Artisan Spirit: Winter 2022 by Artisan Spirit Magazine

WINTER 2022

chart your COURSE FOR

FLAVOR

WHERE THERE'S SMOKE, THERE'S POSSIBILITY

? A BAD

BREAK FOR THE SUPPLY CHAIN

OUT OF

COMMISSION

MAKING A

BID FOR BOOZE

Drink With Your Eyes®

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TABLE of CONTENTS A LETTER FROM THE EDITOR

QUARTERLY GUILD & INDUSTRY REPORTS

Updates from guilds and associations within states, across the nation, and beyond!

ROTARY EVAPORATION: LOW PRESSURE, HIGH QUALITY DISTILLATES From the Good Guy Distillers

(ANTI)TRUST THE PROCESS

Renewed scrutiny of the alcohol industry

WHAT YOU SHOULD KNOW ABOUT YOUR INSURANCE PROGRAM Distilleries face risk on the daily

The Bard Distillery of Graham, Kentucky

ECONOMICS OF WHISKEY PRODUCTION FOR THE GROWING CRAFT DISTILLERY

FORTIFYING A LEGACY

Part 2 – Addressing ongoing cash needs

27 31

With Milam & Greene, two industry giants make waves in the craft sector

SLIVOVITZ 95 35 39

NAVIGATING THE CHEMISTRY OF FLAVOR 46 Steering flavor with the power of botanical selection

SMOKE AFFECTED BRANDY 51 Where there's smoke, there's possibility?

LEAVING MINNESOTA

Craft distillers and brewers begin operations in neighboring states as entrepreneurial growth is limited by arcane laws

An introduction to a category of plum brandy from the Balkan peninsula

Supply chain challenges leave distillers scrambling

TOGETHER FOR GOOD

NAVIGATING ALCOHOL TO-GO AND DELIVERY LAWS

Good Deeds Whiskey: We'll drink to that

How can industry members and third parties navigate the nuances of these newly established practices?

RYE TRIALS SHOW SIGNIFICANT FLAVOR DIFFERENCES AMONG VARIETALS

Research by Minnesota’s Far North Distilling could have profound implications for the way distilleries choose to source their grain

BLACKBIRD ASSETS WHISKEY EXCHANGE 75 A new wholesale auction series offers fresh opportunities for buying and selling

FOUNDATIONS OF CRAFT DISTILLING

OUT OF COMMISSION 101 Big Distribution's shift towards salary over commission

CHICAGO’S CH DISTILLERY

103

DIVERSIFIED DRINKS PRODUCTION

106

BIG THIRST, BIG DATA, BIG PLANS

108

EFFICIENCY SQUARED

111

A TEXAS-SIZED SUCCESS

113

STILL STANDING

115

LIGHTS, TENACITY, ACTION!

117

WHAT I LEARNED TRAVELING FROM BIG WHISKEY TO CRAFT BOURBON

120

ADVERTISER INDEX

122

Hyper-local, grain-to-glass spirits (and a Swedish concoction, too)

Big Thirst, Inc. creates a holistic experience for craft distillers

Lewis Harsanyi shares his drive to produce with minimum input and maximum output

The DISCUS 2021 Conference points to an exciting future

LOCH & UNION DISTILLING

of American Canyon, California

Austin’s Fierce Whiskers Distillery does things sustainably and on their own terms

The consolidated alcohol factory?

BROKEN LINKS 58

from the COVER

The more things change, the more they stay the same at Huber’s Orchard and Winery, through seven generations

FIERCELY INDEPENDENT

ANTHEM OF RENEWAL IN COAL COUNTRY

4: Aging/Bottling

ALL IN THE FAMILY

How two equipment manufacturers weathered the pandemic and its effects on the distilling industry

A California distillery’s dramatic rise from Hollywood poker bet to industry leader

Part 1

The Bard Distillery in Graham, Kentucky. Image by Amanda Joy Christensen. See their story on page 39.

Issue 37 /// Winter 2022 PUBLISHER & EDITOR Brian Christensen CREATIVE DIRECTOR Amanda Joy Christensen SENIOR WRITERS George B. Catallo Devon Trevathan

Margarett Waterbury

CONTRIBUTORS Kristen Catasús Corey Day Carrie Dow Andrew Faulkner Andy Garrison Doug Hall Reade A. Huddleston Paul Hughes, Ph.D. Arnold Klein Aaron Knoll

David Letteney Alyssa Malionski Rich Manning Alexis Mason Jeff Quint Gabe Toth Lisa Truesdale Lauren Voke Peter J. Whalen

PHOTOGRAPHERS Sarah Baumberger Brett Bulthuis Amanda Joy Christensen Carrie Dow Andrew Faulkner

David Letteney Manda Levy Matt McGinnis Devon Trevathan

SALES & MARKETING Ashley Monroe ARTISAN SPIRIT is a quarterly publication by Artisan Spirit Media.

www.artisanspiritmag.com facebook.com/ArtisanSpiritMagazine ArtisanSpiritM ArtisanSpiritM General Inquiries (509) 944-5919 Advertising (509) 991-8112 PO Box 31494, Spokane, WA 99223 All contents ©2022. 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.

Custom Mash Bills + Guaranteed Consistency + Contract Distilling OUR CR AF TED RECIPES AND CUSTOM MASH BILLS MAKE SURE YOU WON’T BLEND IN

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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.

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.

Founded in Boulder, CO in 2016, Arryved is a point-of-sale based software company specializing in the food, beverage, and entertainment industries: distilleries, breweries, cideries, wineries, brewpubs, restaurants, and music venues. In five short years, it grew from being an idea scribbled on a taproom coaster to a revered platform serving over a thousand happy customers across the country. Arryved is a team of tech geeks with relentless passion for, and extensive experience in, the hospitality industry, as both employees and consumers. The goal is simple: Deliver a flexible, reliable, team-centric platform that puts service first in every way. Arryved is changing the narrative on point-of-sale — evolving from archaic static terminals into a flexible tool that elevates guest experiences, fosters staff relationships, and provides owners and managers with robust and easily digestible insights to make informed decisions.

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.

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

The Distilled Spirits Council of the United States (DISCUS) is the leading voice and advocate for distilled spirits in the United States. Representing producers and marketers of distilled spirits, DISCUS advocates on legislative, regulatory, and public affairs issues impacting the distilled spirits sector at the local, state, federal, and international levels; promotes the distilled spirits sector, raising awareness and opening markets in the United States and around the globe; and encourages responsible and moderate consumption of distilled spirits as part of a healthy adult lifestyle based on evidence-based research and policy. DISCUS also powers Spirits United, a grassroots platform for the distilled spirits industry. Spirits United is comprised of a community of advocates united with a common goal: to ensure adult consumers can enjoy distilled spirits where they want, how they want, and when they want. Learn more at distilledspirits.org and spiritsunited.org.

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.

Trusted Oak Expertise Since 1912. 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.

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. 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.

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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.

Founded in France in 1897 and based in the USA for more than 30 years, Saverglass provides for the premium & super premium spirits and wines. Over the years, the Saverglass Group has distinguished itself by its undeniable quality of glass coupled with innovative decoration techniques. Today, one of Saverglass’ main asset lies on its product offer: 110 original designs and 425 references which represent the largest selection on the market! Thirsty for genuineness, Saverglass has created exclusive bottles dedicated to Artisanal distilleries: The Craft Spirits collection is designed to convey the image of authentic, locally sourced and rare high-quality products. Recently, the Group has strengthened its presence and service offering in the U.S. by opening an ultra-modern bottle manufacturing and decorating plant in North America.

Southern Distilling Company is one of the largest artisan distilleries in the nation. We offer product development, contract distilling (standard and custom mash bill whiskeys, rum, and agave spirits), barrel warehouse aging, batching, blending, bottling, and co-packaging of award-winning products. We also keep an extensive inventory of aged bourbon and rye whiskey available year-round. Our spirits are distilled in top-of-the-line Vendome Copper & Brass Works continuous column stills. Our product development services include working with you to perfect an existing recipe and consultations to help you create your own recipe. We can barrel and warehouse age your product to meet both short and long-term goals. At Southern Distilling Company, you get standout spirits that make brands unforgettable.

For over 60 years Tapi USA has produced cork stoppers and a wide variety of bottle closures. Family-owned and operated since its inception, our company 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.

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A LETTER FROM THE EDITOR: The holiday season got the best of us this year and pushed the winter issue of Artisan Spirit Magazine back a bit further than I had originally hoped. While I can’t technically blame the supply chain woes so many in the industry are facing (unsurprisingly we cover that in this issue extensively) I am oddly thankful we had the extra days to wrap up this edition. My reasoning is purely selfish because I get the opportunity to share a few sentimental, dare I say emotional, moments that occurred prior to publication. The 2021 year in craft spirits was a wild ride of hardships and individual tragedies, punctuated by bright spots of perseverance and success. Distillers, along with the people and companies that orbit them, are a beautiful hodgepodge of eclectic characters, but we have somehow created a spectacular community of loving folks. We share our successes and support each other in despair. That was personified in a perfect moment at the American Craft Spirits Association’s annual convention in December. Our dear friend Ralph Erenzo lost his son, Gable Erenzo, earlier this year. Gable was a fellow distiller and his loss rocked us all. Despite the tragedy, Ralph attended this year’s convention, climbed the steps to the podium during the annual spirits awards ceremony, and honored fellow distiller Mark Shilling with an award bearing Gable’s name. In that same room I sat near two other friends who had recently lost a spouse and a child, respectively. It was an emotional moment no one was prepared for, but I wouldn’t have traded the mingled tears and joy for anything. This edition of the publication covers the good and the bad. Legislative victories and setbacks, marketing successes, and supply chain chaos. However, what I want to focus on is the community. I know, I do that a lot. We love our industry, we love this community, and we thrive as a group because of that connection. So, as I’ve said before, and I will say many times again, thank you all for being a part of our extended family.

With greatest appreciation,

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

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Y R T S U D N I & S T D R I L O P RE GU Y L R E T R QUA

eeping with the cyclical nature of our industry all our guild updates share a theme once again. This time it's the excellent news of in-person guild meetings and guild-sponsored spirits festivals. Spirits festivals continue to be one of the best sources of revenue for guild funding as well as providing an excellent chance to promote and advocate for local state products. We are damn excited to see the year end on a bright spot for our guild friends.

— BRIAN CHRISTENSEN

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AMERICAN CRAFT SPIRITS ASSOCIATION The American Craft Spirits Association has been very excited to launch their separate nonprofit initiative, the STEPUP (Spirits Training Entrepreneurship Program for Underrepresented Professionals) Foundation this past quarter. We will be selecting two interns from under-represented communities to go through a year-long program in 2022 incorporating an extensive curriculum that covers everything someone needs to understand running a distillery business, from production through sales and marketing, running a tasting room, and safety. Interns will be connected with mentors and career coaches as well, to aid them in evaluating their opportunities after graduation. Each intern will be hosted by large, medium-sized, and small distilleries for 8-12 weeks each, as

well as a distributor. These interns receive a generous stipend and their travel, housing, and transportation will be covered by the foundation as well. Diageo has joined this effort as our first Cornerstone Partner, making a significant investment in moving this initiative ahead. In 2023, we plan to increase our intern class to six individuals, and then to 10 people annually with sufficient financial support. We would love all interested parties to come and visit us at STEPUPinternship.org, and learn of ways to get more involved in advancing this project. Becky Harris President, Chief Distiller, Catoctin Creek President, American Craft Spirits Association

AMERICAN DISTILLING INSTITUTE In 2007, American Distilling Institute (ADI) launched the Judging of Craft Spirits with the mission of recognizing and promoting the best craft spirits in the country and by giving written feedback to every entry. Since then, ADI has grown to include members from 22 countries, and more than a quarter of our competition entries come from

overseas. To better continue our mission, we are rebranding to the ADI International Spirits Competition. We also believe that this new name will help provide more clarity for the press and consumers about the awards. The ADI International Spirits Competition will continue to apply the highest standards in the industry, using only the best judges and

stewards from around the world, and only awarding exceptional spirits. Early bird registration deadline Is Jan 28. Registration closes on Feb 25. Erik Owens Editor, Distiller Magazine American Distilling Institute

CRAFT MALTSTERS GUILD Craft Maltsters Guild members are reporting strong sales throughout the country as global supply chains continue to experience disruptions. These trends are expected to continue well into 2022. Consumer preference for locally-sourced ingredients is also providing additional support for growth across the industry. The guild hosted the second annual Craft Malt Week celebration Sept. 19 - 25 showcasing the craft malt industry through events and social media spotlights. Maltsters, brewers, and distillers hosted a mix of virtual and in-person events that included tours, interviews, and tastings all designed to highlight the agricultural roots of malt. Coverage of these events was shared across a variety of social media channels. This fall the guild also launched the fourth annual iteration of the Malt Cup. For the first time, the competition boasts three categories: Pale Malt, Pilsen Malt, and Pale Ale Malt. Entries were accepted from September 13th through October 11th and the judging is ongoing. Winners will be announced in February 2022 during the Guild’s annual Craft Malt Conference. In October, the Guild presented a collaborative webinar with the American Craft Spirits Association to give distillers an opportunity to get to know the craft malt movement more intimately. A panel including Guild Executive

Director Jesse Bussard, along with Guild board members Hannah Turner (Montana State University Barley, Malt & Brewing Quality Lab) and Jason Parker (Copperworks Distilling Co.) introduced distillers to our organization and resources, as well as took participants through a crash course in interpreting malt certificate of analysis (COA). The Guild’s educational offerings and programs were also discussed. Participation in the Craft Malt Certified Seal Program continues to increase, with more than 150 breweries and distilleries voicing their support for our industry. This program has helped to facilitate some exciting collaborations across the supply chain, helping all parties to develop unique products. The seal serves as a significant point of differentiation for craft beverage producers facing competition in an increasingly crowded market. Looking into 2022, we are excited for our fifth annual Craft Malt Conference. The 2022 event will be the guild’s first hybrid event with in-person seminars, receptions, a trade show, and networking sessions taking place in Portland, Maine on February 18-19, followed by two days of live online talks February 2526. National grains expert June Russell has been selected as the keynote speaker for the event. Russell has 15-plus years of senior-level experience in building regional grain systems,

adding great value to the craft malt-specific conversations that will happen at the annual conference. In the days leading up to the conference, the guild will also host the Advanced Class in Craft Malt Production. The four-day intensive workshop will take place February 14-17, 2022. Participants will develop knowledge in malting barley and in its characteristics, including learning and controlling the different steps of the malting process; determining the defining characteristics of malt quality and the influence of processing parameters; and learning the technology and methods used to produce craft malt. They will receive a certificate of completion at the end and will be armed with the knowledge that will help them further their professional pursuits. The course will be taught by instructors Hannah Turner (mentioned previously) and Hugh Alexander, owner-operator of Scotland’s Balnamoon Maltings and Brewery. Visit www.craftmalting.com to learn more about the guild and our resources, programs, and events. Jesse Bussard Executive Director North American Craft Maltsters Guild

Brent Manning President North American Craft Maltsters Guild

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since 1912

A barrel should be more than an aging vessel, it should be a partner in achieving your desired flavor profile. Using science-based research and experimentation, ISC barrel experts collaborate with world-class distillers to create innovative barrel solutions for their unique spirits.

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DISTILLED SPIRITS COUNCIL OF THE UNITED STATES Building for the Future at the DISCUS Annual Conference

The Distilled Spirits Council of the United States (DISCUS) successfully wrapped up its second annual conference in Austin, Texas, where more than 450 attendees participated in sessions geared toward identifying challenges and opportunities for the spirits sector and working together to build for the future. Some of the topics covered and discussed throughout the conference included: the changing marketplace (direct-to-consumer shipping, ready-to-drink cocktails, cocktails to-go, e-commerce), diversity, sustainability, post-COVID response/support, cannabis, responsibility, trends, and innovation. DISCUS hosted its first-ever “Innovation Showcase” Competition at Annual Conference

Lallemand DistilaBact® LP, a first-of-itskind, dried bacteria product available to the distilling market, was named the grand winner of the Distilled Spirits Council’s first-ever “Innovation Showcase” competition at the 2021 DISCUS Annual Conference. The winning product, which was presented during the Shark Tank-style competition by Mitch Codd, technical sales manager at Lallemand Biofuels & Distilled Spirits, is an innovative approach to the traditional method of sour mashing. The product is a tailored bacterial inoculant designed to be pitched alongside a yeast in the fermentation and ultimately mimics the sour mash process not always available to smaller producers. The second-place winner was Siponey, a canned cocktail on an environmental mission, presented by its CEO Amanda Victoria. Third place was awarded to Pratt Industries for its sustainable, e-commerce packaging solution, presented by the company’s Business Development Manager Jim Bickley. Six finalists were selected to compete in the inaugural Innovation Showcase at this year’s conference. The finalists were chosen out of more than 50 submissions in categories spanning from spirits packaging, technology, supply chain, sustainability, marketing, structure, responsibility and product development. Each contestant had 15 minutes to present 16

their innovation in front of a panel of judges who scored the innovation based on its concept, value, scalability and demonstrated impact. The competition provided an opportunity to feature some of the best and brightest ideas from product development to sustainability that will make our great industry stronger. Leading Craft Distiller Honored at DISCUS Annual Conference

Another highlight of the conference was the awards ceremony where the spirits community celebrated the outstanding contributions of leaders who have supported the growth of our great industry and the wider appreciation for distilled spirits. Craft distiller Amir Peay, owner/operator of James E. Pepper Distillery in Lexington, Kentucky, was awarded the DISCUS Dave Pickerell Memorial Craft Member of the Year. The award, which is in memory of Pickerell, the “Johnny Appleseed of craft distilling,” is presented to an individual who has been a leader in advancing the craft distilling community and a supporter of advocacy efforts to strengthen the entire industry. Amir has served on the DISCUS Craft Advisory Council for many years where he has played an integral role in industry advocacy efforts including the legislative push to pass the Craft Beverage Modernization and Tax Reform Act and calling for an end to retaliatory tariffs on American whiskey products. Amir was also recognized for his work to help preserve the history of American distilling through his efforts to renovate and rebuild the historic James E. Pepper Distillery, a National Historic Landmark, which had been abandoned for more than 50 years. Key State and Federal DTC Issues on the Horizon

A major emphasis at the conference was the need for the spirits sector to adapt to the rapidly changing marketplace. The pandemic reset consumer expectations, and new channels have emerged with delivery, pickup, and cocktails to-go. Many of these marketplace changes that consumers have welcomed in response to COVID-19 present a new

horizon of opportunities for our industry going forward. Today’s consumers want and expect to be able to purchase household products, including spirits, any day of the week. They also want the flexibility and convenience to purchase their products online and have them shipped to their door. This includes the desire of consumers to obtain limited-release products, club offerings, or to ship products home from a distillery visit. The Current DTC Landscape

Forty-seven states and DC allow shipments of wine, but only 11 states plus DC allow shipment of spirits. When the pandemic hit, six additional states temporarily permitted distillers to ship products to in-state consumers. In states where craft distillers have been permitted to direct ship their spirits to consumers, distillers report it has been a saving grace and a much-needed source of revenue during the hardships of the pandemic. During the monthslong closure of tasting rooms and tours, direct-to-consumer (DTC) shipping helped hard-hit distilleries stay in contact with their consumers and allowed loyal customers to continue to support their local distilleries in their time of need. In fact, according to an American Distilling Institute survey, of those craft distillers who were able to take advantage of DTC shipping in 2020, they reported DTC generated an average of 39 percent of their total sales. Unfortunately, temporary DTC measures have expired in two of the six states (Montana and New York). States, including Virginia, California, and New York, are now considering making DTC a permanent option due to the overwhelmingly positive reaction from distillers and consumers – and they should. Wine producers have responsibly shipped wine directly to adult consumers for decades. There are well-established and newly tech-enhanced safeguards to ensure minors cannot illegally access alcohol. The direct shipping of wine has also shown that DTC can coexist and complement the three-tier system. As Ryan Friesen, head distiller of Blinking W W W . ARTISANSPIRITMAG . C O M

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Owl Distillery, recently pointed out in an opinion piece in the Orange County Register: “This is a question of fairness. I always try to remind people that alcohol is alcohol. There is no more risk in a serving of whiskey or vodka than in a serving of beer or wine. Wine makers are trusted to keep shipments out of the hands of minors, and we should be too. Distilleries like mine have proven over the last year that we can handle DTC shipping just as safely.” The three-tier system has played an important role for more than 90 years. It provides an unparalleled logistics system in fulfilling consumer demand for our diverse products, and it has been an important component of our industry’s success. But we also recognize that the spirits industry must evolve and adapt to meet changing consumer expectations and preferences. DTC shipping can serve as an on-ramp to the three-tier system for distillers. It allows distillers to introduce consumers to new spirits products and build demand for them. The end goal is for small distillers to be able to grow a brand to a point where they can partner with a distributor to provide more efficiency and broader reach. In the last 15 years, the number of distilleries in the United States has skyrocketed from just 70 to more than 2,000. In addition, there are now more than 16,000 distilled spirits products in the marketplace. Laws governing our industry have yet to catch up with this explosive growth. USPS Shipping Equity Act

On the federal level, DISCUS is also working to build support for legislation to permit the U.S. Postal Service (USPS) to ship beverage alcohol to legal drinking-age consumers in states where it is allowed. Currently, the USPS is forbidden by Congress to accept alcohol shipments of any kind. Representative Jackie Speier of California, Representative Dan Newhouse of Washington and Senator Jeff Merkley of Oregon have

introduced the USPS Shipping Equity Act, which would allow USPS to ship beverage alcohol, creating a new revenue stream for the struggling postal service and allowing it to compete with private carriers. An analysis shows USPS could gain approximately $180 million annually in revenue through the shipping of beverage alcohol in states where permissible. The legislation provides safeguards like ID checks to prevent minors from illegally accessing alcohol. It also includes a two-year period for developing regulations before the USPS begins shipping beverage alcohol. In May 2021, DISCUS and 104 other associations and postal unions jointly wrote to members of Congress in support of the bill. As DISCUS president and CEO Chris Swonger recently said in an opinion piece in USA Today: “As the USPS continues to struggle, Congress has an opportunity to change the game by finally allowing it to ship beverage alcohol of all kinds. This would create a win-win-win for postal workers, consumers, and the entire craft spirits industry, from grain farmers to distillers to manufacturers, giving millions of Americans cause to raise a glass.” To join us in advocating for the passage of this legislation, check out Spirits United at www.SpiritsUnited.org. This new modern marketplace can thrive if it’s consumer-led with balanced and responsible alcohol distribution systems that build on the success of the three-tier system. Last year represented the eleventh year of market share gains for spirits overall. To build for the future, we must continue to be guided by our consumers, our drive for equal treatment, and our deep commitment to responsibility. Making the Case for Fair Taxation on Spirits-based RTDs

products in Michigan and Nebraska, Michigan craft member Jared Rapp, co-founder of Traverse City Whiskey Co., wrote an opinion piece in The Detroit News urging the federal government to follow Michigan’s lead in reducing the tax on spirits-based RTD products. Jared made the point that creating a more level tax playing field will help distilleries like his grow, innovate, and support their local economies. DISCUS continues to demonstrate the differing Federal Excise Tax (FET) rates applicable to sugar-based, winebased, malt-based, and spirits-based ready-todrink products (RTDs) to legislators and is encouraging tax parity between all ready-todrink products. Responsibility.org Launches Wrong Side of the Road

In advance of a predicted high-traffic holiday season, a time when traffic fatalities often increase, Responsibility.org launched Wrong Side of the Road, an anti-impaired driving education program designed to educate users with real-life scenarios for lasting impact. The proLEARN MORE ABOUT WRONG gram is geared to reach all SIDE OF THE drivers, but especially ROAD those in the 21-35-yearold demographic who are continually over-represented in DUI crashes and deaths. Wrong Side of the Road aims to educate, create awareness, and stigmatize this irresponsible behavior, especially among high-risk drivers. It is a free, interactive learning experience that presents a series of videos where impaired drivers share their stories. Participants are shown a summary of the information and directed to other online resources that can offer additional education and support. Chris R. Swonger President & CEO Distilled Spirits Council of the United States and Responsibility.org

Following the signing of laws to reduce the tax rate for spirits-based ready-to-drink

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Your One-Stop Advocacy Shop There’s only one place America’s spirits producers, supply chain professionals and service partners can find unrivaled individual service, unmatched business resources, unequaled industry access and unbeatable advocacy might – the Distilled Spirits Council of the United States (DISCUS). DISCUS is the U.S. spirits industry’s top advocate in Washington, our nation’s state capitals and around the globe. Our team of best-in-class government affairs specialists, policy experts, lawyers, economists, scientists and communications professionals are at your service – fighting every day to create a political climate and policy environment that strengthens your business and the spirits economy in the United States.

Join DISCUS Today & Receive: • A team of seasoned lobbyists advocating on your behalf on a state, federal and international level • Subscription to the Spirited Advocate weekly e-newsletter • Weekly updates on state legislative and tax issues • Complimentary edition of the Recommended Fire Protection Practices for Distilled Spirits Beverage Facilities (a $795 value)

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• Access to exclusive monthly webinars developed for members • Complimentary access to the DISCUS Summary of State Laws & Regulations Relating to Distilled Spirits website: Compilation of laws, regulations and rulings governing the sale and distribution of distilled spirits in each of the fifty states and the District of Columbia ($995 value for a one year subscription) • Additional product savings updated monthly on the DISCUS Member Portal • Discounts on DISCUS events, including the DISCUS Annual Conference • And much more

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DISTILLERS GRAIN TECHNOLOGY COUNCIL On October 25 and 26, 2021, the Distillers Grains Technology Council held its annual symposium in Louisville, Kentucky. Two days of industry and university speakers covered a broad range of topics critical for both the fuel ethanol as well as beverage alcohol industries. All centered around the need to add value to non-fermentable materials. Speakers covered both wet and dry distillers grains as well as reuse options for spent grains and stillage, including small scale applications for the

separation of solids, and other opportunities for gaining profit from stillage, thus reducing waste costs. Additionally, presenters talked about domestic and international markets for distillers grains as animal feed ingredients (not just traditional livestock, but also for use in pet foods and aquaculture), evolving processes that are being commercialized, and the new types of high-protein feed products that result from these new operations. Moreover, analytical

methods and mycotoxin analysis were discussed, as these tools are critical for the development of value-added applications from distillers grains and stillage. The next symposium will be held in Omaha, Nebraska, on May 11 and 12, 2022. Visit www.distillersgrains.org for more info. Kurt A. Rosentrater, Ph.D., SEA Executive Director and CEO, Distillers Grains Technology Council

NATIONAL HONEY BOARD 12th Hawaii Distiller Wins Best in Show at Honey Spirits Competition

A whiskey distilled four times with Hawaiian honey won Best in Show honors

at the National Honey Board’s fourth-annual Honey Spirits Competition. The KailuaKona distillery was one of more than 70

The Gold Medal winners of the 2021 Honey Spirits Competition:

Best in Show, Spirits Distilled from Honey: ▶ 12th Hawaii Distiller, 12th Hawaii Distiller Distillers Reserve, Kailua-Kona, Hawaii

Vodka: ▶ Glass Distillery, Glass Nectar Vodka, Seattle, Washington

▶ Caledonia Spirits, Barr Hill Vodka, Montpelier, Vermont

▶ Loggerhead Distillery, Orange Blossom Sweet Tea Vodka, Sanford, Florida

Moonshine: ▶ Castle Spirits Distillery, Castle Honey, Oklahoma City, Oklahoma

Honey Liqueurs/Specialty Spirits: ▶ Mountain State Spirits, Hazelnut Honey Bourbon Ratafia, Bristol, West Virginia

▶ Honey House Distillery, Cold Brew Coffee Liqueur, Durango, Colorado

Bourbon/Whiskey: ▶ Hatch Distilling Co., Honey Barrel Bourbon, Egg Harbor, Wisconsin

▶ Golden Beaver Distillery, Honey Run, Chico, California

entrants into the annual competition that recognizes the best spirits in the United States that use honey either as a sweetener, flavor, or distillate. This was the first year a spirit in the “Distilled from Honey” category took home Best in Show honors. This emerging category of distilled spirits uses honey as its sole distillate. This year’s competition featured 10 gold medal winners in addition to 43 spirits that took home silver and bronze medals. An expert panel of judges evaluated the submitted spirits on their appearance, nose, palate, and the role honey played in the spirit.

▶ Manatawny Still Works, Honey Whiskey

Keith Seiz

with Natural Flavor, Pottstown, Pennsylvania For a full list of winners, visit www.honeyspiritscompetition.com

Ingredient Marketing Representative National Honey Board

AMERICAN STATE GUILDS FLORIDA FLORIDA CRAFT SPIRITS ASSOCIATION In early October, the Florida Craft Spirits Association hosted their first annual 20

Sunshine Spirits Festival, where more than 30 distilleries welcomed over 450 attendees in Tampa, Florida over a two-day event. The primary goal of the festival was to draw awareness to Florida’s burgeoning craft distillery scene, providing attendees with the

chance to sample offerings from our membership all in one place. “The festival was a bigger success than we could have hoped for as our very first event”, said FCSA President David Cohen. “We really just wanted to get all our members in one place to celebrate what W W W . ARTISANSPIRITMAG . C O M

David C. Cohen

has been happening in Florida over the past 10-plus years. What we ended up doing was drawing a very engaged crowd while giving distilleries the chance to showcase their own spirits thanks to a new piece of legislation

legalizing bottle sales at fairs and festivals that passed this July. We look forward to growing the festival and bringing it to other parts of the state in the future.”

MONTANA

president and VP. After the annual guild meeting, the distilleries gathered around Caras Park for a Montana Distiller's Festival where we sampled spirits to hundreds of folks interested in locally made products. We are already planning events for 2022. This has been a great avenue to expand awareness of the growth of craft distilleries in Montana. MDG is also working on a Montana Distillery Trail Map that will feature members from across the state. Montana currently has 28 operating distilleries, and we are excited about the continued growth over the years. Two Montana Distilleries reached a milestone this year; both Glacier Distilling and Whistling Andy had their 10-year anniversary.

2022 starts another legislative session here in Montana. We will once again advocate for our membership and continue to look at emerging ways we can all grow our businesses. This is an exciting time as the economy slowly rebounds after the pandemic. Tourism is strong in Montana and we are all lucky to have such a robust ecosystem that attracts folks from around the country and world. We have missed our Canadian neighbors to the north and as other borders begin to open with safer travel guidelines, Montana will continue to prosper, and for that we are all thankful.

events such as trade shows and conventions, and

new sales opportunities. Southern Distilling Company made its first Sunday sale to bill sponsor representative Tim Moffitt. At the end of October, DANC held its fall meeting at Mystic Farm and Distilling Company with record attendance. Special guests included representative Moffitt and state senator Todd Johnson – the legislative champions for DANC’s 2021 legislative agenda. After celebrating DANC’s legislative achievements, meeting attendees heard presentations on changes to the fire code affecting the storage of barreled spirits, best practices for consumer tastings at ABC stores, and using social media to promote members’ products.

MONTANA DISTILLERS GUILD The Montana Distillers Guild (MDG) had our annual meeting in September in Missoula, Montana. It was good to catch up in person with 16 distilleries from across the state! The current members elected new board members. Ryan Montgomery (Montgomery Distillery) will take over as president and Nic Lee (Glacier Distilling) will take over as VP. Casey Grunow (Lolo Distilling) will replace Erica Droge (DryHills Distillery) as the new secretary. The guild also took time to to thank Jim Harris (Bozeman Spirits Distillery) and Lauren Oscilowski (Spotted Bear Spirits) for their dedication over the last several years as

NORTH CAROLINA DISTILLERS ASSOCIATION OF NORTH CAROLINA The Distillers Association of North Carolina (DANC) celebrated our legislative accomplishments in September when the ABC Omnibus Bill, which included DANC’s priorities, was enacted! This legislative significantly improves the regulatory environment and expands opportunities for North Carolina distilleries including authorization to:

> Sell our spirits in closed containers on Sundays and holidays,

> Sell mixed beverages made with our spirits and provide at no cost a 50 milliliter mini-bottle to consumers at special

OREGON OREGON DISTILLERS GUILD Events are finally happening again! Oregon 22

> Sell our spirits directly to consumers in other states that do not require reciprocity. The bill also makes other technical changes that clarifies language describing distillery production, tour requirements, and laws related to the sale, possession, and consumption of spirits at a distillery. The celebration continued in October when North Carolina’s distilleries began selling bottled spirits on Sundays for the first time since the repeal of Prohibition. Multiple distilleries that were previously closed on Sundays opened their doors to celebrate the historic new law and take advantage of the

distillers put on the first Oregon Whiskey Festival in September. There were specific participation guidelines for entrants, including: they must be mashed, fermented, distilled, and aged in Oregon; be aged in a barrel

President, Florida Craft Spirits Association President & Head Distiller, Manifest Distilling

Jim Harris Montana Distillers Guild Legislative

Pete Barger President, Distillers Association of North Carolina, Principal partner, Southern Distilling Company

for more than two years; be a minimum of 80 proof; and be whiskey distilled from grain. There were 14 distilleries participating in the celebration of Oregon whiskey. In November, 4 Spirits Distillery hosted the Corvallis Spirits W W W . ARTISANSPIRITMAG . C O M

Festival. It was an all-inclusive day of tastings and entertainment with some of Oregon’s best craft distilleries. All net proceeds from ticket and bar sales at this event went to local area veterans’ organizations. The Grocers Association has three initiatives on the 2022 ballot to privatize liquor in Oregon. Each of these initiatives allow grocery stores to sell liquor in one form or another.

> IRR 35 is the broadest of the three ini-

> IRR 36 specifically calls out the ability to sell private label.

> IRR 37 seems “friendly” to craft distillers because it specifies both canned cocktails and craft distilled product as product available for sale. The bill defines craft as any distillery under 100,000 proof gallons.

“We believe that sales of Oregon craft distilled products would slow to 50 percent of the current level,” said Brad Irwin, legislative chair for the Oregon Distillers Guild. Tom Burkleaux President, Oregon Distillers Guild

The Oregon Distillers Guild board voted unanimously to oppose all three of these initiatives.

suppliers! tillers and is d f o e c n onal audie ow groups. reach a nati inspire fell to d y n it a n u s, e rt g o n e pp latest chall ut on this o solve your on’t miss o to D s n ? G io st IN e S TION MIS quest sugg LVED! OR ASSOCIA pporters, re TO GET INVO D su M IL it O U G ru .C c G R A re U M O s, rie IS Y SPIRIT latest victo N@ARTISAN Share your EMAIL BRIA tiatives and allows sales of any distilled spirit.

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ROTARY EVAPORATION LOW PRESSURE, HIGH QUALITY DISTILLATES WRITTEN BY DAVID LETTENEY

istillation requires a significant amount of thermal energy input, which can cause safety issues due to the heat source and ethanol vapor cloud being present. But what if the thermal energy required to distill could be lowered, making the process inherently safer? Welcome to rotary evaporation. The concept behind rotary evaporation is relatively simple. The lower the pressure of the system, the lower the boiling point of the distillate. In practice, it can be a bit more complicated. Although a rotary evaporator seems like a fancy piece of technical lab equipment, it is actually very similar to a traditional still, especially when compared to a glass lab still. Distillation works by adding enough thermal energy (heat) into a mixture of mostly ethanol and water to vaporize some of this mixture. Because ethanol has a lower boiling point than water, the vapor produced will have a higher ethanol content than the liquid does according to thermodynamic principles. When this vapor comes in contact with a cold surface (condenser), the vapor is condensed back to a liquid, which is the product. So in this sense, a rotary evaporator performs the exact same process. W W W . ARTISANSPIRITMAG . C O M

ROTARY EVAPORATOR DIAGRAM In a rotary evaporator, the substrate to be distilled (a mixture of ethanol, water, and most likely botanicals) is placed into the boiling flask. After the whole system is connected, a vacuum is pulled on the whole apparatus. The boiling flask is lowered into the water bath, where warm water is used to heat the flask to the boiling point of the mixture. Using the speed controller, the boiling flask is rotated, promoting faster evaporation (more on this later). The vapor rises through the system until it hits the cooled coils of the condenser, at which point the vapor is condensed to a liquid, and drips down into the receiving flask. One of the main differences between a rotary evaporator and a normal still is that a rotary evaporator is a closed system, so monitoring the ABV and sensory characteristics can only be done if the vacuum is broken.

LOWER PRESSURE, LOWER BOILING POINT The boiling point of a liquid is the temperature and pressure at which a liquid’s vapor pressure is equal to atmospheric pressure. The vapor pressure of any compound is an inherent property that is a reflection of the strength of the bonds in that liquid. More specifically, the vapor pressure is a measure of the pressure exerted above a liquid from molecules evaporating. For example, a liquid with a very high vapor pressure means that there are a lot of molecules evaporating. When the pressure being exerted by the molecules leaving (vapor pressure) is equal to or greater than the pressure being exerted by

air on that liquid (atmospheric pressure), the liquid begins to rapidly and more violently evaporate, which is known as boiling. This principle can be shown in the boiling points of liquids at altitude vs. at sea level. At sea level, water boils at 212 degrees F, but in Lake Tahoe (6300 feet of elevation) water boils at 200 degrees F. Because the atmospheric pressure is lower at elevation, less energy is required to increase the vapor pressure to above that of the atmospheric pressure, thus the liquid boils at a lower temperature. A rotary evaporator takes advantage of this by greatly reducing the pressure in the system so that water can be boiled at 100 degrees F or lower! 27

BOILING VS. EVAPORATION

BOILING

Vapor Pressure = Atmospheric Pressure Bubbles can form and rise

What is the difference between boiling and evaporation? Evaporation is the escape of the highest energy molecules near the liquid-air interface (surface) of a liquid. Boiling is the vaporization of molecules because sufficient thermal energy has been supplied. In order for evaporation to occur, the highest energy molecules have to have access to the surface, so they don’t have to “fight” through the lower energy molecules to get to the surface. This is where the rotary evaporator takes advantage of this phenomenon. When the boiling flask is rotated, this creates a thin film of liquid around the entire surface of the inside of the flask. This exponentially increases the surface area of the liquid, which promotes evaporation at a much higher rate.

STATIC

ROTATING

Arrows represent heat transfer

EVAPORATION

Vapor Pressure < Atmospheric Pressure Bubbles cannot form

ADVANTAGES TO ROTARY EVAPORATION When distilling botanicals, the goal is to extract oils and flavor compounds from the raw material and solubilize them in our spirit. When distilling using a traditional copper still, significantly more heat is required in order to distill the ethanol/water/botanical mixture. Certain compounds that are extracted from the botanicals are very sensitive to heat and will undergo thermal degradation (breakdown

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Rotary evaporation is a

WHAT CAN THE ROTARY EVAPORATOR BE USED FOR IN A DISTILLERY?

HIGH-TECH VERSION OF A TRADITIONAL COPPER STILL

There are many example applications for a rotary evaporator at a distillery. The main and obvious application is the distillation of botanicals for spirits. These can be used to design new spirits and flavor profiles, dose botanicals into spirits to boost sensory characteristics, make a botanical library of flavors, or make tinctures for cocktails in the tasting room. In addition, educational classes can use these botanical distillates to inform the public on gin sensory. The public can make their own compound gin using single distillates, which can be a fun and handson educational program that uncovers the complex nature of gin flavor profiles. Theoretically, non-alcoholic spirits could be made using this method, by evaporating off the ethanol. Much care would have to be taken to ensure sensory characteristics are consistent, as other compounds that are key flavor attributes would also be evaporated off. Rotary evaporation is a high-tech version of a traditional copper still that has many advantages for distilling, especially delicate and light aromas and flavors from botanicals. Large-scale production using rotary evaporators is possible, but difficult to operate with extremely high capital overhead. Smaller-scale production for specific applications such as the ones listed above is practical and efficient.

that has many advantages for distilling, especially delicate and light aromas and flavors from botanicals.

PHOTO BY DAVID LETTENEY

of molecules due to heat). This is especially true for certain botanicals with “delicate” flavors, such as cucumber and rose petals. In order to effectively extract these flavors, lower heat must be used, which is a huge advantage of rotary evaporation. Using rotary evaporation, concentrated distillates of botanicals can be made and then used to dose other spirits. Another advantage to rotary evaporation is safety. When using a traditional copper still, significant heat from a heat source (steam, thermal oil, or open flame) needs to be present to distill the ethanol into a vapor. This is inherently dangerous because of the explosive nature of ethanol vapors. By using a rotary evaporator, the vapor cloud is sealed in the apparatus, and a much lower amount of heat is required. In addition, if vaporization of the ethanol is happening too rapidly, or a dangerous condition of ethanol vapor has built up in the system, the operator only needs to open the feed port (opening the rotary evaporator to atmospheric pressure). This rapid increase in pressure (breaking of the vacuum) will flash condense the ethanol vapor cloud because at atmospheric pressure, the vapor cloud does not have enough thermal energy to stay in a vapor state.

David Letteney is quality assurance technician at Bently Heritage Estate Distillery.

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(anti)

TRUST the PROCESS B

link and you may have missed it, but earlier this year, the Biden administration issued an Anti-trust Executive Order (“EO”) that has the potential to greatly impact the alcohol beverage industry.1 The EO seeks to promote competition in the American economy through changes to regulations throughout the federal government. This broad order identified several industries, including beverage alcohol, that the administration is keen on scrutinizing. Essentially, federal regulators have been ordered to find ways to make business more competitive so smaller companies can succeed in industries where power is confined to a few big actors. While the way the government revises regulations as a result of the EO will play out over the following months, and likely years, it’s important to understand what is going on now and how it could affect your business so you can plan ahead. Relevant to the alcohol beverage industry, the EO includes a directive for the Secretary of the Treasury to produce a report assessing the “threats to competition and barriers to new entrants" in beer, wine, and spirits including: “[U]nlawful trade practices” that “hinder smaller and independent businesses or new entrants from distributing their products,” including “exclusionary, discriminatory, or anticompetitive distribution practices;” “[P]atterns of consolidation in production, distribution, or retail;” and “[U]nnecessary trade practice regulations,” including bottle sizes, permitting, or labeling, that “may unnecessarily inhibit competition.” The directive will result in a study of beer, wine, and spirits industries in all three tiers of the distribution system.

Renewed Scrutiny of the Alcohol Industry Written by Corey Day & Alyssa Malionski

By the time this article is published, the Treasury Department is supposed to have submitted a joint report with the Federal Trade Commission and Justice Department on the “patterns of consolidation in production, distribution, or retail beer, wine, and spirits markets.” This report is purported to be a compilation of results from the Secretary of Treasury’s investigation into conduct found to be potentially harmful to competition. Following publication of the joint report, the Secretary of the Treasury, through the Alcohol and Tobacco Tax and Trade Bureau, must consider: • Initiating a rulemaking to update the TTB’s trade practice regulations; • Rescinding or revising any regulations of the beer, wine, and spirits Industries that may unnecessarily inhibit competition; and • Reducing any barriers that impede market access for smaller and independent brewers, winemakers, and distilleries. While certainly broad in its aims, it is anticipated that regulators will take a hard look at the current structure of the distribution tier. There were over 275 comments submitted that discussed, at least in part, distributors or distribution.2 While some comments were in favor of the status quo, the majority bashed the current three-tier system, arguing that the existing law is too favorable to distributors and consolidation of the wholesale tier has limited manufacturers’ ability to get into the market. As an immediate consequence, it would be reasonable to expect the EO to have a chilling effect on further mergers and acquisitions of distributors.3 Companies are going to be less likely to invest the

https://www.govinfo.gov/content/pkg/FR-2021-07-14/pdf/2021-15069.pdf

https://www.regulations.gov/docket/TTB-2021-0007

The same chilling effect may occur at the manufacturing tier, leading to fewer producer acquisitions from the biggest players.

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serious time and money necessary to consolidate while the government signals it may move to block the merger. This means you should be less likely to have your product line moved to a larger acquiring distributor, and all of the changes that can entail. The government could, foreseeably, go a step further and seek to unwind prior distributor consolidations it deems to have since limited competition pursuant to its powers under the Sherman Antitrust Act. While far from a sure thing, the government has successfully broken up large companies in the past, i.e. AT&T and the Bell System.4 While many commenters advocated for the creation of direct-to-consumer retail channels and even outright abolition of the three-tier system, don’t expect such radical change to come quickly (or at all) from this EO. As a preliminary matter, and as 4 https://www.npr.org/2019/06/26/736344175/couldthe-old-at-t-break-up-offer-lessons-for-big-tech-today 5 See Granholm v. Heald, 544 U.S. 460 (2005), that limited State’s ability to discriminate against out-of-state manufacturers in favor of in-state manufacturers.

mentioned above, while limiting or unwinding consolidations are squarely within the federal government’s authority, challenging the three-tier system is on less solid footing. Each state has its own laws, as authorized by the 21st Amendment, creating the rules and regulations for how alcohol is sold and distributed in the state. While the states’ power in this realm is not limitless,5 the states’ laws have constitutional authority that is lacking in other industry regulations. Accordingly, if the federal government did take the radical action of modifying the three-tier system, expect extensive, expensive litigation to follow. That said, the government need not go so far. If the Treasury’s report concludes the current three-tier system is anticompetitive, that could motivate states to amend DISCLAIMER: This article their laws to promote competition. is intended to be a source Regardless of how Biden’s EO shakes of general information, not an opinion or legal advice out, expect a renewed interest in examon any specific situation, ining the merits of the status quo and and does not create an potentially significant change in the attorney-client relationship not too distant future. with our readers.

Corey Day is an alcohol beverage attorney and litigator at Stoel Rives (stoel.com). Corey likes chatting about potent potables, so email him: corey.day@stoel.com, call him: 916-319-4670, or follow him on twitter: @coreyday.

Alyssa Malinoski is Sacramento litigator at Stoel Rives with experience in alcohol beverage law and regulation. Alyssa can be found out and about at Sacramento’s incredible craft breweries. You can contact her at: alyssa.malinoski@stoel.com or 916-319-4788.

30 years of progress. Like the 30 years before, it will take the leadership, commitment and united effort of people like you — distillers who want a better, more responsible future for us all. Join us, and let’s define the future of alcohol responsibility, together.

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What You Should Know About Your Insurance Program Written by Peter J. Whalen

hile securing proper insurance coverage is clearly not one of the most exciting or pleasant responsibilities that a distillery owner or manager has to deal with, it is certainly one of the most important. At the risk of sounding a bit dramatic, property and liability insurance is the one thing standing between you and bankruptcy after a severe claim, such as a fire or a death. There are a few things to Property consider when going into the marketplace and liability with the goal of securing the best way to insurance is protect yourself from the financial damage the one thing that can occur from an accident. standing The best advice that I can start with is between you for you to make sure that you are dealing and bankruptcy with insurance professionals who underafter a severe stand distilleries. Your local agent may be a claim, such as a great person/friend and they may be exfire or a death. cellent at protecting your home, autos, or any other businesses that you may own, but this doesn’t mean that they are the best choice to insure your distillery. You shouldn’t have to educate them on the nuanced risks that distilleries face each day. W W W . ARTISANSPIRITMAG . C O M

There are four major parts to a comprehensive insurance package.

Property includes your building (if you own or are required by lease to insure it) and contents such as your equipment, raw ingredients, finished stock, and office furnishings. An extremely important part of property coverage, especially for distillers, is business interruption. This will be discussed in greater detail below.

Liability addresses your premises (slips and falls), your products (chips of glass or contaminants in bottles), or liquor liability exposures such as assault and battery (fights) and bodily injury from car accidents involving alcohol overconsumption.

Worker’s compensation covers medical bills and lost wages that an employee suffers from a work-related accident. It also protects an employer from a lawsuit if the worker decides to sue for gross negligence rather than accept the normal benefits. This is rare.

Auto insurance isn’t always needed. However, if your distillery self-distributes or has any vehicles in the company name such as the owner’s personal car or a truck that performs various jobs, you will need to purchase this coverage.

The overview above is just a brief summary of what an insurance program includes. It is not intended to address all of the coverage that an individual distillery requires in order to consider themselves properly protected. Two types of insurance coverage deserve a little more attention. I mentioned the first one earlier – business interruption. It pays for any ongoing expenses that you continue to have while rebuilding after a loss and it is often under appreciated. If you have a major claim, such as a fire, you could be out of business for an extended period of time. Some expenses cease, such as the purchase of your ingredients and salaries for some of your staff, 35

but many live on like debt service and key staff salaries, including the owner’s. Most small businesses that go out of business after a fire don’t do so because of not having enough property coverage, but because they don’t have sufficient capital to withstand the downtime. Business interruption insurance will not only pay for ongoing expenses, but will also compensate the distillery for any profits that would have been earned if the claim had never occurred. The last item worth discussing is related to business interruption, but it is specific to your stock. The distilling industry is one of a few where the value of the product increases over time, often significantly. Think of the impact that would be felt by your business if a fire were to strike four and a half years into a five year aging process. The value of your stock would be several times higher than when you first moved it into the rickhouse. The lost The distilling profits can be insured but if the distillery is of a larger industry is one scale, coverage might be difficult to find. To deal with of a few where this challenge, the stock can be insured separately from the value of your property and liability package by insurance comthe product panies that specialize in insuring stock. Unfortunately, increases over it is a bit harder to find, or afford, these days as a result time, often of many companies no longer being willing to offer this significantly. type of protection after suffering huge losses from the California wildfires when countless wineries were affected. This is another reason to work with an agent who is aware of the increasing value of aged spirits and who has access to companies that are still willing to offer this coverage. Hopefully you find the information above educational and valuable. Please devote an appropriate amount of time to understand your risks and to purchase a good insurance program for your business. If you are fortunate, you will never need to file a claim but if you do, make sure that you are in a position to get the compensation that you deserve.

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Peer-reviewed, original scientific papers • Reporting significant research • Technical reports • Applicable analytical techniques and methods • Reviews

Scientific and technical disciplines applied to the distilling of high-quality, potable alcoholic beverages

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• Distilleries • Raw materials producers • Allied industries supporting the testing and quality control functions of distilling operations

ANTHEM OF RENEWAL

in COAL COUNTRY The Bard Distillery of Graham, Kentucky WRITTEN BY DEVON TREVATHAN PHOTOGRAPHED BY AMANDA JOY CHRISTENSEN

Empty, open, and waiting for new life.

very new owner of a small production facility has a dream, whether that’s making the best spirit they can, creating a household brand, or some combination of the two. Rarely do you get into this business if you’re not propelled by something more meaningful than the desire to make capital gains – besides, there are easier ways to do that. The Bards, however, have several dreams, or perhaps it’s one big dream that spreads and sprawls over time and space, the same way as that big plot of land they have in Graham, Kentucky. It’s unclear where it starts or ends, but it’s a joy to tour just the same, dotted as it is with history and fable befitting a name like Bard. Tom Bard is a fourth-great-grandson of William Bard, who founded Bardstown, Kentucky. Tom grew up on a farm in Muhlenberg County, Kentucky, before attending the University of Kentucky, where he studied mechanical engineering. After an extensive career in industrial quality control and motorsports, where he met his business partner and wife Kim Carter Bard, who was a racer in the NASCAR Busch (now Xfinity) series, Tom and Kim decided to move back to Kentucky and pick up a torch that they hadn’t

always intended to carry. Together, the Bards want to revitalize Muhlenberg County with one of America’s great original inventions: bourbon. Kentucky may be famed for bourbon, or synonymous with it depending on who you ask, but Graham is far from the massive wooden rickhouses belonging to some of the country’s most notable producers. It isn’t without its own history, though. John Prine was from there, as were the Everly Brothers. Merle Travis, the inventor of thumbpicking, was also a native. Bill Monroe, who invented bluegrass music, comes from about 30 minutes down the road; they talk of him when they share the stories of Graham’s musical heritage. “Since he invented bluegrass and the Everly Brothers influenced the Beatles, and John Prine is Bob Dylan’s favorite artist, we basically tell everyone that all popular music originated right here where you are,” said Tom. Beyond popular music, one of Graham’s most successful exports was coal – at one point, Muhlenberg County was the largest coal-producing area on the planet. This was a county of miners. Eventually, like other technologies before it, the coal mining industry in that area faded and ultimately closed; gone were the jobs upon which the town of Graham had been built out of thin air. The economic impact of this change can hardly be overstated; there wasn’t anything left anymore. Some folks stayed, many moved, and the big multi-building school that had been commissioned by W.G. Duncan, the baron who had opened the coal mines and created the town of Graham, eventually closed in the mid aughts. Three generations of Bards before Tom had attended that school. Now it stood on top of the hill, empty. “And they

left the doors open,” added Kim. Empty, open, and waiting for new life. There are possibly no better stewards to usher in this next chapter in Graham’s history than Tom and Kim Bard. Florida native Kim was a NASCAR racer and monster truck driver in Australia before taking on a new title as co-founder of the Bard Distillery. Her fearlessness is evident as she tours the grounds, never hesitating once to step out onto a rickety beam or cross under the shadow of a half-decomposed ceiling. She’s also no stranger to the media, which will serve them well as they maintain the course they’ve laid out for the Bard Distillery. Tom’s background in mechanical engineering and industrial quality control means he is ready to tackle the challenges that lay before him when converting an old crumbling school into a modern distilling facility, or, at the very least, to give it the old college try. He has a keen can-do attitude and an inherent positivity – leave it to Tom to see the upside in the presence of toxic material in a building that he owns. “The good thing is everyone told them, ‘Oh you can’t touch those buildings, they’re full of asbestos,’” he said, referring to the decade following the closure of the school before the Bards purchased the property. Its previous owners, locals who’d snapped up the site at auction without a clear idea of what to do with it, eventually began to consider demolishing the buildings, but refrained because they weren’t sure how to handle the asbestos. When Tom and Kim took ownership of the buildings, they sought opinions from licensed companies, all of which quoted them between $250,000-$500,000 to remove the toxic material. Instead, Tom went to nearby Nashville and got all the requisite certifications himself.

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In this business, there’s usually a fix as long as you’re motivated to find it.

The current distilling setup at the Bard Distillery relies heavily on Tom and Kim’s general willingness to find a solution, lest you think the Bard was some kind of mega bankrolled operation with endless millions from an unnamed investor. The folks at Bard distill by first putting water into their two 60-gallon pot stills and heating that to a boil. Once at sufficient temperature, they transfer it into the cooker, an old dairy tank from the 1970s, which brings the temperature of the water down a fraction. As it’s pumping over, Tom is shaking bags of corn into the cooker. The corn sits in the hot water for about 90 minutes. They run this mixture through their chiller once the hour and a half is up, throw in the wheat, run it through the chiller again, throw in the barley,

and then run it once more to reach fermentation temperature before they pump the mash into 55-gallon soup cans to ferment. This is not the most high-tech, cutting-edge system that you will see, but it’s working for them at their current scale. With the Bards, the eye is on the long term. For the chiller, Tom fashioned it himself after receiving quotes for professional chillers that were too high for his tastes. “So what this is, it's PVC on the outside but it’s one-inch copper tubing on the inside, and on the outside of the copper tubing I took some copper number 6 ground wire and just spiraled it around it,” he explained. After they’ve fermented their mash for about three days in a room that’s not temperature controlled, they use a souped-up flour sifter to separate the bulk of the solids from their liquid. This contraption is one that took a few revisions to get quite right. “I came in and this was aimed kind of at a receptacle,” said Kim. “I walked in and there was corn and wheat and barley. I mean, it was everywhere, so I fashioned a little plastic sock that would go into a receptacle and not around it.” The system that’s coming together may appear a bit like a Frankenstein, but Kim and Tom are getting an invaluable education by attending to nearly all their problems by themselves. They are evidence that, in this business, there’s usually a fix as long as you’re motivated to find it.

The family of products from the Bard Distillery includes the more adventurous Muhlenberg line, featuring a silver whiskey, apple pie whiskey, and salted caramel cream liqueur. Their passion, however, lies with their bourbon. All of the bourbon released by the Bard Distillery thus far has been sourced. The Bards are open about this aspect of their operation, talking in detail on the origins of their early products. “I’d give anything in the world to go back now and buy more barrels,” Tom said about the original 11-year-old barrels purchased from George Dickel that were used for the first release of their Cinder & Smoke straight bourbon whiskey. They still have a handful of those barrels left, so in 2022 they will be releasing a 16-year-old Cinder & Smoke, the demand for which is so high that Tom intends to price it accordingly. “I’m going to put it in a nice box, put it on the shelf out here, and I’m just going to put like $300 on it. Like you want it, go for it,” he said. Another product release on the horizon, a continuation of the Cinder & Smoke brand, is a three-barrel founder’s select bourbon that has been blended by Kim and Tom. It will comprise barrels from Bardstown Bourbon, Green River Distillery, and another source, all of which hover around the four-year mark presently. Amidst selling through these barrels, the Bards are actively distilling their own stock, which they are laying down in 53s. W W W . ARTISANSPIRITMAG . C O M

Equally important as the Bard’s professional history is their vision for the future. When they look at the land and buildings they’ve purchased, they don’t see the decayed wood or rotten tiles; they see what this place will become, a great hope for an entire town’s revitalization and an inspiration for all the labor they’ve put in. “We removed forty tons of debris by hand over the course of three years, and that wasn’t even demolition debris, that was just shit,” said Tom. All of the three buildings, one of which is a sprawling main building, needed to be cleared of the accumulation of trash and destroyed school supplies that had stacked up during the ten years it was left unlocked. “If you can imagine walking into a school right now – we’ll leave everything in it, computers, television, everything,” Kim said. “Leave all that in and then close the doors but don’t lock them and everything was smashed, broken, just piled up on the floor.” The distillery will be housed in the main building, called the “Character Building,” a name that the Bards assure will stay emblazoned over the front door. This three-story

brick structure is huge and stately from the outside. The inside is peeling, but it’s nothing that can’t be fixed over time. The Bards plan to gut parts of the inside of the building, opening up the floors to make room for the higher-output distilling equipment they’ll be bringing in. A tasting bar will be on the second floor with views of the production floor. The building to the left, which in its former life was the school gym and is currently home to their temporary distilling setup, will be transformed into a concert and events venue. The brick exterior will be painted brown and the columns outside painted gray so that the entire structure faintly resembles a half-buried barrel. The Bards are excited to weave into this project one of their great passions: Both Kim and Tom are music lovers, making regular sojourns down to Nashville to see shows. Plus, they like that it envelops another layer to their personal story: The name Bard is obviously connected to Kentucky history and bourbon through Bardstown, which they are happy to mention

The inside is peeling, but it’s nothing that can’t be fixed over time.

as they get their footing in this industry, but it has another meaning – a bard is a poet, one who recites epics and is associated particularly with the oral tradition. As Tom said, “I’m more interested in the bard like you’re talking about, the minstrels, the music, the entertainment, the storytelling, the history, stuff like that.” Hosting musicians and other performers regularly will be a way to incorporate that part of the history of their namesake, which they hope to build up over time. In the same way that they want to bring bourbon distillation to Graham, they also want to make it a destination for some great musicians to play.

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But the structure that most succinctly illustrates the Bards’ experience has to be the one highest on the hill, which is going to become their rickhouse. The building itself has an odd history – it was originally made out of wood and stucco, but at one point in its lifetime had brick facing applied to the outside. A sizable chunk of the back wall is missing from a time when a couple of enterprising thieves stole the boiler that had been there by attaching chains to a truck and ripping it through the wall. Inside, it is deteriorating rapidly, though like the main building, it’s holding together thanks to sturdy I-beams and some temporary support structures that the Bards installed. When you’re inside this structure, it’s hard to see the forest through the trees, but then Tom and Kim start to detail their plans. Like

other choices they’ve made along the way, there is a certain rebuffing to what is standard in this business – once the structure is opened up and the caving roof removed, they’ll be laying out the interior so that barrels line the wall rather than filling the floors with cramped racks. This setup will allow them to fit about 7,000 barrels at one time. “We can fit more but we talked about it many many years ago, that we wanted people to be able to walk into our rickhouse and be able to see the barrels, cause that’s one thing I’ve always hated,” said Tom. “We want people to walk in there and pretty much see every damn barrel, so we give up a lot of space that way but it’s worth it. We think it’s going to be beautiful up there.” It may be hard to see now, but it’s easy to trust in the vision of the Bard Distillery.

The Bard Distillery is located in Graham, Kentucky. For more information visit www.thebarddistillery.com or call (270) 338-6543.

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Navigating the Chemistry of Flavor

he singular flavor of a spirit might be the result of up to 500 different compounds,1 each compound combining with another to create the unique flavor and aroma. Ah, if only it were so simple to just hand select those compounds and curate the desired flavor when putting together a spirit recipe and choosing your ingredients. The process of distillation has a three-fold impact on compounds. It can concentrate them; it can select for fractions among those compounds within your starting materiWritten by Aaron Knoll als; and it can create completely new compounds.2 While the chemistry of each interaction is varied, they are specific to the starting materials a distiller chooses to begin with. This transformative effect is evident any time a distiller distills with plant material in the process. For example, lavender once distilled tastes like lavender – but does it taste exactly like lavender? Therein lies an interesting legal conundrum presented through the chemistry of distillation. Gin’s legal definition in many places requires “that the taste is predominantly that of juniper.”3 That flavor, while technically having been derived from juniper berries, can vary greatly based on a distiller’s choices and the source materials of the production process. Everything from the terpene content to the terpene ratios within those berries down to the chosen bottling proof can affect that flavor. Acknowledging the full wealth of tools at a distiller’s TABLE 1: Terpenes found in Gin disposal to create a spirit, here Primary non-oxygenated monoterpenes we’ll focus narrowly on one Terpene Min. Max Flavor† part of the process: botanical Intense woody, piney and terpy with camphoraceous and turpentine note. It selection. While it’s impossible α-Pinene 1.95 6.12 has herbal, spicy and slightly tropical nuances to guarantee which of the hunWoody, vegetative, citrus, fruity with a tropical mango and slight leafy minty dreds of aromatic molecules β-Myrcene 2.38 11.09 nuances you will have when you turn off dl-Limonene 1.22 17.21 Sweet, orange, citrus and terpy the still, some knowledge of boγ-terpinene 1.16 2.87 Terpy, citrus, lime-like, oily, green with a tropical fruity nuance tanicals’ aromatic makeup (that Terpy and rancid with slightly woody oxidized citrus notes. It has spice is their starting point) can help p-cymene 0.53 1.75 nuances of green pepper and oregano you steer the flavor in one direcMain oxygenated monoterpenes tion or another. Terpene

Min.

Max

Flavor†

geranyl acetate Linalool

0.25

2.09

Waxy, green, floral, oily and soapy with citrus and winey, rum nuances

Perrottet, T (2019)

1.93

36.99

Citrus, orange, lemon, floral, waxy, aldehydic and woody

Piggott (2012)

Source: Vichi et al., (2005) and Piggott (2012) † Flavors descriptions compiled from TGSC Information System (www.thegoodscentscompany.com)

3 Regulation (EU) 2019/787 (2019) W W W . ARTISANSPIRITMAG . C O M

Bitter orange α-terpinolene β-pinene

β-phellandrine β-myrcene

limonene

p-cymene α-pinene Angelica root

linalool γ-terpinene geranyl acetate Coriander

Juniper IMAGE 1:

Core Juniper Botanicals

The aromatic chemistry of a distilled spirit Despite all of the transformation of distillation, there is clear evidence that the compounds in source botanical material in distillation directly translates to the end product. Vichi, S. et. al., conducted a gas chromatography study of London dry gins. Unsurprisingly, “The main [monoterpenes] detected in the gin samples were α-pinene, β-myrcene, limonene, γ-terpinene and p-cymene. These compounds have previously been identified as the main compounds found in juniper extracts.”4 Further many of the other terpenes they observed have clear connections to traditional gin botanicals. Limonene and γ-terpinene are common in citrus fruits. In all except one of their six samples, linalool was the primary monoterpene, ranging 10.96 mg/L to 36.99 mg/L.5 While a rather small component of the aromatic molecules in juniper, linalool is common in large proportions in coriander. It might be fair to say the study found that among the brands studied, coriander was the greatest contributor to gin flavor – not juniper. Other types of terpenes are common in spirits and have clear ties to source material.

example, the gin with “significantly higher values” of α-pinene, β-myrcene, and limonene than others in the study was scored as higher in having a “juniper” flavor.8 Only one other gin in the study had a similar level of typical juniper terpenes, however, it had higher levels of limonene, γ-terpinene, and linalool than others. Study participants evaluated it as having a high level of “citric” flavor and the lowest level of juniper flavor. In other words, it was hypothesized that the relative intensity of these other terpenes “masked other attributes.”9 Overall the data shows a clear connection between source material and the gin’s terpene makeup. Secondly, it shows that terpene makeup correlates with sensory perception, although as in the citrus/juniper example mere quantities are not enough, interactions may need to be considered.

For example, the study found that sesquiterpenes δ and γ-cadinene, caryophyllene, β The aromatic chemistry and γ-elemene, α-humulene and germacrene of botanicals D were all present and are found in juniper berries. However, “sesquiterpenes are less When we talk about a “juniper-forward” important compounds in terms of sensory gin or a “predominant '' gin flavor, we’re not perception because they have higher percepspeaking only about the quantity of juniper tion thresholds.”6 The study found them useberries in one’s recipe (though it helps). ful as chemical markers of composition, but We’re talking about the sensory perception less impactful in terms of predominant flavor. of the whole botanical bill and how it highAs we’re focused on flavor, we will largely lights the terpenes that contribute the most ignore sesquiterpenes, however, it’s worth to juniper flavor. pointing out that they also demonstrate the connection between ingredients and spirit. TABLE 2: Terpenes found in core gin botanicals These patterns have Primary non-oxygenated monoterpenes been observed in a wide Terpene Juniper* Coriander** Angelica root*** range of botanical spirMin Max Min Max its, including absinthes.7 α-Pinene 28.6% 40.3% 0.0% 10.9% 32.19% While knowing the β-Myrcene 7.2% 10.6% tr 1.2% 5.28% chemistry of a spirit dl-Limonene 1.9% 5.2% 0.1% 3.2% 6.56% is helpful, taste is ultiγ-terpinene 0.1% 1.8% 0.3% 11.2% 3.07% mately what determines p-cymene tr 1.0% 0.1% 8.1% 6.39% whether a flavor is “preMain oxygenated monoterpenes dominant.” Sensory evaluations have largeTerpene Juniper* Coriander** Angelica root*** Min Max Min Max ly shown that taste is geranyl acetate — — 0.2% 5.4% — reflective of what has been found in the chroLinalool 0.1% 1.1% 58.0% 80.3% 0.14% matography studies. For Sources: * Chatzopoulou (2006), Damjanović (2006); ** Orav (2011), *** Chalchat (1997)

Piggott (2012)

Pigott (2012)

Riu-Amatell (2008)

Vichi (2005)

Wiśniewska (2015)

Riu-Amatell (2008)

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TABLE 3:

Terpenes found in other common gin botanicals Saputro (2016)*

Nutmeg

Smigielski (2009)

Lavender

Rosemary

Cardamom

Grains of Paradise

Cassia Bark

α-Pinene

16.16%

0.1%

20.14%

0.7%

—

3.47%

β-Myrcene

1.94%

2.7%

—

1.2%

—

0.07%

dl-Limonene

4.93%

0.5%

1.32%

2.5%

0.3%

—

γ-terpinene

5.12%

0.1%

1.02%

0.1%

—

p-cymene

—

0.2%

1.59%

1.1%

0.8%

4.18%

geranyl acetate

—

1.7%

0.24%

0.2%

—

Linalool

—

30.60%

0.25%

0.9%

0.40%

2.98%

Myristicine (15%) Aroma is “spicy, warm balsamic, woody”

Linalyl acetate (14.2%) “fresh, floral-fruity; citrusy connotations”

a-humulene (60.9%) Aroma is “woody, oceanicwatery, spicy-clove”

Cinnamaldehyde (46.52%) “Spicy, cinnamon and cinnamon bark”

Most important Flavor description

Jiang (2011)

1,8 Cineole (26.54%) 1,8 Cineole (55.4%) “minty camphoreous cooling eucalyptus medicinal”

* Using more aged sample as reference.

Sources Aćimović, M., Stanković, J., Cvetković, M., Ignjatov, M., & Nikolić, L. (2016). Chemical characterization of essential oil from seeds of wild and cultivated carrots from Serbia. Botanica serbica, 40(1), 55-60. Ajaiyeoba, E. O., & Ekundayo, O. (1999). Essential oil constituents ofAframomum melegueta (Roscoe) K. Schum. seeds (alligator pepper) from Nigeria. Flavour and Fragrance Journal, 14(2), 109–111. Bautista, S. (2018, September 26). Laevo-Linalool FEMA 2635. Flavor Scientist. Retrieved October 29, 2021, from http:// flavorscientist.com/2013/05/22/ laevo-linalool-fema-2635/.

Ajaiyeoba (1999)

Bouzid (1997)

Flavors descriptions compiled from TGSC Information System (www.thegoodscentscompany.com)

Jiang, Y., Wu, N., Fu, Y.-J., Wang, W., Luo, M., Zhao, C.-J., … Liu, X.-L. (2011). Chemical composition and antimicrobial activity of the essential oil of Rosemary. Environmental Toxicology and Pharmacology, 32(1), 63–68. Knoll, A. (2020). Consumer Taste Preference in Gin and Botanical Spirits: 2020 Report for Distillers and Spirit Creators. Kerrola, K., Galambosi, B., & Kallio, H. (1994). Characterization of volatile composition and odor of Angelica (Angelica archangelica subsp. archangelica L.) root extracts. Journal of Agricultural and Food Chemistry, 42(9), 1979–1988. https://doi.org/10.1021/ jf00045a028

Lachenmeier, D. W., Walch, S. G., Padosch, S. A., & Kröner, L. U. (2006). Bouzid, N., Toulgouate, K., Villarem, G., Absinthe—A Review. Critical Reviews & Gaset, A. (1997). Analyse quantitative in Food Science and Nutrition, 46(5), des fractions d’huile essentielle pouvant 365–377. co-exister lors d’hydrodistillation de plants aromatiques. Revista Ital. Eppos, Mariotti, J. P., Tomi, F., Casanova, J., Costa, J., & Bernardini, A. F. (1997). 79, 15-25 Composition of the essential oil of Burdock, A. G. (2009). Fenaroli's Cistus ladaniferus L. cultivated in Handbook of Flavor Ingredients, 6th ed Corsica (France). Flavour and Fragrance (9781420090772). CRC Press. Journal, 12(3), 147-151. Chalchat, J.-C., & Garry, R.-P. (1997). Mondello, L., Dugo, P., Bartle, K. D., Essential Oil of Angelica Roots Dugo, G., & Cotroneo, A. (1995). (Angelica archangelicaL.): Optimization Automated HPLC-HRGC: A powerful of Distillation, Location in Plant and method for essential oils analysis. Part V. Chemical Composition. Journal of identification of terpene hydrocarbons Essential Oil Research, 9(3), 311–319. of bergamot, lemon, mandarin, sweet orange, bitter orange, grapefruit, Chatzopoulou, P. S., & Katsiotis, S. clementine and mexican lime oils by T. (2006). Headspace analysis of the coupled HPLC-HRGC-MS(ITD). volatile constituents from juniperus Flavour and Fragrance Journal, 10(1), communis l. ‘berries’ (cones) grown 33–42. wild in Greece. Flavour and Fragrance Journal, 21(3), 492–496. https://doi. Noumi, E., Snoussi, M., Alreshidi, M. org/10.1002/ffj.1615 M., Rekha, P. D., Saptami, K., Caputo, L., ... & De Feo, V. (2018). Chemical Damjanović, B., Skala, D., Baras, J., & and biological evaluation of essential Petrović-Djakov, D. (2006). Isolation of essential oil and supercritical carbon oils from cardamom species. Molecules, dioxide extract of juniperus communis 23(11), 2818. L. Fruits from Montenegro. Flavour Orav, A., Arak, E., & Raal, A. (2011). and Fragrance Journal, 21(6), 875–880. Essential oil composition ofCoriandrum https://doi.org/10.1002/ffj.1711 sativumL. Fruits from different countries. Journal of Essential Oil Bearing Dugo, G., & Giacomo, A. D. (Eds.). Plants, 14(1), 118–123. https://doi.org (2003). Citrus: The genus citrus (Ser. /10.1080/0972060x.2011.10643910 Medicinal and Aromatic Plants — Industrial Profiles). Taylor & Francis. Perrottet, T. (2019, April 1). Einfalt, D. (2020). Characterization of The madcap chemists of Booze. Smithsonian Magazine. Retrieved volatile compounds in quality-ranked gins. Mitteilungen Klosterneuburg, 70(4), October 28, 2021, from https:// www.smithsonianmag.com/travel/ 278-291.

Noumi (2018)

mad-scientists-booze-recreating-spiritsgoing-back-era-paul-revere-180971630/. Piggott, J. (Ed.). (2012). Alcoholic beverages: Sensory evaluation and consumer research (Ser. Woodhead Publishing Series in Food Science, Technology and Nutrition). Woodhead Publishing Limited. Regulation (EU) 2019/787 of the European Parliament and of the Council of 17 April 2019 on the definition, description, presentation and labelling of spirit drinks, the use of the names of spirit drinks in the presentation and labelling of other foodstuffs, the protection of geographical indications for spirit drinks, the use of ethyl alcohol and distillates of agricultural origin in alcoholic beverages, and repealing Regulation (EC) No 110/2008 (2019) OJ L 130. Riu-Aumatell, M., Vichi, S., MoraPons, M., López-Tamames, E., & Buxaderas, S. (2008). Sensory Characterization of Dry Gins with Different Volatile Profiles. Journal of Food Science, 73(6), S286–S293. doi:10.1111/j.1750-3841.2008.00820.x Saputro, M. A., Andarwulan, N., & Faridah, D. N. (2016). Physical characterization and essential oil properties of West Sumatra mace and nutmeg seed (Myristica fragrans Houtt) at different ages at harvest. Journal of Pharmacognosy and Phytochemistry, 5(6), 371-376. Smigielski, K., Raj, A., Krosowiak, K., & Gruska, R. (2009). Chemical Composition of the Essential Oil of Lavandula angustifoliaCultivated in Poland. Journal of Essential Oil Bearing Plants, 12(3), 338–347. doi:10.1080/0972060x.2009.1064 Vichi, S., Riu-Aumatell, M., Mora-Pons, M., Buxaderas, S., & López-Tamames, E. (2005). Characterization of volatiles in different dry gins. Journal of Agricultural and Food Chemistry, 53(26), 10154– 10160. https://doi.org/10.1021/ jf058121b Wiśniewska, P., Śliwińska, M., Dymerski, T., Wardencki, W., & Namieśnik, J. (2014). Application of Gas Chromatography to Analysis of Spirit-Based Alcoholic Beverages. Critical Reviews in Analytical Chemistry, 45(3), 201–225

Of the traditional gin botanicals (roughly: citrus, coriander, angelica, and orris root) angelica root is the greatest contributor to the perception of juniper flavor. It has high levels of α-pinene,10 among others. While we often associate pinene with “pines” and coniferous plants, many other spices, flowers, and roots have high levels of the terpene. Nutmegs (16.16%),11 rock rose (39.00%),12 and even carrot seeds (30.1%)13 are on this list. Though adding botanicals such as these will enhance the amount of one core juniper terpene, they often bring their own novel molecules to the equation. Balancing these facets is one way to increase the perception of juniper-like flavor. Alternatively, looking for botanicals with high myrcene content is a way to maintain juniper, but emphasize its “woody” side. The “citric” masking effect discussed in Riu-Aumatell et. al., might be partly behind a number of gins with strong citrus flavor that show less juniper character than their botanical bills suggest they should. Among gin drinkers, citrus is the most popular secondary

Chalchat (1997)

Saputro (2016)

Mariotti (1997)

Aćimović (2016) W W W . ARTISANSPIRITMAG . C O M

Citrus Fruit Peel Composition

TABLE 4:

Limonene

β-pinene

γ-terpinene

Sweet, orange, citrus and terpy

“Fresh, piney and woody, terpy and resinous with a slight minty, camphoraceous with a spicy nuance”

Terpy, citrus, lime-like, oily, green with a tropical fruity nuance

Grapefruit

97.21%

0.01%

Sweet Orange

96.63%

0.04%

0.02%

Bitter Orange

96.31%

0.75%

0.04%

Pummelo

48.9-95.6%

tr-11.3%

tr-6.9%

Clementine

83.0-95.0%

tr-0.3%

tr-2.1%

Chinotto

80.1-95.8%

0.2%-0.5%

tr-0.5%

Linalool, 0.1-5.5%

Citron

51.2-93.6%

tr-26.2%

geranial (0.7-13.3%)

Tangerine

41.2-90.7%

0.2-2.3%

0.3-5.7%

p-cymene (tr-26.9%)

Yuzu

60.4-82.4%

0.3-0.7%

7.6-10.7%

Lemon

69.93%

12.40%

10.56%

Bergamot

65.71%

11.93%

14.13%

α-Pinene (2.24%)

Key Lime

57.80%

22.85%

9.61%

α-Pinene (2.57%), sabinene (3.43%)

2.8-14.2%

20.4%-42.2%

0.9-2.4%

Makrut Lime

Other major components more than a trace of δ-3-carene sabinene (tr-6.2%)

citronellal (3.4-16.8%), sabinene (13.0-25.9%)

Flavors descriptions compiled from TGSC Information System (www.thegoodscentscompany.com)

Source: Mondello (1995), Dugo (2003)

TABLE 5: Grapefruit Bitter orange Sweet orange Chinotto Clementine Tangerine

Pummelo

Key lime

Yuzu

Markut lime

β-pinene

Lemon Citron Bergamot

γ-terpinene

Citrus Relationships

flavor preference.14 But the diversity of aromatic profiles among citrus fruits available to distillers today affords a lot more flexibility in how that citrus note is added. Limonene makes up the vast majority of the terpenes found among citrus, however, it need not be the only one. Β-pinene is a fairly common secondary 14

Knoll (2020)

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α-Pinene

α-Pinene (mg/L)

(Linalool:α-Pinene)

5.65

1.93

0.3

31.87

30.27

0.9

6.38

11.21

1.8

2.00

4.71

2.4

6.12

16.83

2.8

8.80

39.22

4.5

(mg/L)

Limonene

IMAGE 2:

α-Pinene to Linalool ratios from selected gins Ratio

2.25

10.96

4.9

0.49

2.56

5.2

0.26

1.58

6.1

3.60

23.18

6.4

1.95

18.36

9.4

2.42

36.99

15.3

1.35

21.08

15.6

1.07

17.22

16.1

* Riu Aumatell (2005), ** Einfalt (2020), omitting two samples which had no α-Pinene detected above a 0.1 mg/L detection threshold.

terpene in citrus fruits. While similar to its structural isomer, it has a distinctively different flavor and aroma. If alpha is the aroma of juniper and pine, beta is the woody, camphorous pine of dill, basil, and parsley. While less common in juniper, both isomers are found in gin. Both bitter orange and lemon bring limonene, however, lemon brings a more diverse set of terpenes. Similarly, bergamot and key lime can help build a woody-pine

note profile while also bringing some citrus qualities. Additionally, the high quantity of linalool in the gins studied by Riu-Aumatell and its absence in juniper suggests a cautionary note. While quantities as high as 30 mg/L did not preclude a gin from being perceived as having a “juniper” character, its presence indicates a potentially outsized

A World Class Competition for World Class Spirits

effect that coriander has on gin production.15 In large amounts, some describe it as having a “Fruit Loops”-like flavor.16 Distillers looking to emphasize juniper flavor should take care to avoid botanicals that are also rich in linalool. Further, it may also be associated with the masking effect observed in RiuAumatell,17 though further research is likely needed there.

Designing a botanical bill

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FOR DETAILS GO TO

distilling.com/adi-isc

While creating a predominant flavor is not as simple as picking from a checklist – looking into the botanicals you’re using is a good starting point. For example, The Good Scents Company (www.thegoodscentscompany.com) provides good summary level data and links to academic literature on the composition of ingredients. “Fenaroli's Handbook of Flavor Ingredients” is another great reference. For example, a search for eugenol (the distinctive flavor of cloves) lists several natural occurrences ranging from bay leaves to violet flowers.18 Aromatic composition varies based on seasonality, growing location, storage conditions, and others. Your single source of coriander likely differs somewhat from the ones described here. However, understanding its makeup as a starting point – what is generally present, and what is not – are helpful as baselines when trying to create an intended flavor expression. While there’s much art in designing a spirit, distillers are also chemists, combining and recombining molecules to make novel flavors and aromas. For distillers producing or making botanical spirits, the terpenes the botanicals contribute have a major impact on how a consumer will perceive the flavor of the spirit. Especially in the world of gin distilling, where a specific taste impression governs the spirit type identity, knowledge about which botanicals might contribute or detract from that flavor can help distillers build a strong foundation. 15

Einfalt (2020)

Bautista (2018)

Riu-Aumatell (2008)

Burdock (2009)

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. W W W . ARTISANSPIRITMAG . C O M

SMOKE AFFECTED BRANDY WRITTEN BY ANDY GARRISON

am writing this in the midst of a downpour, which hopefully marks the end of fire season for most of the West Coast. The fires might be over for now, but the damage they cause lingers as evidenced by the shipment of smoke-affected wine from the 2020 harvest which we received at the distillery last week. The impact of wildfire smoke on wine is highly variable. This makes the topic challenging for wineries, as they need to rapidly make decisions with big financial impact using shaky data and gut hunches. The swirling mixture of variables that seem to affect the degree of smoke damage includes proximity, grape variety, the plant source of smoke, the stage of growth of the vine, prevailing winds, and site orientation – and those are just the factors that take place before the winemaking begins. The science for predicting and detecting smoke impact is developing rapidly, with many research projects now underway, but there will continue to be much uncertainty. All of that suggests that, unfortunately, when there are fire events in winegrowing regions, some grapes will get turned into wine that will not be usable for the winery. For me, as head distiller of a West Coast brandy-focused

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The science for predicting and detecting smoke impact is developing rapidly, with many research projects now underway, but there will continue to be much uncertainty.

distillery, the last 14 months have included a steady drip of phone calls from distressed and then depressed winemakers trying to figure out what to do with smoke-affected wines. After working through thousands of gallons of different wines I thought I would try to sum up what I’ve learned.

SETTING EXPECTATIONS The first important conversation is about expectations and usage. Smoke damage is a relatively new experience for many winemakers in my region, and it has pushed some into looking at distillation for the first time. I had several conversations that started with a desire to take smoke-damaged red wine and “make high-end Cognac-style brandy” that would match the premium status of the winery and the expense of the grapes used.

Unfortunately, some winemakers have the misconception that brandy is made from “bad” wine, with “bad” meaning regular wine that is faulty or flawed in some fashion. In actuality, brandy is ideally produced from unflawed wine that is merely too acidic and low alcohol to find favor as table wine. For some distillers, their only experience making wine brandy has been from faulted or surplus wine, which might contribute to this misconception about how brandy is produced and what it should taste like. The world standards for brandy, Cognac and Armagnac, are distilled from high-acidity, low-alcohol white wines with little to no added sulfur dioxide, not screwed up scraps from the winery cellar. From a starting point of 13 percent or higher ABV red wine (smoky or not) that has been treated with sulfur dioxide, it may be possible to create something unique, tasty, or well-suited for a 51

purpose like fortification, but it’s unlikely to be the next Louis XIII. Brandy distilled from red wine will not typically have the fruity, floral, bright ester character of white wine brandy, and instead often has strong herbaceous, vegetal, “grapey” red fruit notes more similar to grappa or brandy aged in red wine casks. Wine with typical levels of sulfur dioxide (above ~30 ppm to my nose) will result in a brandy with a solventy chemical aroma unless treated with hydrogen peroxide to neutralize the sulfur dioxide. If the wine has been barrel aged, some of those oak-derived flavors and aromas may be detectable in the distillate as well. If these distillates are compared to Cognac they would probably read as faulty to an experienced palate. However, among American winemakers, distillers, and especially consumers, experienced brandy palates seem few and far between, and you might find you enjoy the results on their own merits.

WHERE THERE’S FIRE… With that background, we can examine how smoke damage affects distillation. The number one question I’ve received when talking about distilling smoke-damaged wine is whether the distillate is smoky or not. And the answer (just like seemingly every question in distilling) is … it depends! Yes, brandy (and certainly neutral spirit) can be made from smoke-damaged wine, but whether the brandy will show smoke character depends on the severity of smoke in the wine and the distillation procedure. Smoke is a more familiar flavor in the distilling world than in the wine world, where it is often greeted with overt revulsion. It is certainly possible to take a smoky raw material and make a smoky distillate, as evidenced by spirits like Islay Scotch and certain mezcals that are revered for the overt wallop of smoke and fire they deliver. However, those

are intentionally smoky raw materials, produced via anecdotal or empirical recipes that prescribe certain hours of exposure to specific kinds of smoke to get the intensity desired. With wildfire damaged grapes, on the other hand, the level of exposure is uncertain and hugely variable from site to site and batch to batch. Standardized methods for determining smoke impact in wine are still being hashed out as research delves into what compounds to look for and what the sensory thresholds are. Adding to the complexity is that individual perception (and acceptance!) of smoke character is proving to be highly variable. Among the numerous smoky wines I sampled, the impact ranged from an overt “burning pine needles and tires” aroma you could pick up across the room, down to a slight ashy sensation in the finish. As might be guessed, this spectrum broadly applies to the distillate as well, with slightly impacted wines showing no obvious smoke character under normal distillation schemes. This variability stresses the importance of getting samples and conducting a lab scale distillation prior to accepting a lot of wine, as others’ perception might be quite different from yours. It will also guide what type of distillation will be required, depending on whether you want a distillate with or without smoke.

…THERE’S SMOKE? Say you’ve got a wine of the “campfire made of cigarettes” variety. Will that distillate be smoky? Again, because there are few straight answers in life, it depends on the distillation procedure and cut points used. Most of the smoke-related compounds are classed as phenols, whose relatively high boiling point and affinity for water pushes them into the later portion of a batch distillation run.

Smoke is a more familiar flavor in the distilling world than in the wine world, where it is often greeted with overt revulsion.

Most of the smoke-related compounds are classed as phenols, whose relatively high boiling point and affinity for water pushes them into the later portion of a batch distillation run.

Sensory testing related to distillate made from rauchbier (a German-style beer using alder-smoked malt) found that “during distillation most of the smoky compounds are traced in the last running,” with the middle fraction containing the least amount of smoky compounds (1). Research by Swan & Howe in the Scotch whisky industry (where phenols from peat-smoked malt are an important flavor) found that in a typical Scotch whisky double pot distillation, roughly 62.5 percent of phenols, are lost in the stillage of the first distillation, and only four to five percent are retained in the spirit. Miller’s analysis of this research suggested that phenols ‘enter spirit near the tails’ (2). This research matches my first-hand experience that much of the phenol/smoke character is retained by the stillage. After distillation of some wine lots, the “heart cut” displayed slight to no smoke character, but the stillage smelled like hotdogs charred on a grill. Distillate that retained smoke character after a single pass, when distilled a second time, even with the same cut points, produced a distillate with significantly lessened smoke character, as it seemed much of the remaining phenols were left behind in the feints and stillage. On a three-plate batch column still, the distillate from a significantly impacted wine would begin to show smoke character around 144 proof, and the intensity of smoke rose as the proof continued to drop approaching the tails. On a traditional alembic pot still, where a typical heart cut will average about 68 to 72 percent ABV, it may be W W W . ARTISANSPIRITMAG . C O M

necessary to triple distill the wine to remove most of the smoke character. On a batch column still with plates and dephlegmator there is significantly more control over the alcohol content of the distillate and cut points. However, on a single-pass distillation there is still tension between distilling under 160 proof as required for brandy, getting reasonable yields, and not retaining smoky flavors. When distilled on a 12-plate column to 190 proof, no smoke character was discernible even though the wine distillate was distinguishable from a corn or canebased neutral spirit.

Once we determined that it’s possible to eliminate much of the smoke character, we needed to answer the more interesting philosophical question of “should we?” For many of the winemakers I spoke with, smoke taint is completely unacceptable, and there is concern that releasing an affected wine could permanently damage their reputation. However, wine is a very different and, in some ways, more conservative industry than spirits. The “Opinions Welcome” ad campaign by the heavily-peated Scotch malt whisky Laphroaig revealed that some spirits drinkers love that their drink tastes like a “hospital on fire.” REFERENCES Millennial drinkers can’t seem to 1. Voigt, J. et al. 2010. New highly aromatic products get enough mezcal, and don’t bat and distillates from smoked malt. Worldwide an eye at bottlings redolent with Distilled Spirits Conference. Pp 253-257 pine smoke. 2. Miller, Gregory H. 2019. Whisky Science: On top of this, brandy remains A Condensed Distillation. Pp 180-184 a challenging category from the

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craft distiller’s perspective, with limited consumer interest or understanding. In the last year I’ve received exponentially more questions and comments about the smoke-tainted brandy we’ve been making than the beautiful brandy distilled from perfect, eye-poppingly expensive white pinot noir aged patiently in French oak. Could smoke-damaged brandy be the triumph-from-tragedy story hook that brandy distillers unfortunately need? Or by the time the brandy is released in five or ten years, will the fires of 2020 be a memory no one is keen to revisit? Or will smoky brandy simply taste gross as it matures? I once again fall back on my standard explanation: “I’m not sure, it depends…” Andy Garrison is the head distiller at Stone Barn Brandyworks in Portland, Oregon. He loves Alsatian marc brandy and wears a scarf well but still can’t speak French.

LEAVING MINNESOTA Craft distillers and brewers begin operations in neighboring states as entrepreneurial growth is limited by arcane laws

hen Tattersall Distilling opened their major expansion in River Falls, Wisconsin on December 1, 2021, it became the first craft distillery to join an exodus of Minnesota craft brewers, expanding across state lines because of laws limiting their growth. Minnesota’s current craft distillers license allows for tasting rooms, cocktails, bottle sales (limited to one 375 ml bottle per customer per 54

day) and exemption from the state excise tax – providing (among other things) the distillery produces no more than 40,000 proof gallons a year. The problem for Tattersall was they grew to 39,000 in 2019, then began turning down contract distillation business to stay under that cap. Above 40,000, they would have to close the tasting room, pay state excise tax on

Written and photographed by Andrew Faulkner

those initial 40,000 proof gallons, and face a licensing fee increase from $4,000 to $20,000, said Tattersall co-founder Jon Kreidler. “We tried to change the law, you know. We had lobbyists working with us. We worked with our distillers guild and had relationships with different Congresspeople, but nothing was happening,” he said. “And we had to do what was right for us.” W W W . ARTISANSPIRITMAG . C O M

“We really needed that proof gallon limit to get raised,” Kreidler’s business partner and Tattersall co-founder Dan Oskey added from the bar of their Minneapolis tasting room. “And if it had, we'd still be here.” Tattersall is officially the first distillery to join a group of Minnesota brewers who have found a similar law unreasonable. Craft brewers producing fewer than 20,000 bbl per year are allowed to sell growlers and crowlers from their taprooms for off-premise consumption. Lift Bridge Brewing Company has expanded from Stillwater, Minnesota, to open a few miles away in New Richmond, Wisconsin, where it has room to grow under Wisconsin’s 300,000 bbl limit. When Minneapolis’s Indeed Brewing Company reached the 20,000 bbl limit, it opened its second brewery and taproom in Milwaukee. And when it became time for Lupulin Brewing Company of Big Lake, Minnesota, to grow, it opened its second location in Sioux Falls, South Dakota. “There's only about five or six breweries in the state of Minnesota who are above 20,000 barrels, but for those breweries, once they hit that point, they are no longer able to sell crowlers or growlers, anything to go,” said Megan Park, founder of Unmapped Brewing and chair of the Legislative Committee for the Minnesota Craft Brewers Guild. “They no longer have the rights to do that because of the current existing laws.”

“There's only about five or six breweries in the state of Minnesota who are above 20,000 barrels, but for those breweries, once they hit that point, they are no longer able to sell crowlers or growlers, anything to go.” — MEGAN PARK

Founder, Unmapped Brewing Chair, Legislative Committee for the Minnesota Craft Brewers Guild

According to the MinnPost, five brewers have already reached the 20,000 bbl level: Castle Danger Brewery, Surly Brewing, August Schell Brewing Company, Fulton Beer, and Summit Brewing Company. Some of those are openly talking about expanding out of state. To stem this tide, a consortium of breweries, distilleries, wineries, and cideries called the Minnesota Craft Beverage Council (MCBC), formed to represent 350 businesses that employ approximately 6,250 people and, according to their website, “engage in collaborative advocacy that removes arbitrary regulations and modernizes state liquor laws so that all small and independent producers have the opportunity to thrive.” MCBC is supporting the Drink Local bill, which proposes changes for all its constituents. For wine and cider makers, the bill offers

tax parity and self-distribution. Brewers are seeking to change beer-to-go laws, lifting the 20,000 bbl cap to allow growler sales for everyone, and allowing taproom sales of smaller containers. Distilleries hope to raise the bottle limit from one 375 ml bottle per customer per day to two 750 ml bottles per customer per day. “From our taproom, we cannot sell anything aside from the crowler and the growler,” noted Park. “Our goal with the Drink Local bill is to be able to – as many other states are able to do – sell four- and six-packs, which are the 12-ounce cans and the 16-ounce cans.” Changing the limitations on bottle size could potentially quadruple off-premise sales and, considering the cost of packaging is not greatly increased for a 750 ml size, increase margins. For craft distillers who are recovering from tasting room closures during the pandemic, the increase could be critical. While not reaching for all the changes each type of craft producer would like, the Drink Local bill would make improvements for each. “The idea is [to] band together in a collaborative effort, put

LEFT: Jon Kreidler, co-founder of Tattersall Distilling, reviews blueprints for their River Falls, Wisconsin expansion. OPPOSITE PAGE:

Construction on Tattersall Distilling's River Falls, Wisconsin expansion in August 2021. W W W . ARTISANSPIRITMAG . C O M

“That limitation is kind of anti-business, right? We want to be successful. The 40,000 gallons is victimless. Like, who gets hurt with our success?” — MIKE DUGGAN

CEO, O’Shaughnessy Distilling Company

one bill, which basically just passes the bare minimum that we all want to be considered,” said Park. “That will not even make us level, on an even playing field, with other states, but just a step above these Prohibition-era liquor laws that we've been dealing with.” However, the Drink Local bill does not lift the 40,000 proof-gallon cap for craft distillers, a limit that currently only a minority of distilleries are approaching. One of the affected is O’Shaughnessy Distilling Company, a

well-funded startup that opened last summer to make Irish-style whiskeys in America on an international scale. The centerpiece of the facility is a hospitality area, which meanders up and down stairs, outside, with multiple tasting rooms and cocktail bars. The largest room features picture windows near the main entrance overlooking the three in-line Forsyths stills, the heart of O’Shaughnessy’s production area. O’Shaughnessy CEO Mike Duggan is confident the 40,000 proof-gallon limit can be changed. But until it is, O’Shaughnessy will be doing a tightrope walk between regulations to keep their tasting room. “That limitation is kind of anti-business, right?” asked Duggan. “We want to be successful. The 40,000 gallons is victimless. Like, who gets hurt with our success?” Whether or not the cap gets lifted, it will be too late for Tattersall, which moved all but one of their production stills over the state line. Kreidler said the dismal prospect of incremental change up to 60,000 proof-gallons, with perhaps a future campaign to increase it again,

potentially edging up to 100,000, helped push Tattersall out of state. “I want to spend the time running the business and growing it, as opposed to fighting legislators and fighting to change laws,” said Kreidler. “That's not what I got into this for.” The decision was not easy to make because it cost Tattersall millions of dollars, which Kreidler said is “more than I care to admit.” The distillery has moved into a 75,000-sq.ft. building that used to house a big-box store where it expects to quadruple production on the more than 26 spirits currently released for distribution. The new facility will have a full-service restaurant, wedding venue, banquet hall, self-guided and guided tours, amphitheater, catering, and live music. Tattersall’s business plan projects the new venture will create 110 jobs in Wisconsin by next summer. Enough production will remain in Minneapolis to supply the original cocktail lounge. The total portfolio features more than 40 spirits because it was developed with keeping the cocktail program supplied. Oskey,

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LEFT: Enough production will remain in Tattersall Distilling's Minneapolis location to supply the original cocktail lounge.

who comes from a hospitality and bartending background, said closing the original was never an option. “The cocktail room has always been, to us, the heart and soul of Tattersall,” said Oskey, looking around his bar. “This is where everything began for us, you know? We built a distillery around this cocktail room.”

“I want to spend the time running the business and growing it, as opposed to fighting legislators and fighting to change laws. That's not what I got into this for.” — JON KREIDLER

Co-founder, Tattersall Distilling

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Andrew Faulkner was Managing Editor of Distiller magazine for six years. In 14 years at the American Distilling Institute he coordinated curriculum for Hands-on Distilling Workshops, helped plan the Annual Spirits Conference and Vendor Expo, and was the architect of the ADI’s International Judging of Craft Spirits. He is the co-author, along with Bill Owens and Alan Dikty, of “The Art of Distilling Whiskey” (2019, Quarry Press) and has edited six books on distilled spirits.

hen Melissa Katrincic, co-owner, president, and CEO of Durham Distillery in Durham, North Carolina, placed a purchase order for the only bottle her distillery uses in early 2021, she had no idea she was embarking on a months-long quest. Her distributor informed her that, not only was the handsome, square-shouldered Liberty bottle currently unavailable from the manufacturer Piramal, but Piramal was actually shutting

A few weeks later, a shortage in another SKU, Durham Distillery’s Navy Strength Gin, led to another exhaustive search. Finally, Katrincic turned up 15 pallets of Liberty bottles from a broker, complete with a $2,500 surcharge. “I don’t know where she got them,” said Katrincic. “I didn’t even ask her.” Not long afterwards, she got word that Piramal’s new factory in India was online, but it wasn’t planning to do another run of Liberty bottles until 2022 – and prices would be up 20%. And it wasn’t just bottles. Corks, corrugate, gin botanicals, even the Grand Marnier Durham Distillery relies on for its signature nitro draft corpse reviver cocktail were either harder to get, more expensive, or both. “It feels like the perfect storm,” said Katrincic. Durham Distillery’s story isn’t entirely unique. The same dynamics are playing out

BROKEN down their U.S. plant and transferring manufacturing to India. So Katrincic called every glass broker in the country, eventually scrounging up seven pallets of Liberty bottles in June. “We didn’t even care about the price at that point,” she said. The bottles were whisked off to the screen printer, quickly filled, and Katrincic breathed a sigh of relief – even though the hiccup meant she’d been completely out of stock of her flagship Conniption Gin for three weeks. As she tells the story, she laughs ruefully. “We had no idea at that time what we were headed for.”

in all retail and manufacturing sectors: buckling supply chains leading to scarcity and increased prices at the same time as consumer demand has skyrocketed. Glass bottles seem particularly heavy-hit, disrupting the entire beverage sector. Distilled spirits producers, however, have the fewest options for shifting into other packaging materials, leaving many feeling trapped in a collective logistics nightmare. At a fundamental level, the disruptions are a result of a classic mismatch between supply and demand. In 2020, many beverage producers either held off on purchasing glass entirely, or bought less glass in anticipation of reduced demand. As COVID-19 restrictions began to lift in 2021, a huge burst of new glass orders began to roll in to manufacturers and distributors.

“March [2021] is when we really started to see an influx,” explained Jyll Vidal, director of sales for the West Coast and Canada at Saverglass. Right around the same time, shipping costs began to skyrocket, particularly for freight being moved between Asia and North America, which was already subject to new tariffs imposed by the Trump administration and retained by the Biden administration. “Distributors bringing in glass from Asia saw these incredible prices, so they just stopped shipping,” she added. The result? Delays on critical supply shipments. In response, beverage producers began hunting for other options with an increasing sense of urgency. “Worldwide, people are calling every manufacturer,” said Vidal. “It snowballs.” Concurrent with booming demand, unfortunately, are chronic disruptions at virtually every stage of the global supply chain. Factories around the world are understaffed. Shipping containers, thrown off course by un-

Supply Chain Challenges Leave Distillers Scrambling Written by Margarett Waterbury

usual spikes in medical and PPE shipments, are scarce. Shipping costs have increased, in some cases, more than 500 percent from preCOVID rates. Once ships arrive in U.S. ports, staffing shortages have slowed the unloading process to a crawl. “It can be eight weeks,” said Vidal. “We’d just see the boats sitting out there in the Port of Oakland, and they’re not unloading them.” And once those containers finally do get unloaded, a profound dearth of truck drivers adds yet another bottleneck. Layered atop this buckling supply chain are increasing raw materials costs, higher fuel costs, and the basic operational challenges posed by similar disruptions in upstream supply chains that provide the equipment everything needs to work, from glass molds to the computer chips that power trucks. “There is a backup in every single part of the supply chain,” said Vidal. “Pallets. Dividers. Plastic wrap. Every industry has a backup, which slows things down.” W W W . ARTISANSPIRITMAG . C O M

Problems with transportation infrastructure, particularly on the West Coast, have become so extreme as to warrant federal intervention. In October 2021, the Biden administration announced that the ports of Long Beach and Los Angeles, which together receive about 40 percent of the shipping containers entering the U.S., would shift to 24/7 operations, and that major big-box retailers like The Home Depot, Walmart, and Target would begin shifting their operations to off-peak hours. But because the beverage industries rely so heavily on internationally manufactured glass, corrugate, capsules, closures, and other supplies, the sector has been particularly hit hard. For distillers, this all adds up to longer lead times, higher prices, and the possibility that the orders placed for glass today won’t be delivered for many months. Some popular stock

Vidal also anticipates slight easing in demand as producers who are able to secure glass close their purchase orders. Increase in supply, while slow to come online, will also help. Saverglass is adding a second furnace at their Mexico plant at the end of 2021, doubling capacity. Pricing, however, is another story. “There will be a price increase,” said Vidal. “And on top of that, there’s all these increases for transportation,” although she said that transportation surcharges could go down or be eliminated if transportation costs ease. Price increases aren’t confined exclusively to glass. Katrincic said her corrugate supplier recently emailed announcing a 25 percent price increase. “There’s some pretty harsh things going on,” said David Schuemann, owner and creative principal at CF Napa, a branding and design firm specializing in beverage alcohol. “ W e had a 100,000case brand that signed a threeyear deal on glass. Their supplier called them back and said there was going to be a 23 percent increase, they were breaking contract, and if they didn’t like it, they wouldn’t be delivering.” In the meantime, distilled spirits producers are coping in a variety of ways. Schuemann says he’s seeing some amount of material switching, including more brands switching to aluminum cans for ready-to-drink (RTD) products (unsurprisingly, aluminum is experiencing its own shortage). Plastic, however, remains a last-resort choice. “It has a big stigma, and a lot of brands just won’t use plastic, period. Their customers just won’t accept it,” said Schuemann.

LINKS bottles – such as Piramal’s Liberty – are nearly impossible to find, while others are still readily available. “We produce all sorts of stock bottles all year long,” said Vidal, noting that it’s possible they could have the stock at the time a customer calls to place an order. “But if it’s [a style] that’s being requested by everyone, then our production timelines have moved out probably six months.” How long will this last? While nobody really knows, it could be several months – or more – before the supply chain stabilizes. “We do feel Q1 2022 should see a relief in transportation tariffs,” said Vidal. “Which means people may have confidence to get things from overseas, so it should loosen up a little.” Katrincic also reported that she’s seen better pricing from Chinese suppliers in particular as they seek to recover clients who moved to other sources during the pandemic. W W W . ARTISANSPIRITMAG . C O M

Contingency planning has become more important than ever before, especially for new brands. Schuemann says he now asks clients to specify first, second, and third choices of paper for labels because of supply chain issues – as well as three different stock bottles that would fit the label. “That way, if you run into a supply chain issue mid-year, you’re not going to get kicked off the shelf if you can’t keep your packaging flowing in.” Ollie Mulligan, founder of Great Wagon Road Distilling Co. in Charlotte, North Carolina, has taken a creative approach to the shortage: asking customers to bring their used bottles back. “You can use a vodka bottle 100 times,” said Mulligan. “They would last a lifetime, if you don’t drop it.” Great Wagon Road Distilling Co.’s “Refill Not Landfill” program actually predates the shortage. He started it about a year ago, when his contracted glass recycler told him they weren’t actually recycling the glass, just grinding it up and burying it. “I thought, ‘this is awful,’” said Mulligan. So he started offering a new deal to customers: Return your bottle to be refilled, and y o u’d

g e t a free flatbread at the distillery’s cocktail bar next door. “In three months, only one person chose to buy a bottle of vodka in a recycled bottle,” said Mulligan. “Everyone said, no thanks, we’ll take the new one.” But disappointing results turned around when Great Wagon Road relocated its facility to a “kind of grungier” neighborhood. “Now, it’s really catching on,” said Mulligan. Great Wagon Road will even refill bottles from other brands. “If somebody brings in a bottle of Tito’s, we just put our labels over his and keep going.” He’s now turning his attention to figuring out how to extend the refill program to on-premise accounts, some of which go through 200 bottles each month. With a packaging cost of about $2.50 per bottle, the potential impact could be significant. “I’ve 59

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even thought about offering them a dollar not to throw the bottle out,” said Mulligan. “It’s just about logistics at their end, where they’ll save the bottles.” While the bottle refill program hasn’t made a dent in Great Wagon Road’s challenges with the bottle shortage, Mulligan thinks it could make a difference in reducing glass waste if enough distilleries adopt it. Plus, he says it’s helped build a sense of community at their new location. “People come in with their shopping bags, they have their bottles in there, they have them refilled, they sit down and have a drink and a chat, and they leave. It’s part of their weekend routine now.” Outside local markets, however, things get more complicated. For Durham Distillery, changing bottles would be a disaster. “We are in growth mode,” explained Katrincic. “We’re in awareness building in multiple new markets. We can’t do that.” She said her previous experience as the head of digital marketing at Burt’s Bees taught her just how critically important consistent packaging is for developing brand loyalty in consumer products. “The specific package. The colors. The feel. How it’s laid out. All of those things, as you’re growing a brand and gaining awareness, become critical to repeat purchase.” Putting Conniption Gin into a different bottle could undermine the six years of brand-building work she’s already put in. “Breaking your brand because of the pandemic and because of the supply chain issues is going to be more painful than we even realize,” said Katrincic. Instead, she’s looking in a different direction to solve her supply chain woes: a custom bottle. Schuemann says he’s seeing more producers exploring a similar path as a way to bypass the stock bottle scrum. “With custom, you have a dedicated supply chain,” he says. “You’re not sharing that mold with anyone. It’s all going to you.” He also reports that, so far, custom glass is still being delivered on time, although he cautions that could change at any moment. It’s a solution with some downside. The initial cost can be enormous, and most custom glass suppliers require large orders. Durham Distillery has requested three different custom glass bids. “They all have different timelines. The mold costs are all over the place. One mold quote was $40,000 for a mold,” said Katrincic. Ballooning supply costs like this will ultimately mean higher prices on the shelf, even factoring in the cost savings of the permanent FET reduction passed at the end of 2020. “Something’s going to have to give, and it’s going to end up being on the consumer and feeding into the concerns about inflation. I don’t see any other way,” said Katrincic. “I haven’t even wanted to do my new margin analysis. I don’t want to do it. I don’t want to know, because I know it’s not good.”

Margarett Waterbury is a drinks writer who lives in Portland, Oregon. Her first book, Scotch: A Complete Introduction to Scotland’s Whiskies, released in fall 2020. 60

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TOGETHER FOR

ost people want to do good deeds. And most people (or at least most readers of this magazine) want to enjoy some delicious whiskey. Might it be possible to do both at the very same time? The answer, as of October 2021, is yes. After the protest movements of 2020 sparked an online discussion in a private distillers’ Facebook group called the Good Guys Distillers, a group of producers banded together to launch Good Deeds Spirits, a collaborative label that will generate revenue for charitable organizations. The first release, Good Deeds Whiskey, is an American blended malt containing malt whiskeys from ten different distilleries: Few Spirits, Santa Fe Spirits, Bently Heritage Estate Distillery, Thornton Distilling, Sonoma Distilling Co., State Line Distillery, Balcones Distillery, Rogue Spirits, Headframe Spirits, and Triple Eight Distillery. One hundred percent of proceeds from Good Deeds Whiskey will be donated to the Spirits Training Entrepreneurship Program for Underrepresented Professionals (STEPUP) Foundation, a new initiative from the American Craft Spirits Association that offers paid internships in the spirits industry for people from underrepresented groups. With 1,000 bottles released, each selling for $75, the project will generate a $75,000 contribution to the Foundation. We sat down with two of the project’s masterminds, Johnny Jeffery, general manager and master distiller at Bently Heritage Estate Distillery in Minden, Nevada; and John McKee, owner, founder, and chief technology officer of Headframe Spirits in Butte, Montana, to learn more about how Good Deeds Whiskey came about, why professional vulnerability can be a good thing, and what kinds of good deeds to look forward to in the months and years to come.

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good Written by Margarett Waterbury Photography by Amanda Joy Christensen

How did the Good Deeds Whiskey project come about? Johnny: We have this informal group called the Good Guy Distillers that John and I started seven or eight years ago. We were sitting at a conference talking about how hard it was to find good sources of information. People online were asking all these really intricate, awesome questions as they were building their distilleries, and people were answering them wrong. John was actively grinding through online forums trying to spread good information and losing the battle, so we decided we needed a peer group of people we could trust, so we started the group. John: That group is still about professional vulnerability. You can say, I really screwed up today, and the only people who will know are the people in the group, and they’ll help you. So last year, just about this time, I came to the distillery one morning. It was COVID, I was trying to figure out how to keep our business afloat, it was snowing, it was very quiet, and I started missing everybody. So I pinged in. Someone else said we should all do something; we should blend a whiskey. I said if we’re going to do that, we should donate all the money to STEPUP. Pretty much instantly, that day, transfers-in-bond started going around. That was a year ago this month. And here we are.

Why malt whiskey? Johnny: Somebody said “malt whiskey.” John: That’s how organized this was! We knew that if we were going to do something initially, putting out a blended American whiskey would be a great idea, but we needed to get a little bit of distinction on the first release, make something that is relatively unique. There aren’t a lot of American single malts with a big following yet, and nobody has ever tried to take 10 different American single malts and vat those into a single blend. It’s never been done. I think what’s really great about that is what Johnny did is proved that 1) what’s being made in the states is just amazeballs, and 2) we didn’t just say OK, everybody send something, let’s just throw it all together and ship it out, Emperor’s New Clothes, everyone will just buy it. What we elected to do was try to put together something that is actually good, that calls attention, that can engender that second bottle sale or interest in lot two. A lot of members who did participate with their malts are also members of the American Single Malt Commission, so it was this really good opportunity to marry two good causes and show something amazing to the public and to the customer base that’s out there, and then hopefully set up a trust in the brand that they’ll come back to again. 62

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Bottling day.

Left to right: Jim Harris (Bozeman Spirits), John McKee (Headframe Spirits), Tom Bard (The Bard Distillery), Kim Carter Bard (The Bard Distillery), and Colin Keegan (Santa Fe Spirits).

The initial blending process involved both of you, as well as Randy Hudson from Triple Eight Distillery and Reade Huddleston from Headframe Spirits. After the initial blend, the vatting was married in used bourbon barrels for five additional months before release.

100 percent of the proceeds, not just a portion of the profits, will be donated to the STEPUP Foundation. That means everything was donated, from the whiskey itself to the branding work, corks, and PR.

What was that blending process like?

John: No. It’s been a really amazing thing. Packaging was donated by Saxco, the corks and closures were donated by Tapi, labels were donated by All American Label, the FET was paid by one of the Good Guys, Amanda Joy Christensen from Artisan Spirit Magazine did the media on the blending and packaging, publicist Alexandra Clough came in and became the boss of us overnight, told us exactly what to do and when. A lot of the Good Guys who didn’t have juice but wanted to participate, they donated to an account that we used for shipping expenses to get things moved around the country. Then finally our retail partner, Seelbach’s out in D.C., they are doing this without taking a cut off the top, and they’re the actual donating partner to ACSA. It’s just really, really cool how many people were willing to give things away in a time when things are so scarce and strange and inflationary. It took one email. One call. It was sort of an instant response to an ask.

Johnny: There were only four of us present, so that was pretty easy. Randy Hudson is an amazing blender, as well as a hunter and naturalist, and his approach lands really nicely in the spectrum I like to walk within, which is knowing the technical stuff but thinking in esoteric terms so we can overlap those things and talk about it with a shared language. We were really on the same page with a lot of things. The next one is going to be harder because we have a whole bunch of people who want to participate. I joke that we should schedule it in one of the Hawaiian Islands so it gets progressively harder for people to show up.

Was it tough to talk people into that idea?

Blending day.

Left to right: Randy Hudson (Triple Eight Distillery), Reade Huddleston (Headframe Spirits), Johnny Jeffery (Bently Heritage Estate Distillery).

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Why is the STEPUP Foundation important to you?

How is the Good Deeds brand structured?

Johnny: The George Floyd murder happened relativly close to one of the Good Guys’ distilleries. Someone who is also one of the first black DSP owners in the country. That block was burning, and his staff was standing outside with signs that said “Black owned business, please don’t burn our building down.” We were all trying to find ways to support. Todd Leopold said, “Why aren’t we doing something about what is happening in our country about diversity?” And that’s how STEPUP was born. So those things were running parallel, we were taping the wings on the plane as the plane takes off the runway.

John: Right now, because we are going a thousand miles an hour with our hair on fire, Good Deeds as a brand exists underneath Headframe’s DSP. But we’re having some high-level discussions within the Good Guys about how to turn this into something more formal. Maybe it will be more like a co-op model or something along those lines, where its structure and purpose can be maintained, but ultimately the ownership of the brand would transfer to that organization.

John: I think we recognized early on that the STEPUP program was awesome. Diageo is dark horsing a lovely donation which cannot be overlooked, but like many things, it was a great idea that had no money. That’s where we decided to step in. It’s too bad in some regard to have this first release be released by old gray-haired dudes, but the goal is that it’s very different in releases two, three, and beyond, in terms of the participants and contributors. Johnny: We called it the Good Guys Distillers because we wanted to put good people together to support one another, but the Good Deeds brand as separate from that is a way to focus on the action that was taking place. The people are less relevant than the verb. Doing good is a community action. You have to bring people in. A lot of people feeling helpless to do something that felt meaningful were given the opportunity to do something really good and meaningful and impactful, and we really wanted to focus on that, separate it from the people and make it about the action.

Johnny: Having seen how quickly the initial bottles are selling, and how much interest there is in participating in the future, we’re planning to create a more formal structure that will allow us to pay the costs to produce the whiskey so contributors aren’t donating everything, just the money that could have been made on it. Also, it’s important to say that right now, this round is being donated to STEPUP, and the next will be made to STEPUP because people donated the whiskey with the understanding that’s what it would go to, but after that we want to explore what other causes we want to support with donations. Our motto is to find good people and do good stuff.

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How are sales so far?

John: It will be one week since launch tomorrow morning, and about 40 percent has been sold so far. That’s pretty bomber. We’ve got to keep that going and activated, because we want to show up to the ACSA conference with STEPUP having the money in their pocket.

What’s on tap for the next release – and when should we look for it? Johnny: Our callout for next year will be a blended whiskey. Anybody can send anything we can put the word “whiskey” on, and we’ll figure out how. John: The purpose of Good Deeds is not to leave behind Good Guys. Mostly it’ll be a private little club, but Good Deeds can be a lot more evergreen. We built the brand and the trademark, the design, to allow it to continue on. There’s talks about doing a compound gin. There are just so many ways to continue to express this. John: With how sales are going, a stretch goal – which I don’t think is all that hard now – is that it could be Q2 or summer of next year. Which would be great. Too long between releases is a loss of community knowledge of the brand, and we don’t want that happening. We want the continuation of its presence in the beverage drinking consciousness. Visit www.gooddeedsspirits.com for more information on Good Deeds Spirits.

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Navigating Alcohol To-Go and Delivery Laws

ho amongst us doesn’t enjoy the ease of ordering a fully prepared meal to be delivered to our doorstep? Pre-pandemic, ordering a hot meal or a premade sandwich with a soda to-go was a breeze, but what about alcohol? Packaged alcoholic beverages for delivery or carrying a cocktail away from a restaurant was a much more hotly debated issue, typically deemed impermissible in a majority of states. In an effort to provide relief to a struggling hospitality industry, governors across the United States issued Executive Orders temporarily allowing both packaged alcohol beverages and cocktails to be delivered to consumers who were weathering the pandemic at home, and Pandora’s Box was opened. Recognizing consumer demand and sympathizing with the effects of the pandemic on the hospitality industry, states are actively passing legislation to codify the permissibility of cocktails-to-go and alcoholic beverage delivery. It is an unprecedented move that is reaching industries previously beyond the alcoholic beverage regulatory realm. As with most alcohol-based legislation, the regulatory framework of such cocktails-to-go and alcoholic beverage delivery requirements are rarely straightforward and vastly differ between states. Major third-party service providers such as UberEats, GrubHub, and DoorDash, who engage in the delivery of alcoholic beverages and cocktails, are expected to understand and abide by a minimum of fifty different regulatory frameworks. So, how can industry members and third parties navigate the nuances of these newly established practices? For starters, we need to understand what type of alcohol beverage is being purchased. States often differentiate between the ability to deliver cocktails to-go from the ability to deliver manufacturer-sealed alcohol. A few states may even allow the delivery of beer and wine, but outright prohibit the delivery of spirits.1 Next, who is delivering the alcoholic beverages, and on behalf of what kind of retail licensee? Some states prohibit retailers from using a third-party delivery service and mandate that only employees of the retailer itself can facilitate alcoholic beverage deliveries.2 In states that permit third-party delivery services, even the permissible age of the delivery driver varies among jurisdictions. Some states require delivery drivers to be twenty-one,3 whereas others allow drivers to be below the

WRITTEN BY LAUREN VOKE, KRISTEN CATASÚS, AND ALEXIS MASON

See e.g., N.C. Gen. Stat. Ann. § 18B-1001.4 (North Carolina).

2 See e.g., 235 Ill. Comp. Stat. Ann. 5/6-28.8 (Illinois), MD AL BEV § 4-1107 (Maryland), Okla. Stat. Ann. tit. 37A, § 7-105 (Oklahoma). 3 See e.g., Ariz. Rev. Stat. Ann. § 4-203 (Arizona), Colo. Rev. Stat. § 44-3-410 (Colorado).

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age of consumption.4 Additionally, industry memRecognizing consumer demand and sympathizing with the bers and third parties should be cognizant of any effects of the pandemic on the hospitality industry, states additional licensing or contractual requirements. Many states prohibit third party service providare actively passing legislation to codify the permissibility ers from delivering alcoholic beverages and cocktails unless the provider is licensed with the state,5 of cocktails-to-go and alcoholic beverage delivery. whereas others have incorporated the privilege into already-existing licenses.6 Moreover, some states will only allow third-party service providers to deoperational gray area for both retailers and third party service providers liver alcoholic beverages on behalf of a retailer if there is a written conoffering delivery services (absent an expressed prohibition otherwise). tract in place between the parties.7 Notwithstanding the nuances surrounding alcohol beverage delivHowever, none of this is to say that the frameworks set forth by each ery itself, a major question licensed retailers find themselves asking is state do not have their commonalities. As a best practice, most states what happens when a third-party delivery service fails to comply with are on the same page when it comes to verifying the age of a consumer all applicable statutes and regulations? Generally, third-party service both at the point of purchase and upon delivery. Additionally, deliverproviders are considered to be a servant or agent of the retailer with ies may only be made during the lawful hours that the licensed retailer whom the third-party provider contracts, and any violation by the is open for business and deliveries cannot be made to high school or third-party provider is deemed to be a violation of the licensed retailer. college campuses. Of course, there are remaining states that have reAs such, it is imperative for industry members and third-party service frained from codifying alcohol delivery at all, therefore establishing an providers alike to understand the statutes and regulations applicable to alcohol beverage delivery, who is liable in the event of a violation, and 4 See e.g., Idaho Code Ann. §23-1013 (Idaho), La. Stat. Ann. § 26:308 (Louisiany additional municipal laws that may apply. ana). 5 See e.g., Ala. Code § 28-3A-13.1 (Alabama), Tex. Alco. Bev. Code Ann. § 57.01 (Texas). 6 See e.g., Mich. Comp. Laws Ann. § 436.1537a (West), Ohio Rev. Code Ann. § 4303.185 (Ohio). 7

See e.g., Fla. Stat. Ann. § 561.57 (Florida), Ga. Code Ann. § 3-3-10 (Georgia).

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Lauren Voke, Kristen Catasús, and Alexis Mason are Associates with GrayRobinson’s Nationwide Alcohol Beverage Practice. Visit www.gray-robinson.com/alcohol-beverage-practice for more information.

LOCH & UNION DISTILLING

of American Canyon, California Written and photographed by Devon Trevathan

t first glance, Scotland and California’s Napa Valley may not seem to have much in common. However, both have conditions suited to producing certain styles of alcohol, and Loch & Union Distilling in American Canyon, California, is hoping to be a bridge between these two famous destinations with their American single malt whiskeys that use Napa Valley wine barrels for aging. Co-founders Colin Baker and Matthew Meyer met at the London School of Economics in 2008. Not long after, Baker decided that he wanted to leave his comfortable desk job to open a distillery, and after studying at Heriot-Watt University, he roped Meyer in as director of business operations. Their story is a familiar one, but perhaps one of the more unique elements to it is the facilities’ location in American Canyon a scant 20 miles south of the heart of the Napa Valley wine region and a stone’s throw from legendary vineyards and wine barrel cooperages. “That was their kind of dream, they wanted to build a kind of Scottish style/size distillery here, and they built it here close to the Napa Valley because we have the access to barrels,” said Gian Nelson, chief distiller and winemaker at Loch & Union. Location has been a strong source of inspiration for the team at Loch & Union. Early on Meyer dictated that the production style for Loch & Union’s whiskeys would mimic that of Scotland’s in many ways, albeit with a California twist. “Our first big product that we did once we built the distillery was to make our single malt and age it in 100 percent used wine barrels from here, so we have about 400 of those barrels sitting, they’re almost four years now,” explained Nelson. He himself brings a bit of that Napa sensibility to W W W . ARTISANSPIRITMAG . C O M

“Our first big product that we did once we built the distillery was to make our single malt and age it in 100 percent used wine barrels from here, so we have about 400 of those barrels sitting, they’re almost four years now.” — GIAN NELSON

Chief distiller and winemaker, Loch & Union Distilling

the distillery: Before joining Loch & Union as a distiller, Nelson was working in the wine industry at several vineyards in the area, but Baker made him an offer that was too good to pass up. “It was a twist because I was already well into my career in wine and loving it. I think the shift was, for me at least, in wine I was always going to be someone’s number two,” said Nelson. This was in opposition to distilling, particularly five years ago when he came on board, which has offered newcomers opportunities for rapid ascension. “It’s kind of interesting that after five years I’m the master distiller here, and it’s like, whoa, hey I never thought in my life — after five years in wine I would have been [just] getting out of the vineyard.” The wine industry in Napa has come a long way from its early days. It feels like a lifetime ago that an American white and red won the Paris Wine Tasting of 1976, ushering California wine into the rarified air populated by the finest French examples. Napa’s distillery scene may not have seen the same development, at least not yet, though Loch & Union are doing what they can to change that W W W . ARTISANSPIRITMAG . C O M

perception. On top of their own spirits production, they have the capacity for a thriving contract business, one that has been particularly busy since the worst of the pandemic was in the collective rearview. “Ever since that happened, for the last maybe eight months, it has just been nothing but just contract, contract, contract,” said Nelson. He explained that they were happy to do so, having thought about contracting at least to some degree when setting up their distillery, but that as a distiller it isn’t the most consistently gratifying work. “Could I blend bourbon for the rest of my life? No, I couldn’t. It’s like being a chef and all you do is make omelets at IHOP all day,” said Nelson.

Acquiring commercial real estate in which to set up a production space is not as easy in Napa Valley as it is in other parts of the country, so there is a certain degree of emphasis on efficiency within Loch & Union. From the outside, their building looks more like a warehouse or office park than a typical production space, but inside it is well laid out, with neat rows of fermenters, tanks, and totes. Their setup is designed for single malt whiskey more than anything — there’s no cooker, only a mash tun, so the distillers at Loch & Union primarily deal with malted barley. For a business that promotes its contracting services, this does pose

a bit of a logistical conundrum. How do they assist the potential swath of customers who want to make bourbon? Simple: They send them down the road to Savage & Cooke, another Napa distillery that is better suited to that type of contract distilling due to their particular system. “I don’t like to work out of the parameters for a client,” Nelson said. “If they want a bourbon, I could make a really interesting bourbon here.” Nelson also recognizes that it won’t be akin to the typical style of bourbon that you see coming out of 70

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Kentucky, which is what many would-be bourbon buyers are looking for. At the same time, he doesn’t feel pressured that he’s going to miss out on this one slice of the pie when there are so many other styles of spirit that they are better suited to distill. They have three large Carl stills and a configuration that was custom engineered for Loch & Union by the team at Carl, which at the point of sale was the first large system they’d ever sent to the United States, according to Nelson. “The big part that I really enjoyed about not only being here in the W W W . ARTISANSPIRITMAG . C O M

conception, of like going to Germany and meeting the guys, talking about how all of our valves and everything should be more like at a man’s height because the guys that are working there are between 5'8" and 6'2",” he said. “The Germans were very good about that.” There’s a 5,000 liter wash still situated next to two sister 3,200 liter wash and spirit stills, the latter of which has a partial condenser/ dephlegmator on top, which can be used to change the character of the whiskey or brandy they’re making through the system. They also have a popular Carl feature: the pot/column

hybrid setup, which can send out distillate between 93-94 percent ABV depending on the starting alcohol content. They do not make vodka on their system, but Nelson is more relieved by that than bothered. Loch & Union has found success dealing primarily with malted barley and fruit-based distillates, particularly brandy, as the core of both their consulting business and their own product lineup. This has been a rare silver lining during a very difficult period of time for their local community amidst the fires that have wracked California. Smoke taint, while 71

detrimental to winemaking, does not always come over as strongly in the distillation, so they have been able to assist other makers in the area with tainted grapes. The biggest benefit to their position, however, would probably be their proximity to wine barrels. So many American distillers use similar barrels for aging their whiskeys — new white oak, char three or four, 53 gallons — but Loch & Union has access to barrels from some of the best cooperages in the world, freshly vacated by wineries within an hour’s drive. This has given their product a unique position within a crowded landscape; few distilleries are doing exclusively wine-barrel aged whiskeys. Loch & Union is able to access fresh barrels twice a year, based on the production schedule of the wineries. This is another area that is benefited by Nelson’s history in the wine industry. “I say, ‘Hey you know what, I need X amount of barrels per year,’ then I go to the cellar with the

winemaker and I look at the barrels there and I say, ‘Oh hey, you know what, I like that cooperage, I know the wood (that) comes from there, I know the style’ — it’s like winemaking,” he said. Being able to play around with a profile made up not only of American oak but French, Russian, and other interesting woods is a creative flex experienced by few distillers, but it also means that blending is a big part of the job at Loch & Union. For as much as Nelson appreciates ingenuity and creativity, as a distiller he said it’s paramount to be able to make a consistent product, and that ethos is very much at play inside the distillery. They want to make a great product, but they also want to know that they can make a consistent amount. “For me, with a distillery this big and the output that we can put, I want our whiskey or whatever brand from shore to shore,” he said. So keep an eye out — you could be seeing Loch & Union very soon.

Loch & Union Distilling is located in American Canyon, California. For more information visit www.lochandunion.com or call (707) 552-2006.

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Written by GABE TOTH

Rye Trials Show Significant Flavor Differences Among Varietals T

he recently completed rye varietal research by Minnesota’s Far North Distilling could have profound implications for the way distilleries choose to source their grain and the flavor impact of those decisions. Far North owner Mike Swanson planted 15 different varietals of rye grain in 2015, 2016, and 2017, distilled the grain in separate batches and aged the spirit made from that rye. The unaged white spirits and the aged spirits were tasted and the differences charted. Despite the industrial-agriculture approach to treating all varietals as uniform, fungible commodities, “there are significant differences in flavor between rye varieties,” Swanson said. “That’s probably one of the biggest takeaways, because that research hadn’t really been done before. I expected that, but nobody had proven it before.” In the commodity grain system, grain that meets certain baseline parameters gets blended — different varietals from different farms get mixed together at the grain elevator — which prevents origin or varietal tracing. “For many, the commodity system is a black box, where grain goes in from the farm and comes back out elsewhere

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in the country, possibly malted, and at a higher price,” Swanson said. “What we’re demonstrating is that direct sourcing is very important, it can be vitally important to distillers, because grain merchants don’t know what variety they have.” The report opens with a paraphrasing of agricultural writer Wendell Berry: “Drinking is an agricultural act.” The Far North study aims to tie the product in a whiskey glass more closely to the product coming from the farm. “Just imagine if nine out of 10 bottles at your local wine shop were simply labeled ‘grape wine’, with no mention of whether it was a Cabernet or Chardonnay. That is the current state of the rye whiskey market,” the study stated. “…There are craft whiskey distilleries that have begun to circumvent this supply chain and buy grains directly from local farmers as a point of differentiation. Still, most of these

newcomers focus on the relationship with the farmer as a feature of regional pride and profile, not as a means to highlight distinctive flavors through varietal selection.” The project began with a call from a farmer in Maine looking to source seed for AC Hazlet rye, the varietal Far North began growing in 2013. When Swanson asked why he needed that particular type of rye — after all, aren’t there plenty of seed producers closer to Maine where he could get rye? — the farmer explained that the distilleries he sells rye to had been complaining that the flavor wasn’t as good when he switched varietals. “I thought, ‘Wait a minute, I thought all of this stuff tasted the same,’” Swanson said. He called a smallgrain specialist at the University of Minnesota and asked if there was any research on the topic, and was told no, but that it would make a good research study. Far North submitted a proposal, received a grant from the Minnesota Department of Agriculture in 2015, and got started. All of the varietals that were tested had known agronomic data available, so Swanson was able to select with an eye on factors such as winter hardiness, days to heading (maturity), plant height, straw strength, ergot, test weight, and protein level, as well as ease of processing in the distillery, given rye’s notoriously troublesome nature.

“What we’re demonstrating is that direct sourcing is very important, it can be vitally important to distillers, because grain merchants don’t know what variety they have.” — Mike Swanson, FAR NORTH DISTILLING

After distillation, the spirit was aged in 15 gallon barrels for 18 months, and sensory information collected on both the aged and unaged spirit from 190 industry professionals, agricultural professors, distillers, bartenders, and members of the general public. The hypothesis, that flavor differences existed, was validated in the clearly identified variability of the spirit based on the rye varietal. The differences among the unaged spirits were significant, Swanson said, “but what really stood out was that after aging, those differences in flavor were actually amplified. I expected them to be covered up by the barrel-aging process. I expected the barrel aging to kind of roll over the differences in varieties.” He also recognized a secondary pattern in the way the flavors were described. The hybrid ryes — those bred for homogeneity, ease of handling, uniformity, and fast pollination — all tasted good and resembled each other. The open-pollinated ryes, which are less standardized, less uniform, and slower to pollinate, exhibited a broader spectrum of flavor. “That wasn’t too much of a shock with the unaged [spirits], but when we got to the aging, the differences just become amplified,” Swanson said, noting there was not much difference in flavor between the hybrids. “It wasn’t bad, but it wasn’t the kind of depth and complexity we saw with the open-pollinated varieties.” That wide variability and depth wasn’t always good. There were varietals that produced spirits they liked and others that produced spirits they

didn’t like. There were also some, such as Oklon, an older variety from Oklahoma, and Spooner, an older rye from Wisconsin, whose flavors were transformed during aging. “Both of those two were surprises, because the unaged distillate didn’t taste very good at all from either of those. It came out of the barrel like a caterpillar that turns into a butterfly. It was amazing – depth and complexity, great flavors, nice finish. We were really surprised,” Swanson said. He laughed, adding that, as a farmer, it was a little disappointing. “Both of those varieties were an absolute pain in the field,” he said. “I couldn’t argue with the flavor, though, so I may grow some for our Seed Vault series.” The research results show that distillers are gambling with the flavors they’re going to get using commodity grain from a merchant, since varietal information is lost very early. “Farmers are individualistic about their variety. They don’t all grow the same thing,” Swanson said. “When the grain is brought from the farmer to the elevator, the varietal information is lost right there, early in the process. And the elevator turns around and sells it to a larger ag company, and the ag company sells it to a grain merchant, and there’s no way for them to know what variety they have. “What we’re showing with the study is that varietal information is vital to the flavor of whiskey. The farming aspect of this really matters. There’s a real voice that the farmer has in the process of making whiskey.” With all the variability in the flavors

The complete study can be found at www.farnorthspirits.com/rye-study/

of different ryes, Swanson said, there’s no single perfect variety. “There are different flavors and different distillers are going to be looking for different things,” he said. The study didn’t even dive into obscure varietals that are more troublesome, whether low yielding, prone to lodging, finicky to grow, and have been effectively retired. “A lot of times, some of those varieties have been heirloomed for a reason. If you have a variety that’s robust in the field, that has all of these great agronomic characteristics, farmers are going to gravitate towards those varieties,” Swanson said. “The trouble with that is, sometimes the varieties that are a little older, maybe a little more troublesome in the field. What we’re showing with our study is sometimes they have really great flavor. That’s important as well.” So with all of this research, how did Swanson’s preferred varietal, Hazlet, fare? “We were relieved that Hazlet was a real standout in flavor,” he said. “When I first picked Hazlet, no one could tell me anything about flavor. Nobody knew anything. There’s not very many of us distillers who are also farmers.” He originally selected it for its winter hardiness and resistance to lodging. “Where I am is flat as a table top,” he said. He came home to the family farm in Minnesota and planted Hazlet in fall of 2012 in anticipation of building the distillery in spring of 2013. He bought some seed from Canada, and “lo and behold, it has this fantastic flavor profile,” he said. “It was a little bit of a gamble, but we did it anyway.”

Far North Distilling is located in Hallock, Minnesota. For more information visit www.farnorthspirits.com or call (612) 720-3738.

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BLACKBIRD ASSETS WHISKEY EXCHANGE A New Wholesale Auction Series Offers Fresh Opportunities for Buying and Selling WRITTEN BY MARGARETT WATERBURY

PHOTOS PROVIDED BY BLACK BUTTON DISTILLING

uctions aren’t uncommon in the spirits industry. Hardly a week goes by without a breathless news story revealing the astronomical sums some magnate or heiress has recently shelled out for a venerable Scotch whisky or a batch of collectible bourbon accompanied by an EFT. But Jason Barrett, president of Black Button Distilling, and David Fiegel, managing director of Blackbird Asset Services, had a different kind of whiskey auction in mind when they created their Whiskey Exchange, a new wholesale auction series designed exclusively for the trade. The exchange, which the two describe as a marketplace, provides a venue for producers to both sell and purchase bulk lots of spirit, including casks of aged product. Barrett says the idea came about when he attended a liquidation auction conducted by Blackbird Asset Services for a distillery that was going out of business. Afterwards, he approached Fiegel with an idea. “This makes a good format and opportunity to bring unique products to light,” said Barrett. “Why does it have to wait until somebody’s going out of business? Couldn’t we do this more often?” The first Whiskey Exchange took place in July of 2021. Held entirely online, the live virtual auction attracted about two dozen prospective buyers, who vied for the opportunity to purchase just over 100 casks of aged Canadian whisky, divided into multiple lots. Barrett and Fiegel say it was a successful proof of concept. “There were some good deals, and there was some intense competition for certain lots,” said Barrett. “If you’ve got a fair group of people in the room, the market gets to set the price.” The duo is now gearing up for “There were some good a second Whiskey Exchange in February 2022, with plans deals, and there was to hold auctions twice a year some intense competition moving forward. for certain lots. If you’ve Live auctions are a unique got a fair group of people venue for buying and selling in the room, the market wholesale spirits. For sellers, gets to set the price.” it provides an opportunity to quickly generate a return from — J A S O N B A R R E T products that might not fit a PRESIDENT, BLACK BUTTON DISTILLING W W W . ARTISANSPIRITMAG . C O M

brand profile, or that no longer fit into an expanding business’ product strategy. As an example, Barrett describes some whiskeys he made years ago using six different yeasts. “I wanted to do this whole yeast series,” explains Barrett. “But now, the idea of coming out with six different whiskeys and trying to explain to consumers what makes them unique is a challenge that will distract us from other priorities.” He sees auctions as a way to give sellers an alternative venue for realizing a return from those kinds of oddball casks without resorting to brokers or managing an independent sale. For buyers, auctions are an opportunity to purchase unique, unusual, or one-of-a-kind lots to fill gaps in product portfolios, trial a new category, or develop an aged spirits program while their own casks mature. “That’s the beauty of this. There’s a buyer out there for everything,” said Fiegel. Unlike consumer-focused auctions, all bidders must hold a valid DSP to gain access to Blackbird Asset Management’s Whiskey Exchange. Bidders are semi-anonymized, identified only by their geographic location. Sellers may choose to remain anonymous, or to disclose their identity. Unless a buyer and seller happen to be located near one another, all lots are routed through Black Button Distillery in Rochester, New York, then sent on to the winning bidder via a bulk transfer in bond. Buyers pay an 18 percent buyers’ premium and cover packaging and shipping costs, while sellers pay a flat $50 fee for each barrel they list. Barrett says the fee structure is highly competitive. “Most brokers I’ve found are looking for a 30 to 35 percent return,” said Barrett. “And if you’re working directly on ADI forums, of course, you don’t have to pay anybody, but you have to take care of the paperwork. And there’s always the question: Did I price it correctly?” He’s alluding to the unique ability of auctions to simultaneously establish and validate market pricing. Auction outcomes differ dramatically based on the kind of product being sold. At one end are highly specialized single-use pieces of equipment — Fiegel offers the Space Shuttle launch platform as one example. These items are extraordinarily expensive to create, but may “The lure of low yield scrap-level prices at auction because they’re so prices can be the specialized that no other buyer can use them. avenue to high At the other end of the spectrum are items such as prices, because art, EFTs, or collectibles. These may cost little to produce, but yield extremely high prices at auction based the competition on intangible value conferred by prestige, rarity, or culis there, and tural context. competition Bulk spirits sit squarely between these two poles. supports the “This is a commodity,” said Fiegel. “An auction will bring price and it what it’s worth.” And while there are no guarantees, the validates the unique dynamics of auction psychology can also play purchase, too.” a role, particularly if a lot appears highly desirable by multiple bidders. “The lure of low prices can be the av— D AV I D F I E G E L enue to high prices, because the competition is there, MANAGING DIRECTOR, BLACKBIRD ASSET SERVICES and competition supports the price and it validates the purchase, too,” said Fiegel. The next auction will take place on February 23, 2022, at 11 a.m. Eastern Time. In addition to more Canadian whisky, lots will include bourbon, gin, cask-strength Canadian rye, absinthe, and rum, with the potential for even more variety as the event approaches. “We’re still receiving new prospects from folks who want to put things into the auction regularly,” said Barrett. “We even have people who bought in the July auction and are selling in the February auction.” Interested buyers and sellers should contact Blackbird Asset Services at auctions@blackbirdauctions.com for additional information, to pre-qualify as a buyer, or to request samples. 76

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FOUNDATIONS of CRAFT DISTILLING WRITTEN BY GABE TOTH

4: Aging/Bottling

s the American craft spirits world grows, new and would-be distillers do not always have access to the best information on the fundamentals of distilling. What worked for grandpa in the woods, or a friend’s methods on their garage still, doesn’t always translate into making the best possible product for a commercial operation. To that end, we hope to provide some basic, foundational distilling knowledge for new craft distillers and those who have not been formally trained in a series of articles that cover the key foundational components of distilling at a craft level. READ FOUNDATIONS While the princi- OF CRAFT DISTILLING 1: MASHING ples laid out in this and previous articles are not always hard and fast rules, there are often good reasons that they have READ FOUNDATIONS become guiding OF CRAFT DISTILLING principles. Rules can 2: FERMENTATION be broken, but one should learn the rules in order to know best how to break them. As much as possible, we will attempt to READ FOUNDATIONS explain the reasons OF CRAFT DISTILLING 3: DISTILLATION for these principles or best practices, but given the space constraints of a magazine, this will not always be possible. This article, Aging/Bottling, continues and builds on the content from the Mashing, Fermentation, and Distilling articles in previous issues of Artisan Spirit. W W W . ARTISANSPIRITMAG . C O M

Aging Barrel-aging is a cornerstone of many types of spirits, whiskey in particular. Estimates vary on just how much of a final barrel-aged spirit’s character is contributed by oak and the aging/maturation process (Is it 50 percent? 75 percent?) but it’s inarguably a significant factor. Spirits undergo a variety of chemical transformations in the barrel; it’s a tremendously complex process that’s not entirely understood. However, there are three primary avenues of change that occur in the barrel: evaporation, extraction, and transformation. Evaporation is the result of barrel contents transiting slowly through the porous oak. A certain amount of loss is to be expected and

is even desirable, as it results in the removal of undesired flavors and a relative concentration of desired flavors. Evaporation in barrel maturation is not isolated to the water and ethanol that are the primary components in a spirit. A variety of less desirable compounds, or compounds that can be desirable in very low quantities, will pass through the microporous wood structure and evaporate. These include acetaldehyde, dimethyl sulfide, and a variety of the lightest alcohols that occur in heads, which can bleed into the hearts depending on other factors in distillation. In addition, as the angel’s share increases in the barrel, the less volatile compounds will actually increase in concentration, potentially improving the flavor of the spirit. 77

When considering extraction, we need to remember that the extraction occurring in the barrel actually consists of two sets of extractive compounds. Oak is primarily composed of cellulose, the molecule that gives wood its strength and structure, but also hemicellulose (which contains a variety of sugars) and lignin, which serves as a sort of intercellular binding agent. There are also a large number of other compounds occurring at lower concentrations, including tannins, organic acids, phenols, and oak lactone. The spirit being stored in the oak consists of large amounts of both ethanol and water, and many oak compounds have a greater affinity for one or the other. Effectively, there are compounds that are more water-soluble, and those that are more ethanol-soluble. To maintain the balance between these two sets of compounds, a barrel proof of 55 to 65 percent is generally used in the United States and other whiskey-producing countries (the TTB sets the upper bounds at 62.5 percent, or 125 proof). Some distillers use a lower proofing rate to increase the level of water-extractable compounds, while simultaneously reducing the amount of water that will have to be added to proof down the final spirit, diluting the flavor. This practice does result in an increased need for storage; to put away roughly the same amount of spirit, a distiller needs to rack five barrels at 60 percent ABV for every six barrels at 50 percent ABV. At large volumes, those numbers can add up. In other places around the world, the upper limit for barreling is higher, up to 70 percent

ABV in some countries. Beyond 75 or 80 percent ABV, though, the ethanol begins to extract wood compounds that can negatively impact the flavor and clarity (filterability) of the spirit. Transformation processes in the barrel can include reactions that are catalyzed between two or more components of the spirit (such as esterification, where an acid bonds with an alcohol to create a fruity tasting ester), by the presence of oxidation or wood compounds, or can occur between a compound in the spirit and a compound in the wood. Ambient conditions can impact all three of these categories of change within the barrel. Increased heat and decreased humidity

can result in higher rates of evaporation, as well as the transformation reactions that are simultaneously occurring, while large temperature swings facilitate aging by driving the spirit into and out of the oak as it expands and contracts. Higher temperatures tend to facilitate more rapid reactions and extraction. Whiskey produced in the United States is required to be aged in charred new oak casks per TTB rules, generally American white oak (Querecus alba). The “new” requirement means the barrels can be used once for whiskey, though they may be used for other barrel-aged spirits afterwards. (Whiskey from used or recoopered barrels can be labeled as “Whiskey distilled from a [TYPE] mash,” with types including malt, bourbon, rye, malted rye, and wheat.) Charring the inside of an oak barrel prior to first use results in a variety of transformations in the oak compounds. The most interior layer of the oak is burnt to a degree that leaves few flavor-active compounds behind, but does result in a layer of activated carbon making direct contact with the spirit. This black, sooty layer of char will bind up many of the less-desirable compounds in a spirit. Further in from the layer of black char are layers of oak that have undergone varying levels of transformation. The heat of charring has broken down many of the constituent oak compounds, resulting in the creation of vanillin, eugenol, and byproducts of caramelization and Maillard reactions. W W W . ARTISANSPIRITMAG . C O M

Toasting is a process, often used in conjunction with charring, that has become increasingly popular with craft distillers trying to control or create additional variety in the character extracted from the barrel. It is a lower-temperature process intended to result in breakdown and conversion of oak compounds deeper in the wood than is generally reached through charring alone. Different types of oak will also impart different flavor characteristics into the spirit. While American white oak (Querecus alba) with its elevated levels of vanillin is traditional in the U.S., other types of oak (such as French Limousin or Hungarian oak) have their own traditions of usage and can contribute more spicy, dark fruit, or other unique character. The American legal requirement for new barrels also helps to feed the international market for barrels. Because they are created in such volume as a result of the persistent and increasing need for new barrels, onceused bourbon barrels have become the container of choice for aging Scotch, rum, tequila, sherry, and a variety of other products. These secondary or even tertiary uses of the barrel result in a decreasing impact of the whiskey on the spirit. The majority of color and flavor is extracted from the barrel in the first use within the first several months or a year of aging. Commonly, 53-gallon barrels are used for aging spirits in the United States, though a variety of other barrel sizes can be used. Smaller barrels can increase the evaporation rate — due to a higher surface-area-to-volume ratio — and the rate of oak extraction into the spirit. This can lead to the over extraction of tannins, lignin, vanillin, and other barrel flavors, leading to a one-dimensional, astringent spirit. Depending on the underlying spirit, even 53-gallon new barrels can over-extract and cause a spirit to diminish in quality after a certain point. However, spirit being stored in a smaller barrel may require narrower cuts to be made during distilling so that a cleaner spirit is barreled because the spirit will have less time for transformational reactions to occur in aging. Longer aging in larger barrels allows for greater production of reaction-based flavor products, though the rate of change is not linear nor is it uniform among the various W W W . ARTISANSPIRITMAG . C O M

possible reactions. Some changes may take place early, others may be continuous and even, while others may continue but taper off over long periods. Some distillers also use oak chips, small barrels, or barrels designed with increased interior surface area to increase the extraction rate and the liquid-to-surface-area ratio. There are even distillers using technological approaches to attempt to rapid-age spirits. Thus far, these approaches have not created an equivalent product (i.e. Process X produces a whiskey in two months that cannot be differentiated from a ten-year whiskey), but they do create unique spirit flavors and offer an avenue for continued research and development in craft spirits. For distillers who buy barrels in lots and don’t use them all promptly, it is common to swell barrels that may have dried out. As empty barrels sit in a warehouse, the oak can lose moisture and the staves will shrink,

leading to leaky barrels. Distillers can easily avoid this prior to filling by soaking the heads with hot liquor for mild cases, or filling the barrels with hot liquor for a day or two to ensure that the oak is properly hydrated before being filled with spirit. This practice doesn’t reduce the extractable oak character in any noticeable way. Optionally, barrels that have been used for other products — most commonly fortified wines such as sherry or port, but widening in the 21st century to include products such as tequila, rum, Scotch, beer, wine, and even hot sauce or maple syrup — can lend another layer of character to a spirit that is properly aged and ready to be transferred into a finishing barrel. Finishing barrels can add their own nuances to the product, but they don’t take the place of proper aging, nor will they turn a bad whiskey into a good whiskey. They are best used to enhance a high-quality spirit that would benefit from another layer of flavor. 79

Proofing and Packaging After the aged spirit has been harvested or the unaged spirit has been distilled, there are still opportunities to make the best of the spirit or to lessen its quality before it reaches the customer. The final key stages of producing a finished product are proofing, filtration, and packaging. Many spirits are rested after distillation, blending, or proofing, prior to packaging. Spirits that are a mixture of separate distillations of botanicals or other ingredients may be rested to allow the flavors to marry. Liqueurs containing a high load of solids that may be difficult to filter can be rested so that the particulate matter can settle out. Spirits that are being proofed down can be rested between proofing steps — in a very involved version of this process, cognac and other fine brandies can be blended, proofed slightly, and rebarreled, with this process being repeated until the product is ready to bottle. For distillers who release whiskey or other barrel-aged spirit, unless it’s all single-barrel iterations, the spirit will inevitably be a blend of multiple barrels. (Not to be confused with the TTB definition of a “blended whiskey,” which is a blend of whiskeys from multiple distilleries.) The spirits from those various barrels can also benefit from a period of resting to allow the flavors to marry. Spirits also benefit from being proofed in stages, known as slow proofing. As compared to adding all of the necessary water at once to bring a spirit down to bottling strength, slow proofing involves adding smaller amounts of water over a longer period, weeks or months, and allowing the water to fully integrate into the spirit. The chemistry of slow proofing is complex and — as with so many aspects of distilled spirits — not fully understood. However, the flavor impact of slowly diluting a spirit versus crash-proofing it all the way down at once is noticeable. Both aged spirits and unaged botanical spirits can benefit from slow proofing. In addition to flavor development, proofing a spirit more slowly can prevent saponification. The rapid addition of water to a spirit that contains high levels of flavor-forward fatty acids can create soapy tasting compounds 80

in the spirit, because the distiller is in fact breaking down the fatty acids and creating soap. When proofing down spirits, either going into a barrel or to prepare for packaging, the type of water used is essential. It should go without saying that the water is clear and filtered, without off-flavors or aromas. Very hard water, high levels of iron in particular, should generally be avoided, but some mineral content, especially calcium, can be desirable. There are different levels of water treatment that a distiller may look into, depending on their goals and their products, including using city water, spring water, distilled water,

and water treated via reverse osmosis. Prior to bottling or in-line on the way to the bottling line, all spirits should be filtered for particulates at a minimum. Neutral spirits can benefit from carbon filtration, but the spirit should be left a few percent ABV above target as the carbon filtration will lower the proof of the spirit. Many aged spirits, such as whiskies, may haze after being proofed down, either in the tank or in the bottle. Some distillers will cool the spirit to prompt this haze formation, which is a result of high levels of flavorful long-chain fatty acids or barrel-extracted compounds, and then filter the haze out. This W W W . ARTISANSPIRITMAG . C O M

is known as chill filtration, and it is believed to potentially remove small amounts of flavorful compounds. When filling bottles of your finished product, it is important to rinse or blow out the bottles to ensure that no foreign debris is left in the bottle, thus making its way into your finished product. Multiple ABV and volume checks should be done during filling to ensure your product meets TTB requirements, and these results should be recorded as a safeguard against potential issues with the batch. As with in-process product, volume should be calculated based on weight and ABV rather than a raw measurement of volume, given that volume can change based on temperature and ABV. There are multiple distillery management software programs out there; decent ones will provide a calculator to help you determine the proper fill weight. Most small distilleries rely on a gravity-fed bottling system, while larger distilleries will use vacuum fillers or large rotary fillers at the

upper end. Glass containers are most common for spirits, but an increasing number of distillers are incorporating aluminum cans into their lineup to offer canned cocktails. It is essential to research any package material (including the interior lining) to ensure that it’s safe and appropriate for a distilled spirit. The higher concentrations of ethanol in a spirit may require a different type of interior coating that won’t be extracted into the strong solvent. Bottling equipment is an area where distillers need to make sure they have the proper seals and gaskets installed. Many distillers use equipment designed for wine processing. There is nothing inherently wrong with this, but the soft parts that are intended for use with wine, which is generally below 20 percent ABV, may degrade more rapidly when used with spirits at 40 percent ABV or above. Be sure that replacements, preferably meant for use with high concentrations of ethanol, can be sourced.

Of course, appropriate tamper-evident closures must be used and a TTB-approved label must be affixed to the finished package. Closures might include t-tops with a top band, shrink sleeve, or shrink capsule; a threaded cap with safety seal; or a roll-on cap with safety seal. And finally, at the end of the day, if you understand and have successfully done the things laid out in this and the previous three articles, you might have a bottle of finished product that makes you proud. This article wraps up our cursory overview of distilling fundamentals. The content laid out in these four articles will form the core of a future publication that will more fully explore and elaborate on these and other essential topics, so notes on any omissions, errors, or questions are welcome and we will work hard to make this material as thorough and accurate as possible.

Gabe Toth is lead distiller at The Family Jones Distillery in Denver and Loveland, CO. A former craft brewer, his passion for fermenting and transforming ingredients also extends to sausage and meat curing, cheesemaking, and pickling. He can be found up in the mountains or at gabetoth@hotmail.com. W W W . ARTISANSPIRITMAG . C O M

ALL in the FAMILY The more things change, the more they stay the same at Huber’s Orchard and Winery, through seven generations Written & photographed by Andrew Faulkner

isitors to Starlight Distillery can easily see there is more than one slice of heaven hiding between the buildings of the fresh produce market, cheesemaker, organic ice cream shop, and U-pick farm found at Huber’s Orchard and Winery. This idyll in southern Indiana exemplifies the American heartland that people try to find on Disneyland’s Main Street. It constantly ranks among the top five tourist destinations in both the State of Indiana and the Louisville, Kentucky, metro area. And, Huber’s is one of the area’s most influential craft distilleries. “We were founded in 1843 by Simon Huber, who would be my great-great-great-grandfather, which puts me at sixth generation owned and operating the business,” said Ted Huber. Simon Huber emigrated from Baden, Germany, where the family grew apples and grapes to make wine and brandy. Arriving in a part of southern Indiana called The Knobs in the 1830s, he homesteaded, planting apples and grapes to make brandy and wine.

Although Prohibition shut down wineand brandy-making, Ted’s father restarted the winery in the 1970s, housed inside their Depression-era dairy barn, which is now home to the bottle/gift shop and Starlight Restaurant. A tunnel behind the shop’s cash register leads down to the winery and distillery. New rickhouses have sprung up on the next rise, with more being planned as fast as they can fill them. Next to the barn is the old farmhouse from the 1843 homestead, where several generations of Hubers have lived. Ted and his wife, Dana Huber, lived there for 11 years, but now bridesmaids and groomsmen often gather there for weddings. Though the Huber family began farming on The Knobs in the 1830s, they claim 1843 as the founding date. “We use 1843 because we've owned that piece of property continuously and lived on that piece of property continuously since 1843,” said Ted, mentioning that one of the new rickhouses sits where they think the 1830s farmhouse once stood, on a piece of land the family had previously sold and bought back in just the last 20 years. Ted – along with Dana, cousin Greg Huber, and Greg’s wife, Jan – make up the sixth generation working the land. As Greg’s three OPPOSITE PAGE: Blake thieves whiskey.

children have already begun “We were blessed when the old guard, working in farm manageor the old generation of distillers, ment, events, tours, and hoswanted to be with us.” pitality, Ted and Dana’s sons, Christian and Blake, are mov— Christian Huber ing into winery and distillery operations with innovations already having an impact. “At that age, being able to participate and “We're transitioning with the next group really learn alongside all of the knowledge that wants to come into the company, looking that was there in the room,” added Dana, at avenues, places that they can flourish and “they've had great opportunities to really abbe entrepreneurial within that group,” said sorb that and be around it.” Ted. Huber’s also had foundational influence And as Christian and Blake grew up exon both the American Distilling Institute posed to the craft-distilling resurgence in its and the American Craft Spirits Association, infancy, they developed sensory analysis skills and Ted served as the chairman of the Small during their formative years. Even though Distiller membership group of the Distilled they’re young – Christian is 25 and Blake Spirits Industry Council, so the boys had is 23 – they have been around the business, plenty of exposure to the first generation of gaining experience, for a decade and half. craft distillers. “We were blessed when the old guard, or “All those great bottles of whiskey that we the old generation of distillers, wanted to be were tasting in those evenings, and the knowlwith us,” said Christian. “When we were 12, edge that you can absorb at that young of age, 13, 14 years old … Dad and Dave [Pickerell] to develop a palate at that age was a fantastic and Lisa Wicker and [Starlight Distillery environment,” Ted stated. head distiller] Jason [Heiligenberg]; all those Despite their advanced exposure to the … were like, ‘Here smell this.’ ‘Do you get industry and sensory analysis, age became a this?’ Or ‘This is this type of oak,’ ‘This is char hindrance when the boys went to get an edfour,’ ‘This is char one,’ ‘This is a toasted barucation, since U.S. universities are restricted rel’ when we were really, really small.” in letting people under age 21 from han-

LEFT: Christian and Blake in August 2021. RIGHT: (left to right) Dana, Blake, Ted, and Christian Huber take a moment for a family photo while hosting American Distilling Institute's spirits judging at Huber's Starlight Distillery in 2012.

dling beverage alcohol. To get around this, Christian went north of the border to Niagara

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University in Ontario, Canada, to study winemaking and distillation. Blake went to Cornell University to study viticulture, winemaking, and enology. Christian furthered his studies with internships in southern Italy and California, at major wineries Domaine Chandon, Cakebread Cellars, and Joseph Phelps Vineyards. Blake also followed at Domaine Chandon and continued practicing winemaking at Dominus Estate. “They had been operating with equipment that might have been better than ours, or different than ours,” noted Dana, “so, I saw our boys instantly challenging the guy to my left here,” gesturing toward Ted, “to make bold decisions to improve our program. So you can see the value of those internships by just that encouragement of, ‘Hey, Dad, we've seen something work a little differently out here, a little more efficiently.’ I've seen at least three or four of those big items come into place in our production area, which is great. It's what we want to happen.” Ted added, “One thing we wanted them to do is get a good education for whatever they want to do and then work in the field. Especially if they wanted to come back to this company, we wanted to make sure that their network of people would be vast.” One of the key innovations that generation seven has brought is to the barrel-finishing program. Two years ago, while tasting through a variety of bourbon barrels, Ted waved as he walked past a row of barrels, indicating that those barrels weren't to be touched. “Those are Blake’s experiments,” he said. “In fact, I don’t know what’s in there.” Whiskey itself was a long time coming to the distillery, which was founded in 2000. The original Indiana craft distillery license only allowed for fruit-based spirits. Until a 2013 law allowed them to make whiskey, grain wasn’t grown on the 700-acre farm. Ted was prominent in lobbying for both the original craft distillery license and for the law to change. Now the farm grows almost all the distillery’s grain, bringing in only malted barley. 86

“The fields of rye are absolutely breathtaking in the springtime here on the farm,” said Ted. “Up on top, one of the highest elevations in the state of Indiana is our farm, and we always have wind blowing up here. So, it's breezy. So those rye fields are always dancing in the springtime, and just beautiful to see.” The farm grows red, white, and blue corn for bourbon, experimenting with heirloom strains both on the farm and in the barrel. Seven different styles of barrels are used to see how different new makes evolve in different types of cooperage. The idea is to create barrels with a greater diversity of flavor profiles to use as a single barrel or in blends. “At the end of the day with Starlight, we make terroir-driven whiskeys. We're much more like European cognac or armagnac: Every single day is a new day,” said Christian. “We want the individuality – cask to cask, rickhouse to rickhouse – from you know, tier six all the way down to the bottom. We want the individuality of every single barrel.” “We're making the best whiskey of each day,” said Blake. “Those fermentations do vary. No fermentation is going to be – no cook is going to go – exactly the same. The grains are going to vary, just ever so slightly… That creates the uniqueness of what whiskey is each and every day.”

Of the young mens’ projects, Starlight Distillery’s private selection program seems to be keeping them the busiest. Single Barrel Old Rickhouse Rye Whiskey finished in Rum Barrels, Rye Whiskey finished in Grape Brandy Barrels and Carl T. Single Barrel Bourbon Whiskey Finished in Cabernet Sauvignon Barrels are some of the one-off whiskeys in Huber’s private selection program. These releases have found unexpected pockets of popularity in places like Connecticut. The family has found itself playing host to not just the usual visitors to the Farm Park, but also to whiskey clubs, retailers, and distributors making selections. They use many of these barrels to create custom blends for finishing barrels. Unlike larger distilleries, which may create very large blends to enter into a large number of a certain type of barrel, they match small blends to a cask depending on how they feel each blend will behave inside each specific barrel. “We're crafting the blend for that particular barrel,” said Blake.

“We're making the best whiskey of each day.” — Blake Huber

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LEFT: The old farmhouse at Huber's Orchard and Winery. RIGHT: Ted discusses transitioning the family business over to the next generation.

While Ted's sons have transitioned the distillery's operations, Greg's offspring have added to the business in other ways. Greg’s son A.J. is farm manager; his daughter Marcie is in business development and his other daughter Allie works in Plantation Hall, an on-site banquet and event center hosting events such as weddings, small conferences, and political campaigns. All of those businesses are very active. Huber’s is the largest fruit producer in Indiana. Approximately 600,000 people visit every year, perhaps 5,000–7,000 on any summer Sunday, and seasonal events bring even more. U-pick berries, peaches, and apples spread out over the summer and fall. A pumpkin patch and Christmas tree farm extend visitors’ season through the year’s end.

“This family has taken what was traditionally just a U-pick operation and blossomed that into what we have today,” said Dana. “People don't realize but – sustainability and all this stuff – farmers have been doing this for hundreds of years,” said Ted about diversifying the business and maintaining sustainability. “Good farms stay in the families that stay productive. You take care of your piece of property in order to make sure the next generation has something to farm with.” Sustainable practices help the farm maintain the thousands of bees necessary for the orchard, while also becoming Indiana’s largest bluebird hatchery. Ted explains how the birds help them reduce the use of chemicals: “Birds can be devastating to vineyards, but they actually, if you have the right population of birds, they could be perfect for insect protection. So, all around the vineyards, “I'm excited to see, excited and a little we have bluebird boxes. nervous for our seventh generation, but And all around the lakes, we very, very excited to see what they'll have swallows. Swallows eat

add to this business and what it will look like in the next 20 to 30 years.” — Dana Huber W W W . ARTISANSPIRITMAG . C O M

“Good farms stay in the families that stay productive. You take care of your piece of property in order to make sure the next generation has something to farm with.” — Ted Huber

insects that fly. Bluebirds eat insects on leaves, but neither one of them eats grapes.” Christian said, “We want to keep sustainability at the heart of it. We've been sustainably farmed since 1843. We're Indiana's largest sustainable vineyard, Indiana's largest sustainable fruit farm, and Indiana's largest sustainable craft distillery.” Dana said, “I'm excited to see, excited and a little nervous for our seventh generation, but very, very excited to see what they'll add to this business and what it will look like in the next 20 to 30 years.”

Starlight Distillery is located in Starlight, Indiana. Visit www.huberwinery.com/starlight-distillery for more information. 87

ECONOM ICS of WHISKEY N O I T C U O R D P Part II – Addressing Ongoing s Cash Need

for the Growing Craft Distillery Written by Jeff Quint

n the previous edition of Artisan Spirit, we explored the basic economics of craft whiskey production. We learned why a whiskey distillery becomes quite valuable as it emerges and achieves a certain scale. We showed not only how the entrepreneur that starts the operation is rewarded, but Read Part I how a group of financial investors can be Value Creation handsomely rewarded as well. This article will build on that previous analysis. What we didn’t get into in the last story is the myriad cash flow issues/concerns that develop once the company is up and running. Cash is the lifeblood of any business. You can only stay in business for as long as your cash holds out. As soon as it’s gone, you’re done, game over. Cash is generated and cash is consumed. If we consume more than we generate, no other business will do business with us and no employee will work for us, because other businesses and individuals are worried about that same thing we are: running out of cash. How is cash generated? Of course, we immediately think of selling something — a sales transaction. But for this report, we’ll also include equity infusions and debt as sources of cash. You can’t have a sustainable business without significant upfront, as well as ongoing investments, as we’ll see.

How is cash consumed? Again, we immediately think of buying something — a purchase transaction. This will include product input costs (liquid, packaging, excise taxes, etc.), as well as selling expenses, salaries, rents, and other general/administrative costs. But, again, for this report, we’ll also want to address cash used up for things like (a) growing your inventory and (b) capital investments, such as production equipment, warehousing, and tasting room expansions. These things also consume cash. The point here is that, aside from the normal selling and purchasing activities, there are other factors that affect cash, such as financing activities and investment activities. We can’t be comfortable that we’ll keep sufficient cash on hand until we’ve fully evaluated these other sources and uses of cash. A simple way to do this is to look at an example company during one year of growth when they are still ramping up and in high-growth mode. We’ll look not only at their simplified profit and loss (P&L) for that year, but their beginning and ending balance sheets. The example company is set up to be in high-growth mode, where it has already spent a few years making and aging whiskey and has begun selling it (30,000 cases sold in the year of this scenario) profitably, but is still growing its volume up to the point where it will level off at 50,000 cases of whiskey annually, where its current production capacity is maximized.

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Assumptions/Reminders

> This distillery was started by an entrepreneur who gave up 80

percent of the company in exchange for $12 million of equity capital to start the distillery.

> This whiskey distillery is in about its fifth year of operation,

where it spent the first two or three years producing only whiskey and began selling whiskey only in the last few years.

> The company’s recent ascent to profitability has allowed it to

> This distillery was built to max out at about 50,000 cases per year and expects to achieve that level of sales in two more years.

Observations Balance Sheet > Accounts Receivable (A/R)

is increasing as sales are increasing.

begin funding its ongoing growth with bank debt rather than additional equity infusions.

Balance Sheet

cash e Accounts receivabl Inventory Land & Buildings nt Operating Equipme iation Accumulated Deprec

> Inventory continues to climb

as the company’s production team makes even more aging whiskey to support the increased sales that will occur 3-5 years from now.

Debt Equity Capital Retained Earnings

Start of Year $

500,000 3,000,000 7,500,000 6,000,000 (2 ,000,000)

$ 15,000,000 $

600,000 3,500,000 7,500,000 6,500,000 (2,400,000)

15,700,000

3,805,000 12,000,000 (105,000)

15,700,000

3,300,000 12,000,000 (300,000)

$ 19,000,000

Change 100,000 500,000

End of Year -

500,000 (400,000)

505,000 195,000

> Capital items, in the form

of operating equipment (tanks, fresh barrels, rickhouse racking, etc.), continue to be added as the volume of needed inventory grows. > $400,000 of depreciation

expense was added to accumulated depreciation as the company continues to depreciate its numerous capital items. The vast majority of the depreciation expense would likely be included in cost of sales, as it would relate to production-related investments. > Debt increased by $505,000

this year, as the company financed its growth. > Retained earnings (technically

negative retained earnings or “accumulated deficit”) improved by $195,000, representing the net income for the year.

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Income Statement Income Statement > The company sold 30,000 cases of whiskey during the year, at an average net revenue of $240/ case (targeting a $40 shelf price for each bottle). > The company realized a

gross margin of 55 percent for the year, after expensing all the costs related to producing and shipping the product, including depreciation.

Sales Cases Revenues Cost of Sales Gross Margin

$240 45% 55% 30% 20%

12 Months 30,000 $ 7,200,000 3,240,000 $ 3,960,000 2,160,000 1,440,000

Selling costs General & Admin $ Total SG&A Operating Income (EBIT) $ Interest Expense Net Income

> The company’s selling costs were 30

percent of revenues. The company expects this to normalize at 25 percent once it plateaus at 50,000 cases and can simply maintain that sales volume rather than growing it.

3,600,000 360,000 165,000 195,000

> The company’s general and administra-

tive (G&A) costs equaled 20 percent of revenues. > The company incurred $165,000 of in-

terest on its bank debt during the year. > This left the company with net income

of $195,000 for the year.

Uses of Cash

Sources of Cash

$ Operating income Add back: sh expense) Depreciation (a non-ca Total Sources

360,000 400,000 760,000

Interest Expense $ 165,000 Increase in A/R 100,000 Increase in Inventory 500,000 Purchase of Operation Equipm ent 500,000 Total Uses Net Cash Used During the Yea r

If we take the example company's scenario and then isolate the cash activity for the year, we will see that, even though the company is turning a profit, it still needs more cash to fuel its growth. In the simplified Sources/Uses schedule above, you will notice several things: > Total sources of cash, $760,000, equals the com-

pany’s EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). This positive cash flow (along with valuable A/R and inventory as collateral) is allowing the company to finance its growth with bank debt rather than raising more equity. Bank debt is normally a much cheaper source of funding than outside equity capital. > Total uses of cash equals three groups of cash outlays

1,265,000

505,000

Whiskey Requiring Several Years of Aging One unique attribute of our craft whiskey industry is that the inventory we create this year must sit in a barrel for several years before we are able to sell it. This is bad for cash flow, but great in terms of creating value over time and keeping competitors from disrupting our plans, however, the barriers to entry are significant. A company that plans to grow at a 20 percent annual rate will need to make twice as much whiskey as they are currently selling, assuming they want their whiskey to age for four years. This requires a good ongoing financing plan.

1 ) Interest expense on the company’s debt (we’re

assuming the company has a line of credit in place that only requires interest payments — no principal payments). 2 ) Changes in the working capital components of

the company’s balance sheet consisting of (a) a $100,000 increase in the company’s Accounts Receivable as its volume grows and (b) a $500,000 increase in the company’s inventory of whiskey as it makes a larger volume of whiskey to be sold in subsequent years to support its growth. 3 ) Capital expenditures (tanks, cooperage, rick-

house racking, bottling line upgrades) in the amount of $500,000 to support the ongoing growth of the company. So, as you can see by the above scenario, even though this company is profitable, it still needs an annual influx of cash to sustain its operation. In this simple scenario, the cash this company needed for this year was all provided by additional bank debt. This need for more cash is largely due to two reasons: (1) it sells a product that requires several years of aging before it can be sold,; and (2) it is still growing. Let’s look closer at each of these factors.

The Company is Still Growing Most rapidly growing companies generally need more cash than their operations provide each year to sustain their growth. This is especially true of companies that make significant investments in inventory and equipment because their working capital needs (growing A/R and inventory) and their equipment needs tend to outstrip the amount of cash they generate during the year. This balancing act can all be calculated via a “sustainable growth rate” model, which can be researched separately but is beyond the scope of this analysis. Hopefully, this helps explain why a company needs more cash even as it runs at a profit. It’s worth pointing out that, once this company levels out at 50,000 cases annually, it will throw off a significant amount of free cash flow for its owners. Once it doesn’t have to grow its inventory or A/R balances any further and can simply maintain its equipment rather than buying more, it will provide in the range of a couple million dollars per year, if we play this scenario out. This is what makes a successful whiskey distillery so valuable. You just have to break through to some significant volume and then level off (or sell out) before you fully realize the financial gain from your effort.

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Summary Successfully growing a craft whiskey distillery requires a lot more financial analysis than simply determining what you’ll need to get started. You’ll also need to go into it understanding that your company will continue to need more cash each and every year that it continues to grow. This becomes quite apparent as you incorporate annual balance sheets and annual capital expenditure needs into your long-term projections. These projections should go all the way out to some future period where your production capacity is reached and you level off your revenues. By incorporating an annual balance sheet into your projections, you’ll quickly see what your annual additional cash requirements will be and by working with a banker or an experienced financial consultant, you’ll gain a better understanding of what may be available to you in the form of borrowings rather than equity, and when you could stop relying on equity infusions and start borrowing money. Again, bank debt is generally significantly cheaper than equity as a financing vehicle. A sizable whiskey operation with a strong brand can be worth more than six times its annual revenues. That’s because it throws off a ton of cash once the sales volume levels off. The large, publicly traded companies in this industry produce billions of dollars of free cash flow annually (EBITDA can be as much as 25 percent of revenues), with relatively high margins and well-established distribution channels. In the scenario we’ve been working with here, a whiskey distillery with its own brand and a production plant that eventually produces 50,000 cases of product annually with a shelf price of $40/bottle will ultimately achieve annual revenues of about $10 million. That puts the valuation of this company in the $60-70 million range someday, representing amazing returns for everyone involved. Well worth the extra effort/expense of getting a complete set of financial projections, with balance sheets and forecasted capital expenditures, in place before you finalize your financing plans.

Jeff Quint is the founder and CEO of Cedar Ridge Distillery in Swisher, Iowa.

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FORTIFYING A LEGACY With Milam & Greene, two industry giants make waves in the craft sector Written by Rich Manning

here are two paths you can take when you’ve built a legacy in the spirits industry: You can either rest on past accomplishments or you can choose to

further your story. The former path is easy; all it requires you to do is sit and point at what you’ve done. The latter path isn’t just hard, it can also be risky.

Heather Greene and Marlene Holmes stood firmly at this crossroads in the fall of 2019. The two had more than 50 years in the spirits industry between

Photo by Sarah Baumberger

them, equipped with resumes that knock down doors. Greene’s curriculum vitae includes a stint at the Scotch Malt Whisky Society in Edinburgh, authoring of Whiskey Distilled, A Populist Guide to the Water of Life, and being a member of Kentucky’s Order of the Writ as a keeper of bourbon whiskey. Holmes landed a distilling gig at Jim Beam in 1990 and spent the next 27 years honing her craft at the legendary Kentucky venue. They couldn’t be blamed had they chosen the easy path. They did not. Instead, they did something audacious. Greene and Holmes migrated to Blanco, Texas, from New York and Kentucky, respectively, and joined forces with Texas entrepreneur Marsha Milam to produce the craft whiskey brand Milam & Greene under the company Milam founded, Provision Spirits. While Holmes became the label’s master distiller, Greene assumed a bigger, more precarious role; in addition to becoming the distillery’s W W W . ARTISANSPIRITMAG . C O M

Photo by Manda Levy

master blender, she took on the position of Provision Spirits’ chief executive officer — her first crack as a CEO. “We really did throw ourselves back into the ring,” said Greene. “Dealing with the pandemic didn’t help, of course. I distinctly remember doing a Milam & Greene tasting event to promote the brand in Dallas on March 9, 2020, and everything started shutting down within a week. We had to completely change our plans.” Despite these alterations, things turned out rather well. Milam & Greene’s whiskeys absorbed awards like an amoeba during the pandemic era, highlighted by their port wine cask-finished rye earning Double Gold at the 2020 San Francisco International World Spirits Competition and winning “Best in Show” at the American Craft Spirits Association (ACSA) in W W W . ARTISANSPIRITMAG . C O M

2021. Greene is quick to point to others for Milam & Greene’s success. “Our whiskeys tell the story of our team, and how they apply their knowledge to the process,” she explained. “Each bottle tells the story of Tammy, of Brenda, of Lindy, of the two Laurens who work here. It’s part of their own legacy that they built, and if they move on, they get to take that legacy with them.”

Indeed, making Milam & Greene’s whiskeys is a team effort. It’s also a multi-state process. They utilize local Texas grains, but they also bring in Oregon, Wyoming, and Washington grains from trusted sources. The proprietary yeast recipe for their bourbon’s mash bill traces back to Texas and Kentucky strains. After Holmes distills the juice in

a 300-gallon Vendome copper pot still, Greene’s blending expertise takes over, as she and her team carefully introduce whiskeys from Kentucky, Tennessee, and Indiana into the mix as they see fit. Other fun tactics are deployed along the way, such as building small-batch single barrel expressions from different sourced casks or finishing the juice in port wine barrels. The accolades Milam & Greene earned in their short existence explains their process’ success. Yet mere results aren’t necessarily the story Greene the blender advocates for when she dons her CEO hat. “When I go into business meetings to talk about our brand, people want binary answers,” she said. “What I mean by this is, they tend to ask me, ‘Do you do this or that?’ But that’s not the right question to ask when it comes to distilling. The right question is ‘How do

you do this or that?’ I’ve been dying to get away from this binary thought when it comes to whiskey making. It drives me a bit nuts.” Part of the reason Greene wants to talk about the process is that she’s still digging into the various ways Milam & Greene’s process shapes their whiskey collection’s profiles. She’s particularly focused on learning more about the scientific properties of Texas whiskey. This means closely scrutinizing the effects of Texas’ climate and its impact on elements like ingredient terroir, barrel char, and entry proof. The search for answers is ongoing. “It’s hard to say how much influence Texas has on the blend,” Greene stated. “The wood tannins seem to come out a little sooner in the Texas juice, but the jury’s still out.”

Photo by Matt McGinnis, Big Thirst Marketing

“If we can’t make whiskeys that reflect our experience in the industry, why bother?” — Heather Greene

CEO, Milam & Greene Whiskies

There’s a a big difference between a woman whiskey producer and a whiskey producer who happens to be a woman. The former highlights a singular aspect of a brand — one that is unquestionably critical to recognize given the industry’s traditional tendencies as a male-dominant industry. But it can come at a severe cost if the aspect gets overemphasized. Eventually, that one aspect starts to overshadow the

juice itself. In Milam & Greene’s case, that mindset also threatens to interfere with the legacy and pedigree that Greene and Holmes deliver to the brand. After all, Milam & Greene’s whiskeys aren’t just women-produced. They are spirits produced by esteemed industry veterans augmenting their well-earned legacy by crushing it in the craft sector. Greene does acknowledge that the “woman distiller” aspect of Milam & Greene’s story

will always be pushed by some. “You really can’t fight it,” she noted. “It’s such low-hanging fruit.” At the same time, Greene fully understands the perils of leaning too much into this element, and she also feels it ties into issues regarding how some whiskeys are viewed. “Unfortunately, the ‘woman distiller’ angle is easier to sell instead of getting into the details of how the whiskey is made,” she stated. “That brings us right back to the issue of whiskey conversations being so binary — it’s either ‘this or that’ and not ‘how this and how that.’ Ultimately, it can backfire, and it can become very pandering, which is a big turnoff to my team.” While building brand recognition based on Milam & Greene’s

creative process may be an uphill battle, these challenges haven’t dampened Greene’s enthusiasm for becoming an executive in the industry. “I had no idea that being a CEO would be my dream job,” she said. “I didn’t realize how well-suited I was to run a business until I started running one. There are so many aspects about the job that are great, like the operational and social aspects.” As much fun as Greene is having hanging in the distilling industry’s C-suite, she is fully aware of where her passion — and her legacy — lies. “Doubling down on the best whiskey we can make will always be at the heart of the job,” she stated. “If we can’t make whiskeys that reflect our experience in the industry, why bother?”

Milam & Greene is located in Blanco, Texas. For more info visit www.milamandgreenewhiskey.com or call (830) 833-3033. 94

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SLIVOVITZ Slivovitz is so intertwined in the life of many Balkan people that one Serbian man was once quoted as saying

Written by Reade A. Huddleston

“With slivovitz we are born, with slivovitz we marry, and slivovitz we bury.”

veryone has that one bottle on their back bar that’s never been opened. Maybe it was a gift from a distant relative, or maybe it was a random last-minute purchase at the local liquor store. Regardless of how you got it, it just never seemed like the right time to open it. What’s more is you wouldn’t know what to do with it once you did. For a lot of people, I would be willing to bet that that bottle is a bottle of slivovitz. Even though you may have never tried it, its presence on many back bars speaks to its important cultural heritage and rich history. A brief note about etymology before we continue: like many other traditional drinks, slivovitz goes by a number of different names throughout Eastern Europe. Furthermore, for those that do agree that slivovitz is the correct name, the proper spelling and pronunciation often changes depending on who you are talking to and where you are. For simplicity’s sake we will be using slivovitz throughout this article. However, be aware that there is more than one way to skin this cat. In order to really delve into the history and processes of slivovitz, we have to first understand

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what exactly defines it. Most people outside of the Balkan peninsula don’t realize it, but slivovitz is actually considered a subset of a much larger category of spirits known as Rakija. Rakija, or Rakia, depending on what part of Eastern Europe you are in, is a general term in the Balkans for any distilled fruit spirit (note: although it is similarly named, this spirit is not the same as Turkish Raki. See? I told you the terminology could get complicated).1,2 Home distilling of Rakija is widely practiced throughout the Balkans with as many as one in ten families having a still for home production.3 Traditionally, families produce Rakija from whatever fruit is readily available, including apples, grapes, and apricots.2 However, the most plentiful and sought-after fruit in the Balkans is the plum.4 Sliv is actually the Slavic root word for plums, and this is where slivovitz gets its name.5 Therefore, one would think it is generally accepted that slivovitz is a plum brandy — a fact that is echoed by the European Union’s regulations stating that the term slivovitz may be placed on any drink that meets the definition of plum brandy.6 However, there is considerable dissension between producers from various countries on whether

There is considerable dissension between producers from various countries on whether slivovitz must be made only with plums or simply has to have plums as a major component. slivovitz must be made only with plums or simply has to have plums as a major component.7 Consequently, in order to really understand slivovitz we have to learn a little about history. The Balkan peninsula has always been a fertile growing region for many different fruits. Plum trees, especially, have grown in the area for centuries. It is not known exactly when Prunus domesticus, the modern-day plum tree, first began being cultivated by the people inhabiting the Balkans, but there is evidence of its wide farming in Bosnia along the Sava and Drava rivers as early as the 3rd and 4th century AD. Originally these were small orchards, planted by individual subsistence farmers to help feed themselves.8 These farmers had very little contact with the outside world, so many different subspecies of plum tree were able to develop, with each village or even farmer growing multiple different types of trees. This lack of contact changed, however, during the Crusades. From the 11th to the 13th century, many crusading knights, wishing to reconquer the holy lands, travelled through the Balkans. During their time on the peninsula, they were introduced to many local delicacies,

References 1.

Rakija Lounge, 2019. What is Slivovitz and How is it Made?. Available from < https://rakijalounge.com/blog/slivovitz-recipe/> [Oct 28, 2021]

Luczaj, L., et. al. 2019. Plants in Alcoholic Beverages on the Croatian Islands, with special reference to Rakija travarica. Journal of Ethnobiology and Ethnomedicine. Vol. (15)51.

Bulgarian Plum Festival, 2013. Plum Brandy. Available from < https:// festivalnaslivata.com/en/about-the-plum/plum-brandy.html> [October 20, 2019]

Vasko, Z., Cvetkovic, M. 2017. Processing Plums into brandy- a matter of economic feasibility of growing plum (Prunus Domestica) in Bosnia and Herzegovina. Acta Horticulture. Vol. 1175. Pp 9-14

Tapper, J. 2014. Slivovitz: A Plum (Brandy) Choice. Available from < https://momentmag.com/slivovitz-plum-brandy-choice/> [October 23, 2021]

Council Regulations. 2019. Regulations (EU) 2019/787 of The European Parliament and of the Council of 17 April 2019. Available from < https://eur-lex.europa.eu/legalcontent/EN/TXT/PDF/?uri=CELEX:32019R0787&rid=6> [October 25, 2021]

B92 2007. Problems with Plum Export <https://www.b92.net/info/vesti/index. php?dd=01&mm=10&nav_id=265855&yyyy=2007> [October 23, 2021]

Seednet. 2000. Balkan Pomology:Plums. Available from < http://qrgj.org/wpcontent/uploads/2019/11/Balkan-pomology-Plums.pdf> [October 27, 2021]

Kerewsky-Halpern, B. 1985. Rakija as Ritual in Rural Serbia. Eastern European Quarterly. Vol(18)4.

10. Glinter, E. 2012. Have another Shot of Slivovitz. Available from < https://forward. com/articles/153431/have-another-shot-of-slivovitz/> [October 25, 2021] 11. Sljivovica.net. 2020. Slivovitz (plum brandy) production <https://www.sljivovica.net/slivovitz.html> [October 26, 2021] 12. Satora, P., et. al. 2013. The Composition of Selected Volatile Compounds in Fermented Mashes Obtained from Different Varieties of Plums. Potravinarstvo. Vol. (7) Pp. 218-221

including plums, for which they developed a taste. When the crusaders returned home, they brought this taste with them and began importing both plums and plum trees regularly. By the renaissance in the 14th century, plums had become a major export for the people of the Balkan peninsula.3,4,8 It is unknown when the science of distilling was first introduced to the residents of the Balkans, but it probably came from traveling Arab alchemists. There are written accounts as early as the 15th century of monks at the Troyan Monastery in Bulgaria producing distilled spirits from the plum trees around the monastery.3 Distilling was an important advancement for many farmers because it offered a way to convert unstable excess fruit harvests into a stable, easily portable drink. Plum brandy, or slivovitz, as it was now commonly known, quickly became one of the most important economic and cultural items for the people of the Balkans.2,9 Now that we know some of the history of slivovitz it is time to learn a little about how it is made. As mentioned previously, slivovitz is a hotly contested product, with multiple countries claiming that only their specific methods are how you make true slivovitz.7 Nevertheless, all slivovitz shares a number of common and very simple processes. Slivovitz, like all Rakija and any fruit brandy, starts with the fruit. Slivovitz producers look for easily processable fruit with high sugar content. Most slivovitz producers use only plums, with the most popular type of plum being the damson.10 However, many rural producers will add small amounts of other fruit.2 The plums, and any other fruit being used, are carefully sorted, often by hand, to remove any damaged or decaying fruit before fermentation.3 The fruit is then placed into a fermentation vessel and pressed to break up the cell walls and release the juice. It is important that the pits of fruit are not damaged to avoid the release of amygdalin which can become poisonous. Some producers avoid this problem by removing all of the pits before fermentation. If necessary, producers will also add sugar and acid to ensure that enough alcohol is made and the fermentation is healthy.11 From there, the fruit mash is typically allowed to ferment naturally using the fruit’s native microbiota, though the addition of outside yeast is allowed. The yeast strains present during fermentation are variable and highly dependent on the type of fruit that is being used. This means that each type of plum used in a mash can create very different aroma and sensory compounds and fermentation times can fluctuate.12 Once fermentation is over, the mash is then distilled using a simple pot or pot column hybrid still. Continuous stills are not used due to the thick nature of the fruit mash. The number of times that a slivovitz is distilled is based on the producer, with a majority of it being distilled at least twice.11 After distillation slivovitz is sometimes aged in oak barrels, though this is not required; the size of the barrel and length of aging depends on the producer. Finally, slivovitz

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is bottled, with the fill strength based on where it is being sold. These range from as low as 20 percent ABV to as high as 75 percent ABV.8 Drinking slivovitz is a crucial part of life for many people throughout the Balkans. Slivovitz, as well as other Rakijas, are consumed on many important holidays and during religious ceremonies. Slivovitz is especially popular as an aperitif and is often drunk before meals.3,9 Slivovitz is also frequently used as a folk medicine, and many families will infuse specific herbs and spices into it to give to the sick.2 Indeed, slivovitz is so intertwined in the life of many Balkan people that one Serbian man was once quoted as saying “With slivovitz we are born, with slivovitz we marry, and slivovitz we bury.”9 Although slivovitz has mostly been considered a regional Balkan drink, it has made some forays into the wider drinking world. Late in the 19th century slivovitz gained some popularity throughout wider Europe during the phylloxera epLate in the idemic.8 With European 19th century grape vineyards decimatslivovitz gained ed by the tiny insect, some some popularity brandy consumers turned throughout wider to slivovitz, seeing it as the Europe during next best thing. In America, the phylloxera slivovitz is commonly associated with Jewish immiepidemic. grants, many of whom came from the Balkans. Slivovitz has gained some popularity with the wider Jewish community because it is made from fruit and is considered Kosher during certain festivals.5,10 Who knows: perhaps slivovitz is just waiting to be discovered by the next adventurous bartender, and it will soon become the next “It” drink

Reade A. Huddleston, MSc. in Brewing and Distilling, is a beverage industry consultant based in Tampa, Florida. He is fascinated with all things drinkable and is always searching for strange and forgotten spirits. If you would like to contact him about said spirits, or anything else, please email him at ReadeHuddleston@gmail.com.

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FIER CELY IND EPEN DENT

Austin’s Fierce Whiskers Distillery Does Things Sustainably and On Their Own Terms

Written by Rich Manning Photos provided by Fierce Whiskers Distillery

here are two things that happen when you drop by Fierce Whiskers’ sparkling facility in Austin, Texas. You’ll have the chance to taste some spirits and/or cocktails. You’ll also discover that former President Rutherford B. Hayes was kind of a jerk when it came to people that enjoyed a tipple. The 19th President was a teetotaler from Ohio who had zero love for the Lone Star State’s capital. His disdain was best captured in the following quote from 1849, well before he assumed the Presidency:

“Austin is an inconsiderable village with large expectations…full of discharged ‘rangers’… costumes of every variety…fierce whiskers, gaming, and drinking very abounding in all quarters.”

The quote that inspired Fierce Whiskers’ name also greets people who visit their website. Co-founders Tim Penney and Tri Vo embrace the quote in all its audacity; to them, it carries an ethos that still resonates today. “We fell in love with the quote,” Vo said. “You have this guy from the north talking mad trash about Texas, but he really didn’t understand who Texans were and how they did things. When people ask questions about our name, we see it as an invitation for them to get to know us and what we’re all about.” This invitation specifically functions as a call to see their distillery, which officially opened in September 2021, as an outward expression of the Texas spirit. It’s an experience that doesn’t lean into cattle ranchers, cowboy boots, and other yeehaw Texan tropes. “Tim and I grew up in Houston together, but neither of us identify with that “Wild West” stuff,” Vo said. “I’ve never even owned a pair of cowboy boots, although I have heard they’re comfortable.” Instead, the duo’s interpretation of the Texas spirit builds upon an energy and attitude that comes with doing things independently with a certain air of stubbornness and fearlessness, much like the city they call home. It’s also driven by a desire to dig into the minutiae of what makes a brown spirit Texas whiskey, a dive that’s led them down some intriguing paths of discovery.

Although recently opened, Fierce Whiskers’ origins go back six years prior, when Penny and Vo came up with the idea of jumping into the distilling game. Like many new distillery founders, the two didn’t come from a spirits industry background. However, they weren’t completely oblivious to the industry’s nuts and bolts. “We wanted to open a Texas distillery, but we took our time because we were looking at how regulatory changes were impacting the three-tier system in various states, like Texas and Colorado,” Penney said. “When we saw that Texas was fighting for more progressive regulations, we decided to move ahead.” However, moving forward meant exploring the current landscape. The duo hit as many distilleries and distillery tasting rooms as they could, taking notes on what they liked, what they didn’t, and what they felt could be improved when the time came to build one. This scrutiny eventually coalesced into the creation of massive indoor-outdoor space anchored by an industrial chic tasting room surrounded by ample patio seating. The space stands adjacent to an abundant patio space and a sizable courtyard groomed for hosting live music acts, food pop-ups, and other events. The design is particularly striking given the zeitgeist surrounding the craft spirit industry’s current sentiment towards tasting rooms. As the industry emerges from COVID-19, there are ongoing conversations about the need for distillery tasting rooms to create holistic experiences that go beyond spirit sipping. While Fierce Whiskers is a new player to the game, their facility already places them in prime position to lead this movement by example. W W W . ARTISANSPIRITMAG . C O M

As splendid as Fierce Whiskers’ tasting room is, it may not be the first thing that captures visitors’ attention. Their eyes may be drawn to the facility’s four-story rickhouse; an imposing black building that looks like a cross between a barn and a cathedral. Stepping inside the sleek structure – the first of its kind in Austin, according to Penney – reveals rows of barrels nestled in wooden racks housing the distillery’s rye, bourbon, gin, and rum. It’s not just for looks either, but also strategic: The building’s orientation was determined after an analysis of prevailing wind patterns, and massive louvers are installed on each side of the building to manipulate the winds and control the impact of the harsh Texas climate with greater efficiency. The use of the louvers also allows Fierce Whiskers to reduce energy waste, and their presence is part of the distillery’s overarching emphasis on eco-friendliness. Signs of efficiency and sustainability abound: Solar rooftop panels, sensors that cut off the HVAC system the moment doors are opened, barrels built by cooperages engaged in American white oak forest sustainability efforts. “Everything we do — choosing barrels, buying equipment, even property design — is done by determining how we can reduce our carbon footprint,” Penney stated. “Sustainability is everything to us,” Vo added. “We also try to make these efforts as transparent as possible for our guests. We don’t want them to think we’re just saying we’re sustainable. We want to show them what we’re doing to be sustainable.” Another tentpole to Fierce Whiskers’ strategy is data, lots and lots of data. The distillery 100

deploys a wide array of equipment to gather and produce analytical info on everything from rickhouse heat to distillate weight. These metrics help them keep an eye on the juice, but also to keep their sustainability efforts on track. They’re also kicking around the idea of expanding these big data efforts; Penney hopes that one day they’ll be able to devise a system that allows them to track the precise slice of land where their sourced grain originates. For now, Penney hopes their efforts will serve as inspiration to others in the industry, even though he acknowledges that may take some time. “It’s hard to change an industry that’s been around for 150 years,” he stated “but we do hope that our efforts can put the burden on others to do the same.”

Fierce Whiskers offers sipping glimpses of their rye and bourbon in their current state in the tasting room, along with cocktails made from their other spirits. They don’t sell bottles of the rye and bourbon just yet – the former won’t be ready until 2023 and the bourbon until 2024. While their debut is still a ways out, there’s no sense of urgency to get to either date. After all, they’re making Texas whiskey on their terms, in a way that helps them connect to that independent Texas spirit they strive to emulate. “We love the position we’re in,” Vo said. “We don’t feel encumbered by any boundaries of what we should or should not do. It’s a feeling that we completely embrace.” Rutherford B. Hayes is probably not smiling over this sentiment, wherever he may be. Fierce Whiskers Distillery is located in Austin, Texas. For more information visit www.fiercewhiskers.com. W W W . ARTISANSPIRITMAG . C O M

OUT W

ithout healthy sales, a product dies on the vine, and sales staff are an essential element to seeing that success. Traditionally, the biggest motivation for salespeople has been commission on overall sales. The more you sell, the more you earn. Of course, there have always been additional incentives and goals on certain products, but sales staff still had motivation to sell their whole portfolio of products. The days of that model, however, may very well be changing in the spirits industry. Some of the largest wine and spirits distributors in the country are, in some markets, trying out a different model: salaried salespeople who get bonuses based on sales goals of particular products. These products tend to be big, corporate-owned brands. Failure to meet these goals could result in more than just missing out on bonus income; it could eventually lead to a loss of the salesperson’s job if it happens too often. Furthermore, these large distributors are pushing online ordering platforms for retailers to use, as opposed to salespeople taking orders. This further separates the salespeople from doing their job of selling a whole portfolio and angles them more towards chasing corporate goals.

What does this model mean for small producers? It means

there is not as much incentive for your products to be presented by a distributor utilizing salespeople. It would be more work that yields no reward. In fact, focusing on your

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of COMMISSION Big Distribution's Shift Towards Salary Over Commission WRITTEN BY GEORGE B. CATALLO

products could take away from their ability to reach their goals. So why would they bother selling your products if it’s more work for less money? Most probably won’t bother to. Could you even blame them? Does this mean you should avoid using these large distributors for your products? While ultimately that’s up to you, don’t immediately think this model won't work for your products — because it absolutely can.

There are ways you can thrive in an even more cutthroat environment. One of them

is to hire a regional brand ambassador or sales manager who works in tandem with the distributor. This individual’s responsibilities would include working with the distributor to ride along with salespeople to get new placements of products, as well as visiting accounts that already have your products to grow existing relationships. This person would also have to visit accounts both new and existing on their own proactively. Obviously, they would not sell the products outside of the agreement with your distributor, but they would direct orders to the salesperson for the accounts they are visiting. This role would also be responsible for coordinating and presenting at tasting events in retail environments as well as bars

and restaurants. No matter the type of distributor you use, this is a positive position to have on your roster. Sending products off to a distributor doesn’t absolve you from putting in the work regardless of the distributor’s structure. Another method, albeit a potentially expensive one, is to coordinate your own sales incentives with the distributor. Legalities regarding incentives can vary from place by place, so check with your lawyer first before doing anything. These incentives can be cash bonuses paid out at particular sales volume milestones — everyone likes cash. But you could also take a different approach. Trips are often used as incentives as well. What does an incentive trip look like? While it could be as simple as sending a worthy salesperson to Hawaii for a week, that’s not necessarily the best value for your money. A more sensible approach is to bring them to you. Pay for their travel and boarding, have them visit your facility, give them a tour, explain in depth your story and your process, feed them both food and drinks, and take them around your city or region. You hear a lot about these types of trips when it comes to tequila. Some larger tequila distilleries employ this formula to great success. An aspect sometimes overlooked, though, is involving your guests in the process somehow, such as foraging for wild botanicals, selecting and/or blending barrels, gin blending, or whatever fun and safe part of your production you choose.

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The goal here is to reward success, but also inspire future sales of your products. Falling in love with

your story, your products, and your hometown absolutely motivates salespeople to work at selling your products — even if they’re not getting directly paid for it as they once would have. As baffling as the concept of salaried salespeople is, it is likely inescapable at this point. It is in the financial interest of the big companies to move further towards this model, because it was not intended to place more money into the pockets of the sales force — it is purely profit-driven. It’s arguably good business for them to do it that way on paper at least. As far as good business from the standpoint of employee loyalty and attracting new brands to their portfolio — it has yet to be seen. Regardless of what lies ahead, we should be prepared and always take heed to the wise words of Bruce Lee and “be water, my friend.”

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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C h i ca g o’s

CH DISTILLERY Hyper-local, grain-to-glass spirits (and a Swedish concoction, too) Written by Lisa Truesdale /// Photography by Brett Bulthuis

fter Carl Jeppson emigrated from Sweden to Chicago in the 1880s, he soon found that he really missed the taste of a traditional drink from back home, called bäskbrännvin. Truth be told, it probably wasn’t the taste of bäskbrännvin that he found himself longing for; the wormwood-based digestif has rarely been described by anyone as being “delicious.” Back in Sweden, it was used medicinally as a hangover cure, or a treatment for stomach worms and other parasites. The “kick” from the alcohol was just a bonus. However unpleasant the taste, Jeppson decided to start making and selling his own bäskbrännvin, hawking it out of a suitcase on the sidewalk near his Chicago cigar shop. Trouble is, Prohibition had just started, so Jeppson would often get visits from suspicious law enforcement

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Uniquely Chicago, right down to the name Adding Jeppson’s Malört to the company portfolio in 2018 only reinforced CH Distillery’s mission of being “uniquely Chicago.” Although, as Tremaine Atkinson clarifies, it was actually the other way around. “Jeppson’s chose US to acquire THEM,” said Atkinson, the distillery’s founder, CEO, and head distiller. “The previous owner wanted to pass it along to a true Chicago distillery, and there is no distillery more ‘Chicago’ than CH.”

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PHO TO BY ARN OLD KLE IN

officers. All he had to do to appease them, though, was to offer them a little sample of his concoction. As soon as the liquid touched their lips, they’d believe his adamant assertions that the bitter-tasting drink was medicinal rather than recreational, and they’d leave him alone. After Prohibition ended, Jeppson sold the secret recipe for his beverage, and it was renamed Jeppson’s Malört (malört means “wormwood” in Swedish). Production of Malört bounced around from distillery to distillery for decades, then in 2018, CH Distillery purchased the brand and brought it back home to its native Chicago. Despite its off-putting taste — it has been described as “citrus-flavored gasoline” and “burnt vinyl car seat condensation” — the unique beverage has become a treasured icon in the city, and the folks at CH Distillery are honored to keep the tradition going.

The distillery hasn’t been around quite as long as Jeppson’s Malört, but it’s just as Chicago-esque. Founded in 2013, CH has always had the goal of producing “Chicago’s hometown vodka” and other spirits by sourcing local ingredients whenever possible. “We happen to live just fifty miles from where some of the best grain in the world is grown,” Atkinson said. “To make a vodka that comes from where we live, using exclusively local grains was a no-brainer.” The yeast, in fact, is the only ingredient that isn’t technically local, though it comes from Milwaukee, a mere 90 miles away. Even the name “CH” has local origins — although it refers to the two fundamental compounds in alcohol, carbon and hydrogen, it also, quite fortuitously, happens to be the first two letters of its home city’s name. The distilling action happens at CH’s corporate location in the historic Pilsen neighborhood on Chicago’s lower west side. There, a 50,000-sq.-ft. building houses enough storage for 75 tons of grain; state-of-the-art equipment for milling, grain mashing,

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Visit us at:

and fermentation; barrel storage; and a 50foot vodka distillation column. The tasting action, meanwhile, happens just a few miles north, at CH’s location on West Randolph Street in the West Loop area. There, visitors can not only try all of CH’s spirits but also take a tour of the company’s smaller secondary distilling operation and enjoy nigiri, sashimi, maki, and more, freshly prepared to order by CH’s pop-up partners, Jinsei Motto. Jeppson’s Malört is now the distillery’s most popular offering. Straight shots are available for the bravest of souls, but CH’s talented mixologists can also whip up creative Malört cocktails, like the “Chicago Style,” with ginger, honey, orange, and soda. After Malört, the CH Vodka (with notes of vanilla and pepper) and Jeppson’s Bourbon (with notes of caramel and vanilla) are next in line as fan favorites. There’s also Spanishstyle CH Rum with a salted butterscotch nose; classic Scandinavian aquavit made with fresh dill and caraway; CH London Dry Gin with juniper and pine and an orange rind finish; and CH Key Gin, a white pepper–forward spirit with key limes, a hint of juniper, and a lavender finish. The latter is billed as a “non–gin drinker’s gin.” The pandemic has affected businesses around the world, though Atkinson proudly explained that CH didn’t lay off a single employee: “We didn’t run and hide; we invested in the business.” The West Loop location stayed busy with to-go food and special cocktail kits, while the Pilsen location — like so many other distilleries — made hand sanitizer. Whether it’s the ingredients he uses in his spirits or the approach he takes to supporting the community, Atkinson has never strayed from his initial goal of being hyper-local, and he doesn’t plan on it. “Our spirits have a unique ‘terroir’ that can’t be replicated by anyone else.”

CH Distillery is located in Chicago, Illinois. For more information visit www.chdistillery.com or call (312) 707-8780.

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Diversified Drinks Production The consolidated alcohol factory?

WRITTEN BY PAUL HUGHES, PH.D.

uring the 1990s I came across the term “condiment brewing,” a scenario where a generic alcohol stream was produced, which was then diversified downstream by the judicious addition of colors and flavors to produce a portfolio of beers. Indeed, to some extent this is common practice in some establishments, and the advantages are clear. There is an opportunity to minimize variability of any carbohydrate conversion and fermentation, with almost arbitrary control over the final product quality criteria. Although my initial reference was to brewing, this concept can in principle be extended to any alcoholic beverage if we have sufficient understanding of the final product quality criteria. Products such as some ready-to-drinks and pre-made cocktails are a testament, at least in part, to this approach and indeed stretch the original notion here of a “beer base” to a neutral spirit base.

Now, in the first quarter of the 21st century, scientists and technologists are homing in ever more closely to flavor and mouthfeel management.1 So is it possible to create a potable alcohol factory that can be the basis of a broad portfolio of alcoholic beverages, Especially as the boundaries between the various alcohol sectors become blurred by hybrid products? The base of any such product is of course aqueous alcohol, and the alcohol must be derived from a carbohydrate-bearing agricultural commodity.2 There is a huge range of such commodities including fruits, sugar cane/beet, grains, tubers, nuts, and others such as agave. The identity of these carbohydrates dictates how fermentability might be extracted and impacts the design of at least the upstream process operations. For instance, fruits and sugar cane/beet bear simple sugars that once physically released will yield a directly fermentable extract, whilst grains, bearing an overwhelming proportion of carbohydrates in the form of starch (an unfermentable

α-glucose polymer), require preprocessing to convert starch into a fermentable extract. Agave falls somewhere in the middle. Whilst the inulin carbohydrates (essentially polyfructose) are not fermentable in themselves, they are more easily hydrolyzed than starch and so fermentable extract is relatively easily released, for instance by roasting or autoclaving3 the agave piñas in the case of tequila production. If we take the condiment approach to “alcoholic beverages,” then we need to consider three main aspects: 1.

Procurement or cost-effective production of a clean alcohol base

QA/QC and supply chain management of flavor and color additives

Shelf-life of final products

The alcohol base can be readily managed. There is extensive prior art for fermentable sugar release from a wide variety of commodities and for distillation. There is the

opportunity to produce alcohol yourself, but for small-scale producers it could be more prudent to source alcohol externally. Additionally, the depreciation of a capital investment for equipment can put the cost per proof gallon higher than what can be purchased from dedicated ethanol producers. A smaller-scale producer can, of course, distill through multiple, sequential batch distillations, but the alcohol yield is likely to be relatively low, with a correspondingly large volume of liquid byproduct. This is not to say that a producer should not manufacture their own alcohol, but rather that a high-quality product can be purchased at lower cost. It is ultimately a strategic decision as to whether alcohol and final blended products are produced on the same site or not. For any neutral alcohol that might be considered, it is essential to evaluate it from a sensory perspective prior to committing to the purchase of multi-gallon/ton quantities. This is perhaps most readily achieved by securing samples of potential neutral spirit candidates and diluting them around 1:4 (v/v, alcohol:water), then nosing and tasting. Sensory evaluation of the neat (undiluted) spirit is foolhardy and will not indicate anything but the most assertive of flavor defects. There is also the risk of toasting your palate for a while! The dilution helps to dim the burn and force out of solution many potential off-flavors, both of which help to enhance the assessor’s sensitivity. When you are selecting alcohol for your future prize-winning products,

1 We could also consider color management here, but in practice this is unlikely to be an issue for alcoholic beverages, unless “natural” and light stability are of overriding importance. 2 Currently the cheapest source of ethanol is from the catalytic hydration of ethylene, which in turn is generated from the cracking of oil to produce gasoline. Right now given the finite resources of crude oil that does not seem to be sustainable and is also not deemed to be potable. 3 The autoclave was developed as a device for sterilization using steam at elevated temperatures and pressures. Some tequila operations exploit this technology to rapidly hydrolyze agave inulin to fermentable sugars.

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Condiment brewing: A scenario where a generic alcohol stream is produced, which is then diversified downstream by the judicious addition of colors and flavors to produce a portfolio of beers. this evaluation and selection is absolutely critical. If you doubt your own palate, bring in others and understand the consensus. There is no such correlation between seniority and palate acuity! After more consideration of the condiment product philosophy, it is evident that not only does the producer need to be concerned about the alcohol source, but also the flavor and color ingredients. Here there is added complexity. This comes from the wide range of additives available and a relative lack of experience of using some of these additives in certain combinations, as it is not always apparent how various ingredients might interact. The point here is that wine, beer, and spirit production processes based on traditional operations are better understood than those that rely on non-traditional approaches. For instance, cider and beer production are both mature processes. However, mixing beer and cider (a so-called “snakebite,” at least in the UK) can often result in haze formation. Cider is usually rich in polyphenols and poor in protein, whilst for beer, proteins are present in excess of polyphenols. As proteins and polyphenols often interact to form precipitates,4 a snakebite can throw unexpected hazes. This is just one example that is readily explained, but care needs to be taken when creating non-traditional liquids by blending different streams, as it can lead to unexpected challenges. It is straightforward to test

whether ingredients are compatible with each other if reaction times are of the order of minutes or hours, but if instabilities manifest themselves slowly, then longer-term storage stability trials are necessary. Perhaps more insidious is the potential for the formation of harmful materials. For instance, the combination of alcohol and acetic acid seems innocuous enough but, in an aqueous system, they can combine to form ethyl acetate. Whilst ethyl acetate is present in many fermentation-based alcoholic beverages, the combination of liquids with both elevated alcohol and acetic acid levels will result in the unintended consequence of high levels of ethyl acetate. Condiment drinks can be seen as “paintby-numbers” products rather than “masterpieces,” but also offer the opportunity to decouple quality properties in a given ingredient. Perhaps the best example is in the brewing sector, where hops have been refined into aroma, bitter, and even astringent components that can be used in any ratio required, instead of attempting to breed and/ or blend whole hop products to achieve the right combination of properties. However, there may be cost implications for purchasing more refined materials, as additional processing costs for the supplier are inevitably passed on to the customer. Whilst available condiments are often produced to tight specifications, they are of course derived primarily from plants, which can vary in composition and physical structure, even from batch to batch, let alone season to season. It is also highly likely that any ingredient purchased will have been prepared, at least in part, in equipment that is not exclusive to your own product, which can result in color and flavor pick-up in some

cases. Distillers are well aware that, if producing vodka and gin in the same still, it is most prudent to start with vodka! The concept of the alcohol factory is appealing in many ways: > Infinite opportunities for new product

development > Faster product formulation in some

cases > Opportunities to simplify processes,

minimized to storage, blending, and packaging > Fewer organic waste products, as pro-

cessing is handled by the supplier However, the concept may cause unease. The apparent lack of tradition for such an approach can harm the products’ reputational aspects, especially if market positioning is in the premium sector. As a final thought, the concept of the condiment approach has been around for centuries. Sherry was developed as a brandy-fortified wine; liquors such as absinthe are routinely colored with post-distillation additives. Scotch whisky distillers increasingly talk of blender expertise rather than age statements. Perhaps then the conclusion to be drawn is that blended drinks relying on prior art are likely to be better accepted than novel products, but the proliferation of blended drinks suggests otherwise!

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

4 The interaction of polyphenols and proteins has been exploited for centuries. Leather tanning is perhaps the best example. Human perception of astringency is due to polyphenols in food and drinks binding and precipitating with salivary proteins to “thickening mouthfeel.”

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Big Thirst, Inc. Creates a Holistic Experience for Craft Distillers

everage is an important tool for craft distilleries to possess. It’s something that’s earned through WRITTEN BY RICH MANNING /// PHOTOS PROVIDED BY BIG THIRST, INC. market penetration, greater brand recognition, and the ability to gain interest among the kind of curious consumers that are willing to occasionally give a new label a try. When it’s been achieved, it can allow a craft brand to stand shoulder-to-shoulder with the industry’s larger labels. It may be fair to say that leverage is the primaBig Thirst, Inc. officially launched in its hometown of Austin, Texas in October ry service offered by Big Thirst, Inc. The Austin2021, at the start of the second annual Distilled Spirits Council of the United States based company doesn’t technically say this (DISCUS) conference. However, it sprung to life as the third prong of a craft-focused – they’re a new player in the ever-burgeoning business triumvirate featuring two existing and similarly named companies. The first e-commerce spirits market. But the collective business, Big Thirst Consulting, launched in 2020. The second business, Big Thirst services they offer point to helping craft brands Marketing, also hit the scene as a rebranded entity in 2020, after launching in 2014 grab a chunk of the market from the big dogs under the name Penn and Tell Us. “All three companies are completely intertwined,” as the online retail landscape evolves. A bold explained Big Thirst Founder and CEO Matt McGinnis, who also serves as partner of Big statement? Perhaps. But it makes more sense Thirst Consulting and president of Big Thirst Marketing. “We set it up that way because it when you dig into Big Thirst’s intricacies. allowed us to give craft brands the same kind of tools that the well-funded big brands have.” Here you’ll find a multi-tiered compaThe tools offered through Big Thirst’s interconnected companies attempt to give craft ny built on experience, industry insider brands a one-stop shop for business and retail guidance. Its consulting component advisknowledge, and copious amounts of data. es brands on the operational side, helping them build strategies that are financially feasible

NEW COMPANY, OLD SOUL

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and in compliance with the industry’s ever-evolving legal landscape. The marketing element builds upon this foundation by increasing brand visibility through storytelling. Big Thirst’s newly launched e-commerce company uses cutting-edge data analytics to help craft distillers optimize the focus of their sales strategies. It also offers distillers a platform to sell their products online, thus functioning as the logical conclusion to a journey initiated by the other two components. This multifaceted process offers a cohesive, holistic approach that’s inherently designed to provide a craft distillery that sweet, sweet leverage they crave.

A TRUSTED TEAM The people behind Big Thirst’s e-commerce venture provide plenty of reasons why their foray into the online retail scene isn’t some sort of bluster. McGinnis had a couple decades’ worth of marketing experience under his belt before jumping into the beverage world full-time Matt McGinnis and Wylie Donaho in 2014. Mark Shilling was a former president of the American Craft Spirits Association (ACSA) and the founder of Revolution Spirits Distilling Company in Austin. According to McGinnis, Shilling’s presence gives Big Thirst significant street cred within the craft distilling sector. If Shilling is Big Thirst’s proverbial ace in “Having Mark on our team, as a guy that owned a distillery, the hole, Donaho is the organization’s wild shows our clients that we’re breathing the same air as they are,” card. Her background isn’t distilling – she he said. “We’ve already had people approach us and say, ‘If made her bones in the healthcare industry Mark’s on your team, we want to talk to you.’” – but her primary focus is applying big data Shilling’s pedigree does more than provide Big Thirst with a concepts like data analytics and data visualrecognizable name in the craft sector. It also helps to ease conization tools to build information about oncerns distillers may have utilizing an e-commerce platform, line retail markets. This data can help craft particularly if they’ve previously had a rough experience. distilleries build highly targeted sales and “Some people we’ve [spoken] with have told us they’ve marketing campaigns that get their bottles been burned by e-commerce partners in the past, and in front of the right consumer at the right they’re desperate for trusted relationships,” explained Big time. The tools used in the process could Thirst Inc. co-founder and chief operating officer Wylie produce actionable data on practically any Donaho. “Because of that, it’s important to us that they metric needed for a craft brand to build a trust us.” pinpointed strategy. If a distillery wanted to see how robust e-sales for their gin were among thirty somethings in Ohio, it can be Mark Shilling done. According to Donaho, these analytics can help bridge the gap between craft and major brands in a somewhat unprecedented fashion. “The big dogs have always had this kind of data available, but craft hasn’t. That’s not fair,” she said. “We want to help them level the playing field by giving them a tool they’ve never had before at a fair price.” The response to these tools has been positive thus far, even if the clients don’t always know how to optimize the information. “People want this data, but some of them don’t know what they want to do with it yet,” Donaho said. “We still have — Wylie Donaho to educate people on how to use it as CO-FOUNDER AND CHIEF OPERATING they learn about what it means.” They OFFICER, BIG THIRST INC.

BIG DATA, NARROW FOCUS

big “dogsThehave

always had this kind of data available, but craft hasn’t. That’s not fair. We want to help them level the playing field by giving them a tool they’ve never had before at a fair price.”

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“

We have a passion for craft, and we want to be good stewards of people’s brands.” — Matt McGinnis BIG THIRST FOUNDER AND CEO

don’t anticipate this learning curve to be much of a problem, partially due to the fascinating nature of gathering and extrapolating data – an element that’s entirely relatable. “It’s just fun to drill down into this kind of data,” Shilling said. “I’ll admit to being the nerd that takes depletion reports by distributors and repopulates them elsewhere so I can find other forms of information.”

GETTING THE WORD OUT While Big Thirst’s e-commerce component can be alluring to craft distilleries in search of gaining leverage, they know they can’t gain traction just by pointing to their consulting and marketing successes. “Our e-commerce platform isn’t a ‘Field of Dreams’ situation by any means,” McGinnis noted. “It’s still important for us to get the word out.” Launching at the DISCUS conference undoubtedly helped this endeavor, yet creating brand awareness is just the first step. The leverage Big Thirst wants to create for craft brands through their consulting, marketing, and e-commerce platforms may be generated from different business prongs, but they all emanate from the same foundation of trust and respect. “We have a passion for craft, and we want to be good stewards of people’s brands,” McGinnis stated. “They care about what they make, and they’ll want to work with people who also care. And if we bring good will to them, they’ll bring good will to us. It’s what good business relationships are all about.”

Big Thirst, Inc. is headquarted in Austin, Texas. Visit www.bigthirst.com for more information.

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EFFICIENCY

squared Written by George B. Catallo Photo provided by Los Angeles Distillery

e’ve all had experiences that have shown us there is sometimes a disconnect between theory and practice. Times where the textbook is wrong, even though the math says it shouldn’t be. Equipment that’s designed and supposed to work one way, but doesn’t. Enter Lewis Harsanyi of both Los Angeles Distillery and Bavarian-Holstein Partners, the dual brewery and distillery equipment manufacturer. Lewis not only designs, manufactures, and installs distillery systems, he uses his own systems on a daily basis. A man who looks for balance between theory and practice. If you spend any time speaking with Harsanyi you will quickly see that one topic interests him above all else: efficiency. Harsanyi holds a degree in engineering and a PhD in mathematics, and was a teacher of economic efficiency behind the Iron Curtain in Budapest, Hungary. For those not old enough to remember, the Iron Curtain was the name for the western border of the Soviet Union. This border was not just a line on the map, but acted as a veil isolating the Soviet Union from the rest of the world militarily, politically, socially, and economically post WWII. Harsanyi escaped life behind the Iron Curtain more than 40 years ago and came to the United States to work in technology for a number of years. After the Iron Curtain’s fall in 1991, Harsanyi returned to his home of Hungary after the legalization of privatized industry and started his own company manufacturing brewing equipment. Harsanyi renamed the company from Bavarian Brewery Technologies to Bavarian Breweries & Distilleries Inc. in August 2003 and has since supplied countless distilleries around North America and the world. Efficiency in the design of a distillery certainly includes efficiency of fermentation and distillation and maximizing yield, but it goes beyond that. Harsanyi and I discussed the categorization of distillery input into two primary categories: physical and intellectual. Physical input would be any manual labor, such as moving grain, pumping mash back and forth between tanks, bottling, cleaning, etc. Intellectual input is the actual running of the still, making cuts, feeding yeast, managing fermentation — the actual science of it all. Ideally, the more efficiently physical input is handled, the more focus can be placed on intellectual input.

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There are numerous ways to go about this. One way could be to hire more employees to do physical tasks. It’s more efficient in the sense that you yourself are not expending the time and energy, but it is not always more economically efficient. There’s a greater financial cost and the amount of labor is unchanged. If you can afford it, however, it’s viable. Harsanyi’s approach aims to be more economically efficient when amortized across the life of a business, making physical labor easier through automation. Many physical aspects of distilling can be automated. Grain can be weighed, milled, and augered into the mash tun at the flick of a switch. Finished mash can be pumped to fermenters via a permanent pipe system instead of a portable pump and hoses. That same system can carry fermented mash to the still, and a CIP (clean-in-place) system can leave equipment sanitary for the next shift at the touch of a button. The goal of automation is not to replace all jobs with machines, leaving everyone out in the cold and hungry. While of course, in a smaller operation, it could help keep labor costs down by having less workers, but that isn’t always the most efficient option. Perhaps the labor budget is fine where it is, but it could be better spent EFFICIENCY on different types of staff such as more DEFINED BY HARSANYI: tasting room workers, office staff, sales To produce with minimum people, marketing people — the types input and maximum output. of people who help grow the business. Reallocating cash directly into growth. Before Harsanyi opened Los Angeles ECONOMIC Distillery in 2013, he visited Scotland EFFICIENCY numerous times and pondered, “How DEFINED BY INVESTOPEDIA: can I make more flavorful whisky than When all goods and the Scots?” A bold question, with a factors of production in an economy are distributed bold goal of beating the Scots at their or allocated to their most own game. valuable uses and waste is eliminated or minimized.

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Harsanyi claims that 75 percent of the flavor in a final whiskey comes from the aging process. The remaining twenty-five percent is divided among five other factors: Raw materials, mashing methods, fermentation techniques, distillation, and equipment. The equipment aspect comes down largely to the copper interaction. The chemical reaction removing sulphur compounds from runs of distillate is vital to producing a good spirit. With the aging process such a massive source of flavor, that is where Harsanyi puts his investment both financially and intellectually. There are three main types of oak available: American, French, and Hungarian. Harsanyi prefers Hungarian oak. You may think it’s for a sense of national pride, and while that could certainly be a small factor, it is actually a far more scientific deduction. A large part of barrel quality comes from tree selection. Hungarian coopers tend to pick trees with more dense wood, which results in staves that potentially impart more flavor. According to Harsanyi’s measurements, Hungarian staves are between 25-30mm thick on average as opposed to 15-18mm thick for American oak. Premium quality barrels come at a premium price though. The barrels he uses are $800 each compared to American oak for $200-$300. For reference, French oak barrels tend to cost about $1000 per barrel. Harsanyi has had a long friendly relationship with his Hungarian cooper who air dries staves for his barrels for three years instead of 18 months, leading to an even higher quality barrel. The Los Angeles Distillery, one of the country’s largest craft distilleries, doubles as a showroom for Bavarian-Holstein and showcases a litany of well used equipment. Harsanyi employs five different stills including his research and development still, two of which are 3000-liter hybrid stills consisting of a pot and four-plate column. There is also a 750-liter vodka still and a 350 liter gin still that is incredibly flexible in its configurations and uses. The biggest takeaways from Lewis Harsanyi’s varied experiences are: First and foremost, efficiency is everything. Finally, innovation is vital to growth. When planning your distillery, leave room for future flexibility — growth and innovation can and will lead to changes in how you fill and use your space. For more information on Los Angeles Distilling visit www.ladistillery.com. For more information on Bavarian Breweries & Distilleries Inc. visit www.potstills.com.

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T E X A S- S I Z E D S U C C ES S

The DISCUS 2021 Conference Points to an Exciting Future WRITTEN BY RICH MANNING PHOTOS COURTESY OF DISTILLED SPIRITS COUNCIL

efore getting to the details of the Distilled Spirits Council (DISCUS)’s second annual conference, allow me to tap into the spirit of the conference’s host city of Austin, Texas, and just say this, “It was good to see y’all.” After a year and a half of Zoom meetings, virtual tastings, and disembodied interaction and chatter, it felt downright cathartic to discuss the current and future state of the distilling industry while raising a glass or two in the process. It served as visceral proof of liquor’s true purpose of being the conduit for togetherness, somewhat magical elixirs that provide the excuse anyone needs to gather, break bread, and enjoy each other’s company. While the conference, held October 6-8 at the Fairmont in downtown Austin, gave us the chance to connect in the present, the three-day gathering embedded its focus in its theme: Building For the Future. The theme was an important one to promote, but not just because there’s a whole lot of intriguing industry-shaping topics to ponder. It also minimized the temptation to spend too much time dwelling on the hell the coronavirus pandemic put the industry through. There was some talk about COVID-19 and its after-effects as we attempt to emerge from its grip. Of course it would have been weird not to mention topics like cocktails to-go and the pandemic’s influence W W W . ARTISANSPIRITMAG . C O M

on direct-to-consumer sales, especially since the conference had COVID safety protocols in place, but it was always framed in the context as a terrible incident that is slowly turning into a chapter of the industry’s past. While it will impact the future of the distilling industry in the short-term, it won’t define the future in the long-term. It was a refreshing perspective that delivered hope, something that we all know was in short supply for about 18 months. There was much ground to cover and DISCUS’ cavalcade of thoughtful symposiums and discussions did so in a manner that was informative, enlightening, and without stuffiness. Some of these discussions focused on ways to welcome back the customer, whether this was curating an immersive tasting room environment or maintaining a proper bar experience while rebuilding staff. Other discussions pondered the staying power of current and emerging trends in the industry, particularly trends involving the ready-to-drink category. A few centered on the business of distilleries, such as how to attract investors to raise capital and ways to further incorporate diversity and inclusion within a diversity business model. There were more than a few shout-outs to “the great state of Texas” throughout these symposiums, but if you’ve ever been to Texas, you knew these were coming.

SHOWING OFF LOCAL DISCUS presented a lot of reasons why the state’s distilling scene is worth bragging about. Several Lone Star State distilleries anchored the tradeshow floor on the conference’s second day, ranging from well-known brands like Garrison Brothers and Balcones to emerging labels like Highway Distillery, who were touting a vodka made with hemp seed. On day one DISCUS hosted a distillery tour that enabled select attendees to spend a few hours checking out a trio of Austin distilleries: Revolution Spirits Distilling Co., Fierce Whiskers Distillery, and Still Austin Whiskey Co. On day two, they ditched the notion of hosting a massive banquet-style dinner at the Fairmont and arranged for smaller group dinners at local restaurants. These more intimate mini-events, called Austin Dine Arounds, succeeded in showing off the city’s eclectic dining scene. Since DISCUS paired attendees with restaurants at random, these dining sessions also provided an organic way to meet new people. 113

GIVING BACK When enjoyed responsibly, spirits can anchor good times with good friends, which in turn can produce good memories. They can also bring a bunch of good people to do good works for the community. It was fitting, then, that DISCUS provided a means to demonstrate the social good that this terrific industry can do when everyone gets together. On day three, folks from different walks of the industry banded together to assemble care packages for first responders in conjunction with the nonprofit Operation Gratitude. The conference concluded with an awards luncheon emceed by industry pioneer Peggy Noe Stevens.

OTHER VOICES Here’s what other attendees had to say about this year’s DISCUS conference...

“ I was impressed by how well-organized

the event was, from the COVID protocols to running the panels and discussions. It was great to see all the conversations about the market shifts happening in the industry happen – those are the kinds of conversations needed to move the industry forward. I also really enjoyed the Austin Dine Arounds. It’s always great to get out and see the town on a conference, but that event’s specific focus was great because it provided a good opportunity to network with more people outside of the ones standing next to you at happy hour.” — Alex Koral

Industry Relations Manager, Sovos

“ The DISCUS 2021 conference was my first time at

a spirits conference. I appreciated that it wasn’t a gimmicky conference where everyone was trying to sell you something and was out for their own best interests. Within hours, I could tell that the spirits industry is a small, tight-knit group of individuals honestly trying to improve the industry and its future. In other sectors, the contacts you make are competitors. In the spirits industry, they’re comrades.” — Wylie Donaho Co-founder and COO, Big Thirst, Inc.

“ It was wonderful to be back meeting people in person

and learning from some of the best minds in the distilled spirits industry. Overall, I left very impressed with the experience and must congratulate the DISCUS team for delivering a world class event. In terms of learning, the content was excellent. It covered the technical, legal/ regulatory, marketing, and more. It’s also only going to get better. I’m looking forward to DISCUS 2022.” — Michael O’Connell

VP of Marketing, AnyRoad

A GREAT CONFERENCE FOR A GREAT INDUSTRY There was a lot to take away from DISCUS’ three-day gathering in Austin, but all these lessons can be summed up in a singular sentiment. There is a bright future ahead of us and the distilling industry has the resiliency to tackle whatever complexities, trends, and weird regulatory voodoo may be coming their way. As new trends and topics emerge ahead of the next DISCUS conference in New Orleans ( June 8-10, 2022), they’ll be ready for those, too. For more information visit www.distilledspirits.org.

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STILL STANDING

WRITTEN BY CARRIE DOW PHOTO PROVIDED BY NORTH STILLS

s the 2020 global pandemic wreaked havoc “Especially in Canada,” noted North Stills presiHow two equipment on the economies of the U.S. and Canada, dent and founder Dylan McKinnon, “I’ve noticed manufacturers, one in the the spirits industry found itself in flux. According some pretty dramatic trends from the time COVID U.S. and one in Canada, to a January 2021 ADI survey of their memberstarted and trying to keep my pulse on where the ship, while there was growth in certain segments demand is in the distilling space.” weathered the pandemic (whiskey sales, ready-to-drink cocktails), overall “Our clients have been getting bigger and bigand its effects on the the member respondents saw a decline in business. ger,” said McKinnon. “People are even distilling distilling industry. Many distilleries had to shift priorities quickly and water with our systems. We’ve had clients in the they began by looking at how existing and new cosmetic space. We’ve worked with farms that are equipment could fit their new needs. Two equipment looking to produce essential oils, lavender farms. But manufacturers – ABE Beverage Equipment in Lincoln, Nebraska, and the vast majority of our client space has been in the craft distillation North Stills in Toronto, Ontario – reflect on their side of the business market.” and what that says about the resilience of the industry overall. This occurred even as Canada had tighter restrictions than the U.S. The U.S. and Canada had vastly different experiences during the The U.S.-Canadian border was closed to non-essential travel at the end 2020 shutdown. Canada went into a near lockdown for the summer. of March 2020 and while Canada opened to vaccinated Americans in In the U.S., laws involving spirit sales changed and manufacturers and August 2021, the U.S. side remained closed until September due to the distillers had to deal with those changes in real time. The addition of Delta variant. Many Canadian businesses were closed well into 2021. direct-to-consumers sales and ready-to-drink cocktails opened new Toronto, where North Stills is based, had one of the longest restaurant revenue streams, but also created supply-chain obstacles. As things shutdowns in the world at more than 360 days. continue to reopen in both countries, these manufacturers are using “We were fully locked down, meaning like complete stay-at-home what they experienced over the past 20 months to handle what’s next. order. No bars or restaurants. Venues of any kind completely stopped,” For Adam Kosmicki, vice president of technical services and sales at McKinnon said. ABE, it’s about flexibility. In the U.S., the sale of alcoholic beverages was deemed essential, but “We’ve adapted based upon the shift in requests and feedback we got different states had different rules for getting those products to confrom prospects. That’s part of what’s driven our business model from sumers. For ABE, Kosmicki said the changes they experienced started coronavirus,” he said. “As we’ve seen different needs in the industry, before the pandemic, but shutdowns and restrictions greatly acceleratwe’ve added different pieces of equipment to support what we identify ed things. as demand.” “We’re seeing more and more industries shift to canning that would Both companies have seen dramatic changes. traditionally be in bottles. That’s facilitating a lot of our efforts. If you W W W . ARTISANSPIRITMAG . C O M

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PHOTOGRAPH BY CARRIE DOW

In Nebraska, ABE found that while some things were up, others products went down. “I think [the pandemic] certainly slowed things down,” said Kosmicki. Kosmicki said an issue he came across was how difficult and slow SBA loans were for his customers, complicating new and existing sales orders. However, he also noted the one bright spot was the uptick in packaging equipment sales as direct-to-consumer and to-go beverage markets opened to distillers. While valuable, Kosmicki said that change brought its own set of challenges. “I assume our competitors are as busy,” he added, “so now there’s a bottle shortage. The mills aren’t working because there’s fires and the lumber places aren’t working. Now there’s a cardboard shortage and lumber prices have increased. It’s a real challenge for folks from a supply standpoint to keep up.” As the world reopens, both companies continue to tweak their focus. For McKinnon, whose company is only five years old, he sees growth not only in spirits but in Canada’s new cannabis industry, as well. “We also do a good amount in the cannabis extraction space, ethanol distillation, and we also dabble in the hydrocarbon extractor line of products, but in the future, I see more as ethanol-based extraction of cannabis products. I’m in the process of expanding our whole operation right now to accommodate all that. We’re first and foremost craft distilling, but there’s a lot of movements we’re going to be making in that area.” Started in 1996, ABE has fallen back on what has always helped them to weather the ups and downs of the last 25 years: Adaptability. ABE began with water distillation systems before expanding into the brewing and spirits industries. Today ABE builds machines for cold-brewing coffee, canning seltzers, and making kombucha, all segments of the beverage industry distillers are looking at diversifying into. What has gotten both companies through the last year and half is noticing changes in consumer habits and listening to what their clients want, basic strategies that work for any business. “We talk about what’s the five- or ten-year piece of equipment we want to develop in the future,” mused Kosmicki. “Those are great pipe-smoking conversations to have, but we’ve really designed products and gotten into industries in real time as those needs have presented themselves.” “I kind of see us going back to the way things were before,” McKinnon said. “The hand sanitizer thing has been taken care of. People are continuing to love craft spirits and the public interest in craft spirits is being rekindled because people can go out and doors are opening.” With a hearty laugh he concluded, “Society is becoming more predictable and steady again.”

look at our website, we do seltzers, wine, kombuchas, CBD products; we’re in a number of different industries and some of those industries are shifting towards cans domestically and international. I can’t tell you how many conversations I’m having about canned wine now.” Kosmicki also notes that COVID-19 restrictions facilitated a downsizing already happening in other markets. “As coronavirus hit – even before coronavirus – the close rate (for breweries) was going up. I think people pumped the brakes … We’ve seen something similar in the distilling side, too. The requests for large systems have decreased and we’ve started to see a push for smaller systems, so we’ve adapted to that market change and come out with little pilot stills that are similar to what the production stills look like, but on a smaller scale.” McKinnon’s company experienced a whirlwind during 2020. “Just by following the graph of our online traffic throughout this whole COVID situation has been very telling in what people have been interested in buying and when,” he said. He described his online traffic spike of 800 percent in April 2020 as “a complete mountain on the graph.” He believes this happened because Ontario’s Liquor Control Board forced liquor stores to close one day a week causing a consumer run on products. He said his company’s sales also increased as businesses jumped into the hand sanitizer business overnight, including companies that weren’t even involved in distilling. “We had all sorts of companies coming to us … I even had Canada Red Cross reach out to me.” Another factor that caused his numbers to spike was when Ontario reduced the time required to get a distilling permit. It was done to speed up the production of hand sanitizer, but McKinnon thinks it also attracted the public’s interest in home distilling. “I’m talking about permits that usually take six months to a year, were taking, I was told, as short as three days after you made the call. It was a state of emergency,” he said.

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ABE Beverage Equipment is located in Lincoln, Nebraska. For more information visit www.abebeverageequipment.com. North Stills is located in Toronto, Ontario. For more information visit www.northstills.com. W W W . ARTISANSPIRITMAG . C O M

, S T H LIG , Y T I C TENA ! N O I T AC L

ike a movie plot, Napa Valley Distillery’s origin story starts in the backroom of an W BY CA RR IE DO PH OT OG RA PH ED Italian restaurant in Hollywood, California. WR ITT EN AN D Theo Alexander, senior hospitality coROM ordinator for Napa Valley MATIC RISE F A R D ’S Y R E L IL LEADER Distillery, described how it A CALIFORNIA DIST O INDUSTRY T T E B R E K O P all went down during a night HOLLYWOOD with Arthur Hartunian, the “So everybody tries it. The guy says, ‘What do distillery’s founder. you think?’ And Arthur says, ‘Meh, it’s fine, I guess.’ “Actually, it was a poker bet that got way, way, Of course, being a proud Italian, the guy says, ‘Ok way out of hand!” laughed Theo. “It’s 2009 in a wise guy. Put your money where your mouth is. If restaurant in Los Angeles. Arthur is having dinner you think you can do better, I’ll buy it from you and at a friend’s restaurant. They’re all a bunch of guys serve that in my restaurant. What do you say?’ After smokin’, laughin’, jokin’ around and [the restaurant a few more rounds, some handshakes happen.” owner] brings out some limoncello for the boys to “Now [Arthur] had been hobby making infusions try.” Theo leans forward lowering his voice. “It deand liqueurs before that,” Theo went on. “Not dispends on how much we’ve had when telling this stotilling at this point, but blending. He mixes up some ry, but occasionally that limoncello has been made organic Meyer lemon peels, some beautiful sugar, by Danny DeVito.” Theo straightens up and continues.

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some great brandy. Mixes up this limoncello and brings it to the gentleman in the restaurant. They did a blind taste test with the staff, you know, Sample A, Sample B. Needless to say, [Arthur] wins the bet.” Theo casually puts one hand in his elbow, and with the other hand puts a finger on his cheek near his impressive handlebar mustache. “Then a friend says, ‘Hey, Arthur, they’re having this contest in Switzerland. Wouldn’t it be neat if…?’ So [Arthur] sends a box. A few weeks later he gets an email: ‘Dear Mr. Hartunian, you have won the absolute whole contest!’” Specifically, it was the Platinum Prize at the 2009-2010 World Beverage Competition in the Spirits/Liqueur category. Only in Hollywood, right? Arthur himself, when discussing his distillery’s origins, is more restrained. “I’ve been a cocktail geek forever,” he said. “When I was 19, I got a job in Hollywood. My sister worked at a law firm on the corner of Sunset and Cahuenga in the old CNN building and got me a job as a paralegal. Downstairs was a diner with a cocktail bar … All the lawyers in the building would go there and Larry King would be there all the time. The lawyers … they would say, ‘Come Arthur, have a drink with us.’ They were drinking Negronis and Old Fashioneds and Sidecars. I became fascinated by cocktails. This was before the internet so I would go [to] the library and check out old books on cocktail making and history and distilling. That’s where I found the passion to do what I’m doing today.” That passion explains the company’s emphasis on classic cocktails, which they sell pre-made in 375 ml bottles. They also make bourbon and rum, but with direct access to California’s wine country, most of their spirits are grape based; however, “brandy producer” doesn’t always fit the distillery’s cocktail ethos. Theo explains this dichotomy through the company’s flagship product, Old Hollywood Ginn – with two Ns. “That is a labeling manipulation. The regulation at the state level at the time prevented us from constructing non-brandy spirits because we sold direct to the consumer. To fit within the bounds of the law, we had to make a product that was made from fruit. So technically, it’s not gin, it’s brandy – if the government asks. Between you and me, it’s a neutral spirit with wonderful juniper flavors and that’s going to be what everyone else considers gin. We add the extra N. I say it’s N for nonsense,” he laughed again. Arthur said he got a state Type 7 license back in 2009 because it was the only one that allowed self-distribution, but was restricted to brandy. To make what he wanted to make and still self-distribute, Arthur would need to change the rules. But before that, he bent them. In 2010 he purchased 2,200 gallons of local sauvignon blanc that a winery unloaded during the Great Recession. Arthur didn’t yet have distilling equipment, so he called Stillwater Spirits in Petaluma.

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“Their distiller at the time was Jordan Via,” explained Arthur. “I said, ‘Jordan, I want to make vodka with this wine.’ He said, ‘It’s never been done, but it’s possible.’ I shipped my wine over and we distilled a beautiful vodka that Wine Enthusiast called…Top 50 spirits in the world (2011).” Today head distiller Tim Espinoza distills Napa Valley Reserve Neutral Brandy with single estate, single vintage Napa Valley appellation grapes. Even though Arthur carved out a unique niche in the spirits world, California liquor stores still wouldn’t carry his products. “What was difficult to overcome,” he said, “was other states had the ability to operate tasting rooms and sell products directly to consumers. They were generating this revenue and taking that money and putting it into distribution in the biggest state. They were taking up shelf space and locking out California distillers, which is crazy.” In 2012, Arthur got together with five other California distillers, including Cris Steller of Dry Diggings and Lance Winters from St. George, and formed the California Artisanal Distillers Guild, with Arthur serving as its first president. The guild then connected with a supportive assembly member, Nancy Skinner of Berkeley. In September of 2013, Skinner’s bill AB 933 allowing for tasting rooms in distilleries became law. Then in 2015, the Craft Distillers Act was passed allowing distilleries to sell direct to consumers on par with California breweries and wineries – a major victory. “It was a small group of artisans and renegades that got together and made that happen,” chuckled Arthur. “I’m very proud of that, almost as much as what we’ve done here. The new guys are able to reap the rewards of our hard work.” You could say a true Hollywood ending.

At Prairie Malt, we love whiskey, bourbon and craft spirits. It’s our distinct honor to supply passionate distillers like you with the world’s finest malts so you can continue crafting perfection. Learn more at www.prairiemalt.com

Our World Is Yours.

PRMALT037_ArtisanSpirit_3.687X4.867indd

Napa Valley Distillery is located in Napa, California. For more information visit www.napadistillery.com or call (707) 265-6272.

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WH AT I L E A R NED TR AVEL I NG FROM

BIG WHISKEY CRAFT BOURBON TO

PA RT 1

For 35-plus years I’ve created products, brands, and marketing for some of the most prestigious whiskies in the world – The Macallan, Highland Park, Johnnie Walker. When I co-founded a craft distillery I thought it would be easy. What I’ve learned is that I was wrong. It’s hard. It’s really hard. This two-part series outlines my 10 biggest lessons traveling from big whiskey to craft distilling.

LESSON ONE

No Math, No Success

In the corporate world you manage profit and loss, but there are departments who do the math for you. In the craft world, it is crazy hard to get accurate financial data. The challenges are immense – angels share, price increases on dry goods, inventory, work in process, wholesale, retail, contract business, and different price ladders in every state. I learned quickly that to make smart decisions on product/ brand development and market expansion/pricing, I couldn’t outsource the math. As CEO I had to know and understand the math. I also made teaching this math to our team a priority so they could help us win. For example, we made the classic mistake of having too many bottles and sizes. When we calculated the true costs of each bottle – label, corks, shrinks, cartons, warehouse space – it became clear that the right number of bottles for us was one. We re-engineered our total product line and reduced our cost per case for packaging materials by 50 percent. I am pretty good at math. If you’re a CEO who isn’t good at math then I strongly suggest you find someone who is and make them your most trusted advisor. When you do, you will sleep better at night.

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LESSON TWO

Product Quality is critical for a Craft Distillery

Working at Procter & Gamble, I learned the key to success is to build a better product then tell the world about it through marketing. In the world of whiskey there are people who believe the reverse and that marketing and branding is all that really matters. Being a product first company was supported by trade association research that found 61 percent of spirit buyers (on- and off-trade) recommended that craft spirits producers focus on improving the quality of their products. When customers bring a bottle of your bourbon into their home, it sparks conversations with their guests. Shot glasses are pulled out and a taste offered of the new craft brand. If your offering wins or at least ties big bourbon you stay in these home samplings. Soon consumers repeat the purchase and you are on the way to a profitable business. To validate that our bourbons were as good or better than big bourbon, we built a system that allowed us to run three-paired comparison blind tests every 24 hours for five percent of the normal cost of fielding quantitative research. We tested against big bourbon brands that retailed for twice our price because our goal was to create products that could be nationally and internationally competitive. Our early test results were discouraging. With our first 24 tests it was not unusual for us to lose 3-to-1. After 150 tests and learning experiments we tied big bourbon. At about 300 tests we beat them with double gold medals and scores of 95 and 97 in international competitions. Today we’ve created more than 2,000 bourbons and done more than 500 tests. We are able to create so many bourbons because we focus on what we call WoodCraft finishing. It was inspired by working with The Macallan of Scotland, which is finished in sherry oak casks. Today many American whiskey brands use WoodCraft finishing from WhistlePig to Angels Envy to Makers 46. Quite simply, to win as a craft brand you need to taste better – when tasted blind – without any marketing smoke and mirrors. The reality is there is no chance you can out market, out advertise, or out promote big bourbon.

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LESSON THREE

“Buy us, we’re craft” is not a Marketing Positioning

My perception had been that as a craft bourbon maker we would enjoy the same “instant love” that our friends with craft breweries enjoy. The reality is we don’t. This became clear to me after a dozen bar conversions like this: ME:

“What craft bourbons do you have?”

BARTENDER :

“What do you mean?”

ME:

“Small, family/employee owned distilleries.”

BARTENDER :

“We have Makers Mark, Jim Beam. They’re larger but still family owned.”

Ugh! I respect the masterful job that big bourbon has done with their marketing. A recent national survey found that 80 percent of customers don’t know that most big bourbon brands are foreign owned by multinational corporations. To win versus big bourbon we set out to create a brand that creates an emotional connection supported by the product taste experience. In the case of Noble Oak Bourbon (co-created/co-owned with Edrington), it’s a double oak bourbon finished with European sherry oak staves. The narrative is “A great bourbon with a noble heart.” The packaging is clean and fresh. The price is $35 a bottle and for every bottle bought we plant a tree. Another example, our Dexter Three Wood Bourbon is named after Edmund Dexter, one of the 1800s most famous bourbon blenders. He was so renowned that author Charles Dickens and King Edward VII visited him. The narrative is “returning bourbon to its roots” and it’s finished with reclaimed 200-year-old oak, cherry, and maple wood. It’s priced at $49.95 and has been named one of the 12 Best Bourbons in the World at the Ultimate Spirits Challenge 2020. If you’re looking to potentially create a national brand, you need to go beyond “local,” “craft,” and “artisan.” You need to develop a brand that creates an emotional connection beyond your local community.

LESSON FOUR

Competitions Are a Craft Distillery’s Secret Weapon

For big whiskey, competitions are considered important but not critical. With a craft distillery, competitions are critical if you have aspirations of becoming a national brand. They quantify where you stand compared to big bourbon. The key is to enter competitions that the big brands enter. We focus our energy on the San Francisco World Spirits Competition and the Ultimate Spirits Challenge. If you don’t feel ready to go head to head with big bourbon, then start with craft and regional competitions. What’s most important is that you put your product out and get competition results. Scores of 95-plus and double gold medals ignite momentum in the marketplace and with whiskey industry gatekeepers both on- and off-premise. They also set off a chain reaction of positives with your team. Big wins versus big bourbon tell distributors and on-premise and off-premise managers that you are worthy of their attention.

LESSON FIVE

On-trade vs. Off-trade and Depletions

Big bourbon has the money and resources to invest significantly in selling to bars and restaurants. For a craft distillery, selling to bars and restaurants is difficult if not impossible to make profitable. In my opinion, most craft distillers should focus all of their energy on retail stores. When focusing on stores, start small and grow. Test, learn, and pivot until you can reliably grow depletions or consumer sell-through. Your mission is to develop the right combination of product and marketing to generate organic growth. Only then should you add stores or states. Staying small and staying out of bars is frustrating; however, losing money selling to bars is painful. Having distribution across a state and then losing it all when you don’t hit minimum sales targets is devastating. Start small and learn lessons. Go from one neighborhood to a town to a state to being all across the U.S. My advice to distillers is to have patience. It takes time to get it right. The good news is, if you continue to change, learn, and E pivot each month, I can nearly guarantee your NEXT ISSU d success long term. What I’ve learne aft cr , about cocktails ss ne si culture, bu e models, and th . em st sy er ti eDoug Hall is the co-founder and CEO of Brain Brew Custom WHISKeY, WoodCraft Bourbon Blender Franchising and thre founder/chairman of the Eureka! Ranch. He has spent 40-plus years creating and commercializing innovations for companies such as Nike, Walt Disney, Diageo and over the past 22 years The Macallan of Scotland.

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ADVERTISER index AGAVE RESOURCES

CONTRACT DISTILLATION

The Tierra Group

INSURANCE

Corsair Artisan Distillery

Southern Distilling Co.

Whalen Insurance

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BARREL WAREHOUSING

LABELS

White Dog Trading & Storage, LLC

CORKS & CLOSURES Tapi USA

Fort Dearborn Company 8 & 123

Niagara Label

7 97

BARREL RACKS Western Square

BARRELS Independent Stave Co.

7 & 15

DESIGN, BRANDING, & MERCHANDISING

PACKAGING

CF Napa Brand Design

Liquor Bottle Packaging

DISTILLING EQUIPMENT ARCHON Industries, Inc. Bavarian Breweries & Distilleries

BARWARE Boelter Thousand Oaks Barrel Co.

105

110

Rudolph Research Analytical

Specific Mechanical Systems

Vendome Copper & Brass Works

Zhejiang Zhangda Light Industrial Machinery Factory

34 119

6&9

XpressFill Systems, LLC

DISCUS Academy Moonshine University

53 8 & 24

BOTTLE MANUFACTURERS & SUPPLIERS Brad-Pak Enterprises

110

PUBLICATIONS Journal of Distilling Science

PUMPS McFinn Technologies

G&D Chillers

RETAILERS Total Wine & More

ENZYMES & YEAST

Ferm Solutions

SPIRITS COMPETITIONS

Phoenix Packaging

Fermentis

American Distilling Institute

8 & 124

Lallemand

7 & 11

Supercap

Vetroelite, Inc.

North Star Leasing 105

Spokane Industries 102

American Spirits Exchange Ltd.

Southern Distilling Co.

60 5

INGREDIENTS CONSULTING Distillery Now Consulting

Briess Malt & Ingredients Co. 67

BSG Distilling Prairie Malt

TRADE EXPOS Craft Beverage Expo

GNS & BULK SPIRITS SUPPLIERS Grain Processing Corporation

COMPLIANCE & BACK OFFICE MANAGEMENT

TOTES & TANKS EQUIPMENT LEASING

CANNING SERVICES Iron Heart Canning Company

102

Imperial Packaging Saverglass

REFRIGERATION & CHILLERS

EDUCATION

BOTTLE FILLERS

Arryved

Cage & Sons Distilling Systems

Ink360

POINT OF SALE

112

BOTTLE & GLASS DECORATING Loggerhead Deco

2&7

TRADE ORGANIZATIONS Distilled Spirits Council

7 & 19

Responsibility.org

Spirits United

6 & 17 119

ARTISAN SPIRIT sponsors 122

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ICONIC SPRING

LET YOUR SPIRIT SWELL Gorgeous and dazzling, the ICONIC SPRING bottle stands out for its soft contours. It features a minimalist, subdued, rounded design and a stylish neck, topped with a small, vibrant carnette finish. Light as a feather, it has a flat and discreet punt, which is, after all, the charm of Saverglass. Its inverted conical body offers an infinite array of variation. A bottle full of promises — a future must!

Saverglass Inc. | www.saverglass.com | Haute Couture Glass 2950 Cordelia Road, Fairfield (CA)94534 : (707) 259-2930 | East Coast (NJ) : (201) 825-7100 Pacific North West (OR) : (707) 337-1479 | Mid West (KY) : (502) 365-2333