By: Gerald Dlubala
“You want to start a distillery? Try not to be overwhelmed, but by all means, prepare to be overwhelmed,” said Patrick Kelty, President of VITOK Engineers, Inc. VITOK Engineers help design and optimize every element of the distillation process, from raw material receiving to proofing and bottling. Their clients range from craft distillery startups to the likes of Wild Turkey and Jack Daniels. And if nothing else, Kelty wants potential distillers to remember a few things.
“Educate yourself about the distilling process and business,” said Kelty. “Talk to other owners. Learn from their mistakes and successes and apply them to your situation. Get to be best friends with your Fire Marshal, insurance agents and inspectors. They are the ones with intimate knowledge of the specific rules and regulations of your location. Base your design on your current situation, your forecasted production numbers and goals and your target customers and marketing plans.”
Kelty said that too many distillery startups begin with the owner blindly agreeing to options and amenities before obtaining proper cost estimates, causing hard decisions regarding cost-cutting and expense squeezing later. Collecting accurate cost measurements before startup is a lot of work, but it ensures that the owner gets the equipment and machinery based on what they have right now and what they want in the future.
“For example, going with a column still means you’ll be installing the entire system upfront, even if you don’t yet need it,” said Kelty. “You may only run it on a part-time basis, but with a column still, once you reach max productivity, you have to install additional column stills to increase production. One fermenter is generally needed per eight-hour shift, so if you run continuous shifts, you’ll need up to three fermenters per 24-hour cycle. A simpler pot still can be run on a batch basis and, if needed, can also be used after fermentation as pre-bottling holding bottling tanks. They are multi-functional and can be added to, but they require more attention than a column still.”
Kelty told Beverage Master Magazine that using experienced professionals in distillery design is a must. Roughly half of VITOK’s distillery design business includes the trendy retrofitting of old buildings into new distilleries. Often, these buildings need redesigning to accommodate the potential hazards of distilling. New construction is costly upfront but allows optimal design based on current and future plans.
“All architects, designers and engineers must have a safety-first mindset because of the inherent dangers of distillery operation. VITOK started as chemical plant engineers, so safety is ingrained in our way of thinking. Others may not necessarily have that same mindset,” Kelty said. “Did you know that commonly installed PVC drains installed under slab concrete floors can melt if distillery wastewater is pumped through them at too high of a temperature? Neither did the particular distiller that this happened to. That’s just one example of things that experienced distillery professionals know, and some unexperienced general contractors in the distillery construction field may not.”
Future goals and expansion plans should include the possibility of increased deliveries, the need for additional raw materials storage and what happens to your spent grain. Farmers used to take all they could, but in Kentucky, Kelty said there’s now an overabundance of distilleries and spent grain, so farmers are now charging to haul it from the distillery, meaning additional costs.
A project manager is also critical, he said, to keep the project on deadline, within budget and moving smoothly.
“And then assemble as much of a dream team as you possibly can to keep all parties moving in the same direction towards the same goal. The owner, architects, engineers, lawyers and marketing consultants need to start at the same time to be on the same page and working towards the brand story or identity that the distiller wants to convey. Having that singular vision helps avoid cost overruns and delays.”
“Just learn as much as you can, talk to those that have gone through it, and partner with those having verified experience in distillery startup equipment, procedures and practices,” Kelty said.
Don’t Forget About Grain Handling
“Grain handling is usually an afterthought,” said Adam Dubose, Sales Engineer at ABM Equipment (See their ad on the Inside Front Cover). “It’s just how it is. By the time we get involved, it’s usually the last step, and we have to deal with the leftover space. But that’s okay because that’s what we do.”
“Most brewers will mill their grain if they can,” said Dubose. “If you can do that, you have total control over the coarseness, the makeup and the content while saving significant money. You’ll find out just how quickly you go through grain when you only buy small bags of pre-milled grain. The costs will add up quickly, so if possible, it’s best to mill it and start with one silo. Just keep in mind a plan and a place to install two or three more down the road.”
ABM Equipment helps brewers design a future-friendly brewery layout to efficiently use the available space to maximum advantage. They take the needed time to go through plans and goals and develop an agreed-upon design to match each brewery’s specific needs. This method heads off potential problems and headaches before installation begins.
“Good planning with good future projections is the key,” said Dubose. “With grain, milling and conveyance equipment, you need to plan as far into the future as you can. Budget will always be a factor. Get what your budget allows, and add the needed equipment later, but good planning and foresight with design and space will make any future additions easy to implement.”
Been There, Done That, and Willing to Help
Starting up a distillery is unlike any other business startup. It’s critical to take advantage of the information and help from those that have traveled the path. People like Patrick Heist, Ph.D., Chief Scientific Officer of FermSolutions and Co-owner of Wilderness Trail Distillery, are a wealth of knowledge, from questions about the startup process through full-service consultation and design of your distillery.
“We engage with customers from the conceptual phase through the distillery construction,” said Heist. “FermSolutions was started in 2006 and works directly with hundreds of distilleries on process optimization and problem-solving. By starting Wilderness Trail Distillery as an extension of FermSolutions, we have real-life experience in the right versus wrong ways of doing things to help solve issues for other distillery startups. Once they are running, we offer our expertise-driven fermentation products like yeast, enzymes, lab services and more to make sure the process is optimized and producing the best possible yields and flavor. We’ve expanded three different times since, from a one barrel per day operation to now being the fourteenth largest bourbon producer and the eighteenth member of the Kentucky Bourbon Trail.”
Heist said that there are numerous questions to consider when starting a distillery, and as expected, the big one involves funding. “Make sure you are properly capitalized, not only for seeing the project through but for any unforeseen situations that will arise. Make sure you can wait, if you haven’t already, for the aging process before you start realizing a cash flow. Some distillers are trying to get initial cash flow through products that can be ready to sell in short order, like moonshine, vodka or gin. I will warn you that sometimes the marketing required to get any meaningful revenue out of these types of spirits is cost-prohibitive. Make sure you have your priorities in order. You should already know the types of distillate you plan to produce along with what feedstock you’ll use for each type. What recipes will you follow? Are your sources reliable? What are your plans to meet future growth and demand? What type of equipment do you need to meet these goals? Are your building utilities proper for your distillery plans?”
Heist suggests that just as you use your budget efficiently and wisely, so should you use your time. For example, if you’re planning on making a straight whiskey, you likely have at least two years to design a bottle and work on marketing plans, so stay focused on the current operation itself, including yields and great flavor profiles. Legalities, laws and regulations must be precisely met and followed, so it’s mandatory to get help in these areas. FermSolutions can provide guidance, but the Distilled Spirits Council of the United States (DISCUS) and the Alcohol and Tobacco Tax and Trade Bureau (TTB) are also great resources. Tap into other nearby distilleries that have already navigated those waters, and don’t be afraid to ask for help and guidance.
“Be a student of the process,” said Heist. “Take the initiative to get yourself going and choose help based on actual need. A lot of money can be spent on non-essential consulting services that could be put to use in production. Because when you get down to it, it’s about what you can afford. Some say to go with bigger equipment, like stills, to support future growth and production increases, but along with that comes more energy requirements, the need for bigger boilers, chillers and so on. Focus on getting equipment that will serve your immediate needs within your current budget constraints.”
Addressing COVID-19 During Startup
“You normally have the big five concerns when starting a business: namely, your business model, portfolio mix, funding, appropriate licensing and equipment, but 2020 has put a whole new spin on things, especially where the public is concerned,” said Donald Snyder, founder of Whiskey Systems, a complete craft distillery management service. “You’ve now got to also ask yourself how you’re going to comply and maintain the safety requirements for your area, including OSHA-based requirements and more, and of course, social distancing if it’s still mandated later this year. In my experience, most new startups don’t consider the current requirements for their locality. How are you going to achieve and continually manage the mandates needed to comply with your local safety, health or fire regulations?”
Snyder told Beverage Master Magazine that while opening and building anticipation of a new distillery in today’s market can be done within local requirements, it’s a different story moving forward. “You’ve got to have some sort of system in place to build on and meet your needs while remaining current on, and working within, those state and local allowances and restrictions. You may, for example, have to prepare to spend money upfront and wait the necessary number of years to age and produce a quality product. White spirits and moonshine age faster and are available to sell quicker, so you just have to be creative and use what you are given.
“A good example is the option to sell your full bottles, mixed cocktails and related items to go,” said Snyder. “If you’re in one of the states that allow that, then great, that’s a quality feature you can build and design your business model around while waiting for the restrictions to ease up, hopefully in a reasonable time. If you aren’t allowed to do that, then for now, at least, your storefront has to be built around merchandising and awesome consumer experiences. When I walk into your place, the customer experience should be your number one concern, followed by the tasting and the tasting room experience.”
Snyder believes in having something to show for your investment, so it’s best to purchase or lease-to-own quality equipment. Financing can work, but the thing to remember is that, unlike the beer or wine industry, distilling equipment holds its value exceptionally well. It won’t depreciate like other manufacturing machinery, so, many times, you’ll get your full or near full investment back. With leases, it can be easier to have someone take over the lease and be on your way. A lot of the equipment for wine and beer can be interchangeable, but distillery equipment is different.
“Little things that have big meaning for distilleries can be overlooked if you’re not using engineers and architects experienced in distillery design,” said Snyder. “One mistake I see made a lot is the absence of roll-up or dock doors. How are you going to move your glass, cans, grain, spent grain and materials? Prepare for the cost of employees, rent, any leases, etc. You’ve got to stay aware of long-term logistics for business expansion or the addition of future lines or products. Don’t layout your distillery in a way that restricts or financially inhibits future growth and expansion. Safety is another important area of concern, so it’s important to consult with engineers and architects that are familiar with and understand the workings of a distillery and the relatable OSHA regulations. Distilling and grinding your grain produces natural explosion hazards, so it’s critical to design your spaces accordingly.”
“As important as all these other things are, it’s just so critical to stay in compliance with state and federal reporting regulations,” said Snyder. “It’s so important to start your reporting and tracking before you get audited. Choose a system similar to Whiskey Systems that fits your needs and provides an audit-ready place to manage your records.”
