Develop an appropriate mission statement for Celtic Renewables. Using evidence from the case and from the company’s website, evaluate your mission statement against the ‘six successful tests of a mission statement’ (Wilson and Gilligan, 2005). (30 marks)
Explore five alternative forms of funding which Celtic Renewables could have pursued. (25 marks)
What are five of the macroeconomic threats which might affect Celtic Renewables business model? (25 marks)
Whisky-fuelled motoring sounds like an odd thing to be building a business around but Martin Tangney thinks it might be the start of a new £100 million industry in Scotland. He is the founder of Celtic Renewables. Based in Edinburgh, it has pioneered a way to produce biofuel from the plentiful waste of the whisky industry. Last July the five-year-old company showed off the first car to be powered by whisky residue. It has now secured crowd-financing for a factory.
The biobutanol it produces can be a direct replacement for petrol and diesel and can be used in the engines of any car without any modification. Unlike the charging network for electric cars, Celtic Renewables’ output can be easily integrated into the existing fuel infrastructure and can be blended with petrol and diesel.
“It’s such an obvious little idea, I do get asked, are you sure no one has done this before?” Professor Tangney says. “Well, if someone had thought of it ten years ago they would have been asked the same question. Somebody has got to be the first and on this occasion it was me.”
The innovation is inspired by a century-old process. The 53-year-old Irishman, who has worked in the renewable energy industry and in academia, says that he is on a mission to build a new industry by “reinventing a defunct technology”.
Celtic Renewables uses so-called acetone-butanol-ethanol (ABE) fermentation, which was developed in the early 20th century in Manchester by Chaim Weizmann, who went on to become the first president of Israel.
With supplies of cordite, used for British ammunition and explosives, running low during the First World War, Weizmann came up with a way of producing large quantities of one of the key ingredients for cordite -acetone – from the fermentation of maize. When maize ran low, conkers collected by schoolchildren were used.
The process was used to make acetone for paints, glues, drugs, fuel and photographic film but the high price of the substrate used in the process, generally corn or wheat, and the rise of petrochemicals as an alternative method of acetone and butanol production put paid to widespread ABE fermentation in the 1960s.
Professor Tangney believes that his company can revive it by using waste products. “Instead of using high-value raw materials, I wondered if it could work with low value materials. It’s a business innovation as well as a science innovation because you’ve addressed the issue that crippled the industry in the first place.”
The raw materials are two by-products of the distilling process: draff and pott ale. The Scottish malt whisky industry produces 750,000 tonnes of draff – what’s left of the grain after fermentation – every year. Two billion litres of pot ale, the copper-containing yeasty liquid left after distilling the whisky – “a murky, crappy water,” as Professor Tangney puts it – have to be disposed of annually.
The whisky byproducts are spread on agricultural fields, turned into animal feed or dumped into the sea. “My view is that it is a biological raw material and we should be deriving way more value out of it than that,” he says.
Disposal is also a significant cost for distilleries. Tullibardine, a whisky producer that has agreed to work with Celtic Renewables, has said that it spends £250,000 a year disposing of its byproducts.
Professor Tangney believes that the industry could one day be worth £100 million in Scotland alone and he has had strong interest from the whisky industries in Japan, Ireland and Canada.
Henry Ford once said: “There is fuel in every bit of vegetable matter that can be fermented”. Professor Tangney says that whisky waste is merely a starting point; waste from the paper and bakery industries could also one day be used.
There’s a long way to go, however. The company has funding for a “commercial demonstrator” plant in Grangemouth, near Falkirk. If that is successful, full-scale production can then begin.
Celtic Renewables is a spinout company from Edinburgh Napier University. Professor Tangney is determined to avoid the mistakes made by other such companies. “Commercialising research is about building a bridge across the gulf to the promised land,” he says. “With too many companies, it is never going to be a bridge – it’s just a pier that they keep refining. They’ll never get there because the capability and mindset is not there. My view is: I don’t care how rickety the bridge is, as long as we get there. I want to take it out of a test tube, put it into a factory and make a real industry.”
Setting the wheels in motion
It may not be turning water into wine but the plan to turn whisky waste into fuel is nothing if not ambitious. Celtic Renewables will need hefty capital to prove that the idea can be commercially viable.
Previously it has secured funding from private investors and the Scottish government but for its first factory it turned to a more unconventional source.
The company has raised more than £5 million of the £20 million it needs by borrowing via Abundance, a crowdfunding platform for green energy projects. It secured £4.4 million from ordinary investors, who could lend as little as £5.
Given the risky nature of the project, the two-year debt instrument pays investors 15 per cent interest a year. “It’s an amount that a high net worth investor can’t do on their own,” Martin Tangney, founder of Celtic Renewables, says. “It’s a sensible return and it keeps the equity in the business for us.”
The remaining sum will come from a grant of £9 million from the Scottish government and £6 million from existing shareholders, including Donald Houston, owner of Adelphi Distillery in Fife.
Professor Tangney calls the “demonstration” factory a “necessary evil”.
“We have to walk before we can run,” he says. “Before we go and spend £100 million on a full-scale production factory we need to integrate all that on a reasonable scale on one site and figure out: where does the truck come on, where does that pipe go? It will allow us to develop the blueprints that will allow us to roll this out at scale.
Hurley, J. (2018) ‘Celtic Renewables run cars on whisky industry’s castoffs’,The Times, January 8, [Online]. Available at https://www.thetimes.co.uk/article/celtic-renewables-run-cars-on-whisky-industrys-castoffs-9gz8sgljl (Accessed 31 January 2018).
Part B: Block 1 mind map
This part of the TMA will be marked out of 20 marks.
Create a mind map showing how the main themes and concepts from Block 1, ‘Big ideas in organisations’, relate to each other.
This question asks you to do two things, 1) develop an appropriate mission statement for Celtic Renewables and 2) evaluate your mission statement. Mission, vision and values are covered in Block 1, Session 4. As well as the online session, you will have also read ‘Reading 1: The marketing concept’ by Harris (2017). Within Session 4, activity 4.3 explores the mission statements of some well-known brands. Neither the case nor the Celtic Renewables website give you a specific mission or vision statement, but there is enough information on their approach to business and an outline of their strategy. This should give you enough material to create your own logical and sensible mission statement. In Activity 4.4 you were introduced to Wilson and Gilligan’s “six tests of a successful mission statement”, which are also discussed in Reading 1, pages 12-13. This will provide the framework for your evaluation, but it is important to support your answer with appropriate evidence from the case and company website. There is no set word limit for any one question, but the marks allocated to each question will give you a clue.
In Block 1 you have covered both traditional and new approaches to financial funding. Traditional forms of funding are covered in Block 1, Session 13 and new financing channels are covered in Block 1, Session 14. In addition, you will have read the document ‘Raising finance – small and medium-sized organisations’ (Oliver 2017).This question is asking you to identify and describe five alternative forms of funding that Celtic Renewables might have used and to discuss their relative merits. Given that sources of funding tend to increase as businesses become more established, your answer could consider how the various sources of finance link to different stages of Celtic Renewables’ growth. You should support your answer with supporting evidence from the case study.