Artisan Spirit: Winter 2018 by Artisan Spirit Magazine

WINTER 2018

& 2018 MERGERS ACQUISITIONS GETTING CARAWAY'D WITH DILL

CONSUMER DATA A DOUBLE EDGED SWORD

HOW STABLE ARE YOUR SPIRITS

waste not

POMACE BRANDY

Brand Design for the Craft Spirits Industry.

DESIGN FOR PACKAGING, LOGOS, CUSTOM BOTTLES, COLLATERAL, SIGNAGE, WEBSITES & NAMING 2787 napa valley corporate dr, napa, california 94558 t | 707 265 1891 www.cfnapa.com

TABLE of CONTENTS A LETTER FROM THE EDITOR

QUARTERLY GUILD REPORT

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

A NEW SUPREME COURT CASE MAY IMPACT THE FUTURE OF SPIRITS DIRECT SHIPPING

Do current rules overly restrict interstate commerce?

MARKETING BEVERAGE ALCOHOL TO HENRYs 31 Brand Buzz with David Schuemann

OND 35 Lessons learned over six years of distilling’s busy season, October, November, and December

DESCRIBING THE FLAVORS OF RUM

HOW CROZE NEST COOPERAGE TOOK OFF

BUYING THE FARM

HOW TO LEAD A TASTING 202

Making barrels by hand on Michigan’s Lower Peninsula

Black Button Distilling — Farm and Forestry

Advanced techniques

THE BIRD IS THE WORD

Blinking Owl Distillery of Orange County, California

104

PRIVACY & DATA SECURITY 108

BELTWAY BANTER WITH PETE KAMER

Interview between Pete Kamer and Robert Lehrman

BOTTLES THAT GIVE BACK

Supporting charity with every sale

DAVE PICKERELL

Tributes from friends and colleagues

INTO THE WOODS

A look at some alternative woods for experimental spirits

EMPIRE STATE OF RYE

New York’s distillers define their own regional spirit category

HOW OLD IS THAT BOTTLE?

Know if you've found a genuine antique bottle or a good facsimile

KO DISTILLING

51 55 58 61

of Manassas, Virginia

DISTILLING POMACE BRANDY 65 Best practices for working with wineries, optimizing processes, and making evocative spirits

2018 SPIRITS INDUSTRY MERGERS & ACQUISITIONS 68 Year in review

DIAMONDS MAY LAST FOREVER, BUT DO SPIRITS? 74 Shelf life and shelf stability

VIRGINIA DISTILLERY COMPANY

EMPLOYEE COMPENSATION

An American distillery with European roots

Going beyond salary to retain key staff with great benefits

from the COVER

New options for aquavit

A primer

THE CRAFT SPIRITS INDUSTRY IS ALIVE AND WELL... FOR NOW ANYWAY From the American Craft Spirits Association

CARAWAY & DILL 84

Best practices for protecting consumer data

COMING BACK FOR ANOTHER TASTE

111

THE SINGLE TAXPAYER RULE

113

SPIRITS AT THE EDGE OF THE WORLD

115

A TALE OF TWO TOMATOES

118

MEMBERSHIP HAS ITS PRIVILEGES

120

AUSTRALIAN SPIRITS TOUR

122

WINNING AMID CONSOLIDATION AND INNOVATION

126

THE SWEET SUCCESS OF HONEY HOUSE DISTILLERY

129

9 BEST PRACTICES FOR IMPROVING OVERALL EQUIPMENT EFFECTIVENESS

131

PORT MORRIS DISTILLERY

134

BUSTING SOME OF PROHIBITION’S BIGGEST MYTHS

136

ADVERTISER INDEX

138

Cultivate repeat business in your tasting room

A unique challenge

Dingle Distillery of Dingle, Ireland

Meet gin’s most unlikely botanical

Do your homework on cask clubs to generate some up-front cash

Visiting distilleries Down Under

Key considerations for high growth brands (and those that want to be)

of Duragno, Colorado

A systematic approach to improving production

of New York, New York

Setting the record straight on this infamous era

KO Distilling in Manassas, Virginia. Image by Amanda Joy Christensen. See their story on page 61.

american distilling institute

Craft Spirits conference

EXPO

Issue 25 /// Winter 2018 PUBLISHER & EDITOR Brian Christensen CREATIVE DIRECTOR Amanda Joy Christensen SENIOR WRITERS George B. Catallo Devon Trevathan

Margarett Waterbury

CONTRIBUTORS

March 18 through 21, 2019 DENVER COLORADO 140+ Vendors « Breakout Sessions Hands-On Workshops « Gin Summit

watch distilling.com for more information

Brandon Archuleta Renee Cebula Jeff Cioletti Brian B. DeFoe Carrie Dow Andy Garrison Bethany K. Hatef Paul Hughes, Ph.D. Tim Knittel Aaron Knoll Margie A.S. Lehrman Robert Lehrman

Rich Manning Jim McCoy John McKee Kevin O’Brien Shannon O'Neil Benjamin Peim David Schuemann Sarah Nagel Sisisky Marc E. Sorini Gary Spedding, Ph.D. James W. Vermillion III

ILLUSTRATORS Amanda Joy Christensen

Francesca Cosanti

PHOTOGRAPHERS George B. Catallo Amanda Joy Christensen Carrie Dow Kayli Gennaro

Andrea Hutchinson Benjamin Peim Devon Trevathan

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.

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.

BSG is focused on supplying craft distillers with the best ingredients from around the world. The craft distilling market trusts BSG to deliver the finest ingredients at competitive prices, without sacrificing customer service. With distilling malts and grains from Rahr Malting Co., Weyermann®, Simpsons, Crisp and Malting Company of Ireland, as well as a full range of yeasts, yeast nutrients, enzymes, botanicals, and finishing products, we have a wide range of distilling ingredients to help you create high quality, artisanal spirits.

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.

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.

Cage and Sons Distilling Systems build premium distillation systems and equipment for premier distilleries.

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.

Every element of Cage and Sons equipment is designed and crafted to provide you with the very best distilling experience at an affordable rate because we know that bottom line matters, but so does function. At Cage and Sons, adequate is never an option, and we continue to develop and design new high functioning, cutting-edge distillation systems that enhance the distillation industry. Cage and Sons works every day to bring you the very best distillation systems for the very best value

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Distillery Products is your “Go To” source for wholesale premium branded distillery merchandise for your Distillery. Specializing in custom branding and engraving on Glassware, Premium Flasks, Cocktail Tools and Insulated Tumblers and more… Our Marketing Team will work with you to create your custom merchandise line to elevate your brand and capture your market identity. Our goal at Distillery Products is simple, have your target market think of you, your company and your brand first! Distillery Products is your innovative partner and “Go To” source in brand development and brand identity.

Decorative label solutions…we’ve got you covered. Fort Dearborn has the expertise and creative appreciation for development and application of labels for the spirits market. Whether your application needs cut & stack labels with specialty hot stamping and embossing, the “no label” look of pressure sensitive film labels or full body graphics using shrink sleeve labels, we have a product to meet your needs. We service brands large and small. Contact us today to discuss your brand building objectives.

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.

Trusted Oak Expertise Since 1912.

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.

ARCHITECTURE ◆ ENGINEERING ◆ CONSTRUCTION

Haskell delivers Architecture, Engineering, Construction (AEC) and Consulting solutions to assure certainty of outcome for complex capital projects, both within existing facilities as well as new brownfield/greenfield projects. Haskell is a fully integrated, single source firm with highly specialized, in-house design, construction, procurement and administrative professionals working across diverse market sectors. The Beer, Wine & Spirits Division is one of Haskell’s most mature markets having served discrete and distinguished clients for decades. Haskell is defined by its people, a culture of transparency and trust, and the delivery of value. WWW.ART ISANSP IRITMAG.COM

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 Our Mission: To craft world-class oak barrels and other cooperage products so our employees, customers and communities flourish.

A vital part of the alcohol production process, fermentation products from Lallemand Biofuels & Distilled Spirits have been designed and selected to create value by tailoring objective solutions to distillery needs.

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.

Moonshine University is located in Louisville, Kentucky on the Beverage Campus with its sister company, Flavorman. Moonshine University offers a variety of classes for enthusiasts, entrepreneurs, industry professionals and those seeking careers in the distilling industry. Our distillery was designed as part of our classroom, and all classes incorporate hands-on learning and sensory evaluation in order to provide a complete and comprehensive education. In addition to its knowledgeable instructors, Moonshine University hosts a range of renowned industry experts for specialized instruction and training.

O-I is the world's largest glass container manufacturer and the preferred partner for many leading spirits brands. O-I delivers safe, sustainable, pure, iconic, brand-building glass packaging to the growing craft spirits market.

For over 60 years our company has produced cork stoppers and a wide variety of bottle closures. Family-owned and operated since its inception, Tapi USA continues to develop new products and enter new markets. Tapi USA is proud to support the growth of the artisan distillery industry and is honored to be the Bottle Closure Sponsor for Artisan Spirit Magazine.

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.

Glass effortlessly conveys a superior image and delivers the unmatched quality that craft beer consumers expect. In addition to the wide range of bottle options offered through our Covet and Heritage collections, we also offer custom glass design and decoration expertise. Find out more at o-i.com.

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Something To Lift Your Spirits From the leader in distilled spirit labels.

Todayâ&#x20AC;&#x2122;s bottles need high-impact decoration and innovative print capabilities to stand out in a crowded marketplace. We service brands large and small with cut & stack, pressure sensitive, roll-fed and shrink sleeve labels using a variety of substrates. Together with specialty finishes, there are no limits to producing labels that set your brand apart.

Your labelâ&#x20AC;&#x2122;s objective is to give customers a clear picture of what your brand is about.

Show off your eye-catching design and let details retell the story of your brand!

MEMBER OF: ADI: American Distilling Institute ACSA: American Craft Spirits Association

A LETTER FROM THE EDITOR: Legacy. When you are dealing with products that demand years of time and patience before coming to fruition, the topic of legacy feels obvious. Yet, sometimes it takes something more personal, like the loss of a friend, to really contemplate the issue. Professionally, it has been an incredibly successful year, but personally speaking, well, people just need to stop dying. The loss of childhood heroes (dammit Stan Lee), suicide, and the death of close friends touched us all in some way this year. The most recent being master distiller and industry consultant Dave Pickerell. Dave could be contentious, and not without controversy, but the man nailed legacy. Few other individuals have taken part in so many distilling operations and his mark will be felt for generations to come. However, we don’t need a resume as long as Dave’s to start thinking about our impact on the industry and what we will leave behind.

When it comes to legacy, not everyone can establish a fivegeneration trust to protect their company and family history. But that doesn’t mean we can’t leave a lasting mark. Transparency, honesty, quality products, charity, local initiates, employee benefits, the list goes on. We can all do a little something to help cement our own, and our industry’s, positive legacy. Perhaps most importantly we can continue to share and educate. We are six years into this adventure of creating a trade publication, and I will never stop being amazed at the sense of comradery and family within the distilling community. Cherish those opportunities to teach a little something when a new distiller walks in your door with an endless font of questions, or when you get a chance to sit down with a distilling legend at dinner and learn just a bit of what makes them great. Those are the moments that make our community stand out, and can create a lasting legacy for us all.

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

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Y L R E T QUAR EPORT R D L I GU

f the year is he close o sales the busiest historically and tasting distilleries r fo n so a se ations, y time ching implic ’s also a ke a it t re u rb fa s, lly m a roo nti eir e, with pote long with s to build th importanc e update a r ild m u la o g u lc ic e te rt a w a st a p for ed r. Of also provid untry a oming yea nada have ross the co n for the c a c o C a ti c a m ily o f m o fr fa s n nd ng pla na. Our frie ll our distilli We wish a n in Monta o y. ti tr a n tu u o si c e e th is th from across resentation p re g n ro a st holidays. nd happy a , d n e r a ye successful

WITH A DASH OF CANADA

UNITED STATES OF AMERICA ACSA STATE GUILD COMMITTEE The ACSA Guild Committee has established a monthly phone call and we have had some productive meetings. We are currently working on: • FAQ’s for the ACSA web page ›› Standards and Practices ›› Safety and Consumption ›› Distilling Trails ›› Lobbying ›› Guild Structure ›› Membership Structures and Dues ›› Spirits Judging Competitions ›› Membership Drives • PAC outreach via state guilds WWW.ARTISANSPIRITMAG.COM

• Plan to get Board members to state guild meetings ›› We hope to get a representative from ACSA to a guild meeting in each state over the next year • Continue to update guild contact information • Continue to update state-by-state rules and regulations • Continue to look for opportunities to support guild DTC legislative efforts • Supporting Montana guild to resist state efforts to force publicizing formulas Our number one focus is working to

make the Craft Beverage Modernization Act permanent, so distillers continue to realize substantial FET savings past January 1, 2020. The most important thing for each and every one of us to be doing right now is joining the ACSA and your state guild, which shows strength and involvement in our industry. If we don’t all step up now, we could very well see our FET go back to $13.50 per proof gallon in 13 months P.T. Wood ACSA VP, Chair State Guild Committee, Wood’s High Mountain Distillery in Salida, CO pt@woodsdistillery.com

MARYLAND MARYLAND DISTILLERS GUILD Working in conjunction with the state of Maryland, the Maryland Distillers Guild is proud to launch the first annual Maryland Spirits Month this November. In partnership with the MD Office of Tourism, and sanctioned by the governor, the MDG will celebrate the manufacturing, cocktailing, and consumption of the incredible spirits distilled in our state throughout November. A number of promotional events, from a distillery festival

MONTANA MONTANA DISTILLERS GUILD The Montana Distillers Guild (MDG) has had an issue come up in the last several months that may reach beyond Montana's borders. The first is the State of Montana asking for individual formula blends of spirits, sold out of the tasting room, and releasing this information to the public. The DORABC (Department of Revenue Alcohol Beverage Commission) allegedly received a request from the Montana Tavern Association to obtain information regarding the percentage of individual spirits distilled on-site versus off-site, and how much of that is sold out of each tasting room. In other words, they asked for the individual proprietary blends of each spirit. The State of Montana allows a tasting room to serve and sell spirits, but the law specifically states that 90 percent of the aggregate proof gallons sold out of the tasting room must be distilled on-site (the state narrowly defines “produced” as “distilled”). To show compliance with this

to cross-brand in-store tastings, as well as educational cocktail classes for consumers, will occur throughout the month, along with on-premise collateral encouraging people to try Maryland-made spirits. Notable developments by our members include the opening of Old Line Spirits’ full cocktail bar, The Ready Room (Baltimore), and the impending launch of cocktail bars by Tenth Ward Distillery (Frederick) and Blackwater Distilling & Tavern (Stevensville). Additionally, The American Shochu Company (Frederick) is distilling shochu from authentic Japanese Koji in Maryland. Our first major educational seminar, “Nosing for Faults,” led by Nancy Fraley,

was held in Baltimore on October 23rd, and it was attended by distillers from MD, DC and DE. Legislative goals for 2018 include: creating a cocktail license for all distillers, expanding the off-site event opportunities (increasing the number of eligible farmers markets, fairs, festivals, etc.) and enabling our Class 9 Limited Distillery licensees to obtain full liquor licenses. The MDG currently has 47 members: 24 licensed distilleries, 6 distilleries in planning, and 17 affiliates.

law, each distillery must provide a quarterly report stating the aggregate proof gallons distilled on-site and sold from the tasting room. The MDG believes this should be sufficient information for the general public, since it is simply showing that distilleries are maintaining a requirement under the law. The MDG takes the stance that each individual formulation is proprietary information and is protected under both the federal and state Trade Secrets Act. The MDG has filed an intent to file suit against the DORABC in district court to protect this information. Thus far, the DORABC has been unable or unwilling to provide the specific email showing exactly what information was requested and when, and has been slow to respond to multiple requests for additional information. As a result, the MDG is considering also filing in federal court to protect the trade secrets of each individual formulation. This suit may very well bleed outside of the borders of Montana, and if it comes to filing in federal court, will set precedent for distilleries and tasting rooms across the nation. The ACSA has generously

offered to assist with anything they are able, and the MDG has also reached out to DISCUS with no response, although we suspect they will not involve themselves unless it does indeed go to federal court. I'm happy to discuss this case and matter further with anyone who has deeper questions than can be answered quickly here. Don't hesitate to reach out. In addition to the above, the MDG is gearing up for the legislative session, which begins in January 2019 and runs through mid-April. It is an exciting time and we expect to make great strides in our industry both on the protection side and the side of small business and commerce. We are holding our annual board and general membership meetings on November 4-5 at Fairmont Hot Springs and we will nail down the details of the bills we will be introducing. It will be great to see the whole membership in one spot again, and it is sure to be a productive time.

Jaime Windon Owner/Co-Founder | Lyon Distilling Co President | Maryland Distillers Guild

Robin Blazer World Headquarters Willie's Distillery, Inc.

WWW.ARTISANSPIRITMAG.COM

ANY CONTAINER CAN HOLD YOUR SPIRIT. ONLY GLASS

CAN CAPTURE IT.

The Covet Collection from O-I is glass at its most artful. Made from premium cosmetic flint glass, each of the newly crafted bottles in this exclusive collection was thoughtfully designed to balance both form and function. Featuring gracefully long necks for easy pouring, large label panels for enhanced branding, a standard bar top finish and a variety of bold shapes, the Covet Collection allows the true character of your spirit to shine through.

glass@o-i.com

NEW YORK NEW YORK STATE DISTILLERS GUILD Leveraging Tourism To Drive Spirits Industry Growth in New York State New York continues to nurture the craft beverage industry by centering it within the tourism industry, and most recently by resourcing six new Cuisine Trails in the North Country of the state. The new network of trails will give exposure to and help draw the connection between farms and the foods and beverages they grow and produce. Reports show that 93 percent of travelers worldwide have sought out and found notable food and beverage experiences while traveling, aside from dining at local restaurants. The creation of New York’s Taste NY program, and of food, farm, and

NORTH CAROLINA DISTILLERS ASSOCIATION OF NORTH CAROLINA North Carolina continues to grow its community of craft distillers with the count now topping 80 distillers throughout the state. This growth brings both opportunity and challenges as new entrants to the market launch products in the NC state-controlled system (NCABCC). DANC continues to focus activity on building productive relations with the state control commission while advocating for better market access and a more industry-centric legislative environment for local producers. Q3 2018 saw significant change and attention focused on NCABCC including a

beverage trails, ties tourism and the food industries together, letting them drive each other’s growth. Including distilleries in that context validates spirits as a part of a vibrant and complex local food culture. Since 2011, New York state has made unprecedented investments in the tourism industry throughout the state, resulting in historic levels of visitors and direct spending. Tourism is now the state's third largest employer, supporting 938,800 jobs annually. In that time frame, through an overhaul of New York’s Alcohol Beverage Control laws, the state has created an atmosphere where craft distilleries can thrive. The number of distilleries has increased over 1,050 percent in the past seven years, from 10 in 2010 to more than 145 today. In addition to the direct creation of new jobs in distilleries and increased tax revenues for the state, this staggering growth has an indirect effect on the growth and viability of small grain and

fruit farms. It gives a lift to allied industries contributing to the production, packaging and distribution of spirits, and helps define New York state as a leader in craft distillation. The Cuisine Trail designation includes a combination of agricultural producers and retailers. Members are chosen by the organization that applies for Cuisine Trail designation and must be in relatively close proximity, sell in a cooperative manner and offer a complementary variety of unique or hard-to-find fresh farm and food products. The six new Cuisine Trails include dozens of production and retail locations selling farmbased New York spirits for on- or off-premise enjoyment. For more information on the cuisine trails in New York state, visit the Taste NY website:

highly publicized audit of the state-controlled distribution warehouse system, the departure and replacement of the NCABCC Administrator, and a recent push towards privatization from a vocal and connected consortium of free market advocates. Each of these issues impacts NC distillers in real and meaningful ways. As such, DANC leadership has spent much time in Raleigh over the past several months meeting with NCABCC to help draft new rules for recently passed legislation and advocating for craft distillers on each of these issues. Examples of issues addressed by DANC at the state level include new product listing procedures, state warehouse stock and inventory control guidelines, and the adoption of new operational rules for the commission and ALE that are favorable to NC based craft distillers while maintaining the public health and safety mandate of NCABCC.

DANC has successfully represented the interests of craft distillers in NC this year while building better lines of communication and more trusting relationships with the NCABCC and the coalition of local ABC boards. These stronger relationships have opened new lines of discussion and greater cooperation between distillers and regulators, which ultimately benefits the growth and success of craft distilling in NC. DANC leadership will continue this course in 2019 with an ambitious legislative agenda that includes both NC state issues and an increased commitment to throw the support of NC distillers behind the fight to maintain and make permanent the FET reduction so important to the success of our industry.

www.taste.ny.gov Jennifer Smith NYSDG Admin

Pete Barger DANC President

WWW.ARTISANSPIRITMAG.COM

OREGON OREGON DISTILLERS GUILD The Oregon Distillers Guild continues to focus its efforts on changing legislation to help the economic future of Oregon distilleries. The Guild is working closely with the Oregon Liquor Control Commission (OLCC) and the Governor’s office. According to Brad Irwin, President of the Oregon Distillers Guild, “We saw the first draft of a proposal from OLCC

UTAH DISTILLERS GUILD OF UTAH The Distillers Guild of Utah held their first marketing and fundraising event, Autumn

VIRGINIA VIRGINIA DISTILLERS ASSOCIATION The Virginia Distillers Association (VDA) meets regularly with Virginia ABC (VABC) to advance ongoing internal policy requests, and to discuss strategic partnerships for the future. Goals for the 2019 General Assembly Session (Jan. – Mar.) are focused solely on two tactical efforts: increasing the

WYOMING WYOMING DISTILLERS GUILD Elections this year saw a change in president, with Amber Pollock of Backwards Distilling Company stepping down to allow more time to devote to her ACSA board commitments (congrats, Amber!). A unanimous approval resulted in the appointing of David Defazio of Wyoming Whiskey to fill her position. A huge thanks goes out from the Guild to Amber for her service over the past several years, and we

that achieves much of our goal. Although this proposal does not go far enough, we are moving in the right direction. We met with the Governor’s office and they are supportive of our efforts to grow the industry.” The fall season was highlighted with the High Desert Oregon Distillers Festival at the McMenamin’s Old St. Francis School. The festival showcased 20 distilleries from all over the state. Our next featured event is TOAST. TOAST 2019 is set for Saturday, March

Spirits. The event was a great time for all — cocktails, local food, live music, and tastings were enjoyed. There are several new distilleries popping up in Utah and the guild is hoping to grow and develop a bit as a result.

9, 2019 in Portland. Entering its 9th year, TOAST allows distillers and producers to showcase their handcrafted spirits and provides the public with a unique allinclusive tasting experience of diverse and high-quality craft spirits from Oregon and beyond. TOAST will take place from 4 -10 pm, with an after-party for VIPs and distillers. More details to come. Jamie Howard Co-founder/Marketing Deluxe Brewing Company & Sinister Distilling Company

Ethan S. Miller Head Distiller, Co-owner Holystone Distilling President Distillers Guild of Utah

commission paid to Virginia distilleries for onsite sales and expanding Sunday operating hours for all ABC stores (locations will be selected at VABC’s discretion). In Virginia, our distilleries’ tasting rooms are also considered ABC stores, so the expansion will not only apply to VABC’s retail stores but also our distillery stores. The latter half of the two efforts will be the funding mechanism for the first half of the legislation. As the VDA continues to focus on shortand long-term regulatory matters, we

believe that promotional activities to expand consumer awareness of our industry is equally important. This year’s September Virginia Spirits Month campaign increased cumulative sales of Virginia distilled spirits by 20 percent at both ABC’s retail stores and distillery stores. This year marked the third anniversary of the campaign.

welcome David into his new role. We are seeing the distilling industry growing here in Wyoming, with a few new members joining the Guild (welcome Chronicles Distilling and Pine Bluffs Distilling) and a few new DSPs being issued. With the growth of our industry, we hope to continue to grow the Guild, thus enhancing our influence on legislative efforts to benefit our budding industry. Our main local legislative goals for the future focus upon the ability to host our own events with what are referred to as “catering permits” in our state, the possibility of having

a second tasting room to thus expand our brands, and to “self-report” cases that we sell from our tasting rooms (i.e. not have to pay to ship them to the state warehouse, only to then pay to have them returned). All of these face challenges from lobbyists and special interest groups, but we intend to gracefully move forward in collaboration with the Wyoming State Liquor Association, Wyoming Liquor Division, and all of our onand off-premise customers. Nationally, of course, our focus is to do everything we can to make the FET reduction permanent. All members have recognized

Amy Ciarametaro Executive Director Virginia Distillers Association

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ATCHISON , KS

LAWRENCEBURG , IN

At MGP, we passionately live by the rule that no detail is too small when it comes to distilling premium spirits. Our pride in craftsmanship shows in everything from rigorous quality control to proven production consistency for brands of all sizes. We’re true partners in creating the best gin, vodka, whiskey, rye or bourbon for your brand, and for your customer.

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the massive benefits from the reduction, with many adding employees, purchasing more equipment, expanding marketing budgets, etc. We will continue to urge our senators and representatives to support making this

FET reduction permanent. Several guild members have already made plans to attend the ACSA conference in February — we look forward to seeing all of you in Minneapolis!

Travis Goodman Secretary, Wyoming Distillers Guild Partner, Jackson Hole Still Works travis@jhstillworks.com

CANADA BRITISH COLUMBIA CRAFT DISTILLERS GUILD OF BRITISH COLUMBIA British Columbia is the epicenter of craft distilling in Canada, with more than 50 licensed distillers and a dozen more in the wings. The heart of that movement is the Craft Distillers Guild of BC. Guild members pride themselves on producing handcrafted spirits made with 100 percent BC agricultural products, and supporting the

local economy on many levels since 2004. British Columbia is the only province in Canada that recognizes and certifies Craft Distilling. Requirements include ONLY BC grains, fruit and produce; ONLY on-site fermentation and distillation; NO additives, preservatives or artificial flavors; NO neutral grain spirit; and total production under 100,000 litres per year. Recently 14 of the 26 current Guild members gathered for the AGM at Sheringham Distillery in Sooke, BC. Aside from discussing

politics and marketing, one of the highlights was a gin tasting — everything from London Dry to Old Tom to genever — and it was great to see that every single gin was made from a different base. There’s truly a spirit of innovation here in beautiful BC. Ken Winchester deVine Spirits Victoria, BC

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CRAFT SPIRITS INDUSTRY is ALIVE and WELL ...FOR NOW ANYWAY W R I T T EN BY M A RGIE A .S . LE HRM A N, EXECUT I VE DI RECT OR, AMERI CAN CRAF T SPI RI T S ASSOCI AT I ON

f you submitted a DSP application to the Alcohol Tax and Trade Bureau (TTB) in September 2018, assuming you dotted your i’s and crossed your t’s, on average you would be waiting 79 days for TTB to issue your permit. It should be no surprise that the processing time is just under three months as TTB continues to be slammed with applications. As of October 31, 2018, TTB had issued a total of 2,842 permits. Contrast that number to barely 600 issued as of 2010. Does that increase correspond to an increase in craft distilleries in the U.S.? In short, YES! Does that increase relate to heightened competition for sales of your products? Again, another YES! The 2018 Craft Spirits Data Project© (CSDP), an annual economic study jointly developed between the American Craft Spirits Association (ACSA), Park Street, and IWSR that was released in September, reported that as of August there are 1,835 active craft distillers in the U.S., growing by 15.5 percent over the last year. Financial analysts and trade media gathered in New York city on September 25th learned our craft spirits market volume reached nearly 7.2 million cases in retail sales in 2017, with an annual growth rate of 23 percent. That’s a lot of spirits entering the market over the past year. Harry Kohlmann, Ph.D., Co-founder and CEO of Park Street, together with Adam Rogers, Research Director at IWSR, conveyed the message that craft spirits reached $3.7 billion in sales, growing WWW.ARTISANSPIRITMAG.COM

at an annual rate of 29.9 percent. In looking at the overall U.S. spirits market, craft reached 3.2 percent in volume and 4.6 percent in value in 2017, up from 1.2 percent in volume and 1.4 percent in value just five years prior. In a heavily concentrated market with nearly 2 percent of the larger producers (defined in the study as producing between 100,000 and 750,000 proof gallons removed from bond) responsible for 57.2 percent of all cases sold, small craft producers (the bulk of the ACSA membership) are responsible for just 13.1 percent of cases sold annually, a slight increase from 12.8 percent reached in 2016. As states begin to recognize consumer demands and guilds become more active in their state legislatures, decades-old laws are being modernized. As such, it should be no surprise that direct sales at the DSP rose for small producers and those sales averaged over 40 percent of total sales, compared to only 34 percent the year prior. Larger producers continue to rely on out-of-state business, which accounts for 62 percent of the total sales. Perhaps most striking is the discovery that in 2017, investment by the U.S. craft spirits industry increased by more than $190 million, reaching over $590 million in total. Similar to findings from last year, there are just five states that make up over 30 percent of the craft distilling producer market. DSPs that operate in California (156), New York (134), Washington (122), Texas (108), and Colorado (99) continue to compete for shelf

space and distribution opportunities as those new DSPs continue to expand. Adding in the next five states to the mix highlights that 15 states represent over 50 percent of the number of active craft distillers. The stills are ablaze in the West and South, with over 60 percent of total craft DSPs operating there. As reported in Forbes earlier this year, Sageworks (a data resource entity for privately-held companies) indicated beverage manufacturing is among the fastest growing industries, expanding by 17.1 percent over the past year. With signs of direct reinvestment from the reduction in the FET, craft spirits will continue to play a role in alcohol beverage growth. Respondents to this data study confirmed that close to 95 percent of FET savings are being used to purchase new equipment and/or hire new staff. Looking at the craft spirits industry as a whole, almost half of the overall business takes place in the home state, while slightly under 8 percent is generated by the export market. With tariffs and the threat of continued trade wars looming, U.S. craft spirits exports remain highly uncertain with a difficult forecast for next year. Of special note is the number of full-time employees within craft spirits distilleries. The number is on the rise from an average of 7.6 employees per distillery in 2015 to more than 10.1 in 2017, representing a 38.2 percent increase. Currently, there are over 18,000 employed, not considering the ripple effect on other segments of the industry, such as transportation, hospitality, and manufacturing of the supplies needed to support the craft spirits industry.

With the uncertain status of continued FET reduction beyond 2019, most DSPs will find it difficult, if not impossible, to project a solid business plan. Is it possible that the excise tax could revert from $2.70 to $13.50 on the first 100,000 proof gallons removed from bond? Sadly, yes. As a reminder, that tax relief is due to sunset on December 31, 2019 unless Congress acts favorably to extend. Would the economic health of this industry suffer? Most certainly it would. For that very reason, it is imperative that every distiller make his or her voice heard if the craft spirits industry wishes to continue to grow and remain economically viable and strong. There is strength when efforts are joined. Moreover, securing permanent tax relief is only one step in the journey ahead for our burgeoning sector. ACSA supports this annual economic data study, evaluates trend impact analysis, employs horizon scanning, and conducts DSP surveys to ensure it fulfills its mission: “To elevate and advocate for the community of craft spirits producers.” The only possible benefit from an economic decline in the craft spirits industry would be a reduction in TTB’s processing time for DSP permits, formula or label approvals. For now, let’s celebrate the overall economic success of American craft spirits and work forward from this unprecedented growth in 2017.

Margie A.S. Lehrman is Executive Director of American Craft Spirits Association. Visit www.americancraftspirits.org for more information on ACSA and to join.

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THE FUTURE OF SPI a new supreme court case may impact the future of

SPIRITS DIRECT SHIPPING BY MARC E. SORINI AND BETHANY K. HATEF

dormant Commerce Clause. But the dormant Commerce Clause is designed to prevent states from engaging in economic protectionism, and the 21st Amendment does not shield all state actions from dormant Commerce Clause scrutiny. Although Supreme Court cases from the 1930s, shortly after the passage of the 21st Amendment, suggested that the exemption of state alcohol laws from Commerce Clause scrutiny was very broad, opinions since have limited the protection the 21st Amendment gives to state alcohol laws.

THE BYRD CASE

n our article in the Summer 2017 issue of Artisan Spirit Magazine on approaches to the direct shipping of distilled spirits, we noted that the issue of direct shipping in the distilled spirits industry seemed to be heating up, as it did for wine in the last two decades. Sure enough, a little over a year later, the U.S. Supreme Court is poised to review a case that — aside from being the first case involving the regulation of alcohol beverages the Court has reviewed since 2005’s Granholm v. Heald — could have big impacts on the concept of direct shipping of alcohol beverages, including distilled spirits. In late September 2018, the U.S. Supreme Court granted a petition for a writ of certiorari (i.e., the Court agreed to hear a case) brought before the Court by the Tennessee Wine and Spirits Retailers Association (Tennessee Retailers) in Tennessee Wine and Spirits Retailers Association v. Byrd. The petition requested that the Court review the lower court’s decision upholding a finding that Tennessee’s two-year residency requirement for retail license applicants is unconstitutional. Specifically, the question Tennessee Retailers posed to the Court is whether the 21st Amendment of the U.S. Constitution gives states the authority to, consistent with the so-called “dormant” Commerce Clause of the Constitution, regulate sales of alcohol beverages by imposing residency requirements on retail (or wholesale) license applicants

LEGAL BACKGROUND As a bit of legal background, under the dormant Commerce Clause, state statutes and regulations generally may not favor instate interests or discriminate against out-of-state interests. The 21st Amendment of the U.S. Constitution, which gave to the states the authority to regulate sales of alcohol within their borders, acts as a partial limitation of dormant Commerce Clause principles when the issue involves a state law regulating alcohol. In other words, when it comes to alcohol, the states can argue that their authority under the 21st Amendment limits the application of the WWW.ARTISANSPIRITMAG.COM

A Tennessee alcohol beverage law requires an applicant for a retail license to have been a resident of the state for at least the twoyear period immediately preceding the application. For corporate applicants, the requirement applies to any of the corporation’s officers, directors, or stockholders. Moreover, to renew a license the law requires Tennessee residency for at least ten consecutive years. After two prospective retail applicants that did not meet the residency requirement, including the THE QUESTION Tennessee affiliate of TENNESSEE RETAILERS Total Wine Spirits & POSED TO THE COURT Beer, sought licenses in Tennessee, the IS WHETHER THE 21ST Tennessee Attorney AMENDMENT OF THE U.S. General preemptively CONSTITUTION GIVES STATES filed a declaratory judgment action THE AUTHORITY TO REGULATE in state court to SALES OF ALCOHOL BEVERAGES attempt to have the BY IMPOSING RESIDENCY court declare the residency requirements REQUIREMENTS ON RETAIL constitutional. The case (OR WHOLESALE) LICENSE was moved to federal court, APPLICANTS. and the district court found the requirements unconstitutional under the dormant Commerce Clause. Tennessee Retailers then appealed to the U.S. Court of Appeals for the Sixth Circuit (Sixth Circuit).

THE SIXTH CIRCUIT’S OPINION In February 2018, the Sixth Circuit reviewed the Tennessee law and, affirming the district court decision that invalidated Tennessee’s residency requirements, held that “a three-tier system can still function” without the two-year durational residency restriction imposed by the state. The majority opinion provided an overview of Supreme Court guidance on the tension between the dormant Commerce Clause and the 21st Amendment, focusing in

particular on the Bacchus Imports v. Dias (1984) and Granholm v. Heald (2005) decisions. The court concluded that the non-discrimination Commerce Clause principles articulated in those cases are not limited to alcohol beverage producers and their products. Accordingly, the court held that the 21st Amendment does not exempt state laws concerning wholesalers and retailers from scrutiny under the Commerce Clause. In terms of the Tennessee residency requirements, in particular, the court found that the 21st Amendment did not protect the requirements from Commerce Clause scrutiny and, without the protection of the 21st Amendment, the court found the requirements unconstitutional.

THE CIRCUIT SPLIT In July 2018, Tennessee Retailers submitted a petition for a writ of certiorari to the Supreme Court. Although the Supreme Court grants only a very small number of the petitions it receives each year, it accepts a 21st Amendment-related case for review roughly every decade or so. If the party seeking a petition for a writ of certiorari can demonstrate to the Court that a “circuit split” exists (i.e., that different U.S. Courts of Appeals disagree with one another on a particular legal issue), the Court is more likely to grant a petition so that it can restore uniformity of legal interpretations. Here, Tennessee Retailers were able to build a persuasive case for the Supreme Court to grant the petition, as over the last

decade, several cases have demonstrated a circuit split relating to the residency question. At the heart of the different appellate courts’ split here is whether the non-discrimination principle of the dormant Commerce Clause, which the Supreme Court clearly applied to wine producers and products in the 2005 Granholm v. Heald decision, also apply to state laws regulating the wholesale and retail tiers of the industry. Two federal appellate courts (including Byrd) applied the nondiscrimination rule to strike down state residency requirements for alcohol beverage licensees. One other appellate court has upheld residency restrictions, and two other appellate courts have taken a similar approach and upheld other kinds of restrictions on retailers, finding that the non-discrimination rule applies only to producers and products, and not to the two other tiers of the industry. This split in the circuit courts has created uncertainty for courts and regulators throughout the nation, and for the alcohol industry in general.

POTENTIAL IMPACTS OF BYRD The Supreme Court’s review of the Byrd case will address the constitutional validity of the Tennessee law imposing residency requirements on retail alcohol beverage license applicants. It remains to be seen whether the Court will go further to also address more fundamental questions about state powers under the 21st Amendment of the U.S. Constitution. But the stakes of

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Byrd reach far beyond residency. If the Supreme Court reverses the Sixth Circuit on broad grounds and finds that state laws regulating wholesalers and retailers are not subject to challenge under the dormant Commerce Clause, Byrd would maintain the status quo with respect to direct shipping of spirits. If the Court affirms Byrd on the broad principle that the Commerce Clause’s non-discrimination principles apply to state laws regulating wholesalers and retailers (as opposed to only producers), then many state laws prohibiting out-of-state retailers from shipping alcohol beverages (including spirits) to in-state consumers could be vulnerable to an attack on constitutional grounds. Most states authorize in-state retailers to ship alcohol directly to a consumer’s home, so the application of non-discrimination principles could force states to extend similar privileges to out-of-state retailers. On a final note, several other cases currently being litigated in courts around the country also have the potential to shape the future of spirits direct shipping. For example, in late September 2018, a federal district court in Michigan struck down a Michigan

statute that allowed only in-state retailers to BYRD’S direct-ship alcohol beverages to Michigan OUTCOME consumers and prohibited out-of-state retailers from exercising that privilege. COULD HAVE Whether that case survives an appeal SIGNIFICANT likely will depend on the Supreme IMPLICATIONS FOR Court’s decision in Byrd, indicating THE FUTURE OF that Byrd’s outcome could have significant implications for the THE DIRECT-TOfuture of the direct-to-consumer CONSUMER MARKET market for alcohol beverages in the FOR ALCOHOL U.S. The Byrd case will take some time to BEVERAGES IN resolve. Briefs from both parties will be THE U.S. due towards the end of 2018, and the Court likely will hear oral arguments in early 2019. A decision likely will come down several months later, in mid2019.

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 supplier-tier industry members. His practice for craft distillers includes distribution agreements, distribution counseling and litigation, spirits formulation, labeling, promotional compliance, compliance strategy, and federal and state tax and trade practice enforcement defense. Bethany K. Hatef is a senior associate in the law firm of McDermott Will & Emery LLP, based in the Firm’s Washington, D.C. office. She is a member of the Firm’s Alcohol Regulatory & Distribution Group, where she concentrates her practice on a wide variety of regulatory and distribution issues involving alcohol beverage suppliers. Her practice includes counseling on distribution relationships, trade practice compliance, and alcohol regulatory and distribution risks associated with corporate transactions.

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HENRYs — “High-Earning Not-Rich-Yet” — are the lucrative next generation of consumers being targeted by luxury wine and spirits brands in the U.S.

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ALL IN ALL, THEIR PURCHASING POWER IS NOTHING TO TAKE LIGHTLY

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THE FACTS The reality of this extended postrecession period is that the American middle class has lost some of its spending power, even with recent economic gains over the past several years. According to the Bureau of Labor Statistics 2017 Consumer Expenditure Survey, the average U.S. household income before taxes is $73,573, down more than $2,237 from its high in 2006 of $75,810. Despite this, average annual expenditures per household have risen to $60,060 in 2017 versus $57,311 in 2016, a 4.8 percent increase in spending. Alcohol producers that have traditionally targeted the middle class must focus on new consumer segments when seeking to grow their sales. While the affluent are the next logical group to target, according to the Robin Report, there is a large subgroup of affluent people that are often overlooked — the lower-income affluents or HENRYs (High Earners Not Rich Yet).

DAVID SCHUEMANN

E N TIA L

($100k - $249.9k) 22.5 million

Source: www.therobinreport.com/who-are-thehenrys-and-why-are-they-important-to-you

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The HENRYs are young, usually well-educated, and highly paid (household incomes ranging between $100,000 to $300,000) but they have not yet accumulated significant wealth. They are sandwiched between the ultra-affluent (annual incomes starting at about $400,000 and a net worth of over 1.5 million) and the middle-income consumer segments. The number of U.S. households that are categorized as HENRYs come to about 22.5 million, a considerably larger demographic than the ultra-affluent who number roughly about 2.5 million households, according to the Bureau of Labor Statistics Consumer Expenditure Survey.

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TIA L

HENRYs account for 20 percent of Americans, but are responsible for 40 percent of U.S. consumer spending according to Pam Danziger, consumer insights and marketing expert and President of Unity Marketing. So while HENRYs have a much lower spending capability per household, they make up for it in their volume with a market potential three to four times greater than that of the ultra affluent.

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COMPELLING BRAND STORY THAT SHOWCASES HIGH-CRAFTSMANSHIP

MASS VS. CLASS — FINDING THE SWEET SPOT

They want to know what the brands they purchase stand for, their stories, origins, and why they exist. They like seeing pride in craftsmanship that sets the brands apart from mass-market offerings.

They tend to be careful money-managers who evaluate various purchasing options, often online, and then balance trade-offs with value to achieve the right return on investment.

They pride themselves on their intelligent buying choices and the research they put into their purchases.

They want to be able to communicate what makes the brands they invest in worth the cost — the value proposition.

They want something in between the lower-tier options and the overinflated price tag of the ultra-luxury products. In other words, they are seeking a high-value proposition without the luxury price tag.

HENRYs don’t want a luxury product that solely serves as a status symbol; rather they see the brands they choose as an extension of themselves and their savvy purchasing abilities.

PROVIDE A LUXURY VALUE PROPOSITION

HENRYs don’t leave their budget analysis and research abilities behind at the office. Instead they tend to employ a rigorous evaluation process and rely heavily on the internet to help determine the best products and brands with the highest value proposition that they can invest in.

The “smart buy” and the reasons behind it are what constitute bragging rights for this market, not an extravagant price tag. Practical, simple and minimalistic, as opposed to gaudy, showy or ostentatious branding is what attracts HENRYs.

Craft spirits brands are well staged to take advantage of the highvalue proposition to price-point offering so critical to HENRYs. Paramount to supporting this proposition will be developing engaging, well-crafted stories and exceptional packaging that support a luxury positioning coupled with intelligent pricing to hit the sweet spot. Because HENRYs research products extensively online prior to making purchase decisions, a strong online brand presence can’t be overlooked. Be sure to put your brand essence and storytelling — particularly details on craftsmanship — into your web presence. Keep in mind many consumers, including HENRYs, may actually discover you online first. If distilleries can develop their stories to be compelling, real and supportive of the quality of their products and package them in engaging designs at affordable luxury price points, HENRYs will take notice and could provide a compelling market segment for many craft spirit producers to focus on for years to come.

David Schuemann is the owner and creative director of CF Napa Brand Design. For more information, visit www.cfnapa.com or call (707) 265-1891.

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O-N-D

(OCTOBER-NOVEMBER-DECEMBER) WRITTEN BY JOHN MCKEE

hen Courtney and I decided to open a distillery, the first thing we researched was the Marketing Plan. Who cares about a business plan, how big should our still be, and all of the other questions if one doesn’t know, “How much does the market bear and how much do people pay for this stuff?” I came from fuel and Courtney came from IT. Both of our industries were relatively stable, month-to-month, year-to-year, as far as annual expenditures by our customers go. You need to drive most every day (you need fuel) and your computer needs to work most every day (so you can buy a 2008 Saab 9-3X off Craigslist before someone else). However, when we started thinking about hooch, we had to answer the question: “What are the cycles that affect peoples’ booze-buying?” We found the Montana annual sales volumes for booze statewide, and the results were wild: An average drop of 45 percent from New Year’s Eve to New Year’s Day! A year-long growth slope leading to what could be described as nothing other than a cliff. Sure, after being in the industry for nearly seven years, we get it now, but at the time, that was a crazy statistic to see and think about. It caused us to ask ourselves:

»» What

would it cost to carry inventory during that period?

»» Could we meet demand? »» Would we have to staff-up during that

FIVE YEAR HISTORY OF CASES SHIPPED BY MONTH 83000

period to meet packaging, sales, and distribution requirements?

78000

We took that info, tucked it away, and then went into our first OND period six months after we opened. Things were just as crazy as the data had shown. People were buying a lot of spirits in those three months, and even with the knowledge we’d found, we weren’t prepared for the reality of that first year. Here is a short list of the things we’ve learned over the last six years that helped us get through:

73000

We started asking customers if they’d like the bottle gift wrapped and hadn’t considered the added labor to make that happen for 10 or so cases of individual bottles going out of the tasting room every day between Thanksgiving and New Year. So we started having our production assistants spend the first hour of their day helping the tasting room staff get bottles pre-wrapped.

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68000 63000 58000 53000 48000 43000

JULY

2013

AUG

SEPT

OCT

2014

NOV

DEC

JAN

2015

FEB

MAR

2016

APR

MAY

JUNE

2017

Figure 1: State of Montana, Annual Sales Volumes by Month. Source https://mtrevenue.gov/wp-content/uploads/2018/04/FY2017-Annual-Report.pdf

2. We participated in every holiday business activity — streetside ice carving, Christmas strolls, Black Friday, etc. — without fully understanding the staffing concerns and greater-than-normal exhaustion that it would put on all of us. We hired up quickly.

3. Rather than package “just in time,” which we did for the first few years, we moved to a large packaging push in late September to satisfy the demands of OND from all of our distribution partners. In that first few years, we were picking up the phone and saying, “OK, another two pallets on the way,” and we’d rush around getting the batching processed, bottled, palleted and sent on the way, only to start over immediately when the phone rang again. In the past few years, we’ve had the benefit of being able to look back at sales trends of our brands and package for OND accordingly in September.

4. Moving the company holiday party to January is something we did the first year. There was just no way that any of us could walk away during the last weeks of December without worrying about not being there for our customers. So, we find a day in January, shut down everything, grab a few

buses and get everyone off to somewhere special where we can celebrate together.

5. We’ve taken to bringing in a traveling massage therapist for our tasting room staff during that last week leading up to Christmas, buying all of our staff coats and other warm fuzzies (onesies were a real big hit one year) and gifting everything to them before the season was over. We have food brought in to the tasting room the night before Thanksgiving (Friendsgiving) because we know they’ll be slammed. We also hire someone to shovel the sidewalk for a few weeks allowing us to concentrate on getting things done, overall just lightening the load a bit.

6. We don’t yet do special packaging for the holidays, other than a nice bag for bottles sold from the tasting room. We stick with what we do, day-to-day, in all of the non-OND months and try to avoid adding additional chaos of new labels, special boxes, colorful neck tags, or whatever else. Moving from fuel and IT to hooch took some getting used to and we had to cock up a lot before finding the general path to make things work smoothly for us during OND, but we got there. You will too. Cheers and be merry.

John and Courtney McKee are the owners/founders of Headframe Spirits and Headframe Spirits Manufacturing in Butte, MT. John thinks there is a special place in hell for companies that start playing Xmas music in their stores before Thanksgiving.

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BELTWAY BANTER with PETE KAMER Interview between Pete Kamer & Robert Lehrman

elow is an email interview between Pete Kamer and Robert C. Lehrman. PROVIDED BY PETE KAMER Kamer started his distilling career with Seagram distillery in Louisville in 1978 working in distilling, bottling maintenance, plant maintenance, utilities, plant engineering, and corporate engineering. He is a licensed professional engineer. In 1985 he went to work for Barton Distillery in Bardstown, Kentucky, as their engineering manager, handling all engineeringrelated work in the Bardstown and Atlanta plants and assisted in the Carson, California plant. His duties included the selection and installation of new equipment, troubleshooting existing equipment, increasing capacity, and improving operations. Mr. Kamer retired from Barton in 2011 and started his own engineering company, Distillery Engineering. Since then he has helped small- to medium-sized distilleries with everything from site selection, equipment selection, plant layout, startup, and troubleshooting.

Tell us about your career so far. I started working for Joseph E. Seagram in 1978 and worked there for about seven years. I left there and went to Barton Brands in Bardstown, Kentucky and worked there as the engineering manager for 26 years. I left Barton in 2011 to go into partial retirement and work as a consultant to small distilleries. I have my own company named Distillery Engineering. Since I started my consulting business I have worked for about 45 different distilleries.

How did you get into the spirits business? When I came out of college with a degree in Civil Engineering, I wanted to work in big construction. The economy was slow and no one was hiring new civil engineers. Seagram’s offered me a job in my hometown of Louisville. I took the job figuring I could work at Seagram’s for a year and then go do construction. I would also be in Louisville with my friends. One month later I was sent to Lawrenceburg, Kentucky to work in what is now the Four Roses Distillery. Once I was in the distilling industry, I loved it and never thought about leaving.

Any good stories from the early years? When I started working at the Four Roses Distillery, it had not been run in a number of years. The first thing we had to do was inspect the equipment, put it back together, and start it up. I got to learn from guys who had been working on this equipment their whole lives, and they taught me a lot about it. Once the distillery started running, I became a shift supervisor. I was able to do my work in a couple of hours; in the remaining time, I got the operators to teach me how to operate the equipment. On the first day, I would follow them around and get them to tell how and why they did everything. After a few days, I would get them to let me run the equipment with them watching me so that I did not do anything really bad. I did this for every position in the distillery. At first, the operators were a little suspicious why I wanted to do this. By the end, they understood I only wanted to fully understand the distillery. They became very open with me and wanted to tell and show me everything. I learned a lot about what works or did not work in the real world. This still helps me to this day.

“Once I was in the distilling industry, I loved it and never thought about leaving.” WWW.ART ISANSP IRITMAG.COM

What have you been doing in recent years?

This is called Beltway Banter and it may be a stretch when it comes to you. Any comments about how the government and TTB have affected your work?

I have been consulting with distilleries for over seven years. Some have been very small; some have been the new major distilleries. I have worked from the very beginning of a concept to helping the first months they started running. Others have brought me in after they were running, but having problems with operations or quality. About a month after I left Barton, I received an invitation to an open house at Flavorman for a new distillery that they had just finished. I met Kevin Hall, who worked for Flavorman and was going to run the distillery. A few days later they invited me back to talk about working with them to get the distillery through the startup and maybe work with them doing experimental contract distillation. They were also interested in developing classes to teach the distilling industry to craft distillers. I worked with many others to develop what has now become their six-day class. We have now done 22 of these six-day classes. While teaching the six-day class, we had people asking to go deeper into equipment design, maintenance, and operations. I worked with Randy Allender to develop the three-day class we call Distilling 201. We have now taught eight of these classes.

I am about as far from the beltway as you can get. The tax cut bill started my phone ringing almost immediately. People wanted to start new distilleries or move forward on projects that had been discussed, but were sitting on the back burner. I have been dealing with the TTB for 40 years. When I first started, there were gaugers assigned to every distillery. Every piece of equipment had copper wire with a seal run through all the bolts or nuts holding the equipment together. If you had a breakdown, you had to call the gauger to get him to break the wire to let you work on the equipment, even if it was the middle of the night. Since I have worked with them for a long time, I know what they want when I am designing a distillery.

I understand there is a college or university — or at least a classroom — named in your honor. What’s the story? As I wrote above, I have been very involved with Distilled Spirits Epicenter and Moonshine University. I, and others, started with a blank sheet of paper and outlined what a distilling class should have in it. Out of that has grown the six- and three-day class that I am very involved in and many other classes. In appreciation of my work, Epicenter named the classroom after me. They did the naming ceremony during the Monday evening reception of a six-day class. I was totally surprised and blown away.

Any good stories about Moonshine University graduates and how they are doing? I have been involved in teaching over 700 students in the six-day and three-day classes. Over 50 percent own or are working in distilleries. I have stayed in touch with a lot of them, answering questions and tasting new products. We say we are family, and I feel like a proud parent every time any of them succeed.

Did you ever imagine the spirits industry would mature into something like this? In my early career, there were no craft distilleries. There were big and mid-size distilleries and companies buying spirits from the big distilleries that they would then bottle. About 10 years ago, I could see the distilling industry following a similar path as the brewing business. People would call me while I was still working at Barton wanting to know how to do things in a distillery. I would answer general questions, but felt like I owed it to Barton not to get too involved in helping other distillers. These calls did give me the courage to leave Barton and start my own company. I wanted to be semiretired and do other things. Little did I know I would have far more work offered to me than I could do.

What are big spirits companies really good at? Where are the advantages for big companies and small ones? Big companies, like small ones, are not a homogeneous group. Some are very good at production, some at sales and marketing. The big advantage the big distilleries have is economy of scale. They use the same amount of labor and make 100 times the volume. They also have the ability to hire a diverse workforce, each specializing in their area, such as engineering, biology, legal, and sales. The little distilleries have the advantage of trying new things in small batches and the ability to make quick decisions as to what to try. If they come up with a new idea, they can make a small batch as soon as they get the ingredients. A big distillery would have to discuss it for a year and then make 200 barrels of it.

“Big companies, like small ones, are not a homogeneous group. Some are

very good at production, some at sales and marketing. The big advantage the big distilleries have is economy of scale.” 40

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Care to hazard any predictions about where all this is going? I think it will tend to follow the path that the brewing industry has followed only much more limited. It costs a lot more to start a distillery than a brewery, and the regulation requirements are harder to meet.

Are you aware of any amazing spirits products not well represented in the U.S. market? I am not, but I am sure there are a lot of small distillers combing the regs to look for new niches to exploit. It never ceases to amaze me all of the new beverages that are entering the market. Some will only be neat fads while others will become new standards.

Do you have any general advice that would apply to most spirits producers? Be open and honest about your story and where your product comes from. It takes great skill in every step to produce a good beverage. Be proud of the part you do. Nothing is worse than a background story proven false or getting caught lying about where a product came from. Also learn how to make the product you want to make before you start. I’ve seen a lot of money spent on equipment and supplies only to make a big mess.

It seems like technology has changed almost everything in recent decades; what about spirits production? The production of spirits has changed completely. When I first started, there was an army of operators running around checking the operation and turning valves. I learned air logic controls when I first started. Then came electronic based instruments, but they were too expensive to use many of them. As the price came down, the number of control loops went up. The quality, accuracy, and durability of the instrumentation has increased tremendously. All of this has led to consistent and better quality.

If you were starting your booze career over in 2019, and knowing what you know now, what would you do (and not do)? I would do it all over again. I have had a great career, working with a lot of great people who spent a lot of time answering questions for a guy who always had another question of why or how.

Robert C. Lehrman is a lawyer at Lehrman Beverage Law, PLLC in metro Washington, DC. Since 1988 he has specialized in the federal law surrounding beer, wine and spirits, such as TTB permits, labels, trademarks and formulas. The firm has six beverage lawyers, over 50 years of combined experience, and publishes a blog on beer, wine and spirits trends at www.bevlaw.com/bevlog.

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.

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BOTTLES THAT GIVE BACK W R I T T E N B Y D E V O N T R E VAT H A N

ho says that drinking and philanthropy don’t go hand in hand? In recent years, a number of distillers have begun to pledge a portion of their proceeds to worthy causes. Some have decided to help animals, others are focused on feeding the hungry, and still more dedicate themselves to supporting marginalized members of the community. With hundreds of choices facing a typical consumer each time they walk through a liquor store’s front door, perhaps altruism can be the factor that influences their decision in one direction or another.

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PRIVATEER RUM CELEBRATES PRIDE

SIMPLE VODKA FEEDS HUNGRY BELLIES

This past June, a month that typically sees a swell in Pride events and festivals, Privateer Rum released their 6th Anniversary Pride Label. The label replaces the normal red logo on a bottle of Privateer Silver Reserve Rum with a rainbow flag. The reach of this unique release isn’t far, but if you’re anywhere near Boston, it’s a good reason to support a wonderful organization. Sales of the Pride Label rum aid a different organization each year, but all are committed to LGBTQQ+ community. This year proceeds will go to the Boston chapter of GLASS (Gay & Lesbian Adolescent Social Services).

It is shocking when you see the statistics of food waste and insecurity in our country laid out in plain black and white, which is exactly how Simple Vodka presents the information on their website. According to Simple, more than 40 million Americans don’t know where their next meal will come from, the majority of those people being children, the disabled, and the elderly. Simple Vodka promises to provide 20 meals to those in need with every bottle sold, doing so through direct support of local and national hunger relief organizations. Their sustainably distilled vodka is potato based and they hope to provide a total of over a million meals by the end of this year.

MAGGIE’S FARM SUPPORTS THE PUPS Maggie’s Farm Rum owners Layla and Tim Russell have three rescue dogs at home — Crosby, Lumi, and Blake. Inspired by the love of their dogs, the two decided, as of February 1st of this year, to donate a dollar from every bottle sold of the Maggie’s Farm core lineup to an animal rescue or charity. Donations are directed toward non-profit, nokill animal shelters found in the area of distribution, which includes Pittsburgh, Baltimore, Washington DC, Delaware, Philadelphia, New York, and Nashville.

FOUR LEAF FUNDS CANCER RESEARCH Four Leaf Spirits, a craft distillery in Woodinville, Washington, that focuses on rum and infused spirits, has always been firmly committed to supporting a cause. From their earliest days in the industry, Four Leaf founders Matt McMullen and Tom Kelley knew that they were interested in giving back, thus inspiring their “You Drink. We Give.” philosophy. Both men lost a parent to cancer so they decided to partner with the Fred Hutchinson Cancer Research Center to donate a portion of their proceeds to cancer research that will benefit a variety of specialties.

COLORADO HARNESSES THE POWER OF SEVEN This collaboration between seven different distilleries in the state of Colorado — Bear Creek Distillery, 291 Colorado Distillery, Laws Whiskey House, State 38 Distilling, Old Elk Distillery, Woody Creek Distillers, and Wood’s High Mountain Distillery — is the second expression produced as part of the Colorado Whiskey Collaboration Project. The juice is comprised of equal portions of whiskey distilled at each location and combined before entering the barrel to age. All proceeds from the sales of the spirit will be given to local charities with each distiller donating to a charity of their choosing. The spirit is currently aging at Laws Whiskey House in Denver and should be available to purchase in 2019.

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

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Photography by Andrea Hutchinson

in memoriam

DAVE PICKERELL Who can ever forget Dave, in a skin-tight Zorro costume, leaping out at the League of the Flying Pig Party proclaiming, “BEHOLD! The Black Prince has arrived!” Dave will be remembered by the world and by history as the Johnny Appleseed of the craft whiskey movement. Jeff Kozak — WhistlePig He was a kind soul with an unstoppable passion for his friends, family, and for the world of whiskey. He will be greatly missed as a friend and as a legendary member of the spirits industry family. John Billelo — Sweet Amber/BLACKENED We appreciate all his help and guidance and will miss him dearly. It is with great sadness that we give our condolences to Dave’s family and friends for their loss. I hope they can take some small comfort knowing that his legacy will certainly live on… Cathy & Jeffrey Baker, Otto, Alex, William — Hillrock There is only ONE Dave Pickerell. A modest man who had an immense talent for creating great things — be it distilleries, whiskeys, or relationships — he was larger than life. His family were his friends, and friends were his family. As a Master Distiller he was a true story teller. In the end, I believe his legacy will be his greatest story. Danielle Eddy — Friend & Colleague …through his teaching, consulting and friendship, he was a founding father of the craft distilling movement that is exploding in the United States. Frank Coleman — Distilled Spirits Council WWW.ARTISANSPIRITMAG.COM

We all know and remember Dave as a larger-than-life figure, always present at whiskey events with his trademark hat, holding court and educating throngs of fans on the art and science of distilling. Dave has left an indelible influence on many brands, and few will ever match his passion for whiskey and Kentucky Bourbon. Eric Gregory — Kentucky Distillers Association As Dave Pickerell and I were leaving one night after a long day in the office blending, something prompted me to take this photo. As I look back, I now know why. His job on our project was in this moment complete. I really loved this moment because it so perfectly captures Dave and the incredible journey he took us on. We will never be able to fully thank or recognize him for what he did for us here. Philip McDaniel — St. Augustine Distillery Dave was my friend, mentor, consulting partner, and provided invaluable advice counsel and wisdom. You lived on your own terms and died “with your boots on,” doing what you loved. Stephen Gould — Golden Moon Distillery Dave was a friend, mentor, and industry icon. We were fortunate to know him and even more lucky to have him share his wisdom and love of Bourbon with us. Dave’s passion and spirit for this industry could be felt by all when he walked in a room. We were fortunate to know him personally and our industry is better because of the great work of Dave Pickerell. Ted and Dana Huber — Huber’s Starlight Distillery

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A GREAT SPIRIT COMES FROM A GREAT STILL

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into the woods

t’s not likely that any other family of wood is going to come along and usurp oak’s position in the distilling world, but that doesn’t mean there isn’t a role for some off-the-beaten-path tree species to play in spirits-making. Copperfox Distillery has been experimenting a great deal with different types of wood, both for smoking grain prior to mashing and for aging the finished spirit. For the latter effort, the Virginia-based producer typically uses chips of these alternative woods. “Everything we’ve done has been experimental,” says Copperfox distiller and owner Rick Wasmund. “Our path started with the idea that we were going to make the barrels out of the different woods, but there were some WRITTEN BY JEFF CIOLETTI questions we never answered about the cellular structure of the wood. As a prelude to making the barrels, we did the experiments with the chips, and the chips were just much easier.” Meanwhile, French cooperage Seguin Moreau has been running some experiments of its own, based on requests from customers looking to explore beyond oak. “A lot of people ask for different species, but what we’ve really been able to do, other than oak, is chestnut and acacia,” says Seguin Moreau’s head of research and development, Andrei Prida. There’s interest in other species as well, Prida notes, but availability, or lack thereof, becomes a factor. “It’s really hard from an industrial standpoint to find the wood to make the barrels.” What follows is a short primer on six types of woods that have produced varying results for researchers like Wasmund and Prida.

A LOOK AT THE PROPERTIES OF SOME ALTERNATIVE WOODS THAT COULD BRING DIFFERENT LEVELS OF COMPLEXITY TO MORE EXPERIMENTAL SPIRITS

APPLE WOOD When used for smoking malt, apple wood imparts a certain nuttiness, Wasmund has found. “It has the essence of the fruit of the tree, but it’s not the same as the fruit of the tree,” Wasmund notes. When the wood is chipped as an aging agent, the nuttiness is still there to some extent, but the prevailing character is earthiness. But Wasmund advises against using apple wood for cooperage. “It’s very hard to make barrels out of apple wood,” he cautions. “The trees grew so twisted that we wouldn’t be able to get stable wood. So that kind of cemented our path down the chipping trail.”

PEACH WOOD Wasmund has had a great deal of success with peach wood, both to smoke his malt and as wood chips to steep in Copperfox’s Peachwood Smoked Single Malt, a top seller for the distillery. The wood, Wasmund says, offers a more aromatic, much more intensely flavored alternative to standard oak.

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C H E R RY W O O D Wasmund found that cherry wood works well for maltsmoking purposes, but not so much on the chip-aging side. “Too much is too much, and I think that’s true of any smoke — it’s a matter of getting the balance,” Wasmund notes. “In the chipping form, there was a bitterness that came through that we did not care for.” Initially Copperfox had planned to eventually turn cherry trees into barrels, but the company soon realized cherry wood casks wouldn’t be conducive to long-term, big-scale production. “It just wouldn’t be great whiskey,” he says. It was that cherry wood trial, however, that prompted Wasmund to experiment with the other woods. Prida conducted some experiments of his own with cherry wood and reached similar conclusions. “We did some trials with cherry wood, but there was not much feedback,” he says. “People a lot of times are expecting to see something spectacular with a cherry taste, but there’s only a very slight cherry character. It’s a little bit different from oak, but there’s really no possibility to do it on a big scale.

CHESTNUT Chestnut wood shares quite a bit in common with oak, as the two have similar tannic properties. Prida explains that the tannins in chestnut are more or less in the same chemical family as those in oak, though he’s found that there are far more tannins in the former. “This could be interesting for someone looking for very significant tannin extraction,” he says. Additionally, chestnut with the same level of toasting as oak can impart more color to the spirit than the latter. It could be an ideal option, says Prida, for a distiller looking to produce a very dark spirit without having to resort to caramel or other additives. “It’s a very good solution because all of the extraction is completely natural.”

ACACIA On the visual flipside, there’s acacia, which brings very little color to the liquid. The color it does bring, however, is made up of some slight green tones. “The color is sometimes a little bit weird, it’s not like a regular color of barrel maturation,” Prida observes. “It is a Cognac-like brown color, but there is some greenish tint to it. It’s a bit surprising for customers to see that color.” Flavor-wise, acacia can contribute

THE VERDICT Keep in mind that beyond the experiments of distilleries like Copperfox and cooperages like Seguin Moreau, alternative wood research is relatively limited. That’s something distillers need to remember before they get creative with unconventional varieties. “It’s really important to be objective

some vegetal notes, as well as some sawdust-like elements. “Depending on the concentration, it can be a pleasant or unpleasant flavor,” he warns. At its best, acacia can provide a certain freshness that could be a good match for a spirit like gin. “Gin is naturally fresh and if you bring some freshness from the wood, it could be very interesting,” Prida offers. But it probably wouldn’t be a good idea to age only with acacia. It works best when it’s combined with oak maturation.

with yourself and your taste buds,” advises Wasmund. “If we didn’t like it, we didn’t like it. And if we did, just because no one had done it before, that didn’t mean we stopped.”

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.

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EMPIRE STATE of RYE WRITTEN BY DEVON TREVATHAN

merican whiskey has been experiencing a renaissance. In the past few years, certain distillers have taken it upon themselves to carve out a style of their very own, one that extends beyond the bourbons of Kentucky or the charcoalfiltration of Tennessee. In an enterprise similar to those that came before it, Empire Rye was born. In 2015, six distillers from New York banded together to define what they call “Empire Rye.” It’s a rye whiskey with its own unique standard of identity: 75% of the mash bill must be New York grain — specifically New York State-grown rye — which can be malted, raw, or a combination of the two. The whiskey cannot be distilled to more than 160 proof, and it must be aged a minimum of two years in charred, new oak barrels, entering at a proof of no more than 115°. The mashing, fermentation, distillation, barreling and aging must take place at a single New York distillery in a single distilling season. The standards

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New York’s distillers define their own regional spirit category in an effort to distinguish themselves from other rye whiskeys.

also allow for Blended Empire Rye, which would be a blended product containing no less than 100% qualifying Empire Rye whiskeys from multiple distilleries. To identify an Empire Rye whiskey, look for a small certification mark either incorporated into the label or affixed to the bottle. The distilleries currently involved in this consortium include Black Button Distilling, Coppersea Distilling, Finger Lakes Distilling, Honeoye Falls Distillery, Kings County Distillery, New York Distilling Co., Tuthilltown Spirits, Van Brunt Stillhouse, and Yankee Distillers. More distilleries have committed to Empire Rye production in future distilling seasons. The standards that qualify Empire Rye are familiar enough — a minimum aging requirement, a mashbill made up of a certain percentage rye, and regionally-specific origins to the grain. The least familiar entry to the list of prerequisites would likely be the lower barrel entry proof of 115°, as opposed

to the legal maximum of 125° for many other American whiskey styles, but the distillers behind Empire Rye say that’s for a reason. According to the website, “Low barrel entry proof was a standard practice in the pre-prohibition northeast ryes. In fact, 100° proof was the norm for barreling. It made a very different and — we believe — more flavorful whiskey.” History seems an important component of the fabric of Empire Rye. The website calls the classification an homage to “New York State’s pre-Prohibition rye whiskey-making heritage,” which was, by all accounts, a tremendously successful operation. Rye flourished in the region’s craggy ground, and the distillation of grain was a well-known way to preserve your crop. Unfortunately, Prohibition bested the area in the end, leaving the neglected stills gathering dust for good. As a category, Empire Rye aims to honor the region’s past, but it also offers a hand in defining its future. In an interview, Colin Spoelman, co-founder and head distiller for Kings County said that he had read somewhere that “70% of all rye sold in the U.S. is distilled at MGP in Indiana.” In truth, there are dozens of distilleries selling MGP rye, the 95% mash bill being a very popular option from the Indiana facility. Spoelman saw the categorization of Empire Rye as a way to set him and other New York producers apart from the world of other rye whiskeys. It would be a vehicle that gave credence and value to the bottles that bore its sign. It is exciting to watch American producers define their own

guidelines. Considering the sheer number of regional spirits that exist in Europe, which is very nearly the same size as the United States, we are ripe for greater levels of geographical and historical classification within our country. The American Single Malt Commission, established in 2016, is striving to create a consistent standard of identity for American Single Malt whiskey that can be applied both domestically and internationally, but is it possible that we can reach even deeper? Underneath the umbrella of American Single Malt, could regional varieties join the ranks? And what about categories like brandy? Could we have our own styles of production, and accompanying appellations, rivaling that of Armagnac and Calvados? It certainly would be a turnaround for a community that has, over the past few decades, been producing without geography at the fore of its mind. In the meantime, look out for a bottle of whiskey that bears the mark of Empire Rye and taste it if the opportunity arises. As regional ryes with distinctive mash bills and styles of production, each offering is likely to aspire to an original flavor. Kings County, for instance, bottles their Empire Rye whiskey at 102 proof, while Finger Lakes Distilling finishes their McKenzie Rye in sherry barrels from local wineries. At the very least, you know you’ll be supporting a product that is active in its regional ecosystem, and I think that’s something worth celebrating.

Visit www.empirerye.com for more information.

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HOW OLD IS THAT BOTTLE? WRITTEN BY HARRY HALLER ILLUSTRATED BY FRANCESCA COSANTI

s long as there has been alcohol there has been a container for saving, serving, and drinking the stuff. Gourds, clay pots, stone urns, animal skins — anything able to hold a liquid was eventually used to hold hooch. And although glass has existed since the time of the pharaohs, it wasn't until the 19th century that what we consider today's glass bottle took hold of the mainstream. Initially, there were countless shapes and sizes of bottles available. In the 1800s everything was handmade which meant bottles had as much diversity as the personalities of the glassblowers making them. From tiny flasks holding mere ounces to multi-gallon carboys, the shape, size, thickness, and color could all vary according to the producer’s wishes. It wasn't until the 1900s and the advent of machine-made bottles that a few fixed styles truly kicked in. Another important event, one exclusively affecting liquor bottles, was Prohibition. More specifically, the post-Prohibition years. To prevent access to an over-abundance of bulk liquor (a cornerstone of the 19thcentury saloon, AKA the supposed wellspring of all the evils which lead to the Volstead Act in the first place) it was decided that liquor could only be sold in bottles. Casks were prohibited. Further to that, all bottles holding alcohol for non-medicinal consumption were required to be embossed with a warning — FEDERAL LAW FORBIDS SALE OR RE-USE OF THIS BOTTLE — something which remained the law of the land until its repeal in 1964. So if you stumble across something which looks like an antique bottle, there are a few tricks to

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tell whether you have a little treasure in your hands or a good facsimile retailing at Bed Bath & Beyond for $7.95 plus tax. The best rule of thumb is imperfection is perfection. The more flawed the bottle, the more likely it was made in the mid to early 19th century. Moulds weren’t introduced until around 1855 and, with the first semiautomatic bottle-making machine premiering in 1892, machine-made bottles only became standard fare in the 20th-century post-Prohibition liquor business. The next thing to look at is the base and the seam. The earliest handmade bottles had a pontil mark on their base. The pontil mark was the location where the bottle was cut off from the glass-blowers punty rod (the hollow tube they blew through as they shaped the bottle). These bottles had no seam. At that time, the craft demanded a glass-blower be able to shape the bottle using a marver table (a special table on which the hot glass could be rolled) or simply by doing it freehand. Soon concave semi-circle molds were added to their repertoire followed by dip molds. These innovations nonetheless required glassmakers continue to roll bottles into the desired shape. They still needed to be capable of forming the bottle without any guide. With the advent of the mold, the seam came to be. Molds also introduced the ability to emboss. Furthermore, it meant bottles no longer had pontil marks. The next thing to look at is the lip. Initially, it was a crude uneven add-on made using a glob of hot glass. It was only in the 1880s, with the advent of the lipping tool, that uniform application of the lip was possible. The last thing to look for is any hint of the bottle being machine-made. The first of these had ABM — which stood for automatic bottle machine — embossed on the base. It was also extremely rare for a hand-made bottle to have a label. But the best sign of a machine-made bottle is the fact that its seam follows the entire profile of the bottle, up and over the lip,something still visible today and impossible to do by hand. So if you find an ugly bottle riddled with imperfections and void of a seam, it's probably safe to assume that it is close to 200 years old. If there's a seam which stops short of the lip, that bottle was most likely made between 1855 and 1919. Everything else is most definitely courtesy of 20th century industrial innovation.

Harry Haller is an independent consultant focused on working with sugarcane-based distilleries. He can be reached at 00harryhaller@ gmail.com.

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KO DISTILLING A military background opens new doors in distribution for KO Distilling W R I TT E N BY M A R GA R E TT WAT E R B U RY / / / P H O T O G R A P H E D BY A M A N DA J OY C H R I S T E N S E N

istribution is one of the largest challenges for any small distillery. Competing with major brands in a landscape whose structure favors the moneyed and already established is no easy feat, especially when every state is different. But for KO Distilling in Manassas, Virginia, taking advantage of its founders’ military backgrounds opened up a promising new avenue for sales that is aligned directly with its brand. KO Distilling co-founders Bill Karlson and John O’Mara first met as classmates at the U.S. Merchant Marine Academy. Their lives took them in different directions until their 30-year college reunion in 2012, when they reconnected over a shared love of great whiskey as well as parallel career paths in military contracting. Karlson and O’Mara have the easy, honest patter of old friends. “I had already been doing some research on distilling, and I noticed John sitting there, drinking some Maker’s Mark,” says Karlson. O’Mara chuckles. “I was doing some ‘research’ on drinking,” he says with a smile. Later on, while at a football game together, Karlson asked O’Mara if he’d ever considered getting into the drinks business. “I’m interested,” O’Mara replied. Karlson says the plan started small but quickly grew. “When we first started, we made a big decision: We wanted to make aged spirits,” he says. That decision influenced every other choice they made at the distillery, from the space they selected, to the size of the build-out, to the budget, to cash flow projections. Karlson took on the CEO role, while O’Mara assumed the mantle of President and Head Distiller. The two settled on a location in Manassas, Virginia, O’Mara’s hometown. The city was excited to work with them on zoning and permitting, but that wasn’t the only factor behind their choice.

“I’ve been commuting all my life,” O’Mara says. “I said that if I was going to be the head distiller, it needed to be close to where I live.” Karlson laughs. “I live three hours away in Baltimore, which means I’ve been living out of a gym bag in hotels for the last three years.” The distillery itself is located in a 12,000 square foot building in an industrial part of town. About 8,000 square feet of that is dedicated to production and a tasting room, while 4,000 square feet is reserved for barrel storage. KO Distilling started off with a 550 gallon Vendome hybrid pot still before installing a 30-foot, 12” continuous column still in November 2017 that tripled their production capacity. To accommodate, the company just signed a new lease on an additional 15,000 square feet of barrel storage. “For the first three years, we were producing about 220 barrels annually,” says Karlson. “We’re now on pace to produce about 800 barrels in 2018.” The company’s flagship whiskey brand, Bare Knuckle Whiskey, riffs on the name of the distillery (which, incidentally, originally came from the first initials of the founders’ last names instead of the acronym for knockout). Three different aged expressions — a wheat whiskey, a rye whiskey, and a bourbon — comprise the range, all utilizing grains grown in Virginia. An unaged whiskey called Virginia Moon Whiskey, made from the same mash bill as the wheat whiskey, rounds out the whiskey portfolio. O’Mara says developing the whiskey recipes was an iterative process. Originally, he’d been excited to make a corn whiskey, but found the new make too harsh for enjoying as a white whiskey. KO’s distiller, Ryan Hendrix, suggested wheat for its soft, sweet qualities right off the still. The two settled on a mash bill of 60% WWW.ARTISANSPIRITMAG.COM

wheat, 30% rye, and 10% malted barley, which produces a spirit with a gentle mouthfeel with a touch of earthy spice. Bare Knuckle Bourbon is made from 70% corn, 20% rye, and 10% malted barley, while Bare Knuckle Rye is made from 100% rye. All of KO Distilling’s grains are grown in Virginia and sourced through Bay’s Best Feed in Keithville. Even the barley is malted locally at Copper Fox Distillery. Karlson says they’re on track to go through close to 400 tons of Virginia grain this year. “Our whiskeys are locally made and sourced, which in this day and age is very impactful,” he says. “Consumers definitely respond to that.” Yet whiskey is just one part of the story at KO Distilling. “I am a gin drinker,” says O’Mara. “I love martinis, so from the beginning, I said we needed to make gin.” Battle Standard 142 Gin is named in honor of the 142 cadet midshipmen from the U.S. Merchant Marine Academy who were killed during World War II. Again, developing the recipe took a lot of time. “I started out experimenting with a very small glass still, counting out juniper berries individually,” says O’Mara. After arriving at a botanical combination he and Karlson both loved, they discovered the recipe didn’t scale in the way they expected. Back to the drawing board. After further tinkering, they finally arrived at a combination of juniper, citrus, spices, and floral botanicals that scaled appropriately and tasted great at standard and navy strengths. Another unique aspect of KO Distilling is its distribution. In addition to standard on-premise and off-premise distribution channels in the Mid-Atlantic states (Virginia, Maryland, Delaware, and Washington, D.C.), KO Distilling products are also sold through regional Navy Exchange and Coast

Guard Exchange outlets, the retail store chains owned and operated by the U.S. Navy and U.S. Coast Guard. Karlson says getting initial placement into those channels was challenging, but that they’ve been excellent markets for their products. Unlike virtually all other retail sales channels, military exchanges operate outside the three-tier system. “It may be the only case in the country,” explains Karlson. “The buyer sells directly to the military, and they’re responsible for distribution and sales.” Even in control states like Virginia, Exchanges can sell distilled spirits. KO Distilling has gotten good traction with Naval and Coast Guard outlets, perhaps attributable to the brand’s direct connection to nautical life as well as its founders’ military background. “I think the Navy and Coast Guard picked up our product because our gin actually has an image of a ship on the label,” says Karlson. Yet so far, KO Distilling hasn’t had as much luck with the Army and Air Force Exchanges, which appear to be more interested in brands with national distribution. Moving forward, growth is in KO Distilling’s plans. “In 2020, when those 800 barrels per year start coming online, we’ll have a lot of whiskey,” says Karlson. The two are eyeing a distribution expansion beyond the Mid-Atlantic and looking forward to the first single barrel release slated for this holiday season. “We just tried the cask strength rye,” says Karlson, “And it turned out just great, so we’re very excited.” For these two college friends, whiskey turned a nostalgic reunion into a new beginning.

KO Distilling is located in Manassas, Virginia. For more information visit www.kodistilling.com or call (571) 292-1115. WWW.ARTISANSPIRITMAG.COM

DISTILLING

POMACE BRANDY WRITTEN BY ANDY GARRISON

n just about every traditional winemaking country, thrifty winemakers have used distilling to wring every last drop of value from their grapes. Whether you call it grappa in Italy, marc in France, tsipouro in Greece, or chacha in Georgia, it is the same thing: a drink made by distilling the pomace — the seeds, skins, and stems left over after winemaking — to create a sometimes rustic, sometimes elegant, sometimes transcendent spirit. Wine is sometimes called the blood of the grape, but only through distillation can we capture its soul. In the United States, these spirits are classed as “pomace brandy.” It is not a romantic name, but making it is the closest we get to true alchemy — “spinning straw into gold,” as Dave Classick Jr. of Essential Spirits Alambic Distilleries says. With a little know-how, a little equipment, and a sturdy shovel, we can transform a crude raw material viewed by many as waste into a beautiful, aromatic spirit.

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As you may have guessed, I love making pomace brandy. For me, it is a great connection to the humble farm roots of distilling and a chance to deepen connections with other local beverage producers. It is also a lot of work. I spoke with several American pomace brandy producers to learn more about how they make them, why they do it, and what they have learned over the years.

FINDING THE MATERIA PRIMA Italian distillers put a great emphasis on sourcing the materia prima, knowing that to get the best product out of the still you need to put the best raw material in. For pomace brandy production, the “best” means the freshest, juiciest, most aromatic pomace. Jeanine Racht of Clear Creek Distillery says it simply: “You can’t work with dry, musty, overlypressed fruit.”

A NOTE ON THE TERM “GRAPPA” While I and many other U.S. producers refer to their pomace brandy as grappa, that term is protected in the E.U. and only allowed for products made in Italy. If you ever tour an Italian distillery, never make the mistake of telling them you distill grappa — it’s like making bourbon in Brazil.

Understanding how wineries work is very helpful in sourcing the best pomace; “learning the terminology and language of wineries,” as Classick puts it. It is important to remember that harvest season is a whirlwind of activity for winemakers. While I have found most to be happy to see their waste get used, keeping track of pomace is often low on their list of priorities, so anything you can do to simplify the process for them is greatly appreciated. At harvest time, grapes are picked into bins, with ½-ton or 1-ton macro-bins being the most common unit of volume. Red grapes will be crushed and moved

to tank or barrel for fermentation, during which time the skins soak in the liquid while the sugar turns to alcohol. The grapes might be pressed at several different points depending on the style of wine (or winemaker), anywhere from mid-fermentation while sugar remains, to several months later. This variable soaking period, called maceration or skin contact, shows the importance of communication with the winery. When the pressing day finally arrives, you will need to be ready to pick up and distill the pomace immediately. Grapes for white wine are pressed immediately after harvest, yielding pomace that is sticky with sugar but no alcohol, as fermentation has not yet begun. Protecting white grape pomace from oxygen is critical, and several producers mentioned tarping off the bin and covering the pomace with a blanket of CO2 or dry ice. Excluding oxygen from the environment will help prevent spoilage, reducing the production of volatile acidity or mold. White grape pomace needs to be fermented prior to distilling. Clear Creek Distillery, which has been producing pomace brandy since the mid-1980s, adds no water or yeast, simply covering the bins and allowing natural yeast to take hold and ferment the sugar. At Stone Barn Brandyworks, we generally inoculate with a sizable yeast pitch which we then mix into the pomace with water at about 5 percent by volume water before blanketing with CO2 and sealing up the bin. Fermentation for whites can be very rapid, as short as one to three days depending on temperature, and the pomace needs to be distilled soon after fermentation. Putting the fermented pomace in a cold room can extend its life. Red pomace will generally keep a

week, and possibly longer if kept wellsealed and free from oxygen. For both white and red grapes, pressings typically get dumped into a bin, which is headed straight for the compost unless you have already made arrangements with the winery. Providing your own macro-bins to the winery to hold until they are ready to fill them can save some logistical headaches, but talk with the winemaker about pomace volume. It takes about four tons of grapes to produce one ton of pomace, which is important to keep in mind as winemakers often think in terms of juice yield, not pomace volume. It can be very disheartening to get the call for pick-up and clear the schedule for production, only to find 300 pounds of pomace when you expected 2000. Jake Soule at Admiralty Distillers in Port Townsend, Washington found it can take a few “go-rounds” to get on the same page with the winery, so it can be helpful to work with the same wineries each year. Visiting them and having them visit you before harvest time can be a great relationship builder, as well as a great way to get to know the wine portfolio to help you decide which varieties you are interested in. The other winemaking decisions that impact spirits production are whether or not the grapes have been destemmed and how hard the grapes have been pressed. Destemming is the removal of the woody green stems that hold the grapes together in bunches. This is a stylistic choice for the winery, and they might remove some, all, or none of the stems depending on the wine. When distilling, stems can add a woody, earthy flavor which some find desirable but they also impart some harshness or bitterness, as well as increasing the methanol content of the spirit. The

While I have found most [winemakers] to be happy to see their waste get used, keeping track of pomace is often low on their list of priorities, so anything you can do to simplify the process for them is greatly appreciated. 66

stems can sometimes make distillation a bit easier by preventing compaction in the pomace, with the stems providing some space and channels in the cake for vapor to escape. I have found having destemmed pomace is important for distilling white grape varietals, as the stems can add unwanted green notes which clash with the fruit and floral aromas I am seeking. Ilias Mastrogiannis, founder and distiller at Mastrogiannis Distillery in Lakewood, Washington, destems Riesling grapes and ferments the skins and juice together as a skin-contact or “orange” wine before lightly pressing to get the maximum amount of grape aromatics in his spirits. How hard the grapes are pressed has a big impact on the yield and is also the most challenging topic to reach an understanding of with a winery. As one interviewee put it, “All winemakers say they press lightly, and all of them are liars.” From the winemaker’s perspective, any juice left in the pomace is that much less wine to sell, so there are not many that generate a truly wet pomace. Again, asking questions about how they make wine and tasting through their line-up (pre-harvest) can be very helpful in finding the right pomace.

DISTILLING THE POMACE Once you have lined up pomace, some big questions remain: How will you get it into the still, how will you heat it, and how will you dispose of the pomace? Pomace is a shovel-able solid, not a pumpable liquid, so most distillery equipment and valves are not up to the task. A sizeable manway is a big help, and if the drain outlet is not at least 3 inches you’ll likely need to scoop the pomace back out the manway when done. The pomace should not be packed too tightly, as that can interfere with heat transfer and prevent vapor from escaping the grape mass. Similarly, adding a small amount of water can help the still to heat evenly

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Distilling pomace brandy can make for some long days (and nights) of steamy shoveling, but it can also be a joyful celebration of harvest and the start of Fall. and may be necessary if the pomace is very dry. Winery supply stores stock a variety of food-grade shovels, scoops, and rakes, which can be a serious back-saver compared to the ubiquitous 5-gallon bucket. Slurrying the pomace with water can make it easier to transfer if you really hate shoveling, but the pomace will need to be dewatered after distillation for disposal which is challenging. Adding excessive water reduces the yield, increases the distillation time and dilutes the flavor so there is not much to recommend about it. How the still is heated is another important thing to consider. A bain-marie, or double boiler, is ideal for providing gentle, lowtemperature heat that will not bake the skins onto the still wall. Steam jackets also work but likely need more liquid added to prevent scorching, and heat should be ramped up slowly. Stills with electrical heating elements inside the pot likely will not work unless equipped with a false bottom to keep the pomace from touching the elements. Direct-fire stills are traditional in many places for distilling pomace, but again, care is needed to prevent scorching. The direct-fire stills at Essential Spirits and Mastrogiannis both have a perforated screen false bottom to keep the grapes off the still bottom. Both make sure the dead space is filled with water, wine, or lees. After distillation the skins need to be removed. Cracking open the drain valve can let some of the extra liquid drain out, but the grapes will absorb a surprising amount during distillation. On some German stills the entire drain assembly can be removed which leaves a perfect opening for pushing the pomace out. Classick at Essential Spirits uses a perforated screen basket which a forklift can lift out to speed up cleaning. While it might be tempting to let things cool overnight, that is a good way to bake a 500-pound grape cake that needs to be laboriously chipped out (ask me how I know…). Once the skins are out, hopefully you have a disposal plan. Wineries are usually set up for pomace disposal or composting, but make sure to arrange ahead of time with the winery as it can be expensive to dispose of the pomace yourself depending on scale. Distilling pomace brandy can make for some long days (and nights) of steamy shoveling, but it can also be a joyful celebration of harvest and the start of Fall. Hopefully this will inspire a few hardy souls to start their own harvest traditions!

Andy Garrison is Head Distiller at Stone Barn Brandyworks, where he’s worked since 2012, and has distilled at a few other Portlandarea distilleries including New Deal Distillery and House Spirits Distillery. He really likes Riesling. For more information, email Andy.w.garrison@gmail.com. WWW.ARTISANSPIRITMAG.COM

WHY MAKE POMACE BRANDY? Everyone I spoke to stressed that making pomace brandy is a labor of love, with many logistical challenges and plenty of shoveling. So why do it? CLEAR CREEK DISTILLERY, founded in 1985 in Portland, Oregon, and recently relocated to Hood River, Oregon, has been distilling pomace brandy for most of their company history. Clear Creek had been working with several local Oregon wineries to distill brandy for the wineries to use in fortified or dessert wines, and these relationships led to discussions about pomace and distilling pomace brandy. As a traditionallyminded distillery with a focus on seasonal produce, it was a natural fit and their ties to the wine industry gave them a reliable source for pomace. Clear Creek continues to work with the same wineries each year, producing three red varietals and one white on their 60-gallon Holstein hybrid stills. Dave Classick, Jr. Head Distiller at ESSENTIAL SPIRITS ALAMBIC DISTILLERIES in Mountain View, California, is the second generation to distill pomace brandy after taking over from his father, who founded the distillery in 1998. They produce a wide range of pomace brandy and brandies for local wineries, using a direct-fired copper still from Bordeaux, France. For Classick, distilling pomace brandy “gives a sense of satisfaction from utilizing the whole grape, I imagine the same sort of feeling a butcher gets from using the whole hog.” Classick also loves grappa’s role at mealtime, and cherishes the way a glass gives family a reason to linger at the table and keep the conversation going. For Ilias Mastrogiannis, founder and distiller at MASTROGIANNIS DISTILLERY in Lakewood, Washington, making pomace brandy was a connection to his past and homeland. Growing up in Greece, Mastrogiannis’s father made wine and distilled the byproduct pomace as a way to supplement their income. When he was thinking about starting a distillery, he realized the beautiful wines and vineyards of Washington state would be a perfect fit for the production of brandy and pomace brandy. Mastrogiannis sourced pomace from several wineries initially, and has now begun to produce his own wine for distillation to have better control over the process and pomace. His pomace brandy are double distilled on a small direct-fired copper alembic. Jake Soule, distiller at ADMIRALTY DISTILLERS in Port Townsend, Washington, has been distilling pomace brandy for several years on a steam-jacketed 150-gallon Adrian hybrid still. When asked why pomace brandy, Soule said, “It’s a lot of work, but after working my ass off as a carpenter for 30 years I don’t mind. It gives me the opportunity to play with varietals and educate my palate without having to invest in a ton of grapes of this or that. There’s that, but mostly I just like the stuff!”

2018

SPIRITS INDUSTRY MERGERS & ACQUISITIONS Year in Review

WRITTEN BY KEVIN O’BRIEN 5.1% 4.4%

$10 - $15

Mid

Value

<$10

consistent investment interest in the space. Tequila The drivers of M&A activity in 2017 remained relevant during this past year. In general, larger suppliers 13.3% continued to seek out brands to fill “white space” voids in their portfolios. That is, these suppliers are seeking brands that address a weakness in a specific product category (e.g., tequila or gin), or pricing tier (e.g., ultrapriced whiskey or premium rum). Suppliers remained incentivized to fill these portfolio gaps 1.3% as they continue to work with the “new world order” of distribution. With two distributor groups, Southern Wine & Spirits and RNDC/Breakthru, controlling over 55 percent of the U.S. wine and spirits market, the pressure is on for suppliers to carry products that are attractive to the retail partners. Lastly, new craft spirits producers continued to emerge during the year, providing an ever expanding amount of product choices for consumers. These choices continue to erode market share of large “legacy” brands forcing suppliers to continue to monitor, and invest FIGURE 1 in, smaller “upstart” craft spirits producers. As a result of these trends, M&A activity in Nielsen Dollar Growth by Pricing Category 2018 remained active and consisted of some (52-weeks ended high profile transactions, many minority October 6, 2018) investments, and the introduction of a few Source: interesting new buyers.

Gin

9.9%

Total

Ultra

>$25

$15 - $25

ergers and acquisitions (M&A) activity in the spirits industry remained healthy in 2018. Driven by a U.S. economy that continues to outperform expectations, there was strong interest from various buyers to partner with, or acquire, several spirits producers. As predicted in last year’s M&A retrospective, the continued growth of premium-priced products, combined with concerns of independently owned producers accessing the increasingly challenging distribution channel, led to numerous investments and partnerships during the year. This activity took place as the spirits industry continued to exhibit relatively positive growth trends. For the 52-week period ending on October 6, 2018, Nielsen market data showed overall spirits dollar volume growth of 1.3 percent, somewhat lower than last year’s growth rate of 1.6 percent for the same period. Growth in the industry continued to be driven by the Premium ($15-$25 per 750ml) and Ultra (>$25 per 750ml) price categories. Year-over-year dollar growth for the Premium and Ultra categories was 4.4 percent and 5.1 percent, respectively (see Figure 1). This trend towards “premiumization” -3.5% is consistent with last year albeit at a slightly lower rate of growth. Overall, higher priced offerings in the spirits industry continue to -4.5% experience solid growth trends which has led to

Premium

Nielsen Food+Liquor

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Southern Glazer’s 31.8%

MAS TEQUILA! PATRON ACQUISITION HEADLINES 2018 M&A ACTIVITY

One year after the head-turning announcement that George Clooney’s Casamigos brand would be acquired by Diageo for approximately $1 billion, 2018 started out with an even larger tequila acquisition. In late January, Bacardi stated their intention to acquire the remaining interest of the largest ultra-priced tequila brand — Patron Spirits — at an enterprise value of over $5 billion. Bacardi had purchased a 30 percent stake in the brand in 2008, but decided it was now ready to make a deeper commitment to the category. This comes as little surprise due to the fact that Patron was nearing case sales of almost 3 million and is squarely positioned in the ever popular ultra-priced tequila category. Demand for ultra-priced tequila has continued to outperform all other spirits categories in Nielsen data with dollar volume increasing by 13.3 percent for the 52-week period ended October 6, 2018. While this is certainly the marquee transaction for the year, it is indicative of where M&A activity remained focused in 2018 — premium and ultrapriced products (see Figure 2). In addition to the much-publicized Patron announcement, there was a flurry of other high-profile transactions that closed, or were announced, in the beginning of the year. Proximo, the U.S. subsidiary of Casa Cuervo, acquired the fast growing, approximately 250,000 case, premiumpriced Canadian whisky brand Pendleton for $205 million. Shortly thereafter, it was announced that Constellation Brands made minority investments in the Louisville-based, ultra-priced brandy producer Copper & Kings as well as the ultra-priced rum brand Real McCoy. These brands further strengthen Constellation’s craft spirits portfolio that includes several previous investments including High West Distillery, Bardstown Bourbon Company,

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FIGURE 2

Notable Spirits Industry Transactions Closed in 2018

TARGET

ACQUIRER

CATEGORY

Pendleton Whisky

Proximo

Premium Canadian Whisky

Copper & Kings

Constellation Brands

Ultra-Premium Brandy

Real McCoy

Constellation Brands

Ultra-Premium Rum

Martin Miller's

Grupo Diego Zamora

Ultra-Premium Gin

Patron Spirits

Bacardi

Ultra-Premium Tequila

Dead Man's Fingers

Halewood International

Ultra-Premium Rum

Puerto de Indias

H.I.G. Capital

Ultra-Premium Gin

Belsazar

Diageo

Ultra-Premium Vermouth

Denizen

Hotaling & Co.

Premium Rum

Casa Dragones

BDT Capital Partners

Ultra-Premium Tequila

Niche Drinks

Luxco

Irish Spirits Portfolio

Atom Brands

ZX Ventures

Spirits Portfolio

Piedre Almos

Diageo

Ultra-Premium Mezcal

Laws Whiskey House

First Beverage Ventures

Ultra-Premium American Whiskey

Gin Sul

Mast-Jägermeister

Ultra-Premium Gin

Wyoming Whiskey

Edrington

Ultra-Premium American Whiskey

Westward Whiskey

Diageo

Ultra-Premium Single Malt Whiskey

Distillery No. 209

Vintage Wine Estates

Ultra-Premium Gin

Multiple Diageo Brands

Sazerac

Spirits Portfolio

within the world of whiskey aficionados. Finally, Diageo announced in November that they were selling off numerous sub-Premium brands to Sazerac for $550 million. Sazerac, the Louisiana-based owner of Buffalo Trace bourbon, has been steadily adding to its portfolio over the years including the recent addition of Southern Comfort. This transaction includes 19 brands, highlighted by Seagrams’s VO whiskey, Peligroso tequila, Myers’s rum, Romana Sambuca, Popov vodka, Yukon Jack whiskey and Goldschlager schnapps. Diageo said the deal will allow it to focus on the faster-growing premium-priced drinks in its U.S. portfolio, which include new brands like Casamigos alongside its core whiskey and vodka lines. Additional transactions announced included two additional ultra-priced whiskey and ultra-priced gin investments. During the summer, First Beverage Ventures announced taking a minority stake in Colorado-based Laws Whiskey House. This was followed by Mast-Jagermeister making a “strategic investment” in Germanybased Gin Sul. In September, Scotland-based Edrington made a majority investment in Wyoming Whiskey. For Edrington, producer of acclaimed scotch brands Macallan, Highland Park, Glenrothes, Cutty Sark and The Famous Grouse, this is its first foray into the American whiskey category. Lastly, it was announced in November that Vintage Wine Estates acquired the San Francisco-based 5.9% Distillery No. 209, which gained popularity for its ultra-priced No. 209 gin. While acknowledging that 2018 was another busy year for spirits industry M&A activity, it is important to take a step back and review these deals to tease out relevant trends or observations. The diverse nature of these transactions provides some interesting insights. These include private equity firms lighting a fuse, rum emerging from the shadows, vodka struggling to remain relevant, and a beverage alcohol Goliath jumping into the fray.

Total Ultra

Rum

Whiskey

Tequila

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Vodka

Catoctin Creek Distilling, and Nelson’s Green Brier Distillery. Additional early M&A activity included another ultra-priced rum acquisition with the announcement that Halewood International would acquire Dead Man’s Fingers. Spain’s Grupo Diego Zamora, which acquired Texas-based Yellow Rose Distilling in 2017, continued its portfolio diversification with a majority investment in the approximately 100,000 case ultra-priced Martin Miller’s Gin brand. Another ultra-priced gin brand, Spain’s Puerto de Indias, received a significant investment from international private equity firm H.I.G. Capital. This was followed by the announcement that Hotaling & Co., formerly known as Anchor Distilling, took a minority stake in yet another premium-priced rum brand named Denizen Rum. Rounding out early M&A activity was an additional private equity deal with BDT Capital Partners making a “significant” investment in acclaimed ultra-priced tequila brand Casa Dragones, as well as Luxco’s enhanced partnership with Ireland-based Niche Drinks, producers of St. Brendan’s Irish Cream and The Quiet Man Irish Whiskey. Finally there was the announcement that ZX Ventures 13.3% had acquired Atom Group , a UK-based spirits, eCommerce and import business. M&A activity throughout the year was also heavily influenced by 9.9% Diageo, the largest spirits company in the world. One year removed from its aforementioned $1 billion tequila deal, 6.1%Diageo was involved in four transactions in 2018 that reiterated their commitment to higher-end brands. The first was the full acquisition of Germany1.1% based Belsazar, an ultra-priced vermouth brand. This brand was the first to “graduate” from Diageo’s venture arm Distill Ventures. The second was the acquisition of the Oaxaca-based, ultra-priced Piedre Almas Mezcal brand. Diageo’s most recent investment, -6.1% another ultra-priced play, was a minority investment in Portland, Oregon-based Westward Whiskey. This investment is of particular note in that Westward is a leading American single malt whiskey brand, an emerging category that continues to garner acclaim

PRIVATE EQUITY LIGHTING “DRY POWDER”

FIGURE 3

$1000

Private Equity “Dry Powder” in $ Billions (2010-2017) Source: Pitchbook

$750

$500

$250

$0 2010

2011

2012

2013

2014

2015

2016

2017

2018 marks the first year in recent history that multiple private equity firms set their sights on the spirits industry. During the year there were three private equity backed investments made by H.I.G. Capital, BDT Capital Partners, and First Beverage Ventures. Private equity firms, which make their money buying and selling companies in a span of five to

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FIGURE 4

Mid

Total

Ultra

Premium

$10 - $15

<$10

Value

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>$25

$15 - $25

Consistent with 2017, there were several transactions during the 4.4% 2010 2011whiskey, and 2012gin brands.2013 year that involved ultra-priced tequila, The reasoning behind these deals is clear — these are the categories that have continued to outperform the overall spirits market. For the 52week period ending October 6, 2018, Nielsen market data showed ultra-priced tequila, gin and whiskey dollar growth of 13.3 percent, 9.9 percent and 6.1 percent, respectively (see Figure 4). This same data shows that ultra-priced rum grew by a mere 1.1 percent, yet there were surprisingly three ultra-priced rum investments during the year. On reflection though, these transactions make sense if one considers product supply and consumer trends. The recent boom in American whiskey and tequila has left 1.3% producers scrambling to keep up with demand. Due to this demand, pricing of aged whiskey has nearly tripled in the last few years. Even more detrimental is the shortage of agave, the key ingredient to make tequila. Tequila Matchmaker reports that agave shortages have increased agave pricing to nearly 25 pesos per kilo versus 2016 pricing of approximately 4 pesos per kilo, a significant price

Total Ultra

Vodka -6.1%

TITO’S PROPPING UP STRUGGLING VODKA CATEGORY

In reviewing the transaction activity for 2018 it was surprising to note that there were no transactions involving vodka brands. While the pace of investments in this category has slowed over the last few years, this is the first year for some time that a vodka brand was not acquired. This is of particular interest in that vodka is the second largest spirits category based on Nielsen data. That being said, review of recent market data suggests that this category is facing some serious headwinds which may be leading some to question the vodka category’s growth prospects. For the 52-week period ending October 6, 2018, Nielsen market data reveals that the vodka category is down 0.2 percent. While that may not appear to be a significant decline, digging into the data suggest a different story. Across all pricing tiers, except for premium-priced, the category is declining by 5 percent or more. The premium-priced vodka category is the only tier that continues to grow, having increased 9.8 percent year-over-year. While that appears to be positive, the data reveals 25.3% 2014 2015 2016 2017 that the growth in that category is strictly driven by Tito’s. Tito’s, which represents nearly 50 percent of the premium-priced category, continues to outpace every other spirits brand of its size by growing an impressive 25.3 percent during the year (see Figure 5). Tito’s has now become the largest single spirits brand across all spirits categories tracked by Nielsen — an amazing feat for an independently owned brand. If Tito’s is removed from the data set then it shows that the total vodka category would have declined by 4.3 percent in the last 52-week period -0.2% ended October 6, 2018. These figures suggest that FIGURE 5 investors are being prudent in Nielsen Dollar Growth of not committing resources in Vodka by Pricing Category (52-weeks ended October 6, 2018) this struggling category.

Tito’s

5.1% YO-HO-HO, AND A BOTTLE OF RUM $0

1.1%

5.9%

increase. In contrast, anecdotal evidence suggests that the supply of current, and aged, rums continues to remain relatively stable. If suppliers believe that rum will follow a similar trajectory of other spirits products, that is, higher priced “craft” offerings, then the rum category could be the next segment to reach critical mass. If that is the case, then these investments may prove to be very fruitful.

Total

$250

Source: Nielsen Food+Liquor

Rum

Whiskey

Gin

Tequila

seven years, have a long history of investing in other beverage alcohol 9.9% categories. The craft beer boom in the middle of this decade saw numerous high profile transactions 6.1% take place with many of the largest consumer focused firms investing in the space. Additionally, there has been a recent wave of investments in the wine industry that has produced billions of dollars of transactions. It may be easy to point at the growth in the premium-priced segments of those industries, or recent high profile acquisitions by strategic buyers, but that is not the whole story. Private equity firms are sitting on a record amount of “dry powder.” Dry powder refers to the amount of capital that has been committed to firms by their investment partners that has yet to be $1000 reports that at the end of 2017 dry powder deployed. Pitchbook reached almost $1 trillion, the highest amount in the industry’s history (see Figure 3). These firms are incentivized to invest this money in a timely manner in order to provide the desired economic $750 returns for their partners. With so much money available, these firms need to find industries in which to make some investments. This leads us back to the recent deals completed by these types of firms in 2018. It would not be surprising to see more investment $500 in the industry in light of the recent high-profile, high-dollar, acquisitions that have taken place in the last few years. Private equity may be wise to place some bets in the industry in that the rewards can be substantial upon a successful exit.

akthru

10.0%

Nielsen Dollar Growth of Ultra-Premium Priced Spirits (52-weeks ended October 6, 2018)

13.3%

Source: Nielsen Food+Liquor

Tito’s

Total

>$25

$15 -

Premium

$10 - $15

Mid

3.5%

1.3%

-0.2%

BEER BEHEMOTH ENTERS THE RING Total

Ultra

price decline by almost half. This is significant in light of how well the overall stock market has performed during the same period. Historic and projected consumption data spells out very clearly the monumental task the company faces to “right the ship.” AB InBev In April, an announcement was made that ZX Ventures acquired has fallen victim to a shift away from mass-market beers. Beer, the Atom Group, a UK-based spirits, eCommerce, and import still the largest beverage alcohol category, is projected by IMPACT business. This deal may have gone slightly unnoticed in the Databank to account for 46.2 percent of share of servings in the craft spirits industry, but is important in that ZX Ventures is the U.S. beverage alcohol category in 2020. This projection is a far cry “global growth and innovation team” of Anheuser-Busch InBev from the share the category held in (AB InBev). AB InBev is one of FIGURE 6 2000 when beer represented 59.1 the world’s largest, and most Share of Servings by Beverage percent. The beneficiary of this influential, consumer product Alcohol Category (2000-2020P) 59.1% change in consumer preference companies — this deal marks their Source: IMPACT DATABANK has been the spirits industry. first foray into the spirits category. Spirits share is projected to grow In a letter to wholesalers to discuss 46.2% Beer from 27.2 percent in 2000 to 36.2 the transaction, an AB InBev Spirits percent in 2020 (see Figure 6). executive wrote that the deal meets Wine These industry dynamics have left two of the company’s strategic 36.2% AB InBev looking for solutions to initiatives: “gain share of throat their “share of throat” problem. and lead category development.” 27.2% Part of the solution is the Atom This investment should come as Group investment, but AB InBev little surprise as AB InBev has has also recently partnered with been struggling over the last few 14.9% Beam Suntory to cross-promote years due to changing consumer 12.6% their flagship brands across bars preferences. and retailers throughout the U.S., Over the last three years, AB 2000 2005 2010 2015 2020P as well as launching Budweiser InBev has witnessed their stock

$1000

RNDC 13.6%

r’s Breakthru

$750

The world’s most-used $500 distillery management software.

10.0%

ng Distributors 44.6%

$250 sales@fx5solutions.com

fx5solutions.com

$0 2010 $600

2011 $610

2012 $630

2013 $710

2014 $700

2015 $750

2016 $770

2017

$961.50

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Reserve Copper Lager, a limited-edition beer aged in Jim Beam bourbon barrel staves. With a strong history of growing through acquisition, it will be interesting to monitor the impact of having another international drinks giant playing in the spirits space.

PEAK SPIRITS M&A ACTIVITY?

Assuming the economy continues to outperform expectations, it is fair to assume there will be continued M&A activity in the spirits industry in 2019. The drivers of activity in 2018 will remain relevant in the new year and will be bolstered by the entry of deeppocketed buyers including AB InBev and private equity firms. That being said, there are a few factors that may present challenges to the continuation of the frantic pace of M&A activity in the industry. With the amount of high-profile transactions occurring recently, there is anecdotal evidence that some large strategics are taking time to “digest” these acquisitions. Many “white spaces” of their portfolios have now been filled which could result in a decreased appetite to acquire additional brands in the near term. Additionally, some of these same buyers are being pulled into the emerging cannabis industry. Constellation, which recently made a multibillion dollar bet on Canopy Growth, has publicly stated they will curb their M&A activity over the next year as they manage their expanding debt load. Other large spirits companies, Diageo and

Pernod Ricard, have been rumored to be interested in the category as well. These companies have been very active over the last several years — combine that with additional interest in cannabis, and 2019 may be a year where these large players reduce their M&A activity in the spirits category. In an effort to curb inflation, the Federal Reserve has been steadily increasing interest rates over the last year. This increase has an impact on all M&A activity by making acquisition financing more expensive and may lead buyers to become more selective with their investment dollars. Increased financing costs, combined with a softening in year-over-year dollar sales growth in the industry, leads to a less attractive investment thesis than in previous years. It’s too early to announce the peak of spirits industry M&A activity, but the aforementioned factors may provide some headwinds for 2019 and beyond.

Kevin O’Brien is a Sr. Vice President with Zepponi & Company, a leading beverage alcohol M&A firm. Dedicated to the beverage alcohol industry, Kevin has presented on various accounting and finance related topics for the American Craft Spirits Association, American Distilling Institute, Brewers Association, and Oregon Wine Board. Kevin will be providing additional insight into M&A activity during his presentation at the American Craft Spirits Association convention in February 2019.

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DIAMONDS MAY LAST FOREVER, BUT DO SPIRITS? WRITTEN BY PAUL HUGHES, PH.D.

How stable are distilled spirits? This is a broad question, not least because the raw materials used for the production of distilled spirits and the way in which the final product is formulated varies substantially across the distilled spirits sector. 74

he stability of distilled spirits is a subject that is, on the whole, largely ignored. In the brewing world, brewers place a lot of value on the microbiological and non-biological aspects of beer stability, but just how stable are distilled spirits? This is a broad question, not least because the raw materials used for the production of distilled spirits and the way in which the final product is formulated varies substantially across the distilled spirits sector. To begin, we need to ask what we mean by stability. Without wanting to state the obvious, stability only has meaning in the context of time, so without a reference sample from a different age (usually a “fresh” sample) it is not possible to consider stability. What constitutes a fresh product is, in itself, a moot point. Aged spirits from casks are not fresh relative to their point of production, but in terms of point-of-sale, they may well be. To start with an apparently easy win, we assume spirits are not prone to microbial spoilage. Unfortunately, given the breadth of spirit-based drinks available, this is not necessarily the case. Specifically, cream- and egg-based spirit drinks may WWW.ARTISANSPIRITMAG.COM

The stability of color of spirits is dependent on the source of the color that is present.

well be susceptible to microbial spoilage, not just because of the microbial load potentially present in cream and eggs, but also because they are generally formulated to lower alcohol concentrations. Cream liqueurs are usually pasteurized, precluding microbial spoilage, but advocaats, traditionally a mixture based on brandy and egg yolks, work best when made with unpasteurized egg yolks, with the concomitant risk of Salmonella typhimurium and Bacillus cereus contamination. I suspect that this is only an issue with craft advocaats, but based on their taste, I’d say it is perhaps worth the risk. One of the easiest properties of a spirit to observe with friends and colleagues is the physical stability of the product. With the exception of poor eyesight and colorblindness, we can share the experience of color, turbidity and the presence of particles in the product. If you choose to add ice to a Talisker 10-year-old Scotch whisky (it’s your drink, do what you will with it!) it is likely to become hazy. There is nothing wrong with that; it is a reflection of “insufficient” chill filtration (a process where the liquid is cooled to sub-ambient temperatures and then filtered to remove any resulting precipitate). “Insufficient” in this case is a moot term, not least because there is a commonly-held view amongst Scotch whisky producers that chill filtration impairs mouthfeel and flavor complexity. On the upside, there is less risk of product rejection by the consumer, due to the visual performance at presentation. This haziness can be attributed to longchain fatty acids extracted from the cask. Additionally, extraction of filter pads after chill filtration of Scotch whisky reveals the presence of β-sitosterol, a sparingly soluble sterol extracted from the oak cask. The presence of calcium in dilution water

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can also be problematic. It can form a precipitate of long-chain fatty acids that are invariably present during cask maturation. A strategy to keeping these less watersoluble materials in solution is to reduce the concentration of water; that is, sell at higher proofs. An excellent example of this in the distilled spirits world is absinthe. My personal view is that it is unfortunate that absinthe is rather hide-bound legislatively in the U.S., not least in terms of thujone levels. Nonetheless there are absinthe producers in the U.S. producing high proof absinthes. To me, this is almost obligatory, as absinthe typically uses about 20 times the botanicals that gin production employs and therefore, due to the higher essential oil content, is at greater risk for a cloudy appearance at lower alcohol levels. The alcohol is needed to keep the botanical oils in solution. Given that most of us consider it generally inadvisable to consume 130 – 155 Proof spirits neat, the classical approach is to dilute, typically by dripping ice-cold water through sugar into the spirit. This is a triple whammy for oil precipitation or “louching” (loo-shing). Firstly, the icechilled water will reduce the temperature of the absinthe, making the oils less soluble. Secondly, dilution itself tends to force oils out of solution. Thirdly, and perhaps most subtly, is that the leaching of the sugar into the spirit increases the polarity of the water. In other words, the sugar makes the water present in the spirit even less receptive to the oils, enhancing louching further. Interestingly, absinthe louche is remarkably stable. Over three months, an absinthe-water mixture (2:1 (v/v)) at ambient Oregon summer temperatures (out of direct sunlight), was stable. Compare that with your favorite oil and balsamic salad dressing!

In contrast, the sedimentation of oils in products such as limoncello and creambased liqueurs can result in the formation of unappealing neck-plugs that resist resuspension. Once formed, there is not really a way to reverse neck-plug formation. Another common source of sediment is the precipitation of sugar as crystals. This is more likely in liqueurs where sugar concentrations can be in excess of 40 percent (w/v), especially if the alcohol concentration is also higher, as alcohol reduces sugar solubility further. The form of the sugar addition during compounding of a liqueur can be highly relevant, with syrups less likely to crystallize than conventional granulated sugar. The stability of spirit color is dependent on the source of the color that is present. On the basis that color does not distill, spirit colors are generally derived from four sources:

>> Wood maturation >> Caramel additions >> Botanical macerations >> Emulsions Brown colorations, from wood maturation and caramel additions, are prone to photodegradation and can result in a loss of color when such spirits are shelved in strong light, especially in daylight. This is not a particularly common problem, but it is perhaps most apparent for lightly colored spirits. For instance, some gin products have a soupçon of caramel added to give a hint of off-white (less water-like) appearance. Such caramel doses will degrade relatively quickly. Indeed, some major spirit brands have experimented with the use of clear glass into which vanadium pentoxide has been added. This gives the glass a pale blue coloration, but effectively

blocks ultraviolet light and reduces the sensitivity of the spirit to light-induced decoloration. Spirits that rely on chlorophyll for coloration, such as traditional absinthes, will discolor in a manner not too dissimilar to olive oil. Shelf storage of absinthes in dark glass and/or in cartons reduces the photo-degradation risk. Today there are much more stable chlorophyll analogs, although eventually they too will change from a green to a brown color. The stability of flavor is perhaps one of the most difficult issues to agree upon. Beyond color and clarity, the chemical changes that occur in a spirit may or may not affect the flavor. Given the diversity of the spirits category, flavor stability has different meanings and connotations. Chemical changes are generally minimal. Alcohol can be oxidized to acetaldehyde (a heady, fleeting, green grass note) which can eventually react with alcohol to form acetal, a compound with significant grassy notes, which persists in the product. This has led to some in the field suggesting that

headspace can be minimized by adding glass marbles to partially empty bottles. Perhaps more problematic is the use of polymeric materials to contain spirits. The packaging of distilled spirits into, say PET bottles, has its advantages, not least at airport liquor stores. However, PET (polyethylene terephthalate) is well-known to be a less than perfect oxygen barrier, increasing the risk of product oxidation in package. Additionally, PET allows for the slow evaporation of water from within the bottle, giving rise to slow increases in alcohol content. Polymeric materials, whether as part of the body of the bottle or as a cap liner, can also “scalp” flavors. The relatively hydrophobic properties of polymeric surfaces, particularly in bottle caps, can adsorb flavors (indeed analytical chemists often employ adsorption processes as part of their analytical strategies). For some spirits, such as gin, the concentration of flavor-active compounds are relatively low, and so there is potential for products such as gin to have a finite shelf-life in the

bottle. It is worth pointing out though that this is not yet proven in spirits; arguably it is an area that requires consideration. So what are good approaches to preserving spirits? Keeping them in the dark and refrigerating drinks of lower alcohol strength are both prudent strategies, although refrigerating oil-rich drinks such as limoncello increases the risk of neck plug formation. In terms of flavor changes, especially in partially-consumed bottles, some suggest topping up the bottle with glass marbles to reduce the air headspace. A more difficult option at home is to flush the headspace with nitrogen gas. Of course, there are the final options of purchasing in smaller volumes or consuming in a more timely manner, but it’s difficult to advise the latter option and simultaneously advocate responsible drinking!

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

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VIRGINIA DISTILLERY COMPANY An American Distillery with European Roots WRITTEN BY MARGARETT WATERBURY PHOTOGRAPHY BY AMANDA JOY CHRISTENSEN

e all inherit things from our parents. Like bushy eyebrows, or burdensome heirloom furniture with too much sentimental value to ever get rid of. But few have found themselves in the position of Gareth Moore, CEO of Virginia Distillery Company, who inherited an in-progress single malt distillery in the rolling hills of central Virginia from his mom and dad. And you thought your grandmother’s antique hutch was a project. Originally born in Ireland, Gareth’s father Dr. George Moore immigrated to the United States and became an entrepreneur. When he sold his business in 2011 and began to contemplate retirement, he decided to follow one of his great passions: single malt whisky. “There’s no explanation why it wasn’t Irish whiskey,” says Gareth. “Scotch was just his preference. I’m sure there are people in Italy who love bratwurst and people in Germany who love pasta.” The Forsythe pot stills and Boby mill had been delivered, the building in Lovingston, Virginia, had been constructed, and much of the primary equipment had already been installed when George passed away unexpectedly in 2013. “I hadn’t really been involved in the project previously to that,” said Gareth. “And I hadn’t spent much time in distilleries, so when I showed up, I was kind of looking for the on button.” Then he laughs. “Our distillery director, Ian Thomas, still won’t show me where the on button is — or even if one exists at all.” Fortunately, despite the initial hurdles Virginia Distillery Company is now one of the most celebrated craft distilleries on the East Coast. Specializing in their own American twist on Scottish-style single malt, the distillery so far has released bottlings that blend aged Scotch whisky with single malt made in-house. Distinctive finishes, including port casks, cider casks, wine casks, and beer casks, add another dimension of flavor to many expressions.

Old World Meets New Fusing old-world traditions with contemporary innovation has always been a driving principle for Virginia Distillery Company. While the distillery is clearly inspired by Scotland, right down to the classic single malt bottle shape, there’s plenty of technological savvy and American ingenuity on display as well. “We’re not trying to reinvent the wheel,” says Ian. “We’re using methods that have been around for hundreds of years, but we’re also melding in a bit of new world innovation and technique.” That can be taken literally — Virginia Distillery Company actually mixes Scottish and American whiskeys — as well as figuratively, in that it uses traditional equipment to make a spirit that’s matured and blended in a uniquely American way. During startup, spirits industry consultant Dr. Jim Swan assisted on the project, helping Thomas and Moore make decisions

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about grain sourcing, distilling, blending, and even warehousing. Moore says the team deliberated extensively when constructing their warehouses. Should they climate control the structures to replicate the cool, moist, mild climate of Scotland? Or should they follow Kentucky’s lead and build ambient temperature rickhouses to take advantage of Virginia’s significant annual temperature swings? Ultimately, they decided to follow a piece of advice from Dr. Swan: “You don’t design your maturation environment to match your distillate; you change your distillate to match your maturation environment.” That means the single malt at Virginia Distillery Company ages differently than in Scotland, with higher levels of extraction. “Over-oaking is something we have to be very aware of in our climate,” says Thomas. He says that can be challenging when marketing to established Scotch drinkers, who expect to see 12-year age statements even on entry-level bottlings. “With our hot summers, there would be nothing left if we waited that long,” says Moore. Rather than fighting that reality, Virginia Distillery Company is embracing it, exploring new opportunities for faster maturation, more intense evaporation and concentration, and more wood sugar extraction due to the warm climate. In an effort to better understand the complex relationships between climate and maturation, they’ve installed sensors in the warehouse and in the distillery that measure temperature, humidity, and barometric pressure every five seconds. “So far, we have well over half a million data points,” says Thomas. “And as we pull samples and start to hone in on what casks are offering what qualities, we can also correlate that with the climate data we have.” Virginia Distillery Company is even exploring adding climate control to their warehouses with the opposite intention of their original instinct: to amplify the heat and temperature swings that characterize the climate of the South. Despite the distillery’s high-tech innovations, Thomas says some things are just better done manually, like sensory analysis. Virginia Distillery Company has put serious emphasis on developing a robust sensory analysis program driven by repeated evaluation and careful tracking over time. Thomas says that the tasting panel provides feedback on each barrel sampled at multiple points during its aging process, assigning scores that are tracked during the entire course of maturation. “Those grades help us determine over the long run how we select casks to be vatted together. What we’re trying to accomplish is a high level of comfort around data-driven decision making,” says Thomas. And, unlike Scotland, where distillers are typically forced to work around a closed spirit safe that precludes them from sampling the new make, Virginia Distillery Company makes cuts based on sensory inputs as well as alcohol concentration. WWW.ARTISANSPIRITMAG.COM

Taking Advantage of Virginia’s Resources Central Virginia is home to thriving beer, wine, and cider industries, offering Virginia Distillery Company ample opportunities for collaboration. The company’s flagship product, Virginia Highland Whiskey Port Cask Finish, uses Port-style wine casks from Virginia wineries to finish a blend of house-distilled single malt and sourced Scotch whisky. Thomas says he finds working with wineries rewarding, especially when they can trade casks back and forth in ways that benefit both businesses. Close proximity to wineries also enables Virginia Distillery Company to experiment with wine cask finishes without worrying about barrel hygiene. When a winery dumps wine from a barrel, the wood can quickly go sour if it’s not sanitized, a process that strips much of the residual wine character from the barrel and can contribute unpleasant sulfur notes. “We’re close enough that we’re able to get over to the vineyard within 24 hours,” says Thomas. “So there’s no downtime for the wood to dry or for any residual wine left in the wood to develop bacteria and get acetic.” Innovative American single malts like those made at Virginia Distillery Company are on the rise, and many industry and consumer groups are watching their progress with interest. “Consumers, in general, are getting more into discovery,” says Moore. “They like to break the mold and get into more interesting categories. At the same time, there’s an almost contra-effect of folks liking to buy something from their own state or country. So we’re at the convergence of those two trends.” Thomas is quick to add that American single malt isn’t really as new a category as it’s often made out

to be. “People have always brought over their tradition and culture, so there’s a pretty deep history of single malt in the U.S.,” he says. “It’s just been overshadowed by bourbon for a long time.” Both agree that education continues to be a major factor, especially for casual consumers who don’t follow spirits trends closely.

Courage & Conviction: A New Chapter Virginia Distillery Company isn’t planning on discontinuing its Scotch whisky sourcing program, but they’re also getting excited for an upcoming release: Courage & Conviction. It’s their first single malt distilled entirely in-house. Named for one of George’s favorite sayings — “Have the courage of your convictions” — it represents an exciting new chapter for the team at Virginia Distillery Company. “We’re feeling really excited about it,” says Moore. “We never thought we would totally replicate a Scotch single malt, and we didn’t. When you taste it, you recognize it as a single malt, but it has some really unique characteristics that come out of the wood in our climate.” Courage & Conviction will be a mix of different aging casks, including ex-bourbon casks, sherry casks, and custom “cuvée” casks made from exwine casks that have been treated, shaved, toasted, and re-coopered. A small preliminary launch is planned for late 2019, with the full release slated for early 2020. “One of the most common things we hear around the sensory table is ‘we could put this in the bottle now,’” says Thomas. “But we want the whiskey to tell us when it’s ready. And we’re getting very close.” “It’s been a long time coming,” says Moore. “And while 2020 might seem far away to some, I think it’s going to fly right by.”

Virginia Distillery Company is located in Lovingston, Virginia. For more info visit www.vadistillery.com or call (434) 285-2900. 80

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EMPLOYEE COMPENSATION WRITTEN BY JAMES W. VERMILLION III

n the Commonwealth of Kentucky, the number of operating distilleries nearly tripled between 2009 and 2016 (KDA), with even more opening since and more yet in the pipeline. A similar story is playing out across nearly every state in America. As the distilled spirits industry grows, so too does the demand for skilled, qualified employees. Meanwhile the national unemployment rate remains near a 30-year low, forcing employers to compete for the best available talent. This challenge is compounded for distilleries since aged product requires a lengthy production timeline and is best served by low employee turnover and extended employee tenure. The most obvious tool in this fight for personnel is wages, but the savvy worker in today’s world knows to look at compensation beyond salary, making retirement plans a highly valuable instrument in recruiting and retaining the industry’s best labor. When deciding which plan is right for your business and employees, it’s best to start by looking at the two types of plans covered by the Employee Retirement Income Security Act (ERISA): Defined benefit plans (DB)

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Aged product requires a lengthy production timeline and is best served by low employee turnover and extended employee tenure. and defined contribution (DC) plans. A defined benefit plan promises a specific benefit at retirement, whereas a defined contribution plan allows for contributions by the employee or employer (or both), which are typically invested on the employee’s behalf. Let’s look more closely at defined benefit plans. The Social Security Administration explains that traditional DB plans provide employees with “guaranteed lifetime annuities that begin at retirement and promise benefits that are typically expressed as a multiple of years of service and earnings received near the end of one's career (for example, one percent of average salary received during the final three years on the job, multiplied by the number of years of service).” When implemented, the investment risk falls on the employer, not the employee, as the employer

must ensure the funds are available to provide the benefit upon retirement. For employees a DB plan is quite attractive, as the risk of outliving retirement funds is non-existent, and investment returns do not impact the retirement benefit. On the other hand, investment returns can outpace estimates, and retired employees will not benefit from the excess. It’s worth noting that because of the open-ended risk associated with traditional DB plans, many employers are switching to defined contribution plans, a trend that began in the 70’s and has rapidly accelerated over the last several decades. While DB plans are becoming increasingly rare, employers are turning to defined contribution (DC) plans, which allow for more simplistic cost analysis and do not require actuarial calculations. With DC’s, the investment risk falls on the employee, as investment results directly

impact the assets available for retirement. Examples of defined contribution plans include 401(k), 403(b), SEPs, and profit sharing plans, among others. Let’s look at these individually and explore the benefits and limitations of each. The most recognizable type of a defined contribution plan is a 401(k), which derives its name from the section of the U.S. tax code that allows for the contributions to take place. While the 401(k) allows for flexibility in plan design, with it comes additional regulations and larger setup and maintenance costs. The 401(k) allows participants to invest a portion of their wages prior to taxes being deducted (pre-tax). In other words, the contributions made by employees reduce their taxable income for the year in which the contributions are made. The 401(k) allows employees to determine the size of contributions (within limits) and most plans provide a variety of investment options (typically mutual funds). Additionally, an employer can offer a matching benefit, in which

the employer matches some portion of the contributions, thus growing the account more quickly. When an employer implements a match, those matching dollars are tax-deductible, lowering the corporate tax bill in addition to providing an attractive benefit to the staff. When looking at tools to retain a productive workforce, the match should not be overlooked. Another helpful tool in the battle for productive workers is the vesting schedule. The term “vested” is used to determine how much of the funds an employee can take with them should they leave the company. All employee contributions are immediately 100% vested, but employer contributions are vested according to company policy, which can encourage employee longevity. In a 401(k), the maximum vesting schedule allowed is six years, after which all contributions are 100% vested. A 401(k) should be considered by distillers who are looking to recruit and retain employees with a tailored retirement plan.

A Simplified Employee Pension Plan (SEP) is an attractive alternative to high-cost, high-maintenance plans and is a favorite among small business owners. It allows employers to contribute on a tax-favored basis to individual retirement accounts (IRAs), which are owned by the employees. The reason SEPs are often utilized is the minimal reporting and disclosure requirements, which make them easily accessible to businesses with limited resources. Unlike a 401(k), the employer makes all contributions to the plan based on a percentage of compensation. Those contributions are immediately 100% vested. The employer may contribute up to 25% of compensation or $55,000 per year, whichever is less, and must contribute the same percentage across all employees. As business evolves, so too can the contributions, which can vary from year to year as needed. The SEP is often chosen by employers starting their first retirement plan and is an option to consider for small distilleries looking to

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offer a competitive benefits package with minimal administrative burden. It is also attractive for owners of companies with few employees who are looking to bulk up their own retirement savings (with favorable tax treatment) as the maximum contribution is higher than many other retirement plan options. Another option for small distillers is the Savings Incentive Match Plan for Employers, or SIMPLE-IRA. As the acronym suggests, the SIMPLE requires minimal administrative and compliance attention and differs from the SEP in a few key areas. Employee contributions are optional, but if chosen, allow eligible employees to contribute up to $12,500 of their compensation ($15,500 if over 50 years of age). Employer contributions are determined based on one of two methods:

Employer matches participant’s contributions, dollar for dollar, up to 3% of employee’s contributions. This can be reduced to 1% or 2% in any two years during a five-year period.

Employer contributes 2% of employee’s compensation regardless of whether the employee contributed or not.

As with SEPs, all contributions are fully vested. For distillers looking to shift a large portion of the contribution cost to the participant, a SIMPLE-IRA should be considered. As you set goals and look for ways to improve your business, don’t forget to look beyond the spirit. While the product is the face of your business, it takes

a host of great people to be successful over a long period of time. The spirits industry has always relied on the passing knowledge from one person to the next, making employee retention even more valuable than in other industries. When considering ways to make your business stronger, consider adding an employeesponsored retirement plan. Whether it’s to bolster your chances to land a key staff member, to create more loyal workers, or to take advantage of the tax deductions, the benefits can far outweigh the costs. A financial advisor can assist in further reviewing the available options and ensuring the best type of plan is properly implemented. It’s also crucial to discuss any potential employer-sponsored plans with your tax professional, as your decision could dramatically impact your tax situation moving forward.

James W. Vermillion III is a wealth advisor for Hilliard Lyons in Lexington, KY. Call (859) 255-9681 or visit jvermillion.hilliard.com for more info. Securities and Investment advisory services are offered by J.J.B. Hilliard, W.L. Lyons, LLC (Hilliard Lyons), a Registered Broker Dealer and Investment Advisor, Member NYSE/FINRA/SIPC. Trust Services are offered through our affiliate, Hilliard Lyons Trust Company, LLC. Visit Hilliard.com for states James W. Vermillion III is registered in. For additional disclosures, please visit disclosures.hilliard.com.

Small Batch Barrels Our new Small Batch barrels offer limited quantities of Spiral Cut and Wave Stave barrels. Innovation and technology pair together to push your vision forward. Learn more by visiting our website.

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

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CARAWAY & DILL NEW OPTIONS FOR AQUAVIT WRITTEN BY AARON KNOLL

his past July the TTB revised their class/type designations with regards to Aquavit. Previously, the Distilled Spirits Beverage Alcohol Manual described aquavit as a “caraway flavored distilled spirits product.” However, after being contacted by an overseas Aquavit producer who, “explained that Norwegian law allows aquavit to possess the flavor of caraway, dill, or both,” the Beverage Alcohol Manual in the states has been updated to reflect the widely accepted international definition that permits both. The entry for Aquavit now reads, “A caraway and/or dill flavored distilled spirits product.” This is good news for overseas Aquavit producers who include dill among their botanical blends. It’s also equally good news for American distillers. Aquavit production is becoming more common stateside and now distillers have a meaningful choice for which traditional aquavit botanical they base their spirits on. Choice is certainly good — but what does that choice mean? How different is dill seed from the COMPOUND DESCRIPTION more-common caraway seed? What factors affect the taste of these ingredients? A closer look is α-Pinene Piney, juniper-like certainly in order. α-Phellandrene Black peppery, Spicy

AROMA COMPOUND GLOSSARY

CARAWAY SEED

Carvone

Rye bread, quintessentially caraway

Caraway is a member of the same plant family as carrots, celery, angelica and parsley. The plants Dillapiole Woody, Spicy grow about two feet tall with frond-like leaves and white flowers that bloom into an umbrella Limonene Orange, citrusy shape. Although other parts of the plant, including its root, were once part of European cuisine, Dihydrocarvone Minty it’s the seeds (technically fruits) that are most frequently found in a modern kitchen. To many people, the flavor of caraway is synonymous with that of deli rye bread, the seeds being a common ESSENTIAL ingredient. REGION OIL YIELD CARVONE LIMONENE RATIO** The distinctive compound in caraway is Poland 5.0% 62.0% 36.0% 0.58 carvone — a terpene with a spicy, somewhat Czechia 5.0% 63.1% 34.5% 0.55 minty flavor. Many flavoring manuals simply Iceland 3.9% 68.8% 26.6% 0.39 define its flavor as caraway manifest. The Good Latvia 3.0% 77.1% 20.7% 0.27 Scents Company sums up use for carvone Austria 3.2% 65.6% 31.7% 0.48 as, “[use] anywhere a caraway or rye note is required.” United Kingdom 2.5% 73.0% 23.2% 0.32 Taking a closer look at caraway’s aromatic France 2.9% 77.2% 22.5% 0.29 profile reveals there’s more than just carvone. Romania 3.9% 62.7% 33.7% 0.54 Although it is the signature compound, it’s Holland † 3.5% 58.8% 38.2% 0.65 really the ratio of limonene to carvone that Hungary† 3.5% 49.1% 45.8% 0.93 differentiates various sources from one another. Israel† 2.3% 51.2% 46.0% 0.90 One study by Sedlakova (2001) generally held Egypt† 2.2% 62.3% 33.8% 0.54 that “higher limonene-to-carvone ratio means VARIANCE ACROSS better quality of caraway.” ± 2.8% ±28.1% ±25.3% SAMPLES There are many factors at play which have Source— Seidler-Lozykowska et. al, 2010, †Putievsky et al. 2010 a significant effect on this ratio. Some are * Caraway samples sourced from botanical gardens, grown in controlled conditions ** Ratio is expressed in terms of Limonene to Carvone as per Sedlakova, 2001 considerations to make when sourcing caraway from external farms. Others are considerations if you are growing your own or working with a local farm. ESSENTIAL ANNUAL Caraway is highly sensitive to annual REGION OIL YIELD CARVONE LIMONENE RATIO** VARIATION weather conditions (Németh, 1998). 2011 44.51% 54.04% 1.21 A good quality product one year is not Banat 2012 27.39% 70.30% 2.57 -38% predictive of the quality of a product 2011 41.53% 57.05% 1.37 in subsequent years. Argañosa (1998) Bačka 2012 27.84% 70.04% 2.52 -33% found mild year-over-year climactic 2011 41.56% 56.19% 1.35 effects in essential oil content and Srem aromatic profile, while Aćimović et. 2012 37.57% 61.15% 1.63 -10% al (2014) found highly significant Source— Aćimović et. al, 2014

ESSENTIAL OIL CONTENT VARIATION IN CARAWAY SEEDS*

ANNUAL VARIATION IN CARVONE CONTENT AMONG SERBIAN CARAWAY*

* Ratio is expressed in terms of Limonene to Carvone as per Sedlakova, 2001

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variations in a study of Serbian juniper grown at the same site between 2011 ESSENTIAL and 2012. The dramatic change in OIL ratios mean the same Serbian suppliers CULTIVAR TYPE CONTENT CARVONE LIMONENE RATIO* would have had a completely different Karzo Annual 3.4% 46.2% 51.9% 1.12 product in terms of makeup and flavor Moran Annual 3.4% 47.3% 50.9% 1.08 profile. Richters Annual 3.6% 45.7% 52.4% 1.15 Growers have found that caraway † Mean of three grown in shorter day conditions cultivars grown in Saskatoon, Biennial 4.1% 53.8% 45.2% 0.84 produces higher yields in terms of seed Saskatchewan 1994–1995 count, while warmer days increases † Mean of three the essential oil yield of the seeds cultivars grown (Németh 1998). This complicates any in Melfort, Biennial 5.8% 55.1% 42.9% 0.78 Saskatchewan generalization regarding source, as 1994–1995 shorter days are often correlated with Source— G. C. Argaños et al. 2010 cooler temperatures. * Ratio is expressed in terms of Carvone to Limonene Of all factors growers can control, the time of harvest was one of the seed as an alternative source of carvone and traditional Aquavit flavor. most significant. Bouwmeester (1995) found that limonene accumulates earlier in the growing season, with carvone developing later. An earlier harvest means a more citrusy and Firstly, pay attention to what kind of dill you are purchasing. European bright caraway, while later harvests yield a more traditionally dill seed (Anethum graveolens L.) has a sweetly aromatic character — warm rye-like flavor. Soil moisture of 50–80 percent yielded the most and somewhat sharp, reminiscent of caraway (Reineccius 1994). Indian number of fruits (Németh, 1998). Dill is also available (Anethum sowa Roxb.) but differs wildly, and includes Harvest method can have a pretty dramatic impact on the a compound dillapiole which is not found in other dill varieties. Fenaroli’s quality of the caraway as well. Hand-picked seeds had the Handbook of Flavor Ingredients, Sixth Edition, describes it as having: “... a highest essential oil content (5.9 percent), while threshing harsh caraway-like odor and flavor,” (Burdock 2010). gradually reduced the essential oil content in proportion to the Similar to caraway, limonene and carvone are the predominate oils of speed of the threshing device. The same seeds threshed at 1080 the seeds (Huopalahti 1983), however, there are small quantities of other rpm had an essential oil content of 5.2 percent (Bouwmeester aromatic compounds. α-Phellandrene, which is common in dill leaves, 1995). is present in dill seeds Even if you are not growing your own, knowing what kind of in small quantities, as caraway you are sourcing can have an impact on quality. While is dihydrocarvone and many annual varieties are preferred by farmers because some α-Pinene — though all can thrive over cold winters and survive frosts in fields as part decline and are replaced of crop-rotation cycles, the biennial varieties have a higher ESSENTIAL OIL by carvone as the growing STUDY CONTENT essential oil content and can contribute more flavor by volume. season progresses (Callan Reineccius, 1994 2.5%–4% Other cultivars can contribute their own unique flavor 2007). quality. The biennial cultivar was found to have a much higher Charles, 1995 1.75%–4.0% But perhaps what is limonene content — just over 50 percent (Putievsky 1994). Ahl, 2015 3.2% more intriguing about Springcar is an annual variety, but it yields a 30 percent Vokk, 2011 3.5% this look at dill seed oil higher carvone content when compared with other singleBlank, 1991 2.0%–4.0% content is that if we used season caraway cultivars (Németh, 1998). Caraway variance affords distillers a lot of COUNTRY CARVONE LIMONENE α-PHELLANDRENE DIHYDROCARVONE RATIO* choice when considering Romania 75.2% 21.6% 0.12% 3.02% 0.29 their botanical blends, Estonia 75.9% 18.41% 0.66% 2.54% 0.24 but that is to say nothing Egypt** 62.48% 14.61% 0.07% 0.23 of whether or not caraway Uzbekistan 73.61% 14.69% 0.03% 5.87% 0.20 itself is the right choice. Source— Rãdulescu. 2010 , Jirovetz 2003, Vokk 2011 , Ahl 2015 If you are an American * Ratio is expressed in terms of Limonene to Carvone as per Sedlakova, 2001 distiller, consider the dill ** The DIll Seed in the Eg ypt study also contained a significant amount of Dillapiole (19.51%)

BIENNIAL VS. ANNUAL CARAWAY

DILL SEED

DILL SEED ESSENTIAL OIL CONTENT

VOLATILES IN DILL SEED BY GROWING LOCATION

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the quality barometer set forth in Sedlakova, it is clear that dill seed is generally going to come up short owing to a lower ratio of limonene to carvone. However, the irony is that dill seed has a much higher quantity of the aroma compound responsible for making caraway smell like caraway. Dill is an essential part of Norwegian aquavit culture in particular, and the large number of dill-forward aquavits is proof that depending on the effect the distiller is looking for in their spirit, this choice can be the difference between a rye-kissed aquavit and a softer, more citrusy spirit.

FOR FURTHER STUDY Aquavits produced with caraway include Linie Aquavit, Brennivín, Krogstad Festlig Aquavit, Aalborg Taffel Akvavit, Devil’s Head Aquavit, Åhus Aquavit and Tattersall Aquavit. Although less common today, with the change in labelling law we should soon see more dill aquavits like Gamle Ode Dill Aquavit, Ole Bjørkevoll Aquavit, D Argentum Dild Aquavit and Aalborg Dild Aquavit.

CLOSING CONSIDERATIONS Like all botanical selection, there are a lot of factors to account for. If you are just looking to add a hint of caraway to a spirit you are working on — gin, perhaps — the choice is not as pressing. You may even be able to use dill seed to more acutely hone in on adding that caraway-like note. But if you are basing your entire spirit on the caraway-like flavor profile, there are a lot of considerations. If you are growing it yourself, or foraging, consider environmental and growing conditions to ensure a high quality product. If you are sourcing, be picky year-over-year as seasonal variations can be appreciable. Be sure you are getting the right species, cultivar or growth-cycle for what you are looking for, and enjoy the new choices and flavors available to American distillers with this newly expanded category definition.

Aaron Knoll is a noted gin historian, critic and consultant. He authored 2015's “Gin: The Art and Craft of the Artisan Revival,” which has since been translated into three languages, and additionally co-authored 2013's “The Craft of Gin.” He also founded leading gin website TheGinisIn.com in 2009.

SOURCES REFERENCED Aćimović, M. G., Oljaĉa, S. I., Teŝević, V. V., Todosijević, M. M., & Djisalov, J. N. (2014). Evaluation of caraway essential oil from different production areas of Serbia. Horticultural Science, 41(3), 122–130. Ahl, H. Al, Sarhan, A., Dahab, A., & Zeid, E. (2015). Volatile Oil Composition of Anethum graveolens Affected by Harvest Stage. International Journal of Plant Science of Ecology, 1(3), 93–97. Bailer, J., Aichinger, T., Hackl, G., de Hueber, K., & Dachler, M. (2001). Essential oil content and composition in commercially available dill cultivars in comparison to caraway. Industrial Crops and Products, 14(3), 229–239. Blank, I., & Grosch, W. (1991). Evaluation of Potent Odorants in Dill Seed and Dill Herb (Anethum graveolens L.) by Aroma Extract Dilution Analysis. Journal of Food Science, 56(1), 63–67. Bouwmeester, H. J., Davies, J. A. R., & Toxopeus, H. (1995). Enantiomeric Composition of Carvone, Limonene, and Carveols in Seeds of Dill and Annual and Biennial Caraway Varieties. Journal of Agricultural and Food Chemistry, 43(12), 3057–3064. Callan, N. W., Johnson, D. L., Westcott, M. P., & Welty, L. E. (2007). Herb and oil composition of dill (Anethum graveolens L.): Effects of crop maturity and plant density. Industrial Crops and Products, 25(3), 282–287. Charles, D. J., Simon, J. E., & Widrlechner, M. P. (1995). Characterization of Essential Oil of Dill (Anethum graveolens L.). Journal of Essential Oil Research, 7(1), 11–20. De Carvalho, C. C. C. R., & Da Fonseca, M. M. R. (2006). Carvone: Why and how should one bother to produce this terpene. Food Chemistry, 95(3), 413–422. G. C. Argañosa, F. W. S. & A. E. S. (1998). Seed Yields and Essential Oils of Annual and Biennial Caraway (Carum carvi L.) Grown in Western Canada. Journal of Herbs, Spices and Medicinal Plants, 6(1), 1–8. George, B. (2010). Fenaroli’s handbook of flavor ingredients. CRC Press (Sixth, Vol. 6). Boca Raton, FL: CRC Press. Huopalahti, R., & Linko, R. R. (1983). Composition and Content of Aroma Compounds in Dill, Anethum graveolens L., at Three Different Growth Stages. Journal of Agricultural and Food Chemistry, 31(2), 331–333. Jirovetz, L., Buchbauer, G., Stoyanova, A. S., Georgiev, E. V., & Damianova, S. T. (2003). Composition, Quality Control, and Antimicrobial Activity of the Essential Oil of Long-Time Stored Dill ( Anethum graveolens L.) Seeds from Bulgaria. Journal of Agricultural and Food Chemistry, 51(13), 3854–3857. Németh, É. (Ed.). (1998). The Genus Carum, Medicinal and Aromatic Plants— Industrial Profiles. Amsterdam: Taylor & Francis.

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Pino, J. A., Rosado, A., Goire, I., & Roncal, E. (1995). Evaluation of Flavor Characteristic Compounds in Dill Herb Essential Oil by Sensory Analysis and Gas Chromatography. Journal of Agricultural and Food Chemistry, 43(5), 1307–1309. Putievsky, E., Ravid, U., Dudai, N., & Katzir, I. (1994). A new cultivar of caraway (Carum carvi L.) and its essential oil. Journal of Herbs, Spices & Medicinal Plants, 2(2), 81–84. Rãdulescu, V., Popescu, M. L., & Ilieş, D. C. (2010). Chemical composition of the volatile oil from different plant parts of Anethum graveolens L. (Umbelliferae) cultivated in Romania. Farmacia, 58(5), 594–600. Reineccius, G. (Ed.). (1994). Source Book of Flavors (2nd ed.). Springer Science. Rowe, D. J. (2005). Chemistry and Technology of Flavors and Fragrances. Boca Raton, FL: Blackwell Publishing Ltd. Sedláková, J., Kocourková, B., & Kubáň, V. (2001). Determination of essential oils content and composition in caraway (Carum carvi L.). Czech Journal of Food Sciences, 19(1), 31–36. Sedláková, J., Kocourková, B., Lojková, L., & Kubáň, V. (2003). The essential oil content in caraway species (Carum carvi L.). Zahradnictví (Horticultural Science), 30(2), 73–79. Seidler-Lozykowska, K., Baranska, M., Baranski, R., & Krol, D. (2010). Raman analysis of caraway (Carum carvi L.) single fruits. evaluation of essential oil content and its composition. Journal of Agricultural and Food Chemistry, 58(9), 5271–5275. Sintim, H. Y., Burkhardt, A., Gawde, A., Cantrell, C. L., Astatkie, T., Obour, A. E., … Schlegel, V. (2015). Hydrodistillation time affects dill seed essential oil yield, composition, and bioactivity. Industrial Crops and Products, 63, 190–196. Solberg, S. O., Göransson, M., Petersen, M. A., Yndgaard, F., & Jeppson, S. (2016). Caraway essential oil composition and morphology: The role of location and genotype. Biochemical Systematics and Ecology, 66, 351–357. Toxopeus, H., & Bouwmeester, H. J. (1992). Improvement of caraway essential oil and carvone production in The Netherlands. Industrial Crops and Products, 1(2–4), 295–301. Vokk, R., Lõugas, T., Mets, K., & Kravets, M. (2011). Dill (Anethum graveolens L.) and parsley (Petroselinum crispum (Mill.) Fuss) from Estonia: Seasonal differences in essential oil composition. Agronomy Research, 9(SPPL. ISS. 2), 515–520. Yili, A., Aisa, H. A., Maksimov, V. V., Veshkurova, O. N., & Salikhov, S. I. (2009). Chemical composition and antimicrobial activity of essential oil from seeds of anethum graveolens growing in uzbekistan. Chemistry of Natural Compounds, 45(2), 280–281. Yili, A., Yimamu, H., Maksimov, V. V., Aisa, H. A., Veshkurova, O. N., & Salikhov, S. I. (2006). Chemical composition of essential oil from seeds of Anethum graveolens cultivated in China. Chemistry of Natural Compounds, 42(4), 491–492..

DESCRIBING of FLAVORS RUM the

A PRIMER

ecently on social media there have been postings complaining that rums and other spirits are defined in non-professional reviews with limited terms such as vanilla, molasses, baking spices, and little else. So, this begets the question: how do consumers or distillers distinguish the many different rums (styles and brands), or extol the virtues of premium products based on such a limited vocabulary? Additional training is needed to expand the terms used to assess rums as for any other spirit. As for any food or beverage, a little knowledge about the origins of flavors contributing to the whole flavor profile is a good start. Learning the terms associated with those flavors helps build up a better descriptive framework. Recently, more scientific studies defined the most prominent terms being described in rums as vanilla, oak, caramel, fruity, molasses and baking spices (1). So, let us try and build an essential vocabulary from there. The purpose of this article is not to get into an in-depth discussion of rum raw materials or production, but to draw out the beginnings of a vocabulary to better understand the profiling of this complex spirit. The reader is referred elsewhere for detailed descriptions of rum production (27). However, a very brief account of rum and cachaca production is presented in Figure 1 to set the stage, and that will have to serve for now. From raw materials through the entire rum manufacturing process, many aromatic substances with different threshold concentrations of detection and recognition are produced, and it is this rich chemistry which is the focus of this short review.

WRITTEN BY GARY SPEDDING, PH.D.

figure 1 FRESHLY HARVESTED RIPE SUGAR CANE ING

ESS

SUGAR CANE JUICE

CRYSTALLIZED SUGAR

BOILI

FERMENTATION:

MOLASSES

NATURAL OR WITH ADDED CULTURE YEAST (+/- BACTERIA)

TION

DILU

“BEER” 7-8% ABV T N PO TIO ER ILLA P P T CO DIS IT LL S

MORE AROMATIC (HEAVY) SPIRITS: SOME RUMS & CACHAÇA APPROX. 65% ABV (DOUBLE DISTILLATION)

DILUTION SOMETIMES BLENDING & AGING IN WOOD SOMETIMES WITH ADDITION OF CARAMEL, SPICES OR FRUIT JUICE

ST CO ILL NT DI INU ST O ILL US AT IO N

LIGHTER SPIRIT: MOST RUMS & CACHAÇA APPROX. 95% ABV

DILUTION SOMETIMES BLENDING & AGING IN WOOD SOMETIMES WITH ADDITION OF CARAMEL, SPICES OR FRUIT JUICE

WWW.ART ISANSPI RI TMAG.CO M

BESIDES VANILLA, MOLASSES AND BAKING SPICE, WHAT OTHER RUM-ASSOCIATED FLAVOR NOTES ARE THERE TO BE INTERPRETED BY THE BRAIN? Typical for most spirits, we see all classes of chemical compounds produced — especially through fermentation which, for rums, includes the inoculation of the sugar cane juice or molasses with yeast plus or minus certain species of bacteria (see Figure 1). Volatile and flavorful classes of molecules include: esters (solventy, fruity and floral notes), higher alcohols (solventy, floral, bitter), terpenoids (think resins and hop and gin-like flavors), acetals (delicate earthy, nutty, green and ethereal), aldehydes (green, cheesy/fatty/sweaty and waxy notes), phenols (medicinal, band-aid, spicy-clove-like), ketones (e.g., diacetyl — buttery), furans and other “cooked” Maillard heterocyclic compounds (burnt, sweet-nutty, bready, meaty and roasted nuances), and organic acids (pungent, sour, dairy and cheesy). These flavor notes were detailed recently (8) and the reader is referred there and to Table 2 for more information. Key flavors are also derived from wood maturation and include vanilla, eugenol (clovespicy phenolics), and lactones (coconut, nutty, celery — the heavy fruity and fatty notes of peaches and plums are also described as “lactony”). So much for describing rums with only the terms vanilla, molasses, and baking spices. All the metabolites, raw-material extractives, and chemical reactions (leading to more volatile flavor molecules) produce a harmony which we call the rum experience. Some are very pleasant, some less so, but the marriage gives us what we have come to know and like in our favorite rums.

table 1:

23 BASIC FLAVOR TERMS

DERIVED FROM A SERIES OF SENSORY EVALUATIONS DEFINING THE TOP 14 ATTRIBUTES DEEMED OF IMPORTANCE IN VARIOUS RUM STYLE OR BARREL AGE CATEGORIES. [SEE TEXT AND REF 1.]

GENERAL DESCRIPTORS

THROUGH WHICH TO START DESCRIBING RUMS

BANANA BUTTERSCOTCH CARAMEL CHOCOLATE CINNAMON CITRUS COCONUT CREAM FLORAL

GETTING A LITTLE DEEPER

FRUITY

Early research (9) showed 184 volatile compounds in unaged sugar cane spirit (known as aguardiente) and in three- and seven-year old cask rums. These components included 64 esters, 47 benzenic compounds, 16 terpenoids, 14 alcohols, 10 acetals, nine aldehydes, six phenols, six ketones, six furans, three acids and three benzopyrans. Moreover, the use of only 15 volatile compounds permitted a differentiation between the three- and seven-year-old rums (9). Ethyl esters were found to be the most prevalent along with 3-methyl-1-butanol and 2-methyl-1-butanol (the key fusel alcohols or fusel oils) (3,9). The flavor descriptors are provided for these and other compounds in Table 2. As a spectrum, rums — light and heavy (aged and unaged), simply by broad strokes, may be assessed as being: pungent, solventy, spicy, grainy, malty, floral, vanilla, soapy, sour, nutty, oily, woody, sulfury, sherry-like, sweet, burnt and molasses-like (5). To which we can add fruity and buttery. More extensive terms for white, gold and aged rums are specified in a rum flavor wheel presented by the Cadwallader group (1). (As an aside, Ickes and Cadwallader also initiated the first sensory study to evaluate the effects of the ethanol concentration on the flavor perception of rum (10).) An extended list of volatiles found in rums can also be found in the thesis by Burnside (11), and the reader should also seek out the dissertation by Gomez (6) for lists of aromatic compounds present in molasses and those compounds that might be derived from wood. Obviously, depending on type and process, many of these compounds end up in your rums. Several white, gold and aged rums (2-5-year, 5-10-year, 10-20-year and 20 years +) were evaluated by Ickes, Lee and Cadwallader (1) and the top 14 flavor descriptors for each category of rum evaluated. (Note: the authors titled their table the Top 15, but only 14 terms appeared in each column. Maybe they had

LEATHER

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HONEY MINERAL MOLASSES NUTTY OAK ORANGE SPICES SUGAR TOBACCO TOFFEE VANILLA WOODY The listing is presented alphabetically and may not represent the order with which they are detected by the senses when evaluating rums. The detection of compounds from complex matrixes is dependent upon many physical, chemical and biochemical variables beyond the scope of this review (18). See reference 1 for the details concerning this listing of components. From this we can begin to look at the chemical flavor classes that give rise to these “flavor” notes (see Table 2).

table 2: a collective listing of

RUM-ASSOCIATED CHEMICAL MOLECULES and their associated flavor descriptors FLAVOR COMPOUND

(17, 18)

FLAVOR DESCRIPTORS

FLAVOR COMPOUND

ACETIC (ETHANOIC) ACID

Vinegar-like, pungent, sour, acidic

ETHYL DECANOATE

BUTYRIC (BUTANOIC) ACID

Rancid, sharp cheese/sour cheese, baby vomit/sickly/sour, pungent/putrid, sour spent grains

ETHYL FORMATE

HEXANOIC ACID (CAPROIC ACID)

LACTIC ACID (2-HYDROXYPROPANOIC ACID)

ACETALDEHYDE (ETHYL ALDEHYDE)

Fruity cheese, fatty, goaty

HYDE DIETHYL ACETAL)

Dairy, yogurt-like, sour, acid (little odor – mainly taste – may dull the sensation of the overall flavor profile) Green apples/bruised apples, pungent/ethereal, fruity, musty, grassy, latex paint, florists’ shop, melon, pumpkin

Nutty, earthy, sweet vegetable

BENZALDEHYDE

Sweet, oily, almond, cherry, nutty and woody

FURFURAL (2-FURALDEHYDE)

Sweet, butterscotch, caramel, smoky, bready, woody, burnt and almond nuances

ISOVALERALDEHYDE (3-METHYLBU-

Fruity, dry, green, chocolate, nutty, cocoa and peach-fatty

TYRALDEHYDE)

SYRINGALDEHYDE (4-HYDROXY-3, 5-DIMETHOXYBENZALDEHYDE)

VANILLIN [4-HYDROXY-3-METHOXYBENZALDEHYDE, VANILLIC ALDEHYDE]

ETHYL ACETATE (ACETIC ACID ETHYL ESTER)

ETHYL 2-METHYLBUTYRATE ETHYL 3-METHYLBUTANOATE (OR BUTYRATE) (ETHYL ISOVALERATE)

ETHYL BUTYRATE (BUTANOIC ACID ETHYL ESTER)

(FORMIC ACID ETHYL ESTER)

ETHYL DODECANOATE

Sweet, woody, cocoa, chocolate, creamy, dairy notes and mild plastic Vanilla, ice-cream, vanilla bean, marshmallow, phenolic and milky Acetone-like (nail varnish remover), estery, paint thinner/ solvent-like and sometimes with fruity nuances – grape and cherry Berry, fruity, green berry, strawberry, pineapple, raspberry, apple peel and pineapple skin Sweet, fruity, spicy, pineapple and apple notes

Fruity – pineapple, juicy fruit, tutti-frutti

ETHYL HEXANOATE (ETHYL CAPROATE)

ETHYL LACTATE (ETHYL-2HYDROXYPROPANOATE)

ETHYL NONANOATE (ETHYL PELARGONATE)

ETHYL OCTANOATE (ETHYL CAPRYLATE)

ETHYL PROPANOATE (PROPIONIC ACID ETHYL ESTER)

ETHYL VANILLATE (VANILLIC ACID ETHYL ESTER)

ISOAMYL ACETATE [AKA. BANANA OIL OR PEAR ESSENCE] (ISOPENTYL ACETATE)

ISOBUTYL ACETATE (ACETIC ACID ISOBUTYL ESTER)

METHYL ACETATE (ACETIC ACID METHYL ESTER)

METHYL DECANOATE

(METHYL CAPRATE)

PROPAN-1-OL (1-PROPANOL) (PROPYL ALCOHOL)

ISOBUTANOL (ISOBUTYL ALCOHOL)

2-METHYL-1BUTANOL (ACTIVE AMYL ALCOHOL)

ACIDS ALDEHYDES ESTERS

(17, 18)

FLAVOR DESCRIPTORS

FLAVOR COMPOUND

Sweet, oily nut-like, yeasty, waxy, fruity

3-METHYL-1BUTANOL

Characteristic smell of rum and partially responsible for the flavor of raspberries

HIGHER ALCOHOLS KETONES

LACTONES PHENOLS

FLAVOR DESCRIPTORS

(17, 18)

(ISOAMYL ALCOHOL)

As above for 2-Methyl1-Butanol – fusely and whisky-like

SEC-BUTYL ALCOHOL

Sweet, apricot

(2-BUTYL ALCOHOL)

Floral, fruity – waxy, fatty

(ETHYL LAURATE)

butterscotch, caramel, 5-HYDROXYMETHYL Sweet, smoky, almond nuances, FURFURAL (5-HMF) herbal, hay and tobacco

ACETAL (ACETALDE-

(ETHYL CAPRATE)

CHEMICAL CLASS KEY

1-BUTANOL (BUTAN-1-OL)

Fruity, apple (red or fresh ripe) with a nuance of aniseed, pineapple, banana and green notes

1-DECANOL (CAPRIC ALCOHOL)

1-HEXENOL (HEXYL ALCOHOL)

Tart, creamy, fruity, butterscotch, pineapple

3-OCTANOL

Fruity, waxy, soapy, tropical fruity

ACETONE

(OCTAN-3-OL) (DIMETHYL KETONE)

Medicinal, banana-fusel Oily, fatty, waxy, green, floral, orange Green, fruity, apple skin and oily Musty, mushroom, earthy, creamy, dairy Solvent, ethereal, apple, pear

Solvent/fresh, floral, fruity – wine, apricot, pear, mushroom and cognac notes

2,3-BUTANEDIONE

Caramel, fruity, estery, apple, sweet, pear, rum, winey bubblegum and grape-like nuances

2,3-PENTANEDIONE fruity, caramel, marshmallow

Floral, sweet, creamy, phenolic, spicy, burnt wood and powdery vanilla Fruity, banana (overripe), pear drops, circus peanuts (candy)

Sweet, pine-woody, fruity with a banana tutti-frutti note

(DIACETYL)

Butter, butterscotch, movie popcorn, creamy and milky. Also conveys an oily “slickness” on the palate that becomes cloying over time/repeated sips Creamy, sweet, brown, butter, and molasses nuances

2-UNDECANONE

Waxy, fruity, cream cheese-like notes, blue cheese

β−DAMASCENONE

Apple juice (berry-like fruity accents), woody, floral, herbal, green and spicy tobacco

β-IONONE

Woody, berry/fruity – raspberry, green and floral notes – violets

OAK LACTONES (WHISKY LACTONE)

CIS AND TRANS ISOMERS (3-METHYL-

“Oaky – oakwood aroma” – honey and woody, coconut and celery – earthy and herbaceous. Cis-isomer: sweet, spicy, coconut, vanilla. Trans-isomer: Coconut and spice, clove and celery

Green, ethereal, fruity, rum and whiskey-like

4-OCTANOLIDE)

Oily, wine, fatty, fruity

fatty, creamy, buttery, γ-DODECALACTONE Fruity, peach

Alcoholic, ripe fruit, fusel-like, musty, yeasty – peanut, nutty, apple, pear and bubblegum

EUGENOL

Fusel, whiskey, ethereal

GUAIACOL

Alcoholic, spicy, vinous, pungent, malty, whisky-like and warming. Too much gives a hot/solventy burn in the aftertaste/linger

4-METHYLGUAIACOL

(2-METHOXYPHENOL)

Sweet brown spice, clove, nutmeg and woody – light cinnamon and allspice nuances Guaiacol and related compounds (from charred and toasted wood) contribute charlike, smoky and spicy aromas. Woody, phenolic, bacon, savory, smoky and medicinal Sweet, coffee, cocoa, phenolic and leathery

This listing is a general account of several key odorants/flavorants to seek out in rum (7). The list (by no means exhaustive) thus provides merely an introduction to some of the required sensory terms to take an observer to the next level of sensory exploration and communication. An evaluation of the literature and the use of Rum flavor wheels being a next step on the journey to sensory mastery. The molecules, representative of different chemical classes, will have different detection thresholds (the concentrations at which they are identified) which vary from parts per million, billion and even to parts per trillion. Some of the cited references list threshold data (e.g., 2 and 17) for some of the compounds as they present themselves in an alcohol matrix. The data in the paper by Sampaio, Reche and Franco (16) enabled the authors to discriminate Cuban from other rums. Note: not all compounds appear in the same amounts in different rums — hence such information as in the table allows the trained taster to discriminate different rums, different quality rums and aged vs. unaged rums. The work of Franzita, Granvogl and Schieberle (13) shows how recombination of specific flavors can mimic the aromas of those naturally occurring in production rums. The correct classification of sugar cane juice rums providing flavor markers for higher quality rums has also been made possible by the work of the Schieberle group (12).

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been drinking too much of those great rums?) Collectively the top terms arising from all the categories of rums studied are listed in Table 1. A total of 23 terms are seen here providing for a more extended, though still general, discussion of rum flavors. Delving further, the aforementioned flavor wheel for rum built up by the Cadwallader group will provide the reader with a very useful tool to help further build their rum sensory vocabulary (1). The flavor wheel categorization of terms defined by Ickes, Lee and Cadwallader presents 22 first-tier terms such as sugar, caramel, baking spices, vegetal, fruity and nutty (and includes mouthfeel/texture and trigeminal-stimulating terms such as burn, warming and cooling sensations). As for other flavor wheels, the first-tier terms are then expanded, or subcategorized, to include many more second-tier terms. This is where nuances of flavor are described. For example, by picking just two of the first-tier terms, sugar and baking spices, we see the increased repertoire of notes: sugar can be defined as candied, honey-like, maple, molasses and sugar cane, etc. Baking spices gets us to allspice, cinnamon, cloves, ginger, licorice, nutmeg, vanilla and more. Again, so much better than describing a rum as tasting simply of nebulous “baking spices.” Similarly, by digging deeper, the first-tier terms of caramel, roasted, woody, nutty, and fruity etc., branch out to sub-category terms. Moreover, fruity includes fresh fruits, dried fruits, tropical and citrus fruits (1). What a rich world our rums become when we can describe them in such refined detail.

TAKING IT EVEN FURTHER: ADDING IN SOME CHEMICAL TERMS WITH FLAVOR DESCRIPTORS Finally, for this current review a tabulation of key chemical components, determined in rums via chemical identification techniques, along with their associated aroma/flavor descriptors, will allow for more serious discussion of holistic flavor for evaluating in-house produced rums and competing products. Table 2 thus represents a set of key chemical class flavor notes detected in rums of various styles along with their more flavorful descriptive terms (data culled specifically from references 1, 2, 4, 6, 7, 9, 11-17 and from other flavor notes prepared by the author over several years). This more chemically defined listing allows for an even clearer communication of the nuances of rum flavor and a better understanding of the origin and control of such flavor notes during rum production. Building up such a vocabulary of terms, along with the use of flavor wheels, assists not only in communicating with consumers but also with fellow judges and sensory panelists.

SUMMARY Hopefully this short review provides the reader and rum producer/aficionado with a good start and some assistance towards them approaching the original literature and, thereby, giving them a better overall education in appreciating their distilled spirits flavor profiles. An expanded general and technical vocabulary leads to better sensory assessments and judgments. You are on your own now — enjoy your rum adventures!

Gary Spedding, Ph.D. is a brewing and distilling analytical chemist with special interest in the origins and development of beverage flavor and in the sensory evaluation of beer and distilled spirits. He owns and operates Brewing and Distilling Analytical Services, LLC and the new division — Brewing and Distilling Educational Services in Lexington, KY. WWW.ARTISANSPIRITMAG.COM

REFERENCES 1) Ickes, C.M., Lee, S-Y, and Cadwallader, K. R. (2017). Novel Creation of a Rum Flavor Lexicon Through the Use of WebBased Material. J. Food. Science. 2. Hill, A. E., Salvesen, O. and Russell, G. (2018). Deciphering dunder: an examination of rum fermentation. In, Local Roots; Global Reach: Delivering Distilling Expertise to the World. Edited by F. Jack, D. Dabrowska, S. Davies, M. Garden, D, Maskell and D. Murray. Proceedings of the Worldwide Distilled Spirits Conference 2017. The Institute of Brewing and Distilling. Chapter 21, pp 103-107. 3. Buglass, A. J. (Editor) (2011). History and Basic Description of Rum and Cachaça. In, Handbook of Alcoholic Beverages: Technical, Analytical and Nutritional Aspects. John Wiley and Sons. 4. Nicol, D. A. (2003). Rum. In, Fermented Beverage Production (Second Edition). Edited by A. G. H. Lea and J. R. Piggott. Kluwer Academic/Plenum Publishers. Chapter 12, pp 263-287. 5. Faria, J.B. (2012). Sugar cane spirits: cachaca and rum production and sensory properties. In, Alcoholic beverages: Sensory evaluation and consumer research. Edited by J. Piggott. Woodhead Publishing. Chapter 17, pp 348-358. 6. Gomez, S. M. (2002). Rum Aroma Descriptive Analysis. LSU Master’s Thesis. Louisiana State University. https:// digitalcommons.lsu.edu/gradschool_theses/2770. 7. Green. V. (2015). The microbial ecology of a rum production process. Ph.D. Thesis. University of New South Wales, Sydney Australia. 8. Spedding, G. (2018). The Fruits Have First Bite: Beverage Flavor Chemistry – Part 1. Artisan Spirit. 24, Fall 2018, pp 103-109. 9. Pino, J. A. (2007). Characterization of rum using solidphase microextraction with gas chromatography–mass spectrometry. Food Chemistry. 104 (1); 421-428. 10. Ickes, C.M. and Cadwallader, K. R. (2018). Effect of ethanol on flavor perception of Rum. Food Sci. Nutr. (Open access online); 1-13. 11. Burnside E. E. (2012). Characterization of Volatiles in Commercial and Self-Prepared Rum Ethers and Comparison With Key Aroma Compounds of Rum. Masters Thesis. University of Illinois at Urbana-Champaign. 12. Franitza, L., Nicolotti, L., Granvogl, M. and Schieberle, P. (2018). Differentiation of Rums Produced from Sugar Cane Juice (Rhum Agricole) from Rums Manufactured from Sugar Cane Molasses by a Metabolomics Approach. J. Agric. Food Chem. 66 (11); 3038-3045. 13. Franitza, L., Granvogl, M. and Schieberle, P. (2015). Characterization of the Key Aroma Compounds in Two Commercial Rums by Means of the Sensomics Approach. J. Agric. Food Chem. 64(3); 637-645. 14. Compound Interest (2015). https://www.compoundchem. com/wp-content/uploads/2015/11/The-Chemistry-of-Rum.pdf 15. Pino, J. A., Tolle, S., Gok, R. and Winterhalter (2012). Characterization of odour-active compounds in aged rum. Food Chemistry 132; 1436-1441. 16. Sampaio, O.M., Reche, R.V. and Franco D.W. (2008). Chemical Profile of Rums as a Function of their Origin. The Use of Chemometric Techniques for their Identification. J. Agric. Food Chem. 56 (5); 1661-1668. 17. Spedding, G. and Jeffery, J. (2015). Smelling Roses, Fruit, Stinky Feet and Much More in My Glass. Artisan Spirit. 12, Fall 2015, pp 53-58. 18. Spedding, G. (2018). New Understanding of Human Sensory Perception: Potential for More Robust Sensory Evaluation of Distilled Spirits. Artisan Spirit. 22, Spring 2018, pp 78-85.

HOW CROZE NEST COOPERAGE TOOK OFF WRITTEN BY DEVON TREVATHAN /// PHOTOGRAPHY PROVIDED BY CROZE NEST

’m sitting across the table from cooper Joe Smith. As we’re discussing his decision to leave a promising career as a marketing manager at a software company to produce whiskey barrels, I realize that he’s a man who doesn’t need much. I’ve heard these kinds of individuals described as “salt of the earth,” and in this case that rings true. Smith is Michigan born-and-bred, a native of the Lower Peninsula, which apparently qualifies him as a “troll” since he lives below the Mackinac bridge. He’s married, has two young children, and lives a couple of doors down from the house that he grew up in, which sits on the same property that is now home to the workshop where he runs Croze Nest. Coopering, as its called, is not a very common profession. To give you an idea, the Associated Cooperage Industries of America (ACIA) lists 49 members on its website that are active in the domestic cooperage industry. Comparatively, recent research has the number of operating American craft distilleries nearing 1,800. Coopering barrels is a complex combination of engineering, math, and hard labor. Making a barrel that will successfully retain liquid for many years, held together with nothing more than metal hoops and geometry, is not a skill you’re likely to pick up in a college elective course. WWW.ARTISANSPIRITMAG.COM

Smith had long known that working with wood made him truly happy. “Really when I was 18, even in college, it was a stress reliever,” Smith says of the pastime. “Leave the campus, go out to dad’s woodshop for a couple hours on a Thursday, and the stress was gone.” He confided his feelings of discontent in his corporate workplace to a friend, and that person sent him a link to a piece from the Wall Street Journal detailing a shortage of whiskey barrels. At that moment, like the seed of a great oak tree, the idea began to take root. Smith decided to make a barrel. To do so, he needed wood. He contacted a relative who worked for a company that made custom oak trims. “I called them up and said, ‘Hey I need quarter sawn white oak, and I need a bunk of it.’ I didn’t have any idea about seasoned wood, I didn’t know about how it’s dried. I didn’t know about the science behind it. I just knew I needed white oak.” While problems surrounding the right wood and treatment for the taste and character of American whiskey would later arise, the more immediate issue was that Smith did not actually know how to put the thing together. Instead of fretting too hard over the dilemma, he decided to do a bit of basic math. “If I’ve got 30 staves in a barrel, 360 degrees divided by 30 is 12, two angles on each stave, it’s six degrees,” Smith decided. Simple enough — or so he thought. “My first barrel was straight-walled. And then I was like, well, crap. I screwed this up because it needs to have a taper.” At a loss for instruction, Smith turned to the existing community to get a bit of assistance. He started by taking tours of different cooperages, but soon found they were insufficient in telling him what he needed to know. “They were public tours — they showed how a barrel was built, but I needed the intricacies of it,” Smith elaborates. Finally he caught a break: a cooper allowed him to come in and watch while they constructed an entire barrel. After four hours, Smith had learned the basics of the process. He now knew how to go about engineering a barrel. The business did not fall into place right away. Though he had the rough elements in his head, there was still the matter of applying it to actual wood. To make matters even more challenging, Smith had taken a new job in his corporate industry. “Sixty days into this new job I get asked to come into the office and I get WWW.ARTISANSPIRITMAG.COM

fired. They told me I was not a good enough fit,” says Smith. He was blindsided and quickly began a somewhat frantic search for a different position. During this time, his wife reminded him that other options remained on the table. “Through all this, my wife is going, ‘You can only apply for so many jobs a day, keep working on [the barrel business].’ So I keep working on it.” At this point in his journey, however, Smith had met a seemingly insurmountable obstacle. The quotes that he had received for necessary equipment were not promising; most put him in need of capital close to a million dollars to move forward. Instead of giving up, Smith turned to his father-in-law, an engineer who owned his own die shop, to try and figure out a way to fabricate his own equipment and keep costs down. “In all of this I’m still slowly working, I’ve got the whole business plan done,” notes Smith. “I’ve got the finances done, started the conversations with my father-inlaw about what equipment [we could just] build.” Smith was finally convinced that some kind of divine intervention was at work. He spoke with his wife, who was supportive, but realistic, and together they set a deadline: if he hadn’t sold a barrel in the next year, he would pack up his dreams of charring wood over an open fire and get back to his corporate career. Smith decided to attend that year’s cooper’s conference in San Diego, California. Up until that point, he had trouble finding a supplier, but at the tail end of 2016 the oak shortage began to taper and wood was in more abundant supply again. At the conference, he learned about the way that oak must be aged for whiskey barrels, recalling the reaction that some oak sellers had when he told them that he was buying from a lumber yard. “They were like, ‘Don’t sell that, that’s a bad barrel. That’s got harsh tannins in it. It’s going to taste crappy.’” Once Smith’s materials were stocked, he returned to the primary task at hand. He had a pallet of wood from which he thought 20 barrels could be made and decided that he would try to make one successful barrel out of that lot. Quite a low bar to set for himself, but Smith figured if he could make one good barrel, the rest would come. He enlisted the help of his father-in-law, who built him jigs, and invested in some old woodworking equipment, and together they built a set of staves. “I’ve got a barrel that on measurement

— at the time I was working on 30-gallon barrels — is a 30-gallon barrel. Cool, I know I can build a shell of a 30-gallon barrel. How in the hell do I croze this thing?” (“Crozing” refers to cutting the grooves — called crozes — inside the barrel where the heads will rest.) In the meantime, Smith had developed a relationship with another local cooperage, Kalamazoo Cooperage, who had built their own crozing machine. They offered to let him come down and croze his barrel at their cooperage, which he did to less than satisfactory results. “The first barrel looked like a bubble,” Smith tells me. “It was massive. I had my angles wrong.” Ben Aldrich from Kalamazoo offered him some advice: Smith was taking too much off both his head and his bilge, which resulted in perfectly curved barrel staves that were supposed to be straight. Smith redesigned his barrel and got back to work, but found that his materials were dwindling. “At this point, I had figured I had about $20,000 into oak and nothing to show for it. I’m starting to freak out.” In a panic, he cut up the remainder of his wood into staves and began to put it together. It fit. Smith took his barrel to Kalamazoo and found that it crozed nicely. He had assembled his first complete barrel, and it wouldn’t stop leaking. Smith took his barrel back to his father-in-law’s shop looking for answers. They measured it together and found that the head of the barrel was a 32nd of an inch off in diameter, and could not seal right with the croze. They adjusted their design, built two new heads, and finally had a receptacle ready for spirit. From his initial

pallet, Smith found he still had enough wood to build two more barrels, which landed him with three complete barrels out of a possible 20. “So once I had proven I could build a barrel, I started going to distilleries in Michigan and talking to them, and I got my first order for 12 barrels in April of 2017.” It’s now 18 months later, and Croze Nest is still very much a fresh face in the market, but they are working hard. Smith initially wanted to keep things small and still does — he is the only person to touch every barrel that comes out of the cooperage. It’s just one of the things that set him apart from other folks in the industry, though he has nothing but kind things to say about them. Croze Nest is committed to doing things the old way. “I use an open fire to bend it, I use all oak chips, introduce very little water in the process till the pressure testing and hydration happens,” says Smith about his production. “I work with craft distillers and some buy all their barrels from me, and some just buy their specialty stuff.” “In all of this my grandmother was doing a genealogy project, and she found out that my 10th great-grandfather was the master cooper on the Mayflower,” Smith reveals. “So 10 generations later, the Smith family picked up the hammer and started again, and I’m building it the same way he did it in 1620.” Perhaps coopering was simply meant to be.

Croze Nest is located in Grand Rapids, Michigan. For more information visit www.crozenest.com or call (616) 805-9132.

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BUYING THE FARM

BLACK BUTTON DISTILLING — FARM AND FORESTRY INTERVIEW BY GEORGE B. CATALLO /// PHOTOS PROVIDED BY BLACK BUTTON DISTILLING

lack Button Distilling, one of the fastest growing distilleries in the Northeast, has stepped beyond just making fine spirits. Jason Barrett, owner and head distiller, has taken “farm distillery” to the next level and purchased an actual farm in South Bristol, New York. Black Button Farm and Forestry will produce crops solely for use at the distillery. I sat down with Jason to discuss his foray into becoming a farmer.

What inspired you to buy a farm? Love of the outdoors, an interest in growing the highest quality ingredients regardless of cost. The ability to plant new and interesting varietals of botanicals and drive the flavor profiles of those ingredients into our products. We have always endeavored to push the boundaries of flavor and bring new products to the cocktail conversation.

What crops will you be growing on the farm? We will start with juniper, white oak, and honey. In time I hope to add raspberry, loganberry, sage, and basil, but we want to crawl before we walk before we run. Nineteen acres has lots of potential.

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Do you have a relationship with a cooperage for when your oak trees are ready for harvesting, or is Black Button Cooperage the next venture? Haha! We are going to work with Adirondack cooperage in Remsen, New York. There are no intentions to start a cooperage of our own. While we love being in full control of the process, when we find great partners who have the same values and devotion to craft that we do, we are happy to partner with them.

Could you explain the logistics of being your one and only customer? Well luckily the distillery knows what it wants to make and therefore the farm provides it. Since the farm will only be producing a small percentage of the supplies the distillery needs, we will be able to adjust production levels to what the farm produces. It helps that the farm is a small matter at this point, and the focus is on the distillery.

What are your one, five, and ten-year goals for the relationship between the farm and distillery?

You have used crowdfunding numerous times on your journey as a distiller. What advice would you give to other business owners who may be considering using crowdfunding services?

Well this first year we are just trying to get everything planted and in place. In two or three years we will have our first crops to bring to the distillery and then we will expand from there. Long-term plans are still being drawn up. I will admit we are still very new to this, but then again six years ago we were new to distilling, and look how far we have come since then.

I think crowdfunding has changed a lot between the two times we have used it. And it has always been a better fit for products you can ship to folks across the country. I think the advice I would give is that crowdfunding sites are just a vehicle to collect pledges, but that the distillers themselves have to drive the traffic and create a compelling reason why people want to get involved in your project.

What is the most surprising thing you have run into in your foray into being a farmer? How hard it is to build a culvert. Let me explain. Eighteen acres of the farm are on the other side of a creek, and though we can take the tractor through it, we can’t get any work trucks back to the main planting areas. So, for now, we carry everything by hand. But we need to build a proper crossing. So we hired an engineer, studied the water flows for the area, and designed the culvert. And it’s a fairly big one — five foot pipe, most likely two of them to span the gap so that when the spring runoff comes it won’t wash out. Well, three different construction companies have come and looked and then come and gone. Its too big of a project for a small operator and too small of a job [for someone big].

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How will the farm impact the distillery in terms of operations and finances? Well they are two separate companies so the finances are separate, and the employees of the distillery are solely operating the distillery. The farm is my labor of love and my responsibility, but I am aware that my first responsibility is to my employees and our mission to bring locally grown spirits to consumers across New York state.

Having a consistent supply of juniper berries is key for any distillery that produces gin. The potential here for Black Button to have a single source of juniper is huge, especially with the ability to control the timing of the harvest to ensure optimum ripeness for their own purposes. The wow-factor of estate grown oak barrels also has massive potential for whiskey releases. The rise of non-Kentucky bourbon terroir is becoming a bigger factor in style. Having a bourbon where every piece of the puzzle is from one small region is perfect for establishing a terroir-driven style. Consumers also love anything and everything local. While operating a farm is not viable for every distiller out there, there are some great lessons to be learned here. A consistent and local supply of ingredients is an absolute must for any distiller trying to maintain quality and style. Having control over the profile of your ingredients also puts you far ahead of the curve. Be as involved with your suppliers as much as you can. Your products will do all the better for it.

Black Button Distilling is located in Rochester, New York. For more information visit www.blackbuttondistilling.com or call (585) 730-4512.

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HOW TO LEAD A TASTING 202 ADVANCED TECHNIQUES WRITTEN BY TIM KNITTEL

YOU’VE

CRAFTED

sampling is handing out shots. A tasting is a performance and — if done properly — has the potential to be an experience that is entertaining, informative and enjoyable for your guests while generating value for your business.

YOUR

In my article “Distillery Visitor Experience Part 1” in the Spring 2017 issue of Artisan Spirit Magazine, I covered the basics of how to lead a tasting:

PRODUCTS.

>>A “tasting” is an experience of flavor.

NOW

>>A comprehensive flavor message encompasses

CRAFT THE EXPERIENCE OF TASTING THEM. 98

nose/aromatics, mouthfeel, front palate, midpalate and finish, plus category positioning.

>>Tastings

have various goals including bottle sales, digital follows, new account activations, cocktail menu placements, earned media, brand awareness, and more.

>>Audiences can range from category novices to enthusiasts or industry (trade/media).

>>Time available can be very short to very long. >>The

triple sip method allows overcoming the high-proof burn.

>>Control

is critical because you as the tasting guide are determining how the audience will ultimately relate to your product.

Here we’ll look at advanced techniques to set your tastings apart from your competitors. WWW.ARTISANSPIRITMAG.COM

FLAVOR MESSAGE REVISITED Ultimately, your tasting is designed to communicate the flavor message of your products both intellectually and sensorially. Ensure your flavor message is clear, concise, and matches the overarching brand identity of your company. A flavor message should always be as unique as possible within the product’s category. Note that “handcrafted” and “locally sourced” are not flavor messages. Neither is “We’re just making the best product we can.” The same can be said about anyone, so you’re not differentiating your brand with that phrase. Also, avoid using “smooth.” It’s an empty word for people familiar with spirits and, unless you’re selling a liqueur, it usually doesn’t apply to category novices (they’re going to experience at least a little alcohol burn). Telling them it’s smooth while their experience says otherwise can turn visitors off of your brand and cause them to lose interest.

PERFORMANCE FUNDAMENTALS Remember: you’re leading a tasting. It is practically a lecture. Talk slowly and control when to sip. Look at your audience. Rehearse. Seriously, rehearse. Practice makes, if not perfect, at least better.

AUDIENCE MATCH There are many different audiences for tastings, and each will have unique needs. Tastings have far greater impact if they are tailored to the specific audience. “NOVICE” DRINKERS: This can be LDA or category novices. It might occasionally be media or other VIPs. Most consumers will fall into this group. Over-explaining and repeating are valuable and should include everything from category positioning and production process to tasting method and flavor message. With these guests, always start with the Triple Sip technique (three sips spaced about a minute apart to acclimate to the high-proof nature of the WWW.ARTISANSPIRITMAG.COM

spirit). Respect that they may struggle with your products. Water and ice are most valuable for these guests. Aromatic and culinary aids can assist with basic palate memory training. Cocktail tastings may be more appropriate than neat pours. INDUSTRY AND CATEGORY ENTHUSIASTS: These guests want something more than the basics, especially if it’s exclusive. Start with the broad-line products you’d share with novices and general consumers and add your high-end, rare or limited edition products for these folks. Don’t assume audience knowledge and always cover the basics of your brand message, production techniques and tasting guidance. However, these elements can be more shallow in favor of deeper histories, longer stories, production minutiae, and actual sensory training.

AUDIENCE ENGAGEMENT When a tasting is a sensory lecture, there’s a give-and-take with audience engagement. Given the opportunity, guests will want to talk among themselves about their experiences. They may also want to ask questions and provide feedback during the tasting. Whenever possible, release focus on you in between each spirit to allow for this interactivity, then regain control before moving on to important information and instructions. If you need to, tap a glass or keep raising your voice until you have your audience’s attention so as never to cede control entirely. When a question is posed, repeat it for the entire audience before answering it. In a formal tasting, plan additional time for further individual conversations after the tasting ends. When interaction is not possible — for example, during post-tour tastings on a high volume tour day — let guests know at the very beginning that time is limited but that you’ll be available for questions and discussion after the tasting (when the tasting room has been turned over to the next group).

RESPECT Everybody’s palate is different. If they say they’re tasting pineapple in your bourbon,

they very well might be. If they can’t taste anything, that’s OK, too — it takes time and practice to develop the ability to taste nuanced flavors in high-proof spirits. The consumption of spirits is most commonly done in a cocktail or over ice. If that’s the way guests want to enjoy yours, don’t poo-poo it — embrace it! A great tasting guide will always say, “There’s no wrong way to drink it.” General consumers often bring up competitor’s products or experiences they’ve had at tastings or tours elsewhere. That’s OK. Don’t disparage anyone else’s brand or products. Consider the introduction of another brand as an opportunity to reinforce your brand positioning especially as it differs from others. Industry and enthusiast guests will have deeper knowledge and often want to show it off. As the performer adage goes: “Be who they want you to be.” If they’re seeking in-group validation, provide it. If they bring up something new to you, it’s OK to acknowledge that you didn’t know that factoid or bit of news. Go so far as to thank them for bringing something new to your attention.

ADVANCED TASTING DESIGN ELEMENTS A tasting is an experience, and it should be designed like one. Here are many of the components that you can leverage for maximum audience impact.

FORMAL VS. INFORMAL TASTINGS A formal tasting has a structured start and end with no competing distractions. All guests are expected to pay attention for the duration of the tasting. Formal tastings might be convention sessions or distributor trainings. Your post-tour tasting should always be a formal tasting. An informal tasting involves guests coming and going as they like. Liquor store and expo hall tastings are informal. Informal tastings need to be short and to the point, and the tasting guide needs to be able to handle guests arriving during a tasting already in

process. A poorly managed informal tasting can quickly descend to handing out free shots and lost return on investment.

ENVIRONMENT MATTERS The environment highly impacts your control of your audience and their experience of tasting your product. An ideal tasting environment should be as sensory neutral as possible — so no videos going in the background, no distracting music or other inappropriate noise, and as scent neutral as you can make it. That means no scented candles, smells of ammonia or other cleaning products, and no air fresheners. The same goes for your tasting guides — no perfumes, colognes, or heavily scented laundry. If you can, recommend they go all the way to using unscented body care products, unscented laundry detergent, and no fabric softener. Scents from bodycare and laundry products can obliterate the taste of your spirits and entirely undermine your goals. At expos, ask for a location away from any scented products vendors, the bathrooms and truck docks. Outdoor tastings can be fun and strengthen the memorability of the experience, but be sure that visual distractions and noises are minimized. Plus, be sure to cover the sample cups to prevent insects from getting to the samples first.

SEATING If possible, a formal tasting should always be seated. Even if it’s short — less than 10 minutes — having your guests seated makes it easier to maintain their focus and attention. In an informal tasting, seating or standing are both fine. Additionally, when guests enter the tasting room, the tasting needs to be set and ready. If you’re looking

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for sample cups, bottles, or pour spouts, you’ve lost control and look amateurish. This also means it takes at least two people to properly handle a formal tasting after a distillery tour — one person is setting up while the other is leading the tour. While it’s conceivable for a tasting guide to pour a formal tasting as they go for a small group, that doesn’t scale beyond a handful of guests without the guide losing control.

TASTING MATS If you’re pouring more than one product, use tasting mats whenever possible so the tasters can easily figure out which product is which — if there’s any confusion, they’ll interrupt to consult with each other forcing the guide to raise his or her voice to talk over the conversation. Another option is to have product identification on the tasting cups or glasses. A tasting mat is a great opportunity to place your logo, tasting notes and social media prompts. The most photographed and shared component of the Maker’s Mark distillery tour is the formal tasting at the end, which contains the brand name in seven places and each product name clearly identifiable on the tasting mat, even on a small phone screen. The visual design of the tasting mat should be treated as an extension of your brand identity and given all the same consideration as any other printed marketing material. Colors, font choice, iconography, and other elements should match your brand identity.

POUR SIZE Bigger is better (maintaining legal and responsibility limits) for a host of reasons. Bigger looks more generous. Bigger also allows multiple sips which is important for tasters to get past the hot-shock of the

first sip. Yes, your products cost money to make, but if the guest is one sip away from finally enjoying it, that little extra expense converts to return on investment. Topping off needs to be considered with care. If you have an upper limit due to legal restrictions, responsibility concerns or physical product availability, be sure to let guests know at the outset that you’re not going to be able to pour any more for them. Also, topping off even one guest can open the floodgates and change a spirit tasting to a drinking session. Provide a clear topping-off policy for all your tasting guides. It might actually be more than one policy — no top-offs for consumers, but it is allowed for industry, for example. Explain the number of sips in advance. If you’re doing a triple sip, tell the guests that they need to stretch their sample to three sips. If you have culinary or aromatic aids and are expecting a 1 oz pour to last for six sips, say that at the outset and at each sip.

GLASSWARE VS PLASTIC Glassware creates a better impression of your brand, but is expensive to purchase, clean, and replace. Ideally, a shaped glass — like a Glencairn or Norlan glass for whiskey — is best, but that’s the most expensive option. If you use glassware at an informal tasting, make sure it’s branded and expect your audience to take it with them. Plastic tasting cups are cheap and easy and are usually fine (although not great) if they’re the right size. Branded is better. Have a trash can handy and visible if the guests are standing. Do not use microtasting cups that are the same size as your pour — that forces the taster to take the sample as a shot and eliminates observing the color, swirling, nosing and the option of multiple sips. If you’re pouring a 0.25 WWW.ARTISANSPIRITMAG.COM

oz sip, use at minimum a 0.75 oz sample cup; if you’re pouring 0.5 oz, go with 1.5 oz and so on.

WATER AND ICE Ideally, all tastings should have drinking water available for the guests. In an informal tasting, it can be behind the counter and served as needed. In a short seated tasting, it can be on the tables for guests to pour themselves. In a longer tasting, especially with guests you want to impress (trade, media), have it pre-poured when they sit or, better yet, give each guest a bottle of purified water. Make sure any water you use is purified; tap water usually has enough unpleasant smelling and offtasting chemicals that it can confuse the taster about the true flavor of your spirit. Pack purified bottled water to off-site tastings if you need to. Water droppers can be used to “open” spirits by breaking the alcohol clusters and freeing trapped aromatics. It’s a good idea to have some on hand for both informal and formal tastings. Heavy dilution can aid novice spirit drinkers by reducing the alcohol burn. Ice accomplishes opening the spirit while chilling, which also reduces alcohol burn. Ice chips are often useful, especially when guests are able to use them themselves.

WRITTEN AND VISUAL GUIDES Official written tasting notes, especially those connecting production elements to flavors, are useful for all types of tasting guests. Ideally, tasting notes should include color (for barrel-aged spirits and liqueurs), legs, nose/aroma, mouthfeel or texture, front palate, mid-palate and finish. Tasting notes are most helpful for written learners who can reference them as they taste. Visual guides might be flavor maps or wheel

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charts, production diagrams highlighting how flavors are generated or iconographic references. They’re invaluable for visual learners who use them to understand flavor balance and connect flavors to production. Like tasting notes, each of your products should have different visual flavor guides. Avoid using existing category-generic visual flavor guides as they don’t assist in positioning your products uniquely within the category and instead make your products’ flavors seem generic. Crafting your products’ tasting notes and drafting visual aids create a prime opportunity to develop and hone your flavor message. Here you can also reinforce differences among your products. Why does your fall gin taste different than the spring release? How does your four-year-old whiskey taste different than your two-year? Plus, they’re a great addition to tasting mats and can function as keepsakes.

AROMATIC AND CULINARY AIDS Because your goal is an experience of the flavor of your product, tasting and palate aids can be used to enable the tasters to develop short-term palate memory. Most folks have a terrible time putting a word to a flavor. Aromatic aids are an easy addition to tastings, and a quick whiff will generate a verbally-associated palate memory which can then be detected in the spirit. Food pairings introduce a whole new level of sensory delight to a tasting. Full pairing dinners are fantastic, but isolating food elements works equally well. Whiskey and dark chocolate? Not only is it enjoyable just as a pairing, the dark chocolate will bring out the smokiness and spice notes in the spirit. This process is called “reflection” in culinary terms, and it deepens the

experience (and therefore, the taster’s relationship with your spirit and brand) in a way nothing else can. Aromatic and culinary aids are best organized into a logical progression. Nose/ front palate/finish, clustering within a primary flavor category (sweet, versus spice, versus fruit-floral, for example) or associating with production points (grainderived to botanical to wood for a barrelaged gin) makes it easier for guests to track the tasting. Note that this type of shortterm palate memory usually lasts less than 30 seconds so don’t delay going from the reference aid to your spirit!

PROPS Props make a tasting more visually interesting and can reinforce aspects of your brand messages. BOTTLE PROPS: The tasting guide must have bottle props available. Tasting guests need a visual connection to the spirit they are drinking for two reasons: first, to associate the product flavor with the brand and, second, to be able to remember to pick up a bottle of any products they fancy on their way out. Often guests will want to take pictures of bottles they really like. PRODUCTION PROPS: Understanding how spirits are made is easier with a little showand-tell. Props have their uses in a posttour tasting as a reinforcement of the prior experience, but can completely transform tastings outside the distillery. Traditionally, spirits production is communicated through six steps or “sources of flavor:” water, sugar, fermentation, distillation, maturation (if applicable) and presentation (batching and proofing). Your props are another opportunity to reinforce what’s

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EXCLUSIVE DECORATORS

A SPIRIT THIS WELL-CRAFTED DESERVES AN ARTISANAL GLASS.

different about your production. Do you use a less-common sugar like a single-source molasses or an heirloom grain? Bring it along. Even better if you can compare it to what’s generally used instead. Have a custom-shape still? At a minimum, bring a large photo if not a table-top replica. BRAND PROPS: Brand elements such as images and iconography can be turned into physical representations. “Touching” a brand is another layer of tangible experience beyond visiting a distillery and tasting product. Also, for whatever reason, oversized fake spirit bottles always elicit strong reactions and get good attention, especially in competitive expo environments.

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As much as “trinket trash” has a reputation as a waste of money, thoughtful souvenirs and keepsakes can help maintain a connection with your brand long after the tasting is over. Like the tasting itself, tailor such items to the audience. Branded barspoons are better gifts for bartenders and branded glasses are better for consumers. Educational and informative references are valued by all audiences so a branded and visually beautiful tasting mat, production flavor diagram, or flavor wheel chart makes an easy (and inexpensive) take-away. Discount coupons or event invitations help maintain connection with the guest after they’ve left. Avoid non-informational (logo only) giveaways as they’re probably going to end up being pitched.

CLOSING THE DISTILLERY EXPERIENCE

If your distillery experience is a movie, the tour is the longrunning action building to the climax of the tasting with the gift shop as denouement. If your tasting is anti-climactic, you lose the impact of the tour and the potential value and return. In traditional sales terms, the tour is the setup and the tasting is the close. For this reason, within your distillery always strive to have formal tastings. If you are pouring shots and handing them around you don’t have control of the audience, and you won’t be able to communicate your brand, product or flavor message. It also looks amateurish compared to the major distilleries. (No, it does not make you look quaint.) The tour should be cohesive with the tasting, especially for sensory components. If your guests taste malted barley on their tour, that’s a setup for nuttiness in your spirit. Nosing a fermenter can introduce fruit and floral notes. Just standing next to an operating still can create temporary palate memory for banana aroma or gin botanicals. These can be reflected back, especially when prompted by the tasting guide: “Remember the orange zest and angelica root aromas from the gin basket? Now we’re tasting them in the gin.” Have separate tasting guides and gift shop

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staff. A tasting guide can continue informal conversation after a formal tasting, creating a greater depth of experience for your guests while the gift shop staff are able to handle sales.

COCKTAILS INSTEAD? If neat isn’t the primary consumption format for your spirit, then why taste it that way? A cocktail tasting can be more pleasurable for consumer tasters and more relevant for bartender tasters. However, a cocktail tasting is far more work than a neat tasting, so plan accordingly. Also, beware the trap of losing the flavor of your spirit within the drink. Cocktail design isn’t easy and the cocktail shouldn’t occlude the flavor of your product. Instead, the cocktail should showcase the flavor and market differentiation of your spirit. Why does your gin make the best G&T? Why does your whiskey make an exceptional Old Fashioned? If you’re not skilled in mixology, consider hiring a mixologist for cocktail design.

THE TASTING BOTTOM LINE

Judging

2019

of Craft Spirits

ADI accepts US and International entries in all classes and categories of distilled spirits, RTDs, cocktail bitters, aperitif & fortified wines from small and medium-scale producers (maximum annual sales of 750,000 proof gallons).

You are always selling your brand. A successful tasting is the most powerful way to accomplish that. First, ensure you know your brand, your flavor message and your metrics of success. Then design each tasting for the audience, venue, and time available.

NEXT: SCRIPTS, STORIES AND MAXIMIZING ROI Beyond the techniques of a tasting, the experience is best served by following a strong story structure of hook/inciting incident/rising action/climax/close. The next part in the series will look as tasting scripts and story-based brand flavor messaging. Then in the concluding article, we’ll cover analyzing tasting use cases, selecting guides, strategies for feedback and continuous improvement, plus more detailed success metrics for tastings.

Tim Knittel is a Bourbon educator, writer and event specialist in Lexington, Kentucky. He formerly managed the culinary and VIP hospitality programs for the Woodford Reserve Distillery and currently manages events operations for The Kentucky Castle. He also runs Distilled Living which provides private Bourbon education, brand representation and distillery consulting services. He holds the titles of Executive Bourbon Steward through the Stave & Thief Society and Adjunct Professor of Tourism, Event Management and Bourbon Studies at Midway University. WWW.ARTISANSPIRITMAG.COM

deadlines International Entries: November 30, 2018 US Entries: December 14, 2018 Deadline to Receive Spirits: December 20, 2018

For more information on how to enter, visit

distilling.com/judging

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THE BIRD IS THE WORD ORANGE COUNTYâ&#x20AC;&#x2122;S BLINKING OWL DISTILLERY TELLS THE STORY OF ORANGE COUNTY.

WRITTEN BY RICH MANNING /// PHOTOGRAPHED BY KAYLI GENNARO

“Would you like to try our bourbon?” The answer is obvious. A minute later, Blinking Owl Distillery CFO Robin Christenson hands me a snifter filled with the latest creation from the Orange County, California-based spirits producer. It’s a special treat — the first allocation of 250 bottles was snapped up in roughly

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the same amount of time it took you to read this sentence. Before I can imbibe, the distillery’s CEO Brian Christenson — Robin’s husband, not to be confused with Artisan Spirit Magazine’s editor-in-chief — proclaims, “You’re drinking history!” This isn’t hyperbole. Blinking Owl’s

bourbon is the first legally produced bourbon in the county that sits in neighboring Los Angeles’ shadow. It’s also the latest historic benchmark by a company built on a foundation of firsts. They were OC’s first legal distillery when they opened to the public in 2016, and they’re responsible for

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the county’s first legitimate vodka, gin, and aquavit. They’ll also sell the county’s first legal rye in November. In addition, they are one of the first distilleries in California to hold a Type 74 Craft Distillers license, allowing thirsty patrons to imbibe cocktails and purchase their spirits onsite. Each groundbreaking foray has played a part in growing a cult following that’s gradually moved beyond the so-called “Orange Curtain.” Their distribution currently extends to the Bay Area, and their recent partnership with the Los Angeles Memorial Coliseum to sell product-based cocktails during the L.A. Rams’ home games is nothing short of a marketing touchdown. It’s an impressive explosion, but Brian still sees Blinking Owl’s first two years as a lit fuse. “We’re no longer in our infancy stage, but we’re definitely still toddlers,” he says. “We’ve made it through the construction and development phase, we’re open, and we’re producing. But I feel we’ll truly ‘make it’ when we really grow. We’re not at St. George Distillery’s level just yet.” Brian and Robin bring up St. George a few times during our chat. Each reference equally riffs on ambition and admiration, however, they also make it very clear that their desire to follow the path forged by Alameda, California’s pioneering craft distillery does not involve shortcuts. “We’d like Blinking Owl to be big, but we want to grow the brand the way we want,” Brian explains. “To us, that involves producing spirits in a way that supports and promotes California and its agriculture.” One look at their spirits’ ingredient list demonstrates their commitment to this philosophy, a devotion that occasionally drills down to a hyper-local level. Each bottle exclusively uses certified organic California grain. Their Orange County Orange Flavored Vodka features Valencia oranges plucked a few miles up the road from their Santa Ana facility. They add hibiscus to their aquavit and gin because it’s Santa Ana’s official flower. “We’re serious about producing California ‘grain-to-glass’ spirits, and we don’t want to do anything to bastardize our principles,” Robin explains. “It’s not always easy to avoid buying ingredients outside California, however, working together with state and local sources excites us, especially since we want people to taste California in their glass.” Starting a distillery from scratch tends to contain a lack of ease and a wealth of excitement. Blinking Owl’s genesis stems from Brian’s passion for whiskey, which was partially romanticized from growing up around stories of his great-grandfather’s bootlegging adventures. Eventually, the intrigue behind those tales compelled him to become a homebrewer and even learn how to distill. Eventually, he left his advertising job behind to jump into the libations game with the help of Robin, a successful entrepreneur and wine consultant. The move was ambitious in more ways than one. “When Brian sat me down and said he wanted to open a distillery, he said, ‘I want to make whiskey and aquavit,’” Robin says. “This was a bit risky. There were only four aquavits being produced in the U.S. when we launched, but Brian felt like the market for aquavit was ready to expand. So we ended up traveling to Scandinavia, educated ourselves on the

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different styles and learned what style we wanted to produce. At the very least, we figured it would be a fun novelty for people to enjoy.” There was also the question of making the juice. Even though Brian has a few skills with stills and a yearning to learn about esoteric adult beverages, he and Robin knew Blinking Owl wasn’t going to fly if they didn’t bring in additional talent. Enter Ryan Friesen, a Michigan native and fellow former homebrewer that parlayed a summertime gig at Journeyman Distillery into a career marked by impressive educational adventures like interning for Ichiro Akuta at Japan’s Chichibu Distillery. Friesen was the Christensons’ first official hire, and it was a leap of faith on both parties — Friesen had only been distilling less than two years before taking the job. It’s an opportunity that he’s still relishing. “Being the first employee who started when the distillery floor was still dirty from the previous tenant has been a privilege,” he states. “These opportunities are rare, and I was lucky to be in the right place at the right time, and most importantly, ready to raise my hand and say yes to admittedly a risky proposition.” Friesen’s transformed his stroke of good fortune into a cascade of popular spirits because his philosophies align so strongly with his bosses, particularly when it comes to telling the tale of Blinking Owl’s surrounding area. “It’s not just important that our spirits tell one of the many stories of Orange County,” Friesen says. “It’s integral to who we are and what we’re doing here. Without a sense of place and identity, we’re just another brand on the shelf. For instance, the way we make the Orange County Orange Flavored Vodka, with our locally-sourced oranges, is intentionally designed to evoke as many emotions and memories about OC as we could get out of one ingredient. That’s why we use the whole orange — juice, pith, peel, seeds, and all. We wanted to remind people that not all that long ago there were orange groves where homes, highways, and shopping centers are now.” The passion that Friesen and the Christensons have for making spirits that honor California’s soul (especially that of Orange County) are the prime movers behind Blinking Owl’s success. According to Brian, the brand would not exist if that zeal wasn’t in place. “I’ve heard people say, ‘I want to start a distillery because I like to drink whiskey,’” he says. “Bad idea. If you want to have any success in this industry, you have to have the heart to do your homework and the patience to deal with the roadblocks that inevitably occur.” Of course, rolling the dice on aquavit didn’t exactly hurt Blinking Owl’s growth, either. “It’s our number one-selling spirit,” Robin states. “Our customers love it, and bartenders love to play around with it in their drinks.” Their aquavit is aces, by the way, and a gamble that paid off in the end.

Blinking Owl Distillery is located in Santa Ana, California. For more info visit www.blinkingowldistillery.com or call (714) 852-3947. WWW.ARTISANSPIRITMAG.COM

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PRIVACY & DATA SECURITY BEST PRACTICES FOR PROTECTING CONSUMER DATA WRITTEN BY BRIAN B. DEFOE & BRANDON ARCHULETA ILLUSTRATED BY AMANDA JOY CHRISTENSEN

aking spirits is an ancient craft, yet today’s distillers live in the age of information, giving them opportunities to connect with consumers all over the world in new and exciting ways. While it used to be a novel occurrence to find an exotic bottle from a faraway location, globalization and the rise of the internet have given consumers the ability to explore new flavor profiles from around the world with a few clicks of the mouse. This provides the intrepid distiller the ability to attract fans to her brand from far and wide. A necessary aspect of this opportunity is the collection of consumer data. This is no easy task but following best practices to ensure the appropriate collection, handling and protection of consumer data will help her avoid possible fines, lawsuits and harm to her brand’s reputation.

WEB SITES One of the main sources of consumer data is a website, a necessary component of the business plan of our heroine (let’s call her MayBelle — that has a nice ring to it) as she tries to launch her brand into the market beyond the boundaries of her hometown. The malleability of websites and the array of forms that they can take provide a great

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forum for MayBelle to communicate information about her brand’s unique identity. But while some websites stop there and simply encourage consumers to make their way to thelocal tasting room, MayBelle wants to use her brand’s website to establish deeper connections to her consumers, such as emailing lists, merchandise sales, and even the fulfillment of product orders (if legally permitted — MayBelle is reasonably risk averse). Each of these activities will require some level of data collection. Any level of data collection, even as simple as just compiling email addresses, should be accompanied by a privacy policy. The intention behind a privacy policy is to communicate to consumers how a company will use and protect the personally identifiable information that they provide through the company’s website. A privacy policy can take a number of forms, but

there are key components that MayBelle will want to include. For example, the types of information that a website visitor could provide, how that information is collected and how it will be used (including whether that information is shared with third parties), as well as what measures MayBelle will take to store and protect that information. MayBelle wants her website to be able to process payments, first for merchandise and later for her hooch, so she needs to understand and communicate to consumers how the payment data will flow. Sometimes that data is transmitted

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directly to the seller, necessitating the need for compliance with the Payment Card Industry Data Security Standards. Maybelle knows it can also be processed through a third party (such as Shopify or Stripe), so she plans to go that route — letting her focus on making spirits while putting the onus on those third parties to ensure compliance with the right standards (and also pointing consumers to their privacy policies). For a small business, mitigating risks associated with data collection can seem onerous at times but can also be a makeor-break proposition if the worst happens. One way to reduce risk is to review the agreements that underlie your financial transactions. For instance, if MayBelle wanted to follow the path of processing financial transactions herself, she would likely need to be a party to a merchant agreement (or something similar) with the bank that facilitates payments from her customers. This agreement will outline a number of requirements and representations for the business, as well as the financial institution, including how implicated data will be handled. Since MayBelle wants to use a third party to take care of payment processing in full (such as when a third party operated web portal appears at the time of payment),her business will need to enter into an agreement with that entity. In either case, one thing MayBelle will learn is that the standard language contained in these agreements will favor the other party — and disfavor her business — on key issues related to data collection, such as indemnity, limitations of liability and vendor-imposed penalties. To illustrate this point, consider a consumer that has navigated to MayBelle’s website, intrigued by the beautiful labeling, founder’s story and overall brand concept. As he’s navigating the website, MayBelle’s consumer is pleasantly surprised that he can order her product directly through the website and have it delivered right to his home. When he decides on his bottle of choice and clicks the “add to cart” button it directs him to a new page operated by a different company, where he inputs his name, email address, physical WWW.ARTISANSPIRITMAG.COM

address, telephone number and credit card information. When the hooch arrives he thoroughly enjoys it, and has a dram every so often to treat himself to a respite from the rigors of practicing law (or perhaps everyday life). One day he receives a notice in the mail stating that a company he had never heard of — which in reality was MayBelle’s online payment processor — had become the victim of a data breach, compromising the information that he had provided when he ordered MayBelle’s booze. As he looks up from the letter at the now half-empty bottle and contemplates how to proceed from here, he struggles to decide whether he would rather drink the rest in a single sitting to drown his frustration, or the smash the bottle as the source of his newfound predicament. MayBelle’s excellent product is now linked in his mind with the prospect of identity theft. Unless MayBelle’s strategy is quite unusual, this is clearly off-brand. MayBelle too has received a notice from her payment processor about the breach. The notice contains information regarding the type of breach, how many consumers sourced from her website were affected and potential mitigation efforts that the processor has undertaken to prevent any further breach or issue. However, it also contains some especially unsettling news: it informs MayBelle that she should consult legal counsel to find out what obligations she has related to the breach. And of course it tells her that in accordance with its standard terms and conditions (that she agreed to when she signed the processor’s form of agreement), all costs associated with such compliance are her responsibility. Furthermore, while the processor is obligated to indemnify MayBelle from direct claims related to the breach, it will only cover those claims up to the nominal monthly subscription fees that she paid. To top it all off, the breach has caused the processor financial hardship that will cause it to cease its operations immediately, severing MayBelle’s online revenue until she can find a new provider. Situations like this can obviously be quite frustrating for any business owner, but particularly difficult for those with a

small business. MayBelle conducted her operations efficiently and successfully, but now the failures of a third party cause her to dip into her own pockets to cover the hard costs related to regulatory compliance, litigation and potential fines. Not to mention, the damage to MayBelle’s brand is incalculable. However, all is not lost and you needn’t think of your business as beholden to the standard terms and conditions that MayBelle’s payment processor imposed on her. It can certainly be difficult, if not impossible, to secure unlimited liability for data breaches, but even small businesses can be successful in structuring indemnity and limitation of liability sections that reflect the amount of transactions being processed. For instance, rather than limiting the liabilities attributable to a data breach to the fees paid to the vendor, a reasonable proposal could be 10 percent of the transaction total processed within the last year. This sort of proposal can be palatable for the processor while also leaving your business in a much stronger position in a worst-case scenario.

MARKETING There are a number of innovative ways to market your products that may involve data collection. While it can be slightly unnerving to navigate from a “craft distilleries” Google search to your Facebook page, only to find ads pertaining to craft distillers pushed into your feed, it truly can be the perfect way to put your product in front of new potential customers. Marketing agencies have a number of creative ways to find large segments of the population who would fit the profile of your average craft alcohol consumer. Taking advantage of these opportunities can give you a leg up on finding new avenues for growth. Again, these kinds of initiatives require thought on the allocation of risk amongst the parties. For instance, there are many opportunities to purchase data sets that will provide fascinating insights into the types of individuals that may be interested in your products. Sometimes demographics align with our intuitive thinking about who

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would be interested in a craft distilled product, but some potential consumer groups may come as a surprise. While these data sets already exist to some extent, it is possible to commission more targeted insights about your product in particular. Of course, in either scenario there are rules and regulations surrounding how to achieve these insights (and how to use them in responsible marketing practices). There are some basic tenets to keep in mind that will help a targeted marketing campaign steer clear of privacy issues, such as consent. At the end of the day, many consumers are happy to be introduced to new products that align with their interests; they just want to feel like they were not forced or coerced into choosing those products. Therefore, when choosing any sort of targeted marketing campaign, securing the consent of consumers is an essential step.

ON PREMISE DATA COLLECTION In addition to the considerations surrounding data collection from a distiller’s website, there are also many opportunities to collect data sourced from the distillery or tasting rooms. According to the Craft Spirits Data Project, approximately 40 percent of small distilled spirits producers’ sales are direct-to-consumer sales at the site of production. Since most consumers are not in the habit of carrying cash anymore, this likely requires the processing of credit cards. While some distilleries might operate under more traditional processes, MayBelle, like an increasing number of distillers (and businesses overall) has turned to simplified technologies for these transactions, such as an iPad and Square®. Similar to the transactions being processed through her website, it is important for MayBelle to understand the underlying agreement for these transactions in order to address potential risk allocation. Another area of data collection that can pose issues is the collection of tangible forms of information. For example, MayBelle may want to run a marketing campaign centered on a sweepstakes

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or contest. She’s going to need to talk to her lawyer about it, as there are a great number of legal requirements to meet. From a privacy standpoint, this will inevitably require the participants to divulge information about themselves in order to facilitate their opportunity to win. There is case law to suggest that a privacy policy posted to a company’s website will be deemed to apply to data collected by the company outside of the website unless it is explicitly stated otherwise. A distiller is required to enact standard protections of information gleaned through these more traditional methods.

it will include other sensitive data such as banking information. Most vendor agreements also treat the terms of their agreement, and any information that the vendor shares with your business as proprietary and confidential. Again, it is prudent to understand the obligations that have been undertaken in your business-tobusiness engagements pertaining to the treatment of confidential and proprietary information. Standard terms and conditions often impose onerous administrative obligations around keeping information confidential, but there are often paths to more reasonable confidentiality obligations.

OTHER AVENUES OF DATA COLLECTION

CONCLUSION

While collecting data from consumers may feel like the top priority, there are other sources of data collection that MayBelle needs to consider to avoid any undue risk to her business. One of the most important is information about employees. Employee data covers the full scope of personally identifiable information, going far beyond the information gleaned from consumers, including social security numbers, health information (potentially implicating HIPAA and other strict privacy laws) and employment records. In fact, a significant portion of lawsuits filed as a result of data breaches are by employees. Sometimes these breaches are due to the direct actions or inactions of other employees. One large beverage company faced a suit from its employees in 2009 based on a stolen laptop, which contained thousands of records holding the personal information of employees. The problem was compounded by the fact that the information on the laptop was not encrypted. This case served as a reminder to many large companies that skimping on data protection for hardware can cause larger headaches down the road. Like all small business owners, MayBelle should take heed and learn this lesson. Lastly, any business will have significant information about their vendors, and for distillers, their distributors. Even though this information will most often not include personally identifiable information,

While the collection of data — particularly personally identifiable data — may seem to bring undue risk to your business, there are substantial upsides to the practice. Websites provide a platform to creatively market products to a wider segment of the population than ever before and selling merchandise and products through your website can unlock revenue and increase your consumer base. With the rise of alcohol delivery applications and online retailers’ forays into the alcohol industry, the market for craft distilled alcohol can be basically unbounded. For the intrepid distiller, there is even opportunity to fulfill these orders directly. Whatever path you choose to get your product into the hands of new consumers, keeping tabs on the data transfers necessary to achieve this will be a necessary aspect.

Special thanks to Brandon Archuleta, an Associate at Lane Powell, who helped author this article. Brian B. DeFoe is a business lawyer at Lane Powell, where he focuses his practice on helping companies in the customer-facing food, beverage and hospitality industries. Brian can be reached at defoeb@lanepowell.com, via phone at (206) 223-7948, on Twitter @ BrianBDeFoe or Instagram @HoochLaw. 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. WWW.ARTISANSPIRITMAG.COM

COMING BACK FOR ANOTHER TASTE

Cultivate repeat business in your tasting room WRITTEN BY GEORGE B. CATALLO

here is no doubt that your tasting room is a fantastic tool to get people to fall in love with your products for the first time, but what if you could use it to capture repeat business from your customers? There are many ways you can do this: trivia nights, live music, educational classes, fun runs, cornhole tournaments, the list goes on. One often underutilized and easy-to-track method is a loyalty program.

WHAT’S A LOYALTY PROGRAM? A loyalty program, simply put is a program that utilizes a membership system that rewards consumers for repeat business. There are many different types of programs. These include cumulative rewards points, tiered or flat discount rates, “get your 12th coffee free”-style punch cards, freebies, exclusive events, swag, and so on.

WATCH YOUR MARGINS The most important part of any loyalty program is to make it fair for everyone. Your customer needs to feel taken care of, while at the same time,you aren’t losing your shirt. The point is to bring more income in, so don’t overdo it. You don’t want any discounts that eat up too much of your profit margins, and any giveaways need to be relatively inexpensive. As with all things in life and business, there needs to be a balance.

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BABY COME BACK! YOU CAN HAVE A DRINK ON ME Who doesn’t love a free drink? Yet when it comes to giving away actual alcohol, I would highly recommend consulting your lawyer about your local laws before moving forward. Fortunately, there are lots of options beyond free cocktails or bottles. Give away things that are branded with your logo that gain high visibility either in person or via social media. Think t-shirts, hats, hoodies, glassware, jackets, etc. Your loyalty members will become walking advertisements for you while being thrilled with their swag. It’s a win-win situation, and your win is a bit bigger. You can even have certain items be exclusive to your loyalty club and have social media photo contests. For example, you might have people post pictures in your loyalty exclusive hat while on vacation and tag your distillery. Contest winners can win more swag, invitations to exclusive events, or even be a “distiller for a day.” While there are many ways to determine a winner in a social media contest, keep in mind that there are also laws governing the rules of certain contests (such as “sweepstakes laws”). As before, consult those lawyers.

EXAMPLE PROGRAMS The program we use at the retail store where I work is simple and effective. We offer members of the loyalty club 10% off any non-

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YOU PUT YOUR HEART AND SOUL INTO THE BOTTLE ...DRESS IT ACCORDINGLY

not already on sale wine when they spend $20-$59.99, and 15% off when they spend $60 or more. We also have branded t-shirts that were designed by local artists that we give away to members and social media contest entrants. We reward return business as well as larger individual purchases and get free advertising by means of shirts and word of mouth. We also use the program to record transaction history.

COCKTAIL CLUB

Possibly the simplest program logistically. Create a punch card that you stamp or initial to track a “buy X get 1 free” promotion. Again, please consult local laws to ensure giving away a drink is legal in your area. Substitute a nonconsumable piece of swag if it isn’t legal to give away alcohol.

MEMBERS ONLY

Using a tasting room membership ID card, members can be subject to exclusive merchandise and discount pricing. Requiring physical and email addresses for membership creates a mailing list for you to send product and event information to. Directly reaching interested consumers undoubtedly increases attendance to events and product releases. You can also send coupons and other specials. Reaching out to consumers, without being overbearing, is a great way to inspire more frequent return trips.

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TIERED MEMBERS ONLY

The same as above, but have different levels of membership. You can charge membership fees or gauge membership level based on a points system. The higher the tier, the better the perks. Offer more freebies, exclusive first access, deeper discounts, and beyond. An annual holiday party for top tier members puts an added value on membership. It can be as simple as a party where members get discounted single barrel whiskey that they get to bottle themselves straight from the barrel and you put out light snacks.

It’s important to remember that people appreciate small gestures. Pilot your program with a “less is more” approach. It’s easier to add to the program than to take away. Be conservative in your approach so as to not slide into an area of harming the profitability of your tasting room. And as always, check with your lawyer before launching any program! Every word matters in the description of the program, and some things may not be legal in your area. Now get out there and make your customers feel appreciated!

George B. Catallo is the “Whiskey Guy” and Floor/Social Media Manager at Parkway Wine and Liquor in Rochester, NY. He has been in the beverage industry since he turned twenty-one and has worked as the Bar Operations Manager of a wine bar, an Assistant Distiller and Supplier Rep for a craft distillery, and has even hosted a spirits review web series on YouTube under the moniker 'Just One Dram.'

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allotment when a distiller he distillery industry operates more than one recently received Distilled Spirits Plant issuances from the (DSP), or contracts with Alcohol & Tobacco Tax another DSP operator & Trade Bureau (TTB) for producing a given addressing several product or products. issues related to the Ordinarily, a single-site agency’s policy and DSP (DSP A) owned by a positions regarding company having no other product formulas, use DSP interest would enjoy of DSP premises, and its full 100,000 proof the impact on their gallon (PG) allotment of tax liability for certain spirits taxed at the $2.70 provisions of the Craft per PG reduced rate. Beverage Modernization Simply put, in preparing (CBM) section of the the Excise Tax Return, Tax Cuts and Jobs Act of TTB F 5000.24, Line 9 2017. While the agency on the form would reflect is, of course, the primary the tax due for distilled source for details on how spirits for the quarterly these policy positions or semi-monthly period impact any given by multiplying the PG situation the distiller WRITTEN BY JIM MCCOY removed subject to tax encounters when dealing by the $2.70 per proof with these rules and gallon tax rate. This agency interpretations, reduced rate is only for we can look through 2018 and 2019 unless what has been published extended or made permanent by the action of Congress. Taxable to glean some important points which should be understood when removals beyond 100,000 PG during either year are taxable at the dealing with these rules. A costly error could be the misapplication rate of $13.34 per PG. of the law and regulations in conflict with how the TTB applies If DSP A is paying tax on 80,000 PG of Brand X Whisky sold in them in practice. Any new law carries with it the need to figure out 2019 and contracts with another DSP (DSP B) to make and ship how it fits into the existing scheme, and sometimes a law change another 50,000 PG of the same Brand X Whisky during the same can have a significant impact that takes time to incorporate into year, then the product would be taxed at $2.70 for 100,000 PG operations affected by it. and $13.34 for the other 30,000 PG. How that reduced rate is A particular issue which was introduced in the CBM is the applied to each DSP is the question. The reduced rates are on the “single taxpayer rule.” This rule provides that when more than one first 100,000 PG removed by the “taxpayer.” As a “single taxpayer” company produces the same brand of product it may be treated as for the brand product in this example, DSP A and DP B must work a “single taxpayer” for the purpose of applying a reduced rate, even together to figure out which shipments are taxed at which rate though the producers are unrelated business entities. This extends during the year. beyond the existing “control group” rules which limit entitlement Let’s say the contract begins January 1, 2019.During January, of reduced rates for related companies that share common control DSP A ships 15,000 PG, and DSP B ships 10,000 PG. The entire of ownership. 25,000 PG shipped by both plants in January is taxed at $2.70 per How is the “single taxpayer rule” to be implemented and how PG. In February, DSP A ships another 15,000 while DSP B ships can it be illustrated? First, I would encourage the distiller to take a none of Brand X Whisky, so DSP A taxes the shipments at $2.70 look at the TTB’s online questions and answers relating to the Craft per PG. In March, each DSP ships 25,000 PG. At the end of March, Beverage Modernization Act, and TTB Industry Circular 2018DSP A has shipped 55,000 PG while DSP B has shipped 35,000 5. In explaining the rule, the TTB provides some examples and PG, thus 90,000 PG of the 100,000 PG reduced rate allotment summarizes how industry members should be aware of and comply has been used by March 31, 2019. In April, DSP A ships 12,000 with this tax rule. PG, and DSP B ships 7,000 PG. How do we determine when Brand Beyond this official guidance, a practical example may help to X Whisky has to be paid at the next level tax rate of illustrate in more detail how this will work. The principal issue is $13.34 per PG? how to apply the annual 100,000 proof gallon reduced rate of tax

the Single Taxpayer Rule A Unique Challenge

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During April 2019, in our example, each day of shipments is totaled as required in the daily summary records at each DSP, and DSP A on April 10 reaches 5,000 PG, while DSP B also reaches 5,000 PG. After April 10, all of the Brand X Whisky shipped by DSP A and DSP B is taxed at $13.34 per proof gallon for the rest of the year. How does this affect other products shipped by each DSP? DSP A only makes and ships Brand X Whisky, so its allotment for the year is used up since the combined shipments of Brand X Whisky for the year have reached 100,000 PG. Shipments by DSP A after April 10 in our example would be at the $13.34 rate per PG. DSP B makes and ships other products, including its own Brand Z vodka. DSP B would have its entirety of 100,000 PG for its own products, as the Brand X Whisky was part of the “shared” 100,000 allotment with DSP A. In effect, the “owner” of the brand, DSP A, is “sharing” its 100,000 with DSP B, who is contracted to bottle and ship Brand X Whisky. This all gets more complex when two or more DSP facilities, unrelated in ownership, share in the reduced rate allotment for a given brand, or multiple brands, of product. This sharing is quite new as a concept in DSP taxation, and of course will be treated by the government on a case-by-case basis reliant on the facts in any given situation. The TTB had also advised that for a taxpayer to be eligible for the reduced rate of tax on a product, they had to be the entity producing and/or processing the product. Included in the Craft beverage law was a provision that finished bottled goods may be transferred in bond between DSP premises. On the surface of it, this may be of some advantage, however, a DSP owner should be careful when transferring product such that the reduced rate of tax is not jeopardized by a circumstance where the producer/bottler is not the entity filing the tax return, thus losing the privilege of paying the reduced rate. Combined with the complexity of the single taxpayer rule, the principle of linking the entitlement to a reduced rate to the DSP entity who produced/processed the product adds to that complexity. Care in planning for tax implications is critical to avoiding a later assessment for underpayment due to misapplication of these rules. As always, laws, regulations and related TTB published guidance are the official “word” on what the rules are and how the government expects operations, procedures and records to be conducted and maintained. The examples above are my interpretations gleaned from what the government has published, so I would again caution a DSP who plans to engage in contract arrangements or any mode of operation that involves potential application of the single taxpayer rule to make these complex tax implications a component of their planning and cost profiles for the production planning process.

A Jonathan Pogash creation featuring Melon Coco Breeze, WSWA 2018

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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 information email Jim at jmccoy@jmccoyconsultants.com WWW.ARTISANSPIRITMAG.COM

SPIRITS at the EDGE of the WORLD

Dingle Distillery of Dingle, Ireland

WRITTEN & PHOTOGRAPHED BY GEORGE B. CATALLO

ocated at the edge of the world, the Dingle Peninsula is undoubtedly the most beautiful place I have ever laid eyes on. In the heart of all this beauty there is a town called Dingle, and in the heart of this town — The Dingle Distillery. My first experience with their spirits was in Spillane’s Bar in Maharees on the north side of the peninsula. While I was already planning on visiting the distillery later in my trip, getting a taste of their gin and cask strength single malt only made the anticipation grow. Because of their gin, Fevertree elderflower tonic, and the bartender at Spillane’s, my whole perspective on gin and tonics was changed for the better (but more on that later). The distillery was founded by Irish craft brewing pioneers — Oliver Hughes, Liam LaHart, and Peter Mosley — and is credited as being Ireland’s first craft distillery. Hughes passed away in July of 2016, but his legacy of ingenuity and quality over quantity proudly lives on in the distillery’s single malt whiskey, gin, and vodka.

THE FOUNDING FATHERS Like any business, it takes a lot of capital to get the ball rolling. The boys at Dingle had a brilliant plan to secure some funds early on. They called it the Founding Fathers program. Under this program, people were able to pre-purchase barrels of whiskey before they were laid down to age. The benefit to this for the participants is that when their barrel came to maturity they had one of two options; have the barrel bottled especially for them, or sell the barrel back to the distillery at a fair market price. For those that opted to sell back the barrel, it was an appreciating investment, and the distillers had more whiskey to work into their batches- a true win-win. There were a total of 500 members in this program, and to honor them, each batch of Dingle whiskey has 500 bottles released at cask strength.

WAITING ON WHISKEY IS RISKY, THANKFULLY GIN IS IN Like most craft whiskey distilleries, Dingle also produces clear spirits. They produce a vodka and a gin using a small swan neck pot still equipped with a gin basket. The vodka is crisp, clean, and pure. The gin is lively, balanced, and refreshing, using botanicals like rowan berry, juniper, bog myrtle, heather, chervil, angelica, and coriander. Now, back to that life-changing gin and tonic I mentioned earlier. Picture how a gin and tonic is generally served in North America. The bartender counts off the pour of gin into a rocks glass with ice, hits it with tonic, drops in lemon or lime, and gives it a quick

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stir. This was not the case at Spillane’s. The gin was poured into a fishbowl glass with ice, my choice of citrus was used as a garnish, and my choice of tonic water was served in a single serving glass bottle alongside the glass. Having higher quality ingredients and the personal control over ratios elevated the cocktail to new heights for me. The Dingle Distillery is actively campaigning and working with bartenders around the country of Ireland to serve, not just gin and tonics featuring Dingle Gin, but all gin and tonics this way. Being at the forefront of the push for better gin and tonics elevates Dingle’s favor with bartenders, which helps grow their brand even more. Furthermore, refocusing on the gin in a gin and tonic cocktail highlights the spirit used so that consumers will start calling for brands they enjoy most at bars and retail shops. This is a great free advertising tool employed by Dingle that improves the entire cocktail and gin scene around them.

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WHISKEY — THE SPIRIT OF DINGLE The reason the Dingle Distillery was created was to make a true craft Irish whiskey. At the time of their founding, the number of Irish distilleries could be counted nearly on one hand — and every outstretched finger adorned with a corporate ring. Free of corporate influence, Dingle set out to mash, distill, and age a single malt whiskey. They filled their first casks on December 18th, 2012 and bottled their first single cask, Cask No. 2, on December 19th, 2015. Since then they have released three batches of whiskey, each with a more rigorous casking regimen than the last. Their first batch release used exclusively first-fill bourbon barrels. While on a tour of the facility the guide admitted that used bourbon barrels aren’t necessarily the best cooperage available, but they are the cheapest. Sherry or Port casks can cost up to three times more than used bourbon barrels. As Dingle’s success grew, they were able to lay down whiskey in Pedro Ximenez and Oloroso sherry casks that were included in Batch 2, as well as Port casks for Batch 3. As the company evolves, so do their products. While the gin and vodka are available in parts of the U.S. don’t expect to see the whiskey here any time soon. Their quality over quantity approach creates incredible results, but rapid growth is not their goal. The greatest lesson to be learned from them is undoubtedly to be hands-on and focused. Their role in shaping their local cocktail scene is a model that should be replicated by distillers everywhere. Keeping early batches of whiskey simpler allowed them to hone their craft more concisely and in a more cost-effective and profitable way. It shows that it’s okay to not reinvent the wheel at first, but you better make a damn good wheel.

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Dingle Distillery is located in Dingle, Co. Kerry, Ireland. Visit www.dingledistillery.ie for more information WWW.ARTISANSPIRITMAG.COM

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a TALE of two

TOMATOES MEET GIN’S MOST UNLIKELY BOTANICAL WRITTEN BY JEFF CIOLETTI PHOTOGRAPHS PROVIDED BY MOLETTO GIN

hen most spirits producers talk about gin botanicals, it’s unlikely that anyone’s short list includes “tomato.” But there are some European distillers hoping to change that with some new products that have recently entered the U.S. market. One of those is Moletto Gin, from Motta di Livenza, in the province of Treviso, Veneto, Italy — the heart of Italian distilling country, best known as the epicenter of grappa production. Moletto combines juniper from the Alps and Mediterranean maquis with four types of tomatoes — San Marzano and three others that are a closely guarded secret. Co-founder Mauro Stival wanted to create a truly Italian gin, capturing some of the country’s signature flavors. The obvious botanical candidates would have been along the lines of basil, rosemary and, perhaps, celery, but Stival felt those ingredients would have been a bit too pedestrian. He had his eureka

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moment when he was at home eating one of Italy’s most iconic contributions to global cuisine. “I was ordering a pizza, and my eyes went directly to mozzarella, and I thought, ‘Mozzarella gin,’” Stival recalls. “After three seconds, I said, ‘What a stupid idea!’” His mind quickly turned to another core ingredient of pizza: tomatoes. “You put [tomatoes] in pasta, lasagna, pizza, everywhere,” Stival says. “It’s the real color of Italian food tradition.” At first, it was easier said than done. It’s one thing to say you’re going to create a tomato-flavored spirit; it’s quite another to find the right varieties of tomatoes whose flavor and aroma are stable enough to consistently assert themselves in a gin. Stival notes that it took about 16 months to lock in a recipe. “We distill every single ingredient separately, and after that we blend with pure alcohol from wheat,” he

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adds. “In the beginning we had some big problems because the primary aromas in the fruit are very difficult to distill.” Initially, the aroma of the tomatoes was a bit too strong and it took a while to dial it back a bit and balance it with the flavor and aroma of the juniper. In the final product, juniper and tomato share the spotlight. One of the biggest issues early on was getting the different tomato varieties to play well with others. “A tomato in combination with other tomatoes and other ingredients is sometimes dangerous,” he says. “It’s very difficult to find the real touch.” Many gins go for a strong sensation in the beginning, with an equally strong finish, mostly from the juniper, but Stival wanted to achieve a spirit that had a powerful start and a soft, velvety, tomato-accented finish. “This combination is very difficult to maintain because juniper has such a strong character, it’s not like a tomato,” he says. “We were tasting very early in the morning, when your nose is completely perfect, as is your mouth before you’ve had any coffee,” he remembers. “And we were tasting the tomato, discovering every kind of defect possible, and that’s how we were realizing the combination was very strange. You say, ‘It’s just a tomato,’ but, no, tomatoes are very difficult to combine with all of the other ingredients.” In the end, it was the four-tomato combo (San Marzano plus the three mystery varieties) that was able to deliver a sustained aroma. And the aroma and flavor are quite striking. A consumer doesn’t need a

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seasoned, sophisticated nose and palate to recognize the essence of the versatile fruit. At first sniff, you’d swear there’s a pot of Sunday sauce cooking somewhere. It contrasts significantly with another tomato-based botanical spirit, Black Tomato, whose tomato flavor is considerably more nuanced than Moletto’s, offering more of an earthy sensation with a hint of salinity and a little bit of dark fruit. The signature ingredient of this Dutch-crafted spirit is a variety of Sicilian tomatoes that get their black licorice-like color from phytonutrients known as anthocyanins, which have purported health benefits. Dutch VOC Spirits took about 18 months to settle on the right recipe, thanks to a particularly temperamental ingredient. “The challenge we were facing was working with fresh black tomatoes,” says Dutch VOC Spirits CEO Léon Meijers. “They are very delicate and extremely hard to handle when processing.” Meijers launched the brand as Black Tomato Gin but tweaked the label recently for its U.S. debut. It’s now called Black Tomato Spirit, so it doesn’t get lost in the clutter of the sprawling gin category. “We have been working on elevating the liquid after the launch,” Meijers explains. “During our journey, we have been convinced that our liquid will receive more credit presented as a spirit rather than a gin.” Moletto Gin, which is imported into the U.S. by Laird & Co. — the folks behind Laird’s Applejack — is being positioned as a versatile cocktail base, especially when drinks demand more savory elements.

Among the concoctions the company suggests is the Caprese Martini, which marries Moletto Gin with basil-lemon syrup and dry vermouth and garnished with — what else — a cherry tomato, mozzarella ball and basil leaf. Another is the TomatoCucumber Collins, which combines the spirit with lemon juice, agave nectar, elderflower, fresh cucumber, and fresh mint. Both were developed in conjunction with Lauber Fine Wines and Craft Spirits. Cocktails only scratch the surface of tomato gin’s potential, though, and both Stival and Meijers see an opportunity in the culinary world. “Black Tomato Spirit goes very well with seafood, [as part of] an awesome vinaigrette for fresh oysters or just a drop to make a delicious sauce or just a splash when cooking mussels,” Meijers reveals. Recently, when Stival was planning to cook pasta, he discovered that his garden was out of tomatoes and was forced to improvise by tossing spaghetti with butter, Parmigiano Reggiano cheese, and half a glass of his gin. He says the resulting dish was surprisingly good. “We weren’t thinking only about bartenders when we created Moletto Gin,” says Stival. “We were thinking we also must be in the kitchen. This is something that many gin producers aren’t thinking about because the big business only comes from mixologists.”

Moletto Gin is located in Motta di Livenza, Treviso, Veneto, Italy. Visit www.moletto.com for more information.

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MEMBERSHIP has its PRIVILEGES Cask clubs are a popular way to generate some up-front cash but make sure you do your homework beforehand. WRITTEN BY JEFF CIOLETTI

aking whiskey is always a risky proposition, especially when the spirit doesn’t do much for your cash flow while it’s sitting in barrels. However, a number of distilleries have made their whiskeys earn their keep through exclusive clubs where members can pay to “adopt” or partially own a barrel’s contents as they wait for it to come of age. It’s a great way to raise revenue, but it’s not without its own challenges and headaches. With the right amount of due diligence, it can be a rewarding experience. Members of Carbondale, Colorado-based Marble Distilling Company’s Barrel Club get a new 11-liter American Oak barrel with a #3 char, engraved with the member’s name and filled with the member’s choice of one of the distillery’s three whiskeys. Each member ultimately takes home about 19 750-ml bottles after the whiskey’s done aging in Marble’s humidification-controlled barrel locker. Before then, they can visit their personalized spirit in the barrel room, and sample it from time to time to gauge its progress. They also get first access to new special releases not available to the public, 15 percent off at Marble’s B&B, the Distillery Inn, and discounts on venue rentals for private parties. The distillery targets two years for the aging process says co-founder and head distiller Connie Baker, but most of the time it’s ready before that and members are eager to bottle it. “It’s at the discretion of the member as to when their whiskey is ready,” Baker notes.

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If Marble hasn’t heard from members after two years, the distillery will usually call with a friendly reminder to come get their whiskey. “When the product’s ready, some members are super-psyched to come in and do their own bottling, then we have other people who want help with that,” Baker says. “We help them proof it to the proofing they want.” There are a few legal quirks distillers need to be aware of before they launch such programs. Naturally, they’re going to have to see what their individual state governments have to say about barrel clubs. On the federal level, there are some technicalities that need to be addressed. Baker notes that, in order to not run afoul of any federal laws, Marble doesn’t technically sell members barrels of aged whiskey. “We’re basically selling it to them white and in bottles,” she says. “That [spirit] has already been removed from bond and the tax has already been paid on it. They are purchasing whiskey and then separately purchasing a membership and we’re essentially storing their own whiskey for them in our barrel club — that’s the way it works with bonded products. You can’t load a barrel outside of a bonded space, it’s not legally possible.” There are separate TTB Certificates of Label Approval (COLA) on the original, white whiskey bottle and the bottle filled with the aged version that the members eventually take home. Virginia Distillery Company, for the most part, takes itself out of the retail equation

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for its Cask Collective. Its Washington, D.C. retail “We get about two-thirds of the money up front partner, Schneider’s of Capitol Hill, handles all and then one-third when we bottle it. That third Collective-related transactions with members basically just pays for all of the taxes.” — an ideal scenario for a distillery based in a “You can’t just sell a barrel, so we treat it like control state. Virginia’s distilleries are permitted our regular Greenhorn, just a separate allotment,” to sell bottles on-site, as long as it has at least Davis adds. “We give them the bottles just like any one product listed through the Commonwealth’s other Greenhorn customer, but on the label, it’s Alcoholic Beverage Control (ABC) store and is going to be their name.” listed as a Virginia ABC “distillery store.” The D.C. Chambers Bay will sell the physical barrel partnership eliminates any additional headaches separately at a discount once it’s emptied if the that would arise from a barrel club. member wants to buy it. The fact that the distillery Virginia Distillery offers two levels of burns a design of the member’s choice onto the participation. One option is to purchase a share of barrel might entice them to do so. a cask — one-tenth of its contents to be precise, The distillery likes to keep membership in the which guarantees the member 24 750-ml bottles Greenhorn Barrel Club as limited as possible. of its American Single Malt aged in bourbon casks Lately, Chambers Bay has been admitting, at most, after a four-year maturation period, among other one member per quarter. That’s partly to minimize benefits, for a price of $995 plus $49.45 in tax. risk. The angel’s share has a little something to do The retail value is $1,735. If with that as well. members want the barrel all to “[Initially] the angel’s themselves, the price starts at share was a little more than $9,990 plus tax. we thought it would be, and “The sale is executed we were pretty conservative completely through with it,” Davis recalls, “but Schneider’s,” says Marlene by guaranteeing them 36 Steiner, brand director at bottles, the customer didn’t Virginia Distillery Co. “The get hit, we did. We did it that contract is held between the way because we’re just trying customer and Schneider’s of to avoid negative customer Capitol Hill. We did a very experiences.” thorough legal review and Creating a memorable CONNIE BAKER felt very comfortable with the consumer experience is mechanisms of the program. what it’s all about for many Co-founder and head distiller, Marble Distilling Company What it comes down to is it’s a distilleries that run barrel membership program — we’re clubs. Sure, the up-front selling a membership rather than just focusing on cash is nice, but many say it’s best to approach the bottles.” such endeavors as marketing and community On the other side of the country in University development opportunities. Place, Washington, Chambers Bay Distillery avoids “Even more than cash flow, what it’s really been any legal issues by keeping things simple with its for Marble is a brand builder,” says Baker. “To be Greenhorn Barrel Club. “If you’re trying to create a honest, it’s time-consuming for our team, who have club with more benefits than just the barrel, that’s to rotate the barrels, keep them in a humidified when you get into more of an accounting/legal cabinet, and, when [members] come in, pull issue,” says co-founder Alan Davis. “That’s why [the casks] so they can taste it.”But, by making we limit it to just the barrel. There aren’t many the effort, Marble has cultivated a loyal group of other club benefits. When you start adding value, regulars. “They purchase other spirits, they bring there potentially are issues.” friends and family into their space, and it’s kind of Chambers Bay’s club guarantees each member built a following,” Baker notes. “I would say that’s 36 bottles of its Greenhorn Bourbon after aging been the biggest reward for us.” for 20-23 months, depending on flavor profile. Members pay $675 up front and then an additional Jeff Cioletti is the editor at large of Beverage World $391 at bottling. “They get about a 14 percent Magazine, creator of The Drinkable Globe website, and hosts the web series, The Drinkable Week. discount when you figure in taxes,” Davis notes.

“Even more than cash flow, what it’s really been for Marble is a brand builder.”

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AN AMERICAN IN AUSTRALIA WRITTEN & PHOTOGRAPHED BY DEVON TREVATHAN

istilling, especially small, craft operations, are everywhere these days. Such was the case on our most recent trip to Australia, where my faithful travel companion, Colton Weinstein, and I traveled around the southeastern tip of the country, getting a feel for cities like Sydney, Melbourne, and Adelaide. Along the way, we took the time to stop at different distilleries, tasting their wares and having a peek around the surrounding locales. I collected a wealth of memories and photographs from our journey, which I am very pleased to share with you now.

SYDNEY The trip began in Sydney, Australia’s largest city, which sports gorgeous beaches right alongside towering architecture. It is a metropolitan city with a bustling Central Business District and plenty of coiffed young professionals (or yopros, as a friend called them). As such, it is expensive to rent out large commercial spaces within the city’s limits, and the industry hasn't developed to the point where tourists are willing to rent cars to journey out of town specifically for distillery tours.

For this and other reasons, most of Sydney’s distilleries are small, urban operations that take up nearly as much space vertically as they do horizontally. This was true at one of our first stops, BRIX DISTILLERS, a rum distillery located in fashionable Surry Hills. What struck me with Brix is that they are a dedicated rum distillery and yet, per Australian law, nothing under two years old can be labeled “rum” on the bottle. That is why their White product, which smelled of fruit and creme brûlée, doesn’t feature the word anywhere on the label or in the marketing. However it is clear that this is a molasses-based product and there is a sticker over the mouth of the bottle that says “Home of Rum,” which is a clever workaround. The White was served alongside a sourced blend of

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La Forgia’s passion for production is evident, especially regarding gin, which remains the lifeblood of the Australian craft distilling scene while producers wait for their aged spirits to mature. (Whisky, like rum, must age at least two years before it can legally be referred to as such on the label.) “Australian gin is at the forefront of global gin in my opinion,” La Forgia tells me. “There are no countries I am aware of that are pushing the category forward as much or as quickly as Australia.” This is especially true in regards to the use of native Australian botanicals, which Aussie producers wield to their advantage. Adelaide Hills Distillery hit the ground running when they released their Green Ant Gin, which features a number of native botanicals including the gins namesake. Green Ants are sustainably collected from the northern Australian bush in collaboration with Something Wild, a native food and game meats supplier part-owned by Daniel Motlop, former Australian Football League star and proud Aboriginal After Sydney, we hopped a quick flight and Torres Strait Islander over to Adelaide. man. The partnership If you’ve not heard of Adelaide, worry not between Adelaide Hills and — I hadn’t either until becoming acquainted Something Wild ensures with the Adelaide distillers, and they were ADELAIDE HILLS DISTILLE RY that native botanicals are not shy about talking up their hometown. being accessed in a way that On more than one occasion I was told that benefits both the Australian Adelaide is the “greatest city in Australia.” distilling culture and the Indigenous communities. Upon first glance, Adelaide is admittedly a wonderful place. Despite any entomological additions, it’s not as though Australian Situated between the beautiful blue waters of the Indian ocean and producers are trying to reinvent the wheel — in fact, most of their the rolling hills of renowned wine regions the Barossa Valley and gins resemble the flavor and texture of a classic London dry — it’s McLaren Vale, Adelaide seemingly has every natural advantage for that they are trying to improve upon the gin market with unique yet a metropolitan city. The Adelaide hills themselves boast beautiful delicious offerings, and succeeding in their goal. wineries making fine products as well as several trailblazing craft “I see a bright future for Australian distilleries as long as we distilleries, including the ADELAIDE HILLS DISTILLERY, founded remain strongly focused on innovation and quality,” says Tim Boast, by Sacha La Forgia.

five and eight year-old Caribbean rums, simply named Gold. Perhaps most interesting of all, especially from the perspective of an American, was that Brix was not only a distillery but a proper bar in its own right, featuring 150 rums from around the world, as well as gins, whiskies, beer, and wine. The fact that Australian distilleries have the freedom to indulge in this business model leaves me with no shortage of covetousness. Another distillery that we were fortunate to visit was MANLY SPIRITS, unsurprisingly located in Manly, a beautiful beach-side suburb in North Sydney. One ferry ride and an hour’s walk later, we had arrived just in time to kick off Sydney Bar Week with a master class hosted by Tim Stones, former MANLY SPIRITS brand ambassador for Beefeater gin and current head distiller for Manly. After traveling the world on Beefeater’s dime, meeting folks and spreading the good word, Stones convinced the people at Beefeater to support him as he received his General Certificate of Distilling from the Institute of Brewing and Distilling (IBD). From there, it was a short trip around half the globe to settle at Manly, where he currently produces a number of gins, whiskies, and liqueurs.

ADELAIDE

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one of the founders of our next stop on the tour, NEVER NEVER DISTILLING CO. The team at Never Never produce decidedly bold gins that lean heavily into juniper, but they’re done in a way that doesn’t alienate the customer or cocktail. “We make the boldest and most flavorsome juniper-forward gins in Australia, if not the world,” Boast says of their product. The company’s growth has been meteoric thanks to their memorable spirits and gorgeous marketing, and while they imagine they’ll expand into other spirits after they expand into a new space, for now, they are sticking with the one that they love to make.

NEVER NEVER DISTILLING CO.

TASMANIA After our stay in Adelaide, it was time to head over to Tasmania, arguably the most well-known region for Australian distilling. This is in no small part thanks to Bill Lark, founder of LARK DISTILLERY, which started in 1992 and ushered in a whisky LARK DISTILLERY renaissance for this small southern island. If you sit down with Lark, he’ll let you know that Australia was not on anyone’s radar when it came to spirits production at the dawn of his distillery, and for nearly 10 years after that. Lark was very much taking a leap of faith, and thanks to some helpful Scottish distillers who saw the promise in his vision, the venture paid off. Bottles of Lark whisky are now distributed all across the globe and are considered as collectibles. Lark himself was kind enough to show us around while we were in Hobart, and after starting the day with a couple of piccolo lattes at his cellar door (Australian for “tasting room”), we all piled into his small white SUV and headed off into the countryside to visit the distillery. Much of Tasmania’s industry reflects

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OLD KEMPTON DISTILLERY

the production methods of Scottish distillation. Pot stills are standard and barley is the grain of choice for nearly all producers. What stood out when touring Lark’s distillery was that he chooses to use small barrels to age his whiskies, albeit used ones that have been coopered down from larger sizes, like 53-gallon ex Bourbon barrels and even larger Cognac casks. This decision seemed more a stylistic choice than anything else but made for an interesting assortment in their warehouse and a distinct impression on visitors. Next, we drove into the countryside to drop by OLD KEMPTON DISTILLERY, formerly Redlands, another project helmed by Lark. The whiskies we tried there were well-made and artfully crafted, but what stood out most from this leg of the journey was the historic inn that houses Old Kempton. Originally built in 1842 by a former convict turned innkeeper, this stately grand coaching inn could not be better suited for its modern purpose. The grounds are gorgeous and the house is wonderfully preserved. To finish off the afternoon, we stopped by BELGROVE DISTILLERY in Kempton on our way back to Hobart. Owned and operated by Peter Bignell, a professional sand and ice-sculptor, among other titles, Belgrove Distillery is the only dedicated rye distillery that we visited. Bignell grows the grain himself on his sizable farm. He also built the copper pot still he uses to make his whisky and was in the process of constructing a WWW.ARTISANSPIRITMAG.COM

hybrid still when we stopped by. If all that hasn’t yet piqued your interest, Bignell uses biofuel made from used cooking oil sourced from a local fish and chips shop to direct fire his still. The entire operation is fascinating and a must for any distilling fans to visit. Before leaving the island to return to the mainland, we made a final stop at SULLIVAN’S COVE, one BELGROVE DISTILLERY of Tasmania’s betterknown distilleries and the most recent winner of World’s Best Single Cask Single Malt at the World Whiskies Awards. They produce all their spirits on a French-style Alembic still that was built in Australia, and age in 53-gallon used barrels. Speaking with Patrick Maguire, their head distiller, I discovered that they were embracing inconsistencies between bottling and attempting to weave that into their business structure, a SULLIVAN'S COVE decision that we continue to see stateside as well.

MELBOURNE Finally, we made our way to Melbourne. For many years, I have been told that I would love Melbourne because of its fabulous museums, beautiful parks, and hip pedestrians. Some of Australia’s most notable craft producers operate in Melbourne, including Starward and Four Pillars, the latter of which being a dedicated gin distillery. Unfortunately for

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ANTHER SPIRITS

us, Four Pillars was an hour outside of the city, and so we were not able to make it on this journey, though we did get to try Starward’s entire lineup at an Indie Spirits Tasting event. We closed our adventure by visiting THE CRAFT & CO., a cooperative space housing a winery, brewery, and the distillery, ANTHER SPIRITS. Anther is headed up by Dervilla McGowan and Sebastian Reaburn. Currently, Anther only makes gin, including a fabulous bold gin, a cherry gin, and several other styles. The native Australian botanicals they use are grown in an urban garden in the city. While I am sad that we could not stop by every single distillery in the whole country, I am proud of how much ground we covered, and even more excited about what I learned from the producers that so graciously shared their time and knowledge. Australia is a ripe country full of unique raw materials, capable people, and an unassailable passion to make good spirit. I predict that it will continue to impress consumers for many years to come.

Devon Trevathan is a writer based out of Nashville, TN. She loves spirits that are older than she is, grower-producer style, and dogs. 125

Winning Amid Consolidation and Innovation

Key Considerations for High Growth Brands (and those that want to be) PART TWO of TWO WRITTEN BY SARAH NAGEL SISISKY

All data and statistical information have been sourced from Bar Convent Brooklyn 2018 Routes to the U.S. Beverage Alcohol Market for Entrepreneurial Brands presentation.

art One of this two-part series explored the current U.S. spirits landscape from a high level vantage point, including consolidation among large suppliers and distributors and the democratization of marketing that creates opportunities for emerging brands. The focus of Part Two will explore trends among distributors and key considerations for navigating these trends to showcase how entrepreneurial brands can increase the likelihood for success. As noted in Part One, data from 2016 indicates that the top 10 spirits suppliers account for 72 percent of total market share, driven by the largest supplier, Diageo, accounting for 24 percent. Similarly, there has been significant consolidation in the distributor tier. Between 1990 and 2017, market share of the top 10 distributors has increased from 24 percent to 74 percent.

Consolidation of Distributors How did this happen in a relatively short period of time? As suppliers concentrated, they increased their power over distributors through their control of marquee brands. This wave of consolidation gave rise to the mega-suppliers such as Diageo, Beam, Brown-Forman, Pernod Ricard, Constellation, and Bacardi. The increased power of these suppliers manifested itself in a variety of ways that were advantageous to suppliers and reduced profitability for distributors — for instance, the routine use of requests for proposals to assess competing offers from distributors, multi-state alignment, distributor gross margin compression, and demands for increased attention and service levels. As a result, distributors began to consolidate to counterbalance the increase in large supplier influence and to strive for cost reduction through further economies of scale. Fast forward to 2017 and Southern Glazer’s Wine & Spirits (SGWS) is the market leader with revenues exceeding $17.5 billion and 31.8 percent market share. On a standalone basis, the next largest distributor is Republic National (RNDC) with revenues of $7.5 billion and 13.6 percent market share. However, on an as-if-fully merged basis, the combination of RNDC and Breakthru Beverage Group (Breakthru) would account for approximately $13

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As suppliers concentrated, they increased their power over distributors through their control of marquis brands. billion in revenue and 23.6 percent market share. In the event Young’s Market is subsequently merged into the RNDC Breakthru operation, the transaction would yield another mega-distributor to rival the size of SGWS with $16 billion in revenue and 29.1 percent market share. SGWS has, as of the time of this writing, been the most aggressive consolidator in the wine and spirits distribution business in the U.S. An important driver that accelerated the consolidation was Diageo’s Next Generation Growth initiative in 2002. This initiative awarded Diageo’s business to Southern and Glazer’s in many states. When Southern merged with Glazer’s in 2016, a simplified route to market emerged for suppliers searching for an almost complete national footprint. SGWS comprises 44 states and represents over 85 percent market accessibility as a percentage of cases sold in the U.S. In addition, SGWS enhanced its salesforce capabilities, which enabled suppliers to reduce their investment in a dedicated supplier sales force outside of the distributor. At present time, in addition to the 44 U.S. states noted above, SGWS operates in the District of Columbia, Canada, and the Caribbean, and services major brands across all categories through its nationally aligned deals with mega-suppliers Pernod Ricard, Beam Suntory, Campari, and Bacardi. As noted above, a fully integrated RNDC, Breakthru, and Young’s would pave the way for another distributor powerhouse to challenge SGWS and create what is essentially a distributor tier duopoly for top brand suppliers, even more so in the event that Empire Merchants (Empire) in New York would be added to an RNDC Breakthru Young’s combination. If this scenario comes to fruition, this new distribution entity would service 37 markets, have $17.9 billion projected revenue from 2017, and hold 32.6 percent market share. This new powerhouse would prove a formidable competitor to SGWS. In an effort to drive growth, WWW.ARTISANSPIRITMAG.COM

Particularly in the early brand phase, the reality and expectation should be that the distributor will take orders and deliver product, not generate orders or build brand awareness among consumers. the combined RNDC Breakthru Young’s Empire operation would likely offer below market deals to lure top brand suppliers currently aligned with SGWS to migrate to the newly merged entity. As a result, the newly merged distributor may likely increase its margin demands on small and medium suppliers. For large suppliers, however, both distribution groups, SGWS and a post-merger RNDC et al., would be capable of improved offerings for their supplier partners due to their increased scale both in terms of sheer size and market reach. These offerings include lower distribution costs and the strongest retail account service. These distributors will also likely request the unilateral option to take national distribution in the event they wish to expand a brand beyond its home market or initial limited market roll out. One other advantage is that due to the depth of their sales capabilities, each distributor would have the ability to demonstrate its fair share of market specific craft products within their respective portfolios.

Approach Distributors with Measured Expectations With the challenging backdrop of distributor consolidation, the question becomes how small- and medium-size brands can address distribution options in non-franchise states. (In franchise states, the laws make it difficult for powerhouse distributors to compete as strongly given that supplier leverage is typically absent). A handful of options are worth considering. Strategically speaking, national footprint distributors should typically be explored first, especially if the brand owner has or can access a relationship there. However, small- and medium-size brand owners should approach the major distributors with measured expectations due to the fact that these distributors often pass on small- to medium-size brands knowing that with a test market success, the distributor will often get another opportunity to work with the brand. The other choices for entrepreneurial brands include second tier and alternative distribution options. These are strong alternatives, particularly during a brand’s launch and ramp up phases. Regardless of which distribution option a brand chooses, the supplier will need to supplement the sales resources in order to get traction in the market. Particularly in the early brand phase, the reality and expectation should be that the distributor will take orders and deliver product, not generate orders or build brand awareness among consumers. Part One of this series emphasized the democratization of marketing and validation as key components for emerging innovation brands to compete effectively. The discussion surrounding emerging brands’ abilities to capitalize on the changing media landscape since 1980 and consumers’ interest in discovery and authenticity are significant. Another important component to easing the route to WWW.ARTISANSPIRITMAG.COM

market battle and attracting a brand’s target consumer is through relevant differentiation. Brand owners should ask themselves, “What is my relevant brand differentiation?” or more simply, “What is different or better about my brand, which consumers should care, and why?” Brand owners should think about their target consumers and their attributes. For instance, here do they live? What do they drink today? Where are they drinking it today? Where are they buying it? Who is selling it to them? Often times the answers will lead towards examples of consumer groups that are driving today’s distilled spirits growth or highlight trends ranging from “drink local” to “drink healthy” and “drink hip.” Once this has been established, consider the brand’s value proposition. If it’s a niche product, the number of target consumers who believe in the relevance of the product’s differentiation, and more importantly, are willing to pay for it, will be smaller. Conversely, if the value proposition of the product is one that may be a possible game changer, then there will be an easier route to market with an accretive sale for the distributor salesperson rather than a product serving as a dilutive substitution sale.

Badge Value Badge value is another example that contributes to a brand’s relevant differentiation. A badge is a special or distinctive mark, token, or device worn as a sign of allegiance, membership, authority, achievement, etc. Brands can serve as a badge for people to communicate who they are, who they want to be, and what they value. Brands with highest badge value are the ones with simple messages and a strong, specific point of view. Consider Grey Goose circa 2007 as an example. The Fizz Agency conducted a case study to assess the decibel level of people’s voices when sitting at a bar and ordering Grey Goose vodka compared to other vodkas. Interestingly enough, the study determined that people were significantly more likely to use a louder voice when ordering Grey Goose than when ordering other vodkas. Why is this the case? The research determined that people associated Grey Goose with being “the best” and thereby ordering it communicated to others that they could afford this vodka and surround themselves with excellence. This is a powerful message that proves creating badge value is critical for premium spirits. Badge value does not happen instantaneously; rather, it is a byproduct of relevant differentiation

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and thoughtful branding, including, in many cases, strategies to activate key influencers as early brand adopters.

Start at Home Highlighting a brand’s relevant differentiation in its home market to focus on a success blueprint that can be replicated in other markets serves as a good starting point. Taking advantage of distributors, retailers, and support in the local market strengthens the home field advantage. Focusing on independent, on-premise retail accounts may not seem worthwhile due to low sales volumes; however, these accounts provide good visibility, a relatively easy starting point, and the ability to establish a mutually beneficial relationship between a bartender’s brand and a supplier’s brand. This lower level of complexity and difficulty is attractive in the early stages of a brand’s lifecycle. From there, working up to big boxchain off-premise retail accounts may prove more multifaceted and difficult; however, these accounts have the highest volume opportunity (after a successful launch) and early traction in the market can be leveraged to help maximize the likelihood of success in penetrating larger accounts. While it is difficult to get listed in big box retailers, it is easy to get delisted. Thus, for an emerging brand, it is crucial to ensure that the one shot with the large players is the right one at the right time. Prior to this, a supplier can sell as a first placement to many retailers, but it is important to consider that reorders are the single most important factor to evaluate the viability of a brand from the perspective of distributors. A retailer who reorders product has experience and confidence that the brand will continue to sell. Following a fine tuning of the micro or test market in the home market, this blueprint can and should be replicated in expansion markets.

Help Your Distributor Help You Even with a differentiated brand and the right distribution partner, there is no silver bullet for distribution. Ultimately, distributors have a certain degree of freedom and power, but are limited by the desires and needs of their customers. Distributors often are critiqued for their performances when this may be confused with lack of consumer demand and/or retailer

rejection. In order to secure a brand’s fair share of attention with the distributor, most often the concept of share of contribution serves as the guiding force. As such, it becomes challenging for distributors to pay attention to small brands for fear of risking large supplier relationships. Therefore, the key becomes one in which smaller suppliers themselves need to create retail demand for their products. This breaks the fair share of attention cycle and can be achieved via supplemental sales efforts. Some examples of how to achieve fair share (or above fair share) of attention with distributors include offering larger margins and incentives, communication in the form of presentations, “ride alongs” and follow ups, as well as in-market sales, brokers, and brand ambassador support. Keep in mind that distributor sales representatives may work with hundreds, if not thousands, of products within a portfolio. For instance, large suppliers pay significantly smaller gross profit percentages (typically 15-22 percent) than small suppliers (25-35 percent). Larger margins can increase a brand’s attractiveness to distributors. Moreover, training and presenting at sales meetings to distributor sales representatives assists in increasing brand awareness within the particular distributor. Sharing milestones during these presentations or “ride alongs” forges personal connections and creates an impact of success with salespeople. Focusing limited resources on particular distributor salespeople and their account universe can help to create success stories that can be relevant to the particular distributor and create winning images for the brand. Understanding the reasons for consolidation by suppliers and wholesalers can help entrepreneurial brands craft an effective approach to the U.S. market that will optimize resource investment and maximize opportunities for success. Using supplemental sales resources, creating relevant differentiation - primarily through badge value - and working effectively with distribution partners are keys to growing a brand within today’s framework and context. If used effectively in a route-to-market approach, these elements help to create a pathway for brands to be successful within today’s alcoholic beverage landscape.

Sarah Nagel Sisisky is the Client Development Director at Park Street in Miami, Florida. For more information visit www.parkstreet.com or call (305) 967-7440.

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SWEET SUCCESS of HONEY HOUSE DISTILLERY the

WRITTEN & PHOTOGRAPHED BY CARRIE DOW

urrounded by the rugged red cliffs and bucolic cattle fields of the Animas River Valley, the Honeyville store has been a solid business in southern Colorado for exactly 100 years. Manufacturing honey and honey products such as whips, jams, sauces, and body lotion using Rocky Mountain wildflower honey, Honeyville is a treasured establishment about 10 miles north of the mountain town of Durango. A varied tourism industry brings multitudes of visitors to the small factory and retail store during the tourist season. Those visitors, along with wholesale customers around the world, remain loyal to Honeyville through the company’s online store year-round. One would think that after 100 years, the company had made everything possible out of honey. Yet one evening over drinks, Kevin Culhane, third generation Honeyville owner, and his friend Adam Bergal had a thought. “Totally random idea,” laughs Brett Rosenbaugh, Honeyville Brand Manager. “They thought it would be awesome to start a distillery.” Who wouldn’t think that was good idea? According to Rosenbaugh, Kevin’s parents and Honeyville co-owners Danny and Sheree Culhane weren’t convinced, though they were intrigued enough to send Kevin to some ADI conferences to learn about the industry. Realizing Honeyville already had the vendors and a devoted clientele, the family went for it. In 2012 the Culhanes and Bergal founded Honey House Distillery as La Plata County’s first legal distillery since Prohibition. (Because of an existing agreement with Honeyville Grain of Utah, Honeyville Colorado cannot use the name on corn-based products.) Honey House’s flagship product, Colorado Honey Whiskey, is an amber-colored whiskey that actually looks like bottled honey. As most distillers know, starting off with whiskey can come with its own set of risks. WWW.ARTISANSPIRITMAG.COM

“Kevin started going to all these conferences and learning what to do to set you apart, like starting with aged spirits versus clear spirits,” says Rosenbaugh. The company purchased a 250-gallon custom Vendome still nicknamed The Queen Bee (it’s shaped like a beehive and etched with honeycombs) and began making and barreling their own whiskey. However, Culhane and Bergal also worked with existing distilleries to develop a whiskey blend they could use while waiting for their product to mature. Using a blend of four- and six-year whiskeys, they mixed it with Honeyville wildflower honey to make their Colorado Honey Bourbon Whiskey. “What we did was kind of different,” says Rosenbaugh. “Instead of getting your license, coming in and doing vodka or gin, we worked with other companies, so our honey whiskey was actually our first product. Over that period of time, we’ve been stashing away barrels to get our supply up.” Rosenbaugh expects Honey House to begin using its own product in the coming year.

HONEYVILLE HISTORY The company’s roots began in the 1920s when Vernon Culhane, Kevin’s grandfather, was removing beehives from his property’s trees. After sampling the honey found inside, which was the best he had ever tasted,Vernon began selling it in downtown Durango from the back of a pickup truck. He was so enamored with his bees, he received special military privileges that allowed him to bring his hive with him no matter where he was stationed, including Europe. Through the years, Vernon sold much of his honey to the Honeyville Company, founded in 1918 by the Mayer family. Danny took over for his father in 1974, and in 1986, the Culhanes

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bought Honeyville from the Mayers, expanding it into a major retail business with around 50 different products using 400,000 pounds of honey each year. Some 8,000 pounds are used in the distillery alone. With so much demand, the Culhanes’ bees couldn’t keep up, so they source wildflower honey mostly from family-owned farms in nearby Cortez and a few other Rocky Mountain regions of Colorado and Wyoming. “As long as your bees are at the same altitude and eating roughly the same crop,” notes Rosenbaugh, “it’s going to taste the same. Altitude is huge. We go to all our vendors and test out their product to make sure it is what we want.”

STICKY NOTES The hardest part about working with honey? It’s sticky. “The hardest part is filtering,” Rosenbaugh says. “We’ve spent a lot of money and time trying to figure out how to filter the products. Honey doesn’t want to be a liquid. It wants to set up so you get sediment in your bottles. We had to figure out what levels of filters and types of filters we could send our products through so it comes out crystal clear.” Despite the difficulties, Kevin Culhane says making spirits with honey has been rewarding. “Honey proves to be an interesting medium to work with. Each batch has an individual taste and color which can make challenges while adding it, but in the end, this is what makes our spirits unique.”

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With Honey House Distillery, the Culhanes have entered sweet new territory. The distillery now offers several products including Cinnamon Honey Whiskey, Red Cliffs Spiced Rum, and Durango Joe’s Cold Brew Coffee Liqueur. The distillers didn’t ignore vodka either. They created Hex Vodka by combining fermented honey with a corn-based spirit. “We were probably three years in before we did a vodka,” recollects Rosenbaugh. “It’s good locally because we have such a good community in Durango. All the restaurants said we’ll carry whatever you make and plain vodka works well for them.” Looking to the future, Honey House is testing new recipes, including a liqueur for La Plata County’s abundant chokecherry harvest. Honey House also hired an additional assistant distiller, Jaime Benage, who started as an intern from Durango’s Fort Lewis College. Producing 13,000 bottles last year, the distillery has plans to upgrade its bottling line, and at only 50% capacity, there is plenty of room for growth. “Within the next year or two, we will be building a grain silo on the hill,” says Rosenbaugh. “We actually have the auger to grind our own grain. That will save us a lot of money on corn because we buy it pre-ground. All our corn is from Cortez, so it’s all Colorado. Then we will probably build a new barrel-aging warehouse or new storage for end product.”

Honey House Distillery is located in Durango, Colorado. For more info visit www.honeyhousedistillery.com or call (970) 247-1474. 130

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ING V O R P M I R O ES F C I T C A R P T S BE

L L A R E V O T N E M P EQUI S S E N E V I T C E F F E N Y SHANNO WRITTEN B

O'NEIL

OEE = Overall Equipment Effectiveness

f you work in bottling for beer, wines, or spirits, you have probably heard this term thrown around like it is the hottest new craze since alcoholic seltzer. Leaders use the term to describe the productivity or efficiency of a line or facility. So, what does OEE actually mean? How is it calculated? And how can you use it to help drive your business in a positive direction? OEE is a metric by which an organization benchmarks its manufacturing performance. OEE may be used to analyze individual pieces of equipment, entire systems, or even entire factories. To put it simply, OEE is the product of three performance metrics. It is often expressed using this basic equation:

OEE = Availability x Performance x Quality As with creating the best spirits, it begins with having the best ingredients. To properly calculate OEE, you need to understand the underlying components that make up the calculation and correctly identify their values.

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AVAILABILITY Availability describes the percentage of time that equipment can run and create product. The percentage describes the time that equipment operates relative to the amount of time that it is designed to operate. Let’s say that you have a bar called Ray’s Tavern. Ray, the owner, has the bar open 10 hours per day, but he is only standing behind the bar serving drinks for six hours per day. The Availability of Ray’s Tavern is 6/10 or 60 percent. Why isn’t Ray behind the bar? Well, he could be yelling at a drunk regular, sweeping the floors, paying bills or attending to other matters. These times away from the bar all count towards reductions in the Availability Percentage. Reductions in manufacturing availability often include:

>> Scheduled and unscheduled maintenance

>> Extended equipment breakdowns >> Changeovers >> Material unavailability

>> Plant interruptions or shutdowns >> Significant equipment adjustments >> Equipment warm-ups >> Cleaning

>> Operator unavailability/shift changes

PERFORMANCE Performance compares the best-case speed at which the equipment will perform (ideal rate) to the actual speed. Blockages or small stops (defined as five minutes or less) are generally considered Performance reductions rather than Availability reductions. Getting back to Ray, when he is at his best he can serve five drinks per minute. However, he is often distracted by conversations with customers or the game on the TV, and it typically takes him a longer time than normal to open a new bottle. So when he is serving, he only

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serves an average of four drinks per minute, giving him a Performance Rate Percentage of 4 out of 5 or 80 percent. Performance reductions in the manufacturing realm often include:

>> Product flow obstructions

>> Substandard materials

or equipment jams

>> Underperformance due to

>> Operation below nameplate or design

>> Unbalanced line control that cannot

speed

keep machines primed and running

unmitigated equipment wear or aging

>> Operator lack of training, attention, or inefficiency

QUALITY Quality is simply a comparison of acceptable, first-run units to total units produced. If Ray serves 20 beers but the first two were nothing but head due to a recent keg change, Ray has a Quality Percentage of 90 percent. Quality reductions often include:

>> Rework

>> Damaged product

>> Scrap during test runs, start-

>> Flushed product (for liquid processes)

up, and changeovers

>> Rejected product

BEST PRACTICES

WHERE TO AIM

The driving concept behind an OEE program is that it should be created to expose areas for improvement. It is a benchmark and not necessarily a “grade” to compare one operation to a different one, or one plant to another. The value of establishing an OEE program comes from developing realistic, honest criteria for the initial Availability, Performance, and Quality metrics and using those initial values to identify opportunities for improvement. Unless the equipment is state-of-the-art, in a climate of high demand, and the operating team is highly trained, the expectation should be that the initial OEE value will be relatively low. Your OEE target may be substantially less than world-class, and that’s OK. The exercise for calculating your OEE has identified where you have extra capacity for production (Availability), room to improve when you are running (Performance), and how well your operational assets yield salable product (Quality). To sum it up, the point of calculating OEE is to help your operation improve. Ray needs to figure out where he is in order to understand how to get to where he wants to go.

World class OEE in beer, wine, and spirits manufacturing industries is generally accepted to be 85 percent. This OEE is calculated using the following component values:

Let’s take a second and calculate Ray’s Tavern’s OEE:

OEE COMPONENT

RAY’S TAVERN %

AVAILABILITY

60%

PERFORMANCE

80%

QUALITY

90%

60% x 80% x 90% = 43% Ray’s OEE percentage is starting at 43 percent. That doesn’t seem too great, but it gives him a benchmark, and because it’s broken down by the different components, he can understand that Availability is where he needs to improve the most. So how does Ray compare to actual beer, wine, and spirits manufacturers?

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OEE COMPONENT

WORLD CLASS %

AVAILABILITY

90%

PERFORMANCE

95%

QUALITY

99.9%

In a recent survey performed by Food Engineering Magazine, manufacturers responded by stating they were achieving the following OEE values:

>> Targeted OEE (average): 79% >> Average OEE (average): 72% For comparison, if you fell seven percentage points below world class in availability and performance and fell one percentage point in quality, your OEE calculations would be:

OEE COMPONENT

EXAMPLE %

AVAILABILITY

83%

PERFORMANCE

88%

QUALITY

98.9%

TOTAL OEE

72.2 %

Ray could say that the availability percentage could be calculated using the time he spends behind the bar, as opposed to the time the bar is open. This would give him an availability percentage of 100 percent and an OEE of 72 percent. That seems much better, but hides the fact that Ray needs to improve his availability percentage.

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BEST PRACTICES TO CONSIDER WHEN DEVELOPING OEE METRIC:

INCLUDE EMPLOYEE BREAK TIMES Employee

break times are often excluded from the baseline or “planned run time” total of the Availability calculation. If you plan to shut down operations during an employee break, don’t include it in the available time. Otherwise, the time that employees take breaks should be included because your facility could theoretically be producing during this time. By excluding breaks, you also exclude the incentive to research possible improvements that reducing break interruptions may bring. If you staggered breaks at key operator positions, built up feed inventory at strategic points, or rotated operators’ positions, you could mitigate the impact of breaks and increase the number of units you produce. Ray could find another bartender to serve people during the six hours when he was dealing with other tasks in the tavern to improve the availability percentage.

INCLUDE SCHEDULED MAINTENANCE As with

employee breaks, scheduled maintenance is often not considered part of planned run time and therefore not included in that portion of the Availability calculation. However, if there are conceivable ways to speed up planned maintenance (enhanced training, better tools, increased maintenance staff), then improving planned maintenance could increase production, and therefore, should be a factor in your OEE calculation.

INCLUDE CHANGEOVERS

Changeover Time should always be included as part of planned run times, but it is often excluded to improve initial OEE calculation values. Optimizing changeover practices will clearly improve production resulting in a comparative improvement in OEE. If Ray needs to switch up his draft line, this changeover could take him hours. He needs to work on making that process as efficient and quick as possible.

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CONSIDER NAMEPLATE CAPACITY Reducing expected

equipment speed due to equipment age is tempting, but that practice eliminates the potential benefits of equipment overhauls or upgrades from OEE improvement consideration. Using nameplate capacity, defined as the initial capacity agreed upon by the equipment vendor, should be seriously considered when calculating ideal rates.

COUNT COMPLETED UNITS ONLY A common

calculation error is including items that are usable (with rework) as items produced. Only completed units should be counted as units produced in the quality calculation. If Homer sends his drink back four times before he gets a drink he likes, all five of these drinks should be considered in the quality calculation.

TRACK SIGNIFICANT EVENTS The goal of OEE is not to collect

data. The goal is to drive improvement. Your OEE data collection process should be as simple as possible. Only significant events should be tracked as a reduction in Availability. Smaller events, such as those less than five minutes, can be logged in less detail and tracked as reductions in Performance. In other words, Ray doesn’t need to account for a five-minute bio break, but he should account for the 45 minutes he spent arguing with Homer over his tab.

UNDERSTAND YOUR GOAL A higher total OEE is not necessarily an

indication of success. For instance, improved Availability and Performance, but reduced Quality, may cost your company more in the long run. Understanding your goals for each subcomponent of OEE should be part of your overall OEE strategy.

BASE AVAILABILITY ON CAPACITY Availability should consider both

plant capacity and demand. If you are performing cleaning and maintenance on a third shift because there is not enough product demand to warrant manufacturing, then it is reasonable to exclude the third shift from your Availability calculations. However, if that cleaning and maintenance is robbing you of needed production time, consider including it (or strategic portions of it) in your calculations. Ray can choose to clean the tavern from 8 a.m. to 9 a.m., because chances are, there are very few customers waiting for drinks. However, if there was a broken pint at 10 p.m. and it takes him 30 minutes to clean up all of the glass, that should probably be included in his calculations.

IDENTIFY INTERNAL CAPABILITIES While creating an uncomplicated

OEE tracking and calculating process is paramount, establishing your OEE goals may take some legwork. Consider whether you have the internal capabilities to optimize the OEE experience, or whether you should engage a systems analytics consultant.

The benefit of OEE is that it establishes benchmarks for success. It divides improvement opportunities into measurable categories, and it provides a measuring mechanism that allows for production improvement. There is not an end goal — you will never achieve 100 percent — your goal is to just get better.

Anthony White leads the Beer, Wine & Spirits division at Haskell which is dedicated to engineering and installing world-class manufacturing systems and facilities for clients in the Beer, Wine & Spirits Markets. Anthony graduated from the University of Florida’s Hough Graduate School of Business with a Master of Business Administration and from the University of Florida with a Bachelors in Construction Management, and is a Certified General Contractor. 133

Port Morris Distillery WRITTEN & PHOTOGR APHED BY BENJA MIN PEIM

ucked among auto shops and warehouses in an industrial section of the South Bronx sits the Port Morris Distillery. Named for the local neighborhood, this distillery has only been around since 2011, however, it’s already developed a reputation The pair had just sold a music and recording studio that they throughout the five boroughs of New York, garnering mentions in owned together when the idea to start their own operation formed, nearly every major media outlet, from The New York Times to the and only a handful of distilleries were open in New York City at the Daily News. The distillery has been hailed as a symbol of the local time. revitalization of the South Bronx, and it produces a Puerto Rican “My uncle was in town and we were talking pitorro,” Barbosa said. spirit called pitorro. “We knew that breweries were up and coming and we thought, why The distillery was launched by two childhood friends, Rafael not do this with pitorro? So then we started Googling.” Barbosa and William “Billy” Valentin. They’re proud “Nuyoricans,” “At first I thought he was crazy, but I followed,” Valentin said. New Yorkers whose families came from Puerto Rico. The two grew The pitorro recipe comes from Barbosa’s uncle, who taught his up together just a few miles away at the Fredrick Douglass Houses nephew to distill as a teenager during trips to Puerto Rico. After in Manhattan’s Upper West Side, and they’ve known about pitorro opening the distillery, they brought their entire lives. Barbosa’s uncle over from Puerto Rico to “Ever since you’re a teenager you’re into be the head distiller. Barbosa took over as pitorro. All the holiday events you go to, head distiller two years ago. it’s always around,” Barbosa said. Their pitorro recipe features apples, The distillery is the first commercial honey, and brown sugar, all of which they seller of pitorro in the country, and only source from farms in upstate New York. the second distillery in the Bronx since The ingredients sit in fermentation tanks Prohibition. Prior to opening their doors for 17 to 21 days, where they turn into a in 2011, it took Barbosa and Valentin form of wine. It’s then transferred to the two years to obtain the federal and state still, where it’s distilled seven times in liquor licenses they needed to start their total before hitting the shelves. business. But they say it was worth it. The Port Morris distillery produces “The thought of being self-employed, around 3,000 six-pack cases a year, of being able to create something that bottled very intentionally at 92 proof. could be a legacy for the next generation Barbosa’s uncle back in Puerto Rico coming after us — it’s an amazing rush,” — WILLIAM “BILLY” VALENTIN never used measuring instruments when Valentin said. “Companies like Bacardi making his pitorro. Instead, he worked by started just like we did.”

“The thought of being self-

employed, of being able to

create something that could be a legacy for the next

generation coming after us — it’s an amazing rush.”

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eye and taste, pouring the pitorro on the ground and setting it alight, watching for its color and for how long it burned to determine when it was ready. Barbosa and Valentin measured every jar of pitorro he had made and, amazingly, found that most measured 92 proof. They knew then that 92 would be their goal. Pitorro might not be broadly known outside of Puerto Rico and its diaspora, but it has a long history. It has been made in Puerto Rico since the 17th century. Historically it was made from sugarcane, long a Puerto Rican cash crop. Today, sugarcane no longer occupies the prominent place in Puerto Rico it once did and has been usurped by brown sugar in the making of pitorro, combined with local fruits like mangoes, pineapples, and coconuts and frequently distilled in back yard operations. The different versions of pitorro are called curados. Currently, the Port Morris Distillery sells two different curados. One is called pitorro shine and comes in 375 and 750 ml bottles. The other is pitorro anejo, which is 80 proof and aged in wood barrels to attract aged whiskey, rum, and tequila drinkers. They’re also preparing to launch new curados with passion fruit and mango. The distillery also produces a traditional Puerto Rican eggnog, called coquito, between November and January. Traditional coquito, which means “little coconut” in Spanish, is made with condensed milk, coconut milk, nutmeg, and pitorro. Port Morris’ coquito differs in that it does not use dairy, but the flavor, body, and texture are the same as the traditional version. In fact, it’s their biggest seller, accounting for nearly 70 percent of their sales. The distillery sells to restaurants and liquor stores across New York City and State, Manhattan’s Inwood Wines and Spirits being a notable account. They plan to expand to other states in the coming years. The distillery has also been visited by a slew of celebrities. On a recent afternoon, Valentin nonchalantly ticked off a few names:“Fat Joe, Fifty Cent, Rick Ross.” As you may have guessed, Valentin and Barbosa’s Puerto Rican heritage is important to them. Aside from putting Puerto Rican spirits on New York’s culinary map, the distillery has done much to help their ancestral island since Hurricane Maria ravaged it just over a year ago. They have held benefits and fundraisers at the distillery. Valentin even flew to the island to deliver a container full of food, water, and medicine. Last fall they held a benefit called “Christmas in September,” in which they collected musical instruments to donate to youth music programs in Puerto Rico. They plan to fundraise more for the island in the future. In the long term, they’d like to make pitorro a household name throughout the entire world.

Brooks Grain Improving the quality of life with grain. www.brooksgrain.com

PROVIDING RYE

to the distilling industry for over 50 years.

Port Morris Distillery is located in New York, New York. For more info visit www.portmorrisdistillery.com or call (718) 585-3192. WWW.ARTISANSPIRITMAG.COM

135

BUSTING SOME OF PROHIBITION’S BIGGEST MYTHS

Written by Renee Cebula

“The United States today completed the legislative process of voting itself dry... prohibition leaders declared that the accomplishment was the greatest piece of moral legislation in the history of the world.” — January 16, 1919, The Frederick Post, Frederick, Maryland

he 100th anniversary of “America’s failed experiment,” Prohibition, is fast approaching. Federal prohibition, which banned the manufacture, import, and sale of alcohol from 1920 to 1933, is a milestone in distilling history. No sooner was Prohibition eliminated than a number of historical myths began to grow around a time that many Americans would have just as soon forgotten. Now is a good time to dig deeper for a more accurate account of the most infamous drinking story in American history.

Myth #1: The Eighteenth Amendment Passed Because People Believed Alcohol was Unhealthy. Fact: Throughout the 1800s, there were a wide range of views regarding alcohol usage and its effect on health. Some advocated reducing and restricting alcohol, while others demanded a complete ban on intoxicating beverages. The Temperance Movement had been debating these different approaches and working toward prohibition laws for over a hundred years. So why was 1919 different?? The Eighteenth Amendment passed in 1919 because of two key factors: World War I and anti-immigration fervor. When America entered the war in 1917, the need for food was a priority. Congress passed the Lever Food Act, making food, and specifically grain, a war commodity. That law prohibited the use of any food product in the production of distilled alcohol. Propaganda posters and political

136

cartoons linked prohibition with patriotism. One war propaganda poster depicts a fighting soldier with the caption, “Will you back me, or booze?” making a direct reference to prohibition. The propaganda played into the hands of the rising anti-immigration sentiments by some Americans who used this fervor to push for policies targeting immigrants. Large numbers of Germans immigrated to the U.S. during the second half of the 1800s. The early 1900s brought an influx of eastern and southern Europeans. These recent arrivals were often portrayed in the press as dirty, heavy drinkers, political radicals, and worst of all, Catholics. Historian Lorraine Boissoneault explains how, “In 1912, Congress debated over whether Italians could be considered ‘full-blooded Caucasians,’ and immigrants coming from southern and eastern Europe were considered ‘biologically and culturally less intelligent.’” These two powerful factors were used by a handful of leaders within the Temperance Movement to push for a Constitutional Amendment.

Myth # 2: Cocktails Were Invented During Prohibition. Fact: Cocktail were invented in the early 1800s. A popular myth, included in many bar books today, is that cocktails were invented during Prohibition as a way to mask rough, homemade spirits with juices, sugar, and bitters, making them more palatable. In fact, the American cocktail tradition was more than a century old at the time WWW.ARTISANSPIRITMAG.COM

of Prohibition. In 1806, a New York newspaper noted, a “cocktail is a stimulating liquor, composed of spirits of any kind, sugar, water, and bitters.” Sugar, syrups, and juices had been part of drinking culture even before the advent of the cocktail. Other types of mixed drinks such as sours, fizzes, and punches called for sweetening agents. We have a record of the mixed drinks that were enjoyed in the first centuries of America before Prohibition. In 1862, bartender extraordinaire Jerry Thomas published The Bar-Tender’s Guide or How to Mix Drinks. The book, a milestone in the professionalization of bartending, sheds light on what drinks were made and enjoyed, and more importantly, what was in them. It’s hard to find a single mixed drink recipe that doesn’t have something sweet. From punches with their “two of sweet” to numerous drinks that call for fruit juice, syrup or sweet liqueur, mixed drinks, including cocktails, incorporated sweet. The sweet was not to mask the spirits but rather enhance and balance the beverage.

Myth #3. Prohibition was the First Time Alcohol Had Been Outlawed. Fact: When nationwide Prohibition was enacted in January 1920, over half the states were already dry, some for three to four years. From Washington State to Florida, Prohibition was on the books in a total of 28 states. North and South Dakota entered statehood with prohibition in 1889. Mississippi and Texas even remained dry after repeal. A contributing factor to state prohibition was the role of women’s suffrage. By 1919, women gained the right to vote in over half of the states, and women had long played a major role in the Temperance Movement. However, women’s suffrage on the national level did not come until 1920 with the ratification of the 19th Amendment. The significance of state prohibition is that these dry states eased the way for the eventual federal prohibition.

runners brought many top-shelf brands into the country. Alcohol smuggled by rum-runners tended to land in urban areas, in speakeasies and in the private homes of the wealthy. Moonshiners were more likely to be found in rural areas distilling spirits that could be described on a range from unaged to rot-gut. A perusing of Prohibition-era cocktails gives insight into the types of liquor that were available and used. Cocktails like the Last Word called for Green Chartreuse. Cognac and Cointreau were needed to make a Sidecar, and the Mary Pickford used maraschino liqueur.

Myth #6: Prohibition Made Gin Popular and It was Made in the Bathtub. Fact: Gin was a staple of American drinking culture and appears as the main ingredient in many recipes in the 1800s. Jerry Thomas’s 1862 guide lists nearly two dozen gin-based drinks, including the Gin Smash and the Gin and Pine. Early Americans enjoyed gin punch made with lemons, oranges, pineapples, and raspberry syrup. Several types of gin were available during Prohibition — Holland, Old Tom, and homemade. Making gin is essentially the same as making a flavored vodka, just with the addition of juniper berries and other botanicals. During Prohibition, home-distilled gin was more likely to be redistilled and scrubbed of denatured alcohol. Producers at that time blended high-proof spirits, juniper, essential oils and extracts and made what is called compounded gin today. In Lost Recipes of Prohibition, Matthew Rowley writes that once repeal came, “most drinkers ditched counterfeit whiskeys... Not homemade gin. New York dealers said that after the 21st Amendment ended Prohibition, sales of neutral spirits showed no decline at all.” Bathtubs most likely were used because the large glass demijohns and carboys used to mix gin and water down to drinking proof couldn’t fit in the sink.

Myth #4: Prohibition was Solely an American Experiment.

Myth #7: Americans Drank More During Prohibition.

Fact: The United States was part of a larger worldwide movement.

because it truly did fail at most of its goals. Advocates believed that prohibition would lead to moral renewal in the United States, with less crime and corruption, stronger families, and a healthier society. It did none of those things — in fact, profits from bootlegging helped fuel the rise of organized crime. The laws against liquor were widely violated, from underground speakeasies in the big cities to illegal “blind pig” saloons in rural towns. However, it is not true that Americans drank more during Prohibition. Exact figures of illegal activity are hard to come by, but most historians who study the time period believe that Prohibition did reduce alcohol consumption for the years that it was in effect.

From Iceland and Finland to the Soviet Union, many countries had prohibition in the early 1900s. Canadian prohibition began in several provinces much the way dry states in the United States led the way to prohibition at the national level. Prohibition failed in many countries and wasn’t just an American failure. Prohibition was shorter in Canada and Norway but lasted in many countries about the same length of time as the United States. Today, prohibition remains in many Muslim-majority countries as well as parts of India. In Canada and the United States, dry counties exist in several provinces and states.

Myth #5: Booze Available During Prohibition was Terrible. Fact: Though rough, homemade liquor was common during Prohibition, bootleggers were able to smuggle in millions of gallons of high-quality liquor made in Canada and the Caribbean. RumWWW.ARTISANSPIRITMAG.COM

Fact: Prohibition is often called “America’s failed experiment”

Renée Cebula is a cocktail historian. Her business, Raising the Bar, connects people to history through unique shopping experiences and interactive cocktail-themed classes and tours. raisingthebarstories.com // Insta: @badassbarware 137

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