Wood Aged Holdings
Thursday, April 14, 2011/
Wood Aged Holdings was founded in 2009 by Kevin Murphy and his wife Regina. Despite being just two years old, the business already operates on an international scale.
Wood Aged Holdings sells barrels of Australian whiskey to investors for a period of up to 10 years. It then repurchases each barrel for around double its original price, giving the investor a return.
The business recently won the Best Start-up Hero Award at the 2011 StartupSmart Awards, recognised for its incredible determination to carve a niche in a limited market.
In addition to building the business from scratch, Kevin is a recovering quadriplegic, making him a hero in every sense of the word. He talks to StartupSmart about the journey.
What inspired the idea for Wood Aged Holdings?
My wife Regina and I invested half a million dollars into a family business; a distillery which had been going for about nine years.
One of the big problems they faced at the distillery is that with whiskey, you’ve got to hold onto it for long periods of time to get the flavours and the characteristics that make it a good whiskey.
I spoke to Macquarie Bank initially to borrow $17 million to put down 5,000 barrels, and I spoke to two or three other banks as well.
It worked out that to borrow the money, it was going to cost about 9% plus the insurance of 1% plus the brokerage to Macquarie Private of about another 1% – it worked out at 11.5% that we would have to pay to put that stock down.
The only problem was for us to borrow $17 million, we needed around $20 million worth of unencumbered real estate – we didn’t have $20 million worth of real estate.
That was an impossible task; to borrow that amount of money to put down stock. We worked out that if we sold a barrel to somebody, and paid them exactly the same return as what we had to pay the bank, it became a good investment.
We set up a company called Wood Aged Holdings, where we sell a barrel of whiskey to somebody.
The day you buy a barrel, our distillery enters into an agreement with you to repurchase that barrel when it’s five, six, seven, eight, nine or a maximum of 10 years of age.
A barrel of whiskey, which sells for $5,120, in five years time is worth $11,861, so it’s not a bad little return. It’s good for a self-managed superannuation fund because it is at least a five-year investment.
We sold 46 barrels last year but we’re finding there’s a huge market for our products in China. The Chinese like our whiskey because we produce a very soft whiskey, so the business opened an office in China.
What challenges did you face opening an office in China?
We appointed one of our people here in Australia. We got a company credit card for him and put $70,000 on it.
He went to China and started talking to people in government circles there. We got all the documentation done to have our company registered in China.
After spending a fortune on different documentation and all these things that had to be stamped by the Chinese Government, we found out that that they changed the law last year where your company had to be trading for two years in the country of domicile before you could register it in China.
We’ve now gone through the process where we’ve registered our distillery because it’s been trading for 10 years, but it was a very costly exercise.
My wife and I went to China last year and we sponsored a function for the Fuzhou Chamber of Commerce. We invited them all to a banquet and we gave everyone a bottle of whiskey.
They loved our product and that was a really good launching pad for it.
What was the most challenging part of starting your business?
The most challenging part was the manner in which we had to comply with ASIC regulations for selling barrels of whiskey as an investment.
We retained the most experienced lawyer in this regard – Mr Tony Hartnell from Anakostivic Hartnell – to advise and assist with our documentation.
As Tony was the retired chairman of ASIC, he was without doubt the guiding light in this venture.
Also, whiskey is an asset class, so it’s really about getting the message out to people that there’s a good alternative investment they can make, but certain religions won’t invest in alcohol so it’s a very limited market.
Is there anything you would have done differently?
I really think we would’ve probably allocated a lot more money into the marketing side of the business. We are using a public relations company this year to promote our product.
How did your accident shape you as a businessperson?
To come out of that situation, you have got to have an extremely positive attitude. You have got to believe with all your heart and soul – to the point where it’s not a possibility, it’s a reality – that you will walk again.
For anyone starting a business in this day and age, they really have to believe in their product and themselves to an extreme level.
The market out there is very, very hard at the moment. I’ve been in business for 30-odd years and I have never seen it quite as tough as what it is at the moment.
As far as trying to raise money for start-up things, I had 67 no’s in a row. You’ve got to have that dogged determination and have absolute belief in what you’re doing. If you don’t believe in yourself, no one else will.