A man of spirit has revived a fine family tradition while winning new export markets, as Peter Jackson discovers talking to John Harvey McDonough.
LUXURY hotel Seaham Hall harbours a dark secret in its otherwise illustrious past.
The cellars of the hotel, which is renowned for the being the venue for Lord Byron’s wedding, were used in the 1920s by Sunderland-based whisky trader Alec Harvey as free warehousing for barrels of Harvey’s blended and malt whiskies.
Much of this was exported to Canada, from where others smuggled it over the border into Prohibition era USA and, it is rumoured, was much enjoyed by infamous Chicago mobster Al Capone.
Now, however, Harvey’s of Edinburgh, a County Durham registered company, boasts more distinguished clients, including The Prince’s School of Traditional Arts and Historic Royal Palaces.
Director John Harvey McDonough, grandson of Alec Harvey and now head of Harveys of Edinburgh, seems to take pride in both historical and current fans of the company’s products.
We meet at Seaham Hall with which Harveys still has strong connections. Harvey McDonough, 55, has a soft-spoken charm and a ready wit along with a twinkle in his eye which, I suspect, might owe something to his grandfather’s buccaneering spirit.
His family on his mother’s side has a long history in the scotch whisky industry dating back to John and Robert Harvey in the 1770s. In fact, when Lord Byron was married at Seaham Hall in 1815 he presented his friends with a cask of Harvey’s Spey Whisky to celebrate his wedding. He even sent a cask to King George III at Kew Palace, though by 1815 poor mad George III was probably too crazy to know what he was drinking.
“My grandfather who was born in Sunderland was from the line of Harveys from Scotland and he continued the trading business in the North East,” explains Harvey McDonough.
“He used to ship barrels of whisky and bottled products down from Scotland and would have the barrels bottled locally and exported from Seaham.”
Alec’s son and John Harvey McDonough’s father – also, confusingly, called John, had no great interest in the whisky business and pursued a career in the Royal Navy. But young John would go out with his grandfather and learned something of the trade.
John senior advised his son that if he was interested in taking up the business he should gain experience of brand marketing and also spend some time in India or China where he foresaw emerging markets.
“My grandfather traded in whisky and my father always said there’s an opportunity in this whisky business but it’s about marketing and brand, so I should learn about brand marketing,” says Harvey McDonough.
He took his father’s advice and left school at 16 and, after working for a food wholesaler in Durham, he did business studies and studied at the Institute of Export in London. He joined Grand Metropolitan for about 15 years and then spent three years in Taiwan with International Distillers and Vintners, IDV.
All the time his ambition was to return to the family whisky business.
“I just learned more about business, all aspects of business, including the finance, the marketing and logistics, but particularly about brand marketing. IDV were fantastic at brand marketing and had launched Bailey’s Irish Cream, the peach schnapps Archers and Smirnoff and Absolut. There were a lot of opportunities to learn there.”
He established networks in Taiwan and by 1996 he felt he had gained sufficient experience and done enough groundwork to leave IDV and resurrect Harveys of Edinburgh. He had also learned to speak Mandarin. By this time his grandfather had been dead for six years but his father, now retired from the Navy, was there to help him. There was also sufficient of Alec’s stock, now well matured in the barrel, to give them a start.
“It allowed us to start the business at the very high end. We focused on single malt, very old, aged whisky and co-operated with the family businesses my grandfather used to deal with and bought in scotch whisky,” he says.
“It was a big challenge, what we wanted to do was to develop a scotch whisky brand at the top of the market and that demands an enormous amount of investment and we weren’t financially geared up for that so we had to learn all the tricks and the shortcuts of getting a high quality product at minimum cost especially in terms of marketing the brands.”
The business was concentrated on the Spey single malt brand and was focused on Taiwan using the contacts Harvey McDonough had made over the years.
Those early years were a struggle. “We didn’t have any money to do what we aspired to do. We started off without an office, without any staff, operating from my flat and my father’s car.”
He also had a Chinese partner Hong Ho, who, unlike him, had a wife and children to support.
“There were lots of times I said to Hong, ‘I’ve enjoyed the journey but your responsibilities are a lot bigger than mine, but he stuck with it’.”
The heaviest blow came when their distribution partner in Taiwan took a strategic decision to drop alcohol products and concentrate on their core business of milk.
“I was pretty devastated,” says Harvey McDonough. “We had to start again, back to the beginning where we did it ourselves. The sales were good but we just couldn’t finance the growth. We almost disappeared quite a few times. There was a greater demand than supply because of our cash flow.”
“From a brand perspective that was quite good because people would say they’d like to order 100 cases but we’d say for the next two months you can have 10 and then 20. That gave us a certain exclusivity, by accident.”
Gradually, over a number of years and working with a several trade partners they were able to build up credibility in the market exploiting pent up demand for a product that was in short supply.
“As we got a quicker turnover we put the money straight back into marketing effort and we also increased distribution,” he says.
The company put a strong emphasis on maintaining the quality of the product and on packaging with distinctive bottles which are made by a French company using “the highest quality glass in Europe” according to Harvey McDonough.
“We have to be different, so our presentation is different. In terms of brand once we had a little bit of credibility we did a lot of brand association with Hermes, Harry Winston, Tiffany – all luxury brands. We knew a lot of the rich families [in Taiwan] and we used to work with them. They signed up The Prince’s School of Traditional Arts and Historic Royal Palaces and Harvey McDonough has met the Prince of Wales three times through British government contacts in Taiwan, which remains the key market.
“Taiwan is being discovered by the international community. Taiwan is quite open, it’s a lawful society with clear terms of trade and it provides a bridgehead into China.”
Now, in the single malt market in Taiwan Spey ranks number three, above Glenmorangie. By this summer, they had achieved an annual turnover of £10.5m and 38 employees.
But Harvey McDonough did not feel able to relax until a few weeks ago when Harveys of Edinburgh bought Speyside Distillers of Glasgow securing future supplies and customers in 22 countries including Russia, Spain and the Middle East. The acquisition – for an undisclosed sum – was funded from Harvey’s own resource and in partnership with a large Taiwanese food company called Vedan.
“Speyside had an enormous stock of whisky and that solved the problems we had and secured whisky supplies for the medium term. They also had a distillery called Speyside Distillery and that answers the problems of the stock in the long term. We can be very aggressive on sales push now because we have the whisky.”
The acquisition brings another 25 staff and additional annual turnover of £8m. Vedan is strong in the Chinese and Vietnamese markets and is keen to support Harveys of Edinburgh to achieve penetration there. It is planned to increase turnover for the new enlarged company by 20% in the first year. Harvey McDonough will work with former director of Speyside Distillers Sir James Aykroyd to develop sales and marketing strategies overseas.
“We are very strongly placed to take advantage of the huge opportunities coming out of China in the next five to 10 years,” he says.
So he has resurrected his grandfather’s business, returned the family to distilling and fulfilled a boyhood ambition after years of struggle. How does he feel about that?
“It’s a huge relief to be – at this stage – safe. It also feels quite exhilarating to have this real challenge of developing a bigger business and I’m relishing the opportunity. It’s really exciting.”
And what does he think grandfather Alec would say?
Harvey McDonough chuckles: “If he was looking down – actually I think he’d be looking up – he’d be having a good laugh.”