Artisan Spirit: Spring 2018 by Artisan Spirit Magazine

SPRING 2018

MANAGING

flavor drift alarming

AMOUNTS OF SAFETY

SHOT FOR TEACHER

WARNING FROM A GHOST SHIP FLEETING RELIEF INSIDE FET REDUCTION

TABLE of CONTENTS A LETTER FROM THE EDITOR

QUARTERLY GUILD REPORT

What’s going on, state-by-state and province-by-province

THE BIRTH AND GROWTH OF THE AMERICAN CRAFT SPIRITS ASSOCIATION From the American Craft Spirits Association

Continued growth and the influence of cocktail culture

Under the influence of changes in Administration and other political shifts

3 THINGS EXCEPTIONAL PACKAGING CAN DO FOR YOUR BRAND

Brand Buzz with David Schuemann

The sunrise of tequila

CLASS ACT 66 More craft distillers are becoming educators

NOTES FROM DISTILLED SPIRITS COUNCIL’S 2017 ECONOMIC BRIEFING 27

TTB IN A DEREGULATORY MOOD

AGAVACEOUS 63

THE CURTAIN'S UP AT BACKWARDS DISTILLING of Mills, Wyoming

RENDER UNTO CAESAR 74 Impacts of federal tax reform on the distilling community

NEW UNDERSTANDING OF HUMAN SENSORY PERCEPTION 78 33

Potential for more robust sensory evaluation of distilled spirits

AN AMERICAN IN IRELAND

What's the craic? Sipping my way from Bushmills to County Cork

BUT DOES CODE REQUIRE AN ALARM SYSTEM? 41 Where there's smoke...

HOW BARRELS OF DENATURED ALCOHOL CREATED A GHOST SHIP 47

GRAYBEARD BRINGS THE BEDLAM

of Durham, North Carolina

BLAUM BROS. DISTILLING CO. 92 of Galina, Illinois

REGARDING GMOS

109

ARE AMERICANS READY TO RAKIA?

111

Picking the best raw material for your product

San Antonio’s Dor ol Spirits introduces Texas drinkers to a Serbian distilling tradition

PRODUCT SOURCING

113

MINIMUM PRICING

115

THAT WESTERN (PENNSYLVANIA) SPIRIT

118

Crafting spirits in a modern world

Can a government mandated bottom line reduce destructive drinking?

Mongohela Rye has re-entered the whiskey lexicon

QUALITY MANAGEMENT AND PRODUCTION DOCUMENTATION 120 Maintaining quality & consistency through paperwork

ANNUAL AMBA LIST SHOWS INCREASED CRAFT VOICE

122

PULQUE 96

Distilleries continue to push for two-row barley

AVOIDING THE SLOW DEATH

SUSTAINABLE DISTILLING AT MARBLE DISTILLING COMPANY 124

Something a bit more unique in the world of spirits

History provides a warning

How to stay alive in the spirits industry

MAKING SENSE OF THE CRAFT BEVERAGE MODERNIZATION A ND TAX REFORM ACT 51

GIN’S THE THING AT SCRATCH DISTILLERY

100

Potential for profit, but due diligence required

PLAIN PACKAGING

103

CRAFT DISTRICT DEVELOPMENT 128

The effect on distillers, contract bottlers, importers and more

LOWER TAX RATE? YES, BUT ALSO...

The good, the bad, & the unexpected

Could a public health initiative crush craft?

EXOGENOUS ENZYMES:

Unlocking your grain’s potential

“YOU SAY POTATO…” Proof Artisan Distillers of Fargo, North Dakota

of Edmonds, Washington

of Carbondale, Colorado

DISTILLERS GRAINS

Newest addition to Tumwater’s Center for Brewing, Distilling, and Cider Making Excellence

105

ADVERTISER INDEX

MANAGING FLAVOR DRIFT 107 Drift happens. Don’t get swept away by it.

from the COVER

126

Proof Artisan Distillers in Fargo, North Dakota. Image by Amanda Joy Christensen. See their story on page 59.

130

Issue 22 /// Spring 2018 PUBLISHER & EDITOR Brian Christensen CREATIVE DIRECTOR Amanda Joy Christensen SENIOR WRITERS Renee Cebula Amber G. Christensen-Smith

Devon Trevathan Margarett Waterbury

CONTRIBUTORS

Shawn Bergeron Colin Blake Jeff Cioletti Brian B. DeFoe Carrie Dow Andrew Faulkner Brett Glick Harry Haller Ashley Hanke Paul Hughes, Ph.D. Tim Knittel Margie A.S. Lehrman

Marbet Lewis Ryan Malkin Jim McCoy John McKee Sebastian Ramirez Kurt A. Rosentrater, Ph.D. Scott Schiller David Schuemann Marc E. Sorini Gary Spedding, Ph.D. Gabe Toth Molly Troupe

ILLUSTRATOR Francesca Cosanti PHOTOGRAPHERS Amanda Joy Christensen Carrie Dow

Margarett Waterbury

SALES & MARKETING Ashley Monroe ARTISAN SPIRIT is the endorsed publication of the American Craft Spirits Association. ARTISAN SPIRIT is a quarterly publication by Artisan Spirit Media. www.artisanspiritmag.com facebook.com/ArtisanSpiritMagazine

twitter.com/ArtisanSpiritM

General Inquiries (509) 944-5919 Advertising (509) 991-8112 PO Box 31494, Spokane, WA 99223 All contents © 2018. No portion of this magazine may be reproduced without the written consent of the publisher. Neither Artisan Spirit Media nor ARTISAN SPIRIT magazine assume responsibility for errors in content, photos or advertisements. While ARTISAN SPIRIT makes every effort to ensure accuracy in our content, the information is deemed reliable but not guaranteed. We urge our readers to consult with professional service providers to meet their unique needs. At ARTISAN SPIRIT, we take the opportunity to enjoy many different craft spirits and adult beverages. However, it’s also our responsibility, and yours, to always drink responsibly. Know your limit, and never drink and drive. ARTISAN SPIRIT’s number one goal is to share and celebrate the art and science of artisan craft distilling. But please remember to follow all the laws, regulations, and safety procedures. Be safe, be legal and we can all be proud of the industry we love.

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How do you think the new tax bill will impact you and your clients?

THANK YOU TO ALL OUR SPONSORS. Our mission at Artisan Spirit Magazine is to share and celebrate the art and science of artisan craft distilling. We are humbled by the support of our sponsors. With their help, we can further our common goals of supporting creativity, innovation, and integrity within the industry we all love so much.

American Craft Spirits Association exists because of real-world momentum and a perceived need for a trade association in the U.S. governed by licensed craft distillers on behalf of craft distillers. Our mission includes legislative advocacy in support of a strong business environment for distillers, and through outreach to consumers help build brands and increase consumer awareness. We welcome your ideas, suggestions and participation.

We think it is likely that the boon provided from the reduction of FET will be utilized by distillers in increased production, additional funding for marketing efforts, and internal investments. We think it unlikely that the FET reduction will result in lower consumer prices or a reduction in wholesale pricing as this would seem to be contrary to placement in the market. We subsequently expect BSG may sell more product to existing customers with some additional growth from new operations due to increased business model viability. In all, it should result in an increasingly healthy industry with increased stability for growth opportunities. — Jake Keeler, Director of Marketing

I think the impact will be great for distillers and their vendors, myself included. With this influx of cash, you’ll start to see many distilleries pursuing projects that they simply couldn’t afford before. These projects will range from fixing long broken equipment, spending a little more per bottle on marketing, to expanding the number of markets they are in, and upgrading or expanding their production facilities. Having just a little more spendable income will allow many of these hard working distillers be able to purchase the things that can make it easier for them to meet their goals, increase their revenue, and produce a better product. — Steven Cage, President and Head Designer

The American Spirits Exchange is a national importer and distributor serving the alcoholic beverage industry (spirits, wine and beer). We provide domestic and international companies with access and support to the U.S. market. Regardless of your size—from micro, craft distiller to publicly traded multinational—our focus fuels your growth. Our flagship Foundations™ program provides companies with access to the U.S. market. We handle your business-to-business functions from start to finish: permitting, brand approvals, purchase order processing, invoicing and compliance.

Unlike other agencies that work within a blinding myriad of industries; our focus is 100% within the spirits, wine, beer and other alcohol sectors. This specialization has allowed us to become experts in the alcohol beverage category. We have an exceptional understanding of design that sells, complimented by professional project management and flawless production oversight. The result has been strategic solutions that consistently produce both critical acclaim and strong measurable return on investment for our clients.

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As an educational facility, it will impact us very little, since we make no product of our own. But it will be a boon for any open distillery, or one opening in the next year. Generally, it takes most distilleries two years to open its doors, and since this reduced rate is only for two years, it would be a little bit of a gamble to hinge a business plan on the tax rate staying the same after 2020. So, we’re trying to let everyone know about the benefit of the bill, but not get peoples hopes pinned on it sticking around forever. — Colin Blake

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As most Artisan Spirit readers probably know, the Tax Cuts and Jobs Act included the first substantial federal excise tax reduction for the alcohol industry in decades. We expect the change to help energize the distilling industry, enabling craft distillers to re-invest in their business, including an increased focus on new, proprietary package designs. And the changes in the tax bill give us the confidence to reinvest in our employees and facilities in ways that will allow us to better serve our customers, so we stand ready to partner with our craft customers as they grow at this exciting time. — Brian Brandstatter, VP and GM for Spirits, Food and Beverage, North America

TapiUSA has long been a backer of the FET reduction through supporting the craft distillers and their associations and guilds. The obvious impact on our customers will no doubt have a trickle-down effect on those of us in the supply chain. Tax parity will finally provide the means for craft producers to hire new employees, purchase new equipment, develop new products and expand marketing initiatives. For some it will mean the difference in keeping their doors open and for others it will provide the means for further growth. As part of our strategic plan, we are thrilled to continue our growth and commitment to meet the rising need in the burgeoning distilling community. — Leah Hutchinson, Midwest Sales Manager

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G&D Chillers is as committed to the cold as they are to their clients. They strive to build long lasting partnerships by offering on-going technical support from their team of engineers, all backed by their satisfaction guarantee. G&D Chillers offers a widerange of options from small portable chillers and heaters, to large custom chilling units. All units are ETL approved in both the U.S. and Canada. Most of their standard package chiller designs have been tested for over 20 years in the field.

ARCHITECTURE ◆ ENGINEERING ◆ CONSTRUCTION

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Live Oak Bank specializes in financing solutions for craft distilleries nationwide. As one of the largest originators of small business loans in the country, our loan options allow you to meet your customers’ demand and take your business to the next level. Our team is guided by craft experts and peers who have a combined 75+ years of lending expertise in this space. With access to a cash flow business model, industry knowledge and innovative technology, you’ll be able to grow your distillery with a committed partner. Financing can be used for expansion, equipment purchases, refinance, working capital, construction and more.

MGP is known for its mastery in formulating, fermenting, distilling and maturing world-class spirits. The company’s expertise in blending art and science to produce premium bourbons, whiskeys, gins and grain neutral spirits serves as the foundation of a lasting legacy steeped in know-how. Customers benefit from MGP's in-depth experience, state-of-the-art capabilities, and strong penchant for developing tailored formulations and meeting precise product requirements. MGP's entire team, with distilleries in Atchison, KS, and Lawrenceburg, IN, takes great pride in delivering the highest quality results with each and every product made. For details visit mgpingredients.com/alcohol.

Total Wine & More is the country’s largest independent retailer of fine wine, beer and spirits. Our strength is our people. We have over 5,000 associates, who must demonstrate comprehensive beverage knowledge before they are invited to join our team. After coming on board, all of our team members undergo an extensive initial training program. We believe that an educated consumer is our best customer. We want to demystify the buying experience for our customers so they will feel confident in choosing the bottle that is perfect for them. Total Wine & More works closely with community and business leaders in each market it operates to support local causes and charitable efforts.

We’ve been in this industry for over 100 years, during which time we’ve learned a thing or two about what makes a great barrel to age great spirits. Our R&D team and account managers have hundreds of barrels currently in experimentation. Partnering with distillers, we think outside the box to develop new products that push your vision forward

Lallemand Biofuels & Distilled Spirits is the industry leader in supplying fermentation products and valueadded services to the distilled spirits industry. We specialize in the research, development, production and marketing of yeast and yeast nutrients as well as a solid belief in education of the distilled spirits industry.

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A LETTER FROM THE EDITOR: By now it’s old news that the FET tax reduction, better known as the Craft Beverage Modernization and Tax Reform Act, made it into the larger tax bill passed last year. Sadly, the buzz has been somewhat subdued. The overall tax bill was not immensely popular on a national scale so perhaps it shouldn’t come as a surprise that alcohol producers are not in a position to vocally celebrate. That said, it’s undeniable the positive fiscal impact this short term (currently two year) tax reduction will have on our industry. To navigate how all this plays out, and how best to take advantage of the new landscape, we are excited to present not one, but three in-depth articles to help guide you through this new world. Industry experts Brian Defoe (PAGE 74), Jim McCoy (PAGE 55), and Ryan Malkin (PAGE 51) each tackle different aspects of the bill and break it down for us. Finally, want to thank everyone for their kind words regarding Artisan Spirit Magazine's five-year anniversary. You've all proven once again that you're the coolest.

Brian Christensen

(509) 944-5919 brian@artisanspiritmag.com PO Box 31494, Spokane, WA 99223

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Y L R E T R A QU T R O P E R D GUIL

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ACSA STATE GUILD COMMITTEE

As we leave behind the 5th annual ACSA convention I thought it would be a good time for an update from the ACSA State Guild Committee. We have a number of topics we covered in our annual Guild meeting including:

• Positioning on DTC • Relationship

between ACSA and guilds—communications— industry relationships

• State regulations: what is it; how used; why needed; identify state or guild member contacts for data veracity, FDA and Environmental

• FAQ—informational

clearing

house

• Economic

development— distillery trails, tourism, tasting events, partnerships with other beverages

• International exports • Staffing guilds—ED; lobbyists, PAC

• Nuts

and bolts of organization—501 (c)(6); legal structure

One of the big things we touched on was the cataloging of state distillery regulations and how we can use that data to help state guilds improve their local business environment. If you have any input or items, you want to discuss please let me know, and I look forward to continuing working with all of you to strengthen our guilds and industry. P.T. Wood Vice President ACSA, Chair State Guild Committee Wood’s High Mountain Distillery Salida, CO pt@woodsdistillery.com

ALASKA DISTILLERS GUILD OF ALASKA Since the passing of HB309 in 2014, which allowed for tasting rooms in Alaskan distilleries, the state’s distilleries have been showcasing their spirits not only with small free samples but also through cocktails which may be purchased. Since August 2017, distilleries have been fighting for the right to continue serving these cocktails in their tasting rooms. The debate arose after complaints from a bar owner prompted the

CONNECTICUT CONNECTICUT SPIRITS GUILD The CT Spirits Trail & Guild members are, of course, very happy about the FET reduction and, like our colleagues across the country, will be able to put more resources in marketing, sales, and production efforts. As a Guild/Trail, our attention resumes to working with the CT Legislature to broaden state laws that will assist us in our efforts to thrive as businesses. We were delayed in these efforts in 2017 as the CT Legislature

COLORADO COLORADO DISTILLERS GUILD The Colorado Distillers Guild is officially launching our Colorado Spirits Trail, highlighting our ~50 guild member distilleries across the state with a huge launch party on February 24th located at Mile High Station in

LOUISIANA LOUISIANA DISTILLERS GUILD

new Alcohol and Marijuana Control Office Director to reinterpret part of the Alaska State Statute regarding distilleries, which states:

e) Unless prohibited by AS 04.16.030, a holder of a distillery license may sell not more than three ounces a day of the distillery's product to a person for consumption on the premises The State Alcohol and Beverage Control Board, under the advisement of the State Department of Law, decided that because the statute does not explicitly state that distilleries can serve cocktails, they should not be permitted to. Despite an outpouring of public support in favor of distilleries, in

January, the board moved to adopt a new regulation. When signed, it will prohibit distilleries from serving mixed drinks. Instead, distilleries will be required to serve their spirits straight alongside a mixer so that the patron may mix his/her own drink. The Distillers Guild of Alaska is working with legislators to pass a bill which will clarify the language in the statute and restore the original intent of the Tasting Room law—with distilleries serving spirits the way consumers will most likely be drinking them at home. Maura Selenak & Brandon Howard Founders, Amalga Distillery m@amalgadistillery.com.

grappled to put together a long-awaited state budget. CT has long had laws and rules that assisted the wine industry and in the past half-dozen years has widened brewery laws (this helped boost the number of CT breweries from 10 or so to over 60 in a short period of time). Last year’s law change, which promotes farm-based distilleries by reducing the cost of a state annual manufacturer permit to $300, is an indicator that legislators are supportive of spirits makers. We intend to continue that momentum by targeting the

liberalization of tasting room laws that allow us to sell cocktails, creating satellite tasting rooms, and other aspects that will help grow business viability of craft distillers. From a marketing standpoint we are going to work with our state economic, agriculture, and transportation departments to see that highway signs can be installed near our tasting room so that we increase our public visibility. Cheers, everyone!

Denver. A map and interactive website have also been crafted, followed by events and promotions throughout 2018. Go to www.coloradospiritstrail.com for more information. Our members are also celebrating the passing of the much-needed FET reduction. I have personally spoken with dozens of members who have directly indicated the use of savings from FET to purchase new

equipment and/or hire new staff. This is exactly what we expected would happen and will hopefully prove the new reduction works and will be extended permanently. Hope we see you in Colorado soon!

Tom Dubay CEO, Hartford Flavor Company President, CT Spirits Trail/Guild

Our state (Louisiana) has completed bylaws and will be reviewing and voting them into action after Mardi Gras. We will also have elections for board and executives at that time. We are excited to finally be moving forward with a distiller’s guild.

Sean Smiley President Colorado Distillers Guild Owner, State 38 Distilling

Kirk Coco CEO NOLA Distilling Company, LLC

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MAINE MAINE DISTILLER’S GUILD The Maine Distiller’s Guild, MeDG, had a successful year in 2017, with 15 members and growing; many of the goals set for 2017 were met and exceeded. The MeDG partnership with Maine Spirits www.mainespirits.com, the exclusive wholesale distributor for spirits in the state of Maine, highlights Maine-made spirits on their website and assists with the rollout of the “Make Mine from Maine” campaign to consumers, bars, and restaurants that encourages them to choose locally made spirits. Maine Spirits also created an iPhone app that helps consumers find their favorite spirits and pricing at the nearest retail agent. The app has a feature to search for cocktail

MONTANA MONTANA DISTILLERS GUILD The Guild had a great turnout at its annual meeting in Butte on October 2, 2017, with 15 DSPs represented. We reviewed the dues structure from other Guilds across the nation and decided to revamp our membership dues to ensure small and growing companies would have equal representation at the table. Dues are based on a sliding scale according to Proof Gallons removed from bond within the State of Montana only, including the Tasting Room. The guild enjoyed an informative and interesting presentation from Montana Craft Malting, a Butte-based malting operation with hopes to open its doors in 2018. There was overwhelming interest in their services, as only one malting plant exists in Montana, and it focuses on one type of malt only. After a minor loss at the Legislative Level

recipes, ultimately making the MAINE DISTILLER’S GUILD OFFICERS process of crafting a Maine cocktail much easier for the consumer. PRESIDENT Ian Michaud MeDG member spirits were Liquid Riot Bottling Company showcased at two fall events. VICE PRESIDENT Jordan Milne Hardshore Distilling Company In October at Portland’s spectacular food and drink SECRETARY Jeff Johnson, Stroudwater Distillery celebration, Harvest on the Harbor TREASURERS Keith and Constance Bodine Sweetgrass Winery & Distillery (www.harvestontheharbor.com), Maine-made spirits were paired with locally sourced food in a level in 2017 for organizations that don’t “Maine only” happy hour. In November, hold a DSP but do have an interest in seeing MeDG members were able to feature this burgeoning industry thrive. Together their spirits at the Maine Harvest Festival with a community of like-minded people and (www.maineharvestfestival.com) in Bangor organizations, the MeDG is looking forward which celebrates the bounty of farms from to 2018 and the bounty of fresh ideas and across the state. Efforts are ongoing with enthusiasm for this industry. hopes of having events spread throughout the year. Keith and Constance Bodine The guild added an Associate Membership Sweetgrass Farm Winery & Distillery.

votes were tallied later in the month, the new in Montana, the guild decided to hire a officers were revealed. professional staffer to represent us at the next session in 2019. Fundraising efforts are currently underway to MONTANA’S NEW GUILD OFFICERS add to the coffers for this salary. We had a lively conversation PRESIDENT surrounding the possible need Robin Blazer — Willie's Distillery, Ennis for a Code of Conduct for guild VICE PRESIDENT LEGISLATIVE & ADMINISTRATIVE AFFAIRS members. More on that to come. Jim Harris — Bozeman Spirits, Bozeman John McKee officially stepped down as Guild President after a VICE PRESIDENT FUNDRAISING AND MARKETING full and rewarding three years at Lauren Oscilowski — Spotted Bear Spirits, Whitefish the helm. We will miss him and his SECRETARY/TREASURER easy-going nature as well as his Erica Droge — Dry Hills Distillery, Four Corners inclusive form of leadership. Other officers vacating their posts were Nic Lee—Vice President, Courtney We are all looking forward to a great 2018! McKee—Secretary; and Casey McGowan— Treasurer. This was a great team to lead our Robin Blazer first three years as a fledgling guild, and we World Headquarters are all better off because of their willingness Willie's Distillery, Inc. to be at the helm. After nominations were cast, and the

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NEW YORK NEW YORK STATE DISTILLERS GUILD The New York State Distillers Guild opened 2018 with our annual two-day meeting held just outside of our state’s capital, Albany, NY. With 30 of our member distilleries present, we welcomed the addition of our three new board members, Richard Barret—Black Button Distilling, Brian Facquet—Prohibition Distillery, and Louise Newsome—Olde York Farm. As of February 1st, registration and sample collection is open for our Inaugural New York Distilled Spirits Competition. The competition is open to all New York distillers

PENNSYLVANIA PENNSYLVANIA DISTILLERS GUILD The PA Distillers Guild was able to successfully ward off legislation that would have been detrimental to the direct sales capabilities of its membership. In January, the Guild organized and held its first ever “Legislative Drive” to the state capital. We

VIRGINIA VIRGINIA DISTILLERS ASSOCIATION The Virginia Distillers Association (VDA) is in the midst of a very busy legislative season. This year’s General Assembly Session has brought about many twists and turns that will hopefully render positive fiscal impacts to VA DSPs. Bills that we are following closely include SB803/HB536, which if passed, will allow VA DSPs to keep the 69% state-imposed markup on all distillery store sales. SB486/HB654 focuses primarily on policy efforts, including: opening distillery stores (to be amended to include all ABC government stores) at 10am on Sundays, the ability to utilize a specified percentage of

and will be awarding the Governor’s Cup to the best spirit made in New York State along with first, second, and third medals in over twenty categories. To be eligible for inclusion in this competition, New York State distillers must be a member of our guild in good standing. The judging will begin late April, and NYSDG will announce results and awards at an event to be held in New York City in July. New York State has one of the highest distilled spirit excise tax rates in the country, with beer, wine and cider being offered production tax credits that in some cases eliminate all required excise tax payments. Much of our lobbying efforts this season will be spent seeking parity with our state’s other burgeoning beverage producers for this tax

credit. Now with over 140 licensed distilleries, our industry here in New York State is growing rapidly, a fact that is not lost on our elected representatives. We consider ourselves lucky to have a governor and legislator that is open to and actively engaged in making our state more business friendly for distilleries of all sizes. For more information on our Inaugural New York Distilled Spirits Competition please visit: spirit.raiseaglassfoundation.com/entercompetition/entry-instructions/new-york or drop us a line at newyorkstatedistillersguild@ gmail.com Cheers!

met with Governor Wolf’s office as well as 18 legislators, of whom were leaders of the Senate Law & Justice Committee, the House Liquor Committee, and the House Appropriations Committee. Members were also given a presentation by the head of category management for the Liquor Control Board. In this presentation attendees were provided with explanations of the various listing channels for products within the state, a review of application

processes for each, as well as key metrics the state uses in determining products that pass its Listing process. In the previous year, a specific subcommittee was set up within the PA Distillers Guild to assist the ACSA in this year’s conference, events, and logistics. The sub-committee has been diligent in assisting the ACSA and will continue to do so up to and throughout the conference.

spirits not produced onsite for the purpose of sampling products to consumers (i.e. Vermouth so distillers can feature their products in a proper martini), and expanding manufacturers’ special events licenses from four to eight annually. By the time the Spring 2018 issue of Artisan Spirits Magazine is published it is likely Session will have ended. Tune into www.virginiaspirits.org/advocacy/ for updates on Virginia legislative affairs. Additionally, the VDA recently completed the 2018 Economic and Regulatory Analysis of Virginia’s Distilled Spirits Industry in concert with the Mason School of Business at the College of William and Mary (to access the study, visit: www.virginiaspirits.org/ industry-resources/). The economic report has helped our constituency add weight and merit to our legislative efforts. As the report

explains, our industry is growing fast, but growth does not equate to fiscal health. Lastly, the VDA wrapped up two consumer branding studies (both done 100% in-kind) with the VCU Brandcenter (the top graduate school in the nation for advertising) and the Robins School of Business at the University of Richmond (U of R). The VCU study focused more on the development of creative assets and strategy for implementing marketing initiatives, and the U of R study focused on marketing research. The VDA will be pivoting all consumer initiatives (website, social media, future spirits trail development) to utilizing these assets in the coming months.

Cory Muscato Lockhouse Distillery—Buffalo, NY President, New York State Distillers Guild

Rob Cassell

Amy Ciarametaro Executive Director Virginia Distillers Association

WWW.ARTISANSPIRITMAG.COM

WASHINGTON

THREE KEY ELEMENTS OF THE COMPREHENSIVE DISTILLING MODERNIZATION BILL (H.B. 2609)

WASHINGTON DISTILLERS GUILD

1. MERGING TWO DISTILLERY LICENSES

The Washington Distillers Guild kicked off the new year by proposing a ten year Comprehensive Distilling Modernization Bill (H.B. 2609), which is now making its way through the 2018 State legislative session. We have high expectations that our proactive efforts to dialogue with the state LCB (Liquor and Cannabis Board) for meaningful improvements will bear the fruits of less complexity, more opportunities for DSPs to expand Tasting Room service, and a crack in the door for reducing state level taxation in the future.

WISCONSIN WISCONSIN DISTILLERS GUILD During the past months, the Wisconsin Distillers Guild has focused its attention on the creation of the Wisconsin Craft Beverage Coalition. The Wisconsin Distillers Guild, along with the Wisconsin Winery Association and Wisconsin Brewers Association (collectively representing over 300 small and independent businesses) have joined forces to establish this not-for-profit trade association which will serve as a unified voice to help educate policy

TOGETHER—merge the current “full” and “craft” licenses into one new license type and creating one nondistilling license- Brand Owner. 2. DEFINING THE OBLIGATIONS AND SETTING

STANDARDS of a distiller in Washington State. 3. MOVING TOWARDS CREATING

PARITY with wine in benefits. Our Board, led by our new president, Mhairi Voelsgen of Brovo Spirits, and our new Executive Director, Susan Welch, headed into the holidays with a super-

makers at the state and local level about the economic, employment, and tourism impact that local craft beverage producers provide to their communities. The Coalition will work to promote legislation that will allow Wisconsin's craft beverage industry to grow and thrive, while raising awareness of all legislative and special interest proposals that would harm our small businesses. Having united craft producers for the first time in Wisconsin, the Coalition was successful in its efforts to fend off legislative actions by the distributors

charged Strategic Planning Retreat to refresh our vision and mission. We also re-booted our core committees—Education, Events, Marketing and Regulatory Environment— in order to best serve the WDG mission: To create valuable business opportunities and help drive revenue for members through legislation and advocacy, marketing and events. It’s time now to roll up our sleeves and dig into the good work laid out in our plans: Preparing for our sixth annual PROOF event (July 7, 2018), re-configuring our quarterly general meetings to include an education track, and launching Phase One of the Washington Distillery Trail. Susan Welch Executive Director, WA Distillers Guild

lobbying to worsen the already inane state liquor laws. With public opinion and good public policy on our side, we now set our sights on improving our state liquor laws in 2018. For more information, please visit us at www.wisconsindistillersguild.com. Brian Sammons Founder/Distiller, Twisted Path Distillery President, Wisconsin Distillers Guild

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CRAFT SPIRITS ASSOCIATION Reflections from ACSA Presidents

W R I T T E N BY M A RGIE A .S . LE HRM A N, E XECUT I VE DI RECT OR OF AMERI CAN CRAF T SPI RI T S ASSOCI AT I ON

n 2013, the Alcohol and Tobacco Tax and Trade Bureau (TTB) had issued just over 1,240

Distilled Spirits Plant (DSPs) permits. According to The Craft Spirits Data Project © 2017 (CSDP) report, only 656—well under 50 percent—of those permits represented CRAFT spirits producers in the United States. Fast forward five years. As of this writing, TTB announced it has issued 2,585 DSPs. 1,600 of which are CRAFT spirits producers, according to CDSP. Indeed, we’ve come a long way with distilleries in all 50 states! Since its inception in 2013, ACSA—the only national, non-profit trade group organized, built, and governed by craft spirits producers—has helped the industry blossom. This year marks our 5th anniversary. At our core, our programs, products and services continue to herald our mission: To elevate and advocate for the community of craft spirits producers. Here are reflections of past and current presidents, Thomas Mooney, House Spirits, OR [2014-1016]; Paul Hletko, Few Spirits, IL [2016-2017]; and Mark Shilling, Treaty Oak Brewing and Distilling, TX [2017-2018]. WWW.ARTISANSPIRITMAG.COM

Thomas Mooney — On the afternoon of Thursday, March 13, 2014, a dozen craft distillers met in Denver, CO. The group was diverse—participants came from cities across America, and they represented distilleries old and new, large and small. These distillers were brought together by a transformative event. A few weeks earlier, the volunteer founders of the American Craft Spirits Association (ACSA) had held the association’s first board election, and the meeting in Denver marked the transition of power to the newly elected board. For the first time in our history, the community of American craft spirits producers would be led by fellow distillers, elected by their peers, and would operate transparently based on the association’s published bylaws and Code of Ethics. The legal entity that would become our association had existed for some time (January 2013), but ACSA was reborn on that winter day. Several “firsts” followed in quick succession. I was both honored and surprised by my colleagues’ decision to elect me as the first president of the board of ACSA, and in the months that followed, we tackled several important issues to make our association more inclusive, transparent, effective, and sustainable. We made tremendous progress on all fronts, but one event in particular stands out as the pivotal milestone of my term as ACSA president. On May 19, 2015, at Kings County Distillery in Brooklyn, NY, Nicole Austin, Steve Johnson, and I met with Margie Lehrman and other candidates to discuss the role of ACSA executive director. Soon after that, Margie was onboard, and her energy, thoughtful leadership, and ability to build a great team have enabled our success.”

Paul Hletko —

Mark Shilling —

In two short years, ACSA became far more than I ever dared to hope, and we established the foundation for even greater success in the years that followed.

As we salute our fifth anniversary, we have much to celebrate. ACSA has experienced a banner year in a multitude of areas, from advocacy to education and member support and communications.

The premiere milestones of my presidency were working with our newly hired Executive Director (Margie) to ensure she had all the tools and resources she needed to drive our mission. A continual improvement in our professional efforts (and demeanor) have secured our position as the only nonprofit trade association for small distillers. I was honored to take over the reins from Tom, and hand over to Mark in a peaceful and structured transition that highlights the core values of the ACSA—an association by distillers and for distillers, managed by elected distillers. We worked with our beverage alcohol industry partners from beer and wine to keep pushing Federal Excise Tax (FET) relief, an agenda that eventually reached our goal due to Mark’s efforts and passion. Working on behalf of all small distillers has been one of the greatest honors of my professional life and I thank each and every one of you for allowing me to serve this art that I love with all my heart.”

It goes without saying that passage of the reduced FET will be remembered as one of the biggest victories for distillers since the fall of Prohibition. Along the way to passage, we created the first of what will become an annual Capitol Fly-In, taking our regulatory and legislative concerns to Congress and TTB; we’ve created a special committee working to lift restrictions on Direct to Consumer shipping; and we continue to identify other areas for spirits modernization. We’ve made considerable upgrades in our member communications, including the Monthly Mash and the Craft Spirits Weekly e-newsletters and the launch of our new and much more robust ACSA website. We’ve also begun increasing the quality and reach of our social media activities—all designed to help increase communication and support among our members and industry partners. In addition, 2017 brought about more and better education in the form of our regular webinar series: The Craft Spirits Classroom: Quenching Your Thirst for Knowledge and our first regional Educational Master Class, held in Denver in August. We commissioned a study of the state regulatory laws impacting spirits and shared it with the growing universe of guilds. Although we’ve had a great five years and have accomplished much, we’ve still got lots of work to do—first and foremost making permanent the reduced FET. But if there is anything more important to the future of craft distilling, it’s the continuing work framing the growth and economic impacts of our industry—our CSDP (we owe thanks to our partners, Park Street and the IWSR, who graciously donate their time and skills to make possible this annual economic study). The CSDP has become an invaluable tool, not just for public policy discussions but more importantly for supporting the financial impacts and continuing growth opportunities for our businesses.”

Here’s to our next five years. Working together, with you and our loyal sponsors who have provided immense support, we will succeed in realizing and toasting our ACSA vision: The greatest spirits are universally recognized as coming from our member producers, and they are enjoyed responsibly everywhere in the world. Margie A.S. Lehrman is Executive Director of American Craft Spirits Association. Visit www americancraftspirits.org for more info on ACSA and to join.

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NOTES FROM

DISTILLED SPIRITS COUNCIL’S

2017

ECONOMIC ECONOMIC BRIEFING WR WRITTEN BY MIATRTGEANRB EY T TC H WRAITSE L RO BZ UIREYR

declines were observed in several categories, including lower cost Scotch, Irish, and blended whiskey as well as value vodka, rum, and gin. This indicates the continued push towards premiumization, for the American spirits industry, with growth across virtually every where consumers are opting to buy fewer, more expensive products major spirits category and excellent performance in exports. rather than higher quantities of low-cost products. The factors that have contributed to the current spirits boom— Notably for the craft industry, American whiskey volumes were increasing premiumization, curiosity-driven consumers, and up by 6.4% to 23.2 million cases, while revenue grew even more, the ongoing incremental modernization of the post-Prohibition up 8.1% to $3.4 billion. Every value segment within the American regulatory landscape—are continuing to drive major growth whiskey category grew, but super premium (defined for the across the industry. When coupled with recent national legislative Council’s purposes as $30+ at retail, a category that includes most successes in federal excise tax reduction, a rosy picture emerges craft spirits) saw the most robust growth: 18.3% volume growth, for the current state of the American spirits industry. Fortunately and 18% revenue growth. When asked if he thought this growth for the craft community, the trends driving growth are directly rate was sustainable, Ozgo replied optimistically: “When you look aligned with what small producers do best. at where the North American whiskey market once was, it used to In early February, the Distilled Spirits Council of the United be 80 million cases. Right now, we’re only at 53 million cases, States reported in its annual economic briefing that sales volumes with almost double the adult population. As a result, I see plenty and revenue were up nearly across the board in the American spirits of room for growth still in the brown spirits.” industry. In 2017, total supplier revenues grew 4%, reaching Within the American whiskey category, rye whiskey saw a $26.2 billion, up from $25.2 billion during 2016. Nine-liter case particularly remarkable performance, with volumes up 16.2% to volumes grew 2.6% during the same time period, from about 220 900,000 cases. “That’s really exceptional when you consider back million cases to 226 million cases. in 2009, rye was just 100,000 cases,” said Ozgo. “The growth we The industry also grew relative to other types of beverage alcohol. see in rye is a natural extension of the rapid growth we’ve seen in In terms of revenue, wine’s market share remained relatively flat bourbon and Tennessee whiskey.” and beer’s market share declined during 2017. At the same time, Another point of interest for craft distillers was the remarkable spirits’ market share grew by 0.7%, reaching 36.6%. “To put success of American exports, especially whiskey. The global that into perspective, each point of market share is worth around popularity of cocktails coupled with a weak dollar helped American $720 million, so we added around $500 million in revenue just by spirits exports grow 14.3%, gains in market share,” said David Ozgo, reaching a record value of $1.63 senior vice president of economics and billion. Whiskey represented the strategic analysis at the Council, during lion’s share of that growth: 68% the annual economics call. The growth we see in rye of total export value and 48% of While there was good news in is a natural extension of export volume. most categories, growth was not the rapid growth we’ve “We are exporting cocktail spread evenly over every spirits type. culture,” said council senior vice Performance was exceptionally strong seen in bourbon and president for international affairs in American whiskey, Irish whiskey, Tennessee whiskey.” Christine LoCascio. “International adult tequila and mezcal, and Cognac. consumers are exploring more expensive The only major categories that saw — DAVID OZGO SENIOR VICE PRESIDENT, U.S. spirits driven by their fascination with declines in revenue at the supplier DISTILLED SPIRITS COUNCIL American whiskey’s heritage, as well as its level were rum (-0.3%) and cordials mixability and versatility in cocktails.” The (-0.2%), even though volume

2017 marked yet another banner year

“

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five largest export markets for U.S. distillers were the U.K., Germany, Brazil, France, and Spain. The U.K. remains our most valuable trading partner, importing $177.9 million in American spirits, but Brazil’s market exhibited the strongest growth, increasing 186.5% over the past year. Another bright spot for U.S. distillers was growth in Cognac. While Cognac is required by law to be made in a specific region of France, its 11.6% volume/13.8% revenue growth in 2017 indicates a thriving interest in aged brandy, a category that includes many craft producers. Notably, Cognac was one of the only categories that exhibited strong growth at the low and high ends of the market, with 33.8%

volume/31.1% value growth in the premium segment, and 20.8% We are exporting cocktail volume/20.8% revenue culture. International adult growth in the superconsumers are exploring more premium segment. Could expensive U.S. spirits driven this be an indicator of the much-predicted brandy by their fascination with boom industry pundits have American whiskey’s heritage, posited over the past several as well as its mixability and years? While the Council generally versatility in cocktails.” refrains from making predictions — CHRISTINE LOCASCIO about the year to come, the SENIOR VICE PRESIDENT FOR council’s overall attitude about INTERNATIONAL AFFAIRS, the future was clearly positive: DISTILLED SPIRITS COUNCIL “There appears to be very, very strong demand in the United States for spirits of all types,” said Ozgo. “Companies are offering more and more products the consumer has a fascination with, so I’d say yes, the future is bright.”

“

Visit www.discus.org for more info on the Distilled Spirits Council.

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AMERICAN DISTILLING INSTITUTE Q U A R T E R L Y R E P O R T WRITTEN BY ANDREW FAULKNER

THE LARGEST GATHERING OF LICENSED DISTILLERS IN THE U.S.

he American Distilling Institute is planning for its 15th Annual Craft Spirits Conference and Expo, March 26–29 in Portland, Oregon. With last year’s attendance exceeding 1,700 people, ADI expects more than 2,000 attendees to this year in the City of Roses. The vendor expo has expanded to over 170 booths. In testament to its quality, since 2013 the ADI Conference has more than doubled its size, both in attendee numbers and in exhibitor presence, and added a number of educational choices, offering more than 60 sessions. Festivities will start early, with the Gin Summit at McMenamins Edgefield on Saturday, March 24. This one-day event will be followed by the best after-party possible: The Oregon Artisan Spirits Tasting. TOAST will be celebrating its eighth year by welcoming out-ofstate distillers to the mix. Distillers interested in pouring at TOAST may go to oregondistillerytrail.com/vendors. All proceeds will benefit the Oregon Distillers Guild. Two distilling workshops will start on Saturday and continue through Monday, including a master class on the French alembic taught by Hubert Germain-Robin at the McMenamins CPR Distillery and a whiskey distilling workshop at the McMenamins Edgefield Distillery. The conference ramps up on Monday with bus tours of Portland’s Distillery Row. In addition to hands-on distilling workshops on whiskey, gin, vodka, rum and blending, ADI will offer deep-dive sessions in packaging, exporting, distillery building, legal and accounting on Monday. Look forward to such presentations as “Bootcamp for Distillery Design and Expansion” with Scott Moore of Dalkita Architecture & Construction; “The Whole Package” with Raul Paredes of O-I, Jack Vogel of Fort Dearborn, Kevin Dunbar of Tapi and Brian Christensen of Artisan Spirit; and “Send Your Spirits Overseas with the Help of WUSATA.” Building on the success of its Women in Distilling Lunches for the past two years, ADI is partnering with

WWW.ARTISANSPIRITMAG.COM

the Ladies of American Distilleries (LOAD) program again this year, expanding to a half day to include an educational womens-only gin tasting and women’s mentoring sessions. The first evening will conclude with an invite-only trade tasting and the Welcome tasting for all attendees. The conference kicks off in earnest on Tuesday, March 27. This year’s keynote speaker is Tad Seestedt of Ransom Spirits, one of the pioneers in the craft-distilling community. Another distilling pioneer, Duncan Holaday, founder of Vermont Spirits and Dunc’s Idea Mill, will talk about catching “The Germ of Distilling.” The breakfast session will be accompanied by a report on FET from Kraig Naasz, president and CEO of the Distilled Spirits Council, and Michael Kinstlick, ADI research economist, will deliver his annual “State of the Industry Address.” After the keynote, the Expo Floor will open at 9:30 a.m., and remain open all day. Tuesday afternoon tastings give way to the Vendor’s Happy Hour, which precedes the Awards Gala. With more than 1,000 spirits entered in the ADI Judging of Craft Spirits, the gold medals will be handed out at the Oregon Convention Center along with the Distillery of the Year Award and the inauguration of a Lifetime Achievement Award. Bronze and Silver medals will be awarded on the Expo Floor stage during the Happy Hour party. Wednesday morning kicks off with Bloody Marys and Irish Coffees, accompanied by a light breakfast, on the Expo Floor. Sessions will resume at 10:30 a.m. until conference closing time around 5 p.m. On Thursday, we will resume our hands-on workshops, including a Two-day Blending and Maturation Workshop with Nancy Fraley and Julia Nourney. The Friday closing of this last workshop will mark the end of a full week of celebrating craft spirits.

Andrew Faulkner is vice president of American Distilling Institute. For more information visit www.distilling.com.

A FEW EDUCATION HIGHLIGHTS INCLUDE: THE FUTURE OF MALTING BARLEY IN NORTH AMERICA

Panel Discussion moderated by Mike Davis, President of the American Malting Barley Association, Jason Cody of Colorado Malting Co., Jason Parker of Copperworks Distilling Co., Seth Klann of Mecca Grade Estate Malt and Ron Silberstein of Admiral Maltings

THE FDA REGULATION OF SPIRITS DISTILLERIES: ARE YOU READY FOR YOUR INSPECTION? Barbara Snider, Senior Counsel for Hinman & Carmichael, LLP

JUST DUMB ENOUGH TO BELIEVE YOU CAN: JUST SMART ENOUGH TO PULL IT OFF

Michael Reppucci, Founder/Owner of Sons of Liberty Beer & Spirits Co.

CANNABIS COCKTAILS: THE GOOD, THE BAD AND THE BUZZ ON “DRINKABLES”

Alana Joyce, associate attorney at Hinman & Carmichael, LLP

AMERICAN SINGLE MALT WHISKEY PANEL DISCUSSION AND TASTING

with Matthew Hofmann of Westland Distillery, Colin Keegan of Santa Fe Spirits, Randy Hudson of Triple Eight Brewery and Distillery and Christian Krogstad of House Spirits Distillery

APPLE BRANDY DISCUSSION AND TASTING

with Hubert Germain-Robin and Daniel Farber of Osocalis Distillery …And many more For more information visit

www.distilling.com 31

NEW YORK INTERNATIONAL SPIRITS COMPETITION

Where The Trade Decides April 15, 2018 Trade-Only Judges nyispiritscompetition.com INTL COM

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TTB in a DEREGULATORY MOOD BY MARC E. SORINI

s every reader of Artisan Spirit knows, the Alcohol and Tobacco Tax and Trade Bureau—“TTB”—functions as the primary federal regulator of the alcohol beverage industry. TTB issues the “basic permits” under the Federal Alcohol Administration Act (“FAA Act”) and the “registrations” under the Internal Revenue Code (“IRC”) that serve as the primary federal licenses that a distiller must obtain to legally operate in the United States. TTB reviews and approves the labels of all distilled spirits sold in interstate commerce, issuing certificates of label approval (“COLAs”) for thousands of labels each year. And TTB administers the advertising, tied-house, commercial bribery, and other trade practice provisions contained in the FAA Act, aimed at preventing consumer deception and prohibiting certain marketing practices deemed destructive in the 1930s. In these and other ways, this small government agency—itself a bureau of the Department of the Treasury—has a substantial role to play in the distilled spirits industry. Like all government bodies, TTB is not immune from politics. While TTB itself is staffed by career civil servants, it answers to a Treasury Department hierarchy lead by political appointees selected by the President. Thus, changes in Administration and other political shifts can have subtle and, occasionally, not-so-subtle influences in TTB policies and priorities. A dramatic example of this occurred in the 1990s, after TTB’s predecessor agency, the Bureau of WWW.ARTISANSPIRITMAG.COM

Alcohol, Tobacco & Firearms ( “ AT F ” ) , approved a number of “directional h e a l t h statements” for wine labels that encouraged the public to ask their doctor about the benefits of moderate wine consumption. These approvals outraged a number of prominent Senators, who immediately informed the Clinton Administration that they would vote against every judicial nominee unless ATF reversed course. Not surprisingly, ATF quickly “reconsidered” its prior approvals and instituted a very restrictive policy towards health statements that remains in place today. Wineries that received COLAs for directional health statements were forced to surrender those COLAs and change their marketing strategies. While the election of Donald Trump as 45th President has not resulted in any dramatic shift in TTB policy, the President’s desire to reduce the regulatory burdens on business has already influenced TTB’s regulatory priorities. The President himself presents a puzzling picture to the alcohol beverage industry. He does not drink, and some suspect that he views alcohol consumption as a weakness to be avoided. Nevertheless, as someone who made millions in the development and operation of hotels, President Trump has made money from the sale of alcohol beverages for decades. Indeed, the President once lent his name to a vodka brand, and his son Eric owns and operates the Trump Winery in Virginia. Moreover, the President recently signed into law the Tax Cuts and Jobs Act, which incorporates a substantial excise tax reduction for producers and importers of distilled spirits, beer, and wine. When it comes to regulations, early in his administration President Trump announced several initiatives to reduce the regulatory burdens on industry. The centerpiece of

those efforts is Executive Order 13771, which requires that for every new regulation promulgated, an agency should identify two regulations for elimination. Executive Order 13771 is subject to exceptions, and many have questioned the “two-for-one” rule as either unworkable or too easily gamed (e.g., by eliminating two very short regulations in exchange for a new, very long regulation). With respect to TTB, however, legislative priorities have taken a decidedly deregulatory turn. In the Treasury Department’s contribution to the most recent “Unified Agenda,” a bi-annual compilation of federal regulatory initiatives, TTB placed a priority on deregulatory projects, several of which would alter the regulatory environment for craft distillers. While some of these initiatives pre-dated the Trump Administration, the change in Administrations appears to have thrust them from back-burner projects to the centerpiece of TTB’s rulemaking efforts. First, TTB expects to propose before the end of 2018 new regulations that will eliminate all but the minimum and maximum “standards of fill” for distilled spirits containers. CHANGES IN As most distillers ADMINISTRATION know, TTB AND OTHER regulations POLITICAL SHIFTS currently proscribe CAN HAVE SUBTLE the only AND, OCCASIONALLY, container NOT-SO-SUBTLE s i z e s INFLUENCES IN TTB that may be lawfully POLICIES AND used by PRIORITIES. distillers to bottle or can their products for sale in interstate commerce. TTB’s proposal will eliminate these prescribed sizes entirely and only set a minimum and maximum size. In the case of the maximum size, the FAA Act itself sets a one-gallon maximum. Because that size limit is set by statute, TTB cannot change it without an act of Congress. A second rulemaking project—long in the

making but apparently receiving a higher priority now—would involve new FAA Act labeling and advertising regulations for distilled spirits, beer, and wine. While TTB’s public statements have not provided specifics on exactly what changes the agency will propose, it has consistently indicated that the result will be less, not more, regulatory burdens. As explained in the Unified Agenda, “TTB anticipates that these regulatory changes will assist industry in voluntary compliance, decrease industry burden, and result in the regulated industries being able to bring DISTILLERS products to market without MAY ENJOY undue delay.” SOME WELCOME Distillers, no RELIEF FROM doubt, will REGULATIONS THAT eagerly await the outcome of HAVE OUTLASTED this rulemaking THEIR ORIGINAL project. PURPOSES. A third rulemaking project would greatly reduce the reporting burdens on the smallest distillers. As proposed by TTB, taxpayers (distilleries, breweries, wineries, and importers) that qualify to pay their excise taxes quarterly or annually could also file their monthly reports quarterly or annually. By substantially reducing the number of reports received, TTB could ease its own paperwork burden and also ease the reporting burden on the companies that face the greatest challenges keeping up with the monthly filing requirements imposed by

TTB’s current regulations. And because such small taxpayers—while very large in number—pay a small fraction of the federal excise tax collected, the reduction in reporting frequency would not likely pose a significant threat to revenue collections. The Unified Agenda includes several other, less-prioritized, rulemaking projects of a deregulatory nature that would impact craft distillers. These would:

•

“Modernize and streamline” the application requirements for permits and/or registrations for all applicants, including distillers.

•

Combine distilled spirits plant reporting (currently monthly although, as indicated above, moving to quarterly and annual for the smallest distillers) from three forms (production, processing, and storage) to a single form.

•

Expand the definition of what constitutes an “oak container” for purposes of TTB’s standards of identity (i.e., class/type) and age statement rules.

Regardless of your political views generally or specifically towards the Trump Administration, distillers should welcome TTB’s recent turn to deregulation. Standards of fill are an anachronism whose time has come and gone. What other consumer product does the government require to come in only a certain limited number of container sizes? Similarly, while everyone likely agrees with the notion that TTB can and should keep false or misleading labels out of the market, even a

quick review of the FAA Act advertising regulations will uncover rules that make no sense. Indeed, many existing rules and policies (e.g., the ban on truthful age statements on a host of products, including vodkas, gins, and “specialty” spirits) actually keep consumers in the dark for no apparent public policy purpose. Hopefully TTB’s labeling and advertising regulatory reforms do away with these and similar restrictions on truthful, non-misleading commercial information. In sum, distillers may enjoy some welcome relief from regulations that have outlasted their original purposes. Of course, whether and how quickly TTB can follow through and complete its planned rulemaking projects remains to be seen.

Marc E. Sorini is a partner in the law firm of McDermott Will & Emery LLP, based in the Firm’s Washington D.C. office. He leads the Firm’s Alcohol Regulatory & Distribution Group, where he concentrates his practice on regulatory and litigation issues faced by suppliertier industry members. His practice for distillers includes distribution agreements, distribution counseling and litigation, labeling, promotional compliance, compliance strategy, and federal and state tax and trade practice enforcement defense.

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BRAND BUZZ

3 THINGS EXCEPTIONAL PACKAGING CAN DO FOR YOUR BRAND

WRITTEN BY

DAVID SCHUEMANN

Packaging is a crucial driver of initial trial, perception of quality and repurchase.

umerous studies have been conducted to determine the extrinsic versus intrinsic factors when consumers are making their purchase selection. One common theme appears across many of the studies: if a consumer likes the packaging, they will be more likely to both purchase and enjoy the product. The key is to set appropriate quality and price point expectations, connect with your consumers’ lifestyles, and deliver against brand promises.

THE THREE BENEFITS OF EXCEPTIONAL PACKAGING

INVITE TRIAL

Packaging that appeals to your target consumer by relating to their needs, aspirations, and desired tastes will go a long way towards setting your brand apart from the competition. Simply being the loudest on shelf is no longer enough. With thousands of choices at the consumers’ fingertips, choosing a spirit, wine, beer or any other alcohol product is a daunting task. Exceptional packaging can be one of the keys to cutting through the noise and standing out from the crowd. Key questions every brand owner should ask themselves:

»»

Does my packaging stand out next to my competitors? How can I differentiate my brand from the competition?

»»

What does my packaging say about the flavor profile and quality of my product?

»»

Does my packaging tell my brand story, its key attributes and express my brand’s personality?

»»

Is my brand’s promise and packaging relevant in relation to my target consumer’s needs, beliefs, aspirations and lifestyle? Will they believe it?

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Consumers have become increasingly wary of overly simplistic advertising. Today, marketers must consider how their brand fits within their consumer’s lifestyle and core beliefs and be relevant to not only their aesthetic, but also to how, why, and where they will consume the product. Packaging has the ability to communicate your brand’s core principles and story. Packaging also has the ability to communicate higher quality through design. Designing your package to appear more expensive than its price point in order to communicate a more premium positioning can be a real competitive advantage. Appearing more premium not only supports a quality promise, it can even make your brand look like a value when compared to your competition. Simply designing your package to look more premium is still not enough. It’s important to consider your target consumer’s lifestyle and how your brand will fit within their everyday lives.

»» »» »»

How do they live? What activities do they partake in? What are their interests, aspirations and beliefs?

Start by exploring other products they purchase. Are there themes that run through their choices, such as colors, styles, or positioning that attracts them? Leveraging these in your brand story and in your packaging can provide relevance.

REINFORCE QUALITY

Consumer’s perception of a product is profoundly influenced by its package design, bottle shape and even the texture of the label or package. Any experienced chef will tell you, the presentation, color palette and textural differences of the food on the plate all have a significant impact on how we appreciate our dining experience. I’ve personally run focus group testing where consumers have unknowingly taste tested the same product aligned with different package designs. The results are startling; consumers dislike the taste of a product if aligned with a design they do not like, while conversely loving the taste of the exact same product when aligned with a package design that they find attractive.

ASSIST RECALL

One of the most difficult tasks any consumer faces is remembering the spirit, wine, beer or hard cider they tried and liked. Memorable packaging reinforces brand name and enhances recall for future repurchase by leveraging strong visuals. Thus, getting the design and packaging of a brand right is not just an aesthetic exercise, it is a commercial necessity.

David Schuemann is the owner and creative director of CF Napa Brand Design. For more information, visit www.cfnapa.com or call (707) 2651891.

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THE ORIGINAL.

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CODE ACTUALLY REQUIRE AN ALARM SYSTEM? BUT DOES

W R I TT E N BY S H AW N B E R G E R O N

ou’re going to ask the question, go ahead, get it out of your system; “Does my little distillery really need that alarm system? Is this really required, or just something that new fire guy wants me to waste money on?” As in the past, it’s the trail of the code books that answers that question, so let’s begin down the trail. From our past experiences, you already know that you’re working with flammable liquids and in doing so your distillery is most likely a “hazardous” (H) occupancy. When determining if that dreaded alarm system is required, here in good old U.S. of A. we look to the series of International (ICC) and National Fire Protection (NFPA) requirements, as these are the regulatory folks that might mandate an alarm system be installed. In addition to those that can mandate, don’t forget to review what our friends at the Distilled Spirits Council of the United States (DISCUS) have to offer as their publication. “Recommended Fire Protection Practices for Distilled Spirits Beverage Facilities” should be on your twice-each-month reading list. Although the DISCUS publication is “A Suggested Guide,” it is very helpful, as it is specific to this industry, developed by industry professionals, and developed with your best interests in mind. This “guide” is so respected that I’ve been able to use its wisdom to sway the decision-making process of confused code officials when other reasoning fails. Let’s begin this study WWW.ARTISANSPIRITMAG.COM

with DISCUS first. as such the requirements of Chapter 66 of Section 4-7 of DISCUS is titled ALARM NFPA 1 is where we have to start. Section SYSTEMS AND WATCH SERVICE, and 66.6.6.1 tells us that “an approved means it opens by saying “Fire and evacuation for prompt notification of fire or emergency alarm systems should be considered for to those within the plant and to the fire department shall be provided. “Shall” each facility.” “Evacuation alarm”…. what is that? Remember that the codes are is not optional… the “notification” is a generally not developed to save buildings mandate… everyone inside your distillery but to save the lives of the people that are needs to be made aware that something in the building in the event of bad is happening and something bad happening. In the Remember simultaneously the fire case of your little distillery that department needs to be that the notified. means you, the distillery dog/ cat (almost all distilleries seem Going further in NFPA 1, codes are to have one), your employees Section 66.6.6.2 requires and the customers in the tasting generally not areas inside your distillery room. The “evacuation alarm” where a potential exists developed for a flammable liquid is the part of the system that audibly and often visually tells to be monitored to save spill everyone there’s a problem and “as appropriate” and it’s time to leave. Like you always buildings but provides three methods did for your mother, follow its for monitoring. The first to save the direction. method is personnel Beyond the recommendations observation or patrol. lives of the of DISCUS we move into the Sure, your crew can mandates of the regulatory people that personally observe and folks. There’s no “should be “on patrol” when they are in the are present. The second be considered” in the Fire Protection or Building codes; building in method is processmonitoring equipment your alarm system is either required or it’s not. Let’s begin the event of that will indicate a spill or leak. This seems to at the NFPA 1, Uniform Fire something be pushing us towards Code to see what that tells us. From the past, you already know bad something that’s not human: “processthat your incredible hooch is an happening. monitoring equipment.” incredibly flammable liquid and

your alarm system, it can’t do Sure, you may have some real tools anything without things that working out back, but do they meet make it all excited… electronic the definition of “equipment?” devices that get it off. Come The third and final method is out of the gutter! We’re talking “provision of gas detectors to alarms here, and in the world continuously monitor the area of alarms, these are known as where facilities are unattended.” “initiating devices,” and there Every distillery I’ve worked in are many. The most common has at least a couple areas where type that everyone has seen are there’s a lot of flammable liquid automatic smoke detectors. that is unattended. This third Smoke detectors do exactly requirement is the one that usually what their name implies: they pushes us over the brink towards hang around, up on the ceiling installing that alarm system, or high up on a wall, waiting to and we haven’t even delved into detect smoke, or other smokethe Building Code yet. For this like by-products of combustion, exercise we’re not going to bother, that in their limited knowledge as once we do, we’re going to shouldn’t exist. When they detect find additional mandates for the smoke, they get all excited and installation of your new alarm electronically tattle to the FACU system. This can’t be put off any which gets more excited and tells longer; it’s time for you to embrace FIRE ALARM CONTROL UNIT everyone in the building about yet another regulation that you PHOTO COURTESY FIRE-LITE ALARMS INC. it. When properly selected and installed, didn’t want to learn about. an emergency or system malfunction it tells smoke detectors can detect a smoldering Let us begin with the parts and pieces the outside world there’s something going fire that’s developing in a trash receptacle that make up the typical “fire alarm” on at your distillery that needs attention. hours before it becomes a fire. Smoke system, and as we go along, you’re going On the more commonly seen alarm systems, detectors are life savers, and they can be to learn that “fire” detection is a small the FACU might be expected to receive and building savers. If you don’t have any other part of what this system will do. We’re send emergency signals, control elevators initiating device in your alarm system, you also going to talk about your alarm system and building ventilation systems, and want smoke detection. being “monitored,” which is a critical release fire doors if an emergency occurs. After basic smoke detection, the next component, and we’ll use alarm system Interestingly, without the FACU your most common initiating devices are heat jargon as we move along because after all, alarm system can’t work, yet like so many detectors, which are often misidentified like in the distillery business, there’s cool important and expensive things, it is often by many as smoke detectors, and in alarm jargon and I want you to sound really tucked away all by itself where nobody fairness, they really can look alike. smart to the folks that are trying to sell you sees it. Remember though, it’s Heat detectors are installed more parts than you may need. You need to never really alone, as the like smoke detectors, know what most of the parts are and you’re FACU is connected even going to learn what they’re supposed although their to the outside to do. “coverage areas” world through the The first part of your new alarm system are usually larger. telephone lines. is its heart, brain, and soul, and we give it For the same size Even when you’re the interesting title of Fire Alarm Control area there will not looking, Unit or “FACU.” This often-intimidating, usually be fewer which is most and almost-always red box contains the heat detectors of the time, this primary and backup power supplies for than smoke expensive red box the alarm system and sends and receives detectors. How do is ready to make a electronic signals to and from the various the two differ and phone call on your system-connected devices throughout your why would you use behalf. distillery. On a properly installed system, “heats” instead While the FACU the FACU is “monitored,” which means of “smokes?” In is the heart, soul, SMOKE DETECTOR it’s connected to the outside world, usually contrast to what and brains of PHOTO COURTESY SYSTEM SENSOR® through telephone lines, and in the event of smoke detectors do,

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that heat, cool, and ventilate your distillery. heat detectors don’t care about smoke. In They continuously observe the moving air fact, they don’t even get excited when they stream for smoke or other by-products of “see” smoke. Instead, they’ll just remain combustion, and if they sense something silent and watch, and because there are that arouses them, two things usually areas in your distillery where a little smoke happen. First the duct smoke detection is a normal day-to-day occurrence, heat notifies the FACU of its arousal, which detectors have their place in a properly leads the FACU to go into its usual tattle installed system. False alarms caused by mode telling everyone that something improperly selected equipment will not bad may be happening. Then the FACU make you friends with the fire department. does one of its additional tasks: it In fact, after a while they may even start tells the air handler to stop moving air to send you little invoices for those false around the building. Think about this for a alarms! What gets heat detectors excited moment. If the duct smoke senses smoke, is, you guessed it: heat. do you want that smoke to be recirculated There are two different types of heat and distributed throughout the building? detectors; fixed temperature and rate of HEAT DETECTOR Of course not… just another way that your rise. Fixed temperature heat detectors PHOTO COURTESY SYSTEM SENSOR® fire alarm system can save lives. get all excited when a set temperature, Beyond heat and smoke detection there often 165°, is reached within its internal are two other fire alarm initiating devices receiver sends a beam across the ceiling sensors. Rate of rise heat detectors get that we often see in distilleries. The of the protected area to a reflector. The excited when they sense quick increases in first is very simple, one that you’ve seen reflector reflects (wow… imagine that!) the surrounding air temperature, which excite hundreds of times but probably never paid transmitted beam back to the transmitter/ their tiny internal elements. Selecting the any attention to. These are called “manual receiver. As long as the reflected beam type of heat detector to be installed is best pull stations,” the little red boxes that doesn’t become obscured by something left up to your alarm system designer as the your mother always told you not to touch, like smoke, the device remains vigilant details are often location specific. Keep in located next to the exit doors. The thought but bored, like watching fermentation. If mind that regardless of which type of heat process behind manual pulls is when the reflected beam becomes obscured, the detector is chosen, “heats” only initiate you’re fleeing the building because you transmitter/receiver becomes aroused and when there’s quick rising or elevated know it’s on fire you’re going notifies the FACU about its temperatures, conditions that usually arousal which again sets the mean there’s an active fire and therefore, Selecting the to stop and say “hey, I’ve got to pull this little doohickey FACU into tattle mode, letting heat detectors should never be considered the entire world know that life safety devices and should only be used type of heat here.” Really? You’re already fleeing a burning building! there’s a possible emergency. where smoke detectors will not function or When considering the benefit will be problematic. detector to Pull stations are installed frequently, often when not of beam detection, also The smoke and heat detectors that we’ve beware of the detriments. A talked about so far are the ones that you’ve be installed even required, and in my opinion, should not be beam detector has a tough seen hundreds of times, so often that time differentiating between when you see them you pay no attention. is best left installed on an intelligently designed alarm system that an intentional steam release Additionally, there are two other types of (like from equipment) and a smoke detection that you probably have up to your has automatic initiating devices. smoke emergency, so while never seen but may suit your distillery well: The last initiating device beam detection is excellent beam smoke detection and duct smoke alarm system I’m going to mention is for the warehouse, it can be detection. Beam detectors are excellent for designer as one that almost no one has problematic when installed to protecting large areas with lofty ceilings, seen, even those of you that protect production spaces. and often a single detector/reflector the details already have alarm systems The second type of smoke can protect a single space. We use this that are supposed to have detector that you’ve probably technology when we don’t want our people are often these installed; these are never seen but have likely to have to pay to maintain a large number alcohol sensors and they’re been around are duct smoke of detectors that are way up in the air. location really cool. Earlier in this detectors. “Duct smokes” A beam detector consists of two writing, we discussed when (more jargon) are installed components: a transmitter/receiver specific. alarm systems are required; inside air ducts like the ones and a reflector. The transmitter/ WWW.ARTISANSPIRITMAG.COM

building. Simultaneously, one triggering mechanism was the FACU tells the the requirement to install buildings heating, continuously monitoring gas ventilation and detectors where “facilities air conditioning are unattended.” This systems to unattended location shut down varies between because A) it distilleries, but they doesn’t want do exist. We often excessive put alcohol sensors in levels of alcohol bonded storage areas, vapor distributed tank storage areas, and around the frankly, we often recommend building, and B) it they be installed “knows” the day-toin the general HORN/STROBE DEVICE PHOTO COURTESY SYSTEM SENSOR® day HVAC system is distillery. Alcohol not explosion-proof vapor is heavier equipment! Lastly, the FACU activates the than air and can be moved around in a lot explosion proof ventilation system (you of ways. It will collect in low spaces and have one of those, right?) which safely the smallest of sparks can make things removes alcohol-vapor-saturated air from “exciting,” so therefore we ask the alcohol inside the building replacing it with fresh sensors to do two things. air from outdoors. First, we want them to continuously Okay, you know about the heart and soul monitor the comparative volume of alcohol of your alarm system and you know about vapor in the air. A little vapor, no big deal. initiating devices, the little things arousing Enough vapor to lift the roof off this place the FACU’s, is there anything left? Of when it ignites… that’s a problem. Alcohol course there is. How are you going to know sensors are adjustable and can be set at that the initiating devices have aroused various “upper limits.” This limit is the the FACU? Aren’t you going to get in on maximum concentration of alcohol vapor the fun? You are, as the FACU is going to in the air that this little beast will accept tell you of its arousal through alarm system before it too becomes aroused and, like duct “notification devices.” smokes, arousal of an alcohol sensor sets Notification comes in two formats; off a chain reaction of life saving events. audible and visual, which means (duh) First, it tells the FACU that something you hear and see that something is going unacceptable is taking place and the FACU wrong. The most common occupant jumps into action. The FACU initiates the notification are horn/strobe devices, building’s occupant notification system, which blink blindingly and scream telling everyone it’s time to leave the

horribly. If these activate and occupants don’t pay complete attention, there’s not much anyone can do for them. The least commonly used occupant notification is what’s called “voice evacuation.” Instead of the screaming horn, a soothing voice warbles across the room telling you the place is on fire. Warble, blinding blinking lights, or screaming horns all mean the same thing: something bad is happening and it’s time to leave. My hope is that this exercise has demonstrated that your fire alarm system can be and is required to do many things in your distillery, all of which are intended to keep you alive, and many of which can help to keep your distillery in one piece. The last thing that many FACU’s can do, is provide premise security. Door sensors, motion detectors and the like can keep the bad guys from stealing your hooch and from messing with your recipes. Talk with your alarm system designer and see which system is right for your distillery regardless of whether your code guy has jumped on you about not having one. Like seatbelts and airbags, your alarm system can be a bit of a hindrance, but when they are used and work as intended, you’re glad you have them. Be well and distill safely.

Shawn Bergeron is an NFPA and ICC certified fire protection specialist and building official with Bergeron Technical Services in North Conway, New Hampshire. For more information or assistance call (603) 356-0022 or visit www.bergerontechnical. com. They will be happy to help you with your distillery no matter how near or far.

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HOW BARRELS OF DENATURED ALCOHOL CREATED A

WRITTEN BY JOHN MCKEE

n 1872 the Mary Celeste was found in the middle of the Atlantic without a crew and without any sign of disturbance. The pillows looked slept on, dinner was set, and the sails were still rigged, but no one was aboard. Although there are many theories as to what happened one of the more compelling possibilities has an interesting connection to our industry of distilling. The Mary Celeste had been contracted to transport 1,701 barrels of denatured alcohol from America to Milan. After the abandoned ship was discovered, a small crew boarded it and sailed it to Gibraltar for salvage hearings and investigations, during which no blood or signs of struggle were found. The captain’s logbook was missing, a lifeboat was missing, and nine of those 1,701 barrels of denatured alcohol were empty while the remainder of the cargo was completely undisturbed. Your first guess may be that the crew were drinking the denatured alcohol and the poisonous after effects of the denaturing led to the disappearance of the crew. Overall that might be a good guess, but you’d probably be wrong. Even if you think that sailors of that era were salty dogs indeed, the 18 crew members couldn’t ingest 250+ gallons of

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GHOST SHIP denatured alcohol in 10 days without some pretty instant effects. Additionally, one of the passengers was the three-year-old daughter of the captain….so let’s assume she wasn’t boozing along with the entire crew. In our industry, it’s understood that white oak is the superior wood for storing all manner of liquids, not just alcohol. Other woods are more porous than white oak, and as a result, often allow greater evaporation or just plain leakage to occur. It’s the reason you don’t often see barrels of balsa, pine, cherry, Russian Olive, etc….and if you do and if they’ve been sitting even for a short while, they’re probably empty. At Headframe, we know this because we have a barrel that a friendly antique dealer dropped by a few years ago. It was originally coopered in 1913 for a distillery in Kentucky. When it arrived, it was super dry, so much so that we could turn a dime sideways and push it between the staves. Not to be deterred, we steamed that barrel up and worked the staves and hoops until we could get it to seal and hold liquid. We took some experimental whiskey, filled it up and said, “We’ll call that the 100-year whiskey!” Within months we figured out that wasn’t

IN OUR RAPIDLY INNOVATING INDUSTRY, WE’RE ALL CONSTANTLY EXPERIMENTING AND LOOKING FOR NOVEL WAYS TO DO THINGS.

LET THE MARY CELESTE BE A WARNING. 47

going to work. The staves, as it turned out, obviously weren’t entirely composed of white oak, and the non-white oak staves were weeping whiskey through the stave walls and the stave joints. Our 100year whiskey was a few-month leaker. So back to the Mary Celeste. Of those 1,701 barrels the nine barrels that were empty were made of red oak. During the voyage, the barrels had completely leaked out and into the hold. The new running theory is that someone went down into the hold with a torch for light, and whoomp, there was a flash of alcohol vapor as a result of the leaking barrels. When the ship was found, there was a 400’ line hanging from the back, the captain’s

log book was missing, and the lifeboat was missing. It’s now thought that after the whoomp, the crew abandoned the ship temporarily, perhaps tying their lifeboat to that line. The ship was found with the sails still rigged and still underway. If the line parted while the crew were all in the lifeboat, then they may have watched the ship sail away unmanned leaving them adrift on the Atlantic. Tests have been performed in the last few years in England with Butane to replicate the conditions of a possible flash fire and it was determined that the fumes from the empty barrels could have caused the ghosting of the Mary Celeste. That testing also showed that such a fire (or whoomp) could have occurred without leaving

a trace associated with larger conflagrations. In our rapidly innovating industry, we’re all constantly experimenting and looking for novel ways to do things. The Mary Celeste can be a new and additional reminder to think about safety, ventilation, and lighting in our barrel ricks and warehouses.…and beware the used barrel from antique dealers. This article is in thanks to Stuff You Should Know Podcast, The Mystery of the Mary Celeste.

John McKee, along with his wife Courtney, are the co-owners of Headframe Spirits in Butte, MT. This summer you’ll be able to find John on rivers in the west, hopefully not in ghost-ship mode. For more info, email john@ headframespirits.com.

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MAKING SENSE CRAFT BEVERAGE of the

MODERNIZATION and TAX REFORM ACT WRITTEN BY RYAN MALKIN WITH ASHLEY HANKE

JUST DAYS AFTER THE INK DRIED ON EXECUTION OF SENATE BILL 41-59, considerable changes impacting the distilled spirits industry went into effect almost immediately, leaving many in the industry questioning: what now? The passage of the bill was certainly a cause for celebration for craft spirit producers. The dramatic reduction in federal DISTILLERS: If excise tax naturally takes top billing. It passed thanks to the efforts of many, including the you’re simply distilling, American Craft Spirits Association. “The reduction in the Federal Excise Tax for bottling and selling your own product, craft distillers is long overdue and we expect an even greater impact things are easy. The federal excise tax rate for in local economic development in communities where distilled spirits went from the flat $13.50 per proof gallon empty or abandoned buildings once stood,” rate to $2.70 per proof gallon on the first 100,000 proof says Margie A.S. Lehrman, gallons of distilled spirits, $13.34 for all proof gallons in ACSA’s executive excess of that amount but less than 22,130,000 proof director.

CONTRACT BOTTLERS:

gallons, and $13.50 for amounts greater. TTB confirmed that the same forms will be utilized in reporting. So for most craft Things distillers, the real question is what to do with the tax savings. become a bit more complicated “We will use the savings to invest in capital equipment [to] when considering the relationship between build our bourbon inventory, as well as sales and a DSP and its contract bottling clients. In a contract marketing to grow our brand,” says production relationship, the company that is distilling or bottling Philip McDaniel, CEO of St. the spirits on its bonded premises is responsible for paying the FET. Both Augustine Distillery. the DSP and client will no doubt seek to keep as much of the allocation of the first 100,000 proof gallons for itself. As a client of a DSP, to be certain you receive your full benefit from the reduced FET, one route is an alternating proprietorship. “There has been a lot of interest from distilled spirits companies that have contract produced with big manufacturers to set up an alternating DSP,” says Rachel Dumas Rey, president of compliance company Compli. An alternating proprietorship refers to an arrangement where two or more distilled spirits companies alternate use of a portion of a bonded DSP. It involves the leasing of space and equipment to manufacture product as if you established the DSP yourself—sans the up-front investment. In the eyes of the TTB, you are the proprietor of the DSP and you are responsible for what happens on the ground while you are leasing the space. In an alternating proprietorship, you are responsible for the permits, record keeping, bonds, label approvals and taxes that result from your operations as a DSP while in use. The advantage of this model is direct tax benefits without having to negotiate with the DSP for reimbursement. Jeff Carroll, Vice President, Product and Marketing at Compli, warned that there is a compliance cost with receiving that benefit. Also, he says, “remember that this could be a short-term solution because the Act is only valid through 2019 unless renewed.” Until we see how these tax breaks play out, individual businesses need to assess the pros and cons of different business models to determine how to make the most of the tax breaks while they are in effect.

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IMPORTERS:

treatment to foreign producers as domestic producers.” In Perhaps the biggest unknown so far the case of distilled spirits produced outside the U.S. and regarding the Act relates to imported products. It’s imported into the U.S., the Act allows foreign distilled spirits simple on its face. As Harry Kohlman, CEO manufacturers to assign the reduced tax rates to importers who of Park Street, explains, “our clients will elect to receive them. As of the date of publication, TTB has said benefit from the reduced FET if their importers will simply have to pay the full FET and seek relief products are produced at foreign CONTROLLED later once guidance is issued. facilities that produce less than GROUPS: The The text of the Act notes that procedures will be established to 100,000 proof gallons.” In applicable taxpayer ensure accurate and transparent accounting of the reduced tax short, Kohlman says, controlled group is any rate assignments, but many question the practicality of policing “the new Act simply group of incorporated or nonforeign manufacturers and importers. “TTB is really scrambling,” extends the incorporated businesses that have says Adam Looney, Senior Fellow, Economic Studies, The same common ownership interests (including Brookings Institute, and formerly of the Tax Analysis division of individuals, partnerships, corporations). A the Treasury. “With the new changes at DHS and Treasury, there business is considered to be part of a controlled are not a lot of people who are experts in this.” Dumas Rey, group, and therefore afforded the tax breaks of only for one, expressed some skepticism regarding the foreign tax one taxpayer, if at least 80% of the business is owned allocations. “I see a potential for foreign producers to create either by, or in common with, another business (or businesses). shell companies to extend tax credit to many different According to Dumas Rey, the definition of the control group importers,” she says. There isn’t a mechanism at broadened significantly. For instance, if you have two distilleries under the moment to look through to the producer two different LLC’s, under the old definition of “controlled group” if those on the importer level. As Looney explains, two distilleries had 50% or more common ownership they would have been a producer can sell to multiple considered a controlled group and would not be eligible for the tax credit. Now, the importers and all can theoretically cut-off is more than 80% common ownership. You can have 79% ownership in multiple claim they are the first facilities and each one would be able to take full advantage of the credit, explains Dumas Rey. 100,000. After all, he She says industry members who have an interest (under 80%) in multiple businesses will now be says, “customs can’t eligible to take full advantage of credits they would have historically been denied. go to France to check.”

TRANSFERS IN BOND: Looney notes that one of the biggest changes relates to transfer in bond now being permissible for non-bulk spirits. TTB guidance notes DSPs may receive transfers in bond of non-bulk distilled spirits if the DSP complies with applicable requirements. TTB provided the non-exhaustive list of requirements for DSPs interested in receiving transfers in bond of non-bulk distilled spirits: • You must receive approval from TTB using TTB Form 5100.16 for each DSP from which you will receive such transfers. When filling out Box 6a of the form, you should use a tax rate of $13.50 for calculating the quantity of distilled spirits authorized to be transferred, as required by the form. • DSPs who transfer distilled spirits (consignors) and DSPs who receive such transfers (consignees) must keep records required by the regulations, including the transfer records required by 27 CFR 19.620 and 19.621. The transfer records must contain all of the information required by these regulations, including the serial numbers of cases transferred and, if applicable, information about calculating the credits for the use of eligible wines and eligible flavors.

Additionally, the consignor should send, and the consignee should keep on file, any applicable documentation to substantiate label claims. • When receiving bottled and other non-bulk distilled spirits as transfers in bond, DSPs must generally enter the distilled spirits into the processing account. If the distilled spirits will be dumped for redistillation, the distilled spirits may be entered into the production account. • The bottler must apply for the Certificate of Label Approval (COLA) for the distilled spirits and should provide a copy of the COLA to the recipient of the bottled spirits transferred in bond. If the labels contain all information required under the regulations, no additional coding or other marking is required to be added to labels on bottles transferred in bond. The reduction in the Federal Excise Tax for craft distillers is long overdue. We all hope things will continue after 2019. Lehrman adds, “ACSA will continue the fight on Capitol Hill to make permanent the reduction so our small business entrepreneurs can flourish without massive debt strangling operations.”

Ryan Malkin is principal attorney at Malkin Law, P.A., a law firm serving the alcohol beverage industry and legal advisor for American Craft Spirits Association. Ashley Hanke is an attorney at Malkin Law P.A. For more information visit www.malkin.law. Nothing in this article is intended to be and should be not be construed as specific legal advice. 52

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s many readers are now aware, the recently enacted Federal Craft Beverage Modernization And Tax Reform law lowers excise rates for distillers from $13.50 per proof gallon to $2.70 per proof gallon on the first 100,000 sold each year for two years. This new law also brought along some less-discussed changes that distillers need to be aware of and consider. Yes, paying $0.43 tax on a 750ml bottle of 80 proof alcohol instead of $2.14 means a lot less cash heading to the government. With that come some rules concerned with how that rate is applied, especially for companies that own multiple plants, or who contract out some of their production and bottling. “Controlled Group” rules, the “Single Taxpayer” rule, and the allowance for transfer in bond of bottled spirits are specific adjustments we should also get familiar with. For those who are also in the brewing and winery business, similar complex rule changes and reduced tax rates were also included in the new law.

IN BOND TRANSFERS

LOWER TAX RATE? YES, BUT ALSO...

Starting with the transfer in bond rule, note that since “All in Bond” went into effect in 1980, 26 USC 5212 only permitted “bulk” distilled spirits to be transferred between DSPs. Bulk containers are defined as holding 1 gallon or more of spirits; finished cases of bottled goods, limited to not more than 1.75L bottles, had to be tax determined when removed from the DSP. This was to prevent creation of DSP premises solely for the receipt and removal of bottled spirits—any wholesale house would otherwise be eligible to bond WRITTEN BY JIM MCCOY their warehouse and pull the excise tax payments “downstream” in the production to market path. The 2018 revised law, given the persistence of the “three-tier” system in the states and potential limitations as TTB sets rules to implement this provision, is unlikely to provide for widespread bonding of bottled goods wholesale sites. WWW.ARTISANSPIRITMAG.COM

However, the law may be helpful for anyone needing bottle warehouse space outside of their present market area. Conceivably, a warehousing premise can be established to receive both bulk and bottled goods. Such a facility would need to be qualified as a DSP site, account for the in-bond products and file reports and taxes. The allowance for transfer in bond from the main DSP to that site would enable deferral of the tax payments on case goods until distributed. A distiller already operating two or more sites may take advantage of this lifted restriction by maintaining stocks at all sites without incurring tax until the product is distributed. The new law also modifies transfer rules for beer and wine to make in bond movement more flexible, as well as providing a revised lower tax rate structure. In the wine industry under pre-2018 rules, a winery could employ the services of a bonded wine cellar to delay tax payment, but had to retain title to the wine in stock. A brewer was not, until 2018, allowed to transfer beer in bond to another brewery that was not of similar/ affiliated ownership.

LOWER DISTILLED SPIRITS EXCISE TAX RATES

In respect to the eligibility for the $2.70 per proof gallon tax rate, as might be expected, Internal Revenue Code “Controlled Group” rules have been applied, linking this allowance to the products removed for sale or imported into the US by a company or group of companies that come under those grouping rules. A group that includes companies that are 50% or more controlled by the same entities or persons are treated as one taxpayer. The new law allows such a group to allot portions of their reduced rate to producer and importer members. TTB regulated businesses should become familiar with these controlled group rules, to be aware of group relationships in respect to permitting and to the benefits of certain tax credits and reduced rates.

Similarly, the law states that for the purpose of applying the reduced tax rate, “two or more entities (whether or not under common control) that produce distilled spirits marketed under a similar brand, license, franchise, or other arrangement shall be treated as a single taxpayer….” (26 USC 5001(c)(2)(D), as added by Public Law 115-97). An compelling bit of language—does it imply that two DSP’s of different ownership, bottling the same product under contract, each would share the same 100,000 proof gallon reduced rate allotment? How TTB explains and implements this provision of the law will be interesting. Working with the transfer in bond rule, the DSP may find it better, in some situations, to have contract bottled product shipped to their plant in bond for shipment to distributors rather than having the contract packager ship to distributors. Neither party would be desiring a “sharing” of the 100,000 ceiling on the $2.70 per proof gallon rate, if either plant’s volume will be near to or over that threshold. The rate jumps to $13.34 per proof gallon for any spirits shipped above 100,000 proof gallons. The reduced tax rates benefit all distillers, not just the smaller companies. Further, the rate applies to imported products, as well. A large group may allocate their 100,000 proof gallons to the varied producers and importers in their group. This creates a complexity for TTB in their auditing and administration of the law,

which requires a group to document their allocations. Another effect of the reduced rate is that the wine credit under 26 USC 5010 reducing taxes on products containing wine will likely be negated for the lowest tax rung, as computation of the wine credit generally leaves the rate above $2.70. The flavors credit computation may be of some benefit, at least a few cents per proof gallon. Again, TTB instruction should help understand how the specifics of the law impact those credits.

LAST WORDS To summarize, the distiller, brewer and winery obviously benefit from the two-year (and possibly longer term) reduction in tax rates, but they should be sure to watch for the layer of rules attendant to the rate reduction which can impact their businesses. How the agency implements the rules is yet to be seen, as TTB folks analyze the changes and issue guidance and regulatory adjustments. Getting things right and staying compliant will require industry members to stay tuned to what the government provides in the way of instruction for incorporating these changes into their records and operations.

Jim McCoy operates J. McCoy Alcohol & Tobacco Compliance Consultants LLC, and since 2010 has assisted alcohol and tobacco businesses in their efforts to meet Federal regulatory and tax requirements. For more info email Jim at jmccoy@jmccoyconsultants.com

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SHOWCASE Boss Expos and the Mid America Beverage Expo & Conference would like to thank all of our great exhibitors, attendees, all of the associations, volunteers, and anyone else who helped make this show a huge success. See you in 2019!

And of course our show could not have been possible without our sponsors!

“ YOU SAY POTATO…” PROOF ARTISAN DISTILLERS FARGO, NORTH DAKOTA Wr i t t e n b y A m b e r G . C h r i s t e n s e n - S m i t h Photography by Amanda Joy Christensen

To each his own. Barley. Corn. Wheat. Rye. Potato. Yes, potato. There’s no famine here, and no lack of luster for the edible tuber at all. It’s not as common in American distilling like the aforementioned grains, and it’s downright difficult to distill. Being the first craft distillery in Fargo, North Dakota, gives you a uniqueness all your own, but by working with potatoes, you take that level of differentiation several steps further. As Joel Kath of Proof Artisan Distillers proclaims, however, “That’s what we think God intended potatoes to be for...” WWW.ARTISANSPIRITMAG.COM

Kath, owner and distiller of Proof Artisan Distillers, has had a complicated relationship with potatoes—he knows the fights and flourishes of them. However, there are definitely regional benefits to using potatoes—they are abundant in the area and the utilization of this produce supports local farmers. Still, there are caveats when it comes to potatoes, as Kath explains: “Potatoes are painful.” In the fresh state there is a lot of potential bacteria. And they can gel up and become impossible to work with—It’s like ballistic gel,” he groans. “You can start from flake, but that’s expensive. There are a lot less potato flakes out there from processing plants. We’re hooked up with some plants that have a potato starch product. Timing is key. We get the product fresh, the day of production. At 20% plus moisture content, it can go rancid in a hurry and that unpleasant flavor will carryover. It’s like a cornstarch if you will, but it’s a potato starch. We cook it, enzyme it, and ferment it in a 600 gallon tank—and it’s a slow and painful four week fermentation.” And that’s not the only issue. When you ferment something that long, there are potential hazards: “If it goes bad, it’s going to carry over into the vodka. We have to use the same sanitation as the breweries.” This is a lot of work. Distilleries can often be more forgiving about their sanitation than breweries and wineries— but not so when distilling potatoes. With something fermenting for multiple weeks, lots can go wrong if you’re not careful. Beyond all the headaches that come with using potatoes, Kath is happy with his decision to be unique, to support local farmers, and to do something not quite as normal in North America when it comes to craft distilling. He also has seen the benefit of using a different type of produce as it appeals to the taste of those that may not be attracted to grain alcohols. “We often get ‘I don’t like gin, but I like this.’ We’re forming new fans of new American style gin. People get very excited about seeing this and tasting this.” Kath has taken this enthusiasm and crafted classes that teach consumers how to distill—which has the added benefit of building a self-sustaining consumer base and fan club. Proof Artisan Distillers is not just crafting potatobased gin. They distill a coffee and a cream liqueur, aquavit, cinnamon flavored whiskey, an Old Tom, bourbon, a newly released 2 Year Blended Bourbon Whiskey, and American Malt Whiskey. The botanical base, which is flavored with orris root, juniper berries, and other traditional herbs and spices, is very sweet and citrusy: “We’re not intending for a London Dry or a martini gin.”

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From the initial planning stages, Proof Artisan Distillers was a multi-year endeavor to get up and running. One of the other interesting hurdles they had to navigate was an issue with the name of their Malt Whiskey, currently offered in limited release. The distillers wanted to name the whiskey “Glen Fargo American Malt Whiskey.” The reasoning behind this? Glen refers to a glacier-formed valley—which is where Fargo is located. After filing for a trademark, Kath and crew were contacted by the Scotch Whiskey Association (SWA). The SWA worried the branding could cause possible consumer confusion. Likewise, Kath wanted to avoid being confused or considered as a Scotch product. “That is why we explained to the SWA that our trademark is ‘Glen Fargo American Malt Whiskey’ all five words. We are proudly Fargo located in what is arguably one of the largest glacially formed valleys in the world. Proudly American Malt Whiskey from North Dakota with its rich agricultural history rooted in barley.” Eventually open communication and transparency won the day, and “Glen Fargo American Malt Whiskey” survived. While it’s more labor intensive than bourbon, Kath loves that single malt whiskey is a new and exciting trend. “We’re double-barreling it. I can’t wait until it evolves over 4-6 years. I love seeing the transformation. It’s like watching a child grow up. Watching this white dog that is not palatable and seeing this change to full maturity.” Being part of a small tight-knit community in North Dakota, Kath is working to form a guild and to keep momentum going for the distilleries in their state. Proof Artisan Distillers and Maple River Distillery may be the only active distilleries there at the moment, but they know that will change. Creating a group now helps them be represented as a whole and puts them in control of the narrative on where distilling can go in North Dakota. “I had envisioned that this venture was going to be a huge undertaking. Even so…. I underestimated,” says Kath of making spirits and putting together a guild. “And I’ve been in engineering for a very long time. From the business side, a distillery it’s much more complex and multifaceted.” Overall, Kath knows, “It speaks volumes when the easiest part of the distillery is the distilling.”

Proof Artisan Distillers is located in Fargo, North Dakota. Call (701) 353-5853 or visit www.proofdistillers.com for more info.

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Agavaceous T

the

SUNRISE of TEQUILA

he mere word tequila can strike fear and horror into the hearts of much of the U.S. population, almost invariably due to an incident, or two, in younger days. This is an understandable response to any product—food or drink—and is presumably a subliminal defense mechanism to protect ourselves from selfharm. If it was bad before, it might be so again. For those affected by over-refreshing on tequila, this is truly a tragedy, as they are missing out on some wonderful sensory experiences. Tequila does not need to be shot back or confounded with other strong flavors such as salt or lime, and can be sipped unadulterated. (There are of course bottom-shelf tequilas that perhaps are best enjoyed in a margarita.) The common experience of tequila is one that belies the history and culture that underpin this venerable category of distilled spirits. So what is tequila? It is a subset of the broader mezcal category. Not all mezcals are tequilas, but all tequilas are mezcals. As a mezcal subcategory, tequila is arguably the most legislated spirit on the globe. It is considered explicitly in the regulations of Mexico, NAFTA and the World Trade Organization. Its alcohol must be made from at least 51% agave that is grown, fermented and distilled only in certain parts of Mexico, mainly Jalisco but also parts of four other states. 100% agave tequilas are considered to be premium relative to those supplemented with other sugar sources, which are known as mixtos. On every bottle of tequila a NOM number is found, which is unique to each distillery and is assigned by the Mexican government to what they consider to be authentic tequila producers. Other legislative details concern the movement of bulk tequila for bottling overseas, something that was also addressed in the Scotch whisky regulations of 2009, both with the same motivation: to keep tighter control over the movement of the spirits. The process for manufacturing tequila is arduous. The period of time between the planting of the raw material to achieving the final product in bottle can take eight years or more, a similar time-frame to that required for typical single malt Scotch whiskies. In the case of tequila though, most of that eight years is the time taken to grow the agave plants, whereas for Scotch whiskies most of the production time is maturation in warehouses. Both industries have challenges when trying to forecast demand, about two presidential elections ahead. However the position of tequila producers is far more precarious. The agave fields are subject to greater risks (e.g. adverse climatic conditions, spread of pests and diseases) than Scotch whisky in a warehouse, where the main risks are fires and, perhaps, roof collapses caused by heavy snowfall. Because of this and the legislative constraints on manufacture, tequila WWW.ART ISANSP IRITMAG.COM

Written by Paul Hughes, Ph.D. & Sebastian Ramirez

production is tightly coupled to agave production. The availability, or not, of agave has been felt directly by the tequila producer, with huge swings in production from the beginning of the 20th century. Today the required species for tequila, of the 200+ agaves available, is the blue agave or Agave tequiliana Weber. But not all tequila alcohol is made from agave sugars. In 1964, regulators were persuaded to allow up to 30% generic sweeteners for tequila fermentations, a rule softened in 1970 to allow up to 49% of other sugar sources, with both rule changes being motivated by agave shortages. As mentioned above, this latter situation persists to this day. The agave plant itself is often considered to be a relative of the cactus, but it is more closely related to asparagus (family Asparagaceae). This becomes clear if the agave is allowed to flower, when an asparagus-like shoot grows up to eight feet tall. Watched over by the jimadors, agave plants are monitored for their growth and maturity. When considered sufficiently ripe, they are harvested. For this occasion, the jimador typically sports gloves and leg protectors, as the spines on the leaves are highly irritant, containing tiny needles of calcium oxalate known as rahpides (oxalic acid causes rhubarb leaves to be toxic). These can readily penetrate the skin and are a common cause of contact dermatitis for many jimadors. Using a sharp hoe-like tool, a coa, the jimador cuts off the leaves, exposing white surfaces on the core, that give the resulting piña a look superficially similar to a pineapple. These piñas, weighing in at up to 200 lbs, are transported post haste for

processing. Consideration of how piñas are processed can spark lively debates. Tradition dictates that the agaves are crushed by a stone wheel driven by an animal such as a donkey (the Tahona process), although prior to the development of this process the agaves were, astoundingly, crushed by hand. Innovations toward the end of the 19th century saw the introduction of masonry ovens to cook the piñas rather than earthen pits. Today some distillers are using autoclaves with superheated steam to cut cooking times from 48 to 24 hours. These cooking processes release much of the sugar present in the piñas by hydrolyzing the fructans present, mainly inulin, into the fermentable fructose. This fructose, though, can also react to give other flavors and some contend that these flavor nuances can be missing if the piñas are autoclaved. Nevertheless, this discussion has made way for a far more contentious debate about the latest innovation around piña processing, that of the diffuser. These are machines that wash fermentable sugars from the shredded piñas. This can be a final step, to recover residual sugars after oven or autoclave cooking. More controversial though, is using the diffuser to recover sugars by washing with hot water with, perhaps, the addition of sulfuric acid that acts as a catalyst for the hydrolysis of fructans into fructose. The resulting juice is then cooked in an autoclave. The yields from the latter are undoubtedly higher but prevent the formation of many of the cooked agave flavors from the tequila. Sauza use this latter approach for all of their tequilas and describe their process as

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producing “fresh pressed agave.” Once the juice is prepared, however it is done, it needs to be fermented. Again tradition dictates that this is achieved by leaving the juice vats open to the air and allowing for spontaneous fermentation. Such fermentations can be unpredictable from the perspective of both time and alcohol yield, so today it is much more common to ferment with cultured yeast. In any case, once the fermentation has ceased, the beer needs to be distilled. Traditionally performed in “Filipino” stills—a rudimentary pot still that is as close to short-path, low reflux distillation as is practical on a production scale—today pots and columns have become de rigeur. Here again, the choice of distillation set-up can affect the flavor of the final spirit, where more refinement from pot and, especially column stills, can be used to partially tune out some of the beer flavors to give a cleaner spirit. Finally the spirit can be finished and bottled as is (blanco, plata or silver tequilas), or matured in wood. Tequilas matured for up to two months are known as “rested” or reposado tequilas. If they are in cask for up to a year they are aged or añejo, and beyond that super añejo. Gold tequilas can be aged or merely colored with caramel and are generally, but not always, mixtos products. So today there are a variety of ways by which diversity can be introduced into tequila: the method of juice extraction, the application of spontaneous or pitched fermentations, the still configuration used and the option of maturing or not and, if so, for how long? The question usually asked at this point is which is

the best way? We contend that the consumer is the ultimate judge. Yes, changing the way in which juice is extracted will impact flavor, as will fermentation, distillation and maturation, but preferences for the resulting products are matters of personal choice and add diversity to the tequila sector. Some tequilas are more challenging than others, but the same can be said of bourbons or Scotch whiskies. Unlike some other spirits that undergo maturation though, tequila can traditionally be consumed unaged, which is in itself noteworthy. It is also worth mentioning that some unaged tequila can be as complex and nuanced as an aged one. Age is not necessarily the definitive indication of quality in this category and even as this article is written debate in Scotland is ongoing as to the relevance of an age statement on bottles. As far as the regulations currently stand, without agave there is no tequila. Agave tequiliana Weber plantations are monocultures and as such are all prone to the same pests and diseases. The reason for this situation is simple: with agave plants taking at least seven years to mature, conventional breeding times can be measured in lifetimes, rather than a decade or two. Both climate change and lack of biological diversity are risks for the agave crop, but we stand by ready and willing to evaluate tequilas made from agaves exposed to new and evolving agronomic forces.

Paul Hughes, Ph.D. is assistant professor of food science and technology at Oregon State University in Corvallis, OR. For more information visit www.oregonstate.edu or call (541) 737-4595.

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CLASS ACT MORE CRAFT DISTILLERS ARE BECOMING EDUCATORS

WRITTEN BY MARGARETT WATERBURY

ew sectors offer quite as many opportunities for lifelong education as spirits. There’s always a new spirit to taste, a new skill to learn, or a core concept to understand more deeply. For many distillers, their industry peers have provided an abundance of learning opportunities, from friendly phone calls with the moreexperienced distiller down the street, to industry-leading education programs that draw an international student base. Now, as the industry grows, more distilleries are starting to return the favor by offering classes of their own. The format of those educational events runs the gamut, from casual after-work cocktail classes to weeklong intensives. Classes have become particular important for relatively earlystage distilleries that rely heavily on tasting room traffic for revenue, as they present opportunities to engage with and educate current and potential customers. For more established distilleries, sharing their hard-won “We started offering professional cocktail classes knowledge through career so our customers development could join the classes is a cocktail revolution natural growth without feeling avenue. Holding intimidated or classes can overwhelmed.” accomplish MELKON KHOSROVIAN simultaneous GREENBAR DISTILLING goals of LOS ANGELES, generating CALIFORNIA

revenue, promoting the distillery in the industry community, and ensuring that new distillers are equipped with the skills they need to elevate standards in the craft industry for years to come. We interviewed several distillers across the country to find out what kinds of classes they were holding, why they were holding them, and tips and tricks for making sure customers and staff alike walk away with a good experience.

COCKTAIL CLASSES Designed to engage consumers, build brand loyalty, and just plain have fun, cocktail classes are one of the easiest educational formats for distilleries to implement. Typically around two hours in length, cocktail classes are an enjoyable, easy way for locals and tourists alike to roll up their sleeves, get their jiggers wet, and learn to make the kinds of cocktails that highlight a distillers’ spirits. Many distilleries borrow strategic themes from their businesses or key aspects of brand identity and build them into their cocktail classes. Koval Distillery in Chicago, Illinois, is owned and operated by former academics who loved spirits but wanted to maintain a connection to classroom instruction. “You never throw anything away,” says Dr. Sonat Birnecker Hart, president and co-founder of Koval. “When we shifted from academia to spirits, we brought with us our love of teaching and educating.” Here, consumerfacing cocktail or spirits education classes

are participatory, but also incorporate elements of history and science. “Our cocktail classes are still very academic,” says Sonat. “We never teach something in a vacuum. It’s never just how you put the cocktail together, it’s where it comes from.” Greenbar Distilling in Los Angeles, California, takes a slightly different approach. Rather than focusing on history, its cocktail classes are geared towards hands-on action, with a class format that encourages experimentation and customization. “Many of our attendees have had elaborate cocktails,” says Melkon Khosrovian, co-founder of Greenbar, acknowledging Angelenos’ love of contemporary cocktail culture. “But few know how to make simple drinks. We started offering cocktail classes so our customers could join the cocktail revolution without feeling intimidated or overwhelmed.” Melkon has found that getting people involved right away has been the key to Greenbar’s success. “Make it interactive and fun; no one is that interested in a lecture.”

HANDS-ON LEARNTO-DISTILL CLASSES GEARED TOWARDS ENTHUSIASTS There comes a time in every true spirits nerd’s life when they start wondering what it might be like to helm the still on their own. Half or full-day hands-on distilling courses are just the thing for this crowd. WWW.ARTISANSPIRITMAG.COM

It’s a way to get into “The classes the action, experience are fun, but what it’s actually like they’re a lot of to mash-in or make cuts, and maybe even work. I used to entertain a few dreams try to build the of distillery ownership class around of their own. the production At New Deal Distillery schedule, but in Portland, Oregon, you can’t do that. owner and head distiller Tom Burkleaux began What if a pump offering hands-on goes down?” whiskey making classes TOM BURKLEAUX more than three years NEW DEAL DISTILLERY ago, and holds between PORTLAND, OREGON six and eight classes a year. These daylong instructional experiences give students the chance to participate in mash making, observe fermentation, and helping distill a batch of whiskey, with plenty of tasting along the way. This year, Tom is excited to start marking the barrel of whiskey produced during each class with a distinctive medallion. Class participants will be able to come in periodically to taste the progress of the whiskey produced during their class, and get notified when it’s ready to bottle and sell. Tom says about a third of the participants are people who are contemplating starting their own distillery, but the rest are just spirits enthusiasts who want to take their understanding of their favorite drinks to the next level. “The classes are fun, but they’re a lot of work,” says Tom. “I used to try to build the class around the production schedule, but you can’t do that. What if a pump goes down?” Now, New Deal stages the production floor specifically for class days, with a prefermented mash ready to load in once the attendees arrive. “You get to see everything in five hours,” says Tom, “so it’s a super value for want-to-be distillers. Afterwards, you can really say, ‘Oh, now I understand how this all works.’”

PROFESSIONAL EDUCATION COURSES Here’s where things start to get a little more heavy-duty. Larger established craft distilleries like Koval and Dry Fly have found a niche teaching multi-day courses geared WWW.ARTISANSPIRITMAG.COM

towards people who want to enter the distilling industry as professionals. Dry Fly has been offering weeklong, individualized courses at its distillery in Spokane, Washington since 2009 geared towards people who are serious about starting their own distillery. “That one-on-one experience was always the model,” says Pat Donovan, director of operations and head distiller at Dry Fly. “It’s not a classroom setting. It’s an individual thing, so we can tailor the class to what students are trying to accomplish.” Pat says the most successful students are the ones who come ready to get involved and learn on their feet. “We’ve had every type of student, but the person who gets the most out of it is the one who just dives in and wants to be hands on—the people who actually want to clean out pipes and hook stuff together.” In Chicago, Koval offers regular three- and five-day small group workshops as well as twoday one-on-one trainings, all tailored towards industry participants and prospective distillery owners. “When we started, we realized we’d entered a field with very few opportunities for learning how to actually do it,” says Sonat. “So we wanted to serve as a conduit for that, particularly for the craft industry.” Sonat also urges “Through prospective students preparation to take preparation seriously. “Through comes questions, preparation comes and if a student questions, and if a comes without student comes without having looked having looked into it into it at all— at all—without having without having thought about, say, the legal landscape— thought about, they won’t be able to say, the legal ask questions that are landscape— personally relevant for they won’t be them or their business able to ask model.” questions that Does it ever feel are personally strange to be training people who may relevant for become competitors? them or their “Not at all,” says business model.” Sonat. “I don’t look at DR. SONAT it like that. I look at it BIRNECKER HART as we’re elevating the KOVAL DISTILLERY CHICAGO, ILLINOIS industry in the United

TIPS FOR DEVELOPING A DISTILLERY CLASS 1. Know your audience. Some

people want to know everything they can about copper chemistry, while others are satisfied with learning how to mix a perfect Manhattan. Make sure your class is geared towards your prospective audience’s needs and desires.

2. Take the time to develop a real

product that leverages your strengths. “For our whiskeymaking classes and our cocktail classes, we did a lot of practice classes with friends,” says Tom. “We didn’t just have people show up, spend their money, and wing it. You have to know what you want to say so you can have a good product.”

3. Be realistic about how classes could impact your production schedule. “You have to slow down to give students the experience they want,” says Pat. “We only do a handful of weeklong sessions a year now, which is less impactful on our day-to-day operations.”

4. The importance of a promotion

plan increases with the length, expense, and complexity of the class. “It can be hard to fill classes,” says Tom. “The kinds of people who want to go to more in-depth classes, you’ve got to be persistent to reach them.” For low-key afternoon or evening events, you may be able to get away with less promotion. Melkon says Greenbar is able to fill four cocktail classes a week with little more than word of mouth.

5. Relish the opportunity to

expand your circle. “We’ve had people from all over the world, like the Cook Islands and Panama,” says Pat. “It’s been very fun to meet all these people along the way.”

States. A rising tide lifts all ships.” Dry Fly shares that sentiment—for the most part. “We’ve always believed there’s enough room in this market for all us small guys to get along,” says Pat. “But at some point, it didn’t make sense for us to be training more Washington distillers.” Now, classes are focused on distillers from outside of Washington State.

CREATIVE CLASS IDEAS Craft distilling is full of clever, entrepreneurial people, so it only makes sense that there would be some creative classes out there, too. At Scratch Distilling in Edmonds, Washington, a regular threehour evening class called GINology teaches customers about the history of gin, then

lets people loose on more than 40 types of individually distilled botanicals to create their own custom gin blend. The price of the class includes a bottle of your own special formulation to take home, and they’ll keep customers’ recipes on file in case they want to order more. Since opening in 2015, Scratch has held more than 50 GINology classes. “So we’ve gotten over our public speaking thing,” laughs owner and distiller Kim Karrick. “And I’ve found I really enjoy the education and interpersonal parts of GINology.” She says it’s not unusual for couples to come to GINology where one member loves gin and the other isn’t quite so sure—but by the end, most people can make a gin they enjoy, and

the class even changes some skeptical minds. Kim says she and her husband and business partner, Bryan Karrick, are starting to develop a similar vodka-based class to capture a larger pool of potential attendees. Backwards Distilling in Wills, Wyoming, hosts conventional cocktail and spirits education classes, but also offers a monthly yoga session on Sundays that pairs all-levels asana with an afterclass cocktail. “We call it happy hour yoga,” says Mallory Pollock, Brand Ambassador at Backwards Distilling and local yoga teacher. Mallory says the class has been very popular since it started three years ago, attracting up to 42 participants at a time. “We get a lot of people who might not

“We call it happy hour yoga. We get a lot of people who might not do yoga in a traditional studio, which can be intimidating. It’s a really rad, relaxed crowd.” MALLORY POLLOCK BACKWARDS DISTILLING WILLS, WYOMING

do yoga in a traditional studio, which can be intimidating. It’s a really rad, relaxed crowd,” she says. “In fact, it’s actually the biggest class I teach anywhere!”

Margarett Waterbury is the managing editor of The Whiskey Wash and regularly contributes to other publications about food, drink, and agriculture. She was named the 2017 Alan Lodge Young Drinks Writer of the Year by Spirits Business Magazine. www.margarettwaterbury.com

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the curtain's up at

Backwards Distilling

WRITTEN BY MARGARETT WATERBURY /// PHOTOGRAPHY BY AMANDA JOY CHRISTENSEN

e’ve all fantasized about joining the circus, but the Pollock family actually did it—only instead of running away, they brought the show right to their hometown. At Backwards Distilling in Mills, Wyoming, carnival themes are everywhere, from the vintage Ringling Bros. posters on the tasting room wall to the names of all of Backwards’ grainto-glass spirits. Bottles of Ringleader Vodka, Contortionist Gin, Sword Swallower Rum, and Strong Man Navy Strength Gin line the shelves, all displayed in custom packaging that brings each character to life. “We’ve always loved the concept of the traveling circus,” says Amber Pollock, co-owner and tasting room manager. “It’s relevant around the world, and it’s been appreciated across time and across cultures.” Her brother, Chad, pipes in. “It also gives you so many visuals to work with— the characters, the colors, and the performance of it.” Backwards Distilling is a true family affair. It’s owned and operated by Bill and Kathy Pollock and their adult children, Amber and Chad. In 2014, each of the Pollocks found themselves at a point of transition. Bill had owned a business for 29 years and was ready to try his hand at something else. Kathy was contemplating her next move after nearly a decade of teaching. Chad had recently graduated from college, and Amber had just started teaching but couldn’t shake the idea that entrepreneurship might be more engaging.

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At that point, the Pollocks knew they wanted to start a business, but they weren’t sure what kind. Then, one evening, Chad—a spirits fan and budding absinthe collector—was lamenting the challenges of shipping absinthe from Europe to Wyoming. Kathy stopped what she was doing, looked up, and asked, “Why don’t you just make it yourself?” “Everybody kind of paused for a second,” says Chad. And then, they started researching. After learning that making craft spirits in Wyoming was, in fact, not only feasible but a rapidly growing industry, the seeds for Backwards Distilling were planted. Yet for a new distiller, there was still a lot to learn. “It was a patchwork at the beginning,” says Chad. “And a lot of messing things up. I learned a whole bunch of what not to do. But then I spent a lot of time at Moonshine University, with Robert Birnecker, and with Dave Pickerell, and I started to learn.” Soon, he started experimenting with quirky ingredients like yams and Southeast Asian spices, and over time, he honed in on the flavor profiles that would become Backwards’ four primary products. Backwards Distilling has not one but two stills: A Kothe hybrid pot still that Amber calls their “workhorse” still, and a Vendome still equipped with a custom, extra-wide gin basket for vapor infusing Backwards’ Contortionist Gin. “Having two stills was an effort to make sure all our products didn’t gradually start to taste more and more like gin,” says Amber. There are about seven distilleries in Wyoming right now, with more on the way. To Californians or New Yorkers that may not sound like a lot, but it’s pretty remarkable when you consider that Wyoming has only 500,000 residents. “A lot of distilleries are in cities bigger than our entire state,” laughs Amber. Operating in a relatively small market like Wyoming comes with its share of challenges, as well as its perks. Early on, the Pollocks saw a sales report

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for the state of Wyoming that said just 4% of the spirits sold in-state are in the super-premium category, a category that includes the vast majority of craft spirits, including Backwards Distilling’s products. Yet premium products comprised 25% of the market, indicating fertile ground if the Pollocks could come up with a way to offer a lower-priced spirit for the local market. So they created 307 Vodka, named after Wyoming’s area code, which is made with higher-yield ingredients and distributed in a more streamlined package to cut costs. “307 will never leave Wyoming,” says Amber, but says it’s helped them penetrate the on-premise market. Simple distance is another thing to consider. Wyoming is big, and its small population is spread far apart. A two-hour tasting at a liquor store can mean more time spent behind the wheel just getting there than actually pouring samples and talking to consumers. “It’s a lot of time when you’re really not selling anything, you’re just driving.” At the same time, the relatively modest number of other

distilleries in Wyoming keeps in-state competitive pressures low. Another challenge stems from cultural realities: Wyoming is beer country. “We are not a cocktail mecca, by any means,” says Amber. “So it became pretty clear to us that if we wanted people to be drinking our products, we had to demonstrate what that could look like.” That means the Backwards tasting room has developed an ambitious and high quality cocktail program, serving up to 30 different cocktails at any given time. “We’ve got more than 50% of our workforce in the tasting room,” says Amber. “We’ve really worked to make this a big part of the business.” Amber has always been motivated to give back, a quality that led her to her first career as a classroom teacher. Initially, she wasn’t sure that managing the tasting room would give her the same opportunities as teaching to stay connected and engaged, but then she realized how important a vital community gathering place was for their 50,000-person town. “Shaking cocktails in and of itself is not necessarily fulfilling.

It’s the interactions with people, having people bring their family out when they come into town, the way they’re proud this is in their community, the support we get. That’s where it gets to be something more,” says Amber. In addition to serving cocktails and offering tastings five days per week, the Backwards tasting room also hosts regular events, including cocktail classes, live music, and even happy hour yoga classes. Even though it’s not in the center of downtown, the Pollocks say the customers keep coming; last year, the tasting room accounted for about half their revenue. “We could have moved the distillery to Colorado, and had a ton of access to other people and a lot more competition,” says Amber. “But I feel like having roots is important. We’re from Wyoming, and so we opened it here. That was what won out.”

Backwards Distilling is located in Wills, Wyoming. For more information visit www.backwardsdistilling.com or call (307) 472-1275.

Cooper’s Select Barrels Our Cooper’s Select barrel uses 18-month seasoned staves, a process that changes the oak chemistry, adding complexity and softness to the palate. Learn more about our Cooper’s Select barrel by visiting our website.

www.iscbarrels.com Chad Spalding • 270.699.1557 chad.spalding@independentstavecompany.com

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RENDER UNTO CAESAR O

n December 22, 2017, President Trump signed into law H.R. 1— a sweeping tax reform law that changes the tax landscape for businesses (and individual taxpayers) in the United States in several significant ways. [Note: Congress initially labeled the bill the “Tax Cuts and Jobs Act” but later removed that name in order to comply with Senate rules regarding the budget reconciliation process. Because that original name stuck, however, I will use its acronym— TCJA—in this discussion.] The TCJA is the most significant piece of tax legislation to be passed in several decades, and it accomplishes many things. A few of those accomplishments will impact smaller businesses operating in the spirits industry—as well as the owners of those businesses. What follows is a brief discussion of those highlights with special relevance for distillers.

FEDERAL EXCISE TAX REDUCTION IS REAL, AND IS REALLY SHORT-LIVED

IMPACTS OF FEDERAL TAX REFORM ON THE DISTILLING COMMUNITY

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WRITTEN BY BRIAN B. DEFOE

By far, the biggest piece of tax reform sought by the distilling (assuming an THE ONLY community over the last several average ABV of 4.5%) and 8 years has been a reduction in federal cents per ounce for wine (assuming an DIFFERENCE excise tax (FET) on spirits. Indeed, average ABV of 11%). [Note: It should be BETWEEN DEATH FET reduction over the last several pointed out that there is no real rational AND TAXES IS THAT years has been a key priority for the basis for this disparity—the operative DEATH DOESN’T GET Distilled Spirits Council of the United intoxicant in beer, wine and spirits is States, the American Craft Spirits exactly the same, the only difference is WORSE EVERY TIME Association (ACSA) and the American the relative amount of it in solution. But CONGRESS MEETS.” Distilling Institute. At a minimum, who needs rationality when it comes to WILL ROGERS these organizations sought to find a tax policy?] way to achieve FET parity for spirits With the enactment of TCJA, this in relation to wine and beer manufacturers. disparity is not eliminated, but it is significantly Indeed, spirits producers for some time have been lessened. Specifically, for tax years beginning on disproportionately impacted by the level of FET or after January 1, 2018, the FET obligation for imposed on the production of their products, with spirits producers is reduced to $2.70 per proof an obligation of $13.50 per proof gallon (calculated gallon for the first 100,000 proof gallons removed as one liquid gallon of spirits that is 50% ABV at from bond and $13.34 per proof gallon for the 60 degrees Fahrenheit) of spirit removed from bond. next 22,030,000 proof gallons. To the extent that Using estimates and assumptions prepared by the a distiller owes FET on anything above 22,130,000 Congressional Budget Office—and recognizing that proof gallons in a single year, it will be taxed at the the taxes are levied on different liquid measures for prior rate of $13.50 per proof gallon. the different categories of product—this meant that In terms of demographics, this means that the prior to passage of the TCJA the excise tax leveled vast majority of distilleries in the U.S. will see a on spirits was roughly 21 cents per ounce of alcohol, significant reduction in their FET obligation for the compared to about 10 cents per ounce for beer simple reason that most distilleries in the United

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States don’t produce anywhere near 100,000 proof gallons in a year. In fact, according to the ACSA’s Craft Spirits Data Project, approximately 2% of craft producers remove in excess of 100,000 proof gallons from bond on an annual basis. That 2% group, which consists of distillers that remove at least 100,000 proof gallons but less than 750,000 proof gallons annually, accounts for roughly 57% of all craft spirits sold in the United States. Notably, 92% of U.S. craft producers remove less than 10,000 proof gallons from bond on an annual basis. Extrapolating from the data, we should expect that roughly 98% of all spirits producers in the United States will end up paying $2.70 per proof gallon in FET. There is of course a catch— in that the reduction may be short-lived. Specifically, the TCJA only provides this relief for FET obligations incurred before December 31, 2019. After that date, unless Congress acts to extend the relief, FET will revert back to $13.50 per proof gallon starting with the very first spirit coming off the still. So how should distillers plan for the reversion of FET to preTCJA levels? If you’re asking the question, you’re already ahead of the game, as the biggest danger here may be for distillers to become accustomed to the reduction in FET and overextend themselves as a result. At the same time, however, this (extremely) temporary tax relief—when combined with other effects of the TCJA— may provide distillers with an opportunity to quickly expand production and, as a result, take advantage of other efficiencies to reduce their cost structures. WWW.ART ISANSP IRITMAG.COM

CORPORATE INCOME TAXES ARE REDUCED FOR MOST AND INCREASED FOR SOME

“

I’M PROUD TO PAY TAXES IN THE UNITED STATES; THE ONLY THING IS, I COULD BE JUST AS PROUD FOR HALF THE MONEY.”

Immediately before passage of the TCJA, by some estimations the United States had the highest ARTHUR GODFREY corporate income tax rate in the industrialized world. In fact, according to Tax Foundation, the “nation’s leading independent tax policy research organization,” the United States had the fourth highest corporate income tax rate in the entire world—at 38.91% (comprised of the highest federal statutory rate of 35% plus the average of the corporate income taxes levied by the states). In their estimation, this put the United States behind only the United Arab Emirates, Comoros and Puerto Rico. It should be noted that Tax Foundation isn’t entirely without bias here, and their focus on marginal tax rates as opposed to effective tax rates might be characterized as somewhat misleading. Nevertheless, their broader point is reasonably accurate; U.S. corporate income tax rates have historically been higher than similar tax rates imposed by most other countries. With the passage of TCJA, the federal corporate income tax rate is now pegged at a flat rate of 21% for all tax years beginning on or after January 1, 2018. For many corporations, this will mean a reduction in rates. [Note: Prior to TCJA those corporations with taxable income between $0 and $50,000 previously paid tax at the rate of 15%. Therefore, for those corporations generating the least amount of profit, the 21% rate is actually a rate increase.] In addition, the TCJA eliminates the corporate alternative minimum tax—a 20% hit previously applicable to some corporations with average annual gross receipts of at least $7.5 million in each of the three preceding tax years. Together, these changes mean that most businesses that have elected to be taxed as traditional corporations (i.e., not sub-chapter S corporations or businesses that have elected to be taxed as partnerships) will see a reduction in their federal income tax liability. But if your distillery is operating as one of the unlucky few that is taxed as a traditional corporation while generating less than $50,000 in taxable income, this may be a good time to chat with your accountant about changing your approach—especially given the 20% deduction available on flow-through income under new Internal Revenue Code Section 199A, discussed below in the context of entity selection.

NOT ALL INTEREST IS EQUAL

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TCJA ushers in some significant changes in THE WAGES OF SIN ARE DEATH, BUT BY THE the treatment of interest paid by a business with TIME TAXES ARE TAKEN OUT, IT’S JUST SORT respect to debt. Under prior law, this interest was generally deductible when computing the OF A TIRED FEELING.” business’ taxable income (subject—of course—to PAULA POUNDSTONE a number of exceptions and limitations). However, under the TCJA, for tax years beginning on or after January 1, 2018, large businesses’ deductions for net interest expense are limited to 30% of the business’ adjusted taxable income. Smaller businesses—those with average annual gross receipt of less than $25 million—are not subject to this limitation. [Note: Those taxpayers who are occasionally frustrated at the disconnect between the concepts of financial accounting and tax accounting should be advised that, for tax years 2018 through 2021, adjusted taxable income will be computed without regard to deductions allowable for depreciation and amortization—meaning that a business’ adjusted taxable income in those periods will be roughly equal to a metric commonly used to analyze business performance—EBITDA (earnings before interest, tax, depreciation and amortization).] To the extent that your business can’t manage to deduct all business interest in the year it is incurred, it will be treated as business interest paid or accrued in the succeeding tax year and can be carried forward in this fashion indefinitely. In other words, if your business eventually stops incurring business interest (say, for example, your business pays off the loan it took out to fund the build out of your distillery), then you should eventually be able to use all of your business interest deductions to offset taxable income.

This ability to push interest deductions forward into future tax years is important for distillers—possibly even more so because of another facet of TCJA—a change to interest capitalization rules. In general, Internal Revenue Code Section 263A, and its associated rules, requires certain direct and indirect costs allocable to real or tangible personal property produced—such as spirits—to be included in inventory or capitalized into the basis of the related property if (i) the production period exceeds two years or (ii) the production period exceeds one year and costs more than $1 million. Because spirits are often aged, and the aging period has historically been included within the IRS’ views of the production period, this meant that producers of aged spirits most commonly needed to capitalize interest incurred during the production period with respect to those products, and that same interest could not be currently deducted as business interest. The TCJA changes this, and specifically excludes from the production period for wine, beer and spirits any aging period following production. The effect of this change is to shorten the production period (for purposes of tax) of these products for purposes of the interest capitalization rules. As a result, spirits producers should no longer be required to capitalize interest associated with the production of their products simply because they are aged before sale.

COPPER JUST GOT A BIT CHEAPER Distilling is a fairly capital intensive business, and unless you’re simply bottling someone else’s production and putting your own label on it you are likely to need large pieces of stainless or copper equipment sitting around. That lovely piece of Vendome or Forsyths engineering is expensive, however. Thankfully, the TCJA will help at least a bit when it comes to paying for it. Specifically, under TCJA taxpayers will now be able to immediately expense 100% of the cost of certain property acquired and placed into service through the year 2022. This means if you buy the new still today, you won’t need to depreciate the cost of the purchase over the life of the asset—you get to write it off immediately against taxable income. Further, immediate expensing is now available even if you buy a used still (and even if you do so in connection with the assets of an existing business). You will obviously need taxable income in order to get a meaningful benefit from this change—so it may not be particularly helpful for some startup producers. But if your startup is a traditional C corporation this change may help generate losses that can be carried forward, and if your startup is taxed as a partnership it may generate losses that can be used to offset the owners’ other taxable income. And for established distilleries that want to take advantage of the reduction in FET, step up production and try to get big quickly—this could be a significant benefit.

“

WHAT’S THE DIFFERENCE BETWEEN A TAXIDERMIST AND A TAX COLLECTOR? THE TAXIDERMIST TAKES ONLY YOUR SKIN.” MARK TWAIN

ENTITY SELECTION JUST GOT A BIT TRICKIER

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TAX REFORM IS TAKING THE TAXES OFF THINGS THAT HAVE BEEN TAXED IN THE PAST AND PUTTING TAXES ON THINGS THAT HAVEN’T BEEN TAXED BEFORE.”

One of the more complicated aspects of TCJA is found in the creation of a new deduction for income from small businesses found under Internal Revenue Code Section 199A. Under this addition to the Code, many business owners organized as flow-through entities (other than certain entities in personal service industries) can now deduct the lesser of: (i) 20% of their earnings from business operations; or (ii) 50% of W-2 wages paid. Note that here we’re talking about the owners of the businesses, not the businesses themselves. And taxpayers below certain income threshold amounts—$157,500 adjusted gross income (AGI) for single filers and $315,000 AGI for those married filing jointly— will be entitled to deduct 20% of their business income without regard to the wagebased limit described above or the nature of their businesses. If you are a taxpayer with income above these threshold amounts, but below the phaseout amounts—$207,500 AGI for single filers and $415,000 AGI if married filing jointly— then you may be able to receive a ratable share of the deduction, but you will need to make sure you qualify. First, you will need to confirm that the business for which you are receiving income and want to use the deduction is one that falls outside the definition of a specified service trade or business, or “SSTB.” SSTBs are generally defined to include professions involving

ART BUCHWALD

law, health, accounting, performing artists, consulting, athletics, financial services, actuarial services, brokerage services or any other trade or business where the principal asset is the reputation or skill of one or more employees or owners—although this oddly does not include architects and engineers. In the spirits world, this is where things can get messy. Certainly your average spirits brand is going to fall outside the definition of an SSTB. But suppose, on the other hand, your business is that of a distiller-for-hire, retained by your clients to provide them with your unique skill—evidenced by your reputation as the goto for creating exciting new flavor profiles. Your business may be an SSTB. Similarly, if you make your living by traveling the world, nosing and tasting new spirits and advising businesses on blending or how to improve their products—your business may be an SSTB. So you may not be able to take full advantage of this new deduction (but please don’t expect us to feel badly for you, since you do get to make your living by traveling the world and tasting booze!). Second, you need to remember that the deduction, if available, is going to be capped at the lesser of (i) 20% of your

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entertainment expenses. The simple fact is that entertaining business prospects, customers or clients is (and has long been) a key component of doing business in the United States. And in many cases, alcohol is a component of that entertainment. Over the last several decades, up to 50% of business entertainment expenses have generally been deductible by taxpayers. The TCJA changes that, and completely disallows the deduction by a taxpayer of business entertainment expenses in tax years starting on or after January 1, 2018. Business entertainment can include “entertaining guests at nightclubs” as well as “meeting persona, living or family needs of individuals, such as providing meals…” It is reasonable to expect that if businesses are no longer permitted to deduct any portion of business entertainment expenses, they may begin to spend less. And if they begin to spend less on business entertainment, then those businesses that rely on business entertainment expenditures for a portion of Of course, no piece of their revenues will suffer. All of legislation is uniformly positive this is a nice way of saying that for any individual or any if you, for example, know that industry. TCJA is no exception. a lot of your product is featured Specifically of note for the in the fancy suites or sky boxes distilling community is the at the local sports arena, you adverse impact that the law should be aware of the fact may have on sales of spirits that those expensive tickets are products as a result of the no longer going to be partially elimination (in its entirety) of deductible by their corporate the ability to deduct business purchasers—and the arena (or the company managing hospitality for the arena) may not need I’VE BEEN HELD RESPONSIBLE FOR quite as much of your TAXES I KNOW NOTHING ABOUT.” product going forward if it can’t sell those tickets. JAMES BROWN qualified business income; or (ii) the greater of (a) 50% of W-2 wages paid or (b) the sum of (x) 25% of W-2 wages paid, plus (y) 2.5% times the cost of depreciable assets in the business (subject to various time limits). That’s crystal clear, right? Seriously, this is an area where most potentially implicated taxpayers will want to consult with an accountant or tax attorney to ensure that their business is set up in the most tax efficient structure possible. For some, that will mean incorporating sole proprietorships, making subchapter S elections, and paying themselves a reasonable W-2 wage. For others, making a check-the-box election such that their LLC is treated as a subchapter S corporation will be the right answer. And for a few, incorporating or making a check-the-box election such that their LLC is treated as a traditional C corporation will be the right answer. No one size is going to fit all taxpayers— some analysis will be required.

NOT ALL NEWS IS GOOD

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HOME COOKING IS STILL PROBLEMATIC

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THEY CAN’T As many readers will know, the FET reduction discussed above COLLECT LEGAL was originally included in the Craft TAXES FROM Beverage Modernization and Tax ILLEGAL MONEY.” Reform Act (the “Bill”) introduced AL CAPONE into Congress in each of the last several years. That bill received gradually increasing support over the years, culminating with co-sponsorship by a majority in both houses. For many years, the Bill included—tucked in among its other provisions—a provision that would have legalized the home distillation of alcohol for personal consumption. Such distilling is currently legal under the laws of several states but, like state laws relating to cannabis, those state laws are in conflict with federal law on the topic and therefore technically invalid under the Supremacy Clause of the United States Constitution. In its most recent iteration, the Bill dropped the provisions that would have permitted home distillation. And that “drop” was carried over into the TCJA. Accordingly, TCJA does not provide any manner of relief for those otherwise law-abiding citizens who might wish to try their hand at home distilling. Individuals who wish to become skilled in separating the heads, hearts and tails prior to launching a spirits business will, therefore, continue to need to develop their craft either legally (in the context of an educational program or work experience) or—as is perhaps more likely—illicitly in the context of home-based experimentation. There you have it—some of the key highlights of the TCJA that impact smaller distillers. If you’ve made it this far in the article (or any article about taxes), pat yourself on the back. You have the kind of tenacity it takes to succeed in whatever venture you choose, and if you choose to make spirits, well, I look forward to seeing your bottle on the shelf.

Brian B. DeFoe is a business lawyer at Lane Powell, where he focuses his practice on helping companies in the customer-facing industries of hospitality and retail. Brian can be reached at defoeb@lanepowell.com, via phone at (206) 223-7948, or on Twitter @BrianBDeFoe. Visit www.hoochlaw.com for more thoughts on spirits and the laws that govern them. This is intended to be a source of general information, not an opinion or legal advice on any specific situation, and does not create an attorney-client relationship with our readers. 77

New Understanding of Human Sensory Perception

POTENTIAL FOR MORE ROBUST SENSORY EVALUATION OF DISTILLED SPIRITS W R I T T E N B Y G A RY S P E D D I N G , P H . D.

nderstanding the evaluation of flavor which, as we will see, is a combination of taste and aroma and, in fact, all the senses combined, has undergone a revolution within the past 30 years. Yet the new findings have not percolated down to brewers or distillers, and there are still some myths and misunderstandings regarding this topic. This even applies with respect to the better-understood evaluation of wine. It is time to address this topic before these myths filter down to affect distilled product evaluation by craft distillers and consumers of their beverage formulations. The review here is a general introduction as to what we know about the senses and how we apply

sensory evaluation to food and beverages in general. Publications by the authors’ Gilbert, Holmes, Shepherd and Spence are recommended as an initial entry into this burgeoning field. They provide very readable and entertaining introductions to the world of sensory evaluation, which will clue readers into both evaluating beverages and in interpreting the results of competitions or the evaluations of their products by other “so-called experts”.1-5 These books represent coverage of the fantastic advances in knowledge over the past few decades, with details from peerreviewed journal articles and material that

in many cases has not yet transitioned to the brewer, distiller or winemaker. From here the reader can venture off into locating the actual research papers and reviews on the subject to build up their understanding of the complexity of the topic, and to prepare themselves to better approach joining a sensory evaluation team or program, or to seek opportunities in participating in judging competitions. For those interested in setting up a sensory evaluation program many other complete works on the topics are available with reference citation details provided upon request. Some summary details from the aforementioned books and a few other works are provided here. WWW.ARTISANSPIRITMAG.COM

Getting the sensory juices flowing

We must also realize that flavor does not reside in a flavorful beverage— rather, flavor is actively created in the brain.

Let us start with a little shock factor here. It had been suggested in the mid-1980’s that the sense of smell had been fading as a useful tool for us humans since we got up off all fours and had two feet firmly on the ground. In-fact, a prevailing view was that we need not study further our aroma sensing abilities.4 That is, unless you were into shoving fast food at the unwitting consumer. Thank goodness then for the likes of Gordon Shepherd (and several other leading scientists): “We think our lives are dominated by our visual sense, but the closer you get to dinner, (later wine3) the more you realize how much your real pleasure in life is tied to smell.”4 Maybe our jobs are safe after all, but we do need to learn how to convey the descriptions or unique identifying features of the flavor of our beverages. And, as we will learn, even the experts are maybe not as “expert” as they or we think they are. In the end we are all different—not necessarily better or worse at overall flavor evaluation—just far different! Yet our abilities can be improved upon with more thought and examination of the world around us and given some training and exercises. Moreover, this ties in well to the fact that, typically, between 8-12 or more opinions need to be considered when assessing a product, and this being for a group trained in the language of flavor and when a specific question about a product is posed. (At least this is understood in general brewing sensory circles). This is far more complex than hinted at here, and a whole collection of books—beyond those cited here—and sensory testing facilities and businesses are available dealing with how to do sensory evaluation correctly. Testing by untrained individuals is known as hedonistic testing. Hedonic tests concern the degree of consumer acceptance and satisfaction with respect to a product through its attributes. This includes overall acceptance of a product and its competitor formulations; acceptance of each attribute, relative importance of an attribute, or for each attribute, and purchase intent.7 Examples of hedonic questions would be: “On a scale of 0-10 how well do you like this product?” or “Which of these two products do you prefer?” or “Which of the three samples is cheesier?” Note that these are very specific and closed questions—the why or why chosen is not being questioned here. Training of a group at a facility making a food or beverage product is essential to understanding what it is supposed to taste like every time it is made. Folks invited to judge at competitions should also be beyond the hedonic level as assessors and have had some considerable training in the product at hand before they cast their votes or award their medal choices. They do need to know what the differences are and the why and the how. However, never forget the consumer in the big picture—they are the ones paying out their hard-earned money for a product they consider to be the best or true to intended style. Just because the WWW.ARTISANSPIRITMAG.COM

distiller or competition judge likes it does not mean others will. All this sensory stuff is a wee bit complicated! Hopefully marketers are also reading this. Getting back to where we started, truthfully it does seem we are not as interested in really assessing our food at dinnertime or drinks under ordinary consumption conditions, but we must start tuning in if we really want to assess our distilled spirits. To do this we need to learn a little about sensory physiology, psychology and cognitive neuroscience. But not to overstretch ourselves, just a little knowledge in these areas will make us better tasters or “flavor evaluators.”3, 4 So, now we need to consider what we mean by taste, aroma (nosing) and flavor. Taste is really a limited evaluation of food or drink. We assess sweet, salty, sour, bitter and a savory sensation known as umami and possibly watery and fatty sensations on the tongue—the gustatory system (covered a little more below and see Figure 1). However, flavor is in fact a combination of taste and both orthonasal and retronasal aroma detection (defined a little more later on and as seen in Figure 2). The main sensations contributing to overall flavor is the olfactory sense. Turns out we are being tricked by the mouth into thinking that taste is flavor. In truth flavor also involves sight (visual), hearing (auditory) and touch which will also be covered in a little more detail shortly. The classic test here is to pinch the nose while chewing or swishing something in the mouth—whereby you will “taste” very little—(see above), not the true complexity of the product. This may best be done blind. Have someone place a small piece of potato, apple/pear or beetroot/onion etc., in your mouth, while you hold your nose and try and identify the food before releasing the pinch. You likely cannot! And, no peeking! Also, when assessing the aroma of food try applying a nasal breathing strip as you will inhale more air and more aroma molecules with each sniff. But, it is the act of swallowing of our food or drink that gives us much more in the way of aroma detection of the overall flavor of our beverage.2-4 So, what is going on here? Sensing of the flavor of our drinks in the mouth is not by sniffing in but by breathing out. That probably caught you off-guard as we tend to think of nosing samples and smelling something as being associated with our good old sniffer— bringing things in, not out. Well we can leave that to the dogs—that is how they best assess their potential food source and its overall quality. This is orthonasal smell (ortho=forward) or the common sniffing-smell. Inside the nasal cavity is where most of “taste” is determined, and in covering this we will define the term retronasal smell (again more on this below).4, 7 However, before we go deeper into the nose let us not forget the tongue—it too plays a more interesting role than we have typically been taught. And probably in a few ways you were not expecting. And, we won’t get tongue-tied after a little more discussion.

A quick discussion of tongue in cheek

Why we don’t drink beer from the bottle—or our spirits for that matter!2

Food and drink is characterized by how it Figure 2 presents the details on how we detect “tastes.” Figure 1 shows a flavor through our olfactory senses and via the mouth. picture of the tongue. The For the orthonasal perception of smell (bright blue main reason to present this lines in Figure 2) the volatile molecules released from is to announce that an old the spirit into the glass and its headspace are inhaled model, whereby we were through the nares (the nostrils) and cross the olfactory supposed to detect sweetness epithelium—the hairs holding the smell receptors. on the tip of the tongue, salty Through now more widely understood mechanisms, on the sides at the front end the spirit’s overall aromatic qualities are perceived via of the tongue, sourness on the the olfactory bulb as the “nose” of the spirit under sides more towards the back examination. These aromas are missed if they are not and with bitterness detected rising out of an open glass and being captured—so towards the back, no longer don’t drink directly from a bottle if you want to fully holds true. An interesting and appreciate your drink. And let us try to convince every FIGURE 1 Diagram of the human frequently updated discussion restaurant of that fact! tongue showing the general outline of on this topic can be found In the next two stages of flavor assessment, we taste buds. The currently well-known online.8 The rough texture are being deceived into thinking that taste is based five tastes—sweet, sour, salty, bitter of the upper surface of the on gustation not olfaction. That is because the next and savory (umami) are sensed by tongue is due to the presence impression of smell, which we generally call taste, all parts of the tongue and are not of protruding structures called is indeed a function of the passage of the volatiles detected only in specific regions as is the lingual papillae (singular through the mouth (dark blue lines in Figure 2). We commonly mistaught, misunderstood or papilla), which is how we represented even in modern textbooks. sense flavor of the spirit in the mouth, not by sniffing Other possible tastes and tastants are detect taste. Four types of in but by breathing out.4 The spirit volatiles (odors) under investigation. papillae exist with different are released via the air drawn through the spirit and structures and are classified by warming of the liquid. At the back of the throat as circumvallate (or vallate), is the retronasal passage (retro=backwards) and the fungiform, filiform, and foliate. All except the filiform papillae are volatiles from the spirit are driven through this passage and over associated with taste buds. the olfactory epithelium. This flow is enhanced by mastication of As noted above it is commonly accepted today that there are food or even liquids via jaw and tongue and mouth muscle action. at least five basic qualities of taste; sweet, sour, salty, bitter and This is an overlooked aspect of enjoying food, wine, beer or your savory (also called the “umami” taste). Umami flavor components favorite distilled spirit. The spirit volatiles are then perceived as include compounds based on two amino acids and these act as “taste”—technically “flavor” by association with other sensations flavor enhancers. It is, therefore, of interest to note here that many and actions in the mouth.2-5, 7 compounds present in your favorite distilled spirit may in fact help Retronasal smell has thus also been termed as mouth-smell.4 enhance one another. So, understanding more about the interplay And now another surprise—very seldom discussed—is the third of tastants and the many aroma molecules present will be important aspect to retronasal perception—aftertaste! This is also important to a true understanding of the sensory properties of distilled spirits. to note in terms of “to swallow or not to swallow” for full sensory But that is yet another topic. evaluation of a product. After the spirit has been swallowed the The five basic tastants can be sensed by all parts of the tongue, surfaces of the tongue and the roof and back of the mouth, and though the sides of the tongue are known to be more sensitive than the air in nose, mouth and throat remain coated and saturated the middle and, furthermore, the back of the tongue is particularly with residual odor/taste molecules. Breathing out gives a final burst sensitive to bitter tastes.8 When tasting a wine or a distilled spirit it of flavor as some of the air flows back over the olfactory sense should be swished over the whole surface of the tongue to stimulate organ (light gray lines in Figure 2). This retronasal perception is the the taste buds in all the papillae. It is possible that there may be aftertaste. Some spirits linger more, or less, depending upon the receptors for fatty taste2, alkaline, metallic and watery (water-like) actual composition of the product with fusel oils, sulfur compounds notes but we will leave this topic here for now. It is more important and certain classes of molecules derived from wood-aging or from to assess aroma than taste for our purposes. For more on taste the use of peated-malts, etc., being especially prominent in the though, several other recommended works are readily available aftertaste. Note though, that these impressions may be more through an online search.9-11 complex than we cover here.

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SMELL: SMELL: SMELL: Orthonasal perception Orthonasal perception Orthonasal perception

As delivered by the retronasal Olfactory bulb route, smell dominates flavor.4 TASTE: TASTE: TASTE: Retronasal perception Simple tastes are hardwired Retronasal perception Retronasal perception from birth according to Olfactory Shepherd4 but retronasal AFTERTASTE: AFTERTASTE: epithelium AFTERTASTE: Retronasal perception Retronasal perception smells are learned Retronasal perception hairs and is thereby open to individual FIGURE 2 Smell and taste differences. The physiology and anatomy— bottom line here Orthonasal and retronasal is that we are all perceptions and air flow totally different in pathways. our aroma/flavor evaluation Full details are presented in the and thus training involves text. Briefly—in bright blue— getting everyone on the same “sniffing in” is orthonasal smell page with terminology— perception—and deals with an flavor descriptors, etc., and initial perception of a product’s Tongue understanding strengths, flavor profile. With orthonasal perception, during sensory evaluation weaknesses and even blind spots of a spirit, odor-laden air—the in flavor detection. One or two volatiles from the glass crosses the people evaluating a product is olfactory epithelium during breathing grossly insufficient and ineffective. in through the nostrils—the orthonasal When we train together and think or direct nasal passage. The reception through the epithelial hairs is perceived more carefully about our everyday via the olfactory bulb as the spirit’s “nose”.7 experiences and our product’s aromas/ The detection thresholds of compounds may flavor profiles we get better at our assessments and judgments. be different here compared to the later retronasal We must also realize that flavor does not reside in a flavorful perception. Next—in dark blue—taste (technically beverage—rather, flavor is actively created in the brain. “The smells flavor), via the backwards flow of volatile-laden air, is defined as retronasal perception. Finally, the lines in light that dominate the sense of flavor arise as differences between gray shows another backwards air flow carrying molecules across molecules; our brains represent those differences as patterns the olfactory epithelium to give a final burst of aroma (flavor) known and combine them with taste and other senses to create smells SMELL: as aftertaste. After swallowing a sample, the mouth and throat remain coated Orthonasal perception and flavors that have meaning for our perceptions of food (and in the flavor molecules of the food or drink just consumed. With breathing 4 beverages).” Furthermore, “Flavor is primarily the smell of gases out, the airflow carries some of the flavor in a retronasal mode and the associated sensation is often described as the strongest contributor to the released by the chemicals (the volatiles in the spirit) you’ve just TASTE: taste of the beverage. However, both orthonasal and retronasal perceptions 4 Retronasal perception put in your mouth” (attributed to E. Schlosser, cited in Shepherd ). contribute to the overall flavor profiling of a beverage. Summarizing our assessment of spirit volatile organic compounds (VOCs). Airflow dynamics are involved in how we assess the volatile AFTERTASTE: Retronasal composition of our spirits and wines. A summary3 reads: We can now reiterate perception that simple nosing of distilled spirits is not

Sniffing in orthonasal air currents—dealt with in the nose Breathing out retronasal air currents in the nose Breathing out movement of volatiles from the mouth Breathing out retronasal air currents moving from the pharynx (the membrane-lined cavity behind the nose and mouth connecting them to or from the esophagus)

Breathing stopped nasal cavity gated-closed during swallowing Breathing out airflow provides a “flavor-burst” and the aftertaste or finish after the swallow. For many tasters the “aroma- or flavorburst” is the strongest contributor to the taste of the beverage (Relate this listing to the actions portrayed in Figure 2).

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enough to evaluate the flavor. Subjects trained to recognize smells (the preferred term should be “aromas”) via sniffing (orthonasally) had difficulties in recognizing them when they were specifically introduced at the back of the mouth. Attention must, therefore, be made to both sniffing and retronasal detection and evaluation of a product to better understand its composition and associated complexity of its flavor profile. It is now known that the human sensory anatomy evolved and has become adapted for enhancing retronasal smell.4 Despite those statements made a few decades ago that we can forget about the sense of smell and that it is not important to modern day human survival—hopefully we now see or smell the situation differently. At least for our enjoyment of our favorite foods and beverages! In evaluating a complex mixture of volatile or aromatic components, say in whiskey, we do, however, need to understand

that we cannot be as analytical as for taste—we can discriminate and taste sweet, sour, and salty for example, but smell has the property of being “synthetic” according to Shepherd4—a mixture of smells makes a unified smell. So, we need to think further about this. Hopefully, the reader will start to think more carefully about individual flavor notes and the whole flavor profile of each product in their portfolio. How is that overall profile synthesized or built up in the brain from the selective detections of its individual components? It is very easy to detect both sour and salt in a mix but defining a mix of even just a few different smells is incredibly complex. In-fact it is suggested that we cannot do this for more than 3 or 4 different flavor compounds in a mix.1, 3, 4 So much for looking at dozens or hundreds of molecules in our whiskey, rum or gin and becoming an “expert?” But see below.

Other mouth-senses and flavor In addition to smell and taste, foods and drinks possess physical properties that can be evaluated by the mouth—we call this mouth-feel, mouth-sense or food/liquid texture (viscosity). These sensations involve touch, pressure, temperature and pain (the burn of alcohol or chili pepper or the cooling effect noted with menthol, etc.) and are detected by a system called the trigeminal nerve pathway. Along with visual and auditory signal processing, the evaluation of our spirits and foods is quite involved. We will not delve further into the qualities of mouth-sense, touch, feel and texture here—nor the visual and auditory aspects of flavor evaluation—but the two books written by Shepherd and those by Holmes, Gilbert and Spence convey the details comprehensively and admirably.1-5 For now, just be aware of these other senses and the roles they play. It should be pointed out though that increasing heat releases more volatile compounds and stimulates olfactory receptors more strongly by retronasal smell, and illustrates the reason for not assessing products too cold. In terms of pain and sensory fatigue (a topic covered in sensory evaluation training) it is often best to reduce spirits from 40% ABV or above to about 20% ABV as routinely done in the Scotch whisky industry to better assess samples. Especially important for side-by-side comparison of two or more products. Though both full strength and diluted spirits could be assessed to try and get at all the flavor nuances. Be sure not to be deceived by the color differences though in diluted and undiluted samples! In routine training an instructor will often have the student or panelist assess the product at strength and then suggest adding a drop or two of pure distilled water to “open up the spirit” for further assessment of the volatiles. A discussion of ethanol-water composition and the effects on volatile release, determination and sensory evaluation appears elsewhere.12, 13 A summary note here would be that the flavors of our distilled spirits are enhanced by heating and dissolving in water (liquid). This increases the vapor pressure which causes volatile molecules to be released into the air from the glass or within the mouth. Moreover, volatile molecules released from our food and drinks are so very important to our

survival that they are evaluated quickly at the highest structures of the human brain.4 We quickly learn that which is bad for us! And sometimes even aromatically “bad” molecules contribute to the overall quality and acceptance of a product. Do you see some potential for bias here? Paraphrasing Shepherd4 here, for a very important point about assessing distilled spirits, “All spirit descriptive language is in fact organized around spirit types which we call prototypes. If this is in fact correct, what a spirits taster does in front of a spirit is not an analysis of its separate sensory properties but a comparison of all the cognitive associations he or she has from the spirit (color, initial aroma, and taste) with the impressions he or she has already experienced when tasting other spirits.” The aroma sense is synthetic as noted above. Shepherd was dealing with wine—we assume the same works for spirits. A take home message here. What Shepherd and others tell us is that descriptive language becomes important to our abilities to describe and distinguish between similar products. We train on known samples which may be spiked or enhanced with a specific, purified flavor note. We learn to assign that flavor a descriptive term or terms and learn about its origins in the production process, so we can detect its presence in future samples. See below for more on language and flavor profiling.

Let’s chew on some other flavor assessment ideas While we now understand that all our senses come in to play in our assessment of our distilled spirits we do not often think about chewing our food—or drink for that matter—to better assess their overall qualities. Yet chewing upon or swishing a drink in our mouths brings it into contact with all corners and orifices of the oral cavity—cheeks and throat—and adds to that retronasal assessment. Dilution with our saliva, and digestion from salivary enzymes affects the qualities and release of aromatic components as does, if it can be done, sucking in a little air while holding liquid in the mouth. Those “sucking” and “ooshh” sounds emanating from experienced wine tasters are not mere snobbish entertainment or to incite amusement from fellow diners. Make more use of your tongues and mouth muscles! A short chapter by Shepherd mulls this over even more.4

X is different from Y and this tastes like a ripe banana, not a green one So, all our sensory modalities—our ways of doing or experiencing something are being extensively researched today. Vision (color) and somatosensory (tactile sensations: including pain, temperature, astringency, and creaminess), and taste (sweet, umami, salt, sour and bitter), and smell (through the generation of smell images) allow us to recognize a flavor. Even nuances of flavor: unripe, green, ripe, yellow, old-browning or over-ripe and mushy, slimy or rotten banana. Moreover, this allows us to state that sample x is different

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Our emotions, from sample y. The brain interprets signals from all the senses and we make “this tastes like” decisions and determinations as to whether this is pleasant/unpleasant, I want/don’t want, I crave or detest this, or I prefer x over y, etc. Our emotions, preferences and memories thus play a huge role in our food choices and assessments and our health and well-being too. We can vary over a 1000-fold from one day to the next in the ability of assessing certain flavors of a product—think about when you have a cold or nasal-allergies on this one. We also all have weak areas of perception or even sensory “blindness”—anosmias to certain flavor components.1-4 This issue is again incredibly complex. Furthermore, we have strengths to our own perceptions that are missing in other assessors or consumers. So, no one person can be relied on to convey how well a product stacks up; likes and preferences also play into this—biases are difficult to avoid. So, a sensory panel or competition panel (with trained members) should consist of 8 to 12 members (general current thinking) to provide a reasonable degree of certainty of a product’s similarity or difference to another. At a minimum, for competitions, we argue for 6 judges at least for final qualifying rounds. One expert we know of insists that every judge should assess every entry in a competition—dealing with Scottish whiskies. This would be too burdensome for most competitions, especially when different styles are being judged— though is often brought to bear in best of show final judging. Even then we are a long way off in making crucial decisions for distilled spirits—lagging far behind the brewing and wine worlds.

Sensory adaptation When assessing spirits or any product for that matter—especially with complex profiles or high concentrations of alcohol or spices etc., or with low threshold potent volatiles present, sensory fatigue or adaptation—desensitization of sensory responses must be taken into consideration—covered in depth elsewhere.3,4 Furthermore, nervous systems are not constructed to register every sensory stimulus they get hit with. The response system is geared to signal a sudden change from a former state. Gentle vs. deep sniffs might be capable of evoking a sudden change in the perception. Swirling the sample or warming the solution by cupping the glass will promote a state change as more volatiles are released—resting vs agitated? Judges should try to evaluate samples in the same manner and under the same conditions in attempts to evoke the same overall responses. Their own sensory strengths and weaknesses notwithstanding. Such issues are wrestled with by sensory panel leaders and flavor houses and competition managers. The mechanics of performing sensory assessments are thus detailed in many books on sensory evaluation. A panelist or judge should be instructed about taking appropriate breaks between testing successive samples and must mentally be aware of potential sensory fatigue. Times to readapt vary according to the molecule type—one size does not fit all situations. And a panelist or judge should be instructed to frequently recalibrate their olfactory and gustatory organs (their tools) by various accepted WWW.ARTISANSPIRITMAG.COM

measures, including reference back to preferences and their own bodies (sniffing themselves— their arms for example—a person’s memories thus play natural smell being the self’s own sensory baseline—neutral ground to a huge role in our them!), a known standard sample, salt-less crackers, or water etc. These food choices and are areas where much more research or training/understanding by the assessments and our individual is needed for successful and true evaluation of distilled spirits. health and well-being Forget the coffee beans. too. We can vary Adaptation to one smell does not affect adaptation to other smells. Note over a 1000-fold also that first impressions usually count—the assessor should record from one day to the their thoughts quickly and then move on to seeking the next flavor note next in the ability and so on. This allows for successive evaluations for different and expected of assessing certain (and unexpected) flavors in a product style. Only after a brief period away flavors of a product from a sample should a taster come back to see if indeed there was that initial whiff of rotten egg (hydrogen sulfide) or vanilla etc., present. Trying to find something again that you really thought was there initially is exceedingly difficult—especially if it volatilizes away quickly from the headspace of the glass. Or if adaptation takes place quickly for that flavor note (hydrogen sulfide being a particularly good example). Covering the glass and allowing the solution to warm up by cupping the glass in the hand later, followed by a quick sniff may confirm your initial suspicions. To repeat here: usually first impressions count! The mind can start playing guessing games as it tries to complete a sensible picture. Understanding one’s own motivation, mood, pleasure and memory, along with experience and thorough training will make a huge difference in conducting an evaluation and eliminate some bias. Any assessor must take the job responsibility most seriously indeed. Several books, mainly covering wine or foods/beverages in general, are available dealing with much of this; a few are noted in the references section.3, 4, 7, 14

Language—defining terms is essential to understanding flavor The final area to cover for now deals with language and meaning. A keen sense of smell is the most important for understanding the volatiles—the flavor profile contributors—in our spirits. A volatile molecule generates a signal that is interpreted by a flavor image or map in the brain. This is only a recent finding and, as it differs from our own better understanding of a visual picture, means we need to generate a commonly understood vocabulary with attempts to make us all aware of the same respective components and their impressions during an evaluation. In training it means we need

to use muscle memory to associate the right word (or words) with known compounds presented to us—often with the need for several repetitive presentations of pure compounds spiked, initially into a water or weak ethanol solution, and then in the true environment—a standard “true-to-type” spirit. Or repetitive group assessments of spirits in their portfolio. When everyone on the panel is in alignment with respect to understanding their own products so well, then collectively, they can note even quite minor differences in the overall flavor profile from one batch to another. An acceptable/ tolerable degree of variance can be in place but within a range that would not allow an untrained consumer to notice. Hopefully, by now, we understand that nosing of such samples alone is often insufficient to convey their flavor. Most accomplished assessors get this. Smelling retronasally is needed as well as orthonasal sniffing to truly assess an individual flavor and the flavor profile of the spirit. Let us all get that part down. The neatest thing about all this though is that experts differ from us only really in their command of the language of flavor. This illuminating and fascinating statement is covered in detail by Shepherd in his Neuroenology book.3

Everyday training—don’t just use your common sense to get you through the day! One of the best things you can do to improve your sensory acuities is to start applying your keen, though underused, senses to evaluating the everyday world you live in. Let your nose guide the way. Start sniffing the air and really tasting your food—try different foods—cooked and in the raw state and really “chew” and “mull” upon them retro- and orthonasally. You could learn where in your city you are, while being driven around blindfolded, by smelling the bakery, chocolate factory, sanitation plant, florist’s shop, etc. Learn the notes others describe, when eating or drinking together, such as, for example, when they say gooseberries, or this is like a “gooseberry fool”. Now—I just set a challenge—you need to go out and find out just what a gooseberry is (most in the US do not) and evaluate one or two so in the future you too will be in the know on that attribute. It is a flavor note that pertains to some wines and certain hops and maybe to some fruit flavored spirits. Go enjoy a food-fair and try something new. Repeat these muscle-memory building exercises frequently. We really let down our appreciation of the world by not truly using our senses to evaluate it. By the way gooseberries look like hairy grapes and are quite tart—and they smell, well, like—gooseberries. Try them sometime. So we will both know what I mean. Classes of instruction in the area can illustrate how different chemical species fall into categories so-as to extend the appreciation and vocabulary of flavor—helping build up a library of information in the brain for future reference when assessing or judging any food or beverage. Building up a primary aroma lexicon and then adding secondary tiers and so on led to online data listings of molecules and their properties and to flavor maps and well known

“flavor wheels,” which provide memory tools to assist in sensory evaluation. Again, these ideas being the food or fuel for another article on this vast topic. Some sensory trainers lead with—“break down the notes detected into animal, vegetable, fruity, citrus-fruity or mineral characteristics,” then with “what type of fruit (or animal etc.)?” and, next, with the quality of that fruit. “Is it reminiscent of unripe/ green flavor, fresh, overly-ripe, bruised, fruit-skin- or fruit pulplike, rotten or possessing old-like aging aroma qualities?” Think again of the banana example noted above. Or, if it’s an apple, is it a cooking apple type, a red or a green apple etc.? Then move onto the next flavor you sense—animal, vegetable, mineral? Groups such as the Aroma Academy of Scotland cover this approach in the notes accompanying their aroma kits, for example. Sensory training courses will do the same. Finally, here—context is important too. The smell of various fatty acids and butyric acid, for example, convey sweaty/rancid body odors like sweaty feet, or the end of the day on the crowded commuter train home or at the gym—which are regarded as unpleasant. Those same flavor notes are characteristics of classic cheeses including parmesan which you may enjoy sprinkled on your pizza or pasta that same evening. Or not! Neither situation may appeal of course. Good smell, bad smell—same smell?—different context or nuanced differences. Different personal preferences or sensitivities too. The setting is also important in sensory training and at competition/judging events. Odor-free, comfortable temperature, quiet environment? The size, and the shape of the glass (glass vs. plastic?) and the fill level and temperature of the liquid being served also matter. Rules exist as to how to conduct a session and oneself to best appreciate the samples set before you. Such rules are not always followed (personal observations). An interesting note by Shepherd (p.17 Ref. 3) may clue winemakers into understanding the need to swallow the wine rather than spitting it all out, while presenting the conditions to do so without getting inebriated quite as quickly as might be expected. When we taste the spirit, we are actually tasting spirit plus saliva and so as our saliva production varies during the day it should clue us into understanding why a wine or a spirit can taste different mid-morning or at lunch, in an afternoon session of judging or at dinner.3 Also a person’s saliva can be of an acidic, neutral or alkaline pH and so a sample will be perceived differently to a fellow imbiber because of this factor or variable. Different sniff rates may be needed to present to olfactory receptors maximal responses of the different components present based upon solubilities or sorption into the mucus.³ The linger of chili peppers—colorless, tasteless and odorless capsaicin can make judging a round where one or, worse, all the samples are “hot” quite a challenge. Capsaicin itself detected through the trigeminal sensory pathway. You will still be detecting the chili flavor through its other aromatic molecules—but talk about the need to readapt to fairly assess the next sample in the line-up. Training helps a lot here. As does the careful ordering of samples in a flight by the organizers. But that gets us into positional biases—oh my! What a fascinating place this flavor world is. No? WWW.ARTISANSPIRITMAG.COM

REFERENCES

Closing the sensory loop Shepherd4 sums up the language connection with the olfactory sense very well: “Thus, connecting smells and flavor with language may be difficult, but it is a uniquely human endeavor. That we require effort to do it, using all the linguistic tricks at our disposal (analogies, metaphors, similes, metonyms, and figures of speech) qualified by the entire vocabulary of emotion (joy, despair, hate, revulsion, craving, and love) should not come, therefore, as a surprise.” and3 “There is no primary vocabulary for smells. Everything is analogy. So, the expert must develop a set of meaningful terms borrowed from the other senses that facilitates the dissection of the complex odor space into parts that can be reliably identified” Here endeth the lesson—for now. If this article topic has grabbed your attention, and you want some more fascinating insights, at a slightly less technical or academic

level, though written by authors who truly are knowledgeable about the subject and have done their research well, we yet again encourage you to read for sure the books by Shepherd3,4 (especially his Neuroenology book³) and those by Gilbert¹, Holmes², and Spence5. Want to become better at sensory evaluation or become a competition judge or part of a sensory panel? Or just to better enjoy your food and beverage choices? Then go forth, read, learn, eat, drink and think, learn some more but most of all—enjoy!

Gary Spedding, Ph.D., is a brewing and distilling analytical chemist and biochemist with special interest in the origins and development of beverage flavor and in the sensory evaluation of beer and distilled spirits. His company, Brewing and Distilling Analytical Services, a triple TTB certified laboratory, is dedicated to testing alcohol-containing beverages. A team of four supports the operation with Gary. Two chemists, and one microbiologist, all with B.Sc., degrees to their credit, and one sensory and computer operations specialist who administers and co-teaches in the new division of the business—Brewing and Distilling Educational Services.

1). Gilbert, A. (2008). What the Nose Knows. The Science of Scent in Everyday Life. Crown Publishers, NY. 2). Holmes, B. (2017). Flavor. The Science of Our Most Neglected Sense. W.W. Norton & Company, Inc. 3). Shepherd, G. M. (2017). Neuroenology. How the Brain Creates the Taste of Wine. Columbia University Press. 4). Shepherd, G. M. (2012). Neurogastronomy. How the Brain Creates Flavor and Why it Matters. Columbia University Press. 5). Spence, C. (2017). Gastrophysics. The New Science of Eating. Viking. 6). Attestia/Daesenso. http://www.attestia.com/A/serv_01_1. html 7). Schuster, M. (2017). Essential Winetasting. The Complete Practical Winetasting Course. Octopus Publishing Group Ltd. 8). How does our sense of taste work? (2016) https://www.ncbi. nlm.nih.gov/pubmedhealth/PMH0072592/ 9). Chandrashekar, J., Hoon, M.A., Ryba, N.J.P. and Zuker, C.S. (2006). The receptors and cells for mammalian taste. Nature. 444 (16); 288-294. 10). Breslin, P.A.S. and Spector, A.C. (2008). Mammalian taste perception. Current Biology. 18 (4); R148-55. 11). Trivedi, B.P. (2012). The finer points of taste. Nature. 486; S2-3. 12). Spedding, G. (2017). Eighty Years of Rapid Maturation Studies. Why Are We Not There Yet? Part 1. Key Analytics and Solvent Chemistry. Distiller. Fall 2017. 13 (2): 88-100. 13). Spedding, G. (2018). Eighty Years of Rapid Maturation Studies. Why Are We Not There Yet? Part 3. A review of spirit in wood maturation—The chemistry: reactions and mechanisms; solvent and congeners; oxidation and catalysis. Distiller. Summer 2018 (In Press). 14). Jackson, R.S. (2017). Wine Tasting. A Professional Handbook (Third Ed.) Academic Press/Elsevier

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AN AMERICAN IN IRELAND

WRITTEN BY COLIN BLAKE

ecently I found myself spending six days on the Emerald Isle, careening from distillery to distillery in a Volkswagen Jetta trying to keep pace with an overly aggressive schedule to visit nine distilleries in six days. Luckily Ireland is slightly smaller than my home state of Kentucky, so even when I was driving halfway across the country, it wasn’t a daunting excursion. During my short stint there my enjoyment of the country’s namesake spirit went from appreciation, to admiration, to adoration. Any trip or personal interaction tends to broaden one’s enjoyment for anything, but I feel like I never would have fully understood Irish whiskey if it weren’t for experiencing it first-hand. It’s this trip that not only helped me broaden my palate for the spirit, but also helped me understand where all the differences between Irish and American whiskey originate. Moments after I landed, I grabbed my bags, a rental car and started driving north…across the border. My first distillery visit was to BUSHMILLS . I was originally going to meet with someone from production, but something happened and I ended up taking a public tour, which was pretty much a rush to the gift shop. It ended with a delightful tasting, but really, I learned nothing other than a bit about the brand while taking a delightful stroll through the beautiful and historic distillery. A little disheartened with my first visit, I drove south to spend the night closer to my first distillery of day two, Great Northern. I will describe GREAT NORTHERN as a notebook filler. This distillery opened up in the old Harp Brewery in Dundalk by John Teeling. John Teeling is an Irish industrialist who opened the Cooley distillery in the 80’s, which is on par with opening a wine cooler plant in America today; it just seemed like a horrible idea. See, in the 80’s, Irish Whiskey was at an all-time low in popularity worldwide. The country was down to two distilleries, and had a sliver of the world whiskey market share. But John, an Ivy Leagueeducated economist, wanted to create a market for a product that was made of Irish goods, by Irish people, that would be sold almost exclusively abroad. He looked at all options and Irish whiskey seemed to be the best fit. So he built a giant distillery under the guise of selling the product to people who wanted to have Irish whiskey brands, but no distillery. And this became a huge turning point in Irish whiskey history. I won’t go into a deep history lesson, but this was all done by a teetotaler. John Teeling doesn’t even drink the product he helped to re-popularize. I was given a tour of the operations by distillery manager, Brian

Watts, a delightful man whose background was in Scotch whisky production, but got wooed away from Scotland with the chance to make Irish whiskey. which has much more latitude in definition than Scotch. Brian buzzed with excitement while explaining the whole distillation process, often peppering in phrases like, “… which we couldn’t do in Scotland,” or, “I never got play with things like this at my old job.” One of the main things I was taken with was the mashing process. Not many people discuss how widely different it is from American process, and how big of an impact it has on the flavor. Where the vast majority of cookers in America are big vats where ratios of water and grain are heated up and cooled down to create the mash, the cookers (or mash tuns) in Ireland are filled with milled barley and just enough water so that long rakes that rotate above the grain can very slowly move through the grain. Then they go through a process of watering the grain from above 3 separate times at different temperatures. Some of the distilleries refer to it as the three waters; how devastatingly romantic does that sound? “We mash our grains with the three waters,” which might just come across better with a lilting Irish accent. The temperature of the water along with how fast it is sprayed from the top and how fast it is pulled from the bottom will wildly change the flavor of the distillate. Warm water being pulled slowly will make the spirit taste like apple and pear, whereas hotter water being pulled faster will make the spirit nuttier with more robust brown spice notes. Generally, the wash pulled off the bottom from the first two waters goes to a fermenter, where the third water will be collected and used as the first water in the next mash. Next, I was off to SLANE CASTLE DISTILLERY where I spent some time with whiskey blender Quinzil du Plessis. Quinzil had taken a wealth of barrel pulls from various types of spirits in various types of cooperage and walked me through a tabletop blending exercise. This was an eye-opening experience because it helped me dissect a lot of the flavors I pick out in various Irish whiskies and trace some of those flavor profiles to certain types of cooperage. Tasting the same type of spirit out of a used bourbon barrel vs a used Oloroso sherry cask was a world of difference. Where a used bourbon barrel imparted sweet, vanilla, coconut, and woody aspects the sherry cask was like jam, plum, raisin, and Christmas pudding (a term and food you must become familiar with when tasting whiskies with an Irishman or Scot). After my massive tasting, and failure to make a good Irish blended WWW.ART ISANSPI RI TMAG.CO M

whiskey myself, I crashed a tour of the distillery that consisted of British bartenders. Since we had all been drinking, we were naturally loud. As we all shared a love for anything Richard Ayoade has ever done, we became fast friends and took our drinking to the various establishments the small town of Slane had to offer. To say the least, a night was had. But it was on this night that I discovered something somewhat shocking. Do you know what Irish people drink? Pints. They don’t really drink that much whiskey. Over 80% of Irish whiskey is exported. Regrettably, my next morning was an early one. Undaunted, I rose and steered my trusty Jetta towards KILBEGGAN DISTILLERY, which is the country’s oldest licensed distillery, dating back to 1757. I had to mind about 50 low clearance signs with a deep bow and shuffle. It’s a great location to see how distillation has changed over time, and how things were done before automation. Irish whiskey doesn’t take the grain along to the fermenter; instead, it’s lautered off. Most distilleries have automation to take that spent grain out of the mash tun. Here, there was a gentleman with a rake scrapping it out. After Kilbeggan I took a short drive to get to TULLAMORE DEW which has an amazingly designed visitors center, but unfortunately no access to see the distillery. Tullamore is a great town to visit, it feels small but is large enough to have plenty of things to do. I visited a few pubs and chatted with many endearing people, none of which drank Irish whiskey, but all of whom seemed to have a favorite brand despite the fact they never imbibed. The next morning I drove down to MIDLETON DISTILLERY in Cork, Ireland’s largest distillery. The building that houses their column still is the tallest building in Cork, and despite everyone being proud of that fact when I asked how tall it was, it took four people, and the internet, to answer the question. One operations guy said that it was so tall that if they forgot to turn the lights off at night planes would circle around it waiting for instructions on where to land. Midleton is the distillery that produces Jameson, Red Breast, Powers, and a slew of other brands. They also offer the Irish Whiskey Academy, which is a brilliant, well-crafted educational experience for Irish whiskey. This day-long experience deepened my knowledge of every aspect of Irish whiskey and gave me access to a vast array of different types of Irish whiskey at different ages, production styles, and barrel variables. Ciaran O’Donovan led my experience, and he couldn’t have been a better teacher. He was undaunted by any question and could even jump into ancient history with simple questions such as, “Were the barrels in Ireland ever made with Irish oak?” The short version is yes…until the damn British came in and cut down all their forests for ship lumber. After all the walking around campus, and all the samples, needless to say I slept well and long that night. The next day was my last on the island, and my most ambitious. WWW.ARTISANSPIRITMAG.COM

BUSHMILLS DISTILLERY

GREAT NORTHERN DISTILLERY SLANE CASTLE DISTILLERY

KILBEGGAN DISTILLERY

TULLAMORE DEW

TEELING IRISH WHISKEY DISTILLERY

PEARSE LYONS DISTILLERY

WALSH DISTILLERY

MIDLETON DISTILLERY

I began my day at WALSH DISTILLERY in Carlow. I was shown around by a fast-witted, wise-cracking gent named Woody Kane. He was full of amazing stories of Irish whiskey history, facts about production, and styles. He showed me around their gorgeous distillery while never missing a chance to make a memorable joke, even if it was in the form of offering to take a picture of me but taking a selfie of himself instead. I ended my visit with a small tasting of brilliant whiskey. Sadly, only some of which is available in America. If you ever happen upon a bottle of Writer’s Tears, don’t pass it up. I had to rush away in order to fit in my last two distillery visits in Dublin. First, I went to the newly finished PIERCE LYONS DISTILLERY in the Liberties area of Dublin, pretty much right across from the Guinness brewery. The distillery is in an old church and is a wide-open space were all aspects of distillation, sampling, and gift shop are housed. They didn’t miss a detail during restoration and remodeling, from the new stained-glass windows that showcase history and whiskey production, to the glossy painted British storefronts that kept the merchandise. I finished my trip at the TEELING IRISH WHISKEY DISTILLERY. Now

if that name rings a bell from earlier in this article, it should. But it’s not John Teeling behind this distillery, it’s actually his children who opened this distillery and launched the brand. Despite a long family h i s t o r y in the business, this is the first time that the Teeling name appeared on a bottle of Irish Whiskey. The Teeling distillery was the busiest distillery that I visited on my trip; I must have watched 200 people go through in my few

hours there. It was impressive what they built in such a short time. By this point in my journey I felt fairly well versed in production and aging My time there with lead distiller, Paul Corbett, was a series of nitpicky questions and clarifications helping me cement what I had absorbed over my trip. One of my favorite parts of this visit was hanging out in the control room where a drawer was eventually opened that had all sort of amazing samples and experiments in it. It really is astonishing how experimental they can get in Ireland and still fall under the legal definition of Irish whiskey. Aged in a barrel made of chestnut? Yup, Irish whiskey. Stored in a used red wine barrel? You guessed it, it’s Irish whiskey. During my trip I was blown away with how amazing the industry is over there. Much like the American industry, everyone I met was friendly, welcoming, and willing to share any kind of information. Also, like what’s happening in America, distilleries are opening up at a breakneck speed, and for good reason. We always talk about the impressive growth numbers of American whiskey, but we’re nowhere near the 20% growth rate worldwide that the Irish have accomplished, and plan to maintain. The distilling world there is exploding with good reason—to keep up with the demand. After my trip there I can understand why everyone wants it, it’s made by great people, with a great history, and it’s f****ng delicious.

Colin Blake is the Director of Spirits Education. For more information visit www.moonshineuniversity.com or call (502)-301-8130.

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GRAYBEARD brings the BEDLAM W

hen Scott Russ set out to craft a new American vodka, he had no interest in using wheat, potatoes, or any other commonly used bases. It was rice or bust for the head distiller of Durham, North Carolina’s Graybeard Distillery, mainly because he was intent on replicating an old nineteenth-century family recipe from Ireland. When Russ’s grandfather described the fabled hooch to his grandson, he likened it to vodka. So it would be a rice vodka, not an unaged rice whiskey, that Graybeard would create. In theory, it seemed pretty simple and straightforward, but in practice it was a whole other story. The distillery tinkered quite a bit with the recipe in 10-gallon batches before Graybeard was ready to produce it on a commercial scale. Eventually the team achieved the flavor profile for what would become Bedlam vodka: a bit of sweetness, with hints of vanilla, citrus, and an herbaceous, peppery earthiness. “We probably did about 25 to 30 different runs when we hit on the flavor profile early on,” recalls Russ. “From a smallbatch perspective, it was just a matter of how much stress we could put on the process without losing that flavor profile.” But the biggest challenges emerged when it came time to scale up production. “It was not a linear move from five to 500 gallons,” Russ reveals. That’s where production and facilities operations director Shane McCurdy came in. McCurdy was tasked with managing the scale-up to distribution-ready batches—a complicated matter when you’re dealing with a grain that doesn’t always want to cooperate. And the particular breed of rice Graybeard uses for the vodka—a Louisiana-grown long-grain style—is especially stubborn. “Long-grain white rice, unlike fluffy white rice, is very tightly wrapped,” McCurdy explains. “Just to get through the protein and get the starch to break out is extremely challenging. Most use one or two enzymes to do that, but we have to use several rounds of enzymes at multiple temperatures.” Temperature control is another key challenge with rice, as the distillers must maintain a temperature that’s higher than that for most other mash types. The fermentation process itself takes about twice as long WWW.ARTISANSPIRITMAG.COM

Durham, North Carolina distillery shakes up the vodka category with a rice-based spirit that’s not short on personality. WRITTEN BY JEFF CIOLETTI PHOTOGRAPHS PROVIDED BY G R AY B E A R D D I S T I L L E R Y

as it does for some other types of mash, McCurdy says. Where most fermentations will take four or five days, Bedlam’s is closer to eight to ten. “The yeast is slow moving and part of that is because you have to create a high gravity,” McCurdy says. “In consequence, you end up with a lot of waste product, which is probably why a lot of people don’t use long-grain rice.” Graybeard went through about 40,000 pounds of rice in two and a half months just figuring out how to scale up. “Our entire first shipment of rice from Louisiana was nothing but up-scale R&D,” McCurdy notes, “but at the end of that we were able to capture the flavor profiles that we wanted and were able to take to market.” All of the time, effort and resources seem to have paid off for Graybeard as heightened demand for Bedlam made the distillery hit its capacity pretty quickly, which necessitated a further expansion. “This requires another upscale, going from 500-gallon batches

to 1,250-gallon batches,” says McCurdy. “There will probably be more trial and error, tweaking things as we go. But I think that’s the challenge with any distillery trying to grow.” Graybeard now has the capacity for about 100,000 cases. Some high-profile attention Bedlam attracted right out of the gate certainly helped Graybeard hit the ground running. When it launched at the Wine & Spirits Wholesalers of America’s annual convention, it did so in style, winning a trio of awards at the event. It took home the Hot New Now Media Award, voted on by media professionals attending the convention, and it won the top prize in the Shark Tank-like Brand Battle competition. It was also among the winners in the spirit tasting competition sponsored by The Tasting Panel magazine and SOMM Journal. “We want people to understand that vodka can have variety in the category, it doesn’t have to have an antiseptic flavor profile,” Russ notes. “If it has some kind of personality, that’s not necessarily a bad thing when it comes to vodka.”

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At sampling events, consumers are usually surprised by its character, though their experiences tend to be quite subjective. According to anecdotal feedback Graybeard has received, some find Bedlam reminiscent of rum, while others detect tequila, whiskey or even sake notes. “If you probe a little bit into [the respondents], those are generally their favorite liquors,” McCurdy says. “People who really like whiskey will pick up whiskey. People who really like sake will pick up sake.” The sake part really is little more than the power of suggestion, as Bedlam has little in common with the Japanese beverage beyond their use of rice—different types of rice at that—not to mention the fact that sake is not distilled. Additionally, much of sake’s character is imparted by the koji mold, which is inoculated onto rice to produce the enzymes necessary to break down the starches into fermentable sugars. “Koji is what gives it its pungent and funky personality and we

don’t use that process at all,” Russ points out. Whether based on preconceived notions or actual flavor notes, Russ says Bedlam’s character is challenging consumers to experience vodka differently. And it’s enabling bartenders to swap out tequila in favor of Bedlam in a margarita, for instance, or replace cachaça in a Caipirinha for a more flavorful Caipiroska. Russ says it also works in place of gin in a Negroni if a drinker wants to take some of the juniper kick out of that classic cocktail. “We like to show that it’s a kind of singularity in the spirits industry,” Russ says. “This is what your vodka wants to be when it grows up,” Russ says. “It’s a vodka for everybody. Why does vodka get such a bad rap? Scotch is appreciated on its own, [so are] rum, gin, and whiskey, so why not vodka?”

Graybeard Distillery is located in Durham, NC. Visit bedlamvodka.com for more information.

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GALINA, ILLINOIS

BLAUM

BROS. DISTILLING CO. W R I TTE N BY MARGAR ET T WAT ER BU RY P H OTO G R A P HE D BY AMANDA J OY C HR I S T ENSEN

e’re whiskey nerds,” says co-founder Matthew Blaum. And when he and his brother, Mike Blaum, decided it was finally time to start a business together, it was whiskey that guided their journey from the very beginning. Before starting Blaum Bros. Distilling Co, Matthew and Mike each had very different careers. Matthew worked in nuclear medicine, and Mike worked for the Department of Defense. Yet the two had never given up on their dream of someday working together. In April of 2012, the brothers took their families on a joint vacation to Florida. One night, after the kids and wives had gone to bed, the two stayed up late drinking a bottle of craft whiskey. “One glaring thing we always had in common was a love of good whiskey,” says Matthew. “And we looked at each other and thought, we can do better than this.” And so the scheming began. It took more than a year before the duo were able to secure a location, get licensed, and order and receive their equipment, but by late 2013, the Blaums fired up their stills for the very first time. From the beginning, Matthew and Mike knew they weren’t willing to compromise when it came to their whiskey. If it wasn’t fully matured in full-sized casks, they weren’t interested in selling it. Yet they also knew they’d need to generate more cash flow early on than they could rely on gin and vodka to produce. So they sourced aged whiskey from nearby MGP, giving it the tongue-in-cheek name of “Knotter Bourbon” and proudly touting its out-of-town origins. Today, that doesn’t sound particularly revolutionary, but at the time, sourcing and transparency were a hot topic in craft whiskey. That upfront attitude paid off almost immediately. “Two months after we first put it out, all that Templeton rye press hit,” laughs Matthew. “We got a lot of accolades for our transparency, a lot of great mentions in publications.” That transparency ties into another of Blaum Bros’ core values: a refreshing lack of puffery. “We don’t have a greatgrandfather who was a moonshiner and our family didn’t make whiskey for Al Capone,” says Matthew. “We’re just ourselves. There’s no marketing fluff. We’re not secretive, and we want to stand behind the product being good.” Knotter Bourbon has been a success, but selling sourced whiskey was never the Blaum’s end game. For the past four and a half years, they’ve been hard at work distilling their very own bourbon, rye, and malt whiskey, and 2018 marks the year they’ll release those products for the very first time. Later this year, Matthew says the distillery plans to release a four-year-old bourbon and a four-year-old rye, both made from grain milled, mashed, fermented, and distilled onsite in a 2,000 liter Kothe still. Blaum Bros. only uses full-sized casks for maturation, a choice made based on the unmistakable quality of flavor they impart to whiskey. “There’s always a lot of pressure from distributors and WWW.ARTISANSPIRITMAG.COM

accountants to get the juice out on the shelves, but we’re proud of the fact we’ve done it our way and not rushed anything out or taken any short cuts,” says Matthew. He says both the bourbon and rye have a classic flavor profile with just a hint of smoke. No release date has yet been set for the malt whiskey. “Those we’ll release when we decide they’re ready,” says Matthew. While whiskey has always been the focus at Blaum Bros., it hasn’t kept the distillers from exploring other categories. In addition to whiskey, Blaum Bros. makes a grain-toglass vodka from wheat and rye, as well as a gin that takes advantage of their 400 liter Hoga still. The smaller size allows them to distill each botanical separately, giving them greater control over the final flavor profile and eliminating what they say is an unpleasant bitterness that can come from over-extracted botanicals. Blaum Bros. is also exploring some smaller-batch projects, including a high-ester rum and, thanks to an employee who loves the stuff, an absinthe. Matthew says experimental projects like these are a way to pursue new ideas and explore other traditions in the world of spirits. “It’s almost like an intellectual curiosity,” Matthew says. The rum and absinthe are sold exclusively via the tasting room, while other products are distributed throughout Illinois as well as Iowa, Indiana, Wisconsin, Tennessee, and Colorado. Yet Matthew says the tasting room remains key to his company’s success. Only about 3,400 people live in Galena, but the city sees about 1.5 million tourists each year thanks to its well-preserved historic downtown, nearby ski hill, and golf resort. That means tourist traffic is a big part of Blaum Bros.’ consumer base. “We see more Chicagoans in our distillery in a week than Chicago distilleries do,” says Matthew. “On a good Saturday, we get 300 people through the door.” Illinois’ liberal tasting room laws permit distilleries to serve full cocktails, a right that Blaum Bros. happily exploits with a full bar and extensive cocktail program. As their business continues to grow, Matthew and Mike are planning for a delicious future, laying down more bourbon, rye, and malt as well as experimenting with heritage grains and cask finishing. For a duo whose former day jobs had a lot more to do with bureaucracy than barrel storage, Matthew says it’s an exciting new world. “Being whiskey nerds, this is the dream: to have our own distillery where we can play and make whiskey.”

Blaum Bros. Distilling Co. is located in Galina, IL. For more information visit www.blaumbros.com or call (815) 777-1000.

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PULQUE

WRITTEN BY HARRY HALLER ILLUSTRATED BY FRANCESCA COSANTI

other Nature wants you to drink. If She didn't, pulque would not exist. Pulque—also known as Octli—is an ancient Aztec alcohol made from the sap of a mature Maguey Agave plant. Left alone, the sap can collect in the plant's hollow head and spontaneously ferment without any human interference. The magic behind this transformation stems from the unique metabolism of the microbiota found inside the Maguey. Feeding off the phytochemicals of the sap, bacteria and yeast—introduced into the Maguey by insects and dust—play off of each other to create the Pulque. A predominance of lactic-acid producing bacteria due to the neutral Ph of the environment kick-starts the fermentation process. As the fermentation progresses, the acidity level of the sap increases and yeast begins to outnumber the bacteria. Eventually, the yeast takes over the fermentation, converting the sap's sugar into alcohol. After a few days the sap turns milky and slightly foamy, a sign the Pulque is ready to drink. Commercial production of Pulque aims to mirror this process. Harry Haller is an independent consultant focused on working with sugarcanebased distilleries. He can be reached at 00harryhaller@gmail.com.

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Three generations of raising premium grains for distilleries of all sizes. distillinggrains.com TOBY BLAKE

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BRETT GLICK

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I WISH I DID NOT HAVE TO WRITE THIS SERIES. At Thoroughbred, we receive on average 4-5 inquiries per month from distilleries that are stuck, and 1-2 that are on the verge of collapsing. While we can often be helpful, sometimes it is simply too late. As someone who has personally experienced both a failed and a successful spirits business, I am sharing this with the hope that it will be helpful for at least one company or individual. Companies tend to be tripped up from at least one of four root causes:

== Underfunded from the start == Product weaknesses == Poor distributor relationships == Human capital deficiencies

In this initial article, I will focus on the financial piece, which is the most common scenario. One of the biggest mistakes distillery owners make is that they didn’t fully plan before they began. Going on a distillery trail and spending lots of time in liquor aisles is not proper planning no matter how diverse your home bar looks afterward. It is troubling how many HOW TO OPERATE A SUCCESSFUL operators never put a financial forecast DISTILLERY BUSINESS AND and operating model in place. Having a PREVENT A DOWNWARD SPIRAL solid path and understanding of what your capital needs are for both optimistic and WRITTEN BY SCOTT SCHILLER pessimistic circumstances is critical. Of course, like most things, what you place in these models must be validated, not just educated guesses or tidbits from chat rooms. Also, the admiration you have of a distillery that started five or 10 years ago cannot be used as a model for one started in today’s environment. The capital, resources, or strategic plan they utilized when they launched likely won’t suffice in the greater competitive landscape of today. The reality is that many enthusiastic entrepreneurs who are fueled by an emotional connection to this space often have an irrational sense of the capital needed. The term “bootstrap” in this business is doing it with just a few million, not a few hundred thousand. It’s fair to say that it takes a minimum of $3-$5M to simply break through to positive cash flow. Once you have your capital needs figured out, we always suggest that entrepreneurs raise all of the capital in a conservative sales model. We also advocate that all of the projected capital required is raised up front. In addition, raising capital is a full-time job and the last thing you’ll have time for when you are in the middle of operating a spirits company. Presuming you are already operating and fall into one of the categories of a stalling or failing business, here are some very high-level suggestions on what to do. Every situation is, of course, unique, and I am certainly not all-knowing, but I offer this information as a guideline that might benefit a business in need.

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WHEN TO KEEP GOING You have fairly steady repeat orders from distributors in at least two core markets. Diving further, it is important to see that these orders are being fueled by more than one key retailer. Product accolades are very positive, and this does not include the best of show award from your town’s annual festival. Be very critical on this. For example, conduct a blind tasting panel against your competitive set. Aging inventory is growing steadily, and supply is not an overly limiting concern with true demand. Presuming what is in wood is tasty, it is worth a lot to both the trade and investors/banks/buyers, not to mention this is your path forward for growth.

NEXT STEPS: Your negatives are both identifiable and fixable. You may have SKUs in your portfolio or strategies you are following that are dragging the overall company down. Having the wherewithal to proactively and selectively self-identify lagging products and/or tactics is crucial in the first step to either pruning your portfolio or changing various operating strategies. As a result, time and capital can be utilized on products and areas best positioned to help your brands grow. Don’t forget the importance of packaging design/refresh in this equation. Dedicate at least one individual 100% to business development. Polish up all of your financials, and outline a very detailed and compelling set of next steps of what you will do with the capital raised, and of course how it will solve your current state. Then work the phones non-stop to meet with as many qualified investors and banks as possible. Do not wait to start this and do not dilly-dally; time is not on your side and, on average, it takes six to 12 months to close an investment.

WHEN TO CONSIDER EXITING You have taken on personal debt to continue funding operations with no clear path to profitability. This is a death spiral, and you are now risking the well-being of your family. You, your family, or founding members have yet to take a real salary. Don’t cheat yourself, you are a cost and need to earn a living. Your tasting room sales are the only thing keeping the lights on. While the margins are nice, if you are effectively a bar that has a very nice piece of copper artwork, eventually your place will lose its novelty. You are still self-distributing in your home market. This is often a case where people are supporting your product because they like you/your story, not necessarily the product itself, and as soon as another personable local distiller enters, you are at risk. Your passion for the spirits business and your portfolio is outweighed by all the daily negatives. It is hard to stay positive and personable when you are under this amount of pressure, and thinking clearly is virtually impossible.

Keep in mind, very few investors are interested in backing a down business, and nobody wants to be the investor who keeps the lights on, not even your parents. Whatever you do, please do not stretch your personal finances too thin. That stress is often unbearable, and your personality and relationships with family and employees will be affected. The stories of Tito and

NEXT STEPS: If you find yourself exhausted and not able to sustain yourself to press forward, it’s time to take a pause and personally reflect on what drives you and determine if your business will meet those internal goals. Step outside of the business physically and mentally. Become very cognizant of what it will mean to your business and yourself/ employees/family if things continue as they are. Presuming your business has some physical assets of note, I’d suggest placing the business up for sale, and at a fair price. There is a slew of entrepreneurs out there that are looking to get into this space, and many would certainly explore paying a premium to bypass the startup phase. In some scenarios, they may even want to keep founders/ employees involved in some capacity. Work with business brokers or industry experts to prepare the business for sale and actively market/ target buyers. Be mindful, though, to inform key stakeholders such as vendors/distributors in advance of your activities so that they don’t end relationships out of fear, but instead work to help you.

credit card debt and Fred Smith betting on the roulette table are not models to follow. As is true with most things, be honest with yourself: Are you a serious operator and treat this as a business, or are you a fanatic with a super expensive hobby? To be very clear, I am not suggesting that our industry is in a doomsday scenario, nor bubble, but if you are in this very

unfortunate predicament you need to be realistic as none of the situations listed above are related directly to competition nor the spirits market; they are instead self-inflicted. Again, as someone who has lost and made money in this space, I am pulling for you.

Scott Schiller is managing director of Thoroughbred Spirits Group. For more information visit www.tbspirits.com or call (312) 809-8202. WWW.ARTISANSPIRITMAG.COM

GIN’S THE THING at

SCRATCH DISTILLERY WRITTEN & PHOTOGRAPHED BY MARGARETT WATERBURY

or distiller Kim Karrick, gin is far from an afterthought. It’s a painter’s palette, a playground, and a poignant reminder of an important moment in time decades past. “I first met my husband, Bryan, when he handed me a gin and tonic in 1987 at Michigan State University,” she laughs. “And now, here we are.” Scratch Distillery in Edmonds, Washington, is the first distillery to call this north-of-Seattle community home. Since opening in 2015, co-owners Kim and Bryan Karrick have transformed a former grocery store into a craft spirits outpost specializing in grain-toglass (or, in one case, tuber-to-glass) spirits, with a particular focus on gin and vodka. Before starting Scratch, Kim worked in the wine industry. Her sense of smell was so acute that her colleagues would routinely ask for her help in nosing cases of wine before events to make sure none of the bottles were corked. “Kim has a really incredible palate,” says Bryan. “I joke that she has dog smell.” But it wasn’t all about wine. Kim loved gin, too, and on a trip to London in 2013, she made time to visit a few new gin distilleries. “I was fascinated by gin’s endlessness,” says Kim. “There are so many possible combinations.” At one distillery, she picked up a copy of Artisan Spirit, and the notion that this was something she could actually do herself was planted in her mind. Kim poured herself into her new interest, taking classes and workshops while she and Bryan searched for a suitable location. Many startup distilleries struggle to find a space that will meet code, suit their needs, and offer a steady stream of consumer

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traffic, so the Karricks braced for a long, arduous search. Fortuitously, a local developer had recently begun to divide and redevelop an old Safeway on Edmonds’ waterfront, not far from the ferry dock. High existing ceilings, appropriate zoning, and ample parking made it an ideal location for the distillery. They took the plunge, signed the lease, and ordered their equipment. The architectural vernacular of the old Safeway is still evident from outside, where the gently arched entrance and surprisingly large parking lot give the building’s previous life away. Yet inside, neither Scratch Distilling nor any of the other businesses that share the building feel anything like a grocery store. A full-scale retrofit, including an expansive tasting room with a U-shaped bar, extra seating space, and a hexagonal design scheme makes Scratch Distilling feel like a hip restaurant, complete with backlit bar. Gin and vodka are the primary focus at Scratch and, as the name suggests, everything, even the gin base, is made in-house. Kim makes three different vodkas, each from a different material and offering a different flavor profile: wheat, sauvignon blanc wine, and potatoes, all grown in Washington. The potato vodka is the sweetest and softest of the bunch, while the wheat offers gentle heat and a slightly caramelized flavor. The grape-based vodka is crisp, with a slightly acidic tang. All are unfiltered. “Filtering takes away the body, takes away the character,” says Kim “I have a filter collecting dust in the storage room.” Scratch also makes three vapor-infused gins: a Martini Style WWW.ARTISANSPIRITMAG.COM

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Gin, a Gin and Tonic Style Gin, and a Barrel Rested Gin, all built on a wheat vodka base. The Martini Style Gin offers brisker, woodsier notes, while the Gin and Tonic Style Gin is a lusher, more contemporary style. The Barrel Finished Gin layers spicy, caramelized notes from used bourbon and rye casks atop the Martini Gin, amped up with a little more warm spice and juniper. All of the grains Scratch uses are organic and sourced from nearby Fairhaven Organic Flour Mill in Burlington, Washington. The potatoes come from Warden, Washington, on the other side of the cascades, and arrive in bulk sacks as potato flour. Even many of the botanicals are procured from local farms, although some, like peppercorns, pose insurmountable cultivation challenges to even the most intrepid Northwest farmers and must be imported. Kim says starting with three different vodkas was a great way to get acquainted with her equipment, develop a feel for the process, and start out with more than a single solitary product in the tasting room “Vodka doesn’t require recipe approval,” explains Kim, “So I wanted to start with that in the beginning. And, by having three vodkas, it was more interesting in the tasting room. It made it possible to do comparison tastings, just like wine.” According to Kim, Washington State’s recent move from state control to privatization has made it more challenging to sell craft spirits through grocery stores and liquor stores. “With privatization, it became a lot harder to count on out-of-tastingroom sales,” says Kim. “Right now, we do 85% of our business out of our tasting room.” Synergy from neighboring businesses, including a bar, a restaurant, and an art museum, contribute to a steady flow of foot traffic. Building on their popular tasting room as well as their reputation for gin, the Karricks designed a class called GINology that lets participants formulate their own custom gin from a palette of more than 30 different individually vapor-distilled botanicals, ranging from traditional flavors like juniper, coriander, and angelica root, to quirky notes like cardamom and rose geranium. After the class, participants get to take home a personalized bottle of their very own gin, and Scratch stores the recipes so they can order another round down the road. “We’ve made a lot of gin converts,” laughs Kim. What’s next for Scratch? Gin and vodka aren’t going anywhere, but the Karricks are excited to collaborate more with their craft beverage neighbors. Kim has already made a spirit from Breakaway IPA, a hoppy ale made by Edmonds’ American Brewing Company, and she’s excited to experiment more with distilled beer and whiskey as well as potential crossovers with cider and wine makers. Scratch also released its very first whiskey in January 2018, which sold out in a month. The next whiskey release is slated for November, and Kim says she’s planning to make more next year. It turns out she was right all along: the possibilities truly are endless.

Scratch Distillery is located in Edmonds, WA. For more information visit www.scratchdistillery.com or call (425) 673-7046. 102

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PLAIN PACKAGING WRITTEN BY DEVON TREVATHAN

lain packaging is the World Health Organization’s new global go-to in the fight against tobacco. Instead of the familiar brands one might see lining the walls of the local convenience store or gas station, there would be indistinguishable boxes labeled with a standardized font and decorated with large, graphic photos depicting the possible illnesses one could contract from sucking on cancer sticks. Unfortunately, it doesn’t look like supporters of the legislation are going to stop at cigarettes—some, like Dr. Judith Mackay, an advisor to the World Health Organisation, as well as advisory body Public Health England, are trying to ban branded bottles in the alcohol industry as well. This has citizens of all backgrounds growing concerned, and rightfully so. According to experts who speak in no uncertain terms, applying plain packaging to alcohol would crush the craft sector. Packaging is the tool with which producers are able to distinguish themselves as a unique and desirable commodity. With these proposed regulations, consumers would see only the most basic information. Plain packaging is already a nationwide law for tobacco products in a number of countries, including the U.K., France, and Australia. Canada’s got this and other health initiatives related to smoking on the calendar for rollout in the near future. While the measure might seem radical, smoking remains a massive health risk—it kills upwards of 7 million people each year worldwide. The

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WHO has concluded that the current strategy of visible warnings and informative commercials isn’t enough; the government has to take greater steps to manage this kind of behavior. Seven million deaths is a hard pill to swallow, especially considering the amount of research that has laid out exactly how dangerous smoking is, but there is an underlying argument that should be addressed here. It is one of personal accountability. If you are of legal age to purchase a pack of cigarettes or a bottle of cask strength whiskey, the onus should be on you to make that decision. Knowing full well the possible outcomes, it’s an individual's right to weigh the consequences and choose for themselves how they would like to proceed. Alarming as it would be to lose such basic freedoms, the immediate disasters would come in the form of revenue loss and the cessation of growth. The entire industry would take a remarkable nosedive, as valuation consultancy group Brand Finance estimates losses to be greater than $293 billion. Another important factor to consider is the efficacy of plain packaging. Australia implemented these regulations on tobacco products in 2013, making it the first country to do so. While it’s still quite early to draw definitive conclusions, the daily smoking rate dropped 1.6% from 2011 to 2014. How much of that reduction is actually attributable to this legislation? A much bigger opponent to traditional smoking is electronic cigarettes and vaporizers, whose popularity has skyrocketed in the last ten years.

Fortunately, it seems that, at least in the United States, serious discussions of plain packaging are still way down the road. There is some vocalized support from non-profit organizations, however, with proponents claiming that their interests are purely the public’s wellbeing. Their intentions might be in the right place—after all, the people have a right to more transparency regarding the products they put in their bodies—but plain packaging is simply not the answer. Just consider the negative effects it would have on thriving creative industries. The demand for alcohol would never go away, but the variety that we’re accustomed to would disappear before our very eyes. Business would flood the black market in a desperate attempt for collectors and enthusiasts to get their hands on traditional bottles. Industrial producers would weather a sizeable deficit, but their portfolio would be the likely choice in a market bereft of brands or advertisements. The beverages that are meant to be savored, ones made from quality ingredients with a price tag reflective of the care and cost involved in their production—they wouldn’t be able to compete. That is what would be lost, and if the effort is to steer consumers away from irresponsible drinking habits, perhaps removing the artistry and craft is not a suitable option after all.

Devon Trevathan is a writer based out of Nashville, TN. She loves spirits that are older than she is, grower-producer style, and dogs.

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EXOGENOUS ENZYMES

UNLOCKING YOUR GRAIN’S POTENTIAL WRITTEN BY GABE TOTH

or distillers who are looking to increase yield, improve flow, or just shorten their conversion times, exogenous enzyme producers often have a solution. Historically, spirit production has relied solely on naturally occurring grain enzymes, often leaning on the higher enzyme content of six-row barley to convert corn, rye, rice or other starch sources that can’t self-convert. Tworow barley has enough diastatic power, or capacity to convert starch, to selfconvert, making it a natural choice for malt whiskey and beer. Further, added enzymes are prohibited in some styles and regions, such as in Scotch whisky production. However, a variety of exogenous enzymes (those not resident in the grain already) allow distillers to tailor their approach to specific conditions and let them target particular problems they may be experiencing. “For some distilling processes, all the enzymes are coming from your malt,” Kerry Technical Sales Manager Chris

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Limmex said. “If you’re using purified enzymes in place of the malt or (in place of) some of the malt, you’re keeping the activity the same from batch to batch. Barley enzymes can vary crop to crop.” Kerry Brewmaster Chika Ezeani describes exogenous enzymes as a “complement” to existing malt enzymes. “It gives you the flexibility, it increases your turnaround time. Most distillers use malt plus exogenous enzymes as tools to improve processes.” For distillers who have to cook grain to gelatinize starch, a high-temperature amylase enzyme allows saccharification to begin during cooking. Amylase from barley malt has a temperature range below that of the gelatinization range, so a cooked mash has to be cooled down before adding the barley, otherwise the amylase will denature. “Some of the exogenous enzymes can extend that range. You can process at higher temperatures, up to 200 degrees,” according to Limmex. “The real benefit would be to extract at high temperatures. You can speed up your processes by

using Hitempase. “You can also use Convertase or amylase to increase that extract yield if there is a high percentage of stuff there that isn’t being broke down,” he explains. Because malt amylase’s ability to break down starch—essentially long chains of glucose molecules—is limited, exogenous enzymes offer an opportunity to increase the amount of sugar pulled from the same amount of malt. Malt amylose, in particular the highertemperature alpha amylose, leaves a significant percentage of malt sugars in an unfermentable form. Most of it will be broken into fermentable one-, two-, or three-glucose groups—glucose, maltose, and maltotriose—but the rest will be more than four glucose molecules or contain a branch where the glucose chain splits. Those otherwise unfermentable dextrins can be broken down completely by amyloglucosidase (referred to by the brands Convertase or Amylo), which takes everything down to simple glucose. Because amyloglucosidase converts methodically, working from the end of

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a starch chain and removing glucose molecules one at a time, it is generally used in conjunction with amylase. While it may not break the starch down as completely, amylase does help encourage conversion by breaking starch down into shorter, more accessible chains. “If you’re replacing malt, you need a combination of enzymes,” Limmex said. “Once you get the Hitempase working, then you can also add in both the Amylo and Convertase-type enzymes. Overall, what you see is reduced viscosity and increase extract, in the range of ten percent for a corn mash.” Ezeani added that most enzymes are designed to be added at any stage, but he recommends adding them early to optimize their effectiveness, getting the most of them at higher temperatures. Exogenous enzymes, which are generally extracted from microbial

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sources such as aspergillus niger and aspergillus oryzae, also offer the opportunity to ease the usage of highprotein and high-glucan materials, such as wheat, rye, and sorghum. “Rye is one place we see a lot of increase. You can get higher extract and also get higher filterability,” Limmex said. Glucanases and proteases don’t necessarily create fermentable sugars out of protein or glucans, but they break down the protein and glucan matrix which can lock up starch and prevent it from being accessed. “That’s really where you’re increasing your yield.” By breaking down proteins, a protease will also increase free amino nitrogen, which will encourage yeast health. “Anywhere you’re having protein precipitate out, or looking to increase FAN … Often it increases yield to add a little protease. That economic picture

changes depending on the market. If malt is more expensive, then it becomes more beneficial to add exogenous enzymes.” Considering the diversity on the shelf today, enzymes can allow distillers to access grains and pseudo-grains that would have been unworkable in the past. One recommendation to determine whether a distillery’s wash would benefit from enzyme usage is to take a sample of stillage and add enzyme and yeast to it. If it ferments further, then there is potential sugar (and profits) being washed down the drain.

Gabe Toth is the head brewer at Twisted Pine Brewing Co. An experienced craft brewer and distiller, his passion for fermentation also extends to pickling, cheesemaking and meat curing. He can be reached at gabetoth@hotmail.com.

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MANAGING FLAVOR DRIFT

DRIFT HAPPENS. DON’T GET SWEPT AWAY BY IT. WRITTEN BY TIM KNITTEL

“To be a creative cocktail MA K ING DRIFT GOOD maker is to be a student of your First, acknowledge that flavor drift is real—to yourself ingredients. Compared to chefs and your customers. It’s not a sign of failure that your and sommeliers, bartenders are current batch tastes different than the prior one. incredibly lucky to work ingredients Next, address it. Be upfront with your employees and that are usually consistent your customers. Talk internally about the differing flavor (booze). That said, these products profiles of each fermentation, distillation run, single sometimes do change and, over the barrel and batch. Make sure your team is versed in why years, we’ve experienced a number flavor changes are occurring and preempt consumer A few examples: of our spirits going down-hill. In confusion by explicitly addressing it. Equipment changes and upgrades one case, a favorite tequila brand Third, embrace it! Don’t make excuses for flavor can have quite dramatic impact was purchased by an international change; that makes it look like a negative or fail point. on fermentation outputs and conglomerate, and our hearts Instead, make flavor change a part of your brand story. distillate congener components. broke as we watched it tortuously Consider these phrases: (So much so that Scotch stills decline in quality. In another, a • “Sure, our product is changing. We think are traditionally carefully patched popular rye whiskey began to taste we’re making it taste more like what we want rather than changed out to prevent weaker and less like itself in what our product to be.” the slightest alteration in shape.) we suspect was an attempt by the • “We’re getting better every day, and we producer to fill demand by bottling Some botanicals are naturally vintage hope our products taste better and taste younger whiskey. … Additionally, and subject to weather and other more like what we want them to be with new and game-changing products influences. each successive batch.” are introduced all the time, more These messages generate excitement about Barrel-aged products can vary based on so now than ever before.” your improvements without denigrating either the size of the barrel used, the length your previous release or your current ones. — Death & Co: Modern of time in the barrel, the weather during Classic Cocktails Now, you’re ready to exploit your flavor drift. maturation, position in the warehouse, Celebrate it! Talk openly about the improving and batch sizes—not to mention that Change is not always negative, flavor profile of your distillate, the new every barrel will have a slightly unique though flavor drift in the distilled botanicals you’ve sourced, your latest small flavor profile. spirits industry has normally been batch. A flavor change presents an opportunity viewed as such as it was often due As your production systems improve, the to recapture new excitement without having to attempts by large producers to points of the process that affect flavor will to produce an entirely new product. It can expand distribution at the expense change. be used to exploit the ‘newness’ bias in of flavor. Craft spirits, conversely, One of the biggest changes is moving from traditional and social media, so use it! may find their spirit flavors drifting sourced or contract production to in-house. A new release—be it a new vintage, or a for the better. Every variable in the process will be modified recipe change, or the first bottling from Properly managing the at least slightly (or possibly majorly), leading a new still—can get great traction for messaging for flavor drift can to the greatest potential for a differing flavor earned media and social media shares. change the potential negative profile. This is something the established into a positive—even highly bourbon industry is very, very good at. As consumers get to know your brand and your beneficial—outcome. Each reason Consider the hype and discussions products, unexpected flavor change will likely provoke for flavor change has its own best around the releases of the Buffalo a negative response. Human beings are naturally way of handling. Here are a few key Trace Antique Collection, Old Forester change-averse, especially with unanticipated change. steps to follow. istillers strive for consistency. Consumers expect it. But consistency is rarely consistent. The flavor of your product will naturally change over time. There are many reasons for flavor change, all of which are simply part of the distilling industry

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Birthday Bourbon and Four Roses Limited Edition products. Subtle though the yearto-year flavor change may be, those products receive huge attention by acknowledging flavor change.

M A RK E TING THE ME S S A GING

DRIFT, MA NAG E D

Communicating your flavor change message can Flavor drift will happen be done at any point of brand contact with the to you. By accepting it and consumer. dealing with it proactively, At your distillery, the consumer interaction you can leverage it for new is obvious and easily managed. Likewise via products, line extensions, MAKIN G TH E M E S SAGE press releases and online channels. Marking the limited releases and The specific messages required will vary spirit’s packaging with a vintage identifier and individual bottlings. This depending on the type of spirit and reason for the barrel or batch number directly on the bottle or can mitigate consumer change. on secondary packaging (like a hang-tag or box) frustration with the change Vodka: It’s all about purity. Celebrate new awards can catch a potential repeat consumer’s attention and even generate powerful and reviews, and how you’re achieving constantly without the expense (or potential brand confusion) marketing value, but you higher standards of purity with your product. of entirely new labeling. need a clear flavor change Gin: This spirit can be relatively consistent at the message and strategy for hands of an experienced distiller. But the first runs S P E CIA L CA S E : S OURCE D OR communicating it. will almost certainly be variable. Changing botanical CONTRA CT TO IN- HOUS E recipes and sourcing can change the flavor profile. When you’ve had another distiller produce your Consider ‘seasonal releases’ or named recipes even spirit and then begin to make it yourself there will Tim Knittel is a bourbon within the same product. undoubtedly be flavor change. How you manage educator, writer and Brandy: Like wine, brandy can be vintage or nonthe messaging depends on several factors. event specialist in vintage. ‘This year’s crop’ is a great phrase and Lexington, Kentucky. If you are switching your primary brand to inHe formerly managed successfully captures positive interest in experiencing a house liquid, consider carefully how close the the culinary and VIP new and limited availability flavor. flavor profile matches. Be honest with yourself. hospitality programs Rum & Whiskey: Differences in sugar/grain type and Blind trial with consumer groups for verification. for the Woodford souring, fermentation methods, distillation parameters If the flavors are similar enough to be Reserve Distillery. He and barrel aging can all make dramatic changes. When you interchangeable, great! Nothing else to do. If not, now runs Distilled Living which provides make a change, be straightforward with what is different one option is to blend the products slowly sliding private bourbon and how it shaped the product. from majority of the old to majority of the new. education, brand Barrel-Aged: Since every barrel has at least a slightly This won’t go undetected by all consumers, so be representation and different flavor profile, ‘barrel picks’ are the new hotness ready to address the flavor change over time. distillery consulting in the American whiskey industry. Some individual barrels If the flavors are dramatically different, consider services. He holds have achieved legendary status (Willett 808, for example). the title Executive releasing two separate products. If you’ve been Bourbon Steward A product could be released with a unique barrel number on honest about sourcing from the beginning, an through the every bottle (like Blanton’s) or even a name. The same is true ‘in-house’ product checks the new and possibly Distilled Spirits for small-batch production. It’s also possible to craft a new exclusive boxes for your brand, which can be a Epicenter. product line (ala Heaven Hill Brands and Jack Daniel’s) based great boost for earned traditional and social on barrel warehouse position and resultant flavor characteristics. media.

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REGARDING

GMOs WRIT TEN BY BRETT GL I CK

ince the dawn of agriculture when people settled down to an agrarian lifestyle, plants have been selectively bred for human use. Up until the 1950s, this was done by storing the seeds from the best plants and using them in the next growing season. As the understanding of genetics advanced, people were able to apply systematic breeding approaches that resulted in plants that were much healthier, produced greater yields, and fit the modern style of agriculture. Many of the modern agricultural crops that are common today developed into their current forms by the 1970s. Improvements to plant genetics continued gradually into the 1990s when scientists and breeders made efforts to further adapt plants to human needs and developed ways to insert traits into the DNA of those plants or eliminate unwanted traits. This was done by inserting parts of DNA found elsewhere in nature into a plant’s DNA, or deactivating a portion of a plant’s DNA. The plants with changed DNA are commonly referred to as GMOs, or Genetically Modified Organisms. The pursuit of specific traits is the reason GMOs were created. The traits are aimed at protecting the plant from stress-causing elements in nature or improving the product of the plant. Many GMO plants are developed to be resistant to certain diseases or insects, and by inserting genes from other organisms in nature, GMO plants are able to protect themselves. Certain plants naturally exhibit the ability to conserve water and tolerate a drought. When plants that can do this are identified, the genes that enabled it are found and transferred into a plant used in commercial agriculture. In other instances, GMO plants are developed to tolerate specific herbicides, thus allowing farmers to spray a field with that herbicide to kill weeds while not affecting the crop. This lowers the volume of herbicides used which helps farmers develop better environmental production practices. All of these traits help the plant to be stronger and more productive. There are also a number of traits that improve how we are able to utilize the product of the plants. Some GMO soybeans, when harvested, produce an oil with many of the healthy attributes of olive oil. Also, in an effort to reduce food waste, there are GMO potatoes and apples that do not superficially brown or bruise. The thought is that less food will be discarded with discoloration. To improve how much biofuel can be produced with corn, some GMO

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corn has been created to aid in the Whether your process of converting it into fuel. Currently there are nine crop distillery chooses plants that have been genetically modified and are commercially to use organic, available. They include soybeans, conventional, cotton, canola, alfalfa, sugar beets, papaya, potatoes, squash or GMO grain and corn. There has been genetic modification performed on other to produce your crops, such as wheat, but in those instances the crops are not spirits, there are commercially available. Research may be ongoing, or it has been options to obtain determined there is not a ready market for that GMO plant. high quality Concern over effects of GMO products has caused some to grain of any type oppose them. When GMO plants you prefer. are produced in the vicinity of wild variations of the same plant, cross pollination can happen. This results in GMO traits being present in wild populations where it often proliferates. Once traits are in the wild it is not possible to remove them. This permanent contamination of wild population does not allow breeders to return to the original seed bank to obtain genetics unaltered by humans. The process of creating a new GMO crop requires significant investment of time, knowledge and money. This has resulted in only large corporations having the ability to bring new GMO crops to market. Due to the benefits of GMO crops, the vast majority of the genetics they use are from one of these large corporations which has caused a bottleneck of genetics being planted. Some worry that with less variability in genetics a new strain of bacteria, virus, or other diseases could cause an oversized effect on the supply of food. Many people find the small number of corporations developing the majority of genetics worrying due to the corporations being responsible to their shareholders first and not the public well being. In the process of adding a beneficial trait to a plant’s DNA, part of that plants DNA is swapped out. It is not possible to know exactly what function that part of the plant’s DNA preformed. A trait detrimental to the plant may have been removed, or it could have been one that was beneficial. It is also very possible that the DNA removed did not play any sort of a meaningful role in the plant’s life or its final product. For these reasons, some people favor labels for products that utilize GMO technology. Currently there are organizations that help producers verify that they do not use any GMO crops. Once that

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has been determined, the final product can use a GMO-free label that one of several organizations provide. The lack of GMO labeling on consumer products is because the vast majority of research on GMO crops suggest that they are safe to consume. GMO crops also have the potential to feed a rapidly growing global population that agriculture will struggle to feed without GMOs. There is also the possibility to create crops that contain more vitamins and minerals to improve the diet of people who are malnourished. Many of the concerns surrounding GMOs currently are based upon conjecture and have not been proven. However, as long as there is concern over the safety of GMO crops and as more GMO crops are brought to market, more research is warranted to affirm the safety and supply of our food. Out of the three grains most commonly used for spirit productionâ&#x20AC;&#x201D;corn, wheat and barleyâ&#x20AC;&#x201D;only corn is commercially available in a GMO form. Corn can also be obtained from farmers or suppliers that did not use GMO corn which is commonly referred

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to as Non-GMO or conventional corn. In conventional corn, it is not uncommon to find some traces of GMO in the corn. This is most often caused by pollen from GMO fields blowing in during pollination of the plant. Most commercial purchasers of conventional corn consider any corn under five percent contamination to be acceptable. These purchasers pay a premium for conventional corn, and the premiums increase as the percentage of GMOs decrease. If a distillery decides to use conventional corn in its production, there are a number of ways to ensure a reliable supply. It is always quickest and easiest to ask the supplier. The vast majority will know if their product is GMO or not, and will be up front and honest about their product. Another option is to take a sample of grain to a local grain purchaser that deals in conventional corn. Most will be happy to run a test for the presence of GMOs for a small fee. If that is not an option, a sample can be sent off to a grain or food lab that will run tests for the presence of GMO traits. If a quick

on-site test is desired, there are a number of testing kits available for purchase that would allow you to quickly test any shipment you receive. This test provides less information,but it will tell you if GMO traits are present. Whether your distillery chooses to use organic, conventional, or GMO grain to produce your spirits, there are options to obtain high quality grain of any type you prefer. Having these options is great because it allows the final consumer to seek out what they desire. Having good sources of all different kinds of grain is also a great relief because it allows the distiller to focus on crafting the best product while not focusing on the details of how his grain was produced, as he or she knows it is a high quality and safe product.

Brett Glick is a farmer and business owner from Columbus, Indiana. He and his brother, Trevor, operate their family farm. They also own and operate their private seed company, L&M Glick Seed, which sells corn, soybean, and wheat seed directly to customers and to the wholesale market

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Are Americans Ready to Rakia? W

hen Artisan Spirit caught up with Dor ol Spirits and founder Boyan Kalusevic, he was dealing with the all-too-familiar logistical headaches involved in the delivery of a new still. “Just another day in paradise,” Kalusevic laughs on a Tuesday afternoon in January. “We’ve had some 28-degree weather, which shut the city down, so the still is just sitting in Houston. The idea was that the still was supposed to come [last] Friday, but it didn’t clear customs until Monday.” Yes, the still—a 750-liter copper pot still to join its existing 400-liter unit—was en route from outside the U.S., but it wasn’t from an obvious distillery-equipment-manufacturing country like Germany. Its point of origin was a little more off-the-beaten-path: Serbia. That seems less illogical when you consider Dor ol’s flagship spirit: rakia, the traditional fruit brandy of many Southeastern and Central European countries, including Serbia. It’s also where Kalusevic spent the first 10 years of his life before immigrating to the states a quarter-century ago. His life has always been rakia-adjacent. His granddad was a distiller and winemaker in what would become Kalusevic’s company’s namesake: the Belgrade neighborhood of Dor ol. Kalusevic gets his stills from the same Serbian coppersmith family that made his grandfather’s equipment. “When we immigrated to the states, the family affair that was bootlegging was formed,” he recalls. “Every time we traveled back to Serbia, grandpa would send us back [to the states} with a couple of bottles.” Fast-forward a couple of decades and Kalusevic and old college friend and business partner Chris Mobley decide to go “legit” and give the Lone Star State its first taste of the apricot-based distillate in the form of Kinsman HandCrafted Premium Texas Rakia. We often hear distillers talk about the “labor of love” that is their chosen field, but, as a rakia producer, you’ve got to be willing to crank up that concept to 11. Managing a fruit supply, especially something as unpredictable as apricots, takes a special kind of commitment. “With a grain distillate, for the spirit alone, you’re looking at [a cost] of a couple of bucks a bottle, maybe a little less,” Kalusevic notes. “With fruit,” depending on the year, it’s between $14 and $19 a bottle. And that’s before you’ve dealt with the three-tier system or even talked about excise tax or added capital, or anything like that.” He likens purchasing his raw materials to buying futures in the financial world. “You’re pre-paying for a harvest at the beginning of the season, not knowing what the yield will be and you end up wrapping up a whole bunch of cash flow in ingredients that you’re trying to predict over the next 12 months,” he explains. “If you overbuy, you’ve overspent and if you under buy, you run out of product.”

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San Antonio’s Dorćol Spirits introduces Texas drinkers to a Serbian distilling tradition. WRITTEN BY JEFF CIOLETTI PHOTOGRAPHS PROVIDED BY DORĆOL SPIRITS

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The Dor ol team refuses to cut corners. The company singlesources its fruit for distillation and doesn’t ferment from an existing juice concentrate or distill from previously fermented fruit juice. It takes about 10 kilograms of fruit to make a single liter of distillate. “Some will just pick up wine and run it through a still,” Kalusevic says. “We do custom crushes to our desired [specifications] and that hurts a little bit.” Before they’re crushed, the apricots need to be de-pitted. To do so, they go through rollers that push the pits out through perforated metal, leaving just the meat of the fruit on the belt. “At that point you’re just pitching yeast in a fermenter and making yourself a mash,” he notes. “Two weeks later, you start clearing out your distillation schedule. We do a pretty narrow hearts cut—we don’t re-distill our heads, we discard them, capture the hearts, cut the tails off and start again.” It’s ready for dilution after the second distillation. “And, because there’s no column, it is literally two,” Kalusevic points out. As brandy is starting to have a bit of a moment in the U.S., the time may be ripe for American consumers to discover an obscure (to them) fruit-based spirit like rakia. However, the Dor ol team has found that educating the public often can be an uphill struggle. Much of that involves being transparent where others have not. “Half of the battle is undoing the work that has been done— specifically where you draw the line on what hand-made and handcrafted even mean anymore,” Kalusevic says. When people visit Dor ol, they witness the artisanal process in action, without any smoke-and-mirrors or obfuscation. “‘Wow, you guys really make this,’” they’ll say. He details one visitor in particular, a Serbian-American from Dallas, who was intent on having the distillery put its money where its mouth is. He wanted to test that Kinsman was, indeed, a pure fruit distillate and not one that contained added sugar. “He takes a shot of rakia and spills it on a rag and asks for a match,” Kalusevic recalls. “He fires up the rag and says if there’s sugar in the distillate, it will latch on to the fibers, which will catch fire.” The fibers didn’t catch fire. As soon as all the vapors burned off, the rag was hot, but not burned. “It only validated what we already said we didn’t do,” Kalusevic says. Though, right now, 100 percent of Dor ol's production is fruitbased, the company does plan to start making some grain spirits as an additional profit stream to offset the cost of the fruit-only products. “Grain and molasses are so much more cost-effective than fruit,” he admits. “That’s why, right now we’re doing all we can to ramp up our grain distillation. Fruit is incredibly challenging to work with— it’s an entirely different supply chain. In a sense, it’s only available once a year!” But, lucky for curious consumers, Kinsman is available yearround.

Jeff Cioletti is the editor at large of Beverage World Magazine, creator of The Drinkable Globe website, and hosts the web series, The Drinkable Week. WWW.ARTISANSPIRITMAG.COM

T C U D O R G P N I C R U O S W

ine, beer, and distilled spirit sourcing has become a modern and convenient trend within the supplier industry. The costs and time associated with a startfrom-scratch approach could prove cost prohibitive for many startup brands. Aside from constructing a business plan and securing financing through private or third party means, the alcohol licensing requirements for a new product can also be time consuming and costly. Our alcohol regulatory system mandates a dual licensing process for suppliers including both federal and state license and permit requirements as well as post-licensing compliance factors. Generally, new brand development begins not just with production and definition of the product formula itself, but also with product identity including labeling and obtaining label and license approvals from first the U.S Department of the Treasury, Alcohol and Tobacco Tax and Trade Bureau (“TTB”) and subsequently any state into which the product will be imported, distributed and sold. For a novice brand owner or producer, this process could be fairly lengthy and riddled with regulatory obstacles from first impression. After overcoming federal and state licensing hurdles, many start-up producers can also be stalled by the added complexities of our three-tier system requirements, which govern the distribution and sale of alcoholic beverages within the United States. Without going too far into this regulatory scheme of federal and state rules that aim to prohibit tier entanglement of interests, suffice it to say that distributor relationships and compliant marketing WWW.ARTISANSPIRITMAG.COM

S T I R I P S G N I T F N A R E CR D O M A IN D L R O W

plans are priority items for a successful brand launch. Accordingly, even after navigating the licensing and permitting processes, start-up brands can lose momentum in developing a strategy for getting their product to market without the need for added price markups that ultimately make a product an unattractive option for consumers. While there are a variety of exemptions that may streamline this process for certain qualified producers and brand owners, please note that such exemptions vary by state and may restrict production capacity. An appealing option for many start-up producers and brand owners is pairing with sourcing manufacturers or established importers that can navigate the pre-market processes and assist with a brand launch. Many of these service providers offer to assist with regulatory requirements, business consulting, and product launches that can ease a new industry member into the market and help educate owners and operators on the business of producing and selling alcoholic beverages. These types of service providers, while often criticized for devaluing the “craft” categories, allow new brand owners with less start-up capital to focus on making the product and developing brand identity rather than the intricate regulatory complexities that can seem daunting at first. However, while third-party service

MARB EN BY T T I R W

WIS ET LE

providers offer an immediate aid, new brand owners and producers should consider the benefits of independently running and developing their business, whether that is accomplished at the inception of business development or later once a product has already been initially established and is market-ready. For example, anyone entering the ever-evolving alcohol industry should study the licensing process and the rules and regulations that will ultimately govern their business. This includes state and federal review of the types of pre-requisite licenses needed along with the many rules and regulations that govern label design and ultimately the distribution and sale of alcohol products. Like many other regulated industries, the “ignorance is bliss” concept won’t shield industry members from administrative, civil and/or criminal liability in many cases. Even those licensees and permittees that choose to pair with a third-party sourcing provider will continue to bear the ultimate burden of complying with the laws that govern the sale of their product along with their financial risk.

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Accordingly, allocation of risk and responsibility are important issues that should be considered in the negotiation of any third party contract including other sourcing providers, management companies, importers, and distributors. Below are just a few of the several key factors to consider before solidifying any third party relationship that will impact the development, sale, and marketing of an alcohol beverage product:

Specification of detailed services to be provided with respect to production, labeling compliance, bottling, shipment and possession;

Compensation for such services and ultimate ownership of product formulas, trademarks, labels and brands;

Termination clauses and governing regulations that impact contract termination rights pursuant to state franchise laws where applicable;

Marketing and product promotion responsibilities including specified program targets; and

Ownership of marketing materials and data.

Of course, any proposed arrangement or contract should be reviewed by counsel in the state in which the business is being conducted prior to consummation of any relationship, as there are various key components to such contracts. Again, starting any new business can be tedious, costly, and time consuming. An alcohol related business adds an extra layer of complexity due to the dual federal and state regulatory framework that governs the industry. Therefore, seeking added assistance at inception, even if that means engaging in a temporary relationship with a sourcing facility or importer, can be a valuable strategy based on intended business model and future long term goals.

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Marbet Lewis focuses her practice on the laws governing the alcohol industry and the manufacture, importation, and sale of alcohol beverage products. She represents clients in all aspects of alcohol business licensing, national alcohol licensee mergers and acquisitions, negotiation of asset purchase agreements and required alcohol use provisions, license transfers and licensing due diligence, trade practices, contracting between industry members, industry member relationships, alcohol product advertising and review of marketing agreements, importation agreements, label approvals, and regulatory compliance guidance.

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MINIMUM PRICING

WRITTEN BY DEVON TREVATHAN

he practice of minimum pricing began in Canada as a policy largely focused on fiscal stability. Its cardinal function was to protect the government’s revenue stream from being mangled by price cuts among retailers desperate to outsell each other. That it evolved into an instrument of public health seems almost accidental. The policy that was just greenlit by the British Supreme Court is an evolution of minimum pricing, now called minimum unit pricing, and has been branded as an effort to reduce the abundance of alcohol-related hospitalization and fatalities occurring in Scotland each year. Minimum unit pricing (MUP) hinges on the assumption that increased prices on alcoholic beverages will reduce destructive drinking more effectively than education and awareness alone. At the current cost of 18p, or $0.24, per unit, an adult needs only spend £2.52 to drink the maximum recommended weekly limit of alcohol. Researchers are recommending an increase to 50p ($0.67) per unit to reduce an estimated 120 fatalities and 2,000 hospitalizations per year. But does it actually work? WWW.ARTISANSPIRITMAG.COM

Six other countries currently practice some form of minimum pricing: Canada, some states in the USA, Russia, Moldova, Ukraine, and Uzbekistan. Research from Canadian provinces have made up the bulk of available evidence in the past. Though the policy in Canada is slightly different from the proposed legislation in Scotland—a price proportionate to the actual volume of the liquid in a drink compared to the alcohol-by-volume—proponents of MUP have argued their similarities are such that effectiveness in Canada is a good indicator of success in Scotland. Perhaps the most cited source by those willing MUP into existence is Sheffield University’s Sheffield Alcohol Policy Model, which used econometric and epidemiological assessments to estimate the outcome of minimum unit pricing. Their conclusion is that MUP targets the most harmful drinkers who often exist on lower incomes, which has inspired other countries to take notice. There is already some urging of the Irish government to implement policies similar to MUP, and the Welsh government announced its Public Health Bill just three months back, which

Minimum unit pricing

hinges on the assumption that increased prices on alcoholic beverages will reduce destructive drinking more effectively than education and awareness alone. But does it actually work? strives to address health issues related to the consumption of excess alcohol. Today, 29% of women and 38% of men regularly drink above the recommended limit, and the UK National Health Service is spending upwards of 2.7 billion pounds to treat problems related to alcohol. It was because of this enormous burden on the state that Scotland decided to act. They are hopeful that minimum unit pricing will offer a solution to reverse the nation’s difficult relationship with drink. Alcohol abuse is not just a dark mark

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on the UK, it exists in countries all over the globe, though other places have chosen to handle the problem in different ways. 12.7% of American adults meet the criteria for alcohol abuse disorder. The CDC expects 88,000 people will die each year from alcoholrelated illnesses, and while our neighbors to the north implemented minimum pricing years ago, we have relied on a minimum age restriction to control dangerous drinking in a portion of our population. The Federal Uniform Drinking Age Act established 21 as the minimum legal age in 1984. Any state that did not enforce the minimum legal drinking age of 21 would lose a sizeable chunk of their transportation funding. Like minimum unit pricing, this was not easy to pass into law and faced a lot of backlash when it was first introduced. Age restrictions were originally a tool used by advocates of the temperance movement in their campaign to outlaw all drinking. Following annulment of the 18th Amendment in 1933, age restrictions were established and maintained by states individually. It wasn’t until encouragement of the 26th Amendment at the time of the Vietnam war that a majority of states lowered their legal age of purchase to 18, following the logical argument that if a young person can fight abroad for their country and vote for their representatives, why can’t they buy a beer? But times change, and as America crested the decade of Generation X and the Reagan administration, legislation was passed to raise the legal age of possession to 21 across the country. This was largely a result of the wildly successful Mothers Against Drunk Driving (MADD) campaign and the President’s general attitude toward mind-altering substances he deemed as criminal. Intervention for problem drinking became a primary mission, with special attention paid toward understanding the drinking habits of youths and adolescents. The MADD campaign honed their focus on underage drinking even more so. Though some states allowed those under the age of 21 to legally drink with their parents, the vast majority of individuals denounced adolescent drinking outright. This public trend toward consumption has withstood the last 30 years with ever-growing resolve. New studies like the one titled “Adolescent Brain Cognitive Development” (ABCD) are underway, exploring the effects of alcohol on a young person’s brain with genetic, behavioral, and neuropsychological analyses. Some, however, question the success of our prohibitive measures. Following the initial decision in 1984, there was a visible decrease in alcohol consumption: 19% over seven years. Consequential declines in motor vehicle crashes and adverse outcomes such as unintended births were also observed. The policy seemed to be effective in the years following its establishment, however little research has supported its intended outcomes recently. The US still struggles with deaths related to alcohol abuse in persons under the legal drinking age—the CDC estimates 4,300 young people will die this year, and motor vehicle crashes have not dropped significantly since the late 80s. It’s easy to pretend that the rules put in place will never be broken, but it’s far from realistic. Whether or not the US will revisit the legal drinking age to try and reconcile it with the information currently available is a valid inquiry, but it’s clear that their methods

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of controlling dangerous drinking have not always been effective. It’s a wonder, then, that America has not turned toward legislation implementing minimum pricing across the country. Currently 17 states and jurisdictions have adopted some form of the “Control” model. They control the sale of distilled spirits, and possibly wine and beer, at the wholesale level—similar to a minimum price—or they only allow purchase at government-owned outlets. There is a rolling sea of variabilities within these states in regards to their application of the model, but they typically sell liquor at a higher price and have a smaller selection. These states often feel pressure to privatize, and in 2012, Washington did just that. For the remainder of control states, however, they boast two negative outcomes that prevent them from making that decision: loss of state profit and increase in dangerous drinking. Evidence of the second objective does exist to some extent. States that have a retail monopoly over spirits observe an average of 14.5% fewer reported instances of alcohol consumption among high school students. Whether this is because of reduced access, less aggressive advertising, stricter enforcement by control agencies, or increased price is unknown. According to NIAAA’s 31st annual consumption report, New Hampshire consumes the most total alcohol per capita in the country. It also happens to be a control state, selling wine and liquor from state-owned operations only. Of the 10 states that drink the most alcohol in the United States, three have retail monopolies in place. Does minimum pricing within the control states lessen dangerous drinking? Current evidence makes it seem unlikely. The Scotch Whisky Association has brought a case against MUP to the Supreme Court in London. They are fighting tooth and nail to reverse the decision, arguing that the original ruling clashes with European law and that increased taxes would be a more flexible alternative. They claim that minimum pricing is the equivalent of a trade barrier and could have serious ramifications on the industry. Though the architects of the MUP bill claim that their directive is to go after cheap, high-alcohol spirits and ciders, the nature of the industry is such that taking a dig at their sales will ultimately affect the other operations owned by those entities, like many of the beloved Scotch whisky labels, not to mention all other producers. As we can see in the case of the United States, the positive outcomes of minimum pricing are dubious. If the aim is to save lives, then wouldn’t a comprehensive educational program and addiction support be more beneficial? The doubts that cloud minimum pricing are difficult to address and not likely to cease before this policy is brought up for renewal in six years. Perhaps governments should take into consideration the views of producers; surely they would have something to say regarding the laws that govern their livelihoods. While that and many other questions remain unclear, there is one thing I know for certain: our appreciation for alcohol isn’t going away anytime soon.

Devon Trevathan is a writer based out of Nashville, TN. She loves spirits that are older than she is, grower-producer style, and dogs.

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THAT WESTERN (Pennsylvania) SPIRIT WRITTEN BY JEFF CIOLETTI

Mongohela Rye has re-entered the whiskey lexicon. But what exactly makes it tick?

s whiskey drinkers get better acquainted with rye—its growth continues to surge in the double digits—they’re ready to take their appreciation to the next level. Consumers have recognized that not all ryes are created equal and are eager to explore stylistic nuances within the category, particularly those that are regional in origin. That’s good news for some distillers in Western Pennsylvania that have been reviving Monongahela Rye, the style that came to define their region in the late eighteenth and early nineteenth centuries. The rye whiskeys produced in Western Pennsylvania at the time were considerably more robust in character than those produced in other major rye-distilling states like Virginia and Maryland, with a pronounced rye grain aroma, fuller mouthfeel and striking peppery spice elements. “Monongahela Rye was born out of necessity,” says Meredith Grelli, co-founder of Pittsburgh-based Wigle Whiskey, a distillery on the forefront of the Monongahela revival. “The Monongahela Valley and River in the 1790s was the frontier. It was the edge of the country as people moved westward and settled in Pittsburgh.” Those early residents farmed rye, brought by German immigrants because of its resilience in colder temperatures. The distillate they made from the grain became their currency. “Bringing whiskey across the Allegheny Mountains was certainly easier than bringing 1,300 pounds of raw grain,” Grelli points out. “Rye whiskey became their livelihood and very much a part of the regional identity and everyday lives here. At its height, one in 10 people were producing whiskey.”

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Wigle actually took its name from one of those people, late eighteenth-century Pennsylvania distiller Phillip Wigle. Wigle famously was sentenced to hang, but was later pardoned by President George Washington, for his role in the Whiskey Rebellion of the 1790s. Eventually the Monongahela style all but vanished as Western Pennsylvania moved on economically. While Kentucky maintained its distilling tradition, the greater Pittsburgh area had shifted toward coke and steel production. In fact, distilling, in a sense, laid the groundwork for those industries, as its how the robber barons learned about manufacturing and infrastructure. One of the most famous names in rye distilling has direct ties to the coke industry. Henry Clay Frick, grandson of distilling icon Abraham Overholt— namesake of the brand now known as Old Overholt—leveraged his own interest in the family whiskey-making business to invest in coke in the late nineteenth century. By the time he died (somewhat coincidentally in December 1919, the eve of Prohibition), he had become one of the wealthiest individuals in American history. Prohibition took an obvious toll on the style, although bootleggers tried to doctor lesser alcohols to approximate its famous flavor, and it pretty much vanished entirely a few decades after Repeal. For Wigle, reviving Monongahela rye has meant figuring out what exactly makes the style tick. A few years ago, the distillery initiated a research project to help do just that. Wigle procured rye from five different farms from across North America and made a batch of whiskey for each different grain source, reducing or eliminating as many operational variables from batch to batch. The Wigle WWW.ARTISANSPIRITMAG.COM

team then analyzed each of the resulting spirits twice, once as raw distillate and once after two years in barrels. “And we did find that there were some pretty interesting differences with essentially the same whiskey, made by the same distillers on the same stills, [aged] in the same barrels and stored in the same place,” Greill reveals. “The largest variable was where the rye came from.” Isobutanol, the compound that delivers distinctly fruity elements and flavors that people generally associate with rye bread, was particularly assertive in the Pittsburgh batch. In the batch made with Canadian rye Wigle sourced from the same farm that grows Whistlepig’s grain, the presence of isoamyl acetate— known to impart some banana-like elements—was much more pronounced. “Historically, Pittsburgh rye has been described as spicy and robust, so maybe there is something to the notion that there’s something in the grain that’s making it like this—where it comes from, the soil it lives in,” Grelli says. In other words, terroir comes in to play for rye, much as it does for grapes in wine. But that’s just one of the contributing factors. The method of distillation also plays a role in the whiskey’s ultimate character. “As we studied [Monongahela Rye], we understood the distillation to be fairly aggressive,” Grelli offers. “When we had the still built, we separated the column from the still so we could do a true alembic. The distillate never touches the column and that is to preserve as much of the spicy, earthy quality from the grains as we can.” She says the distillation technique is a bit “more conservative” for Wigle’s non-rye whiskeys, such as its Straight Allegheny Wheat and Pennsylvania Wheat. Wigle’s portfolio includes several ryes, including its most assertive rye expression, Deep Cut. Co-founder Alex Grelli, Meredith’s husband, says that the distillery targets a mash bill of 70 percent rye, 16 percent wheat and 14 percent malted barley for Deep Cut, as well as a lower overall distillation proof. The distillation retains a more significant quantity of tails to help enhance the whiskey’s robust flavor and full body. Sometimes, the higher concentration of alcohols comes from mixing back in heads and tails from previous batches. “To make this determination and selection, we’ll taste through a variety of different lots and barrels to identify which barrel we believe fits this quality in addition to the overall distillation proof,” Alex Grelli explains. Deep Cut batches are all singlebarrel releases, so the flavor profile might vary slightly from batch to batch. Overall rye whiskey volume in the U.S. is considerably smaller than that of bourbon. But as distillers like Wigle continue to rediscover their local roots, Pennsylvania may soon rival Kentucky as a destination for whiskey pilgrims.

Jeff Cioletti is the editor at large of Beverage World Magazine, creator of The Drinkable Globe website, and hosts the web series, The Drinkable Week. WWW.ARTISANSPIRITMAG.COM

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QUALITY MANAGEMENT

AND PRODUCTION DOCUMENTATION Q

uality Management (QM) is a tool utilized by distilleries that want to combat inconsistencies. When inconsistencies carry through to finished product, customers are lost. No one wants to buy a bottle from one batch, fall in love, and purchase another bottle only to find that it is not the same spirit inside. Large distilleries with big budgets have a team dedicated to just QM. Small distilleries are at a disadvantage because of lack of personnel, which means they need to be much more creative with their resources. However, their advantage is that it is harder for something to slip through the cracks with a small team as opposed to a long chain of command. Distilleries of all sizes must be diligent in all regards to eliminate or minimize inconsistencies. QM has two sides that cover all aspects of quality: Quality Assurance and Quality Control. Quality Assurance (QA) involves preventative actions and is centered on processes, not products, while Quality Control (QC) is reactive and solves problems directly related to released products. Both QA and QC make up a healthy Quality Management program as the preventative and reactive measures that handle whatever happens in production. Elements

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of QM like good processes, good production documentation, well trained employees, and a broad sensory analysis program cannot be divided evenly into either QA or QC. Each of these elements can be applied to both QA and QC. A complete Quality Management program consists of four components: good processes, good production documentation, well trained employees, and a broad sensory analysis program. This article focuses on the second program component: good production documentation.

PRODUCTION DOCUMENTATION: WHEN PAPERWORK IS THE ANSWER There are stages at every point of the distillation process that can be problematic if handled without caution and without the proper information. Even something as simple as grain intake can lead to future problems if something is done differently, or if differences are not recorded. A simple log that includes sections for date, type of grain, quantity of grain, batch information, and observations is a great tool to have. If, for instance, it's found that any grain has been recalled, simply consult the log to

WRITTEN BY MOLLY TROUPE

determine where that grain went. Stages that benefit from paperwork include: : grain, water, yeast, equipment cleanliness, yeast activity, low wines, high wines, white whiskey, whiskey while aging, finished whiskey, and bottling. These stages all have QA and QC aspects and call for good production documentation. While there is often the need to record for the TTB or other legal reasons, it's also important to collect independent records for internal use. Good production documentation has many benefits, including allowing for the collection and tabulation of data, creating an environment of accountability, and creating a chain of response.

COLLECTION AND TABULATION OF DATA Data is one of the most valuable assets a distillery can have and is one of the most important tools for both QA and QC. Collecting data on measurements such as pH, Brix readings, low wine proof, and barrel shipments helps create standards. For example, monitoring the pH of the wash from the beginning to the end of fermentation helps identify what is normal for your equipment, grain, yeast, and water

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in combination. If the pH is unusually high one day, then it can be noted as abnormal and an attempt can be made to solve this problem. The tools that worked to solve the issue are included in the data and if this problem arises again, it can be solved in the most effective and consistent manner. Having a great deal of data collected and analyzed for production means that when problems arise they are solved using data, not just gut feelings. Analyzing data allows for the visualization of results. It's not just staring at numbers or words; it's putting meaning behind them. This is how problems are spotted and solved.

ENVIRONMENT OF ACCOUNTABILITY Once a distilling team expands beyond a team of one, there needs to be an environment of accountability. Having studied in numerous chemistry labs, human error was not a viable excuse for determining why an assignment went wrong. This is not the case in the distilling world. Human error is unavoidable. Every distiller has, at one point, left a valve open when it should have been closed or forgotten to turn on the still when starting a run. If you haven't, it's only a matter of time. Mistakes happen, but the difference between the people who learn from their mistakes and those that don't is largely due to documentation. Writing things down allows a distiller to process mistakes, to track them, and to see what mistakes actually cost. This isn’t necessarily monetary mistakes, at least not initially.

These mistakes affect consistency and documenting these mistakes allows for proper procedural adjustments to be made and also documented. Continued documentation leads to the creation of a chain of response.

CHAIN OF RESPONSE A chain of response can only be created in a system where data is analyzed. Once data is analyzed, improvements are developed and problems are solved. The next step is making a guide. This guide is the chain of response, and it is thick with the knowledge that can only be gained by doing. As distillers know, there is only so much that can be learned from brewing and distilling books. They can give great background knowledge and a lot of helpful information, but they cannot teach you the very special way to optimize still running time or the best way to prep a barrel for filling. They cannot completely tell you how to run your distillery. Every chain of response will be unique, as it is tailored to each facility to create good processes. This document contains all the data information, tidbits, and tricks that have been gained while in production. It is a great refresher tool and training tool. It helps with creating good processes and training good employees. Good processes can only be developed with the information that is learned from consistent documentation and studying of data. Imagine you were unexpectedly incapacitated and there was a need to immediately hire someone to replace

you. Keeping up with documentation and recording all valuable information gives anyone operating your facility an incredible insight and a fighting chance to maintain a consistent product. Employees can only be trained to work to the best of their ability when they are presented with a well-informed guide. Even having previous experience running a distillery does not completely translate to another facility.

CONCLUSION Distilling is a beautiful blend of art and science. The art is generally the fun part, while the science often involves paperwork. As most chemistry professors would say, it’s just messing around in a lab unless you are writing it down. Paperwork and documentation is important and more is needed than what the TTB requires for the distillery to stay in compliance. Good production documentation is required in the fight for consistency, and it can be easily accomplished with a small production team or a single person. An effective QM program is made up of good production documentation which, in turn, will lead to good processes and well trained employees.

Molly Troupe is currently the master distiller at Freeland Spirits, located in Portland, Oregon. Her previous experience includes both Oregon Spirit Distillers as the production manager and lead distiller and at Hood River Distillers, Inc, as a quality control assistant. Along with her experience, Molly has an M.S.c in Brewing and Distilling from Heriot-Watt University and a B.S. in chemistry from Southeast Oregon University.

P R O V I D I N G R Y E to the distilling industry for over 50 years.

Brooks Grain Improving the quality of life with grain.

WWW.BROOKSGRAIN.COM WWW.ARTISANSPIRITMAG.COM

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ANNUAL AMERICAN MALTING BARLEY ASSOCIATION LIST SHOWS

INCREASED CRAFT VOICE

WRITTEN BY GABE TOTH

RECOMMENDED MALTING BARLEY VARIETIES AMERICAN MALTING BARLEY ASSOCIATION 2018

TWO-ROWS AAC Synergy

Hockett

ABI Voyager

LCS Genie

AC Metcalfe

Merit 57

CDC Copeland

Moravian 37

Charles*

Moravian 69

Conlon

ND Genesis

Conrad

Newdale

Endeavor*

Pinnacle

Expedition

Propino

Explorer

Scarlett

Harrington

Wintmalt*

SIX-ROWS Celebration Innovation Lacey Legacy Quest Thoroughbred* Tradition

he American Malting Barley Association’s annual list of approved barley varieties, released at the beginning of January, continues the trend away from six-row barley, traditionally used for its higher enzyme content, and towards more small-production boutique two-row varieties as craft producers make themselves heard. The list represents the AMBA’s efforts to ensure quality and consistency in the malt industry. AMBA, whose members have traditionally consisted of barley growers and maltsters, maintains the list of recommended varieties based on lab data, feedback from membership, and usage, according to Scott Heisel, vice president and technical director. “For the most part, our malting members are malting 99 percent of the barley malted in the U.S. Our list covers most all of the barley that’s being grown and malted,” he said. This year’s list sees two malts dropped and three added, based on lab data, feedback from membership, and usage, according to Heisel. While most of that is made up by a small handful of varieties—such as Tradition, CDC Copeland, and AC Metcalfe—that are farmed at industrial scale, others are grown by small local outfits. One of those varieties is Newdale, which was bred in Canada, grown in Maine, and added to the recommended list this year. “One of our members uses it,” Heisel said, adding that the change was a result of the user’s

* winters

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engagement with AMBA. “For a long while, most of our members were the only ones malting barley. There’s a few on our list that are just for a couple of craft brewers who are interested in them. Even if it’s a niche variety, we like to keep it on.” As craft brewing and craft distilling have grown, he said, interest in AMBA has mirrored it, even among larger players. Brown-Forman recently joined, and a few craft distilleries are now AMBA members. “We hadn’t had a lot of distilling members until fairly recently,” he explains. “Back in 2005, we had seven members. Now we have 80. They [the members] want a voice in what varieties are getting out there and what they look like,” Heisel said. In addition, planting a listed variety helps growers access insurance if they don’t have an agreement with a malting, brewing or distilling company. While a variety’s inclusion on the list is not a purely numerical, lab-driven exercise, AMBA does provide specific guidelines, such as plumpness, germination rate, protein levels, extract, color and enzyme levels. Breeders provide early-generation samples of new strains to AMBA, which provides pilot material for members to try. “We want to make sure you can make good beer or whiskey with it,” Heisel said. “The industry’s been testing barley since Prohibition. Prohibition set everything back,” he said, explaining that brewers and distillers found themselves using inferior feed barley in an unregulated market. “That’s when the industry got serious about testing new lines and making sure they’re suitable. We have guidelines for breeders, these are our ideal characteristics.” While some members may lobby for certain strains, continued usage is necessary to stay on the list. Heisel pointed out that Meredith, which was dropped from the list this year, looked like a solid malt for inclusion but wasn’t embraced by maltsters. “When something drops off and nobody’s using it any more … they die of old age, sort of. It looked like a great variety, but it died because it didn’t malt very well,” he said. Many of the malts that have dropped off over the years are sixrow varieties. This year’s recommended list includes 22 two-row strains and seven six-row strains. “Ten, fifteen years ago we were more even between six-row and two-row. Our list has gotten longer, so there’s definitely more tworows on the list,” Heisel said. “Six–rows are getting more phased out.” The needs of distillers will continue to play an increasing role for AMBA. Heisel said the next step with regard to the industry will be to “review our guidelines and revise as needed to address not only the malting quality needs of grain distillers, but also the needs for malt distilling.” “Growing our research and programs will require growing our distilling membership.”

Visit www.ambainc.org for more information on the American Malting Barley Association.

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SUSTAINABLE DISTILLING at MARBLE DISTILLING COMPANY W R I T T E N & P H O T O G R A P H E D B Y CARRIE DOW

hen Connie Baker attended the Dry Fly Distilling Institute in Spokane, Washington, in January 2011, she was looking for a chance to have some alone time away from a busy life in Carbondale, Colorado. She didn’t plan on a life-changing experience. “I really loved vodka and had been reading a lot. I had just read a marketing book on Smirnoff and Absolut and that is my background. I never thought it was going to become this,” she says

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as she changes out a hose from her 250-gallon finishing still named Hazel. “My mom always made this coffee liqueur around the holidays. When I walked into that [Dry Fly] distillery, you know your nose and your perceptions can take you back somewhere and can be so powerful. When I smelled those fermenters, it wasn’t necessarily a light switch, but I definitely felt something. I called my husband and said, ‘I’m going to open a distillery’.”

However, opening Marble Distilling Company and maintaining her belief of environmental stewardship came into conflict . Her Spirit Liaison, business partner, and long-time best friend Michelle Marlow remembers that time well. The two already owned a medical communications company with offices in New York and Colorado. Baker wanted to change careers but was conflicted. “As Connie was working on the business plan, she’s touring all these distilleries and was appalled at how much water and energy is wasted. Not only how much it takes to make, but how much is just flushed. Water goes down a drain at 90 degrees Celsius, super high temperatures, and some distilleries even flush their stillage. She said to me, ‘I want to make spirits, but I don’t want to ruin the environment by doing it.” To that end, Baker built sustainability into her business plan. She purchased

American-made equipment, sourced ingredients as locally as possible, and implemented a water reclamation system that heats and cools the building. And stillage? It all goes to a local ranch to feed cattle and pigs. It’s a process that Baker and Marlow call Grain to Glass to Ground. “There are a lot of great spirits out there,” says Marlow, “but our sustainability initiatives are really our biggest differentiator.” The distillery’s website has slogans and hashtags, like #drinksustainably and #liquidchange, however, this distillery walks the walk starting with ingredients. Most grains come from only a halfmile away. When Baker started in 2015, she sourced her grains from Colorado Malting Company in Alamosa, Colorado. However, that wasn’t close enough. After partnering with a local familyowned ranch to take spent grains for their cattle, a family member looking to diversify approached her about growing grains as well. Recognizing an

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opportunity, Baker now has Nieslanik Beef growing the distillery’s soft white wheat, rye and triticale, a wheat/rye hybrid. “It reduces our carbon footprint even more,” says Marlow. However, Colorado Malting still provides the malted barley. For liqueurs, Baker uses beet sugar from Wyoming, but Marlow says they are working with the Colorado Department of Agriculture to secure a Colorado source. The distillery’s equipment is all American-made, but that didn’t happen easily. Baker couldn’t find a U.S.-built mash tun. She called Bennett Forgeworks in Ridgeway, Colorado, a brewing equipment manufacturer, thinking the leap to distilling wasn’t that far. They originally turned her down, but Baker had drawn her own equipment plans (she’s also a general contractor) and took them to the company. Realizing they could make what she needed, Forgeworks built the distillery’s mash tun and two stainless steel fermenters. Baker selected her open cypress fermenters and stripping stills from Confederate Stills of Alabama, and Baker’s pride and joy Hazel was built by Vendome Copper and Brass in Louisville, Kentucky, to her strict specifications. While any distiller could have this equipment and even the ingredients, Baker had a vision to make her products stand out from others through her main

ingredient, water. Baker lives in Marble, Colorado, famous for the Yule Marble Quarry, the quarry that supplied fine white marble for the exterior of the Lincoln Memorial and the Tomb of the Unknowns in Washington DC. Not only is Marble what Baker named the distillery, but the local tap water is some of Colorado’s finest. Baker spoke with the man who installed her home’s water well and learned that the natural marble in the area filters the water from the Crystal River before it enters the house. Baker says the stone adds a unique minerality without stripping flavor. “Delicious water, delicious vodka,” Baker smiles. She brought this into the distillery through a crushed marble filtration cylinder next to Hazel. Most importantly, Baker also found a way to keep the water from going down a drain. “Connie put together a team of 24 engineers to come up with a solution. They came up with the WETS System— Water, Energy, Thermal System,” explains Marlow. “It’s essentially an aboveground geothermal system. We reclaim, recycle, and reuse 100% of our process water to heat and cool our building. Last year we saved over 4.1 million gallons of water and harvested 1.8 billion BTUs of energy. That’s enough energy to power 20 homes annually.” “The system is made with all off-the-shelf parts,” she

continues. “We share it readily with anybody. We want people to do this. We purposely put the storage tanks out back so people could see it.” Marlow shows off the two 5,000-gallon water storage tanks behind the building, one painted blue for cold water and the other red for hot. “If we can do that in our small urban distillery on a postage stamp lot in downtown Carbondale, imagine what could be saved if the big guys employed this technology,” ponders Marlow. “As far as we know, we are the only Zero Waste distillery in the world.”

Marble Distilling Company is located in Carbondale, CO. For more info visit www.marbledistilling.com or call (970) 963-7008. WWW.ARTISANSPIRITMAG.COM

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DISTILLERS GRAINS POTENTIAL FOR PROFIT, BUT DUE DILIGENCE REQUIRED WRI TTEN BY KURT A. ROSENTRAT E R , P H . D .

hat an exciting time to work in the alcohol industry. Demand for alcohol continues to increase, the number of distilleries continues to grow, and many new, innovative products hit the market every year. But a growing problem that many companies in our industry need to tackle is that of coproducts: the nonfermented materials. Since fermentation of cereal grains consumes the starch, all of the other chemical components (proteins, fats, fibers, minerals, etc.) are left after fermentation, and must be dealt with. Indeed this is a conundrum, especially for smaller distilleries. As discussed in previous articles, the large-scale distilleries and biofuels plants separate these materials, dewater them, and sell them as livestock feed—either in wet or dried form. These are known as distillers grains. Most distillers grains in the U.S. are fed to beef, dairy, swine, and poultry. These approaches could work for your company as well.

POTENTIAL REVENUES Can you really make money selling these coproducts? How much are distillers grains worth? Dried distillers grains are sold in the U.S. for approximately $120-150/ tonne, but this is impacted by domestic demand as well as export demand (primarily the Chinese market). Wet distillers grains will generally sell for about half that of dried distillers grains. Giving away your distillers grains (as many small companies do) is an unfortunate loss of significant income for your distillery. Why are spent/distillers grains valuable coproducts? Primarily because they contain approximately 3x more protein (on a dry basis) compared to the raw cereal grains that go into your mash. This is true for wheat, corn, barley, or any other grain that you use to make your alcohol. Cost, of course, is a key consideration for installing and operating systems for successful utilization of your coproducts. I discussed costs for the dewatering of spent grains in an article last year. Depending on the size of your operation, you might want to consider installing a

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dryer as well. When considering a drying system, capital cost is important, but so are operating costs. One of the largest categories of operating costs for a dryer will be the fuel that is used to evaporate water, so that your wet distillers grain becomes dried distillers grain. Keep in mind that you can install dryers that use either natural gas or propane (electric and steam can be used as well, but are not as common). Natural gas contains approximately 1010 (U.S. average) BTU/ft³, and sells for approximately $15 / 1000 ft³. Propane, on the other hand, contains about 91,000 BTU/gal, and sells for about $2.5/gal. If your dryer is designed to operate between 120-160ºF, then it will take about 1500 BTU to evaporate 1 lb H2O, but if your dryer operates above 160ºF, then it will take approximately 2200 BTU/lb H2O. Depending upon your location, it may not be your choice as to which you are able to use. Normally, natural gas and propane will be less expensive than either electrical drying or steam drying.

MARKETING Another key aspect is marketing. Just because you have coproducts doesn’t necessarily mean that you will be able to get them to livestock producers, or that the producers will demand your products. You will have to actively market your coproducts. Benefits that livestock producers could gain from using your coproducts include better quality protein, more digestible protein and fiber, and the probiotic effects of yeast proteins. Additionally, all nutrients other than starch are concentrated by approximately 3x compared to those found in the raw cereal grains. You must promote your products to sell them—they won’t sell themselves.

FOOD & ANIMAL SAFETY There are other things to keep in mind as well. We are entering an era with an increased emphasis on human food safety, and thus on animal feed safety. After all, feed ultimately becomes food for people (i.e., meat, milk, eggs) when fed to livestock and other food-producing WWW.ARTISANSPIRITMAG.COM

animals. During the past few years, the Distillers Grains Technology Council (www.distillersgrains.org) has reviewed and commented upon two key components of the Food Safety Modernization Act (FSMA), including the Current Good Manufacturing Practice and Hazard Analysis and Risk-Based Preventive Controls for Food for Animals (FDA-2011-N-0992), and the Sanitary Transport of Human and Animal Food (FDA-2013-N-0013). FSMA has expanded the scope of the U.S. Food and Drug Administration’s oversight of the animal feed industry. If you are not familiar with FSMA, and if you sell your coproducts to livestock producers, you are under their jurisdiction and should review the FDA’s documentation at www.fda.gov/FoodRegulation/FSMA/. We must, therefore, make sure that we do our due diligence when it comes to the products we make and the processes we use to manufacture them, being cognizant of the relevant regulations. It is your responsibility to ensure that you are compliant with regulations. To be sold in the U.S. marketplace, all feed ingredients must meet specific, delineated legal definitions. These definitions are published each year by the Association of American Feed Control Officials (AAFCO). Those relevant to the beverage alcohol industry are shown in Table 1. Current definitions cover both wet and dry feed products. Most were developed and approved for the beverage alcohol and biofuel industries many years ago. They may have been on the books for some time now, but they still apply to the feed products that you make and sell. The AAFCO Official Publication is printed annually, or you can subscribe to the online version which is updated continuously. See www.aafco.org for more information. All alcohol production facilities produce nonfermentable materials. If you make grain-based alcohol products, then you will likely produce traditional distillers coproducts, and more than likely your coproducts are already defined appropriately—so you will be able to legally sell them. You will, however, still have to provide a guaranteed analysis and feed tag. But, if are you making innovative alcohol products, perhaps you will be producing a new type of coproduct. If so, does this fall in line with one or more of the existing definitions? You will have to review the definitions to decide. If it does not, then you must develop a new definition (if you want to sell this new coproduct in the U.S. market, that is).

COMPLIANCE In order to legally sell a new coproduct, the new feed ingredient must be proven safe for its intended use. There are three mechanisms to gain authorization for a new feed ingredient in the U.S.: the AAFCO definition process, the Food Additive Petition process, or the

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generally regarded as safe (GRAS) determination with voluntary notification. All three of these mechanisms for approval can be very lengthy, ranging from one to three or more years, and each of these paths requires extensive documentation about your ingredients safety. Although it is dependent on the product and company preference as to which path to take, most follow the official AAFCO process to establish the legal identity and get a published definition in the AAFCO official publication. “A Guide to Submitting New Ingredient Definitions to AAFCO” is available on the AAFCO.org website. In this process, companies work with an AAFCO investigator, who also will work with the U.S. Food and Drug Administration to develop the definition and prove the safety of the ingredient. After the initial review, the proposed feed ingredient definition package will be submitted to the FDA Center for Veterinary Medicine, where the supporting scientific information is assessed, including manufacturing information, ingredient safety, and utility data. Once completed, the FDA will issue its recommendation to the AAFCO Ingredient Definition Committee and, if all goes well, will result in an official AAFCO definition for your coproduct. Congratulations, you can now sell your product legally in the U.S! If, however, the FDA determines the new ingredient may result in human safety concerns, the company must submit a food additive petition to the FDA. Again, extensive documentation is required. After this process, if the ingredient is determined to be safe, the FDA will issue a regulation under section 21 of the Code of Federal Regulations (21 CFR). A third approach is to establish that the ingredient is safe for the intended use (i.e., beef, dairy, swine, or poultry) via a GRAS affirmation. GRAS is for specified uses only and does not imply approval for all applications in animal feeds. If general recognition standards, often defined as published information in peer reviewed journals, can be met, the GRAS determination can be submitted under the voluntary notification procedures, either through self-affirmation or the FDA's GRAS notification program. Being proactive is important when developing and commercializing new processes and products. There is much profit to be made in sales of non-fermentable coproducts, but there is considerable work involved as well.

Kurt A. Rosentrater, Ph.D. is executive director of Distillers Grains Technology Council and faculty member at Iowa State University in the Departments of Agricultural and Biosystems Engineering, and Food Science and Human Nutrition. For more information visit www.distillersgrains. org or call (515) 294-4019. 127

CRAFT DISTRICT DEVELOPMENT I

n Tumwater, Washington, beer has always been a source of local pride. For generations, this small city just south of Olympia was the home of Olympia Brewing, one of Washington’s most famous and historic beer brands. Last year, Artisan Spirit reported on the progress of a new collaborative initiative between the City of Tumwater, South Puget Sound Community College, Washington State University, and a host of other public and private partners with the goal of revitalizing the million square foot former Olympia Brewery into a regional hub for the craft beverage industry. Termed the Center for Brewing, Distilling, and Cider Making Excellence, the project aims to create a vibrant hub of commercial space, education, professional training, business incubators, and other support to help bring beverage production back to the south Puget Sound. When the Olympia Brewery closed for good in 2003, leaving behind an empty historic production facility and a beershaped hole in Thurston County’s heart, it marked the end of an era for Tumwater. Yet for the team behind the Center for Brewing, Distilling, and Cider Making Excellence it also marked the beginning of an exciting new chapter. “We know the mega brewery is not coming back,” says John Doan, City Administrator for the City of Tumwater. But that doesn’t mean beverage production can’t play a

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major role in Tumwater-Olympia’s economy again, just that it might look a little different this time around. What does that mean? “We talk a lot about the Walla Walla model,” says Heidi. “That partnership between workforce development, agriculture, industry, the community, their port, all that public and private investment. Years ago, the branding of Walla Walla was a prison. Today, it’s wine, arts, and culture.” It’s an ambitious project, and since its launch in 2014, the collaborative team behind the venture has seen its share of challenges. Yet the past year has brought significant new progress in the development, including the establishment of a new Craft District overlooking the old Olympia Brewery with purpose-built commercial space designed especially for beverage producers, food businesses, beverage industry education, and other members of the food and beverage economy. Here’s an update on what’s new at Tumwater’s Center for Excellence.

PRESERVE AND RESTORE Repurposing the old Olympia Brewery facility hasn’t been easy. Aligning multiple property owners, coordinating with potential developers, and addressing the urgent maintenance needs of an aging structure have taken longer than expected. “The question has been, how do we incentivize the redevelopment of a million

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square foot space?” says John Doan, City Administrator. “It’s an expensive project, and one the city can’t just afford to throw money at.” That doesn’t mean the old facility is coming down—it just means the group hasn’t found the right set of partners yet. In the meantime, emergency repairs on the brew house were completed in 2017, and in early 2018 the Washington State legislature approved a $500,000 allocation to help the city permanently restore the landmark brewery tower.

CLASS IS IN SESSION For a highly technical field, the American craft distilling industry has long suffered from a dearth of professional training and education opportunities, especially when it comes to instruction that incorporates academic principals as well as real-world professional experience. As a component of the Center for Excellence, South Puget Sound Community College has developed a new two-year Associate’s degree program in Craft Brewing and Distilling. John Doan says the degree curriculum was specifically designed to supply the industry with the skilled workers it needs and position students to jump directly into work or opt to continue their studies with a four-year degree from a university with a full fermentation sciences program, like Washington State University, Oregon State University, or Cornell WWW.ART ISANSPI RI TMAG.CO M

University. Plans call for the first cohort to start in the fall of 2018, and as of publication, about half of the 30 available seats have been filled. “There’s such a need for this kind of program that it has a potential national and international draw,” says Heidi Behrends Cerniwey, assistant city administrator and brewery project manager at the City of Tumwater. “With beer, cider, and spirits options—where else in the world can you go to have all those elements?” Partnerships with producers, service providers, and industry experts have been built into the program at every level, and the coursework will provide students with lots of opportunities for handson experience. “We’ve been able to get a lot of people on board,” says Noel Rubadue, dean for corporate and continuing education at South Puget Sound Community College. “We have some local brewers teaching our fermentation science classes, a lawyer who’s also a distiller teaching our legal classes, and some existing business faculty teaching the entrepreneurship classes in the degree.” Some of the hands-on classes will meet in partner spaces, but most will take place at a brand new classroom facility in the Craft District, a new development adjacent to the old Olympia Brewery.

SPACE TO GROW While the collaborative continues working on redeveloping the old brewery for the future, the Craft District development is creating some exciting opportunities for brewers, distillers, cider makers, and food businesses right now. The project is a new build development spearheaded by Regenerative Development Partners, an Olympia-based development company WWW.ART ISANSP IRITMAG.COM

focused on sustainable projects that leverage community strengths. It’s located on property adjacent to the old Olympia Brewery and designed to house a vibrant collection of craft beverage producers, restaurants, food businesses, classrooms for South Puget Sound Community College’s Craft Brewing and Distilling program, a music venue, and other resources for the local craft economy. Plans currently call for the development to encompass about 55,000 square feet, with enough room for another 20,000 square feet to be added in a later phase. Grading and foundation work began in late 2017, and John Peters, president of Regenerative Development Partners, says vertical construction is expected to begin in early 2018. Much of the space is leased or in leasing discussions, but some smaller spaces are still available. “We really see ourselves as a facilitator,” says John Peters, pointing to the collaborative’s long-term work on the concept. “It’s not just a developer coming in with a vision and making the city let us

do it. We couldn’t do what we are doing if they hadn’t been working on this for the last five years.” Plans for the Craft District were designed by Cardinal Architecture PC, a Seattlebased architecture firm that specializes in commercial design for the beverage industry. Architect and principal James Cary says that the project has been created to meet all major craft beverage needs, from permitting compliance to the way customers will interact with the space. A glass wall will give classrooms a direct view into the production floor. Common spaces are designed to help visitors flow through tasting rooms, restaurants, and shops. And details like onsite heat capture, wastewater management, and potentially solar power generation position the development at the forefront of the industry in terms of green design. “To create a project like this that is authentic, commercial, and also a true consumer space that is connected to the neighborhood, it’s an awesome design challenge,” says James. “It’s what you hope to do when you become an architect.” The Craft District has already signed several tenants, including South Puget Sound Community College’s brewing and distilling program, Heritage Distilling Company, a brewery, a cidery, a speakeasy bar, two restaurants, a commissary kitchen space, a boutique cannery, and shops including coffee, gelato, wine, cheese, chocolate, boutiques, and a beauty bar and salon. Spaces are still available, says John Peters, and interested parties can enquire at rdp.peters@gmail.com.

For more in about the Craft Brewing and Distilling Center, please visit www.craftbeerciderspirits.com. 129

ADVERTISER index BARRELS

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106 8, 65, 73, 85, & 91

Thousand Oaks Barrel Co.

119

BARWARE

GRAINS

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Cage & Sons Distilling Systems

6 & 15

Corson Distilling Systems

HBS Copper Stills

Prospero Equipment Corporation

112 & 123

117

Rudolph Research Analytical

Distillery Products

Specific Mechanical Systems

Sterling Cut Glass

110

Vendome Copper & Brass Works

Boelter

117

The Annex by Ardent Mills Brooks Grain L&M Glick Grains

American Craft Spirits Assoc.

American Distilling Institute

INGREDIENTS BSG Distilling

EDUCATION

Loggerhead Deco

GUILD ORGANIZATIONS

Briess Malt & Ingredients Co.

BOTTLE & GLASS DECORATING

49 121

45 6&9

Sethness Caramel Color

102

Brewing & Distilling Educational Services 123

BOTTLE MANUFACTURERS & SUPPLIERS Brad-Pak Enterprises

Moonshine University

7 & 28

Bruni Glass a Berlin Packaging Company

Gamer Packaging

112

Imperial-Packaging Corporation

O. Berk Kols Containers

O-I 7 & 21 Phoenix Packaging

Saverglass

132

Vetroelite

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LABELS Fort Dearborn

7 & 17

ENGINEERING

Impact Print Solutions

Haskell

Multicolor Corp Global Solutions

Wright Global Graphics

Vitok Engineers

8 & 25 46

PACKAGING

ENZYMES & YEAST Ferm Solutions

Fermentis

Lallemand

8 & 11

White Star Yeast by Winemakeri Inc.

114

Liquor Bottle Packaging

PUMPS & HOSES McFinn Technologies

119

REFRIGERATION & CHILLERS

FILLING EQUIPMENT InLine Filling Systems, LLC

116

104

G&D Chillers

7 & 19

CONSULTANTS Spirits Consulting Group Thoroughbred Spirits Group

123

FINANCING

Live Oak Bank

CORKS & CLOSURES 108

Supercap

114

Tapi USA

7 & 131

Distillery Products

CREAM LIQUEURS

Southern Distilling Company

Creamy Creation

114

Ultra Pure

Total Wine & More

5&8 4 30

Great American International Spirits Comp. 72 New York International Spirits Competition 32

TOTES & TANKS Spokane Industries

TRADE EXPOS Mid America Beverage Expo

DESIGN, BRANDING & MERCHANDISING

SPIRITS COMPETITIONS

GNS & BULK SPIRITS SUPPLIERS MGP Ingredients

Flowdesign

GLASSWARE

Paulson Supply

CF Napa Brand Design

RETAILER

2&6 50

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