Boom & Bust in Whiskyville


Posted by in July's Magazine

In these days of high profile dot-com businesses that seem to fly high for a short time and then crash and burn, its easy to see their sort of gimmick laden marketing strategies and gung-ho approach as a fairly modern phenomenon. Not so, Leith in the late 19th century had its own ‘cavalier’ enterprise and when it went down it almost took an entire industry with it. Let me relate the sorry tale of Pattisons of Leith.

Pattisons Ltd started life as a dairy wholesaler in Edinburgh and in the beginning had a fairly modest but healthy business. Their course was changed forever thanks to a tiny little insect in France – this less than timorous beastie was called Grape Phylloxera, a type of aphid with a fondness for fine French vines. A microscopic pale yellow insect, quite similar to greenfly, it came over from North America in grape vine samples.

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The North American vines had developed a resistance to the insect but the delicate European vines had never needed to and this proved disastrous. The disease first wiped out what little there was of England’s wine crops before moving to France where up to 90% of the country’s vineyards were destroyed by 1889.

One man’s disaster is another man’s opportunity and with the wine industry in free-fall there was a sudden gap in the market. Cognac, which had been the preferred drink of the great and good, was replaced with whisky – ‘Les Miserables’ news for the French but very good news indeed for the Scots. The whisky industry, which had been founded on small illegal distilleries in the Highlands, had its version of the gold rush and Pattison’s eagerly cashed in on the bonanza.

Initially the company bought the produce of various distilleries, creating blended whiskies that were a little less challenging to the uninitiated. This proved massively successful so Walter G.G. Pattison and Robert P. Pattison expanded from the blending business into distilling and incorporated as Pattisons Ltd in 1896. Buying up shares in distilleries like Monopoly streets, they took on Glenfarclas, Aultmore, Oban and Ardgowan distilleries as well as The Duddingston Brewery in nearby Craigmillar.

The company became notorious for extravagant advertising and spending. They had a sales force of 150 – far higher than anyone in their sector. In one year alone they spent over £60,000 (£4.3m in today’s money) on advertising. It was this over the top style that sealed their reputation, and of all their stunts the infamous ‘Parrot Campaign’ was the crowning glory.

A ship arriving in Leith had ‘acquired’ an extra cargo of 50 African Grey Parrots and was looking to offload them in Edinburgh for a good price. Such an unusual cargo quickly became gossip around the port and made its way to the offices of Pattisons. Within hours of the ship docking a company representative was dispatched to obtain the birds at whatever cost. They were prepared to pay ‘through the beak’ but on one condition, the birds had to be trained to cry “Buy whisky, Buy a whisky”. Within a few days the duly trained ‘advertising parrots’ were each placed in gilded cages and dispatched to public houses in Liverpool where the company was looking to increase its market share.

The Pattison brothers were masters of the publicity stunt. Another favoured ploy was to arrive at Galashiels or Peebles railway station just too late for the Edinburgh train. Local press were always to hand and they would exclaim loftily that “they couldn’t possibly miss a important meeting” and make a brouhaha of hiring a private train to transport them north at a cost of over £5 a mile – effortlessly making next day’s front page.

As the boom continued through 1890 to 1900 over forty new distilleries popped up around Scotland, this massive up scaling of production was far in excess of the actual demand and it was inevitable that something had to give. By 1898 there was 7 years worth of whisky in Bonded warehouses and production was still ramping up. Coupled with this the banks were being unusually generous with their lending to any enterprises within the industry. The clock was ticking.

By 1896 the Pattison’s bankers began to get nervous. The company had exceeded its overdraft limit but the brothers came up with a plan involving securities (preference shares and life insurance policies), they raised £40,000 and then promptly kept the money for themselves. At shareholders meetings healthy profits were being reported but in reality the company was out of control.

On the 5th of December it all started to come tumbling down. The company stock fell 55% from £9 18s 9d to £4 5s. Word got out that the firm was in trouble and by the next day securities were in the hands of the banks, that afternoon the stock plummeted to £1 17s 6d.

Some attempts were made to save the company; at one point Sir Thomas Lipton agreed to step in to save the business but then pulled out, denying ever having made such a promise. A collection of local businesses looked at forming a syndicate to take over the company but this also floundered.

For months the accountants and bankers poured over the books and what they discovered was not pleasant bedtime reading. All manner of shoddy accounting practices were uncovered, the company had been deliberately over-valuing possessions and buying back whisky stock at a higher price than previously sold – vastly over inflating their stock value. There was also evidence that the company had been mixing cheap grain whisky with higher quality scotch and re-labelling it as ‘Fine Old Glenlivet’. Charges of fraud and embezzlement soon followed.

From the official stoppage date of December 5th it took around two and a half years before the Pattison brothers were brought to trial. After nine days of evidence the jury took just over an hour to find the brothers guilty. Robert Pattison was jailed for eighteen months and Walter nine.

The after effects for the industry…
were catastrophic. Ten other large businesses went down with Pattisons. Many distilleries were mothballed, some never reopening, and overall production fell by a third and the advent of the Great War and prohibition in the USA all but finished the job. It was nearly 50 years before another new distillery opened in Scotland.

Depending on who is doing the talking, today the Pattisons are painted as either villains or entrepreneurs. I like to think that, despite all their failings, they were just ahead of their time. Flawed visionaries who would be running some app driven social media site if they were alive today. Maybe ParrotTalk.com

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