Sotelo: How a pisco producer has become a de facto bank

Distillery: Sotelo

Location: Ica, 300 km south of Lima. Ica is the region where most pisco has traditionally been produced, and where most pisco is still produced to this day.

Distillery founded in: 1927

Pisco Varieties: Quebranta, Italia, Torontel, Albilla, Moscatel, and a 5 varieties Acholado.

Our favorite pisco: The Quebranta. Quebranta around Ica is of very fine quality. Sotelo´s quebranta dazzled us. Intense, yet very round notes. Drinking it is like stepping into a magical botanical garden in the tropics.

I´m sitting accross Julio and ask him. What´s your last name?

- Sotelo, he replies.

Right, of course. I forgot how much of a family thing pisco is in Peru. You see, that´s the wonderful thing about pisco in Peru. There are over 500 different distilleries out there. Each unique, each personal. When you´re tasting a pisco, you´re not being watched by an anxious production manager, you´re sipping it with the son, grandson, or someone baring the name of the distillery itself. Things are personal, and the people making the pisco don´t just do it because they want to make an income, they do it because they´re trying to live up to their ancestor´s legacy and do a good job of stepping into such a wonderful role.

The distillery was built in 1927 by Julio´s great-grandfather. The second generation died very young: Julio´s grandmother passed away as she was a mere 33 years of age, and her husband followed suit shortly after. That meant that, in a very short amount of time, they´d lost the family´s two main pillars. Their 5 kids were sent to be raised with aunts and uncles who raised them as their own. Of course the distillery was affected: it practically fell into abandonment for nearly 60 years.

In 1968, land reforms offer new possibilities to the Sotelo family. Julio´s father hears that the government is willing to offer lots of land to those ready to work them. Aged 60, he jumps at the opportunity and immediately plants vineyards! Three years later, he begins reconstruction of the distillery, which he runs until his death in 1985. Just as Julio´s father had passed away, Julio was freshly graduated from university with a diploma in engineering. He takes over.

The first delivery truck used by Sotelo to distribute its piscos around proudly stationed in front of the distillery, offering a glimpse of the distillery´s past.

I´d like to highlight a few interesting points concerning the way in which Julio managed the distillery. First, in 1986, he implemented an interesting scheme whereby he´d convince grape producers to give him the grapes free of charge in exchange for pisco. This allowed him to finance the early-stage development of the distillery at virtually no cost, since the cost of grapes can account for up to 70%-80% of total production cost. His father had left him two resting tanks of 2,000L capacity each, and Julio was determined to fill them from the very first year of production."The dream of a recently graduated student like myself inheriting a distillery was to fill those tanks with pisco, and we managed to surpass that, producing 5,000L of pisco that first year!"

The fact that the pisco "industry" was largely based on barter was not the only factor that made the pisco world so informal. In such days, demand for pisco was so big that Julio didn´t even have to bother with setting up distribution channels. Instead, he simply "opened up shop" every Saturday. On that day, bar owners and other clients would show up at the distillery with their own recipients, fill them up, pay and leave. So Julio was basically financing 80% of his costs for free, and didn´t even have to bother with issues like buying bottles or setting up a distribution and sales force. Pretty damn sweet, you´re probably thinking. Hell yeah, I agree. I wish things were that simple.



Unfortunately, good times don´t last forever. The system, which was widely applied at the time, worked for another 3 or so years, then broke down, for 2 reasons: First, producers began to give bad pisco to grape harvesters. Second, the distribution channels changed, leaving small grape harvesters unable to sell the pisco they´d received in exchange for their grapes. As we´ll see later, this didn´t catch Julio off balance; he had a few more tricks in his pocket.

In 1995, Sotelo opened their first store in the city center, in which they exclusively focused on selling their pisco. Such sales model was unheard of at the time, with all other pisco producers selling either through resellers or straight from the distillery. Sales started booming for Sotelo, it turns out that the bet was paying off. More importantly, the industry was undergoing massive changes: producers began bottling their product themselves and setting up formal distribution forces. In such context, a lot of the smaller distilleries fell out of business, unable to invest the necessary funds to adapt. Sotelo though, was ready, since they´d already set up their store in Ica´s center. That´s when Julio decided it was time to pull out the first trick from his pocket.

Julio Sotelo, 4th generation producer, in front of his vineyard. Besides running the company, Julio teaches chemistry and oenology at the university of Chincha.

Since it was no longer attractive for grape harvesters to barter, since, once paid in pisco, they´d have a hard time selling it off, Julio offered them the possibility for Sotelo to sell their pisco instead, and just pay them the proceeds. So basically, a grape harvester would hand them his grapes, they´d make pisco, sell it, and give him a part of the sales money. That system worked well, and was in place for almost a decade, until Sotelo decided to stop it. Why? By then, they had sufficient funds to finance the purchase of grapes themselves, and it made more sense to do so, since the scheme whereby they´d pay back in full later was actually a very costly way to finance themselves (more than 100% interest rate, in fact).

Today, Julio has pulled out his last trick, no less ingenious than the previous two. Sotelo offers grape harvesters the possibility to pay them in monthly installments year-round instead of at the time of the sale. This offers the advantage of developing privileged relationships with them, and of balancing the cash outflows throughout the entire year. For the harvesters, it gives them a stable monthly income. Win-win, and with that trick, Sotelo has become a de facto bank.

Old "botijas", remnants of pisco´s past sit empty in the distillery. In pisco´s earlier days, they were used to store pisco once distilled, and to transport it by land or sea.