TRADEMARKS: USE IT OR LOSE IT
spirits & weed: TALE OF TWO INDUSTRIES
Strategic Brand Design for Alcoholic Beverages.
DESIGN FOR PACKAGING, LOGOS, CUSTOM BOTTLES, COLLATERAL, SIGNAGE, WEBSITES & NAMING 2787 napa valley corporate dr, napa, california 94558 t | 707 265 1891 www.cfnapa.com
TABLE of CONTENTS A LETTER FROM THE EDITOR
OREGON’S TERROIR TRIANGLE
Maltsters, researchers, and distillers come together for flavor
QUARTERLY U.S. GUILD REPORT
What’s going on, state-by-state
COMING SOON: BARDSTOWN BOURBON COMPANY
of Barsdown, KY
THE STATE OF THE INDUSTRY
Revenue growth and trends to watch
CODE EXPLAINED SLOW AND GENTLE
Tips on effectively communicating with your code official
THE TIME IS NOW
FRUIT DISTILLATE FERMENTATION
The art and science — Part 3
TRADEMARK TIPS 27 For small distillers
THE DUSTY BACK CORNERS OF 27 CFR 5 & 19
Reading up on the Code of Federal Regulations could save you some trouble
THE PROS & CONS OF CUSTOM GLASS FOR SPIRITS BRANDING
HERIOT-WATT UNIVERSITY'S INTERNATIONAL CENTRE FOR BREWING AND DISTILLING
Undergraduate and postgraduate programs for distilling students
DISTILLERS MALT VS. BREWERS MALT
What’s the difference?
Brand Buzz with David Schuemann
THE NEED TO GROW!
Advice on expanding your space, your equipment, and more
LOSS PREVENTION THROUGH TEAM BUILDING
Keep your bottles from walking away
BOOZE, WEED AND TAXES 45 48
FARMERS, MALTSTERS & DISTILLERS
A four-part plan
Chambers Bay Distillery of University Place, Washington
Past, present, and future
KEEP YOUR DISTRIBUTORS EXCITED
Comparing the business of legally producing spirits and marijuana
HARNESSING THE MOTION OF THE OCEAN
AN UPDATE FROM AMERICAN DISTILLING INSTITUTE’S BILL OWENS
Preparation will be your best way to success
Connect at the Cascadia Grains Conference
CANADIAN CRAFT SPIRITS AND THE DISTILLING BOOM 54 What is going on north of the border?
The most famous spirit you've never heard of
TURNING THE COGS
Understanding your Cost of Goods Sold is key to making a healthy profit
of Bloomington, Indiana
Quincy Street Distillery’s historic spirits
CASHING IN ON COCKTAILS
The benefits of onsite cocktail sales are numerous
WOOD AND STEEL
A cooper’s story
ALCOHOL DILUTION PRACTICES FOR DISTILLERS 65 Let's dive into the science
CHARBAY ARTISAN DISTILLERY & WINERY
of St. Helena, CA
from the COVER
Charbay Artisan Distillery & Winery in St. Helena, California. Image by Amanda Joy Christensen. See their story on page 71.
Issue 14 /// Spring 2016 PUBLISHER & EDITOR Brian Christensen ASSISTANT EDITOR & SENIOR WRITER Chris Lozier CREATIVE DIRECTOR Amanda Joy Christensen SENIOR WRITERS Amber G. Christensen-Smith
CONTRIBUTORS Shawn Bergeron Kris Bohm John Cox Harry Haller Attila Kovacs Margie A.S. Lehrman Matthew Linske, B.Sc. Justin Koury Marat Mamedov John McKee Bess Morgan
Carter Raff Jeanne Runkle Michael Scanzello David Schuemann Lisa Simpson Donald Snyder Marc E. Sorini Gary Spedding, Ph.D. Amber Weygandt, B.Sc. R. Scott Winters, Ph.D.
ILLUSTRATORS Francesca Cosanti Max Makowski
PHOTOGRAPHERS Scott Gordon Bleicher Amanda Joy Christensen Brian Christensen Andrew Faulkner
Chris Lozier Travis Ralls Jeanne Runkle
SALES & MARKETING Ashley Monroe ARTISAN SPIRIT is the endorsed publication of the American Craft Spirits Association. ARTISAN SPIRIT is a quarterly publication by Artisan Spirit Media. www.artisanspiritmag.com facebook.com/ArtisanSpiritMagazine
General Inquiries (509) 944-5919 Advertising (509) 991-8112 PO Box 31494, Spokane, WA 99223 All contents © 2016. No portion of this magazine may be reproduced without the written consent of the publisher. Neither Artisan Spirit Media nor ARTISAN SPIRIT magazine assume responsibility for errors in content, photos or advertisements. While ARTISAN SPIRIT makes every effort to ensure accuracy in our content, the information is deemed reliable but not guaranteed. We urge our readers to consult with professional service providers to meet their unique needs. At ARTISAN SPIRIT, we take the opportunity to enjoy many different craft spirits and adult beverages. However, it’s also our responsibility, and yours, to always drink responsibly. Know your limit, and never drink and drive. ARTISAN SPIRIT’s number one goal is to share and celebrate the art and science of artisan craft distilling. But please remember to follow all the laws, regulations, and safety procedures. Be safe, be legal and we can all be proud of the industry we love.
THANK YOU. Each issue we take a moment to highlight and thank our sponsors. However, we often forget to mention that these companies are more than just industry vendors vying for attention. There are individuals at these companies that also act as advisors. Each one of them offers more to Artisan Spirit Magazine and the distilling industry than just monetary support or goods and services. They have also provided years of expertise, with the intent to help guide and grow our industry. As always, we are careful to guard the integrity of Artisan Spirit Magazine, which is why we continue to maintain a separation of “church and state” when it comes to content and advertising. Advisors are not directors, and we have been exceedingly lucky to find people and companies in this industry that respect that delineation. The distilling industry could probably survive without associations, guilds, or publications but it couldn’t function without the distilling entrepreneurs or the suppliers that serve them. We are very thankful that these two fundamental groups on opposite sides of the fence have chosen to support what we do at Artisan Spirit Magazine.
WE COULDN’T DO IT WITHOUT EVERY SINGLE ONE OF YOU.
WWW.ART ISANSPI RI TMAG.CO M
DU PRO BY
WWW.ART ISANSP IRITMAG.COM
A LETTER FROM THE EDITOR: Lake Michigan at 11:06 pm in early March is one damn cold venue for a celebration party... I don’t exactly know this firsthand, but standing about five feet up shore with another 15 or so revelers, watching two men laugh maniacally while wrestling in the surf, it sure looked that way. Matt Hofmann was congratulating Randy Hudson on his best single malt whiskey win at the American Craft Spirits Association’s annual convention. Matt won the award last year, so it was a joyful (and frigid) passing of the crown, and a superb example of the camaraderie we are lucky to share in this industry, which is full of people who realize that valuing another’s success does not have to diminish your own. Almost as an afterthought the exceptionally talented Amanda Christensen set up a burst photo with her iPhone capturing the image pictured below.
When we awoke the next morning, we found out the Boston Herald had picked up the photo from Facebook and run it as an online story. What followed was a lot of giggling and exclamations of “What just happened?” It was then that I was reminded of a fact none of us should lose sight of: this job/industry/business is fun. Infectiously fun. Not every industry gets to have this kind of joy or enthusiasm at its core. They look on in wonder, awe, and with a tinge of jealously. We are lucky in a way that few others can even begin to comprehend. It’s that reason that I can sincerely say so many of us are “family”—sometimes dysfunctional, but always loving.
Brian Christensen (509) 944-5919 email@example.com PO Box 31494,Spokane, WA 99223
WWW.ART ISANSPI RI TMAG.CO M
THE FIRST (AND LAST) CALL FOR ALCOHOL.
MAKE IT A WORLD-CLASS POUR WITH MGP, a top supplier of bulk beverage alcohol. With our extensive portfolio, the possibilities are truly endless. Partner with our master distillers or bring us into your supply chain to make your brand stand out above the rest. To learn more about our premium beverage alcohol, contact us at 812.532.4156 or firstname.lastname@example.org.
Y L R E T R A QU D L I U G U.S. RT REPO
tion 6 conven tion’s 201 ia c o ss A s n Spirit provided a can Craft Ballroom t of Ameri d a n se e a brief ra G e th s and provid he er House T s, lm . ild a n u hicago wa P g io e ir ss e u th s, th disc as such themselve rface of roundtable show, and introduce tch the su ra to ate guild y sc st itr n lt n and trade u u ve o e m ec r’s e to me around th nough tim r this yea st a welco ble isn’t e fficials from ckdrop fo o a ta b d n ild e u u iv g ro g is not ju r ss r in fo u o rk y h o it n impre e tw u n e o rt n o pp nd at a end, let's fantastic o boration a de clear th rovided a ry. To that diately ma t state colla st e a u m d th in d im e g s h meeting p a in it w ablis row across t of our g quickly est . However, componen report from f their state it was also ry o a ild s ily u k ss si g c e p c u o s e L n r' n . e sy nt, but a this quart uild scene y! the countr developme jump into the U.S. g
ALASKA DISTILLERS GUILD OF ALASKA The Distillers Guild of Alaska is partnering with the Brewers Guild of Alaska to host the first industry-wide tasting event featuring Alaskan-made spirits, beer, wine, and mead. The event, Alaska Crafted, will be held in downtown Anchorage on May 21. An Alaska WWW.ARTISANSPIRITMAG.COM
Crafted press and media campaign will accompany the event. This winter we have been lobbying against a bill introduced in the State Legislature by Governor Walker that proposes to DOUBLE our state excise tax, which is already one of the highest in the country. The passage of this budget bill would be devastating to all our distilleries here, which are still young and fragile small businesses. Operating in Alaska can be challenging with high shipping
costs, high energy costs, long lead times on inventory orders, and high seasonality of populations. A state budget crises doesn’t help. We are working hard to protect our industry and promote the value of our distilleries as exporters of Alaskan products, tourism destinations, and job creators in the state. Heather Shade Port Chilkoot Distillery President, Distillers Guild of Alaska
CALIFORNIA CALIFORNIA ARTISANAL DISTILLERS GUILD California distillers have been feverishly applying for (and now obtaining) the brand new Type 74 license gained by the passage of AB 1295 Gray/Levine. The new law allows for direct to consumer sales in licensed tasting rooms, private events and up to three bona fide eating establishments. California ABC instituted a streamlined process which allowed very fast processing
COLORADO COLORADO DISTILLERS GUILD The Colorado Distillers Guild had a great and challenging 2015 with a number of legislative wins and continued growth. For 2016 we are facing even more challenges and a lot of opportunity, as well. Legislatively, we have a number of items we are working on:
are drafting legislation that would drop both our wholesale license fee and manufacturing license fee to bring
MAINE MAINE DISTILLER’S GUILD 2015 was a year of tremendous growth for the Maine Distiller’s Guild and saw the guild coming together as a cohesive and legal entity. 2016 will be a year of defining ourselves and building our individual brands and that of the guild. Work is underway to have a Maine Distillery Trail
MARYLAND MARYLAND DISTILLERS GUILD The Maryland Distillers Guild formed in early 2015 with the intent to develop the
of new license applications, the average wait time being less than 40 days. While this license is a huge step in the right direction for equaling the playing field for California distilleries, it is not a fix-all. The California Artisanal Distillers Guild continues to have a daily presence in Sacramento with legislative advocate Richard Harris of Nossaman LLP. CADG is working on additional language in the 2016 session to provide more opportunities for new and existing distillers. With California being on the edge of a craft distilling boom, it is only fitting to hold the annual
American Distilling Institute's conference in San Diego. CADG will focus on connecting the multiple guilds throughout the state in an effort to have a unified voice. Also during the conference, CADG will be showcasing California spirits made by CADG members during a spirits and cocktail evening. Finally, a big tip of the cap must be given to Assemblyman Adam Gray for his efforts and support to make AB 1295 a reality.
those more in line with what the beer and wine producers pay.
that we are required to pay to the Colorado Department of Public Health and Environment to conduct FDA inspections on our facilities.
hope to introduce legislation that would allow us to sell up to 20 percent by revenue of other Colorado-produced alcohol beverages in our tasting rooms.
continue to work with the Keep Colorado Local Coalition, DISCUS and the State Legislature to find a solution to the attack on our one retail license law by the grocery and convenience store industry.
are working to find a way for our state excise taxes to pay for the fee
Jim Harrelson CADG President Chief Troublemaker, Do Good Distillery
Beyond those fun issues we continue to work with a number of events to help our members get their amazing spirits out in front of both the industry and the general public. Our relationship with the Colorado Tourism Office also continues to grow as they help us get Colorado spirits in front of both national and international audiences. P.T. Wood Wood’s High Mountain Distillery President CDG
pamphlet released to the public in May 2016. Members of the guild are working on a joint marketing project with Pine State Distribution, their Maine Spirits marketing division, and the State of Maine to boost the visibility of Maine-made spirits in the media. The guild is forming working partnerships with the Maine State Bartenders Association and other groups to promote Maine spirits to an ever growing professional bar industry. The guild is working on plans to have a guild-
only tasting event in the Fall of 2016. Maine distillers are looking forward to 2016. Maine is known for its foodie tourism, with an abundance of quality local food and awardwinning restaurants, and Maine spirits are poised to be included in that distinction.
industry through legislation, events, and education. The inaugural board of officers is: President—Jaime Windon, Lyon Distilling Company; Vice President—Brad Blackwell, Lost Ark Distilling; Secretary—Kelsey Louthan, Louthan Distilling; Treasurer—Max
Lents, The Baltimore Whiskey Company. The first Maryland Distillers Summit was held in the state capital on February 17, 2016, with a majority of the 22 members in attendance. Distillers met with senators and delegates to discuss the challenges facing
Keith and Constance Bodine Sweetgrass Farm Winery & Distillery www.sweetgrasswinery.com
the growing industry and to gain support for legislation introduced this session:
HB 616: Class 1 Distillery: Revisions to existing license, a streamlined application, more flexibility in sales and sampling, removes production cap related to sales. HB 1316: Class 9 Limited Distillery: Makes existing Class 9 license issuable by the state in every jurisdiction. HB 1337: Limited Liquor Distribution License: Creates limited liquor wholesale license for distilleries producing less than 100,000 gallons annually, allowing them to distribute products statewide.
HB 370: On-Premise Promotions & Product Sampling: Allows manufacturer to provide their own products at a promotional tasting. SB 0630: Distillery Off-Site Event Permit & Spirits Festival Permit: Allows distilleries to apply for a permit to provide samples and sell product at off-site events. The guild also supports, and opposes, certain other bills which directly affect the industry, and members will testify in hearings over the coming weeks at the capital. Committees have formed to concentrate efforts into key areas such as Ethics, Marketing, Agriculture, and Government
MONTANA MONTANA DISTILLERS GUILD Montana Distillers hope to obtain parity with our manufacturing cousins, the brewers, with tasting room regulations (ounces served, operating hours), and we look to provide industry support to the microbrewers in their desire to lift or eliminate their statutory manufacturing cap. We know that by working together, the Drink Local movement will only be stronger. To that end, the Montana Distillers Guild is an active participant at the Montana Alcohol Coalition Table, comprised of Montana brewers, beer and wine distributors, state
Affairs. In addition, the guild is working diligently to foster relationships with a number of other industries, like agriculture and tourism, all with the mission of promoting an increase in consumption of local products. The Maryland Office of Tourism continues to be an excellent resource for promoting local spirits and encouraging tourists to visit distilleries throughout the state. The first Maryland Distillery Festival is in the initial stages of organization, and a number of other events are planned for 2016. Jaime Windon President, Maryland Distillers Guild Owner, Lyon Distilling Company
MONTANA DISTILLERS GUILD MEMBERS Bozeman Spirits (Bozeman) Dry Hills Distillery (Bozeman) Glacier Distilling Company (Coram) Headframe Spirits (Butte) Rattlesnake Creek
Distillery (Missoula) Spotted Bear Spirits (Whitefish) The Montana Distillery (Missoula) Trailhead Spirits (Billings) Triple Divide Spirits (Helena)
liquor stores, tavern owners, the gaming industry, restaurants, and the Department of Revenue. This is the Table through which most industry-led alcohol policy changes will be vetted prior to introduction in the legislature in January 2017. As we continue to work on growing our
Wildrye Distillery (Bozeman) Whitefish Handcrafted Spirits (Whitefish) Whistling Andy Distillery (Bigfork) Willie’s Distillery (Ennis)
membership, the Marketing Committee is working on outreach to business partners who may be interested in promoting this exciting industry in Montana. If you do business with a Montana distillery, look for our Associate Memberships! Jen Hensley Public Solutions, LLC
NEW YORK NEW YORK STATE DISTILLERS GUILD 2015 brought many exciting changes to the New York State Distillers Guild, starting the year with new branding and a new logo, and ending with some fresh faces on our board of directors. Our membership is poised to increase by an additional 20 DSP holders in 2016, and with 10 associate members already added since the year began we're anticipating another period of tremendous growth. We continue to be appreciative of the State Liquor Authority
and the legislature of New York State for their sustained willingness to work with us to achieve our legislative and regulatory goals. We held our annual members meeting in early February where we debuted two new websites, both key to our collective future:
• The New York State Distillery Trail site— a consumer facing presence dedicated to improving tourism and craft spirits awareness across New York State.
new internal website for our membership to communicate, coordinate events, and recruit new members. This year New York State will see the
enrollment and progress of the first craft distillation associate's degree program, and with it a new generation of craft distillers. With the program’s direct relationship to the New York State Distillers Guild, this will streamline and connect our future employees with the guild membership. Though there are many opportunities and challenges that await us this year, the biggest one will be unifying the craft distilleries of New York State into one voice, and to build on the successes we've achieved by working together. Cory Muscato Vice President—New York State Distillers Guild Lockhouse Distillery, Buffalo WWW.ARTISANSPIRITMAG.COM
presentation on the state EXECUTIVES regulatory issues that pertain President — Robert Cassell to a craft distiller in PA. At our Secretary — Mark Meyer spring meeting, the Spirits Treasurer — Herman Mihalich Category Manager from the PLCB will give a presentation on all aspects of the LICENSES listing process with PLCB. Current — 45 Legislatively, we are first trying Pending — 12+ to add clarity and
PENNSYLVANIA PENNSYLVANIA DISTILLERS GUILD Key objectives of the guild are to organize and educate. Last year the second in command at Pennsylvania Liquor Control Board (PLCB) Regulatory Affairs attended our meeting and gave a two hour
Rob Cassell New Liberty Distillery, Philadelphia
! d suppliers distillers an ft ra c f o e nc llow guilds. tional audie reach a na d inspire fe n to a y s, it e n g u n rt alle oppo ur latest ch out on this s to solve yo n Don’t miss io st e g g su VED! rs, request it supporte O GET INVOL
G? GUILD MISSIN ru E T A T S R U O c IS Y victories, re Share your
ease for new distillers of what already exists.
@ARTISAN EMAIL BRIAN
Pot Stills Column Stills Mash Tuns Fermenters Hand-built in the U.S.A. from raw stainless steel and copper. Delivery, installation, training, and TTB permitting assistance included with every Corson Distilling System.
BOISE, ID U.S.A. | WWW.CORSONDISTILLING.COM | (208) 407-4268 | INFO@CORSONDISTILLING.COM
THE STATE OF THE INDUSTRY WRITTEN BY CHRIS LOZIER
U.S. SUPPLIER REVENUE GREW TO $24.1 BILLION IN 2015
obody could have predicted the incredible growth that’s happened in the last few years,” tells Whisky Magazine’s Dave Sweet. “As a result, everyone from the craft producers to the world’s largest spirits companies, distributors, retailers and even the tasting events have to evaluate and recreate their approach.” Sweet opened late February’s North America Whiskies & Spirits Conference “State of the Industry” address with this message, which was fitting since the industry is bigger than ever, it will continue to grow, and if you do not proactively evaluate and market your brands, somebody else will likely replace you. If you do keep pace, though, this is a great time to produce and sell spirits. U.S. supplier revenue grew $950 million in 2015 to $24.1 billion according to the Distilled Spirits Council of the United States (DISCUS). While that is a 4.1 percent increase in revenue, the volume only increased 2.3 percent, which DISCUS senior vice president David Ozgo says is good because it means suppliers are moving more high quality products than before. DISCUS separates spirits into four market classes: value, premium, high-end and super premium. Of that $950 million revenue gain, over $900 million came from the high-end and super premium categories. There are multiple reasons for this, like the growing international thirst for U.S. whiskies, but in the U.S. market,
more awareness of our national distilling it can generally be attributed to more heritage, and Ozgo says every week he educated consumers. gives writers data on what is happening in “Consumers’ quest for knowledge will the spirits industry. continue to drive premiumization and “There’s a real fascination with the innovation,” explained Ozgo, who says cultural heritage our industry brings,” he that consumers not only want to try new tells. “People just can’t get enough of the products, but also learn more about those story.” products. They want to know how their One particularly story-soaked segment is spirits were made, who made them and whiskey, which grew to nearly 60 million what makes them good. cases in 2015. Mark Meek, CEO of Ozgo said small distillers are responsible International Wine and Spirits Research for much of that increased awareness. (IWSR), says domestic whiskey is the Micro-distillers bring a lot of excitement to fastest growing category in the U.S., and the industry, and people who visit or hear IWSR expects U.S. whiskey to continue to about local distilleries start asking more grow both at home and abroad for at least questions about all spirits, generating more the next five years. demand for spirits from small and large By 2020, Meek says it is likely that brands alike. bourbon will even overtake malt whiskey in To put the growing number of distilleries global sales volumes for the first time. Eric in perspective, Ozgo said that in 2010 Gregory, president of the Kentucky Distillers there were about 90 operational DSPs in Association (KDA), says Kentucky distillers the U.S. Margie A.S. Lehrman, executive are proactively pursuing this thirsty market, director of the American Craft Spirits spending billions of Association (ACSA), dollars on expansions, says they believe and doubling the there are between industry workforce in 800 and 900 now, just three years. with at least one in There’s a real fascination “We’ve seen every state. with the cultural heritage our tremendous growth in All of those new industry brings. People just the past five years,” labels and their accompanying stories can’t get enough of the story.” begins Gregory. “In 2010, we only had are doing more than — DAVID OZGO about eight or nine driving sales, though. operating distilleries The increased interest DISTILLED SPIRITS COUNCIL in Kentucky. Now is also creating OF THE UNITED STATES
we have 28 members with another 18 distilleries on the way.” That is the largest KDA membership since the repeal of Prohibition, and they currently rank eighth in the number of distilleries by state. Even with all the new bourbons coming from small producers across the country, Kentucky distillers still make 95 percent of the world’s bourbon, and 2015 was the third straight year Kentucky distillers have produced more than a million barrels. Unlike the beer industry, large Kentucky distillers embraced the influx of small distilleries, and rewrote the KDA bylaws to include them and provide a craft level membership. They also added a Craft Tour to the Kentucky Bourbon Trail, which not only increased tourism in the communities where those distilleries are located, but also helped generate additional traffic for the whole tour, with 762,000 visits last year. Adding the Craft Tour also expanded the political footprint for Kentucky distillers, and Gregory says they now have politicians voting for alcohol bills that they never considered before because they have craft distilleries in their district now. Improving legislation is essential for distilling industry growth. Ozgo says that defeating hospitality tax increases is one of DISCUS’s primary objectives, and he says distillers need to continue to push for modernization of alcohol laws. One modernization effort Ozgo advises distillers to watch is the growth of delivery services like Drizly and Amazon. “It’s the way people buy things today,”
shared Ozgo, “and spirits obviously need to move in that direction.” As laws regarding spirits are modernized and distillers gain more parity with brewers and vintners, they also gain more alcohol market share, which is extremely valuable. Since 2000, spirits market share has increased 6.7 points, and each point is worth $680 million. That equates to $4.6 billion, and accounts for almost 20 percent of the total spirits industry revenue.
TRENDS TO WATCH Nearly all whiskey sales grew in 2015, with Jack Daniel’s and Jim Beam leading the U.S. brands. One category that shrank was white/corn whiskey, which many small distillers produce to generate revenue when they first open, but are often marketed and purchased as a one-time novelty. Flavored whiskeys now account for 14 percent of the whiskey market, growing from almost nothing in 2008. Flavored vodka sales, on the other hand, shrank, while traditional vodkas grew a bit. Overall, vodka accounts for one-third of total spirits volumes. Rye whiskey volumes grew 20 percent, cognac was up 14 percent and tequila added 7.4 percentage points, with most of that growth in the high-end and super premium categories. When looking at the future, all the speakers said distillers should consider millennials when developing their marketing and branding. With a smorgasbord of labels to choose from and new products entering the market daily, millennials are used to experimenting.
“If you look at millennials and their desire to taste new spirits versus baby boomers, there’s a big difference,” explains Meek. Meek says that over half of millennials polled want to try new spirits and new categories, while only 36 percent of baby boomers said they would. While that means millennials are willing and excited to try your brand, it also means it will be much more difficult to retain their loyalty, since many switch brands, and even categories, regularly. That means your advertising, brand identity and packaging may need to change with purchasing and consumption trends, and Meek notes that brands seem to have shorter life cycles than they used to. If you do change your branding, keep in mind that many industry experts believe that transparency will become a defining characteristic in the rise or fall of a brand. “Today’s consumers are much more educated than they were five years ago,” shares KDA’s Gregory. “They understand quality, and they understand labeling issues, so resist taking creative license with age requirements and labeling. If you’re not going to get caught on social media, there are lawsuits out there.” The spirits industry is growing, and purchasing trends are shifting toward high quality products, innovative products, independent brands and authenticity. Most of the suppliers who meet these criteria are succeeding and growing, but no one is doing better than consumers. With a larger selection of high quality products than ever before, this is a great time to drink spirits.
PUT OUR CUSTOM INTO YOUR CRAFT. custom-metalcraft.com 417-862-0707
A GREAT SPIRIT COMES FROM A GREAT STILL
CUSTOM COMMERCIAL DISTILLATION SYSTEMS HBSCOPPER.COM
the time is LEGISLATION 101
AMERICAN CRAFT SPIRITS AWARDS
BEST OF SHOW BEST OF CLASS: RUM
Maggie's Farm Single Barrel Allegheny Distilling
W R I T T E N B Y MA RGIE A .S . LE HRM A N, E X E CUT I VE DI RECT OR A MERICA N CRA FT S P IRITS A S S OCIAT I ON
American Craft Spirits Association’s legislative team is building on the momentum that was generated at the end of 2015...
ristotle taught us: Law is order, and good law is good order. But what happens when the law is unjust? For instance, what happens when a law creates a substantial economic hardship for one manufacturing sector, in this instance, the alcohol beverage industry? And, what can happen when the groups within that sector organize and speak in a collective voice? Before we answer that, here is a quick refresher from your middle school civics class. Ideas become laws only after a somewhat lengthy process, either at the State or Federal level. For our purpose, let’s focus on what happens on Capitol Hill in Washington, D.C. In general terms, someone has an idea and finds a member of the House of Representatives and a member of the Senate and convinces them that the idea is meritorious. The idea is massaged and introduced as a bill, gaining sponsors along the way. It then goes to a House Committee to study, where it oftentimes merits a hearing, where a stakeholder testifies as to why that bill is important and fields questions from Committee Members. The Committee then “marks-up” a bill, meaning they take legislation and make changes through amendments in Committee. From there, the bill goes to the full U.S. House. This is classically what is known as regular order for WWW.ARTISANSPIRITMAG.COM
BEST OF CLASS: WHISKEY Double Barrel Rallypoint Still 630
BEST OF CLASS: GIN
Barrel Aged Knickerbocker New Holland Artisan Spirits
BEST OF CLASS: DISTILLED SPIRITS SPECIALTY Barrel Aged Blueberry Liqueur Huber's Starlight Distillery
BEST OF CLASS: VODKA Fugu Vodka Ballast Point Spirits
the consideration of legislation. If released by that Committee, the bill then gets to be voted on, debated or amended in the House. If successful, the comparable bill goes through the Senate. If that bill succeeds, it goes to a Conference Committee to work out any kinks in the language. It then returns to the House and Senate for another round of votes. If it passes, it goes to the President’s desk for signature. The law then becomes a part of the U.S. Code. Oftentimes, the law authorizes government departments to issue regulations to help implement the law. Those departments can then task their agencies or bureaus to come up with a set of guidelines to help facilitate compliance with the law. In our case, the Department of the Treasury delegates its authority to the Alcohol and Tobacco Tax and Trade Bureau (TTB) to come up with specific regulations and rules. But what happens when the rules or regulations are unfair? Can they be changed? In short: yes. In general, anyone can propose revisions. The TTB would then publish a Notice of Proposed Rulemaking, giving time to the public to respond and share comments. Once all the comments are considered, the regulation can be revised and a final rule would then be approved by Treasury and published in the Federal Register. The bottom line is that rules and regulations, not only with TTB, but also with FDA, OSHA, EPA and other regulatory agencies, can be revised. ACSA, with its Legislative Affairs Committee and lobbyist James E. Hyland from the Pennsylvania Avenue Group in D.C., is currently active in both legislative and regulatory efforts. Specifically, ACSA’s legislative team is building on the momentum that was generated at the end of 2015, when there was a very serious effort to pass legislation that would reduce the Federal Excise Tax (FET) for craft distillers. Spirits producers are currently paying a FET of $13.50 for each proof gallon. ACSA’s legislative proposal would reduce that to $2.70 for those that produce less than 100,000 proof gallons in a calendar year. This could be the difference between a profit or a loss for the year. Led by Senator Ron Wyden (D-OR) and Senator Roy Blunt (R-MO), there was a major last minute push to get this into law in the year-end Congressional negotiations. The legislative push for FET came down to the wire, but unfortunately, was not included. Although disappointed, ACSA was proud of the efforts of our members. The final tax bill did, however, include regulatory relief for small distillers. For producers who do not reasonably expect to be liable for more than $50,000 per year in alcohol excise taxes, they can pay such taxes on a quarterly basis rather than twice per month. Further, those reasonably expecting to be liable for no more than $1,000 per year can pay such taxes annually, rather than quarterly. This will take effect in 2017. ACSA efforts started early in 2015, and we are starting early in 2016, as well. In January, Revolution Spirits and Treaty Oak Spirits in Austin, Texas hosted the Chairman of the U.S. House Ways and Means Committee, Congressman Kevin Brady, and the Chairman of the House Agriculture Committee, Mike Conaway. The Ways and Means Committee has jurisdiction over taxes, including
any reduction in the FET for small producers. In ACSA’s talks with Chairman Brady, he encouraged ACSA to seek a hearing and a markup on legislation regarding a lower FET for craft producers, and we are aggressively pursuing that opportunity. It does not always happen this way, but new Speaker Paul Ryan has encouraged the Congress to return to regular order so that Members of Congress, not just the leadership, have more say in legislation. The ACSA Legislative Committee is huddling every week to plan a strategy for 2016. ACSA is also working closely with Congressman Todd Young (R-IN), who introduced H.R. 2520, a bill that would also lower the FET for small producers, and with Congressman Erik Paulsen (R-MN), who introduced H.R. 2903, a bill to lower FET for small distillers as well as craft brewers and vintners. We are also working with other spirit producers, craft brewers and small vintners who are supporting efforts to keep a coalition together to move a bill through the U.S. House. We are keeping in close touch with Senator Ron Wyden’s office, as well, because they believe that if the House acts, there is an opportunity to get this through the Senate. Senator Mitch McConnell (R-KY), the Senate Majority Leader, played a key role in throwing his support behind these efforts and we believe he would like to see this accomplished in 2016. ACSA will also take a lead in working to reduce the regulatory burden for craft distillers. Last year, we supported increased funding for TTB for expedited formula and labeling approval, and Congress provided additional funds for TTB in the last fiscal year. In the President’s budget for this year, Fiscal Year 2017, TTB has once again proposed a $5 million increase in its budget. While the money is not specifically directed to formula and labeling approval, ACSA will urge Congress to commit those new TTB resources to this area. As TTB has noted, it has tried to meet this challenge through its electronic filing and processing environment, and early data indicated reduced processing times for new permits, which decreased from a high of 95 days in January 2015 to 68 days in July. However, these gains were not enough for TTB to achieve its annual performance target of 75 days in 2015. At year end, only 47 percent of permit applications met the 75-day service standard, largely due to increased filings that reached nearly 154,000 applications, an eight percent increase over the prior year, and well above the historic high reached in 2012. ACSA will also work on other miscellaneous regulatory issues that have been raised by our members, including transportation in bond and enhancements to make exports more uniform. Recognizing that laws are fluid, Aristotle further counselled: Even when laws have been written down, they ought not always to remain unaltered. The time for craft spirits producers to seek that legislative change is now.
Margie A.S. Lehrman is Executive Director of American Craft Spirits Association. Visit www.americancraftspirits.org for more information on ACSA and to join. WWW.ARTISANSPIRITMAG.COM
TRADEMARK TIPS FOR SMALL DISTILLERS BY MARC E. SORINI AND BESS MORGAN
hat’s in a name? (Or a slogan, logo, symbol or other source-identifying device?) Well, turns out a lot. While the craft spirits industry is a tight knit and collegial community, businesses must strive to create a unique and distinctive place in the market that makes their products stand out from the rest. For small distillers, who may have leaner advertising budgets than the spirits giants, one effective way to plant your flag in the ground and say “This is who we are, come and join us!” is through trademarks. A trademark is any word, name, symbol, logo and/or device that identifies the goods and services of one party, and distinguishes such offerings from those of others. Below we provide some tips and recommendations for small distillers to consider when selecting and protecting trademarks.
THERE IS NO BENEFIT IN BEING GENERIC: SELECT DISTINCTIVE MARKS One of the most exciting, and often head-scratching, parts of establishing and developing your business is selecting trademarks. Marketing considerations are usually top of mind when selecting trademarks, and rightfully so. Trademarks establish and communicate your business identity. Is your distilling philosophy traditional and sophisticated? Modern and progressive? Off-the-wall and lighthearted? Trademarks reveal your company’s personality, and that personality will attract WWW.ARTISANSPIRITMAG.COM
Marc E. Sorini is a partner in the law firm of McDermott Will & Emery LLP, based in the Firm’s Washington D.C. office. He leads the Firm’s Alcohol Regulatory & Distribution Group, where he concentrates his practice on regulatory and litigation issues faced by supplier-tier industry members. His practice for distillers includes distribution agreements, distribution counseling and litigation, product formulation, labeling, promotional compliance, compliance strategy, and federal and state tax and trade practice enforcement defense.
c o n s u m e r s who share, or are attracted to, your point of view. While marketing considerations are significant when creating brand identity, just as much emphasis should be placed on selecting trademarks that will be considered strong in the eyes of the law. Certain types of trademarks are inherently “strong” and afford broader legal protections. Other marks are “weak” and afford less-extensive legal protection, or none at all. The basic trademark categories are:
Fanciful: completely unique and madeup terms with no known meaning other than as a trademark. Examples are PEPSI, KODAK and XEROX. Fanciful marks are considered the strongest type of trademark, meaning they are entitled to a more extensive scope of protection.
Arbitrary: a mark made up of one or more “real” words with a commonly understood meaning, but the words have no relationship to the goods or services with which they are used. Examples are OLD CROW whiskey, and APPLE computers. These marks are also considered strong.
Suggestive: marks that hint at a quality or characteristic of the relevant goods or services, but require some imagination, thought or perception to make the connection. Examples are CHICKEN OF THE SEA for tuna or AIRBUS for airplanes. Suggestive marks are considered weaker than fanciful or arbitrary marks, but can acquire strength over time.
Descriptive: words or phrases that merely describe an ingredient,
characteristic, quality, function, feature, purpose, or use of the goods or services with which they are used. Examples are AMERICA’S RUM, EXPERTLY DISTILLED, PERFECT VODKA. Descriptive marks are only protectable if they have acquired “distinctiveness” or “secondary meaning” to the public through substantially exclusive and continuous use for a considerable amount of time.
Generic: a word that is used to refer to the class or type of goods or services. Examples include vodka, rum, whiskey, and tequila. Generic terms are not protectable as trademarks because they must be available for others to use.
A Clients often ask whether it is TRADEMARK possible to use IS ANY WORD, their surname NAME, SYMBOL, as, or as part of, a LOGO AND/ trademark. OR DEVICE THAT Generally, IDENTIFIES THE if a term is GOODS AND SERVICES “primarily merely a OF ONE PARTY, AND surname,” DISTINGUISHES meaning it SUCH OFFERINGS does not have a recognized FROM THOSE meaning other OF OTHERS. than as a surname, that name is not protectable as a trademark unless and until it has achieved secondary meaning as an indicator of source for the relevant goods or services. Of course, many surnames do achieve secondary meaning in the eyes of the public, and some very famous trademarks are 27
surnames, including MCDONALD’S, FORD and WRIGLEY. Owners of well-known name marks may prevent others with the same name from using or registering that name as a trademark. You can imagine you might face a problem with opening a restaurant using any form of the name “McDonald’s,” even if “McDonald” is your last name. Thus, while it is possible to acquire trademark rights to a brand comprised of a family name, business owners should conduct a clearance search (see next section) to make sure that their name has not already been used and registered by another party in their field of use. Distillers should also use caution when incorporating THE geographic terms into U.S. their marks. The U.S. Patent and PATENT AND Tr a d e m a r k TRADEMARK Office (PTO) OFFICE WILL NOT will not REGISTER A MARK register a THAT, WHEN USED ON mark that, when used OR IN CONNECTION on or in WITH SPIRITS, connection with spirits, IDENTIFIES A identifies a GEOGRAPHIC PLACE geographic OTHER THAN THE place other ORIGIN OF THE than the origin of the goods. For GOODS. example, you should not call your product ALL AMERICAN VODKA if your product is distilled in Canada. Not only does such a name risk disapproval by the PTO, it also puts your ability to obtain a certificate of label approval (COLA) from TTB in jeopardy. And even if you can somehow get such a mark past the PTO and TTB, you would still face the prospect of potential false advertising lawsuits under the federal Lanham Act and state false advertising and unfair competition laws. Even geographic terms that accurately reflect the origin of your goods will likely be deemed merely descriptive by the PTO, and will not be protectable absent evidence of secondary meaning. Thus, give careful consideration to whether you want to pick a
mark that has geographic significance. From a legal perspective, your rights to the mark will be limited, as you cannot prohibit others from using a geographic term to accurately identify the geographic origin of their goods. From a larger business standpoint, consider whether using a geographic indicator may restrict your audience to a particular market. For example, the name IDAHO VODKA CO. may not have nationwide or foreign appeal, despite the clever rhyming. Ultimately, the primary reason to have a trademark is to distinguish your company’s offerings from those of a competitor. That is why adopting a distinctive trademark is highly recommended. Others are more likely to use a descriptive trademark without permission, and you will likely have a limited ability to stop others from using your trademark in a purely descriptive manner. So, when selecting trademarks, we recommend coming up with a number of options for consideration, with an emphasis on fanciful, arbitrary, or suggestive marks.
CLEAR THOSE MARKS! Your team has finally come up with the perfect trademark. You are so excited that you call up legal and yell FILE! FILE! FILE! You patiently wait for good news when—cringe— the PTO rejects your application because it finds the same or similar trademark in your field of use, with senior (i.e., prior) rights. You also might receive a demand letter from a senior rights holder demanding you immediately and permanently refrain from any use of, or plans to use, your perfect mark. We write those letters, so we know. Upfront due diligence could have avoided the foregoing scenario, or at least an unpleasant surprise. Engaging in trademark clearance is simply part of good industry citizenship. Regardless of whether you are a seasoned distiller or are new to the industry, everyone feels financial pain, and throwing away money and time on a brand you eventually have to abandon cuts deep. The purpose of trademark clearance is two-fold. First, you avoid infringing prior rights by assessing whether your proposed mark is even available for use. A clearance analysis will compare your proposed mark
to those that came before you and assess whether your mark will invite rejection from the PTO and/or objection from third parties. Trademark clearance can also help you determine whether your mark is distinctive. If prior records show you that marks identical or very similar to yours were rejected by the PTO as being merely descriptive or generic, then your application will likely meet a similar fate. When engaging in trademark clearance, do not limit your clearance searches only to spirits in International Class 33. In analyzing whether a proposed trademark is “confusingly similar” to an existing registration or prior pending application, the PTO has found beer to be “related” to other alcohol beverages—even though the PTO classifies beer separately from other alcohol beverages. In addition, the PTO and the U.S. Court of Appeals for the Federal Circuit (the federal court that hears appeals arising from PTO proceedings) have held alcohol beverages to be “related” to restaurant services in view of evidence that restaurants frequently offer their own private label wines, and brewpubs are restaurants that offer their own private label beers. Similar to brewpubs, the restaurant/ distillery movement appears to be gaining steam, with restaurants distilling their own spirits and distilleries serving food. Thus, the PTO would likewise have evidence to support a conclusion that spirits and restaurant services are “related” AS for a likelihood of confusion analysis. Therefore, THE when clearing CLEARANCE your marks, we PROCESS CAN recommend casting a wide TAKE SOME TIME, net. WE RECOMMEND We also GIVING YOURSELF recommend ADEQUATE LEAD TIME expanding y o u r BEFORE YOU NEED clearance TO COMMIT TO A searches MARK AND GET LEGAL b e y o n d marks that INVOLVED EARLY ON are filed or IN THE SELECTION registered PROCESS. with the PTO. WWW.ARTISANSPIRITMAG.COM
As discussed below, in the United States trademark rights are acquired through use. If you come across a website or social media page of a distillery that appears to have started using an identical or similar mark before you, that common law use can still cause problems for your company even if that senior user has not secured a federal registration. At a minimum, your clearance searching should include reviewing the PTO’s online database and conducting common law searches using various internet search engines. TTB’s online COLA database also provides a valuable tool to identify other alcohol beverages (at least those under TTB’s labeling jurisdiction—a category that includes all distilled spirits) sold in interstate commerce that potentially might use the same or a similar mark to the one you wish to use. But we also suggest having a trademark attorney order and review a “comprehensive trademark search report,” which provides a more thorough search of the PTO register and includes common law references such as newspaper articles, magazine articles, internet web pages, and business directories. Having a professional search firm research these sources provides a more robust search than you can conduct yourself. While even a comprehensive search WWW.ARTISANSPIRITMAG.COM
cannot provide 100 percent certainty that a mark is not already in use, it provides some measure of comfort and shows that your company pursued a mark in good faith. If you are really committed to a trademark in spite of potential risks identified by the clearance process, you can be proactive about addressing likely conflicts. For example, you can approach a third party trademark owner and ask that they consent to your use and registration of a mark. You also can explore co-existence with, or offer to purchase, a conflicting mark. Of course, there is no obligation for a senior rights holder to entertain your request, so be prepared to select an alternative mark. For this and other reasons, the decision of whether or not to seek a co-existence arrangement with another trademark owner presents complex issues of business and legal strategy. As the clearance process can take some time, we recommend giving yourself adequate lead time before you need to commit to a mark and get legal involved early on in the selection process. That way your advisors can gain a solid understanding of your plans for a brand, and can conduct diligence searches effectively. There are certainly upfront costs associated with trademark clearance, but these costs represent a worthy investment that could help avoid a potential lawsuit or costly re-branding.
GET IN THE GAME—ACQUIRE RIGHTS BY USING YOUR MARKS A common myth is that without a federal trademark registration, you have no rights. In the United States, trademark rights are acquired through use of a mark in
commerce, even if the mark is not federally registered. The moment you sell your spirits, marked with your trademark, or transport your trademarked goods to distributors or retailers, you are acquiring common law trademark rights. These common law rights may permit you to successfully challenge a third party from later attempting to use and/ or register a mark identical or highly similar to yours. Common law rights do have limitations. They extend to the geographic area of actual use, and a reasonable surrounding area. For example, if you have only used your mark in and around the Detroit metropolitan area, chances are slim that you will be able to successfully prevent someone WITH from using a A FEDERAL mark identical REGISTRATION, or highly YOUR TRADEMARK similar to yours in RIGHTS BECOME Texas. NATIONAL AS OF YOUR F o r CONSTRUCTIVE USE this and other DATE, AS OPPOSED TO reasons, YOUR COMMON LAW t h e r e RIGHTS THAT ARE are clear DEPENDENT ON benefits to federal YOUR GEOGRAPHIC registration. AREAS OF One of the ACTUAL USE. chief benefits of a federal registration is that it sets a constructive first use date based on the filing date of your application, which gives you nationwide priority over others who are using or attempting to register the same or similar mark after that point in time. In other words, with a federal registration, your trademark rights become national as of your constructive use date, as opposed to your common law rights that are dependent on your geographic areas of actual use. Bear in mind, however, that a party whose common law rights are senior to yours still has the right to use their trademark within their geographic area of use, notwithstanding your federal registration. A savvy common law rights holder might require that you
exclude from your trademark registration their market area, or negotiate some form of co-existence. Provided your mark has passed the clearance process, it is in your best interest to begin using your trademark in U.S. commerce to start establishing your common law rights while you consider, and ideally pursue, federal registration.
Captivating capsules Riveting labels
Not only word marks enjoy trademark protection. To build a robust trademark portfolio, also consider protecting logos and designs, which may consist of a symbol (e.g., the BACARDI bat), a combination of words and designs, or words presented in a stylized font (e.g., ABSOLUT in its signature block lettering). Slogans and taglines are also protectable designations of source, for example, “IT’S MILLER TIME,” “JUST DO IT,” “TASTE THE RAINBOW,” and “THE HAPPIEST PLACE ON EARTH.” Spirits trademarks can consist of various elements on a bottle label, including the name of the product, name of the distillery, logos, and design elements (e.g., a shield or crest, decorative banners, a background pattern, etc.). They might also include the combination of all of those elements and how they are presented on the label or configured on the bottle. You can also explore protecting the shape or color of your bottle if it is unique and does not serve a functional purpose. Trademarks come in many forms. Being aware of, and obtaining protection for, the various trademarkable elements of your business will increase your company’s valuable intellectual property assets and put you in a stronger position to enforce your marks against unauthorized third party users.
CUSTOM CAPSULES and CAST METAL LABELS
The growing number of small distillers highlights the desirability of joining a collegial and creative industry. By understanding some basics about trademark selection and protection, you can build your business upon a solid foundation and focus on expanding your empire rather than defending against attacks. Marc E. Sorini is a partner in the law firm of McDermott Will & Emery LLP, based in the firm's Washington, D.C. office. He is the leader of the Firm’s Alcohol Regulatory & Distribution Group. Recognized as one of the leading lawyers in his field by Best Lawyers and the Chambers USA directory, he advises breweries, distilleries, wineries and importers on regulatory, litigation, licensing, distribution, advertising, product formulation, and taxation issues.
Ramondin USA Napa CA 707.944.2277 ramondin.com SAMPLES
QUOTATIONS – email@example.com
Metal labels by Apholos – distributed in Nor th America by Ramondin USA
Bess Morgan is an associate in the law firm of McDermott Will & Emery LLP and is based in the firm’s Los Angeles office. She focuses her practice on trademark prosecution, counseling, licensing and dispute matters. Bess advises clients on the selection and adoption of new trademarks, renders opinions on the availability and proper use of trademarks, and assists in the enforcement and protection of clients’ trademark portfolios. Bess also advises clients on a variety of other intellectual property transactional matters including: copyright and right of publicity clearance, protection and licensing; contests, sweepstakes and raffles; recovery of domain names through UDRP actions; licensing and distribution agreements; compliance with advertising and marketing regulations; and IP due diligence and counseling in connection with corporate transactions such as mergers and acquisitions. WWW.ARTISANSPIRITMAG.COM
High-Proof Spirit Bases for your Custom-Crafted Blends
Expand your formulation options
Increase proﬁtability & value
Diversify your product line
HIGH-PROOF SPIRITS Neutral Spirits Gin (3 options)
Organic Spirits Unaged Whiskey
Aged Bourbons, Rye & Whiskey Cream Liqueur Base
Brandy & Cognac
877.778.5872 | 203.662.9761 | www.ultrapure-usa.com
DUSTY BACK CORNERS OF
27 CFR 5 & 19 WRITTEN BY JOHN MCKEE
am a distillery owner, not an attorney, so take this with a grain of salt, but how many times have you read TTB 27 CFR Parts 5 and 19? Do you have copies in the bathrooms at your distillery? Do you know what CFR stands for? If your answers are “Less than four,” “No,” and “Huh?” then consider getting a copy. Title 27, parts 5 and 19 are the Code of Federal Regulations sections relating to “Labeling and Advertising of Distilled Spirits” and “Distilled Spirits Plants.” They outline the rules by which we can operate. I’m sure that most of you are aware of the “Restrictions as to locations” or “Filing of operations or unit bonds” regulations, but I thought it might be fun to look at some of the dustier corners and see what we might find.
PRESENCE OF NEUTRAL SPIRITS AND COLORING, FLAVORING, AND BLENDING MATERIALS Considering the innovative spirit of our industry, this one needs to be reviewed by anyone using chips and staves. Specifically “(c) Treatment with wood”: “The words ‘colored and flavored with wood ____ (insert chips, slabs, etc., as appropriate)’ shall be stated as a part of the class and type designation for whisky…” That means that if you are using barrel inserts you may need to change your labels.
CHANGE IN CONSTRUCTION OR USE OF BUILDINGS AND EQUIPMENT Have you been growing or remodeled to accommodate more square footage? If so, did you submit a “letterhead notice before making any material changes”? If not, you had better follow up.
EXEMPTIONS FOR NATIONAL DEFENSE AND DISASTERS
AUTHORIZED WITHDRAWALS WITHOUT PAYMENT OF TAX
Are you sick of doing paperwork? Then get the feds to issue you an exemption for National Defense and disasters. You still have to pay your FET, but you can get an exemption to “any provision of the internal revenue laws” relating to distilled spirits. Should Nicole Austin at Kings County Distillery in Brooklyn have applied for this privilege after the disaster declaration of Superstorm Sandy (DR-4085)?
If you do not want to pay your FET, put your spirits on a “whaling boat.” This one takes a little bit to get to, but follow (a)(4) “Supplies for certain vessels and aircraft, authorized under 19 U.S.C 1309 (a)(1) (B)” which says, “vessels of the United States employed in the fisheries or in the whaling business.” Greenpeace has obviously not read this section of 27 CFR 19 in a long time.
You received your DSP and you thought you were good to go, right? Wrong. Even though you have your license to operate, you must “file on letterhead notice” when beginning or resuming operations, otherwise you are in violation.
At Garrison Brothers Distillery, Dan Garrison has a funny story about being fined because he had chickens roaming outside that were determined to be “other business” that had not been declared in his license application. If you are performing other business at your DSP, declare it and get it authorized.
NOTICE OF OPERATIONS
THE BURNING QUESTION:
Pretty much all throughout the U.S. Code, the Secretary of the Treasury is referred to as a “he.” If we have a female Treasury Secretary, will we still have to follow the law?
BETTER SAFE THAN SORRY:
There are a lot of rabbit holes that you can fall down
in all regulations, be they federal, state or local. You should review them regularly, challenge yourself and your staff to understand them and pass the word to new distilleries if you see them miss something.
Ignorantia legis neminem excusat is Latin for "ignorance of the law excuses not.” If you take some extra time with
your bathroom reader copy of 27 CFR, and always declare your chickens, you can save yourself some trouble. John McKee, along with his wife Courtney, are the owners of Headframe Spirits in Butte, MT. When John isn’t catching up on his reading he’s wondering if the toilet paper is put on the roll the correct way. For more info email firstname.lastname@example.org.
Flavor you seek Black Swan Cooperage, LLC offers barrel styles to meet the flavor and aging timelines you require. Our dedication to creating the best tasting barrel is maintained by using traditional toasting and charring methods, to bring out the best qualities American White Oak has to offer. Traditional Barrel
Black Swan Standard Barrel
HONEY COMB® Barrel
HONEY COMB® Barrel Alternative
1605 Commerce Ave. South, Park Rapids, MN 56470
Financial Solutions Crafted for Distilleries Working over 30 years in capital finance and our substantial owner-operator experience in the distilling industry gives us the insight to help you plan for success.
Affordable Equipment Leasing Flexible Leasing Terms
Low Upfront Cost
Diverse Buyout Options
Low Monthly Payments
Simple, Efficient Process
Helping You Grow
The Tools You Need
Having already laid the groundwork by directly partnering with vendors, we can deliver anything including mash tuns, fermenters, kettles and any accessories you might need. We’ll take the burden of finding equipment off your shoulders so you can start distilling.
We know you’ll face challenges throughout your business’s life cycle, such as investing in new equipment, expanding, and establishing partnerships with other distilleries. We work hard to deliver the dream you envisioned and reach your goals as soon as possible.
Call for a FREE consultation today - 877-901-1378
THE PROS & CONS OF CUSTOM GLASS FOR SPIRITS BRANDING WRITTEN BY
Custom bottles can provide a unique look and add valuable brand benefits, including increased purchase intent and brand loyalty, but brand owners must evaluate the pros and cons before committing to a custom design.
n today’s competitive marketplace craft spirits packaging has to work hard on the retail shelf and on the back bar to attract consumer attention. Custom bottles are a powerful way to achieve this end, especially when finished with complementary packaging components. But brand owners must fully consider the investment of committing to a custom bottle before choosing this path. In the following article, I have outlined the pros and cons every bottle buyer should consider before embarking on a custom bottle design search.
PROS: .PROPRIETARY — BOTTLE AS BRAND ICONOGRAPHY. A proprietary bottle can provide a distinct, iconic look for your brand. Custom glass allows you to leverage unique shapes and the ability to incorporate your branding into the actual bottle mold. Proprietary shapes give cues to the consumer that the product is of superior quality and craftsmanship. Particularly astute brands have chosen bottle shapes that make it easier for their customers to scan for their brands on the shelf and the back bar. Some brands have taken this to its natural end where WWW.ARTISANSPIRITMAG.COM
their bottle is actually as much a part of their iconography as their logo or package design, even if the bottle acts as their primary brand communicator. Tanqueray, Crystal Head Vodka, Chambord, Bulleit Bourbon and Samurai Vodka all do this well.
.ANTI-COUNTERFEITING Custom bottles are a powerful anti-counterfeiting measure. The high cost of development, replication difficulty, and hurdles in inventory management provide strong barriers to counterfeiters as opposed to stock glass, which is much more easily accessible. .CUSTOMIZABLE
A custom bottle gives distillers the ability to highlight their product, accentuate its unique attributes, and account for production parameters to ensure their bottle will run smoothly during bottling. The option to use a custom glass bottle to highlight flavor or your product’s main attributes is one of the most underutilized packaging opportunities. Great examples of leveraging a custom glass bottle to accentuate a brand’s main selling points include Smirnoff Twist, which promises fresh fruit flavors, and Finlandia Vodka, which looks ice cold on any shelf.
To maximize a custom bottle, the structure should be designed with the overall packaging in mind. Custom bottles require in-depth coordination between the glass vendor, your designer and the production team. Be sure to allocate plenty of time for development, modifications to drawings, Lucite models, and production samples to ensure proper shape, fit to hand, volume, and bottling line optimization.
While some glass manufacturers may offer staggered production runs or warehousing of back stock not immediately needed, most manufacturers have minimum orders that will require brand owners to store glass beyond their immediate needs. Last minute orders will be difficult, if not impossible, and because of that, many artisan distillers who utilize custom glass choose to warehouse an overstock of bottles to avoid gaps during bottling or increases in orders or distribution.
Prices for custom bottles range greatly depending on where the production
“If you want it done and you want it done right, you call Joseph & Joseph.” CORKY TAYLOR, CHAIRMAN/4TH GENERATION, KENTUCKY PEERLESS DISTILLING COMPANY
is taking place and the overall complexity of the bottle. The cost of custom glass has decreased rapidly over the past few years with increased demand and competition amongst glass manufacturers. Asian glass manufacturers have improved their quality through partnerships with more sophisticated U.S. and European glass companies and their own experience. These companies have further driven down the cost of entry and order minimums, challenging the status quo. Once the initial investment is made in design and molds, production costs are often equal to stock glass, if not less expensive depending on the complexity of the bottle design and the ongoing order quantities.
ALTERNATIVES: .CUSTOM CARTOUCHE
A less expensive way to achieve a custom look without long lead times is to choose a stock bottle mold and add a custom cartouche, or design embellishment, to make it more proprietary. This is typically more economical and also allows for quicker mold development and production turnaround times. However, keep in mind, the overall bottle shape is that of a “stock” bottle and customization is limited to adding a logo or graphic into the bottle, not a change in the bottle’s shape.
OTHER CONSIDERATIONS: .BUDGET EFFECTIVELY Do not forget to allocate funds for design, Lucite models, bottle molds, unit samples, final production, delivery, and storage of back stock of bottles. .FIND THE SWEET SPOT BETWEEN FORM AND FUNCTION. You can design the most elaborate, intricate bottle in the industry, but if the bartender has a difficult time handling it, they may not use it! Make sure the final bottle design is easily handled with one hand.
Designing distilleries for more than a century. Coast to Coast. Our expertise ranges from craft distilleries in urban and rural locations to master plans and designs for major spirits companies.
.GET YOUR SPECS RIGHT THE FIRST TIME As with many things in the craft distilling business, the devil is in the details. Do not forget to check and double check your weight, volume, and pour hole diameter specifications (18.5mm is the most common diameter, allowing a snug fit for bar pour tops).
Despite the obstacles, custom glass bottles are not prohibitive as long as the proper time and financial resources are allocated to achieve success. Because of decreased minimums and other advances in production efficiency, many craft producers have found that custom glass is within reach. With a little bit of planning and the right team, the benefits of custom glass for your alcohol brand can far outweigh the drawbacks.
502-583-8888 | email@example.com | josephandjoseph.net
David Schuemann is the Owner and Creative Director of CF Napa Brand Design. For more information, visit www.cfnapa.com or call (707) 265-1891. WWW.ARTISANSPIRITMAG.COM
adiforums.com Build relationships Gain knowledge Share knowledge Find a mentor be inspired Blow your horn Change your life 速
Helping each other become better distillers and produce better products increases public perception and awareness. Everyone benefits.
Loss Prevention Through Team Building WRITTEN BY KRIS BOHM
rowth happens quickly, and there are often pains, struggles, and new problems that come along with it. One of those problems that sometimes goes unaddressed, or even worse, unrecognized in a growing small business is loss, or shrink. As your company grows, you must bring on new employees and build a team to meet the needs of your distillery. As production and employee numbers increase, the potential for loss will also grow. A well thought out and executed loss prevention strategy can ensure that your percentage of loss does not grow along with your company. So what is loss? Loss can be defined as when something goes missing from your company unexpectedly. This includes bottles of spirits, spirits from your in-process account, cash from the register, tools, and other raw materials. Anytime something goes missing and is unrecoverable, it can be considered loss. Now that we have a definition of loss, you must ask yourself a tough question: How much product/spirits/materials/money is being lost every day/month/year? Thankfully, there are four useful ways to minimize loss through team building... WWW.ART ISANSPIRITMAG.COM â&#x20AC;
EMPHASIS ON PROCEDURAL CONTROL To answer the question of how much loss is occurring, you must have strict procedural controls to account for and measure loss. It is vital to have a standard set of operating procedures and inventory controls that employees understand and can properly apply. If your employees do not understand inventory controls, you will never have a clear image of the exact amount of loss occurring. Inventory controls come in a few shapes, such as distillery tracking software like Whiskey Systems and Distillery Solutions, or just by tracking data through Microsoft Excel. Any data tracking will work as long as all employees are accurately entering all data to provide a complete picture of operations. Only when your inventory controls are complete and accurate can you gauge what your loss is. Once loss is a known and measurable factor, then it is possible to address it.
FOSTERING ORGANIZATIONAL OWNERSHIP Organizational ownership is the concept that all employees have a personal sense of pride and responsibility regarding the wellbeing of the company. Fostering organizational ownership among all employees requires continuous work by company leadership. When employees believe that the company they work for needs them and values them as an individual, they will naturally develop a sense of ownership. The key to fostering a sense of ownership in all employees is honest communication. Taking the time to communicate one-on-one with all employees on a regular basis will grow your employees’ trust in the company and the company’s leadership. Get to know all your employees, and demonstrate to them regularly that you care about them both at work and outside of work. This personal communication forms a bond with the employee, giving them a higher sense of worth, which in turn fosters ownership in the organization.
UTILIZE FORMAL COMMUNICATION Formal communication is the perfect forum to present the issue of loss to your entire team. Whether you have two employees or 200, formal communication is the best way to deliver a unified message. Meaningful formal communication comes through regular team meetings used to discuss the company’s direction, goals, loss, and other critical metrics that determine the future of the company. For a formal meeting to be effective, you must present critical
data to your team in a way that is meaningful to them. For example, if you state to your team that the company loss for the quarter is one percent, the message will not resonate. A better way to demonstrate loss to your team is with the following example: “We sold X number of bottles this quarter, and after reconciling inventory, Y number of bottles were unaccounted for.” This example creates an image that is relatable to the staff. Once you have established an understanding of loss with your team, you are now able to elicit discussion and your staff can contribute ideas for reducing loss. Soliciting employees can bring new ideas to the table that may have been missed, and it also creates a sense of ownership. When your employees feel that their opinion about company direction is heard, they are far more likely to go above and beyond while performing their job. Regular meetings in which you are discussing sales and production numbers, company issues, and reviewing day-to-day procedures will ensure everyone is moving in the same direction. When an entire team is moving in a positive direction the results are often spectacular.
INCENTIVIZE EMPLOYEES TO REDUCE LOSS To minimize internal loss, you must maximize the incentive for employees to prevent loss. Do not give your employees a reason to steal. Create a program where employees can take home bottles of spirits as a reward for their hard work. Employees are far less likely to allow loss to occur if they feel properly rewarded. Providing free product does more than prevent loss. For example, if you reward all of your employees with a free bottle every month, you can challenge them to exercise their creativity and create a cocktail with the spirits, then ask them to share their creation with your entire team. This type of exercise builds the skill set and language for every one of your employees to speak publicly of your spirits. The result is many of the employees will become brand ambassadors. When your employees have a bottle of spirits at home and they share it with their friends and family, these discussions often lead to sales. With one plan, you can reduce loss, increase the sense of ownership among employees, and grow local sales of your products. Loss is something we must all account for if we wish to grow our companies. Building your team to a point that all employees are aware and vigilant to prevent loss is the best strategy you can use to keep money and spirits from slipping away. Keep your organizational controls tight, foster ownership among employees, and be an open, outspoken leader about loss and you will find success with minimal loss.
Combine 1 part Orphan Girl Bourbon Cream Liqueur with 1 part root beer in a glass filled with ice. Repeat and share.
Idaho, Illinois, Montana, Nevada, South Dakota, Washington, and Wyoming. Also available online: www.theliqourbarn.com. Note: limited availability per state.
21 South Montana Street, Butte, Montana, 59701 406.494.7368 | headframespirits.com
Kris Bohm works at Ascendant Spirits in Buellton, CA as the Associate Distiller, where he is constantly refining the art of whiskey production. When he is not pursuing the perfect whiskey, he is brewing beer at home and traveling around the county by bicycle. Email firstname.lastname@example.org for more info. WWW.ARTISANSPIRITMAG.COM
Vinnie Cilurzo Russian River Brewing Company
Matthew Hofmann Westland Distillery
Craft Dave Engbers Founders Brewing Company
Alan Kropf Anchor Distilling Co.
Rhonda Kallman Boston Harbor Distillery
Michael Fairbrother Moonlight Meadery, LLC
Damien Wilson Sonoma State University
Randall Grahm Bonny Doon Vineyard
Josh Jensen Calera Wine Company
16 The Business of Craft Beverage
M ay 1 8 - 2 0 , 2 0 1 6
REGISTER TODAY with code CHEERS100 Bruce Nissen Crispin Cider Company and Jester & Judge
to save $100 off full conference registration.
Larry Vincent UTA Brand Studio and author of Brand Real
BOOZE, WEED & TAXES WRITTEN BY CHRIS LOZIER
PHOTOGRAPHY BY AMANDA JOY CHRISTENSEN
n some ways, trying to compare the marijuana and distilling industries is like trying to compare baseball and apple pie: some people like both, but beyond that, the similarities get hazy. They are two different industries with two different consumers and two different national conditions. That said, they have followed similar pathways in and out of social acceptance, taxation and regulation throughout the history of the U.S., and we are currently in an era of radical change for both industries. Both were thriving components of the national fabric before the early 20th century, only to become prohibited, regulated, criminalized, streamlined and revived at different intervals. Currently, nearly half the 50 states have legalized marijuana in some form or another, just as all states have again legalized distilling in the past four decades. Four of those states and Washington D.C. have also legalized recreational marijuana, starting with Colorado and Washington in 2012. Coincidentally, those states are two of the leaders in the craft distilling movement, with Colorado’s first distilling licenses issued in 2005 and Washington’s
in 2006. To put it in perspective, the distilling industries in both states are a decade old and the recreational marijuana industries are less than half that. Being that young means they are both constantly changing and should expect to see more change. And, since they are managed by the same regulatory bodies, they are receiving similar treatment. For instance, Eli Sanders of Dawgstar Cannabis in Seattle, Washington says they are required to use tracking software that tracks plants through the entire process. “An actual barcode for a plant will change up to five times before it goes out the door,” explains Sanders. “It is a processing nightmare.” Distillers should take comfort in that since they also have to track their spirits from the ingredients through production, processing and storage. It might be nice to know you are not alone in your tracking misery. In Washington, there are three recreational marijuana industry licenses available: producer, processor and retailer. Originally, all three of them paid excise taxes, but Sanders says the process was
recently streamlined. “The rec. stores are now responsible for a 37 percent tax which they pass on to their customers,” explains Sanders. “It makes sense from a management standpoint because that gives processors and growers the ability to trade back and forth without having to worry about the tax process.” That tax may be lowered to 25 percent this year pending legislation, but it really has no direct effect on distillers. However, it does make them wonder why in three years the recreational marijuana tax structure has seen multiple revisions to improve the process, while distillers are still struggling to sell their spirits in a market with the highest liquor tax in the nation, which DISCUS calculated at $35.22 per gallon. Back in 2012, Washington voters didn’t just vote to legalize marijuana, they voted to privatize liquor sales, and liquor costs skyrocketed. Now, all those distillers who had favorable conditions when founding their businesses are facing consumers that often will not risk the extra cash on a small label they do not know much about. That is because the state liquor tax is now 20.5 percent plus $3.7708 a liter. Add to that a federal excise tax of $13.50 per WWW.ARTISANSPIRITMAG.COM
proof gallon and business and licensing taxes, fees and expenses, and Washington distilleries start to look like nonprofits. “I don’t see how the state can work with them on their taxes like that and not work with us, because the taxes are killing us,” tells Will Maschmeier, whose distillery, 3 Howls, is right next door to Sanders at Dawgstar. “I sell a bottle of one of our spirits for $10.75 to our distributor, and after all markups and taxes it ends up costing about $34 to the consumer, and I can’t get any cheaper on my end.” Maschmeier says Dawgstar is a good neighbor, and that people who visit the distillery from states where marijuana is not legal often think they are smelling hops, not weed. To him, the marijuana industry is neither a driver or a detriment to business. The detriment is Washington taxes. Meanwhile, the same DISCUS data that put Washington liquor taxes at $35.22 a gallon shows Colorado at $2.28, making them number 46 on the list. To illustrate that difference, I found a bottle of Stranahan’s Colorado Whiskey on sale for $49.99, regularly $59.99, on a private Colorado liquor store website. The same bottle on the website of a private WWW.ARTISANSPIRITMAG.COM
Washington retailer was $55.99 before taxes, and $70.30 after. For consumers, purchasing that bottle requires a lot more deliberation in Washington than it does in Colorado, and those exorbitant taxes are a major barrier for consumers wanting to try new spirits. Colorado recreational marijuana buyers also pay less in taxes than Washingtonians, but it also depends on where you are selling, and the structure is not as simple as it is in Washington. Charles Parks of Ballpark Holistic Dispensary says they have a boutique retail location just outside Coors Field in Denver. They grow and process their weed offsite, but taxes apply at both locations. “In Denver we pay 15 percent excise tax when we move products out of our recreational grow,” tells Stephanie Hopper, Ballpark’s COO. That 15 percent is constant and has not changed since it was enacted in 2012, however what it applies to does change. Every six months the Average Market Rate of the marijuana products is reassessed by the Colorado Liquor Control Board’s Marijuana Enforcement Division, and the excise tax is based on that new rate. For instance, in the second half of 2015,
Colorado bud was assessed at $1800 a pound. Each pound was multiplied by 1800, then 15 percent of that total was paid in excise tax to the city and county. Similarly, marijuana trim was assessed at $365 a pound, and both have since changed. Then at the store, medical marijuana is taxed at standard state and city sales tax, but recreational marijuana gets an added 10 percent excise tax from the city. It is a much more complicated process than Washington’s 37 percent retail excise tax. When it comes to regulating distilling and recreational marijuana, Colorado and Washington seem to be mirror opposites of each other. Colorado’s liquor taxes are simple, their recreational marijuana taxes are not. Washington’s marijuana taxes are simple, their liquor taxes are not. For those differences, there is one similarity: in both states, at least distillers do not have to worry about their dumpsters getting broken into. "They climb in—full on, feet up in the air,” tells Sanders, who explains that they are required to mix their unsalable product with inedible media to “destroy” it, then throw it away. “It's like watching bears in Yellowstone National Park.”
HARNESSING THE motion of the ocean WRIT T E N & PHO TO G R APHED B Y CHR IS LO ZIER
e know small barrels will impart flavors sooner, but there are lots of micro-barreled spirits out there and I haven't tasted anything as good as this for as young as it is,” tells Jeff Robinette of Chambers Bay Distillery in University Place, Washington. You might have heard that before, and you might know of some examples of mature whiskeys that came from small barrels, but what you probably have not heard of is someone who does it like Chambers Bay, who stores their barrels in a TTB bonded boathouse on the Puget Sound.
“We've got a 14-foot tide out there and the waves from the wind, so it's constantly moving,” explains Alan Davis, who co-founded the distillery with Robinette in 2012. That liquid movement keeps the spirit in constant interaction with the oak, expediting the aging process in a natural way. Coupled with the humid ocean air that flows through the non-temperaturecontrolled boathouse, the spirit develops a distinctive salty, briny flavor that pairs well with the oak in their wheat-forward Greenhorn Bourbon. Robinette and Davis’s goal was to create a sweet wheat and malt WWW.ARTISANSPIRITMAG.COM
base so the salt and oak could produce a salted caramel flavor. They use Washington-grown corn and wheat, which Robinette’s brother-in-law, a seed broker, handpicks at a grain co-op he works with, and a high percentage of malted barley from Great Western Malting just down the road in Vancouver, Washington. The bourbon also has a fruity, apple aroma, which partially comes from their house-propagated yeast strain. Robinette is an embryologist, so he used his knowledge to harvest, propagate and freeze a wild yeast strain from an apple orchard in town. Davis says the yeast profile boasts apple cider, tangerine, red citrus and rhubarb aromas. “We've got a bunch of samples that are frozen so every couple of months I’ll take a sample off our starter, propagate it and freeze it so we can always go back in time if we find something that was really hitting the mark,” explains Robinette. Assisting Robinette in his yeast exploration is Jim Rutledge, a yeast and fermentation expert and former master distiller of Four Roses Bourbon. Rutledge is on the board of advisors at Chambers Bay, and they send him new releases for review and comment.
SPREADING THE WORD Chambers Bay is a small distillery, and since Washington has the most licensed distilleries of any state (more than 120), being local is not enough to drive sales because there are many local or semilocal options. They focused on making great products, first, but they do a lot to promote those products, too, like serving signature cocktails at local events and fundraisers. They also started a Barrel Club and they have about 10 members who get to sample and choose when to harvest their barrel, help with bottling and receive a 10 percent discount on those bottles, with 50 375-milliliter bottles guaranteed. Those members then share their bourbon with friends and family and the bourbon speaks for itself. Chambers Bay is also working with brewers on future barrel and beer partnerships, bringing new visitors to the distillery and creating a collaborative community. While they plan to sign with a distributor soon, they currently self-distribute, so they initially focused on their immediate surroundings to generate local awareness. They also have logoed whiskey glasses that they give to high-end restaurants and bars who pour their bourbon, helping the bar present the spirit as a premium product and giving free direct-to-consumer advertising to the distillery.
A DIVERSIFIED APPROACH Davis and Robinette chose to diversify their branding so they could aim their products specifically at their intended markets. Their house brand, Chambers Bay, is reserved for the bourbon and future whiskey releases, and it has a top shelf look. The packaging is not cheap, but the premium appearance separates it from a well bourbon, so customers know they are getting a quality product. Their upcoming release, Rán Vodka, keeps with the maritime WWW.ARTISANSPIRITMAG.COM
theme, being named after the Norse goddess of the sea. The packaging for this is different from the house brand, intended to appeal to the vodka market. Their third product, Ghost Dog, has its own packaging and branding, as well, and it has been a home run. Davis says the branding was aimed at twenty-something males who were drinking cinnamon whiskeys because they thought they were tough. In reality, those guys’ moms were drinking the same thing, so they developed Ghost Dog to give young males a more masculine alternative to cinnamon whiskey. Ghost Dog is a unique product, and, as it says on the packaging, it’s not for pussies. The 80 proof spirit is 82 percent corn and 18 percent smoked malt barley, to which they add selected botanicals, natural sweeteners and smoked ghost peppers. Ghost peppers are some of the hottest in the world, so the heat is definitely a prominent characteristic. That spiciness pairs well with the smoke from the malt and peppers, much like spicy, smoky barbecued meats. Chambers Bay and bartenders have found the spirit to be a very versatile mixer. One local bartender helped Davis and Robinette design a list of 19 cocktails that feature Ghost Dog, which they
serve as samples at the distillery. They also distribute the cocktail list to local retailers and bars, which use Ghost Dog in those cocktails, as well as a replacement for tequilas, mescals and vodkas in many popular requests like margaritas and bloody marys. With Ghost Dog, Chambers Bay Greenhorn Bourbon, and Rán Vodka aimed at different markets and selling well, Davis advises other distillers to consider diversifying their branding, too, and examine the message they are sending to consumers. "The last thing we wanted to do was have the same bottle for every product with a different color label,” shares Davis. “That to me, whether it's good or not, says it's overpriced and not very good.” That targeted approach is working, and with their innovative ocean-aging, local yeast strain and Ghost Dog’s cocktail versatility, they are finding a niche for their products in a sea of other small local labels. Their products are high quality and unique and the branding is effective, so now Chambers Bay has the best problem of all: keeping up with demand. Chambers Bay Distillery is located in University Place, WA. Visit www.chambersbaydistillery.com for more info.
STOCK INVENTORY | CUSTOM DESIGN | CAPSULES | CLOSURES
Partnering with Saxco for your packaging solutions is a smart move For more than 25 years, Saxco International has been helping distillers create the packaging identity that is their brand. We offer a comprehensive range of products tailored to craft distillers, that includes bottles, corks, closures, and capsules. And for turn-key packaging needs, Saxco is the one-stop-shop solution for bottle design, decoration, and secondary packaging components. Email: email@example.com, or call: Chris Tubertini at 502-445-9836
FARMERS, MALTSTERS & DISTILLERS I
CONNECT AT THE
CASCADIA GRAINS CONFERENCE WRITTEN & PHOTOGRAPHED BY CHRIS LOZIER
N THE CASCADE MOUNTAIN REGION of British Columbia, Oregon, and Washington there are over 250 licensed distilleries (and far
more breweries and bakeries) looking for ways to distinguish their products by using quality, unique grains. Fortunately, the Cascadia region also has exceptional grain-growing areas. One such location is the Skagit Valley, one of only six places in the world capable of growing the low-protein, large-kernel barley that distillers love. But even though those farmers, distillers and consumers are neighbors, in a commodity-driven global economy, they rarely work together. In an effort to connect those neighbors, Washington State University started the Cascadia Grains Conference four years ago. This January over 300 farmers, seed brokers, maltsters, educators, bakers, brewers, distillers, consumers, and city and county leaders attended the conference at the South Puget Sound Community College in Olympia, Washington’s capital. Presenting partner Oregon State University and many local businesses assisted WSU in the day of presentations and networking, with the goal of promoting a more profitable, and tasty, local grain economy. “It’s a very different vibe from other conferences that we’ll go to, and that’s just because of this real vibrant regional economy and interest in local foods, beverages and products,” tells OSU barleybreeding professor Pat Hayes. “You just have this audience of people who really want to be engaged.” WWW.ARTISANSPIRITMAG.COM
Having witnessed the growing demand for other local food products like fruits and vegetables, many feel that grain production and processing could be localized, as well. The concept of creating local grain economies is constantly evolving, though, because grain takes extra steps (and extra equipment) which are often challenging and expensive to do on a small scale. Depending on the desired product— bread, beer or whiskey—the grain might need to be milled or malted, then turned into dough or beer, and distillers have the extra step of distillation. All of those steps require more equipment, time and knowledge, so when you look at the process that way, you see why locally grown carrots are a lot easier to find than local malt. But it is not impossible, a few are already doing it, and that is what the conference set out to do: connect the people playing those different roles and educate them on what the other participants’ needs,
desires and challenges are. With a common understanding of grain production, processing and end-user demands, the hope is that these neighbors will be able to find ways to work together and add more value to everyone’s work.
ADDING VALUE TO GRAIN
THROUGH MALTING, BREWING AND DISTILLING The conference offered 18 different presentations and four networking sessions. Areas of focus included farm production and market opportunities, advanced and diversified baking ingredients and practices, grain variety research and development, small business loan procurement, public policies impacting grain growers, brewers and distillers, and the growing demand for grain-based beverages. The beverage courses, presented by
“Grain doesn’t have to just disappear into the world market— you can add value to it, and it’s really neat when you can make something on your own farm and it doesn’t disappear, it stays close to home." SETH KLANN MECCA GRADE ESTATE MALT 52
maltsters, brewers and distillers, were very popular, and they demonstrated how the beverage industry adds value to local grain production and processing. Farmer and maltster Seth Klann of Mecca Grade Estate Malt has been on the conference steering committee for the past two years. He hopes the conference will help farmers see the potential profit and market stability by growing for local, rather than commodity markets, because the concept is already working for him. At his eighth-generation Oregon family farm, they used to grow grain in a crop rotation just to clean up weeds and improve the soil for their more profitable specialty seed crops. They hoped to break even on that grain, but sometimes they lost money because they were selling to a flooded commodity market. Now that they grow, malt and sell their grain directly to brewers and distillers, they can pay themselves a better price for that grain, stabilizing their own market. “Grain doesn’t have to just disappear into the world market—you can add value to it, and it’s really neat when you can make something on your own farm and it doesn’t disappear, it stays close to home,” he explains. Making a regional grain economy profitable
requires many different people working in their specialized areas for some common goals. In one of the presentations, Klann joined a panel of other maltsters, brewers, millers and farmers to present a tasting selection of malted barley, handing out sample trays of different malts to attendees. Each of the panel members had played a role in the malt’s production or use at different stages. For instance, the barley varieties were developed by Pat Hayes at OSU, grown by Klann or other regional farmers, malted at either Mecca Grade or Skagit Valley Malting and used by Fremont Brewing. That panel gave attendees a snapshot of how a local grain economy can function. The concept is still young and the malt costs more, but the hope is that if more people participated, efficiency would increase, producers and processors would make more money, and distillers would have access to a world of new flavors, as evidenced by the malts attendees were sampling. It would also give brewers and distillers a new terroir marketing platform, which many feel is a valuable distinction. In other presentations, Washington Distillers Guild President Jason Parker of Copperworks Distilling and Matt Hofmann of Westland Distilling talked about the value distillers WWW.ARTISANSPIRITMAG.COM
were bringing to their states through tax revenue, job creation and agricultural promotion. Parker collaborated with representatives from government conservation and land use districts, the executive director of the Washington Brewers Guild and Amy Halloran, author of The New Bread Basket, a book detailing local grain economies across the U.S., to discuss policies affecting grain growers, processors and users. Parker represented distillers well, and told a packed house about the current state of the national and local distilling industries, pointing out the local potential. “We have more distilleries in Seattle than any other city, more in King county than any other county and more in Washington than any other state,” Parker explained, “and a lot of that industry is being driven by malted barley.” Attendees were engaged, asked questions, and got an in-depth look at just how beneficial local distilleries are, and how they are currently using, and could be using more, local grain.
Following that session, Parker and Hofmann presented a class called “Flavor First,” guiding attendees through different distillation systems, equipment and techniques best for the type of raw materials they wanted to use. Of particular importance to the grains conference, Hofmann’s Westland Distillery is the largest single malt distillery in America. Through his experience, he was able to explain in detail the strengths and limitations of different mills and stills. A short session followed which introduced the Craft Brewing and Distilling Center. Hofmann and many others, including city leaders, brewers, cidermakers, distillers and educators, are taking steps to purchase and renovate the abandoned Olympia brewery and turn it into a beverage industry education and service center. Possibilities include cooperage renovation, malting, sensory and chemical analysis, cooperative bottling, canning and supply purchasing, welding and tank maintenance, and any education or vocational training needed in the cider, beer and distilling industries.
Plans are tentative and subject to change, but the project is moving forward, and Hofmann says people are excited. The conference wrapped up with a networking dinner and beverage tasting. Both lunch and dinner featured locallysourced foods with an emphasis on grain, and after dinner at the “Best of the Cascades Tasting Tour,” brewers and distillers poured beers and spirits made with local grains. Over a beer or whiskey, everyone got the chance to taste the local partnerships that were already happening, and talk about where they might fit in. “It seems like they’re trying to attain the same goals,” tells OSU Faculty Research Assistant Scott Fisk. “You don’t really have to convince them of anything. They’re all willing to pitch in.”
Cascadia Grains Conference is presented by Washington State University in partnership with Oregon State University. For more info, visit www.cascadiagrains.com or call (360) 531-0312.
Canadian Craft Spirits A N D T H E Distilling Boom WHAT IS GOING ON NORTH OF THE BORDER? WRITTEN BY LISA SIMPSON
anadian craft spirits production is exploding, with growth resembling the ‘80s craft beer boom, and much has happened to make the industry what it is today. Innovative, hard working distilling pioneers, spirits retailers, bartenders and support industry partners have changed legislation and increased consumer awareness to drive this growth, making this an exciting new era in a lengthy national distilling history. Canada's distilling industry began in Quebec City in 1769. By the 1840s there were more than 200 small batch and large scale distilleries in Canada. According to Statistics Canada, 22 distillery establishments were in operation in 2003, with the bulk of the industry located in Ontario and Quebec. At the end of 2014, there were 67 distilleries reported in all provinces collectively, with none existing in the territories.3 Today, it is estimated there are upwards of 100 distilleries established in all provinces and territories, with the majority in British Columbia, which had 51 licensees at the end of 2015. Canada's provinces and territories vary significantly in geographic size and population, with Ontario being the largest alcoholic beverage market in Canada. The growth of craft distilleries also varies
greatly from province to province, not reflecting geographic size, but instead the dual role that government plays in distilling regulation, taxation and alcohol sales. The presence of distilleries and alcohol sales is a paradox in terms of associated benefits and perceived costs resulting from health and social harm. Revenue derived from taxes on alcohol sales, on the other hand, is important to government finance departments and provides funds for goods and services important to the public, while also balancing budgets. The history of alcohol sales and regulation in Canada is both complex and confusing. Following the enactment of the British North America Act, the federal and provincial governments disputed which level of government had authority. The British Privy Council ruled in favor of the provinces to enact Prohibition, and like the U.S., the Canadian industry suffered a blow with Prohibition from which it never fully recovered. When Prohibition was repealed, each of the provinces chose to replace it with tight government control that persists today, and those restrictive laws and high taxes made it impossible for anyone except large-scale producers to re-establish. Before the craft beer era, craft distilleries did not exist due to the challenges of
operating in a highly regulated industry ruled by outdated legislation. To complicate matters, requirements to establish, licensing terms, pricing structures, and distribution channels all differ from province to province. Established in 1947, Spirits Canada (formerly Association of Canadian Distillers) is the only national association representing the interests of Canadian spirits consumers, manufacturers, marketers and exporters. Unfortunately, lobbying efforts of this group for the most part do not result in significant change to support a viable “craft” industry due to the conflicting issues and financial needs of the various provinces, and finding national agreement is as likely as winning the lottery. Nevertheless, Canadian craft distillers are passionate, dedicated people determined to move the industry forward. The noted pioneers, at the grand old age of 11 years (2004), 9 years (2006) and 8 years (2007), are Okanagan Spirits in Kelowna, BC, Still Waters Distillery in Concord, Ontario, and Prince Edward Distillery on Prince Edward Island. Despite all odds (or common sense), they pursued a dream to lay the foundation for those that would follow, accepting significant frustration and financial loss.
WWW.ART ISANSPI RI TMAG.CO M
The Canadian distilling community, now primarily rooted in British Columbia, began to take shape in 2010 and started to explode in 2013 when BC relaxed some of its liquor laws due to a change in provincial regulations and pricing structure. Legislative change did not come easily, however, and was primarily realized through the early efforts of a handful of committed people who formed the Craft Distillers Guild of BC to open dialogue with the BC Provincial Government. Specifically, they wanted to address minimum changes required to make micro-distilling a viable industry in BC. Ten years would pass before their efforts were realized, and now there are more distillers in BC than in the rest of Canada, combined. Following the Guild’s success, the Association of Micro-Distilleries Quebec and the Ontario Craft Distillers Association formed to engage their respective provincial authorities to amend legislation to create an open, progressive, dynamic and competitive alcohol beverage market. Despite efforts to evolve, there are only a handful of distilleries in these two regions. The Nova Scotia Liquor Control, on the other hand, was receptive to one-year lobbying efforts by Ironworks Distillery that resulted in a positive change. Recognizing that the growth of the local spirits industry has the potential to contribute to employment and economic output in the Province, Nova Scotia now has some of the most progressive craft distillery policies in Canada, after BC.
Consumer Shift At the end of 2013, Statistics Canada reported that overall alcohol consumption had decreased. However, craft distilling has had a mixed growth story relative to the craft beer scene. Overall category sales have experienced an average growth rate of 1.57 percent in BC, almost keeping up
WWW.ART ISANSP IRITMAG.COM
with inflation. The craft beer and spirits sector has increased relative to beer or wine, which has spilled over into related industries. Why is “craft” outperforming other alcohol segments? Opinions will differ, but many believe it is because consumers are more educated and engaged than ever before. Perception and taste preferences have evolved, quality expectations are higher, and consumers are more refined in their choices. Once upon a time (before the era of craft), the focus was placed on consistency and reliability. Consumers are now more interested in product variety, seasonality, organic offerings and having a complete experience. The success of craft distilleries will now be determined by their ability to compete on flavor, branding, effective communication, scalability (cost efficiency), and development of distribution channels. Various distribution channels exist across Canada due to different provincial legislation. Depending on geographic location, distilleries may pursue sales through an onsite store, private liquor stores, government stores, farmers markets, or a combination thereof. Cooke Street Liquor Store owner Glenn Barlow, and Stacey Brennan, General Manager of Hillside Liquor Store on Vancouver Island, both say their customers are interested in the developing craft industry. “Demographics are shifting, and the younger people are interested in flavor, quality and supporting local,” explains Barlow. “The release of new products has been significant, and we look forward to more diversity.” Both Barlow and Brennan estimate Canadian craft spirits occupy 5-10 percent of shelf space, which is up over the past year. They say their customers are excited about the forthcoming release of new
barrel-aged whiskies, and tell that gin is a current customer favorite because of the potential for local and organic ingredients.
A New Interest in Cocktails Talented bartenders are reviving and reinventing Canadian cocktail culture, and their work is in turn driving growth in the craft spirits industry. But not every craft spirit will make it onto a back bar, let alone a cocktail list, so understanding who does and why is paramount if a craft distillery wants to thrive or merely survive. More than anything else, bartenders demand quality spirits. Whether the producer is local, big or small is irrelevant—creating a memorable and quality experience for guests is their top priority. Simon Ogden, bar manager of Veneto Tapa Lounge in Victoria, BC, explains that since he and his staff are essentially reps for the spirits they use, it is essential that they are all excited about those products and confident in them. “I'm looking for a flavor profile that will distinguish itself from a host of others,” tells Ogden. “If I don't have anything like it, odds are I'm going to want to bring it in and play with it. It's not enough that it is local, it has to be remarkable.” Likewise, Jay Jones, one of Vancouver’s first cocktail pioneers, says he is always proud to wave the local flag over their back bar, but quality spirits get priority and the shelf space must be earned. Jones shared he often has to decline working with many craft distillates because they do not achieve the essential aroma, flavor and recipe versatility he needs. He also warns that even if the spirit is high quality, if it is too unusual it can be tough to integrate into a cocktail list. “There's something to be said for making your gin or vodka stand out from the rest
with key notes of personality, but the risk is deviation from classic fundamental character,” he shares. “However, exploration, while embracing traditional offerings like aquavit, vermouth and barrel finishing is exciting. Creating a unique product for the market may be challenging, but the successful ones can make a real impact and name for the distillery." On the flip side, award-winning bartender, author and consultant Shawn Soole says sometimes the most effective way to compete is to create a spirit that is distinctly your own. “Some may say 'It's weird to work with,' but people said the same of Hendricks 10 years ago when it was introduced, and now it is a massive brand,” Soole reminds us. As for cocktail trends, Shaun Layton, beverage director for Juniper in Vancouver, BC, and Tim Siebert, bar manager of The Northern Quarter in Victoria, BC, agreed that most of their customers are drinking gin. Siebert believes the influx of gins is in part due to BC being a great source of interesting botanicals.
“Many BC craft spirits have balanced, rich, flavor profiles that allow me to create something unique to our corner of the world and give me the ability to put a spin on a classic,” tells Siebert. “That excites me!"
Implications for the Supply Chain Steve Pelkey, CEO of Universal Packaging, a glass supplier and decorating company located in Vernon, BC, says the Canadian craft spirits segment represents approximately five percent of their overall business. However, it is a fast growing segment, increasing over 15 percent per year, with stronger growth expected over the next three years. He said that while the Canadian market remains relatively small compared to the larger U.S. craft distilling industry, there are some parallels. Consumers are demanding more choices alongside mass produced spirits and Canadian craft distilleries are filling this void. Distilling license applications continue to rise, and established distillers are
expanding in response to growing consumer demand. All that growth has in turn created a fierce demand for new and used distillation equipment. Reo Phillips, general manager of Vancouver Island-based distilling equipment manufacturer Specific Mechanical Systems, says that their distilling market growth took root 10 years ago, but noted, “It has only been on the straight up path for the last three to four years, and is really only evident in hindsight looking at the startups since 2012.” Phillips says that growth has changed their business dramatically, and explains that they had an advantage because of their presence in the U.S. craft beer market, which naturally turned into an early introduction to the U.S. distilling market. That awareness laid the foundation to initiate their distilling business venture prior to BC's craft boom, and the company made the decision to invest heavily in the design and fabrication of copper to marry with their well-established stainless steel fabrication. Their strategy paid off,
with business growth in the hundreds of percentage points, and they expect to grow even more rapidly in the next five years.
Laying the Foundation for Future Growth Canada is renowned internationally for its clean, pure water, quality farming, organic products, and world-class spirits. However, the craft scene has yet to reach its full potential due to a heavy and unsustainable tax structure imposed on spirits in our domestic market. Craft distillers across the country continue to face the same common challenges
hindering growth: high taxes and markups, imposed production limits, ineffective distribution channels, branding challenges, scalability, and coordinated efforts to lobby government. Nonetheless, craft distillery owners persevere and continue to work hard to move the industry forward, and they are grateful to their industry partners who are helping them reach their goals. “Growth to a world class level takes time, perseverance and relentless dedication to quality,” explains bartender Jay Jones. “As a hospitality industry, we have to remain patient and intelligently supportive with the evolution of our craft spirit community, because we're all symbiotic!”
Being so young, the Canadian craft spirits industry is changing rapidly. That means that growth can come quickly, and Julie Shore, distiller at Prince Edward Distillery, says that is exciting for distillers and consumers alike. “The boom has just taken off this year, so there are huge opportunities,” says Shore. “People's awareness of craft spirits has just begun.” Lisa Simpson is director of operations for The Liberty Distillery in Vancouver, BC. For more info, visit www.thelibertydistillery.com or call (604) 558-1998.
FURTHER READING AND REFERENCES 1. Lane, Judith. ”A Spirited History Part 3: Distilling in Canada.” Taste Spring 2011: 50-53. 2. Government of Canada. Agriculture and Agri-Food Canada. The Canadian Distillery Industry. January 24, 2016. <www.agr.gc.ca/eng/industry-markets-and-trade/statistics-and-market-information/by-product-sector/processed-food-and-beverages/the-canadian-distillery-industry/?id=1171995761751>. 3. Government of Canada. Agriculture and Agri-Food Canada. Consumer Trends – Wine, Beer and Spirits in Canada. September 2013. January 25, 2016. <www.agr.gc.ca/eng/industry-markets-and-trade/statistics-and-market-information/by-region/canada/consumer-trends-wine-beer-and-spirits-in-canada/?id=1422297046469>. 4. Government of Canada. Industry Canada. Distilleries (NAICS 31214): Establishments. November 26, 2015. <strategis.ic.gc.ca/app/scr/sbms/sbb/cis/establishments.html?code=31214&lang=eng#est1>. 5. A Handcrafted Guide to BC’s Most Hopping Industry: Food & Beverage. Deloitte, 2015.
MAKE THE BEST CHOICE FOR YOUR SPIRIT!
MEET US STAND 626 AT THE CRAFT SPIRITS CONFERENCE
THE OBVIOUS CHOICE FOR BEVERAGE FERMENTATION
Powered by Lesaffre, one of the world’s largest yeast and yeast derivatives manufacturer, we offer you the highest quality standard of products for spirit manufacturing. Through a dedicated range of active dry yeasts, we deliver innovative solutions to give you the ability to create the spirit you dream about. So, select the right choice from the Safspirit lineup to create the ideal spirit!
Authorized distributor in USA
S T I R I P S L A N I D R A C S IRRI TI ST P S L PI DI NI NA AL S R A C RD DBBY YC A E D I V D PRROOV I D E S O P T P H OT O S // // / P H O ITH / - SMMI T H N E S NS NIS ST ET EN S E R H C RI RGG. .C H E B M ER BY YA AM B N E TT B WRRI TI T E N W
any historians declare American Industry was born in the late 1700s when Samuel Slater created his spinning mill in Rhode Island. Around that same time, after the Revolutionary War, handson manufacturing became a primary part of American labor over the next 150 years. In the most recent years, however, there has been a great shift from hands-on labor to that of technological occupations, cubified white-collar jobs, overseas manufacturing, and service industry work, and frankly, it’s just not the same. There is much to be said for creating something with a calloused pair of grubby hands, seeing the progress of something from start to finish, and watching others enjoy this artistic endeavor in which you have toiled. The joy in observing others love your work is indescribable, as most creative spirits will attest. Like these early American industrial businessmen, Jeff Wuslich, president of Cardinal Spirits in Bloomington, Indiana, had a vision of making something
WWW.ART ISANSP IRITMAG.COM
from the ground up. “I love American manufacturing—making something of high quality with your hands,” he explains. “I wanted to work a job where I could do that.” Combining his love of creating a great product and his passion for spirits, Wuslich found craft distilling. Wuslich became interested in spirit production in his early twenties and began his journey by volunteering at ADI and ACSA events. He met many great craft distilling leaders at these shows, engrossed himself in education, and eventually hooked up with his partners Adam Quirk, Jason Katz, and Rick Dietz. By 2011, Cardinal Spirits was in the works.
The biggest barriers for the owners of Cardinal have been the quirky laws in Indiana. They have been able to circumnavigate some of the restrictions— such as having to operate a winery or brewery for three years before distilling (they missed that one by getting their
license prior to it)—but they do find the legislature measures everything from their wastewater to their plans for tree planting at the distillery. “Dealing with the local government was much harder than state or federal restrictions,” tells Wuslich. Even though several roadblocks inhibit Cardinal from moving at the pace they would like, Wuslich adds that they love what they do and are largely proud of their accomplishments. “I love turning raw ingredients into a delicious spirit,” beams Wuslich, “and I work with great people that keep me focused, challenge me, and inspire me with their passion and creativity.”
FANNING THEIR FEATHERS
Cardinal is producing solid spirits and liqueurs in the Bloomington area. On their menu they boast rum, vodka, gin, whiskey, and bourbon, as well as their Songbird liqueurs and seasonal items, such as a black raspberry ramble.
QUALITY H G I H F O IC H ING H T FF WUSL E E J M O ” S . DO THAT MAKING D L — U G O N C I I R WHERE UFACTU N B A O J M A N A K C R MERI O WO “I LOVE A ANDS. I WANTED T RH The farmers they purchase WITH YOU
LEARNING TO FLY
Cardinal makes all their spirits in-house, fermenting and distilling their own neutral base. “For our vodka, gins, and liqueurs, we start with grapes, which is uncommon and definitely gives our products a unique flavor,” shares Wuslich. They also released Indiana’s first single malt whiskey, using barley that was malted nearby. Cardinal procures as many ingredients as they can from Indiana, and they have been successfully sourcing most of their ingredients locally. Wuslich says he and the team at Cardinal are especially proud of their locally sourced Songbird Craft Coffee Liqueur. “We worked with a local roaster, Hopscotch Coffee, who supplies the beans which we blend with sugar and vanilla,” shares Wuslich. “I really think it is the best coffee liqueur.”
Alongside their stringent state laws, Wuslich says one of their biggest challenges is dealing with suppliers. “There are so many that make it difficult to give them your money—I really don’t understand.” However, Cardinal has found some great ones, like Columbus Container, who Wuslich says adds value to their production. “I can’t say enough good things about our box company, Columbus Container,” begins Wuslich. “I really do feel this huge company cares about our business and wants us to succeed.” Cardinal attributes much of their success to their community support and the good suppliers that treat them fabulously. “The Bloomington community is incredibly supportive and proud of what we have accomplished,” says Wuslich. “I love the people and they’ve shown us a lot of love as well.”
their ingredients from have also been fantastic supporters. “I’m proud to work with our local farmers,” boasts Wuslich, “and they are some of our best customers!”
SOARING IN THE SUN
In the near future, Cardinal hopes to expand and increase their whiskey production. They know it is also important to become financially sustainable and hire more people to better support their community. As for ways distillers can support one another, Wuslich sees that there are many opportunities for people to learn about distilling, but few chances to learn the other aspects of the business. “There are so many other skills you need: legal, finance, construction management, hiring, branding and sales,” he begins. “If you’re weak in any of those areas, find good partners or consultants.” Cardinal currently has 22 investors that helped them create WWW.ARTISANSPIRITMAG.COM
their business, and many of them are available to help and act as brand ambassadors when needed. Wuslich also urges distillers to remember to share their story and let community leaders know the huge investment they are making in their community. He also believes distillers should get involved in local, state and federal legislation. “Distillers need parity with craft brewers and small winemakers, otherwise this industry will really struggle,” he explains. “Invite your U.S. Representative and U.S. Senator to your distillery, and know that it might take several asks to get an official visit.” Cardinal is finding their wings in a competitive distilling world and navigating the challenges with grace, all while remembering their goal of bringing back an earlier vision of American industry. Making quality products the blue-collar way with a hard-working crew, their spirits are liquid pride. Cardinal Spirits is located in Bloomington, IN. For more information, visit www.cardinalspirits.com or call (812) 202-6789.
by I N D E P E N D E N T S T A V E C O M P A N Y
Our exper tise allows us to unlock the r ic h v a n i l l a , sweet c a r a m e l and svelte textures hidden d e e p within the oak of our b a r r e l s.
Dedicated to Our Customers’ Success Since 1912
Jeff LaHue | 5 73 442 5707 | jeff.lahue @ independentstavecompany.com | www.independentstavecompany.com WWW.ARTISANSPIRITMAG.COM
CASHING in on COCKTAILS WRITTEN BY CHRIS LOZIER
n-house cocktail sales could be your W.M.D. — What’s Missing from the Distillery. Cocktails drive bottle sales and create brand exposure, and for some small to mid-size distilleries, cocktails are their leading source of income. Not all states currently allow cocktail sales, but those laws are changing thanks to the efforts of individuals, politicians and distillers guilds. What follows are case studies from two distilleries with differing challenges but similar approaches to their in-house
I L L U S T R AT E D B Y A L I C E S E I M
cocktail programs, explaining why cocktail sales are so beneficial. Dominion Distillery in Colville, Washington has a consumer base interested in local spirits and they benefit from state laws and licensing that are relatively distiller-friendly. However, they suffer from the highest spirits sales taxes in the nation, which the Distilled Spirits Council of the United States calculated at $35.22 per gallon. Over in Minneapolis, Minnesota, Du Nord Craft Spirits has a WWW.ARTISANSPIRITMAG.COM
more competitive tax advantage at $8.59 per gallon, but their laws are much more restrictive than Washington’s, and most of their local consumers don’t know that they, or Minnesota-made spirits, even exist.
CREATING A BRAND CONNECTION “We have many customers that say, ‘I didn’t know I could buy local spirits, and I didn’t know that anyone in Minnesota was doing this,’ so we’re still looking at an educational component to our marketing,” explains Shanelle Montana of Du Nord. The bulk of that education comes through Du Nord’s cocktail room, where customers can sip the spirits they were previously unaware of while watching Montana’s husband make them. Customers are fascinated by your distillery’s shiny industrial equipment and raw ingredients, so when they taste your spirits in-house, they make a deeper connection with your brand. If you present those spirits in a tasty, fresh cocktail, your vodka is no longer just a curiosity, it is now that customer’s preferred cocktail base because you showed them it was possible. This is especially helpful when you have a story or product that is challenging to sell without face-to-face interaction. Du Nord’s spirits are made with grains from their family farm. It is a compelling story, and many would say it makes a qualitative difference, but it comes at a cost. A consumer that might have skipped reading the label in the liquor store due to the higher price tag becomes a captive audience at their distillery, where Montana and the bartenders can tell them why the bottle costs more and why it is worth it. Dominion’s Henry Anderson says that is a big benefit in Washington, where the high taxes take his expensiveto-produce single malt vodka to $43 a bottle. Compared to the lineup of other lower-priced labels on the shelf, very few consumers will choose Dominion’s vodka. But if Anderson can get them to taste it in his tasting room, they discover the flavor difference, a difference that makes it the top-shelf vodka in many regional high-end bars and restaurants. “A lot of times people will have a cocktail with our vodka in it and they think it’s really good,” begins Anderson, “so we’ll offer them a sample of the straight vodka, and they’ll say, ‘No, I don’t like vodka straight, it’s not good.’ We offer the sample on the house, and half the time they walk away with a bottle. If I can get them to try it, even the hardcore whiskey drinkers that don’t like vodka will end up buying a bottle.” WWW.ARTISANSPIRITMAG.COM
BETTER PROFIT MARGINS Thanks to Washington’s absurd spirits taxes, that $43 liquor store sale nets Anderson about $3. If he sells the bottle in-house, he keeps $7. When he serves a cocktail with that vodka, though, even happy hour prices net at least $3 per drink. “It’s about a 30 to 40-fold increase in profit,” explains Anderson. “By selling one cocktail we make more than selling the whole entire bottle.” Thanks to a change in legislation, Dominion is not required to serve food to offer limited sample cocktails. But even before that change, when the only way they could serve cocktails was to obtain a bar/restaurant license which required food sales, cocktail sales were so important to their business plan that they were painstakingly planning how to provide food to customers in their small, speakeasy-style distillery. “Onsite sales are your anchor,” offers Anderson. “That’s where you make your money to pay your employees, keep the lights on, and that’s basically where you build from. Anymore you cannot really start out by doing strictly production and make it. The market’s not there. You’ve got to slowly build up and grow your name, you can’t really just jump out there and all of a sudden be a moving production facility.” Anderson built his own still at Dominion’s sister company, Gatling Still Works, with an intentionally small footprint to save square
footage in their basement space. He says they are working to add more seating now, and possibly a rooftop bar, because that space fills up quickly on busy nights. Likewise, Montana says Du Nord’s 90-person winter occupancy, with an extra 30 outside seats in the summer, is still not enough on Saturdays and holidays. That exposure is also driving bottle sales and helping Du Nord exceed their production and distribution goals. That is especially positive
in Minnesota, where they can only sell 375-milliliter bottles at the distillery, and cannot sell alcohol on Sunday. Du Nord realizes that distillery legislation is a work in progress, though, and they partially recoup those lost sales through tours. Whether someone came in for a tour or a cocktail, many new customers choose both, and $10 gets them a distillery tour, a logoed Du Nord glass and a sample of three of their spirits. They also offer a cocktail club, which is a double-your-money gift card especially popular around the holidays. “You get a fancy card and you can pay for cocktails for your group as long as you are present,” Montana explains. “So $250 equals $500, $500 equals $1000, and it goes up from there.” That extra revenue is money spent on Du Nord’s cocktails and spirits instead of someone else’s. It helps them invest more in their production, pay their seven bartenders and brings life to a previously abandoned space in south Minneapolis.
PART OF THE COMMUNITY Cocktail sales are also good for public relations. Du Nord’s cocktail room was the first of its kind in Minneapolis, and one of the first in Minnesota, so they made a big splash when they opened. Since then, other bars have followed suit, elevating the Minneapolis cocktail scene and promoting quality of drink over quantity. Similarly, Anderson says that Dominion has brought a new flavor to Colville, a town of about 5,000 people.
“You just can’t get the type of cocktails we’re serving anywhere else in town,” shares Anderson, “so to be able to have a cocktail with fresh ingredients, people are pretty excited about that.” He says people don’t just come to Dominion for a drink, they come for an experience. Anderson grows herbs in the distillery, and he says people love seeing the bartender cut fresh herbs for their drink. He also makes infusions in large carboys, but sets smaller infusion bottles on the counter where people can watch the ingredients imbue color to the clear spirits. Du Nord makes infusions, too, and they have experimented with many teas, which customers love. The sights, sounds, aromas and flavors customers find at Du Nord create an immersive experience that brings them back, which also supports the neighboring restaurants and brings vitality to their neighborhood. “We were able to take an old industrial facility that hadn’t been used for years and transform it into a place where people can gather,” shares Montana. “It shows people that distilleries can be a very positive part of the neighborhood and business.” Consumers are gradually awakening to the new flavors and ideas their local distilleries offer. They want to experiment, support local business and meet the people making their food and drink. That especially applies to spirits because, frankly, whiskey is sexier than scones. If you meet this demand by serving cocktails at your distillery, you will make more money, sell more bottles, gain more exposure and have more fun while you’re at it.
THE BEST DISTILLERY EQUIPMENT SUPPLIER FOR OVER A QUARTER OF A CENTURY
With the experience of having in-house designed, engineered and fabricated over 500 systems using state of the art technologies, Newlands creates innovative and expertly crafted products. Providing a comprehensive array of products and services, including everything from project conception through installation and commissioning, Newlands is your single source for advice and expertise in developing your distillery: • FABRICATION / CONSTRUCTION • COMMISSIONING & TRAINING • PROCESS AUDITING • AFTER SALES SERVICE
• SHIPPING • INSTALLATION • PRODUCTION
CRAFTSMANSHIP IS WHAT OUR CUSTOMERS LOOK FOR IN OUR PRODUCT AND IT’S THE SAME REASON WE CHOSE NEWLANDS TO DESIGN, ENGINEER, AND BUILD OUR DISTILLERY. PATRICK EVANS Shelter Point Distillery
ALCOHOL DILUTION PRACTICES
FOR DISTILLERS W R I T T E N B Y G A R Y S P E D D I N G , P h . D . , A M B E R W E Y G A N D T, B . S c . , & M A T T H E W L I N S K E , B . S c .
istillers and those dealing with industrial ethanol in large quantities are often required to make dilutions to lower the alcoholic strength of their products. Many solutions can simply be mixed in appropriate volumes to yield the desired ending concentration. However, some chemicals exhibit a contraction effect when mixed with other aqueous solvents, resulting in a final solution of lower volume than would be expected theoretically. Alcohol water mixtures are a prime example of this relationship at work. Many chemists, mathematicians and distillers still use the algebraic formula V1C1 = V2C2 for ethanol water solutions. (V = volume in any unit and C = concentration, often % v/v for alcohol solutions.) However, due to the contraction effect of water and alcohols, the above formula is inadequate for accurate mixing purposes with respect to ethanol and water mixtures. The magnitude of this physical effect (often seen as 3% in the literature) is actually from 0 to 4% and can be illustrated as a curve across the full range of water – ethanol volume permutations. (See Addendum for comments and terms used.) Distilled spirits are known to contain many congeners besides ethanol. These congeners are generally insignificant in their weight and volume contribution in terms of the contraction effect and are not considered further in this current discussion. Tables that give water volumes to add to a defined volume of alcohol exist often in discrete increments, which leaves the chemist or distiller to interpolate data for actual or desired conditions. Algorithms and other data tables also supply information enabling certain mixtures to be made, but are also either difficult to find, use or adopt by the distiller or are unknown to many (or may not be appropriate to task or accepted by regulatory bodies). Failure to understand hydroalcoholic dilutions can lead to label errors and rejection of product for sale by regulatory authorities. WWW.ARTISANSPIRITMAG.COM
Recently, Dr. Travagli, a professor of Pharmacy, presented an online paper dealing with applications of mixing ethanol solutions for drug delivery. The paper turns out to be a boon to the distilling industry in that it provides both the theory and the equations that may make it easier to attain accurate volumetric dilutions, ideally by first going through the mass relationship properties of alcohol. This prevents some possible errors for spirit dilution and proofing for bottling. An interpretation and extension of the paper is presented to broaden its acceptance and application to and for distillers (Travagli – see Reference citation at the end of this article). It, at the very least, provides us with a much-needed talking point for the new age distilling industry folks, though it is noted that the U.S. TTB regulatory agency would likely rely upon methods using the Gauging manual tables. Distillers should be aware of this latter approach and be clear on how to do proofing dilutions when bottling their spirits (see Addendum for more on this). The equations and approaches here may well be useful for double-checking proofing calculations and confirming the accuracy of dilutions.
INTRODUCTION Many years back, several publications (early treatises) discussed alcohol blending and alcohol dilution issues, especially for distillers, and presented some data in tabulated form. The available tables, although limited in scope, showed a few data points for specific volumes of water to add to various strengths of alcohol to lead to correct dilutions of distilled spirits. Distillers and regulatory agencies provided details dealing with Proofing, Proof Gallon equations etc., to adequately report alcohol content for excise purposes. Such instructions can be found on the TTB website, and require some practice. (See: U.S. Govt. Gauging Manual table 6 - “Respective
Volumes of Alcohol and Water” and associated instructions.) The issue was raised in 2015 at a distillers’ conference where it became clear that some distillers were not actually doing proofing for TTB reporting purposes, potentially opening themselves up for fines or forced closure of their operations. More than 10 years ago our laboratory updated and extended those earlier published Alcohol Dilution tables - (Reduction Table for Dilution of Alcohol to Lower Strength – see Figure 1) and provided an example of how to get dilution water volumes to reduce the strength of spirit samples using the Gauging manual data. The table can be found here:
alcbevtesting.com/wp-content/uploads/2009/05/NewCopyDilutionTable.pdf However, the table covered only specific pairs of data (e.g. dilution from 95% ABV to 85%, 80% etc., in 5% increments). Only smaller volume reductions are called for in practice making the table helpful but not useful for daily operations. To do this type of process the distiller is still required to look up U.S. Government Gauging Manual Tables and then run detailed calculations to derive their reduction volume water values. The Gauging tables can be found here: www.ttb.gov/foia/gauging_manual_toc.shtml for those interested in the traditional method. Recently we revisited the calculation process for this kind of table and noted that the approaches outlined below can provide confirmation of our results.
ALCOHOL DILUTION CALCULATIONS Now we attend to some useful formulas dealing with alcohol dilution factors, with the theory presented largely by Travagli. Note these calculations work very well with hydroalcoholic solutions and with traditional spirits. The more modern spirits and liqueurs with heavy flavorings, oils, sugars, etc., require more attention to detail. For official alcohol content values needed for legal approval, we recommend distillers send in such samples to a fully qualified testing laboratory unless they wish to invest heavily in instrumentation. The instruments needed include, but are not limited to: an analytical laboratory balance, distillation systems, temperature regulated water baths and digital density meters or GC systems for the analysis. Even then, there can be issues with codistilling congeners and oils, etc. Such issues are often ignored or forgotten about only to return painfully when regulators reject the products for failing to meet specifications. The major point to mention is that these alcohol and water dilutions are not easy to do accurately and effectively due to the aforementioned non-volume additive nature of water and alcohol mixtures. Volume contraction was noted as about 3%, so the contraction issue cannot be neglected when dealing with alcohol beverage formulations (ref. Travagli and see Addendum for details especially with respect to the ethanol “contraction curve” and a range of contraction values). Also due to volume expansion and contraction effects caused by temperature dependency, the use of mass rather than volume relationships make it more accurate in practice to obtain the subsequent alcohol by volume values. As Travagli rightly points out, the classical formula for mixing
solutions does not hold true here.
aVwater + bValcohol ≠ (a+b)Vmix Where a and b represent the units of volume respectively.
DETERMINATION OF THE ALCOHOL CONCENTRATION OF AN ALCOHOL AND WATER MIXTURE Travagli discusses some theory of additivity of alcohol and water but, most importantly, presents a useful equation dealing with the combination of equal volumes of water and alcohol. Here we see the need to use density values as well as volumes. For reference, the legal metrology tables known as the OIML tables can be consulted for the density and the corresponding alcohol values and are available online: www.oiml.org/en/files/pdf_r/r022-e75.pdf/view. Table Va. refers to density and alcohol by weight (ABW) values and Table Vb. refers to density vs. alcohol by volume (ABV). Thus we see from this work: EQUATIO N1
% w/w diluted = % w/w conc. ×
ρ conc. × V
ρ conc. × V + ρ water × V
Where ρ = density (of the stock concentrated alcohol and water respectively) When equal volumes of water and alcohol are used the V terms can be deleted: EQUATIO N2
% w/w diluted = % w/w conc. ×
ρ conc. + ρ water
For example, we can start with a 95% by volume alcohol (v/v) solution (ABV). The first step is to obtain the corresponding alcohol density from the OIML tables (density vs. ABV values) which gives 0.8114 g/mL as the density (20 °C) for 95% ABV stock. The OIML density for 95% ABV (at 20 °C) corresponds to a value of 92.41% alcohol by weight (ABW). The density for water, under defined conditions and as commonly used in practice, is 0.998203 g/ mL (see Eq. 1). Density values and theory are more involved than this, but for simplicity, the above notations are sufficient for our arguments. The OIML tables present values at 20 °C, though values for 60 °F (15.56 °C) are used in the U.S. for proofing purposes. As the Gauging manuals and U.S. regulations rely on 60 °F as the temperature of reference, some argue that it is the ONLY approach to take in the U.S. Within the normally allowed degrees of tolerance, data for alcohol and density as expressed at 20 °C should, hopefully, become acceptable in practice for alcohol dilutions. Those experienced with the Gauging manual approaches can test out the equations presented here to see how good a fit they really are. They should crosscheck very well! A major point to note is the need to be careful with any approaches to this topic. With
several suitable and robust options, the validity of any one method can be tested against another, thus providing confidence in the appropriate distillery operations and reportable values. Inputting the example values from above into equation 1 and setting equal volumes of the 95% alcohol and water to be used:
% w/w diluted = 92.41% ×
0.8114 × 50 0.8114 × 50 + 0.998203 × 50
% w/w diluted = 92.41% ×
40.57 40.57 + 49.91
= 41.43% w/w
Where % w/w is also simply noted as ABW – alcohol by weight. Taking the mass value of the diluted alcohol from such a mixture to the OIML tables provides a density value of 0.9322 g/mL and then taking this to the density vs. ABV table shows the ABV to be 48.94% (not a simple additive 50%) for the resulting mixture when stabilized to 20 °C. It is important to note that the mixing of alcohol and water is an exothermic reaction; the solution warms up as heat is liberated and therefore the sample must be brought back to a temperature of 20 °C to ensure accurate measurements. Here 48.94% ABV is obtained, compared to a value of only 47.5% as would be obtained by a simple non-contracted volume type dilution—a 1.44% ABV difference! The conversion from the mass to volume value can also be done mathematically, instead of relying on the OIML tables, but requires the specific gravity of the sample (not the density) and the relative density of pure alcohol. Consult the authors for more on this topic. Again, Travagli showed that the equations above can be used when non equal volumes of water and alcohol are used. His example shows 45.5L of 95% alcohol, when mixed with 9.5L of water, results in an 80% ABV solution. Using the approaches discussed here and consulting the OIML tables, the reader might want to check this out in practice going through the intermediate ABW stages to obtain the final answer. Using mass relationships in the alcohol world can be very useful.
CALCULATING THE AMOUNT OF WATER NEEDED TO DILUTE A GIVEN VOLUME OF ALCOHOL TO A LOWER PERCENTAGE Of more use to those wishing to dilute matured spirits to bottling strength (proofing) the following guidelines and equations will be useful. Again, for modern formulations the density of the sample might be reflective of not only the original alcohol water mix but also sugars and flavorings used, so the actual specific gravity of the sample may be at play here. Thus a distillation in the lab of a well-mixed and fully equilibrated sample may still be required after making dilutions to obtain the true final alcohol value and the actual extract content. The usual proofing rules on obscuration WWW.ARTISANSPIRITMAG.COM
solids if between 400-600 mg/100 mL will not interfere as much with these calculations as there is still essentially a hydroalcoholic mixture at play here (the multitude of congeners only adding a fractional amount to the density). The reader should consult the TTB website for the proof obscuration method and regulations. However, they should be aware of the composition of their products. TTB Gauging procedures and Proofing/Proof Obscuration details may be found here:
www.ttb.gov/foia/gauging_manual_toc.shtml#27:18.104.22.168.25.4.504.1 As noted above, tables exist showing the amount of water to add to a given volume of alcohol of specific concentration to obtain a desired final lower concentration. In addition to that approach, an equation can be applied which acts independently of the final volume of the hydroalcoholic solution desired. It involves a simple algebraic resolution, introduced here: EQUATIO N3
%v/v conc. × Vconc. = %v/v dilute × Vdilute
From equation 3 can be derived the formula that allows the determination of the final volume of a hydroalcoholic solution which undergoes the volumetric contraction as discussed above:
xV diluted =
% v/v conc. % v/v dilute
Example (volumes in milliliters):
xV diluted =
100mL = 237.5mL
This value is very important in cross-checking the final alcohol concentration following mixing of the defined volumes of alcohol and water (and will be used in the example below). Now, multiplying the volume by its density leads to the final weight of the diluted solution and then the water of dilution to be added is determined: EQUATIO N5
water to be added = ywater = xVdilute × ρ dilute – Vconc. × ρ conc.
Where y = volume of water to add and ρ = the respective densities of concentrated alcohol solution and the final diluted sample. Again, tables can be referenced for these values. For this example, plugging in the numbers* gives 144.0 mL** water to add to 100 mL 95% alcohol by volume solution to yield an apparent 244 mL of final solution at 40% ABV. Note: the volume contraction is 244 – 237.5 = 6.5 mL or 2.66%. The final alcohol concentration is now corrected for in making this mix of alcohol and water, and voila, an accurate sample of known alcohol strength has been made! Of course, it should be tested to be certain. *For this example, the number inputs for equation 5 need to be for 95% and 40% ABV solutions and the respective densities and 237.5 mL as xVdilute from equation 4 and 100 mL for Vconc. **There
ALCOHOL DILUTION TABLE REDUCTION TABLE [DILUTION OF ALCOHOL TO LOWER STRENGTHS]
STRENGTHS TO BE REDUCED (% V/V) 95%
VOLUME UNITS OF PURE WATER TO ADD TO EACH 100 VOLUME UNITS OF ALCOHOL
% V/V 90% 85% 80% 75% 70% 65% 60% 55% 50% 45% 40% 35% 30%
25% 20% 15% 10%
Alcohol: water mixtures are non-volume additive mixtures. This table may be used to determine the volume of water needed to reduce known volume strengths of alcohol solutions (such as distilled spirits for sensory evaluation or the cutting of spirits to desired final strengths) to desired volume/volume strengths.
is an apparent unresolved assumption here, noted when examining the cancellation of the units – it ends with mass terms (grams) not volume (mL) as illustrated above. However, it is noted for most purposes that the “relative density” of water at unity (at 4 °C) is considered to be 1.0000. Density and gravity relationships are more complex than this but the explanation just given should be acceptable and apparently has been so within the industry for some time. Update: just prior to submission of this manuscript a personal communication from Harvey Wilson (see acknowledgments) showed the relationships proving our simple statement above regarding the relative density of water. A full account is available upon request and will form a part of the ongoing discussion on this important topic. Equation 5 may be rewritten (simplifying to use one equation) as:
Plugging the requisite values (the same example numbers used above) into the variant equations (7) leads again to 144 units (mL, Liters, Gallons, etc.) of water to be added to 100 units of 95% alcohol. Taking a look at Figure 1 shows that for diluting 95% ABV alcohol solution to 40% ABV, the result is in agreement: the table in Fig. 1 shows 144 parts water to add to 100 parts of 95% ABV solution. The use of such equations and the OIML tables will assist in defining precise dilutions for the distiller. However, Dave Pickerell advised in a meeting in February 2015 that barrel to bottling proof adjustments should be done in two or three defined sub-steps so as not to overshoot the mark. A series of refined dilution steps will get the distiller closer to the required value than one attempted larger single dilution step. This is important to note because reconstituting the spirit solution back to a higher alcohol concentration is even more difficult to calculate and achieve than a dilution (see Addendum for more on this topic). Furthermore, consultants would advise to do all dilutions in the distillery based on weight so accurate balances and means to determine tank weights and weight of water and alcohol would be required. The above equations provide a decent volumetric approach perhaps for smaller scale or beginning operators, with the volumetric evaluation still relying on the “more accurate” underlying mass relationships. Setting up spreadsheets can render the calculation processes quite simple and rapid.
y water =
% v/v conc. % v/v dilute
V conc. × ρ dilute – Vconc. × ρ conc.
A simpler way to compare data for water of dilution additions is by consulting tables such as ours (see Figure 1), or to prepare solutions of known final volume. The volume of the concentrated alcohol can be set as 100 parts; from this point it is easy to determine the volume units of water to add:
ION 7 EQUAT
y water = 100 × 68
% v/v conc. × ρ dilute – %v/v conc. × ρ conc. % v/v dilute
= 100 ×
% v/v conc.
% v/v dilute
ρ dilute – ρ conc.
CONCLUSIONS Using the approaches above should prove useful in standard distillation practice, thanks in part to V. Travagli for raising them in his paper (and from personal communications). If using TTB proofing tables and calculations the equations presented above will provide a further means to check the obtained data. Furthermore, if standard tables such as the one provided as Figure 1 don’t have the paired values needed for a specific process, then equation 7 and OIML tables (or other suitable tables of alcohol and density values) should provide a quick means for solving the dilution
factors needed in most proofing and alcoholic strength reduction situations. Commercial software programs are also available that could do this even more safely and quickly. By presenting the details from within the recently discovered paper “The Alcohol Dilution” by Travagli, we hope a talking point has been raised to further explore such approaches by the craft distiller and distillery movement. For example, the development of other equations to solve for alcohol content when mixing different strength alcohol solutions are also now possible and we are investigating them.
ADDENDUM: NOTES OF CLARIFICATION Dave Pickerell of Oakview Consulting has discussed several issues, outlined below, and provided useful commentary on the concepts of Gauging and Proofing matters. While some of his cogent points are included here, we emphasize that any errors of interpretation or omission remain ours and ours alone. The information, however, adds considerably to our discussion. 1. The contraction effect, as noted by us here, is also sometimes referred to as the “excess volumes of mixing.” 2. The excess volume of mixing for ethanol and water is not really a 3% contraction, as is sometimes reported as an approximation in the literature (see the main text). The amount of the contraction is actually dependent on the fractions of each of the chemical species. At 0% - 100% and 100% - 0%, the effect is zero. At 50% 50%, the effect is about 4%. A graphical representation of this had been shown in the earlier literature and in compendium volumes of physical and chemical data. The curve (not shown or discussed further here) shows the contraction across the range of ethanol water mixtures. It should in fact be possible to generate this curve using the equations contained herein. The curve can then be compared to those examples in the literature to see how accurately it can be reproduced and thus provide confidence in the equations presented. 3. Most of the algorithms used to calculate proof are not acceptable from a TTB standpoint because they rely on curve fitting techniques that are not TTB approved. Rather the Gauger’s manual table look-up and interpolation method should be used. We suggest the calculations outlined here be approached cautiously until the reader is familiar with both the Gauging method and the use of these equations. Nevertheless, we believe they should be useful in practice. 4. The rationale for diluting in steps (discussed in the main text) is the potential cumulative error of the WWW.ARTISANSPIRITMAG.COM
various measuring devices. By doing dilution in three steps, the possibility of cumulative error is limited. 5. The recommendation for doing the dilutions by weight rather than volume is accommodated within the following reasoning: a. The TTB already has tables to adjust for temperature and hydrometer readings, so the user doesn’t have to worry about deviation from 20 °C or the exothermic mixing effect. b. Accurate and precise tools already exist to measure spirits by weight over a large range. Measuring spirits by volume tends to be much less accurate. c. The only part of the process that is not well comprehended is the table interpolation procedure, which can easily be overcome by use of a little spreadsheet calculator.
With respect to the last point (5c), we do note that several commercial or private software options exist to aid the distiller in performing these calculations. The authors would be happy to discuss the merits of such software and to direct readers to the sources of such robust and accurate programs. Finally, we do wish to note that the industry has generally accepted that the weight of water and its respective volume are at equivalency and are taken as 1.0000 (the number of decimals depending upon the accuracy of the measuring devices used). So in dealing with water of dilution the expression of mL volumes to add is effectively the same as grams in real world practice. Those equations noted above, when units are cancelled, that actually give grams as the final unit of expression are in practice (for water of dilution), while not theoretically correct, in fact arguably acceptable when written as mL. If the temperature of solution mixing or determination is other than at 4 °C then there will be differences as noted in point 5a above by Pickerell. Different regulatory bodies might deal with or worry about this issue, though it is doubtful they will. The more serious technical explanations for all this are not dealt with here, that being a topic for others at another time.
REFERENCE The paper which provided the impetus for this present discussion by Valter Travagli is titled: “The Alcohol Dilution.” The paper can be found here: www.scribd.com/doc/70865498/Alcohol-Dilution#scribd or here: docslide.us/documents/alcohol-dilution.html. Moreover, Dr. Travagli has indicated that he would be happy to receive direct communication on this topic and his address is: (valter.travagli@ unisi.it). The authors of this paper are also happy to discuss the topic further.
ACKNOWLEDGMENTS Many thanks to Valter Travagli for presenting a challenging and interesting account dealing with this often confusing topic (and for personal communications regarding his work). It has started a topic of discussion that will likely continue for some time. We wish to thank Victoria (Ali) Spedding for a careful evaluation of some of the equations in the original publication consulted in
preparing this article. Thanks also to Harvey Wilson (Katmar Software — AlcoDens) and Payton Fireman (WV Distilling Co. — ABS Software) for discussions on the calculations and potential software applications. They made our understanding that much clearer. Amber Weygandt and Matt Linske have carefully tested these principles in our daily testing of beverages and in research projects supervised in our facility. Thanks to David “Dave” Pickerell for many useful discussions and personal communications as the expert on all matters pertaining to Gauging methods. Finally, thanks to Dr. Joe Power and to Jim Hackbarth for stimulating discussions on alcohol measurements and calculations over the years. Our comprehension of this subject matter would be rather incomplete without their input.
Gary Spedding, Ph.D. is a brewing analytical chemist/sensory specialist and managing owner of Brewing and Distilling Analytical Services, LLC. Amber Weygandt, B.Sc. is lead chemist at Brewing and Distilling Analytical Services, LLC. Matthew Linske, B.Sc. is lead microbiologist at Brewing and Distilling Analytical Services, LLC. For more info visit www.alcbevtesting.com or call (859) 278-2533.
Artisan Distillery & Winery WRITTEN BY AMBER G. CHRISTENSEN-SMITH /// PHOTOS BY AMANDA JOY CHRISTENSEN
here is something relaxing about the Napa Valley with its lush rolling hills, vibrant crops, and daring blue skies. It’s difficult to be unhappy in a place such as this. Maybe that’s why Marko Karakasevic, master distiller at Charbay Artisan Distillery, comes across as so laid back. Maybe it’s because he’s been doing this for a few decades now—has lived and breathed it—and knows all its ins and outs and other peculiarities. Or maybe it’s just because he’s cool as hell.
A Family Tradition The Karakasevic family has been in the distilling business for 13 generations. Does that mean they bleed spirits? It might; the only thing we know for sure is that they know an awful lot about distilling. Marko’s father Miles Karakasevic is a vat of winemaking and distilling knowledge. A Serbian immigrant, he worked as a winemaker for other Napa Valley businesses for years. In 1983, he thought it was time to start his own venture so he founded Charbay Artisan Distillery & Winery, and Marko has followed enthusiastically in his footsteps. They started with wine, got into brandy, then whiskeys and rums followed in the 1990s. Now they offer more than 28 products and have grown from a three-person crew to eight employees (which is just how they like it). Owning a family-owned distillery in California is not easy, however. One of their biggest challenges is a state law that prevents them from selling bottles at the distillery. This law, and others like it, are Prohibition-era statutes that no longer apply to what spirit makers are trying to accomplish today. To combat these issues in a unified way, Charbay joined other California distillers to form a state guild. “We have an artisan distillers’ guild now in California,” begins Marko, “so we are joining together to have one voice in what we all need, which is to sell all our products direct to our customers.” He adds that it is not about shunning restaurants, distributors, or the like, saying, “We need our distributors and other partners, but we also need to be able to sell our own product from our business.”
The Long Haul Some distillers get into distilling to turn their business around and sell it rather quickly, but that was not the goal of the Karakasevics of
P R O V I D I N G R Y E to the distilling industry for over 50 years.
Brooks Grain Improving the quality of life with grain.
Charbay. They are in this business because they love it, and when your family has been distilling for as long as theirs has, you see things longterm. “It wasn’t designed to be pumped up, to fill the pipe, and to sell it off to a larger brand,” tells Marko, who loves what he does each day. “There are times when the days and nights are super long, but it’s fine.” Marko and his family love what they do and they are passionate about what they create. When something works they stick with it, and they are still using the same alembic copper pot still they had fabricated for them and shipped over in 1983. “When we distill, we do it 24 hours a day,” shares Marko. “That’s the way my dad did it, that’s how I do it. It’s slow, the yield isn’t good, but who cares? It’s about quality.” The crew at Charbay knows there are new techniques and technology available that might speed up the process, but they are masters of their techniques and equipment, and their spirits are high quality because of that. “To change to another still is really something I’m not interested in,” tells Marko. “It’s not about how fast we can make it or how high we can distill it to; this is about capturing the flavors of whatever you are distilling and being able to balance that flavor on the second time through. It’s a lot more of an art than straight-up mass production.” Marko focuses on quality when procuring ingredients, too. Purchasing the best Meyer lemons, blood oranges, pomegranates, and grapefruits they can find, they source their fruit from the Southern United States. Much of that fruit even comes from California, and they use those fresh fruits to infuse their vodkas. Shaking up their traditional methods with modern splashes like fruit infusions, Charbay’s top-notch spirits show how generations of knowledge can make a solid foundation for innovation and creativity. ”It’s been a wild ride,” tells Marko, who was 10 years old when this journey began. His hope is that Charbay will steadily grow and continue to support his family and those that work there. He also adds that he would love for his son to walk in his footsteps someday if he wants to, but the boy is just a preschooler now. “I don’t know why he wouldn’t want to do this, but we’ve got some time,” laughs Marko. “I’m going to show him everything I know.”
Charbay Artisan Distillery & Winery is located in St. Helena, CA. Visit www.charbay.com or call (707) 963-9327 for more info.
YOUR LOGO ON PREMIUM TASTING ROOM MERCHANDISE
Lifting your Spirits 73
TRIANGLE WRITTEN BY CHRIS LOZIER
regon State University professor Pat Hayes calls this the most exciting time in his 32-year barley-breeding career. Creating doubled haploids and mapping genetics is something he and faculty research assistant Scott Fisk enjoy, though they never have expected much consumer interest. Now, thanks to the exploration of grain’s genetic and terroir flavor contributions, people are connecting the dots and following their beer and whiskey back from their bottles, through the fields and to the lab at OSU. About 10 years ago, Hayes crossbred a new barley variety and labeled it BCD-47. It did not fit some of the traditional specifications for malting barley, but it had mapped genetics that conferred it resistant to a barley disease called stripe rust, so he released it as a genetic stock. Then BCD-47 wound up on the craft brewing radar when a brewer from Sierra Nevada Brewing Co. thought it had some interesting flavor notes. With the renewed interest, Hayes thought BCD-47
needed a catchy name, and since it is a short-growing variety, barely knee high, someone suggested Half Pint. It made sense, but as Hayes says, no one wants a half pint of beer, so they settled on Full Pint. Around this same time, seventh-generation Oregon farmer Seth Klann had started malting grains he, his father and brother-inlaw grew on their 1,000 acre family farm in Madras. Using his “redneck malter,” a large sauerkraut mixer hooked to a hydroponic timer, and an upright freezer he converted into a kiln, Klann turned his garage into a mini malt house and brewery. Klann was interested in making German lager and Czech pilsner beers, which only use one malt, but found that he usually had to source malt from Eastern Europe to get the rich flavors he wanted. American malt seemed muted, which made sense since commodity malting barley is driven by demand for malt that is good, consistent and reliable, but also universal.
1) Harvesting OSU-bred Full Pint barley at Mecca Grade Estate Malt’s eight-generation family farm. PHOTO BY TRAVIS RALLS 2) Culturing anthers to grow doubled haploid barley at OSU’s Barley World Tissue Culture Lab. PHOTO BY CHRIS LOZIER
WWW.ART ISANSPI RI TMAG.CO M
Then he found Full Pint. “When you can only ride on one malt in your beer, you need a really complex and flavorful malt,” explains Klann. “That’s why we started looking at Full Pint. I went over and visited Pat and got two 50-pound bags of raw seed and I started growing a one acre seed plot. As soon as we got some into the combine from that plot I was malting it in my garage, because I wanted to make a beer out of it and see how it tasted.” The flavor difference was significant enough that Klann and his family invested a great deal of time and money into a new family business, Mecca Grade Estate Malt. Now they grow the Full Pint, malt it, and deliver it to a group of brewers and distillers who want even more than Mecca Grade can supply. Four years into the project, their startup prototype equipment can produce 700 pounds of floor-malted estate-grown Full Pint a week. Soon, however, Mecca Grade’s new proprietary mechanical floor malting equipment will take them up to 8,000 pounds of specialty malt and 20,000 pounds of base malt every week. Mecca Grade focuses on three Full Pint base malt products named after local places: Pelton, a 1.5 Lovibond lager style with grassy, nutty, graham-cracker notes, Lamonta, a 3 Lovibond with more biscuity aromas, and Vanora, a 5 Lovibond Octoberfest style with deeper roasted walnut flavors. While they plan to move into a few more specialty malts, the base malts will be the focus, because Klann believes the better quality your base malts are, the less your beer and whiskey will need to lean on specialty malts. “That’s what I’m excited about,” tells Klann. “Getting back to less ingredients, better ingredients and more flavor.” Mecca Grade will plant 300 acres of Full Pint barley and 40 acres of malting rye this spring, with all of those acres concentrated as closely as possible. That way there is consistency in the grain, allowing any genetic and terroir differences to stand out. He is also growing test plots of 130 experimental varieties he got from Hayes, and if any of them perform well, Mecca Grade will purchase them
RIGHT PLACE AT THE RIGHT TIME Jason O’Donnell and Corey Bowers love barley and the distinct regional characteristics of Scotch whiskies. They wanted to do the same thing in Oregon, so they started Tualatin Valley Distilling in Hillsboro with the idea of making an Oregon terroir single malt whiskey. Bowers had been following the barley breeding at OSU for several years, but he could not find anyone growing those new varieties. Fortunately, a large malt house offered an Oregon malted barley, so they were able to make the locally sourced whiskey they wanted to. A week before the whiskey release, the malt changed from Oregon-grown to Pacific Northwest-grown. It was still great malt, but it created a big problem for Tualatin Valley Distilling, who had built their brand on Oregon terroir. “We had Oregon plastered all over the place, but we had to shift it to Pacific Northwest,” tells O’Donnell. “That set us back, but that’s when we discovered Mecca Grade.” The timing was perfect. Bowers and Klann connected and Tualatin Valley Distilling bought some of Klann’s first malt. O’Donnell says the malt was exactly what they were looking for, and so was Mecca Grade, who he and Hayes both describe as visionary and practical—thinking about doing something different, and actually implementing it, too. “We knew if we could find a small farm growing that barley it was going to be of a higher quality,” tells O’Donnell, “we just didn’t realize how much.”
THE FLAVOR PROJECT The same growth and flavor characteristics that prevented Full Pint from being accepted for commodity-scale malt production made it a perfect fit for Klann to grow and malt and Tualatin Valley Distilling to distill. Full Pint did not work for everybody, but it did
PROVIDED BY 3) Grain silos awaiting the barley, rye and wheat the Klann family will grow and later malt at Mecca Grade Estate Malt. MECCAPHOTO GRADE ESTATE MALT 4) OSU’s Tanya Filichkin shows the doubled haploid barley plantlets that grow from the cultured anthers in image 2. PHOTO BY CHRIS LOZIER
WWW.ART ISANSP IRITMAG.COM
work for them. Mecca Grade’s custom malt is not cheap, but O’Donnell and Klann agree that the distinct flavor difference is worth the extra money. That difference comes in large part from the malting process, certainly, but what flavor distinctions come from genetics or terroir? That is the question Dustin Herb, one of Hayes’s graduate students, is trying to answer as part of OSU’s Flavor Project. Herb’s study involves 37 samples of barley grown in three different locations with distinct climate and soil characteristics. Rahr Malting in Minnesota is helping him malt the sample barley in small quantities, which are then brewed at OSU’s pilot brewery and submitted for gas chromatography mass spectrometry and sensory analysis. Right now the tests are on the micro level, but the preliminary data gathered will drive further research at a larger scale, which will hopefully show exactly what flavor contributions barley genetics and terroir have on beer. Seven breweries are supporting the Flavor Project: Bell’s, Deschutes, Firestone Walker, New Glarus, Russian River, Sierra Nevada and Summit. Other large and small-scale maltsters, brewing companies and barley growers are providing financial and in-kind support, too, because for all their different interests, everyone appreciates better beer and whiskey. “We can operate at a lot of different scales and one of the beauties of being a public sector scientist is that we can work with everyone from Anheuser-Busch InBev down to a one barrel brewer,” explains
Hayes. OSU just installed a mini-malter that Scott Fisk will oversee in an effort to quickly malt the sample barley before sending it across the street to the university’s pilot brewery. Alongside the minimalter, OSU is building a malt lab that will provide chemical and sensory analysis of the malt, allowing them to provide a certificate of analysis for each sample. It seems too good to be true: a team of fermentation professors, barley-breeding experts, graduate students focusing on flavor contributions, a mini-malter, malt lab, and a pilot brewery and sensory analysis lab, all on one campus. But it gets better. Paul Hughes, a distillation researcher and professor, who used to direct the brewing and distilling programs at Heriot-Watt University in Edinburgh, Scotland, just joined OSU to develop and direct their new distilling program, and he is building a pilot distillery, as well. Hayes says this is a perfect opportunity for distillers to participate, especially with OSU’s current research on hybrid crosses of Full Pint and a Scotch whisky favourite, Golden Promise. Distillers could come to the lab, inform the barley selection and malting process, and help to distill and evaluate samples. If feasible, they could also join the brewers in making a tax-deductible donation to the foundation, which generates good press for the distillers, and helps OSU perform the research effectively. “We’d like to know what distillers want,” explains Hayes. “We’d just sit down and have a conversation with them and Paul Hughes and say ‘Wow, we’ve got all these barleys, we can make malts,
Craft distillery equipment designed by craft distilling pioneer Robert Cassell exclusively for your craft distilling needs and manufactured entirely in North America by Specific Mechanical Systems, one of the leading craft brewery manufacturers for over 25 years. Available with industry best lead times in our exclusive, modular 240 Gallon all-in-one skid mounted system that can be easily moved into place and arrives pre-wired and pre-plumbed. We feature interchangable heads so you can make any spirit you want to at any time. Custom work also available.
WWW.MILLSTONESPIRITS.COM VISIT OUR STILL SHOWROOM
New Liberty Distillery 1431 N Cadwallader Street Philadelphia, PA 19122 www.millstonespirits.com 800-996-0595
VISIT OUR MANUFACTURING FACILITY
Specific Mechanical Systems 6848 Kirkpatrick Cres Victoria, BC Canada V8M1Z9 www.specificmechanical.com 250-652-2111
ALL OF OUR DISTILLING EQUIPMENT IS 100% PROUDLY MADE IN NORTH AMERICA 76
we’ve got some protocols for small scale assessment of beer sensory, how can we do small scale with spirits? How can we cater our research program to target specific things that would allow us to quickly bring new flavors into the world of craft spirits?’”
“You’re not going to see people just walking in and going ‘Oh you make a whiskey, I’ll take a bottle of that,’” he shares. “They’re going to be a little more particular, a little more focused. As a step towards that, we really want to be able to focus on that Oregon terroir. It’s a story that tells them exactly what’s in that bottle and why they want it.” That story is a long one, reaching back to heirloom barley varieties, and it will continue into the future as barley breeders, maltsters, brewers, bakers, distillers and consumers ask more questions about what flavors are hiding in grain genetics and terroir. It involves people OREGON STATE UNIVERSITY like Hayes, Fisk, Klann, Bowers and O’Donnell, who acknowledge that the malted barley we have now is excellent, but also recognize that there are new flavors and better performance waiting to be discovered. For now, this chapter is about their partnership, which didn’t just create another whiskey, but a whiskey of place and collaboration.
a lot of different
TASTING THE TRIANGLE
scales and one of the
beauties of being a public
In late February, Klann met with O’Donnell and Bowers in Portland at Brewstillery 2, a tasting event that pairs brewers and distillers. Tualatin Valley Distilling paired their single malt whiskey with partner Humble Brewing’s saison in their “Pray to Mecca” pouring, and both beverages were made entirely from Mecca Grade Pelton malt. They used similar yeast strains, and Humble minimized the hops to let the malt take the lead so attendees could discover the common grain notes in both products. O’Donnell says that consumers are going to look for these nuances in the future with so many new whiskeys hitting the shelves.
sector scientist is that we can
work with everyone from Anheuser-
Busch InBev down to a one barrel brewer.”
FROM CONCEPT TO EXECUTION YO UR
S T R AT E G I C
PA RT N E R
BARDSTOWN BOURBON COMPANY
WRITTEN BY STEVEN SEIM
PHOTO BY BRIAN CHRISTENSEN
mong the news stories of companies hiding their product’s origins, a new high-volume distillery is coming soon to help dispel some of the negative association with sourcing spirits. The enthusiastic people behind Bardstown Bourbon Company are building a new distillery, opening this summer, with the goal of producing custom authentic Kentucky rye and bourbon that others can bottle and sell under their own brand. Bardstown Bourbon Company’s Master distiller is Steve Nally, whose history includes leading both Maker’s Mark and Wyoming Whiskey. President and CEO David Mandell gave us a tour of their facility while Nally described his goals with this new venture. They described several tenets they are following in order to drive their company: transparency, celebration, and education. Mandell said “the whole concept behind the Bardstown Bourbon Company is a celebration of the craft of making whiskey.” Mandell, Nally and their team will offer their customers the chance to develop their own recipe, choose from a wide variety of ingredient options, and produce their resulting product. The distillery is on 100 acres of active farmland and provides corn and wheat directly for their production, and all their customers will have a say in where other ingredients come from. Through an exclusive partnership with Live Oak Bank, they will offer comprehensive financing for new fill barrels and will offer storage of anything they produce. Marketing and design are not offered, however, so they will not be able to help you design a label and sell your product. Mandell and Nally’s primary goal is to produce whiskey for those who are able to move it themselves. Construction started in 2014, and when it is finished, their facility will be an allencompassing experience. Bardstown Bourbon Company will have a state of the art distillery capable of producing 1.5 million proof gallons per year and storage capabilities for 230,000 barrels, with room to build more if necessary. But Mandell and Nally have thought of many WWW.ARTISANSPIRITMAG.COM
if they desire, and their two glass-walled more details besides that: the grounds will rooms, with full views of the production have educational rooms, an event venue environment inside the distillery, will with a capacity of 250 people, a visitor’s assist with classes. They will also have the center, and they also have plans for a hotel benefit of the regular presence of an OSHA and restaurant. With these goals in mind, officer, who will help Bardstown both they're working with a specialist tourism learn and educate others about following company to plan a unique experience for safety guidelines. The onsite OSHA visitors. Most of their distilling process will representative will offer warnings about be viewable behind clear walls and windows, possible violations and give Bardstown the and their tour is designed to showcase as opportunity to correct those violations, all much as possible. Mandell says they have while educating their partners who wish to also contacted local colleges and artists learn about running their own facility. and plan to display local art around the Bardstown Bourbon does not intend to be property to strengthen their bond with the a secret source, so any of their partners may local community. speak freely about a working relationship. While building their physical space, Nally In addition, if the customer gives the go and Mandell have also been concentrating ahead, Bardstown intends to help spread on building their partnerships with which the word about them in different ways, like they will open production. Between their telling about their specific brand as a part own products and their client distilling, of the tour of the facilities. Or they can list Mandell believes when they open this it on their bottle and leave it at that; it is up summer they will be close to capacity. to each partner brand to decide. SeventyThat said, not just anyone can produce five percent of total production will be custom whiskey with Bardstown. “We’re devoted to their various partners, and each vetting them as much as they’re vetting has the opportunity to make Bardstown us,” tells Nally. Mandell described the Bourbon Company a public home for their types of companies they are working with brand. as “ones that are well established, ones Nally, who has been making bourbon for that have current brands, ones that are looking to establish future supply lines. They are also large companies, or nondistilling brand owners who are making decisions about whether to build their own distillery.” Keeping with their philosophy of transparency, Mandell hopes to be able to offer more than barreled product to their partners. A key component of Bardstown Bourbon Company will be the educational opportunities available. Their customers will have the opportunity to send their own employees to work with and learn from STEVE NALLY AND DAVID MANDELL PHOTO PROVIDED BY BARDSTOWN BOURBON COMPANY Nally about scalability of production, distilling, etc.,
“THERE CANNOT BE GOOD LIVING WHERE THERE IS NO GOOD DRINKING.” -Benjamin Franklin
QUALITY IS KEY You care about the quality of your craft, and we care about the quality of our competition.We formed the Distilled Competition to celebrate, recognize and promote skillfully crafted spirits and the distillers who produce them.
• Open to commercial spirits producers throughout the world • We purchase spirits at
regular wholesale cost to serve at our Distilled Spirit & Cocktail Festival. Unlike other festivals which ask you to donate your product, we actually buy it!
• We promote your spirits to our massive audience. Our
Competition & Festival are affiliated with the San Diego County Fair, the largest county fair in the United States. Our attendees are a desirable market: 65% age 25-54, 68% college-educated, 46% have an annual income of $75K+, 35% are Hispanic
(Scarborough May 2015)
Entry materials are now available, so save money by registering early and get a head start on the competition now!
EARLY BIRD ENTRY: Friday, April 8, 2016 FINAL ENTRY: Friday, April 29, 2016
over 40 years, cannot hide his excitement at having the opportunity to build a new distillery. He described the joy of combining modern technology with the methods he has always trusted, saying, “When someone comes through here, they’re going to see someone turning a valve, not pushing a button.” Mandell added that the distillery, in order to produce the highest quality and quantity, will be “A good mix of new technology and handmade.” Vendome has outdone themselves again for Bardstown’s needs, accommodating Nally’s requests to include glass panels in new places in order to make their process more transparent. Someone touring their facility will be able to view almost all of their processes, and will even get views inside tanks and cookers where windows have not traditionally been before. In addition, for efficient energy, a solar field is planned on the property to help power their infrastructure. For his production staff Nally intends to start with about 12 people. He is in the hiring process right now and shared a few guiding principles that have helped him assemble staffs in the past. “First is a good work ethic,” he said. Knowledge and experience are good, but Nally warns that sometimes bad habits can be detrimental if they have learned under a different system. “It’s not a wrong way necessarily, but it’s not my way,” he explains. Eagerness to work, learn, and anxiousness to make something good are qualities Nally values. He continued, “I think pride is a big factor too, to make the product that we want to develop.” Nally cites his experience at Maker’s Mark, where he learned their methods when he was young. He did not see the value in some of those methods at first, but learned their worth over time. His goal is a staff whose pride gives him confidence: “If I’m not here, I don’t have to worry about someone putting the right amount of grain in the mash tank, or if the temperature is right. I’m going to know it’s right.” Smaller distillers will have an opportunity to work with Bardstown Bourbon, as well, through the company Ultra Pure. Orders smaller than 400 barrels will be collected and organized by Ultra Pure and produced at Bardstown Bourbon Company in larger, combined batches. While the mash bills will be less customizable when ordering in these amounts, small distillers who want the opportunity to source their spirit from Bardstown Bourbon Company will still be able to ensure their bourbon or rye is reliable and consistent. Mandell and Nally believe it is the right time for a company like Bardstown Bourbon because whiskey is more popular than ever before. “From the big guys to the small craft distillers,” begins Mandell, “if you look at the investments across the board, clearly that says that this growth will continue for some time.” After all his years in the industry, Nally agreed, saying, “I don’t think this has ever been done, in history, this scope of expansion.” Within a few years, Bardstown Bourbon products will begin appearing in bottles and on shelves in various forms. If Mandell and Nally have their way, you will hear those brands bragging about where their whiskey is produced, not hiding from it. Bardstown Bourbon Company is located in Bardstown, KY. For more information, visit www.bardstownbourbon.com.
EXPLAINED SLOW and GENTLE W R I TT E N BY S H AW N B E R G E R O N
hen we wrapped things up in Artisan Spirit Magazine’s Winter 2015-16 winter issue we concluded your new venture should be classified a High Hazard H-3 occupancy, which means the building and fire code officials are going to look at your operation with more scrutiny than most. With that in mind, let’s continue down the path towards the permits you need to get your new distillery functioning. In this article, we are going to identify the first important building and fire code requirements that you should not be allowed to ignore, because if you do they will haunt you like an unknown strain of yeast. Remember, the goal of this quest is to earn you the elusive Certificate of Occupancy, and after you get it, it is important that you keep it. In the last installment, we learned that the quantity of your premium hooch (that wonderful class 1-B flammable liquid) dictates your occupancy classification. That is really WWW.ARTISANSPIRITMAG.COM
important, because if the amount of alcohol within your distillery is very, very small (hobby volumes), the building and fire code requirements will be less prohibitive, which also means less expensive. But answer this question honestly: Can your new venture sustain itself at the small production volumes allowed by the less prohibitive and less expensive occupancy classification? Unfortunately, this question is often never asked, or if it is, it is not answered honestly, which leads to a future debacle. If you scrimp on being appropriately code compliant at the beginning, the real cost in money and lost time to make things right in the future will be significantly greater. Now imagine you have hired a good consultant to plan your distillery so they will not allow you to wander a primrose path. They plan away, working under the premise that your venture needs to be self-supporting and provide you a reasonable living. You need adequate, safe and code
compliant space in which you will spend most of your waking hours, and all of this is depicted on a set of wellprepared plans. Like many other distilleries that we have visited, there will be a spacious room in the center where all the fun and scientific hard work takes place. This is also where you set up your cot to take a nap in the midst of your typical 20-hour day. In a separate space, there are the materials receiving and storage areas, and at the opposite end, there is the promised land: tasting and retail. That is where we find the beautifully crafted tasting counter, the attractively displayed bottles of fine spirits and some aging casks piled three-barrels high. From one end to the other, this is the perfect space from which you will take over the spirits world. When you arrive at the local building department with your professionally prepared plans, you gently unfurl your documents onto the table in front of the permit technician. You take a step
backward and wait for their praise. Instead, the first words you hear are terrifying: “A hazardous occupancy can only go into a non-combustible building.” Fortunately, that is not correct; the building and fire codes are not this restrictive. Unfortunately, it is now up to you to prove this, and until you do, your project is dead in the water. Codes take into consideration the inherent risk of all occupancies and the size of the occupied area where the risk is taking place, and then perform a reasonable analysis based on this simple premise: the larger the occupied area, the greater the risk. Because you possess this understanding, you have the wisdom to work through the construction requirements with your code official, but be prepared to talk slowly and be gentle. No one likes a smart aleck! Like I forewarned you in the last writing, you need to assuage their fears, and in this case you need to educate them, too. Your new distillery is going to be located all by itself in the middle of a parcel of wonderful land. It will be 50 feet by 100 feet of energy efficient construction, and 34 feet tall measured from the average ground level around the building up to the mean average height of the sloping roof. The building will be “stick built,” with common wood framing, attractive wood siding, and an easy-to-clean fiberglass-walled interior. You explain all of this to the code people, referring to your plans as you move along. Then, gently, you present the second most important planning information that YOUR code guy has given you: the height and area calculations. Within the building code, you will find a table that shows an array of what at first will appear to be bizarre extraterrestrial information, but it is actually easy to demystify. You already know your occupancy, so the next question is, “What is the area of your occupancy in square feet?” We know your building is 50 feet by 100 feet, which equals 5,000 square feet, right? Nope. The codes do not recognize the outside dimensions as the dimensions of an occupancy. The codes tell us the area of your distillery is measured as the area included within surrounding exterior walls,
the space you actually occupy, the space that is, in your case, hazardous. Because your distillery is super energy efficient, it has heavily insulated two-foot thick walls, which makes the area of your building (for the code world only) 4,416 square feet (46 feet by 96 feet inside dimension). The thickness of the surrounding walls is not part of the occupied area and not part of the building area when doing the code area calculation. Now, take all of this information and bring yourself and the code guy back to the code book. Working with the International Building Code we find a table called, amazingly, ALLOWABLE BUILDING HEIGHTS AND AREAS. Down one side we see a list of occupancy classifications and find yours, H-3. Across the top we find “TYPE OF CONSTRUCTION” with five mysterious identifiers, Type I through Type V. All that means is the smaller the number, Type I for example, the more noncombustible a building will be, so in the event of a fire the building itself will not be a contributing source of fuel. At the other end of the height and area table we find Type V construction which is defined by the code as a building that is constructed “of any materials permitted by this code.” Type V construction can be of balsa wood if you can glue it together in a way that is structurally safe for the region where your new distillery is going to be located. The concern with Type V construction, however, is that in the event of a fire the building itself will become a contributing source of fuel. For that reason, a distillery of Type V construction is going to be limited significantly in size in comparison to a distillery of Type I construction. See, more wonderful code wisdom. You and Mr. Code are back at your plans with the ALLOWABLE BUILDING HEIGHTS AND AREAS table in front of you and once again, your new-found wisdom will allow you to prevail. You explain that your occupancy is H-3 and that the occupied area is 4,416 square feet. You also talk about the chosen type of construction, balsa wood joined with white glue, and how that is identified by the code as Type V. Applying these facts to the table in the code book, you show
Mr. Code that an H-3 occupancy of Type V (B) construction is limited to a 1-story, 40-foot building height with 5,000 square feet of building area. Congratulations are in order as the building that is depicted on your plans falls within all of the BUILDING HEIGHTS AND AREAS limits so your combustible building is completely code compliant! Are we done? Can we have the building permit please? Nope. You are still in a code headlock. You have properly identified your occupancy and you have shown that your building meets the height, area and type of construction requirements. That is all great if you are building a machine shop, but the products produced in a machine shop are not hazardous unless you throw them at someone, so the codes drive you and your hazardous occupancy deeper into the murky waters of the code pool. Because we are dealing with your distillery there are more, let’s call them “special,” requirements. Look at that: once again, you are special! Moving further into the codes we find that because your occupancy is hazardous, we have to consider “fire separation distance,” which is how close your hazardous occupancy can be to the donut shop next door. The code also tells you that at least 25 percent of a distillery’s walls must be exterior walls. What does all of this mean? The exterior wall requirement means your distillery cannot, for example, be in the middle of an enclosed shopping mall. In the event of a fire emergency, firefighters need to access your distillery from outside, so one quarter of your distillery’s enclosing walls need to be exposed to the exterior. Luckily, that is no problem for your distillery as it is going to be standing alone, all by itself. Now, what about that “fire separation distance” requirement? Great news! Although yours is a hazardous occupancy, your fine alcohol is not classified as an explosive or an oxidizer, nor is your alcohol a pyrophoric gas, so you are, for the most part, off the fire separation hook. Finally, you caught a break! Unfortunately, we are still in the deep WWW.ARTISANSPIRITMAG.COM
end of the code pool. Remember that room that houses your hammer mill? Any concerns with that? Of course there are. Anyone that has spent time dumping corn into the hammer mill knows what it is like to pull corn boogers out of your nose for the next few days, and although those are uncomfortable, they are quite safe in comparison to the corn dust that is preventing you from seeing the other side of the milling room. According to the very knowledgeable folks at the Distilled Spirits Council of the United States, grain dust can be very explosive. Ridiculously small amounts of corn dust particles per cubic foot of air can, if ignited, produce an explosion capable of pressures greater than 100 pounds per square inch. Compare that to atmospheric pressure which is about 15 pounds per square inch, and you can quickly grasp just how bad a dust explosion can be, particularly when the six-time increase in pressure occurs in a fraction of a second! Since explosions in your distillery will be looked upon unfavorably, your milling room is required to be separated from the remainder of the distillery by “fire barriers” which have a fire-resistance rating of no less than two hours. The room must also be equipped with a dust removal system that can safely remove the dust cloud. Additionally, some codes will require explosion venting, a mechanism that allows much of the force of an explosion to move somewhat harmlessly outdoors. Once again, all of this sounds horrible but it really is not. A “fire barrier” is defined in the
International Building Code as “a fireresistant-rated wall assembly of materials designed to restrict the spread of fire in which continuity is maintained.” Simple explanation: this fire barrier is a wall that extends from the floor to the ceiling, is substantially attached thereto, and is constructed of materials that provide the necessary two-hour fire rating. The 19th edition of the Fire Resistant Design Manual published by the Gypsum Association provides seven wall assemblies constructed of wood studs and gypsum wallboard that will fulfill this requirement. The codes do allow door openings through the “fire barrier,” however the doors and door frames are required to be fire rated for oneand-one-half hours. The doors also need to be self-closing and when closed, they are required to be “positively latching,” which means they stay closed until you open them. Code compliant doors, door frames and hardware meeting all of the requirements are readily available, usually by special order from your local building supplier. Now what about that dust removal? Nothing overwhelming here either. Most startup distilleries have a small milling room, which your designer should put on an outside wall. This will make your life easier, the code people happier and save you hard-to-come-by funds. Remember, what we are looking to do is remove an extremely explosive and very fine airborne dust and send this outdoors or to a filter system of some type. Filter systems work well, but they give you yet another piece of equipment that will break down at the
worst possible moment, so sending the dust outdoors is preferable. This can be accomplished by installing an explosion proof through-wall exhaust fan, which is turned on as soon as the mill comes to life. Although “explosion proof” sounds daunting, again, it really is not. Throughwall, explosion proof electric fans are readily available. Just make sure you work with your electrical inspector to get a fan that is properly rated for this Electric Code “special occupancy,” and remember that as dusty air is removed from the milling room, it needs to be replaced with clean air from somewhere. If provisions are not made for replacement air, your exhaust fan will not exhaust for long. This takes us towards the future. What’s left? We have not completely finished the selection or installation of the exhaust fan in the milling room, nor have we talked about the requirements to separate your retail area from the distillery itself. We have not talked about the boiler installation, the sprinkler system, the fire alarm system… wow, we still have our work cut out for us. We will continue onto these and other topics in the future, and someday we will talk about the specific requirements for your new rick house, because you are definitely going to need one of those.
Shawn Bergeron is an NFPA and ICC Certified Fire Protection Specialist and Building Official with Bergeron Technical Services in North Conway, NH. For more info or assistance call (603) 356-0022 or visit www.bergerontechnical.com. They will be happy to help you with your distillery no matter how near or far.
FRUIT DISTIL FERME LATE NTATIO N THE A RT AN D SCI ENCE OF
The final installment of this three-part series focusing on the fermentation of Eau De Vie (EDV) fruit brandy covers tooling and instruments, procedures, automation, and recaps lessons learned.
WHEN IS THE MASH READY FOR DISTILLATION? During the fermentation process, yeast feasts on sugars in the fruit mash and converts them to alcohol. This process will take weeks and will depend on the type of fruit used, as well as other conditions such as temperature and yeast strain. Eventually, the yeast will run out of fermentable sugars and die off, ending the fermentation process. During fermentation it is important to measure the sugar content of the mash to understand the activity levels inside the fermentation tank. The measure of sugar content, coupled with the pH and mash temperature, is an indicator of the overall health of the mash. pH levels can be measured with simple strips that indicate the acidity or basicity of the mash by color, or with more accurate digital readers. The best way to track the sugar concentration levels in the mash is with a refractometer, a laboratory device used to measure gravity during fermentation to determine the amount of fermentable sugars in the mash. This is the same tool that was introduced in Part 1 of this series to identify the sugar levels in fruit during selection and sourcing. When the refractometer measurements are the same for at least three straight days, this indicates that yeast cannot convert any more sugars into alcohol. There are several causes for this condition:
Yeast molecules are stressed out by the synthesized alcohol and carbon dioxide
• • •
Primary carbon-source is depleted from the mash
pH has dropped to a critical level Lack of calcium, magnesium, or ammonium salts in the mash
BY A TTIL A
CS A ND M ARAT
The causes above are another reminder about the importance of selecting the right yeast strain for your mash. Fermentation is a complex process, where some yeast is able to adapt to the new environment and stay alive for a long period of time, while other yeast cannot tolerate the stress and may die quickly before completing their job. There are also yeast strains that can utilize more carbon sources than others, thus producing more alcohol. At the end of the day, finding the right yeast strain is a critical step in fermentation and has a major impact on the final results of distillation.
INSTRUMENTS AND TOOLS The last important measurement of the fruit mash is the volatile acidity. Fruit mashes, when compared to whiskey mashes, have higher acidity levels because fruit naturally contains higher acid levels than grains. The measurement of the volatile acids in the mash is important, because higher than normal levels could ruin the mash. Volatile acids are synthesized during fermentation, however if bacteria or oxygen are present in the mash the acid levels will rise, and as a result acetic acid and other volatile acids are developed. These acids will introduce bad flavors and reduce the alcohol content of the mash. This measurement of volatile acids is necessary when you can detect vinegar-like, or nail polish remover-like aromas in the mash. The measurement process is a little more complex and requires basic chemistry knowledge. The steps are as follows:
Measure a 20 ml mash sample Add 3 ml of 30% tartaric acid, or, as the alternative, a spoon tip of crystal tartaric acid WWW.ARTISANSPIRITMAG.COM
Use a steam distillation unit to distill the mixture until you yield a sufficient quantity of final product (you can also add some water at the end of distillation if it is needed)
Transfer the product into a glass flask and add 2 drops of phenolphthalein indicator solution
Using a burette, add 0.2 N (Normal Concentration) sodiumhydroxide drop-by-drop until the mixture gets a pinkish (fuchsia) color
After the liquid changes color in the flask, determine the quantity of sodium hydroxide used, and calculate the volatile acid content using the following formula:
CVolatile acid = VNaOH*f*0.3 Where: CVolatile acid — is the volatile acid content VNaOH — is the volume of the used sodium hydroxide solution f — is the factor number of the sodium hydroxide solution It is always a good practice to capture the daily fermentation conditions and yields in the log and compare them to the past results. Additionally, measuring acid, sugar, and alcohol quality and quantity can be performed through hyphenated analytical methods, such as HPLC (High Performance Liquid Chromatography) or GC (Gas Chromatography). This equipment can be expensive and they require some special technical and analytical knowledge to use them, but they give very precise information about the chemical compounds in your mash and spirit.
STORING THE MASH SHORT TERM While it is not ideal, there will be times when the fully fermented fruit mash, with fine aroma and high alcohol content, cannot be distilled right away and you will have to store the mash for a period of time. The longer the mash sits, the more prone it is to spoilage. To reduce the risk of spoiled mash, several methods can be deployed depending on the storage period. If the fermented mash needs to be stored for a short period of time (a few days), make sure that the mash is contained in the fermentation tank and does not get exposed to oxygen. Also, lower the temperature of the fermentation tank below the yeast’s lower optimum temperature. You can check yeast’s optimum temperature (this information is usually listed on the yeast package), but when in doubt, keep the mash between 10 and 14 degrees Celsius. If the mash needs be stored between one and two weeks, then the following precautions should be made:
Make sure that there is little headspace (10%) in the fermentation tank above the mash—this is generally challenging to accommodate after fermentation has finished and transferring into a smaller fermentation tank may present challenges and introduction of additional bacteria that may
affect the mash
Floating solids should be submerged into the liquid mash to prevent bacterial and mold infections
Check the pH level and lower the pH to 3.6 Cool the mash below 14 degrees Celsius
In cases where mash must be stored for more than three weeks, then the mash must be kept in the tank where it is filled at 100% capacity with no floating solids on the surface of the mash. Before sealing the tank from oxygen, confirm that the pH levels of the mash are below pH 2.8 by adding phosphoric acid or sulfuric acid to the mash. Finally, adding yeast nutrients to the mash can extend yeast’s lifetime and, at minimum, prevent yeast from decomposing in the mash. After all of these steps are completed, maintain the mash in the cold environment until distilling, which should be as soon as possible.
FERMENTATION AUTOMATION Fermentation requires a lot of attention and daily monitoring. Depending on the size and scale of the operation and other duties of the distiller, maintaining a healthy fermentation can be a laborious tank. While fermentation cooling can be managed manually with appropriate engineering, it can also be automated with the right sensors, electronics, hardware, and software. Fermentation automation does come with a cost and is not always required for a distillery, but can provide operational efficiencies if implemented. Here are some options to consider when planning your fermentation process:
• TEMPERATURE CONTROLS & MIXING:
With fermentation automation the distiller has complete control of the mash by regulating the temperatures (both cooling and heating if needed) and mash agitation cycles. To achieve this, the fermentation tanks should be integrated to the chiller and heating vessel (if a heating option is needed) and managed through software. The software is able to regulate the flow of the cooling or heating solution, such as glycol, to the fermentation tanks if the mash temperature is cooling or heating above a set threshold. This is ideal for non-temperature-controlled operations where weather may fluctuate with the seasons. Additionally, this allows for 24/7 control of the mash without having to come in late at night to run the cooling manually. Controlling the temperature of the mash allows the distiller to reduce the risk of a poor fermentation and allows for more consistency from batch to batch.
• INLINE REFRACTOMETER:
Automation also allows for a periodic measurement of sugar content of the mash with minimal manual interaction. This is more challenging to set up, but can be achieved using a built-in refractometer in the fermentation tanks. The sample measurement schedule can be programmed to capture sugar samples based on your needs—for example, at the beginning of fermentation and
then every eight hours. In this scenario, when the same sugar content measurement is captured 12 times, that is the sign that the fermentation has completed.
• GAS FORMATION, INJECTION & MONITORING:
Oxygen inside the fermentation tanks can negatively affect the alcohol formation in your mash. You can get rid of the oxygen by introducing inert gas into the tank, like CO2 or N2. During fermentation, carbon dioxide will naturally form in the mash. Having a monitoring system in place to measure the amounts (and headspace) of gases inside the tank is very helpful when there is a need to store the mash after the fermentation for a period of time. Further, the monitoring of carbon dioxide can be used as a safety mechanism to identify any leaks.
MEASURING THE ABV At the end of fermentation, the distiller needs to be able to measure the alcohol content of the mash to plan his distillation strategy. Measuring the alcohol content of the fruit mash can be easily performed with a small glass distillation unit, or any small scale distillation unit that can hold up to 500 ml of mash. To run a simple distillation the volumes will vary on the size of your system, and we will use the following as examples:
Start with 100 ml of mash, which will yield 20-30 ml of distilled product
Fill the evaporating flask and run the distillation at a gentle heat—try to avoid burning the glass as it will make it very difficult to clean after distillation
Turn on the condenser as the mash begins to form vapor and collect in a receiving flask
Since we are measuring the alcohol concentration in this process, we do not need to make the traditional heads, hearts, and tails cuts
Run the distillation until the mash is exhausted of all alcohol, extracting as much distilled spirit as possible
• pH MEASUREMENT: This can be achieved by programming the pH level measurement cycle for the fermentation period to allow the system to control the valves of the acid and base tank, and by turning on the agitator. Although automation will support some of the activities during the fermentation cycle, it can never replace the trained professional’s eye and nose. Your nose will tell you more about the potential issues during the fermentation than the instruments. Making a decision and checking on the mash should always be performed by professionals.
With the alcohol collected from the simple distillation, the
distiller can use a density meter or a digital alcoholmeter to measure the alcohol content of the mash. Knowing the ABV of the mash allows the distiller to plan for the yield that can be expected from the distillation and the quantities of heads, hearts, and tails based on the quality of the fermentation.
FERMENTATION LESSONS LEARNED Fermentation of Eau De Vie (EDV) is a fun, scientific, and complex process that can be both rewarding and frustrating. Keep the following guiding principles in mind when you ferment your next batch of EDV:
Fruit quality is critical—always pick the most aromatic, ripe, and sugar-rich fruit
Yeast strain selection is important and is the second most important contributor to aroma formation after the fruit
Cleanliness and sanitation is as important as fruit quality — otherwise you risk infecting your meticulously selected fruit
Grinding is a must—always choose the right grinder depending on the fruit type—a finer grind will result in a better fermentation and a better final product
Temperature control is important in fruit brandy production to provide an optimal environment for the yeast
By adding specific acids you can gain control of the microbiota of the mash
Track the fermentation, because stuck fermentations can produce a poor quality spirit with a low yield
If mash intervention is required then react immediately
When you have no other choice but to store the mash, store it in a cold place, keep oxygen away from the mash and lower the pH to prevent mold development.
Try to distill the mash once the fermentation has finished, avoiding extended storage when possible
With an exceptional distillation that focuses on proper heads, hearts and tails cuts, the distiller can create a beautifully balanced, aromatic, flavorful, and smooth EDV, but we can cover that another day. Ferment on! Attila Gabor Kovacs is a PhD scholar and an industry recognized expert in the fermentation and distillation of pálinka, a Hungarian fruit brandy. Attila has over nine years of academic, research, and professional experience in distilled spirits production and assessment. He has developed and taught Bachelor's and Master’s courses, and authored publications about pálinka production and origin identification. Attila is a member of the National Pálinka Committee and a distilled spirits sensory judge.
OUR CRAFT BECOMES ONE WITH YOURS. The Barrel Mill crafts tight grained white oak staves into premium barrels. Then the magic happens. We toast and char the barrels to your specifications to inspire the unique flavor profile you desire. Here’s to excellence – from barrel to glass.
Choose from four sizes
Let’s talk 800.201.7125 THEBARRELMILL.COM
HERIOT-WATT UNIVERSITY'S INTERNATIONAL CENTRE FOR BREWING AND DISTILLING WRITTEN BY CHRIS LOZIER
P H O T O S P R O V I D E D B Y H E R I O T- WAT T U N I V E R S I T Y
hen people think of alcohol in the world of higher education, they usually think of college parties and consumption. However, there are a growing number of academic programs focusing on fermentation and alcohol, now, and they deserve a closer look. While several schools and organizations in the U.S. offer quality distillation and fermentation training, Heriot-Watt University in Edinburgh, Scotland offers the only qualified combination master’s degree in brewing and distilling for English speakers. The program is well-respected throughout the world, and many U.S. distillers have received their education there. Heriot-Watt provides both undergraduate and postgraduate programs for distilling students. As an indicator of the growing global interest in distillation, enrollment has nearly doubled in the last decade, and in 2015, approximately 40 undergraduate and 61 postgraduate students enrolled. U.K., U.S. and Canada are the top three countries of student origin, but students come from many countries, making for a diverse student body. The postgraduate program is a combination of brewing, distilling, malting and fermentation science. While students may choose to specialize their field of study with a master’s thesis, they all attend the same core courses when earning their postgraduate diploma. Both on-campus and distance learning opportunities are available, and Daniel Hammerschlag, Head Distiller at Whiskey Acres Distilling Company in DeKalb, Illinois, took the on-campus route. “It was just a lot easier for me to put a lot more into it while being there,” tells Hammerschlag. “We had the library, which has a lot of old and very expensive books, and you have the professors that help out, answer questions and help you network and inquire. Plus there are events that they arrange for you to go to, so I think there are a lot of advantages to being there.” Hammerschlag studied in Edinburgh for 10 months, earning his postgraduate diploma in two semesters. The diploma by itself is a respected accreditation, but Hammerschlag also chose to pursue the master’s degree, and he recently submitted his master’s thesis for approval. Students that have the opportunity to travel to Edinburgh for school appreciate this relatively fast, yet intense, education, especially since several of the top distilling schools in the U.S. usually have waiting lists. “I think sometimes students went to the U.K. because it expedited the education and qualification rather than waiting to get into a program for a couple of years,” explains Paul Hughes, who
used to direct the brewing and distilling programs at Heriot-Watt. Hughes, who also has an MBA, says one of his goals when he directed the programs was to teach students not just the science and processes, but also business skills. “It’s good to train scientists and technologists, but if you work in a business environment then you need to understand that,” he explains. Employability is still a focus, and Professor Alex Speers says they offer a “Fit for Work” program, with sessions designed to educate students on the opportunities for, and requirements of, landing jobs in the beverage industry. Representatives from companies like Diageo lead the extracurricular courses, which are not required, but are popular with students and pay dividends when looking for work after graduation. Several major Scotch whisky companies also fund some of the coursework and research at Heriot-Watt’s International Centre for Brewing and Distilling because the school provides them with a more competent workforce and advances distillation research and science. Being in Scotland, the programs focus on barley and Scotch whisky. For Hammerschlag, who now works with mostly corn at Whiskey Acres, the malt principles he learned were adaptable, and he said that is half the fun of distilling. For Matt Hofmann, who works exclusively with barley in Seattle at Westland Distillery (the largest single malt distillery in the U.S.), Heriot-Watt was a perfect fit. And since he took the distancelearning route, he was able to pursue his education while starting the business. ”We launched Westland three months after my 21st birthday, so I never ended up finishing my undergrad degree,” explains Hofmann. “Heriot-Watt let in a couple people who don’t have an undergrad degree, but you have to go through a couple of chemical engineering courses first, which I did and they were very useful.” Hofmann lived in Edinburgh for those summer program courses, then returned to Seattle to run the business. He says most of the other distance-learning students were in their 30s and 40s, already employed and looking to learn more. “If you do the distance learning you can’t do it any faster than two years because you can only do two courses per semester, and there are eight courses that you have to get through,” tells Hofmann, who has already earned his postgraduate diploma and expects to complete his master’s thesis this year. “It took me three and a half years to get through it since I was building the business.” One of Hofmann’s goals is to offer a similar education to students
that cannot travel to Edinburgh, so he is working with a diverse group of leaders on something called the Craft Brewing and Distilling Center in Tumwater, Washington. City leaders, brewers, cidermakers, distillers and educators are taking steps to purchase and renovate the abandoned Olympia brewery and turn it into a beverage industry education and service center. Possibilities include cooperage renovation, malting, sensory and chemical analysis, cooperative bottling, canning and supply purchasing, welding and tank maintenance, and any education or vocational training needed in the cider, beer and distilling industries. Plans are tentative and subject to change, but the project is moving forward, and Hofmann says people are excited. “We’ve started to at least outline from an industry standpoint what we would need in terms of education,” he tells. “What are the educational deficits in the distilling industry?” Just down Interstate 5 at Oregon State University, Hughes is also asking what U.S. distilling students are looking for, visiting many local distilleries while developing the university’s new distilling program. Hughes says that another one of his goals at Heriot-Watt was to introduce students to ingredients beyond barley, which he did then and is doing now at OSU. “There’s a lot of interest in innovating, whether it’s the process, or the products, or even redefining product definitions,” explains Hughes. “That’s what’s really exciting and that’s something I want to address in our core programs and the research that we do.”
Part of his task is to collaborate with other professors to reform the university’s entire fermentation program, integrating dairy, beer, wine and spirits. He says if students are unfamiliar with other fermentation methods, they miss opportunities for learning and innovation in their own field. Hughes also plans to produce publishable distilling research addressing industry issues, and that will likely lead to a graduate student program, and potentially the first master’s degree in distilling in the U.S. Right now, he says he is not sure how much of a U.S. market there is for a master’s degree in distilling, but he plans to find out. Currently, small American distilleries seem to be less worried about master’s degrees and more worried about their employees’ ability to keep them in business as they face their tax-burdened and increasingly competitive market. But that could change, and with it so will the domestic and overseas focus of university distilling programs. Some schools may focus on innovation, others on tradition, but one commonality that will never change is college kids distilling in their apartments. “We had a black tie dinner one night,” tells Hammerschlag, “and one kid brought a mason jar full of his homemade moonshine to share with all the distillers. I’m not sure they were impressed.” Heriot-Watt University is located in Edinburgh, Scotland. For more information, visit www.hw.ac.uk.
STOCK INVENTORY | CUSTOM DESIGN | CAPSULES | CLOSURES
Our craft is producing the finest all natural corks in the world For more than 25 years, Saxco International has been helping distillers create the packaging identity that is their brand. We offer a comprehensive range of products tailored to craft distillers, that includes bottles, corks, closures, and capsules. And for turn-key packaging needs, Saxco is the one-stop-shop solution for bottle design, decoration, and secondary packaging components. Email: firstname.lastname@example.org, or call: Chris Tubertini at 502-445-9836
DISTILLERS MALT vs.
BREWERS MALT What’s the difference? WRITTEN BY MICHAEL SCANZELLO
ne of the most common questions distillers ask me is, “What are the differences between your distillers malt and your brewers malt?” My answer is to ask them my own question: “What kind of whiskey do you want to produce, or what does your grain bill consist of?” This cuts right to the chase and gets into which product will best serve that particular distiller’s needs. There are some important differences between the two categories. Those separations begin with barley sourcing and continue into the malthouse, where maltsters use different processing parameters to meet quite different specifications. Examining these differences in greater detail will give you a better idea of which product is best for your spirit, and why. Let’s first take a look at some of the key analytical differences between these malts. Below is a chart that shows some of the most critical parameters, and compares general specifications for the two malts.
EXTRACT FG db
110 - 130
40 - 60
The most glaring difference is in enzyme level. Both diastatic power and alpha amylase levels are significantly higher in the distillers malt than the brewers. We also see that the distillers malt requires higher protein barley, which results in a lower extract since those two parameters are inversely proportional to each other. WWW.ARTISANSPIRITMAG.COM
Unlimited Possibilities Discriminating craft distillers choose the finest quality barrels from Barrels Unlimited. Hand-crafted from American Oak to the most stringent standards and shipped direct. Available in 5, 10, 15, 20, 30, and 59 gallon sizes.
www.barrelsunlimited.com | 1-800-875-1558
NOW PROVIDING DISTILLING EQUIPMENT FOR ALL SIZE PRODUCTION FACILITIES. PLEASE CALL TODAY FOR MORE DETAILS AND PRICING ON EQUIPMENT.
DISTILLING EQUIPMENT BOILERS • BREW HOUSES CELLAR EQUIPMENT TANKS • REFRIGERATORS FILTERS • PUMPS FILLER MONOBLOCKS SCREW CAPPERS COUNTER PRESSURE MONOBLOCKS LABELING MONOBLOCKS MOBILE BOTTLING SOLUTIONS
Corporate Office West Coast North Northwest Canada British Columbia Pleasantville, NY Windsor, CA Geneva, NY McMinnville, OR Montreal, QC Kelowna, BC
To understand why the malts are different, we need to discuss application. Here in the U.S., distillers malt has been designed to convert grain bills consisting primarily of corn. Since barley malt is the only source of enzymes in those bills, and it is used at low percentages (8-12 percent), maltsters needed to produce a highly enzymatic malt. To help achieve this, they learned to use higher protein barley, which will have a greater potential to contain more enzymes since enzymes are proteins. The maltster will also “modify,” or grow the barley as much as they can during the germination step of the process. The more modified the barley is, the more enzymatic activity it will have. Finally, they will try to preserve as much enzymatic potential as possible during the final kilning step by using lower heats with increased airflow, thereby limiting denaturing. American whiskey distillers often compromise with slightly higher moisture, lower extract malt to assure that the enzyme levels are adequate to effectively and efficiently convert all the extract coming from the much higher percentage of raw grains. It is all about the enzymes for these distillers, because the better the enzymatic conversion, the more sugar and thus alcohol is produced during fermentation, ultimately resulting in more proof gallons per bushel coming off your still. A brewer, on the other hand, expects more from his malt. It not only provides the enzyme package, it is also the source of extract and provides much of the flavor and all of the color in a beer. For many brewers it also provides the ever-important filtration media (the husk) for their lautering operations. In the malthouse, brewers malt germination temperature is more tightly controlled to produce just enough enzyme while not consuming too much of the starchy endosperm. Higher temperatures are then used in kilning and/or roasting to develop flavor compounds through the Maillard reaction. The craft distiller wanting to produce an all malt whiskey, like a Scotch or Irish-style, shares many of the needs of the brewer. Their malt is also the sole source of extract, and provides the entire enzyme package for conversion of that extract. While not providing color, flavor certainly is important for the all malt distiller, so a good 2-row brewers malt is a great start for an all malt whiskey grain bill.
At the end of the day, you want to make sure you are using the right malt for the spirit you are producing. For the American whiskey or grain based vodka distiller that cannot or will not use synthetic enzyme in their process, an American distillers malt used at a small percentage of total grain bill is the best all natural solution. However, if an all malt distiller does not want to purchase expensive EU distillers malt, they can choose a good domestic 2-row Pale or Pilsen brewers malt to be the backbone of their spirit.
Michael Scanzello is Director of Brewing and Distilling of Briess Malt and Ingredients Co. For more info, visit www.briess.com or call (800) 657-0806.
THE NEED TO
GROW! W R I T T E N B Y C A RT E R R A F F
hen do you expand? This is a tough question because it can mean so many things. Does it mean finding a bigger space, hiring more help or expanding your product line? There are different types of growth, and there are good reasons why you should or should not pursue each kind. First, you need to ask yourself why you need to grow. Seriously, why? This is the most important question and it is also the hardest to answer. I fell into the expansion trap last year and it nearly killed me and my business for various reasons. I thought I wanted to expand my space, my product line and my bottling line all at the same time. “Hard” is not the word, it is beyond that, especially since I am still a one person show. If you are considering expansion, here are a few lessons I learned that might help you, too.
EXPANDING YOUR SPACE Let’s start with the easy part: the space. By easy, I mean that the permitting and build-out are difficult, but it is easy to decide whether you actually need more room. I wanted a new space that would cater to the new California law that would allow me to sell directly to the public and make them a cocktail in lieu of a six-pour tasting. Did I need to move? No. Did I want to move? Yes. Was it the right decision? No. I had more than enough things on my plate to keep me occupied at my current WWW.ARTISANSPIRITMAG.COM
location. Being a one-person company, I would have even less time to live life if I had went through with the plan, but I almost did. In fact, I actually rented a space and started the process of building out and getting all my permits from the city. Thankfully, I realized early on that I did not need the extra space badly enough to take on the extra burden, and I was lucky to live in a city where the landlord was able to rent the space quickly. I was let out of the lease, but I spent an enormous amount of money in the process that is now not recoverable. If you absolutely need more space that is a different story, but you have to consider what else comes with taking over a new space. Sometimes it is easier just to rent another small space for product or barrel storage. Remember, if you need a completely new place you are going to be doing the same thing you did originally to build your distillery, with the added work of fitting it out with the enhancements you want. You will also have to get all your permits switched over from various governments, and apply for and receive approval on all your new city permits. This, as you know, is an enormous amount of work.
EXPANDING YOUR EQUIPMENT I also wanted to expand my equipment, and since I always either build or modify my equipment, I was going to build my own fully
automated bottling line. However, in the midst of all the usual distillery operations and my other planned expansions, it was overwhelming and the project consumed me. The problem I often run into is that I always want to improve things, but in this case I did not really need to do that because my current bottling line, albeit somewhat manual, worked. You have to consider if you absolutely need new equipment, because if you do not, you will be spending all your profit on something that is not necessary to have until you can produce the volume that provides the funds to justify it. The status quo is something you should live with for a while. Make some money and enjoy the fact that you are making a product people want to drink. Along with that bottling line, I was adding an automated labeler. I thought it would automate the process of labeling with its conveyor and sensors and free up people I hired to help bottle, but it did not. If I only had one product and fine-tuned the labeler to it we probably would have been alright, but we are using the same labeler to label all four of my products, switching over a few times a day when bottling. That leads to problems, which requires someone to spot check and a packer who also does the quality control. With our old labeler, you have to place the bottle on it and step on the foot switch and so on. It worked pretty well, well enough that I should not have bought the large expensive labeler. You really have to evaluate what you need and when. If you ask yourself, “Do I need this now?” and the answer is “No,” that is probably the correct answer. If you think you might need new equipment, though, remember to forecast for it, because most equipment manufacturers will have a lead time of two to six months. With stills, it can be as long as two years.
EXPANDING YOUR PRODUCTS The biggest mistake I made was product expansion. I thought I wanted to jump on the whiskey bandwagon. I also thought I needed to create more products to keep the public interested. I told myself they would round out my product line and then, except for limited edition products only available at the distillery, I would never need to release anything new again . However, if you look at successful liquor companies you will see that most make and sell only one product, despite the conglomerates that own many brands. Yet here I was, overwhelmed with production and the new space and so on, and I was planning to release four new products in the new year. Make sure you are not expanding for expansion’s sake or the desire to fill the market with a trending product. Currently, whiskey sales are on fire, but whiskey or other aged products are something that you will need to seriously consider as it takes time to age properly. With whiskey, you also have to think about adding employees, more space and investing lots of money. The yields are low, and if you want to make enough whiskey to keep your suppliers happy in the
future you will have to make a lot of it now. Making whiskey is a full time job, and you will have to keep your still running every day. Having too many products can also confuse consumers and make it hard for salespeople. In my opinion, you should not have too many SKUs. Now, if you see a gap in the market or see that something is going to emerge, and you can afford the time to make that product and promote it properly then go for it; I am not saying innovation is bad, but you should choose your products carefully.
EXPANDING YOUR COMPANY So when do you hire an employee? That is another tough question because then you have someone relying on you to provide a paycheck. I started out with paid interns, but I do not recommend it. Usually this means that they are part time and not paid much above minimum wage. There is nothing wrong with doing that, but eventually they will find full time employment and leave unless you outline a plan to increase their salary and take them on full time. Unfortunately, I did not have enough work early on to keep my interns on full time, and when someone is not full time, they do not see the whole operation of what you are doing, which limits their exposure. Plus, they will get bored doing the same task over and over since it is often the grunt work you have them doing. Now I have someone working regularly, and he had actually already built a distillery, but was pushed out. He is a substitute teacher and can pick when he works, but I still gave him a set schedule to rely on. If you donâ&#x20AC;&#x2122;t, employees will eventually tire of the spotty work schedule and leave. I paid him minimum wage as I was training him and then moved him to a higher wage once he knew what he was doing. Although hiring him was an important step, especially to relieve some of my workload, it still created more work for me. I had to figure out what my sales were going to do so I could plan and thereby keep him working at a constant rate. One of the biggest benefits of hiring your first employee is you now have a team, and you can see them learn and grow. Then, when your products take off, you can proudly hire them full time. Whether you are hiring employees or expanding in some other way, it is important to find balance. It can be hard to see the forest through the trees, and sometimes you need a wakeup call, like I did. I was so wrapped up in my expansion projects I was missing the fun in life, but since I have slowed that pace I am a much happier person. I am able to balance work and pleasure and my products are selling fast. Before you expand, ask your friends and family what they honestly think, and I hope some of the lessons I learned can help you, too. Carter Raff is owner and master distiller of Raff Distillerie in San Francisco, CA. Visit www.raffdistillerie.com for more information. WWW.ARTISANSPIRITMAG.COM â&#x20AC;
AN UPDATE FROM AMERICAN DISTILLING INSTITUTE’S BILL OWENS WRITTEN BY CHRIS LOZIER PHOTO BY ANDREW FAULKNER
really don’t think people know the story of how ADI got started,” begins American Distilling Institute founder Bill Owens. “I was sitting in a coffee shop, talking with a kid with long hair who was taking classes in real estate, and I said, ‘Man you’ve got to look in the mirror, you don’t look like a real estate broker to me with your pony tail.’ Then I said, ‘Watch this, I’m going to go over and form a trade association.’ I got in my car and went to the county courthouse, did the DBA for American Distilling Institute, LLC, and away I went.” That may seem like the mother of all non-sequiturs, but of course, there is more to the story than that. Owens has led a broad-reaching, intriguing life. His first work recognition came through his photography in the '60s and '70s, where he focused on photographing people in their natural environs without props or costumes. Whether it was a woman smiling in a kitchen in Jamaica, or a child riding his bike around a suburban cul-desac, Owens wanted to tell their story. Through his photography, Owens earned a Guggenheim Fellowship and two grants through the National Endowment for the Arts. His books and freelance work reached an enormous audience, and his photographs have held their place in national and international museums for over 40 years. In 1983, he founded one of California’s first brewpubs, Buffalo Bill’s Brewery. He later wrote a how-to book about starting a small brewery, founded American Brewer and Beer magazines, and spent most of his adult life in publishing. Owens lost his house in a lawsuit following a divorce, so he took the money he had left and travelled around America visiting breweries and distilleries. When he got back to California, he realized that unlike brewers, distillers did not have a trade organization; then he walked into that coffee shop.
CONNECTING DISTILLERS AROUND THE GLOBE ADI’s first meeting was at St. George Spirits in Alameda, California, one of the first small distilleries in the nation. It was 2003, and Owens says he remembers that 85 people attended because he rented 75 chairs and 10 had to stand. He says attendees were engaged, asked questions, and they were excited to meet other distillers who had similar goals and challenges. With that momentum, Owens wanted to visit more distilleries, but money was tight. However, as fate would have it he received a call from his photo gallery in San Francisco. “Elton John’s agent wanted to buy $30,000 worth of my photographic prints, and they did, so $15,000 came to me so I could make the second trip across America and start visiting these distilleries in earnest,” he tells. “Most people don’t know that Elton John helped seed the American Distilling Institute.” Owens made two more distillery road trips after that, and on this most recent fourth lap, he traveled nearly 18,000 miles around America, visiting over 130 distilleries. He has visited distilleries all over Europe, and it is probably fair to say that no one individual has been to more distilleries or met more distillers than Owens. Part of this drive comes from his love for travel, but Owens also prefers working faceto-face rather than over a wire. In fact, most of the speakers for past ADI conferences were distillers he met on his road trips, people he thought were perfectly suited to share their knowledge and insights with other distillers. He also prefers paper magazines and books to e-books. ADI’s publishing branch, White Mule Press, has published nearly 30 titles written by niche distilling and support industry experts. Owens says that the books are so expensive to produce that they do not bring ADI any real revenue, but he feels they are important resources for distillers. “People that want to learn about distilling need books, and I just don’t see them sitting down and looking at an e-book and trying to figure it out,” he explains. “I think
you have to have a real book that you’re holding in your hand, and then you buy another book and read the conflicting information and try to figure out, ‘How do I really do this?’” Those books help further ADI’s educational mission, and ADI also offers hands-on classes, a spirits judging event, a national conference, and Distiller, their quarterly magazine. In addition, ADI produces an annual directory, and that is Owens’s favorite project. Each year, he goes through every vendor and DSP in the directory, checking into the businesses. Owens says that directory is growing fast and that membership has grown by about 30 percent every year. He expects to see more than 1,000 registered DSPs in America, soon, and says we may reach 2,000 in the near future. Distilleries are also emerging internationally, and Owens says ADI is interested in helping them form trade associations, as well. He says that Australia has nearly 50 DSPs now, and Europe is approaching 300. “There’s a craft distillery in Bolivia making gin on a Holstein,” he explains. “Those distillers don’t have any connection to anybody, and if there was a trade association where they could come to a conference they would love to meet other people making gin.” That rise in international distilling interest emphasizes something domestic distillers might take for granted, too: the entrepreneurial American spirit. Owens explains that he feels in many countries, people are not comfortable taking the risk of starting a distillery, and often do not have the access to capital that American entrepreneurs do. He also said in places like New Zealand, where home distilling is legal, distillers are facing consumers that like cheap alcohol, and generally have little desire to try a brand just because it was made locally through different techniques or has a unique flavor. Consumers in the U.K. seem to embrace smaller labels, however, and small gin distilleries are opening relatively quickly. That is why ADI held their first international show in London, attracting about 300 people and 30 vendors. Due to this positive response, ADI included international categories in their judging competition this year. Owens says that judging is a real value to both domestic and international distillers because of the notes they receive from the judges, but it comes with a great time and monetary investment. ADI has eight full-time employees now, and they are all busy organizing the competition, accepting and registering entries, and providing, compiling and mailing notes and awards afterwards. He says it also takes a lot of time, money and energy to develop and run the national conference each year. “When you run these conferences you’ve got to have deep pockets,” he explains. “Deposits on conference centers and hotels and restaurants and staff, that adds up.” Owens says the cost is worth it, though, and he’s happy to be involved with distillers. “Our membership is fabulous and we have so many fabulous people in the industry,” he tells. “We have a wonderful organization.”
NOW PROVIDING DISTILLING EQUIPMENT FOR ALL SIZE PRODUCTION FACILITIES. PLEASE CALL TODAY FOR MORE DETAILS AND PRICING ON EQUIPMENT.
DISTILLING EQUIPMENT BOILERS • BREW HOUSES CELLAR EQUIPMENT TANKS • REFRIGERATORS FILTERS • PUMPS FILLER MONOBLOCKS SCREW CAPPERS COUNTER PRESSURE MONOBLOCKS LABELING MONOBLOCKS MOBILE BOTTLING SOLUTIONS
Corporate Office West Coast North Northwest Canada British Columbia Pleasantville, NY Windsor, CA Geneva, NY McMinnville, OR Montreal, QC Kelowna, BC
Innovative and Custom Solutions!
Bill Owens is American Distilling Institute's founder and president. For more information visit www.distilling.com or call (510) 886-7418. WWW.ARTISANSPIRITMAG.COM
KEEP YOUR DISTRIBUTORS
A FOUR-PART PLAN WRITTEN BY JUSTIN KOURY
ow that you have read part one of this series and have chosen your dream distributor, it is time to develop a plan for both short- and long-term growth. Writing a training program that includes everything you will need for working with wholesalers is one key to your success. It is important to realize that a good training program is not a substitute for the work you will have to put into growing your brand. However, it is a great way to send a consistent message to your sales force. You need a way to keep your distributors excited about your products and your growth, and this program will help you accomplish that. This program will be used as a roadmap for how much growth you will expect and how to get there. Since you will eventually have several distributors in several markets, use your program as a template and change what you need as required by market size, sales, timeline and growth potential. Included in the program will be your social media strategy, what happens when you are inmarket, and your narrative. Training your distributor should seem just like training your staff because it is an extension of who you are. Remember that it is your message, your product and your livelihood on the line. It is important to note that these are simply guidelines for how you would like to conduct your business and how you would like your sales force to present your products to buyers and consumers. These rules are not written in stone and should be changed when needed. First, we should dispel a few myths surrounding distribution and understand what distributors will not do. They will not:
1. 2. 3. 4.
Do all the work Get every new account for you Completely or adequately service every single account Focus all of their time on your products
Distribution is more than just filling orders for retailers and onpremise accounts. A great distributor should be able to not only sell your products to new accounts, but also help you build relationships with those accounts. As a rule, distributors make their money by selling your products, and they cannot do that if you are out of product. The law of supply and demand applies here, so if you are constantly running out of products for your distributors to sell then you will be replaced.
Likewise, you cannot call everything you run out of a limited release. Eventually the consumers will tire of it, the retailer will find something else to put in your spot and the distributor will look silly for over promising. All of this leads back to you and tarnishes your brand. Thankfully, you can prevent this by adding your sales goals to this program.
PART 1 — A SIMPLE NATIONAL STRATEGY One common problem that wholesalers have is when your product sells for different prices in different markets. That is why you will need to develop a national pricing strategy, which encompasses sales taxes, shipping and other local costs. If you can find an average and establish a set price for each market, you might also find some wiggle room. Making your wholesale price too low based on your home market and raising the price for new markets will cause problems for your distributor and consumers will think it is unfair. One way to solve this potential problem is to consult your distributors in each market before setting prices. An overall strategy is a carefully choreographed symphony of information used to grow your business. The easiest way to develop an overall strategy is to control how the information flows. CIA-level security is not necessary; you only need a few pages of an outline on how you will present information, including your social media strategy. This is covered in section two.
PART 2 — CONTROL THE INFORMATION There was a time when local was enough for a buyer, because the consumer was clamoring for it. Now, a local story and accolades are the norm, even somewhat required. As a craft producer, you will essentially be offering the same products as every other craft producer, so set yourself apart with your story. The story that you want recounted by your sales force should be full of personal history and all of the fun things that make you and your brand unique. After you have that well-thought-out narrative, you will need a way to articulate it. In today’s technology-filled world, the best way to present your story quickly, globally and strategically is through social media. You may be wondering what Facebook or Tumblr have
to do with distribution, but it is simple: a social media plan to grow distribution during your visits or events should be included. In your social media plan, include how you are going to spread the word through the almighty interweb. Include how you would like social media interaction to be conducted with retailers, distributors and on-premise accounts. You will need to consult a lawyer for this section in particular, because amazingly enough, social media laws vary from state to state, so it is important to know what you can say.
YOUR SOCIAL MEDIA/EDITORIAL CALENDAR
This information includes all foreseeable rollout dates for new products and will include a media list (local writers and blogs for each market). Consult your distributor for their list of buyers and writers and bloggers in the area.
Post pictures on Twitter, Instagram and Facebook in your company’s hometown as much as you can and in turn ask them to share their pictures of your events. This will grow your core audience, while possibly introducing you to new followers.
Ask your distributor what their social media policy is, if they have one.
When you plan events, make sure all venues have a sharing policy or enact your own.
Pick your platforms wisely, target your posts based on the demographics of each platform, and use them often.
MINDING THE DETAILS Include a section with the nitty-gritty technical details of your process. In the training materials, you should have a page with some of the details that make your product unique, like a highlight reel— this section is far from that. This section is the highly technical details for those who seek nerdvana; people that love the chemistry and science behind your products. Believe it or not, there are some buyers who look for a great story, but also love to geek out on the details. If you train your sales force on the technical jargon of your brand, they will be better equipped to answer more questions. It is better to have too much information than too little. Information you can include in this section: How you source your raw ingredients What type of still/other equipment you are using Unique technical details Where your crops grow (organic-focused consumers love this) Your fermentation process Do you bottle in a trendy way? What, if anything, is handmade?
»» »» »» »» »» »» »»
PART 3 — WHEN IN ROME OR CHICAGO Having a distributor in one state when you produce in another is a great way to expand your business, but this often creates a misconception that all of your sales work is done. If anything, you
will be working harder to sell yourself and your story. The biggest aspect of your distribution relationship is what happens when you are visiting your markets, that is why the market visit is key to your long-term growth. Here is a list of all of the things you should consider when you visit your distribution market:
1. How often you need to be in-market 2. Which markets need the most attention 3. How many events you can plan while you are in town 4. Taking the top salespeople to lunch or dinner 5. Tastings with the sales force 6. New product launches 7. Which accounts need some hand-holding 8. Getting new accounts with ride-alongs 9. Thanking loyal accounts 10. Showing your versatility during a cocktail hour or event 11. Presentations for new products in the line 12. Possibly hosting a competition while you are in town VISITING YOUR DISTRIBUTOR Attending distributor sales meetings, going on ride-alongs, teaching them all about new products or having them re-taste old standards are all requirements when you are in town. Now keep in mind, if you are in market more than once a year, you can skip some of these, but every time you visit you should schedule time with individual sales reps. The all-important ride-along is a key part of getting to know your buyers, but sometimes they are not feasible. When that happens, make certain you have plans while touring the market on your own, and schedule tastings and events even when the whole sales force is not available. Capitalize on every moment you are in town, even going so far as to schedule a tasting or dinner at the hotel where you are staying. You never know who your next big account could be.
CREATE AN IN-MARKET BUDGET In your annual marketing plan, include an in-market budget with the following considerations:
»» Server incentives »» Menu printing (for events and promos) »» Swag for buyers and consumers »» Non-social-media advertising »» Free goods to encourage case sales »» Bottle replacements »» Travel expenses including hotel accommodations, rental cars, buying drinks and meals
»» Blogger/media events »» Taking the best sales team member to dinner CRAFT COCKTAILS
DDM 2911 PLUS Density Meter 0.01% Alcohol Determination
Adding Precision to the Art of Craft Distilling. TTB Approved Easy to Use Easy to Validate Windows 7TM Embedded OS Precision Built-in Electronic Temperature Control 3 year Warranty 20 year service guarantee
Part of your training program must include a craft cocktail section that has ideas for the mixology crowd, but keep in mind that mixologists and craft bartenders might not really care about the recipes that you have. They want to come up with their own recipes, so if you have ideas that will help them do that you are ahead of the game. Strategic partnerships with bitters or readyto-drink-mixers companies can also help you understand how your product will be used in a market. Likewise, energy drink makers, especially those that are regional, can be great partners when it comes to spending budgets and hosting events that generate awareness of your product.
THE GRAND TASTING
Ask about a free on-site Demo of the DDM 2911 PLUS
Leasing is available
Rudolph Research Analytical
www.rudolphresearch.com – 973-584-1558 – email@example.com
Occasionally, your distributor will throw a grand tasting where all of their brands appear. These events put your brand in front of dozens, perhaps even hundreds of buyers at one time. You do have to be careful in these situations, because most of these buyers go to these events looking for very specific brands or niches. One big drawback is that these events tend to be large and feature an extensive selection so your brand can get lost in the crowd. An alternative is to schedule a side event with a focused group of brands, perhaps just one category, which may help you reach more buyers. Finally, while you are in town, you should schedule at least one media or blogger event to get in-depth coverage of your visit.
er Rum J sum
Even a small craft brand with limited resources can get creative with incentives for their sales force. Including incentives in your training program will set guidelines for what the representatives of your brand can expect, and your offers can range from free products to trips to lunches to swag. Anything that gets your sales force excited about your brand and sends them to the streets with determination and zeal will stimulate growth, even if you do not see an immediate jump in sales. One very useful incentive is a trip to the distillery, which should go to the top performers in each market. Flying out a select few, giving them an exclusive tour and even letting them work for a few days bottling or distilling can really get them excited about your brand. The potential growth as a result of this familiarity with your innerworkings is well worth the investment, because for the price of a few hotel rooms and flights, you give them a one-of-a-kind experience that sets them on fire for your brand. OFFICIAL GLASS
R UM F EST
PART 4 — SALES GOALS Including your past and projected sales as part of your training guide will give the sales force an overview of your growth potential. The bulk of your sales goals will not be included in this program—
that will be in the contract you work out with your distributor—all that is needed here is a quick overview, including:
»» What the incentive goals are »» What rate of growth you expect and where you started »» How much production could rise with growth »» Three- and five-year production goals »» How many new accounts will be needed to sustain growth
Each of these issues should be discussed with your distributor as a part of your initial contract before signing, and it is good to review your goals and needs periodically because circumstances change. Perhaps you have some new investors and you can buy more equipment and thereby increase production, which will obviously need to be sold. Maybe you could increase your sales force or spend more money on marketing. One market could far outperform the others and you need to adjust how much time you spend in that region or how much product you allocate. If you change your program in response to these developments, both you and your distributor will be more successful.
BRINGING IT ALL TOGETHER This program is not an exact science and should be altered depending on your needs. Figuring out the sales requirements to keep you in the market is very important, but it is also a good idea to take a step back from the numbers and spreadsheets to examine how your brands fit in each market. This will make the difference in building your brand. Building your training guide before getting too involved in distributor relationships will save you time and money. By following these guidelines and writing a plan now, you put forward a professional front on how you want to conduct your business.
At Gatling, Our Motto is to ensure that your Spirit Is entirely Distinguished From All the Rest.
to that Effect, We are Proud to Present
The Alexandria Still. Signature Efficiency and Higher Production, Neatly Contained in a Smaller Package.
6 THINGS TO REMEMBER
Training guides can help your sales force understand the direction you want to go.
Hiring a distributor will not lessen the workload; it adds to it, unless you plan ahead.
Understanding the needs of each market will help you grow.
Make sure that you spend quality time on each market.
Spell out exactly what you expect the wholesaler to sell every month.
Keeping everyone on the same page adds value to your brand and promotes growth.
Justin Koury is a transplant to California from Chicago, where he spent 10 years in wine and spirits retail. He is a graduate of Purdue University’s Hospitality, Tourism management program and has taught culinary school, spirits classes, wine training and has written extensively on the craft business. WWW.ARTISANSPIRITMAG.COM
INTERSTATE EXPANSION WRITTEN BY R. SCOTT WINTERS, PH.D.
any distillers are not prepared for success when it arrives in the form of interstate sales. Selling across state lines is very different than selling within your home state because permits, regulations, and reporting requirements all vary. This article will cover the requirements for interstate sales and how to prepare for expansion.
BACKGROUND Following Prohibition, the U.S. government enacted two policies that structured how alcoholic beverages could be sold. The first established a threetiered supply chain: supplier, wholesaler, and retailer. Companies can conduct business in only one tier (although limited exceptions exist), so if you are a distillery then you cannot act as a wholesaler or retailer. The second policy ceded control of distribution—the middle tier—to state governance. Each state regulates what alcohol products can be sold within its
borders, how those alcohol beverages are distributed, and the conditions for advertising and selling to consumers. The outcome of these policies is a national market for alcoholic beverages that is uniquely American. While federal approval is a mandatory requirement, alone it is insufficient because a product must also be approved by the state in which it is to be offered for sale, and the regulations are strictly enforced across state lines. However, the distilling industry’s lobbying efforts have focused on relaxing the three-tier requirement within distilleries’ parent states, and many efforts have been successful, as evidenced by the rise of tasting rooms and consumer sales therein. Each state has its own product evaluation criteria, transportation regulations, advertising limitations, and taxation schedules. Consequently, the application process and its cost, product restrictions, and state excise tax levels vary widely. Each state is a distinct entity and developing a national sales footprint is equivalent to
entering 50, or more, separate countries. Practically, this means that there is no true “national” wholesaler. Instead, multistate wholesalers are really a federation of independent, state-level companies.
REQUIREMENTS States follow a two-stage approval process that mirrors the federal requirements. A company that wants to offer spirits for sale must be licensed by the state and obtain an out-of-state shipper permit. Some states, such as Georgia, require bonding, others request owner fingerprinting, and a small number necessitate in-state representation. Therefore, distilleries that want to sell in new states must either obtain a permit for each state or utilize a licensed, third-party company as their agent. Following company approval, each brand must be registered and approved by the state. The process requires an approved COLA, often a processing fee (which ranges from $0 to $200 per brand), and,
in most cases, the designation of an instate distributor. This latter point protects the state’s interests in two significant ways: first, most states require monthly shipping reports in order to ensure the payment of state excise tax, although who pays the tax—supplier or distributor—varies by state. Second, it ensures that in-state business interests are protected. The most extreme examples are franchise laws where the out-of-state supplier cannot terminate an in-state distributor. In general, states fall into one of two distribution models. Open states allow private companies to act as distributors or retailers, although the state government regulates supplier permitting and brand registration. In the 18 control states, however, the sale of alcohol beverages is managed by the state. In control states, the aforementioned approval stages exist, but are combined into a single application process for state representation.
IMPLICATIONS Since the transport and sale of alcohol beverages is governed at the state level, there are a number of practical implications for distilleries. The most significant is the time and cost required to be permitted in every state where you want to sell. But there are also some issues regarding management and cash flow, and the four most common concerns are detailed below. First, for open states, the in-state distributor must hold title to the goods at the time they cross the state line. This means that all sales should transfer title at the distillery, and terms should be FOB (free
BY DEVELOPING A STRATEGY FOR HOW TO SELL IN OTHER STATES YOU WILL BE READY TO EMBRACE NEW OPPORTUNITIES AS THEY ARISE, AND DO SO IN A MANNER THAT MAXIMIZES YOUR PROFIT. on board) distillery, rather than offering the product with shipping included. The benefit of this is that once the BOL (bill of lading) is signed by the trucker, the product is the wholesaler’s property, so any shortages upon arrival are between the wholesaler and their shipper. The downside is that shipping costs become a point of negotiation in discussions with wholesalers. Second, a wholesaler is going to take their mark-up on the laid-in-cost (LIC), which includes state excise tax (SET) and shipping, in addition to the cost of goods. Since both shipping and state excise tax can vary significantly, you need to be conscientious about your pricing strategy. For example, if you offer a single FOB price to all wholesalers, then the differences in shipping and SET will result in significant differences in shelf price between states. State excise tax varies nearly 10-fold across states, therefore it is important to develop a pricing strategy that considers interstate expansion in order to avoid either pricing yourself too far above your target in some markets, or giving up too much margin in others. Third, as the out-of-state supplier you will be responsible for filing regular monthly reports and paying the excise tax in some states. These are added costs that, unless preemptively considered, can erode
your margins. You do not want to find out that you are responsible for paying SET but forgot to build it into the price charged to your distributor. Fourth, the lead-time for entering a new state can be very long. The initial setup for the company can be lengthy—and costly— depending on the state requirements. One common option is to utilize a third-party company that is already nationally licensed to be your agent and handle monthly reporting. But brand registrations also vary widely in their time requirements, from instantaneous to a few months, if priceposting is required.
THE KEY TO SUCCESSFUL INTERSTATE SALES: PREPARATION By developing a strategy for how to sell in other states you will be ready to embrace new opportunities as they arise, and do so in a manner that maximizes your profit. The best way to embrace success is to prepare for it.
R. Scott Winters, Ph.D. is Founder of The American Spirits Exchange. For more info, visit www.AmericanSpiritsLtd.com or email Scott@AmericanSpiritsLtd.com.
THE MOST FAMOUS SPIRIT YOU'VE NEVER HEARD OF D WR ITTEN BY HARRY H AL L ER I LLUSTRATION “C A C H AÇA. A COMPLETE GUI DE” B Y MA X MAKOWS KI AND FR A N CE SCA COSANTI C O URTE SY OF FA UB OURG DIS TILLE RY
epending on the data you choose to use, caçacha is the first, second, or third most consumed liquor in the world, and yet practically no one seems to know what it is. You probably did not even notice it was misspelled in the previous sentence, but if you asked your local bartender for a glass they would more than likely be able to serve you one. It would possibly come in the form of the Caipirinha, Brazil's de facto national drink, a mixed-beverage most people have heard of which makes cachaça's relative anonymity all the more confounding, save for the fact that, being a cocktail, the Caipirinha's contents are something easily lost in the mix. In fact, the Caipirinha, like the Margarita, purposely intends to hide the flavor of its liquor, partly because of taste and partly because of shame. For most of its history, cachaça was looked upon with disdain. It was the liquor of the poor and enslaved. It was South America's moonshine. Even words related to cachaça continue to carry negative connotations: in Portuguese, a person who makes cachaça is called an Alambiquero instead of a Cachaçeiro since the latter is a slur used to describe a drunkard. And even though cachaça was created a century before the advent of rum, it was only a few years shy of the 21st century when things truly began to turn towards the positive for the sugar cane-based liquor. The late '90s was a time when distillers
started putting serious effort into elevating cachaça to top-shelf status. Soon thereafter, high-end restaurants began to showcase the liquor. People started to drink it neat. Numerous gold and silver awards were bestowed by prestigious international competitions. Diageo, Bacardi, Grupo Campari, and Pernod Ricard paid tens of millions for cachaça distilleries (Diageo actually shelled out $450 million), and on February 22, 2013, the U.S. Government announced it would stop labeling cachaça as a "Brazilian Rum" and start recognizing it as a distinctive product exclusively made in Brazil. With the World Cup and the Olympics turning all eyes towards Brazil, pundits began to proclaim cachaça would surely be following in the footsteps of tequila and mescal. So far, international sales have yet to reveal any solid signs of a cachaça invasion. Some say it is because “cachaça” is both hard to spell and impossible to pronounce. Others point to the fact that with a local consumption representing 95 percent of the market share, there is not enough motivation nor sufficient collective effort to get the product on foreign tables. Some blame the domination of international markets by low-quality cachaça, which give the product a bad name. Probably the best explanation is the most boring one: it takes time for any liquor to garner the spotlight. WWW.ARTISANSPIRITMAG.COM
Mescal's transformation from ugly duckling to swan took over 40 years, and even with all its fancy new friends, tequila sales outside of Mexico and the U.S. account for a mere 15 percent of total purchases. So as seemingly stagnant as things appear to be, there is hope. The resurgence of tiki bars and their energetic inclusion of cachaça in signature drinks is helping considerably. The uptick in new and innovative rums will also help serve as a gateway towards their sugar canebased brethren. Faubourg Distillery in New Orleans is so optimistic, in fact, that when
sugar cane season begins this year they will begin their full-immersion hands-on cachaça-making course using authentic hand-hammered Brazilian alembic stills. Master distillers from Minas Gerais (the birthplace of cachaça) will help with the classes, and Faubourg is even going so far as to teach their students how to grow and harvest the cane. All in all it seems to be a matter of when, not if, cachaça will become a staple of drink lovers in the U.S. and abroad, as well as the liquor of choice in many next generation cocktails.
For now the only place to learn how to make cachaça is in Brazil, but Faubourg Distillery in New Orleans is planning to offer courses using traditional Brazilian stills and equipment this coming cane season. More information is available at contact@ cachaca.academy. In the meantime, here is a step-by-step guide on how to do it yourself. Just remember, without a TTB and state Distilled Spirits Plant license you can grow sugar cane, but you cannot turn it into cachaça.
HOW TO GROW YOUR OWN SUGARCANE THE BRAZILIAN WAY Brazil is the largest producer of sugar cane in the world, and Minas Gerais is the home of cachaça. Farmers there follow a particular technique for planting sugar cane which yields the highest crop per acre. It is basic enough for anyone to do in their backyard, assuming your backyard is in a climate where sugar cane can grow. Before you begin, please take note: sugar cane grows from sugar cane, not from seeds, not by grafting. The stalk is divided into sections by ring-line seams. These seams, known as nodes, are home of the buds from which a new stalk sprouts. 1. The first step is to cut the cane into yard-long sections,
removing all the leaves. You will need 3 - 4 tons per acre. 2. Dig v-shaped ditches four feet apart from each other,
8 - 12 inches deep. 3. Lay the cane down in a line, tips touching tips, buds
facing up. 4. Lay a second line of cane staggered so their tips meet
at the halfway point of the cane in the first row. 5. Get a machete and cut the cane so that no piece has
more than two nodes. The reason for this is that cane will grow from the outermost nodes, so a stalk with three or more means only the outside two sprout. 6. Cover the two rows of sugar cane with 2 - 4 inches of dirt.
At harvest, cut cane flush to ground. This will give you one more season of sugar cane good enough for cachaça. Come season two, new cane should be planted.
WWW.ART ISANSP IRITMAG.COM
HOW TO MAKE CACHAÇA THE TRADITIONAL WAY Even if you are not interested in cachaça it might benefit you to make some, especially if you are a novice. It is as if freshly squeezed cane juice yearns to ferment, making cachaça one of the easiest, if not the absolute easiest, distilled spirit to create. There is but one condition to guarantee success: the sugar cane needs to have been cut no more than 24 hours prior to fermenting.
WHAT YOU NEED Sugar cane — do not use cane that is over one year old
Yeast (optional) — the most popular is CA-11 from LNF
Crusher Vat Still
STEPS 1. Cut the sugar cane. 2. Squeeze/crush it. 3. Get the Brix down
to 15. 4. Take 20% of the juice, elevate to 2632 degrees Celcius. Add yeast. Aerate every 15 minutes for 2 hours. 5. Add the remaining juice. Temperature should be 22 degrees Celcius and juice should be added slowly or 100 liters at a time. 6. Leave in an open-
air vat for 24 hours. Temperature should hover around the 22 degree mark. 7. If there are any sugars left, check back in 12 hours. At the 48 hour mark, regardless of the sugar levels, send everything to the still.
Distill once keeping the ABV above 38%. Heads are the first 0.7% to 1% of the total volume. The next 16% is the hearts. The next 2% is the tails.
Add water until you get the distillate to 74 to 96 proof (above 96 it is no longer cachaça, it is aguardiente de cana).
Brazilian fermenting vats have a v-shaped bottom. Called the Pe de Cuba, this holds 200 liters of the fermentation, enabling future runs to skip step 4 for 15 days. In the U.S., moonshiners refer to this as “Sloppin' Back.”
OPTIONAL CAIPIRA (WILD YEAST) FERMENTATION Let's assume our fermentation vat holds 1,200 liters.
DAY 1 – MORNING Place 100 liters of cane juice in 800 liter vat at 5 brix.
DAY 5 – MORNING Place 200 liters of cane juice in 800 liter vat at 15 brix.
DAY 2 – MORNING Place 100 liters of cane juice in 800 liter vat at 7 brix.
DAY 5 – AFTERNOON Send 400 liters of cane juice to fermentation vat
DAY 3 – MORNING Place 100 liters of cane juice in 800 liter vat at 9 brix.
DAY 6 – MORNING Send 1,000 liters to alambic still to distill. Then add
DAY 3 – AFTERNOON Place 100 liters of cane juice in 800 liter vat at 11
DAY 7 – MORNING Send 1,000 liters to alambic still to distill. Then add
DAY 4 – MORNING Place 100 liters of cane juice in 800 liter vat at 13 brix.
DAY 8 – MORNING Send 1,000 liters to alambic still to distill. Then add
DAY 4 – AFTERNOON Place 100 liters of cane juice in 800 liter vat at 15
DAY 9 THROUGH DAY 15 (SOME GO AS LONG AS A MONTH) – MORNING Repeat
Oxygenate every 2 hours at 30 degrees Celsius.
Oxygenate as before. Oxygenate as before.
brix. Oxygenate as before.
Oxygenate as before.
brix. Oxygenate as before.
Oxygenate as before. at 15 brix.
1,000 liters of cane juice at 10 brix. 1,000 liters of cane juice at 12 brix. 1,000 liters of cane juice at 15 brix.
WWW.ART ISANSPI RI TMAG.CO M
THE WORLD'S BEST CAIPIRINHA I have a friend who is genuinely modest save for one thing— he insists he makes the best Caipirinhas in the world. This is his recipe.
WHAT YOU NEED Cachaça Limes Coarse Sugar
Crushed Ice Wooden Pestle Double Old Fashioned Glass
STEPS 1. Cut the limes in half. Remove the center. 2. Cut the halves into four pieces. In other words, each
lime is cut into eight sections. 3. Place a total of two limes in the double old fashioned
glass. 4. Add a good amount of sugar (my friend insists you
never measure—"You will know when to stop"), AKA Roughly two to three tablespoons. 5. Grind the sugar into the limes. Do NOT pound. Push
and turn. The idea is to get the sugar into the limes. 6. Add a handful of ice. At this point you should have a
little more than two fingers of room from the top of the ice to the rim of the glass. If not, remove/add ice. 7. Add the cachaça. 8. Stir or shake. 9. Add a little more sugar (a teaspoon) and stir again.
The final taste should barely hint of any cachaça. When in doubt always err on the side of too much sugar. Harry Haller is an independent consultant focused on working with sugarcane-based distilleries. He can be reached at firstname.lastname@example.org or (310) 933-6430.
YOUR LOGO ON PREMIUM TASTING ROOM MERCHANDISE
Lifting your Spirits 107
g n i n r Tu th e C OGS
he alcohol industry is incredibly unique. In what other industry can you take 90 cents WRITTEN worth of grain and yeast, put it in a $2 bottle with a 35 cent closure and a $1 label and sell it for $35? Obviously, it is more complicated than that, but high profit margins are possible for eager craft spirit entrepreneurs. To see what it takes, let’s explore a traditional Profit and Loss (P&L) business model for a bottle of bourbon, figure out how to calculate fair distributor pricing, examine what the traditional Cost of Goods Sold (COGS) is for a finished bottle, and see how a craft distillery can leverage the P&L to maximize profits in the future. In the business world, a normal P&L report is broken down into four major sections: Gross Revenue, Cost of Goods Sold, Operating Expenses, and Net Income. Gross Revenue tracks total cash from the sale of finished case goods. Cost of Goods Sold details the actual variable costs incurred from making the sold cases, including raw materials and Federal Excise Taxes on the spirits. Subtracting Total Cost of Goods Sold from Total Gross Revenue leaves Gross Profit. Operating Expenses track other fixed overhead expenses like sales, marketing and administrative expenses (SGA), fixed management salaries, rent, fixed utilities, depreciation, and other expenses of running the distillery. Subtracting Operating Expenses and income taxes from Gross Profit leaves the distillery’s Net Income. For the purposes of illustration, imagine a craft distillery that produces a two-year-old bourbon sold in six-bottle cases at 84 proof through a distributor, and direct to consumers through their tasting room. After an analysis of the market, this example distillery decides on a retail shelf price of $35/bottle. Retailers need at least a 25 percent margin to dedicate shelf space for a new brand and will expect to buy the bottle at no more than $26 from the distributor. The distributor will also want a 25 percent margin which means they will look to buy a bottle for no more than $17.50 from the distillery. Negotiating distributor pricing can be much more involved, including managing sample limits, chargebacks, freight allowances, promotion and incentive spending, but for this example, the simple pricing strategy above will work. If this distillery sold 1,500 cases to a distributor at $17.50/ bottle (or $105 per six-bottle case), and 250 cases direct from their gift shop to consumers at $35/bottle (or $210/case), they would have a Gross Revenue of $157,500 from the distributor and $52,500 from their gift shop sales, or $210,000 of total gross
revenue. The next step on the ER BY DONALD SNYD P&L would be to detail the variable Cost of Goods Sold for the cases. A six-bottle case of two-year-old bourbon at 84 Proof has approximately one proof gallon (PG) of alcohol per case. What all goes into a bottle of bourbon? Assume this example distillery is buying pre-milled corn and other grains shipped in bags. This distillery can buy milled corn for $15/bushel, milled rye for $20/bushel, and milled malted barley for $25/bushel. If a mash bill is 75 percent corn, 21 percent rye, and 4 percent malted barley, the weighted average for total $/bushel for grain would be $16.45/bushel ($15 x 75% + $20 x 21% + $25 x 4%). With good mashing and fermenting techniques and the correct yeast and enzymes, a distillery should be able to yield at least 3.5 proof gallons per bushel. This puts the grain cost at $4.70 per proof gallon ($16.45/bushel ÷ 3.5 PG/bushel). Including approximately 60 cents per proof gallon for yeast, enzymes, or nutrients, this distillery can make one proof gallon of bourbon distillate for approximately $5.30, excluding labor and utilities like water, steam, and natural gas. The next major cost for bourbon is the barrel. Bourbon must be aged in a new, white oak barrel. Assume this distillery can purchase new 53-gallon charred oak barrels for $250/barrel. By filling up a barrel with 53 gallons of 125 proof bourbon distillate, the Original Proof Gallons (OPG) for this barrel is 66.25 PG (53 gal x 125PF/100). The cost of the new empty barrel is an incremental $3.77 per proof gallon ($250/66.3PG). The total investment to fill and age a 53-gallon barrel for this distillery would be the cost of the empty barrel ($250) plus the cost of the grain and yeast to make 66.25 PG ($5.30/PG x 66.25 PG = $350), which is $600 per barrel excluding labor, handling, and utilities. If this barrel matures for two years, some of the spirit will evaporate as Angel’s Share. A general rule, depending on aging conditions, is that a barrel will lose 10 percent of its proof gallons the first year and 4 percent of the PG every year after. Using that evaporation rate over two years, this barrel would lose 14 percent of its original spirits. Dumping the barrel should yield approximately 57 (66.25 X [1 - 14%]) Recovered Proof Gallons (RPG). The cost per RPG after evaporation would be $10.53/PG ($600 total investment / 57 RPG). Now that the distillery has aged bourbon, it needs to bottle the WWW.ARTISANSPIRITMAG.COM
F R E S H APPR OACH &
NE W B RANDS
B U I LDI N G
BU S I NE SSE S
I N F O @ S P I R I T S C O N S U LT I N G .C O M
Donald Snyder is Founder and President of Whiskey Resources LLC and Whiskey Systems Online. For more information, visit www.whiskeysystems.com or www.whiskeyresources.com or call (815) 382-0021.
S P I R I T S CO N S U LT I N G .CO M
spirits. Here is an example packaging Bill of Material (BOM) for this six-bottle case of bourbon: six empty glass bottles at $2/bottle, six front-and-back label sets at $1/set, six cork caps at 20 cents/ closure, six capsule heat shrink sleeves at 15 cents/sleeve, one custom printed corrugated cardboard case and divider at $2/box. Total packaging in this example is $22.10/case. The Federal Excise Tax rate on most distilled spirits is $13.50/ Proof Gallon and is due when cases are withdrawn from the distillery’s bonded space. In this example, the liquid spirit costs for the case would be $10.53, packaging is $22.10 and Federal Excise Tax is $13.50, for a grand total COGS of $46.13 per case. This would equate to a Gross Profit Margin of 56 percent on sales to the distributor and a very healthy 78 percent margin on sales direct to consumers from the gift shop. In order to make $210,000 in revenue from the sale of 1,750 six-bottle cases, this distillery had to spend ($46.13/case x 1,750 cases) $80,727 in COGS leaving ($210,000 - $80,727) $129,273 in Gross Profit (a 62 percent Gross Profit Margin). Now the distillery needs to account for Operating Expenses. In this example, fixed expenses could include sales and marketing spending (example 10 percent of gross revenue) of $21,000 and salaries such as a head distiller at $45,000/year and an assistant distiller at $35,000/year. Subtracting Total Operating Expenses of $101,000 from the above Gross Profit leaves $28,273 in Annual Operating Income before other expenses like rent, interest expense, dividends to equity owners, and utilities. This example illuminates some worth-while considerations. How can an analysis of this distillery’s P&L help to make decisions to increase the profitability? Can the distillery leverage their existing equipment and fixed salaries to increase their sales to overcome their fixed operating expenses? Would an investment in larger equipment yield more cost-effective production? Can the distillery increase the retail price without pricing themselves out of the market? Is there a way to reduce their Cost of Goods Sold? Since the largest gross profit margins in this example came from direct to consumer sales, could the distillery increase their foot traffic and bottle sales? What other products can the distillery bring to market that would have a positive impact on net income? Craft distillery entrepreneurs can see the potential for healthy returns in the spirits industry, and there are very few industries that can boast more than 50 percent gross margins. However, it is very important to take a critical view of a distillery’s entire P&L model to make sure the bottom line is in the green. If a distillery can establish a fair and competitive pricing structure, keep a good handle of their COGS, ensure they are leveraging their fixed overhead expenses, and use all the available systems to optimize their net income, they can raise a glass to growth and profits for years to come.
CHASING AUTHENTICITY QUINCY STREET DISTILLERY’S HISTORIC SPIRITS WRITTEN & PHOTOGRAPHED BY JEANNE RUNKLE
hicago is the country's third largest city, and many top mixologists and bartenders call it home. But away from the hustle and bustle, on a narrow street in a small suburb of Chicago, big things are happening. While the country is bursting at the seams with new distilleries, and even new distilling technologies, Quincy Street Distillery is taking things back to the basics. "We're using spirits to teach people the history of the area," tells Derrick Mancini, owner and founder of Quincy Street. Mancini is a retired physicist who loves all
things historical, and through his distillery, he is combining that love of history with another passion of his: bourbon. While Kentucky currently produces 95 percent of all bourbon, that was not always the case. Bourbon was a big Illinois product, too, both pre- and post-Prohibition. It is where Hiram Walker made Ten High Straight Bourbon after buying the Great Western Distillery in Peoria at the end of Prohibition in 1933. Unfortunately, the distillery closed in 1981 when America fell out of love with brown spirits, and that was
the last straight bourbon made in Illinois for more than 30 years. Now that Quincy Street and other distillers are reviving Illinois bourbon, Mancini saw an opportunity to connect with that local heritage. Quincy Street’s recipes and techniques are throwbacks to those early days of local whiskey making, and their product names are historically inspired, too. Take their Bourbon Spring, for example. Historically, the Laughton brothers kept a tavern very close to the current distillery. WWW.ARTISANSPIRITMAG.COM
In 1834, more than a thousand militiamen arrived at the tavern and decided it was time for a drink. The popular way to drink whiskey at the time was in a punch, so they threw some whiskey, tea, sugar, and lemon juice in a barrel and put it in the nearby spring to keep it cool. Bourbon Spring was born that day, and its story survives on the label of its namesake bottle. In December 2014, Quincy Street again honored their local history with Laughton Brothers Straight Bourbon. Looking to produce something more than unaged and young spirits, Mancini looked to the future with this bourbon. While he needed to fill smaller barrels to generate early revenue, he also filled 53-gallon barrels with the high-corn bourbon and waited. Once it was ready and bottled, it was the first straight bourbon released in Illinois since the days of Hiram Walker.
Bottle Dipping & Sealing “Small Craft Waxery for the Small Craft Winery, Distillery & Brewery” Buy direct from the wax manufacturer! Label color matching available!
Reed Wax Bottle Dipping & Sealing Waxes are known for their “peal appeal”! Tear tapes come off leaving a clean line with no chipping.
• Low Temp Glossy • Matte • Iridescent • High Temp Glossy
SOMETHING NEW ON THE PRAIRIE
In his college days, Mancini was a mazer, or mead maker. After opening the distillery, one of his first ideas was to find out what Also Available: happens when you distill mead, and Prairie Sunshine was born. • Grafting Waxes Made from 100 percent Illinois wildflower honey, this unaged • Barrel Wax spirit retains the hints of its honey origins in the nose, and makes a great replacement for silver rum or tequila in a cocktail. In fact, email@example.com Since the top-selling cocktail in the tasting room bar is the refreshing 1939 (781) 944-4640 Honey-jito, made with Prairie Sunshine, tarragon and mint. Quincy Street also offers a barrel reserve Prairie Sunshine, which is aged in an ex-bourbon barrel, and blended back with AVA ILA B L E some of the unaged spirit. It shows gold in the glass, with sweet, APRIL caramel notes, and most people have never tried anything like it. 2016 A little further along the history timeline, you find Old No. 176 Railroad Gin, named after the first custom built engine for PROOF READ THIS CAREFULLY • THIS IS YOUR AD P Get inspired with a whole new world of premium craft the Chicago, Burlington, and Quincy Railroad. That train ran on Every effort has been made to ensure accuracy of your distilling yeasts. Our introductory the tracks that are just a stone's throw out the front door of the errors could occur. By signing below or confirming via e White Star sampler pack features THE 4 x 100g uniquethat craft you yeast strains distillery. have reviewed and approved the ad as it appea in convenient 100g P.E.T. jars. By celebrating their local history in technique, recipe and Final prints will vary from monitor viewed and printed pr For details and to order, visit variations from printer to printer & monitor to monitor. Sl brand, they connect people with the area’s heritage in a fun way. whitestaryeast.com Your Best Viticulture Source Connecting Suppliers With Buyers variations are inherent in the four color print process. Th Taking the tour at Quincy Street Distillery is a little like when product will meet or exceed commercially acceptable prin mom sneaks a veggie into your smoothie: if you’re sipping on Whiskey | Vodka | Rum | Neutral Grain Spirits Reed Wax spirits while you're learning about the local history, it's all the q OK AS IS GV111215 Issue more interesting! q OK WITH CHANGES 1/4 4c Offering over 15 spirits with unique ties Ad to their community, q CORRECT & SHOW NEW PROO Soldinto By: the threads of the past are neatly sewn theMike fabric of today's Fax to: 515-573-8790 distilling community by Quincy Street Distillery. It is more than Signature:_______________________ Da just a marketing campaign; it is a large part of what makes their distillery, story and spirits authentic. Changes: "Being authentic isn’t just something we talk about, it’s who we are and what we believe in,” says Mancini. “I think that shows in the quality and taste of our spirits, as well as the methods we use to make them.”
The world’s ﬁrst craft distilling yeast sampler.
Jeanne Runkle currently lives in the Northeast. You can also find her whisk(e)y musings at www.PancakesandWhiskey.com. WWW.ARTISANSPIRITMAG.COM
A COOPER’S STORY
STEEL WRITTEN BY JOHN COX
inter has come: the heady smell of toasted oak wafts through the shop, and the men are busy cutting steel for rings. No glue or fasteners are used in a barrel, and the cooper’s rings are the only thing holding the staves together. Today most coopers use galvanized steel that is rolled and riveted to create the rings for their barrels, but this was not always the case. For centuries, most casks were fitted with coiled, rope-like wooden hoops shaved from saplings. As the green wood shrank over time it created an ever tighter fit on the vessel making it watertight. We even see them on the earliest Scottish quaichs, drinking cups usually made of small staves in alternating light and dark wood that had been feathered together and held tight with wooden hoops.
LEFT PHOTO: Barrel fitted with coiled, rope-like wooden hoops shaved from saplings. BOTTOM PHOTO: Two draw knives, used by hoopers to turn saplings into hoops.
PHOTO COURTESY OF D&H CANAL HISTORICAL SOCIETY
PHOTO COURTESY OF QUERCUS COOPERAGE
The area where our cooperage is located, nestled between the Catskill Mountains and The Shawangunk Ridge, was at one time a major producer of wooden hoops. By 1887, this region was producing up to 30 million hoops annually. It was a hardscrabble life for farmers in the mountains, and hoop shaving was a reliable and self-sufficient way to work the land in the winter. The hoop-shaving huts would lie dormant during the farming season, but came alive once the snow fell. The hoops were used by the farmers in the mountains to barter for goods, and the great naturalist John Burroughs, who spent his early career in the area, wrote, “No man had any money till he sold his hoops. When a farmer went to town to get some grain, or a pair of boots, or a dress for his wife, he took a load of hoops.” Hardwood saplings were abundant. The tanning industry had cleared much of the hickory and oak during the early 19th century, and saplings sprung up in their place. No log movers or sawmills were needed to harvest saplings, and when the snows fell they were cut and brought down the mountain on sleds to the shaving huts. Using a draw knife, they would split the sapling into two rods. Sitting hunched over a shaving horse, the workman, or hooper, would take long pulls with the knife. Hoopers used a drawing knife that had handles at a 90-degree angle, allowing the tool to take a “greedy” pull on the green wood. The thin wood would be formed into a hoop and either tapered or notched, depending on the cask it was intended for. Modern materials and technology have made the wooden hoop obsolete, but it serves as a reminder to us of not only how our resourceful ancestors used what they had at hand, but also of the many smaller trades that contributed to the early production of spirits. John Cox is owner of Quercus Cooperage in High Falls, NY. Visit www.qcooperage.com for more information.
PHOTO BY SCOTT GORDON BLEICHER
IN MEMORIUM The Hudson Valley distilling community lost one of our own last month. Angus MacDonald, co-founder of Coppersea Distilling, passed away in his sleep on January 17, 2016. Angus was largely self-taught, and speaking to him was fascinating, stimulating, and to us at the cooperage, inspiring. He was a distiller, repo-man, restaurateur, vagabond, programmer and raconteur, and his untimely passing has left a void in his large family and friends. Angus was featured here in the first issue of this magazine, and he personified both Artisan and Spirit. We fondly raise a glass to Angus and remember him in the words of Scottish poet Norman MacCaig:
The beneficent lights dim but don't vanish. The razory edges dull, but still cut. He's gone: but you can see his tracks still, in the snow of the world.
ADVERTISER index ARCHITECTS
Joseph & Joseph Architects
92 7 & 34
Distillery Products by Laser-On
Artisan Still Design
European Woodworking Machinery Co.
Corson Distilling Systems
Independent Stave Company
Gatling Still Works
Thousand Oaks Barrel Co.
BOTTLE & GLASS DECORATING 112
BOTTLE MANUFACTURERS & SUPPLIERS Brad-Pak Enterprises
77 7 & 13
COMPLIANCE & BACK OFFICE MANAGEMENT American Spirits Exchange Ltd.
90 7 & 115
GUILD ORGANIZATIONS American Craft Spirits Assoc.
21 Missions Organics
92 & 97
Rudolph Research Analytical
Specific Mechanical Systems
Vendome Copper & Brass Works
Impact Print Solutions
EDUCATION American Distilling Institute Moonshine University
39 7 & 16
ENZYMES & YEAST Ferm Solutions Fermentis White Star Yeast by Winemakeri Inc.
113 57 111
Liquor Bottle Packaging
PUMPS & HOSES McFinn Technologies
SPIRITS COMPETITIONS Distilled Spirit & Cocktail Competition
REFRIGERATION & CHILLERS
Total Wine & More
FINANCING Brewery Finance
San Diego Spirits Festival
TOTES & TANKS
GLASSWARE The NEAT Glass
DESIGN, BRANDING & MERCHANDISING
HBS Copper Stills
InLine Filling Systems, LLC
CORKS & CLOSURES
Thoroughbred Spirits Group
CF Napa Brand Design
Boston Capital Leasing
Spirits Consulting Group
Global Stainless Systems
Prospero Equipment Corporation
7, 73, & 107
GNS & BULK SPIRITS SUPPLIERS
The Barrel Mill Black Swan Cooperage
7 & 20
TRADE EXPOS Craft Beverage Expo
ARTISAN SPIRIT sponsors 114â&#x20AC;
WWW.ART ISANSPI RI TMAG.CO M
PA S S I O N F O R C LO S U R E S
T. 1 (8 66 ) 4 92 - 7 50 1
inf o@ t a p iusa .c om
www.t a p iusa .c om
SPEAKEASY, THE CRAFT SECRET LINE
Saverglass opens up an exclusive universe, one with an air of prohibition lightly reimagined, in its new CRAFT spirits collection composed of 3 new designs: MIXOLOGIST, OSLO APOTHEK and BOTANIC.
SAVERGLASS INC. Napa (CA): (707) 259-2930 East Coast (NJ): (201) 825-7100 Pacific North West (OR): (707) 337-1479 Mid West (KY): (859) 308-7130
www.saverglass.com HAUTE COUTURE GLASS