originally the first UK nation to launch the scheme in August this year, has delayed it until March 2024 following fierce opposition from many small breweries and distilleries.
“That’s going to be tough for drinks producers and it’s not something we need right now,” said Rhys. “It works in Germany because they implemented it a long time ago and not in a post-Covid, post-Brexit, cost of living crisis scenario, which are all really tough challenges businesses have to manage."
Andy said: “I don't understand why the Welsh Government wants to introduce [the DPS] when we're probably the best in Europe on recycling. There's got to be a different way to tackle the issue. But at this time when everybody is struggling, I think it’s the wrong time and wrong mechanism to make it work.”
Aside from producing spirits, the distillery also pivoted during the pandemic to produce enough hand sanitiser for 90 million people.
Ethanol - the alcohol base used to make sanitiser - was in short supply throughout Europe at the time, with countries like France, Spain and Italy stopping exports and retaining it for their domestic needs.
After securing a deal with a Scottish distiller to supply the base spirit, Rhys repurposed the business to produce the antibacterial gel over 12 weeks.
They subsequently produced 1.3 million bottles of 100ml hand sanitiser and 124,000 litres of the gel in larger containers which they supplied to police forces across the UK and the NHS.
Rhys has since received a British Empire Medal (BEM) for his work during the pandemic and has now been invited to attend the King’s coronation at Westminster Abbey on May 6. He said being invited to the coronation was both exciting and slightly surreal.
“It’s something I never thought would happen, but also I have absolutely no expectation, it’s quite hard to have any expectation,” he said. “I’ve never really seen a coronation so it’s going to be interesting, the atmosphere, it will be special.”
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