Diamonds are forever

John Teeling remains one of Ireland’s foremost entrepreneurs, with business interests that range from Cooley Distillery to African diamond mines. He spoke to Irish Director magazine about a lifetime in business.

Given John Teeling’s portfolio of interests, which includes Cooley, Ireland’s only independent whiskey distillery, diamond-mining companies in Botswana and Guinea, oil exploration operations in Iraq and South America and a gold exploration business in Iran, it’s no great surprise when he reveals that he has always been interested in high-risk, high-potential ventures.

It is interesting, however, to note that Teeling made his initial money from speculating on the stock exchange, which he says “was my first love and my best skill, and still is”.  Like Warren Buffett, he was, and remains, a disciple of the Benjamin Graham strategy of value investing, which Teeling says was particularly good to him in the Seventies and early Eighties.

By the time he began setting up his first companies in 1983, Teeling was already something of a veteran, having taken over running the small family business at the age of 14 after his father died. He then studied commerce at University College Dublin (UCD) before going to the US to complete an MBA at Wharton and a doctorate at Harvard Business School.

In exploration mode
Teeling’s connections with the exploration sector go back some 40 years, when he joined Irish Mining, which was based on the Clontarf Road, in the same offices where his companies are headquartered today.

Teeling also spent nearly 20 years as a lecturer at UCD, initially teaching finance in the late Sixties, and then business administration, primarily to first-year commerce students, in the Seventies and Eighties. “My job was to bring in innocent 17 and 18 year olds and to try get them to think about entrepreneurship and establishing their own businesses and away from permanent and pensionable jobs, which in the Seventies was school teaching, the banks and, particularly, accounting,” he says.

Between 1983 and 1987, Teeling set up four exploration ventures, including Minquest which later became Arcon, African Gold and Pan Andean Resources, an AIM-listed oil and gas producer and explorer.

Setting up Cooley in 1987 was the culmination of an interest he had developed in whiskey from 1970 when studying for his doctorate, Teeling did a paper on the demise of Irish whiskey, something he describes as “an absolutely horrendous story”.

“The very best industry that this country can have is whiskey,” he says. “We’re perfectly suited climate-wise: it uses Irish air, Irish water, Irish time, Irish grain and it’s all exported. We had 60pc of the world market at one time, and it was an industry that should have lasted. Instead it declined to 2pc. In the early 19th century, there were 1,100 distilleries in this country. By the time I looked at it in 1970, there were four. And in 1986, there was one.

“The reason is absolutely elementary: there was a change in technology – developed by an Irishman – using columns instead of pots, but the Irish distillers said: ‘Nah, this is not whiskey’ and wouldn’t accept it. They fought for 80 years to try and change people’s perceptions and failed. They continued to make the big, heavy Irish whiskey in pot stills, whereas the Scots took the Irish invention very quickly and made cheaper, lighter whiskey that was easier to drink. The Irish wouldn’t change and really didn’t until the late 1960s.”

Having spotted the opportunity, Teeling finally took a gamble on setting up his own distillery and bought an old potato alcohol plant in the Cooley Peninsula in Co Louth in 1987. He readily admits that it wasn’t the wisest decision to make, given the difficulties of getting into a market that is essentially controlled by big players such as Pernod and Diageo globally.

“It was economically foolish to do it, but it was the type of the thing that we did – very high-risk, high-potential projects,” he concedes. “That’s by choice, whether we’re exploring for oil in Bolivia, gold in Zimbabwe, or diamonds in Botswana.

“Almost everybody thought we wouldn’t survive, particularly the industry, because we had no skills. We had no money. We had nothing to sell for eight years. If you’re setting up a business, you normally look for your payback within five years. We didn’t get payback for 15 years!

“So, was it a clever decision at the time? It was not. Is it a good project? It’s a wonderful project,” he says now.

These days, Cooley exports to 45 countries and has a wide range of brands. In 2008, it had profits of more than €3m, up 100pc from the year before. It won World Distiller of the Year at the 2008 International Wine and Spirit Competition Awards.

Teeling attributes part of the success to the fact that the whiskey market has exploded in the US, where young Americans are turning to brown spirits. As a result, Irish whiskey sales have quadrupled there in six years to around a million cases a year. Elsewhere, the emerging markets have had a massive impact on worldwide sales of whiskey, he adds.

“Opportunities are bigger and better than they ever were. Irish capacity is probably adequate to double current sales to about nine million cases, which will be reached, I would have thought by 2014, so there will be a need for further expansion.

Cooley is the only supplier in the world of own-label Irish whiskey and its biggest single customer is French supermarket chain Carrefour. Teeling concedes that, globally, marketing Cooley’s products and forging deals with distributors has been a challenge. “The advertising budget for Jameson in the States is €40m – my gross worldwide sales are €18m,” he says. “Winning distiller of the year has brought the trade to our door, but we have been unable to take advantage of it in that we’re not big enough to be able to advertise it directly to the consumer.”

Cultivating ideas
Despite the challenges, Teeling  is confident of ongoing success at Cooley, and says he has no regrets about setting up the distillery. “I would do it again because the stuff we do is not just for money. This may sound pompous, but I do not make these kinds of investments to make money. If I want to make money, I play the stock market. This is as much about seeing if you can do it, if you can take the germ of an idea and grow it into a big company.”

Ironically, Teeling says Cooley has been an easier proposition than some of his other companies. “We’ve drilled more dry holes. It’s like gorgonzola in some of the places we’re in,” he laughs. “When that happens, that’s your money lost 100pc. I’m not rescued by NAMA when I drill a dry hole.”

As chair of nine companies, he describes his role today as “squeaky wheel stuff”. “With nine companies, there’s nearly always a crisis,” he says. “I would also manage those that don’t have management teams. My time would be spent on what’s the most urgent and what’s the most strategic. I also do far too much. I have had one day’s real holiday in 18 months. The last year has been very busy, but I’m very lucky in that my busy is good busy.”

Keys to success
Teeling believes his success has been helped along by two particular factors. One has been his ability to concentrate, which made him an excellent student. “Secondly, because my father died when I was so young. I had to have huge confidence in myself. I like high risk, high return because I’m very confident that if I screw it up I’ll do something else.

“That said, I would always have worked hard to reduce the risk, even in the diamonds, which is probably the riskiest of all, where you have a one in 2,500 chance of finding anything. You wouldn’t dream of betting that on a horse!

“We cut down the odds dramatically by going to the place where the diamonds are, by getting people who knew what they were doing, by getting ground close to where there was a diamond mine and then by joint venturing with De Beers who was the prime [diamond expert] company in the world. That brings the risk down dramatically. And we found a diamond. By 2011, we will have a diamond mine that will be in the top 10 profit-wise in the world.”

Teeling doesn’t look like slowing down any time soon.  “There are loads of challenges now. The trouble is I woke up one morning and I was over 60, which is frightening. I’m now the oldest at every meeting I go to – that’s upsetting because there are loads of things I still want to do.

“I’m interested in the whole energy area, both conventional and alternative and have been for some years, and that led to the investment in AER. I’ll be in renewables with certainty. I am blessed I never did property. No interest. It’s too boring! Why would you collect rents?”

Teeling is characteristically outspoken when it comes to the economic crisis in which we find ourselves today. “The first thing is we all knew it was going to happen. Every last one of us participated.

“The burst had to come,” he continues. “I would have bust all the banks because capitalism doesn’t work if you’re going to be rescued. Nobody has paid me for all the dry holes I have drilled.”

As for the future, Teeling believes we have a few tough years ahead, and that we will all have to get used to the idea of a lower standard of living. He says he would – reluctantly – raise taxes. But, above all, he says it is time to move resources from the non-productive sector into the productive sector, which he lists as manufacturing, services and farming.

“Farming and secondary sectors generate wealth. The tertiary sector does not generate wealth. Go back 25 years and you had the Michael Smurfits, Tony O’Reillys, Tom Roches, Don Godsons and Denis Brosnans – they made it in industry because that’s where the opportunities were. Move on and suddenly you could double your money in a property, so you get the Sean Dunnes, the Bernard McNamaras. Why wouldn’t they become billionaires? That’s where the opportunities were, the tax incentives. That’s all gone now.

“We have to get people back taking the risks in the productive sector. We’ve got to incentivise young people – young political leaders, young social leaders and young businesspeople. I think there’s a need for decisive leadership and I think that’s going to come from the young. We need new, fresh blood.

“We had our chance and we blew it. Now we need to clean things out, so the next generation has a clean balance sheet and can make their money.”

This article first appeared in Irish Director Magazine

by Grainne Rothery