Case Study: Highland Grain and the Edrington Group
This case study covers the following points:
- Introduction to Highland Grain and the Edrington Group
- The Commercial Drivers for Collaboration in the Chain
- What are the Key Working Relationships and how are they Maintained?
- Examples of the Results of Collaboration
- Long Term Thinking and Mutual Support
- Innovation, Value Add and New Product Development
- Conclusion
Highland Grain and the Edrington Group
Introduction to Highland Grain and the Edrington Group
Highland Grain is a grain drying, storage and marketing co-operative specialising in malting barley for Scotch whisky distilling. The business owns a 30,000 tonne grain store, has 85 active farmer members and 6 full time employees. Established in 1977, the co-operative has grown from a throughput of 6,000 tonnes in 1978 to over 30,000 tonnes in 2006.
The Commercial Drivers for Collaboration in the Chain
As the business grew, Highland Grain recognised the desirability of directly supplying a customer who processed their barley to make malt and then used that malt to distil whisky. This was because it would provide them with the opportunity to respond directly to the needs of the distiller in a way that would bring maximum benefit to the customer while at the same time securing their place in the supply chain. The focus on this priority increased during the mid to late 1990’s when prices for malting barley declined and markets became increasingly competitive. Without a customer, Highland Grain was in danger of losing their market.
This search for a customer resulted in discussions with the Edrington Group, one of Scotland’s leading international premium spirits companies who own and produce some of Scotland’s best-known Scotch brands. As a distiller, the Edrington Group purchase malt for distillation. However, they also retain a maltings at Tamdhu so they continue to buy some barley for malting which they use internally within the group. The continued operation of the Tamdhu maltings is vindicated on the basis of its high levels of operational efficiency and cost savings. This is achieved through its location next to the Tamdhu Distillery where the surplus heat generated in the maltings is used by the distillery and where the men who operate the malting plant also work in the distillery.
The early discussions with the Edrington Group resulted in an initial order for Highland Grain of 1,000 tonnes of malting barley. Simon Barry, Chief Executive of Highland Grain and Dr Bill Crilly of the Edrington Group agreed on a specification for the barley and on a protocol for communication, planning, reporting and performance review. At subsequent meetings following barley deliveries, the performance of the crop in the maltings and the distillery was discussed. This feedback resulted in a new database of knowledge spanning the entire malting and distillation process and the specification of the barley was further refined and developed. This process is ongoing and the specification has now been developed to a point where there are key parameters for nitrogen, screenings and water sensitivity. These are, to an extent, variations on the common criteria for malting barley widely used throughout the industry. What is different about the malting barley delivered to the Edrington Group is that Highland Grain tightly streams the crop. Barley is delivered within a tight band of nitrogen content, it is a very clean sample and it has a guaranteed level of water sensitivity.
Both companies adopt the highest levels of best practice in protecting the Environment; Highland Grain are TASCC approved, only accept grain from assured sources and operate to an ISO 14001 policy; Edrington Operations are certified by LRQA to ISO 9001-2000, ISO 14001-2000, OHSAS 18001 and GMPB animal feed scheme.
What are the Key Working Relationships and how are they Maintained?
Delivering this specification requires careful management from Highland Grain and they have developed a system that supplies what the Edrington Group need. The process starts on the farm immediately after the barley crop is harvested. 30 tonne batches are sampled for nitrogen content, moisture, screenings, germination and thousand corn weight, the results are logged and farmers are immediately notified of their results. Simon says it gives growers a real buzz to know how their barley has performed. The information on quality is then used to plan the collection of the crop from the farm to the drying and storage plant located at Glaikmore north of Inverness.
On arrival at the plant the barley is streamed according to its nitrogen content and is dried down to 12% moisture. At this level, barley is stable and its quality can be maintained. After drying the barley, it would be normal to cool the grain with ambient air. However, Highland Grain, through the feedback they have received from Edrington, have identified that delayed cooling of the grain after drying reduces its water sensitivity. As a result, they do not cool the grain after drying leaving it ‘as is’, a process known as warm storage. There are potential hazards to warm storage and careful attention has to be paid to avoid insect infestation from insects such as grain weevil and saw tooth grain beetle. Again the collaboration of the farmers is essential to avoid such infestations and members are issued with clear instructions concerning grain store cleaning and hygiene practices and procedures. They are also issued with bait bags and traps which are returned to Highland Grain before harvest for inspection to identify any potential infestations. Where such infestations are identified, Highland Grain advises on appropriate measures to treat the store to eliminate the insects. Any information concerning an infestation and its method of treatment on the farm is fully recorded on the farm and at Highland Grain, and records are available to Edrington, as required.
Examples of the Results of Collaboration
The benefits of this management process are clear to the Edrington Group. It allows them to buy barley tailored to the Tamdhu Maltings and this makes it possible to produce malt that provides additional spirit yield and improved processability. This is achieved through a rapid uniform germination that provides them with a level of consistency, which has been hard to match using barley from other sources. In terms of spirit yield, the barley from Highland Grain has consistently provided improvements in yield of between 1 – 2%. Processability, the other key performance area, has a direct impact on the operational efficiency of the distillery. For example, a number of problems can result if the ground up malt entering the mash tun contains whole hard grains or large particles. This can be caused by variations in the barley germination leading to inconsistent malt quality resulting in insufficient protein breakdown. When this happens gums can build up in the mash tun during mashing resulting in it taking longer for the wort (sugar solution) to drain from the mash tun. After mashing, additional cleaning can also be needed to remove the gums. In a distillery this results in fewer mashes, lower levels of production and lost potential sales.
Communication has played a key role in developing the relationship between Highland Grain and the Edrington Group. This communication happens through a variety of different channels:
- After harvest, a detailed report outlining the quality and quantities of the various bulks assigned to Edrington are sent to them.
- Prior to delivery, information concerning the quality of a particular barley consignment is e-mailed to Edrington.
- Every two months there is a planning and review meeting between Simon and Bill at which the performance of the barley delivered to the maltings is discussed. Production and supply plans and the key performance criteria of spirit yield and processability are examined.
- Annually, Bill meets the Highland Grain board members to discuss and review the performance of the barley delivered to the maltings.
- Frequent meetings are held by Highland Grain to feedback the performance information of the barley delivered to the maltings. These meetings are held both with members of staff and farmer members.
Through these communication channels there is a complete and open transfer of information up and down the chain. Everyone from the farmer to the employees working at Highland Grain has a complete understanding of what they do and how that impacts upon quality of the barley delivered to the maltings at Tamdhu. This open transfer of information gives Edrington sufficient information regarding the barley, before delivery. Simon says that “this means we need to be proactive when informing Edrington about issues. “For example, if we have an insect infestation, we tell Bill”. “Although it’s tough at the time, we find the honest approach has meant that we are now a trusted and preferred supplier to the Tamdhu maltings and it shows our long term commitment towards supplying top quality malting barley”.
Long Term Thinking and Mutual Support
Notwithstanding these efforts, nobody at Highland Grain takes anything for granted. They consider they must continue to improve their performance in order to earn the right to retain the business placed with them by the Edrington Group. This process of continuous improvement is implemented in a range of different ways:
- By investing in new technology to reduce energy costs, Highland Grain has reduced fuel consumption by 33% in the last 3 years. In doing so,Highland Grain reduced CO2 emissions by 250 tonnes in 2006 and has plans for further reductions of around another 250 tonnes in 2007. This has accounted for two-thirds of their original emissions. Should future planned investment in biomass heat generation be implemented, it will almost eliminate their use of fossil fuels. This has been achieved by changing the drying regime and by installing a heat recovery system.
- Through Investors in People, Highland Grain is clear about its aims and objectives. The people employed by the business are clear how they contribute towards achieving the aims and objectives and they know what role they play with respect to satisfying customer requirements. They are encouraged to find new and better ways of doing things.
- By evaluating their performance against others through a benchmarking tool available from HGCA, called PROBE (Promoting Business Excellence). The exercise highlighted the existing high level of performance and outlined some further opportunities for improvement.
Innovation, Value Add and New Product Development
Looking further forward Simon and Bill are now looking at a number of new barley varieties. ‘Optic’, the current mainstay, has been the cornerstone of the Scottish malting and distilling industries for some time and a number of new varieties are coming through. However, before a new variety is adopted, it must satisfy a number of criteria. For the growers, a new barley variety must yield well, have good disease resistance and have a decent corn size; for distillers it must be a GN non-producer, produce high levels of spirit yield and processability. That means the barley should avoid problems such as absorbing too much nitrogen or being prone to pre-germination. Finding a barley which ticks all of these boxes is not easy but with the systems of communication that have been developed Simon and Bill have an understanding of each other’s needs. This enables them to rapidly assess new barley varieties and adopt only those that are acceptable to distillers and that farmers are capable of growing on a consistent basis.
Conclusion
The approach adopted by Simon and Bill on new varieties very much sums up how they work together. The relationship is forward looking, there is an open book policy concerning information, problems are highlighted and solutions sought and planning plays a key role. The result is that each party trusts the other and this helps improve margins, add value and manage risk. Edrington, as a company, benefit through improved productivity and in close working relationships with a supplier at a time when the market for malting barely is short of supplies. Highland Grain benefit by obtaining a fair market price of their malting barley and by knowing they have secured a customer that is likely to stay with them for the long-term. Hard evidence of the successful relationship between the two organisations is demonstrated by the fact that tonnage of barley supplied by Highland Grain to the Edrington Group has increased from 1,000 tonnes in 1995 to 11,000 tonnes 2006. Further growth is targeted for the coming season; a supply of 13,000 tonnes is planned for 2007.