The idea to start a craft distillery can come from many places. If you talk with almost any brewer they will tell you the idea of a distillery is one they have considered. The tools needed to start a distillery are so similar to a brewery that much brewery equipment is identical to the equipment found in a distillery. Brewers who want to jump into making distilled spirits have most of the knowledge, tools and skills needed to manufacture spirits. One skillset brewers lack is in the art of operating a still but have no fear we are here to help. Let’s talk about selecting the right still for a brewery to make amazing, distilled spirits. Afterall good beer makes great whiskey so if you have a brewery why wouldn’t you do it?
Designing a Distillery
As the dream is put down on paper and planned for the specifics start to come into play. Are you going to make whiskey, vodka, gin , rum or do you plan to make all of them? What do you want your still to look like? Will it be a shiny copper showpiece or a stainless economical work horse? What ingredients you plan to utilize to produce distilled spirits is very important to consider when selecting the right still design. The equipment for distilling potato vodka is very different from that used to distill malt whiskey. If you are unsure where to start here, this may be a good point to bring in an expert to help you make these choices.
Selecting the Right Still Size
The first question many folks ask when selecting a still is something like how big of a still should I get? Should I get a column still or a pot still? What is more important to consider about how big is how small is too small? A common issue with many new distilleries is that they start off far too small. In fact some distilleries start so small that they outgrow the capacity to produce enough product within a year. The opinion held by most whiskey distillers is that a still any smaller than a 250 gallon will hinder your distillery from growing. Depending on the configuration of a still and the ABV of the wash a 250 gallon still can produce a single whiskey barrel per day. This key number is important to consider. Why this matters is that a larger still only costs slightly more than a smaller still. Secondly the larger your still is the less you will spend on labor per gallon of spirits produced.
It can be easy to underestimate the real quantities of spirits a distillery needs to produce to be successful. This is especially true if you plan to distill any spirits like whiskey or brandy that need to age for years before they are ready to bottle.
Some of the best whiskies from around the world like bourbon, or single malt whiskey spent years in the barrel before they were bottled. If the products you plan to make are going to taste as good as other products on the market they will need to age as well. There are no proven shortcuts to age spirits faster, but there are plenty of examples of so called “rapid aged” products that were not successful. The point of all this is that you have to plan years into the future. If you buy a still that can only produce enough spirits to meet the demand you are planning for today this still will not be able to make enough spirits to age to meet your demand several years down the road. The more whiskey you are putting in barrels every day the more potential you have to grow. To put a cap on growth by selecting too small of equipment can be a costly mistake.
Selecting the perfect size still or stills is not an easy decision to make. There are a multitude of factors that must be carefully considered to make these decisions with confidence.
Budget is the critical factor. Budget not only for the cost of the still but also other equipment needed to support the still is important. A budget for operating expenses is also helpful as once you get the still it takes capital for raw materials, labor and overhead to operate the equipment.
Another consideration to take in is the size of the facility.. If you only have 500 square feet of space for your equipment, then it is unlikely that a 500 gallons still is going to fit well into your building and still leave room for the operation to function. You should not select your equipment until you know the amount of space you have for the equipment.
Production Goals are a critical factor that must be given thought and planning. If you want your distillery to be producing 1000 barrels of whiskey every year then there is no way a 250 gallon still can get the job done. Sizing the still for the long term production goals of a distillery will help you stay ahead of your growing pains. The size of the still will directly determine the quantities of spirits you can distill.
Skilled labor is an essential part of the equation. For a brewery to make the best spirits possible it is a wise investment to bring in an experienced distiller to help guide the process and handle the distilling. Although there are many similarities between the brewing and distilling, there are also vast differences in the process and in the regulation of the industries. A skilled distiller will bring the knowledge and experience to the table to help you make the best whiskeys possible and also ensure it is done in a way that is compliant with regulations.
Lets Make Whiskey!
Building a brewery is an expensive endeavor and most brewhouses in a brewery are not run constantly. The addition of a still can create the opportunity for a brewery to run its brewhouse more often to create distillers’ beer to be distilled into whiskey. This is good for the business as it can create greater economies of scale. To do this effectively is it paramount to select the right size still to meet your goals. This is a huge opportunity for most breweries and one that can create immense new value and also open new markets for a brewery. If your brewery is ready to take the leap into distilled spirits now is the time to do it. After All most brewers love a good whiskey and good beer can be transformed into great whiskey.
Breweries have to deal with many legal issues, including licensing requirements from various federal and state agencies, formation of a corporate entity, negotiating contracts, and registering trademarks. With so many new skills and requirements to learn, it can be easy to miss something. Below are examples of three legal issues that are often overlooked.
Failing to Require Employment Agreements
There are a million things to do when starting a brewery. Finding and hiring staff checks off a significant box on the list and it can be easy to overlook the need for an employment agreement for these early hires. Later, there is little enthusiasm to impose these agreements retroactively or to apply them to new hires when they were not required for original employees. Yet, employment agreements serve a variety of functions that are so essential that their omission can cause substantial problems down the line.
As a preliminary matter, an employment agreement defines the relationship between the parties. Often breweries will try to categorize workers as independent contractors as opposed to employees, because this distinction allows the brewery to avoid providing certain benefits that are required for
employees. But, the IRS does not care about the brewery’s characterization, it cares how the worker is treated, and the key determination is control. An independent contractor is hired to provide a function, but has significant autonomy to perform that function when, where, and how they see fit. Often they will provide their own equipment and set their own hours. By contrast, if the brewery exercises control over the worker by imposing certain work hours, requiring the job to be performed in a certain way, and providing the equipment used, the worker is considered an employee.
There are many important sections of an employment agreement, including designation of at-will employment, requirement to abide by rules set forth in the employee handbook, etc. But two often-overlooked sections relate to confidentiality and assignment of intellectual property. Although the brewing industry is far more collaborative and congenial than most, it is still a competitive business and certain information should be treated as confidential and/or trade secret. Employees should be made aware that unauthorized disclosure of business plans, growth plans, customer and supplier lists, recipes, and marketing ideas, to name a few, can cause harm to the business. This section of the employment agreement not only serves that notice function, but can set up more enforceable consequences if the terms of the agreement are breached.
Breweries generate a significant amount of material that can be protected by trademark or copyright registration. Label designs, beer names, domain names, and social media accounts are all valuable assets that should belong strictly to the business. An assignment of intellectual property section in an employment agreement sets forth the understanding that anything created during the term of employment is the sole property of the business. As an example, if an employee has artistic talents that are used to develop designs for labels, those artistic designs should be assigned to the company. Otherwise, the employee would have the right to sell the same designs to other companies or individuals who may use them in a way that is detrimental to the brewery’s brand.
Failing to Secure Music Licenses
Music is such a common part of the brewery experience that many people take it for granted. However, breweries must obtain the proper licensing to play copyrighted music in their establishments or they could face a copyright infringement suit and potentially crippling statutory damages that could be as much as $150,000 per instance.
Under U.S. copyright law, the owner of a piece of music has the exclusive right to control its use, including whether or not it may be played in a public setting. Typically, however, while the artist may own the copyright, s/he delegates the task of licensing its use to a Performing Rights Organization (PRO) such as the American Society of Composers, Authors, and Publishers (ASCAP) and Broadcast Music, Inc. (BMI). In some cases, a single artist may have some of its songs licensed by one PRO and others licensed by another.
So, is a license required for every song played in a brewery? Generally, yes, in order to publicly play any piece of music, a brewery must obtain a license from the PRO that has the piece in its catalog. Below are some common situations where a license is required, followed by some exceptions to the general rule, and one very simple way to stay in compliance.
Disk Jockeys by their very nature play a variety of pre-recorded music. Although it may be the DJ that selects the pieces it plays, because the venue derives the benefit of the music, it is responsible for obtaining all necessary licenses.
Bands that play “cover songs” written by another artist fall under the same category as DJs. But, what about bands that play only original songs? The brewery should ask the band whether it is affiliated with a PRO. If so, even if the band is playing its own music, the venue needs a license for the performance.
Purchased music is only licensed for private use. Many people assume that when they buy a record, CD, or digital audio file that they own the music and can do anything they want with it. In reality, the purchase price of that music only covers private use and does not entitle the owner of that copy to broadcast it to the public. So, even if the brewery owner brings in her own collection of vintage vinyl, she must obtain a license to play the records in the taproom.
Generally, music licensing fees are not terribly expensive, but vary according to the size of the establishment and the type of music being played. In some cases, discounts may be available. For example, the Brewers Association has negotiated a discount with BMI of up to 20% for its members.
There are a few exceptions that will enable music to be played without a license, but they are narrowly construed and must be followed carefully. Music that is broadcast to the general public over the radio, television, cable, or satellite services may be played in a brewery without further license if the establishment is smaller than 3,750 gross square feet, including all interior and exterior spaces used for customer service. Larger spaces may also qualify for license-free performance, but other restrictions apply, such as: the music may not be played over more than six loud-speakers or more than four in one room; there may not be a cover charge to enter the establishment; and audiovisual content may not broadcast over more than four televisions or more than one in a single room. Music may also be played in the brewing space or offices for the benefit of employees, as long as it is not audible to the patrons in the tasting room.
By far, the simplest way to get music in the brewery is to use a commercial streaming service, such as Pandora For Business or Sirius XM For Business. The fees for these services include performance royalties and do not require any additional license.
Failing to Report Changes inProprietorship or Control
It should come as no surprise that when forming a brewery the TTB will want to know exactly who owns the business and who is in charge. It should be equally unsurprising, then, that if there is a change in ownership or control of the business, the TTB must be informed. Yet, this is an often-neglected requirement and failure to adhere to the letter of the law can have serious consequences.
It is important to understand the distinction between a change in proprietorship and a change in control. A change in proprietorship occurs when there is a change in the entity that owns and operates the brewery. The obvious example is if the brewery is sold to a new company. Clearly in that situation, the TTB must be made aware of the new ownership and the law requires that the notification be made well in advance of the proposed change. Specifically, 27 C.F.R. §25.72 requires that the successor brewer “qualify in the same manner as the proprietor of a new brewery” before beginning operations. Less obvious examples might be the conversion of an LLC to an S-Corporation or the folding of the brewery business under the umbrella of a parent corporation that has the same owners and officers as the brewery business. Both those situations involve changes to the proprietorship and must be cleared with the TTB before operating under the new structure.
By contrast, a change in control occurs when there are changes in stock ownership, LLC membership unit ownership, or major changes in the corporate officers or directors of a corporation. The same business entity continues to operate the business, so there is no change in proprietorship, but there is a change in who controls the business within that entity. In this situation, an amended Brewer’s Notice is required to be submitted within 30 days of the change. Further, if a new LLC member or stockholder holds more than 10% interest in the business, a new Personnel Questionnaire must also be filed. Common situations that involve a change of control may include the removal of a founder, death of a member, addition of a new corporate officer with ownership interest, addition of new members through a round of fund-raising investments, or the buy-out of previous investors.
Failure to abide by the notice requirements for changes in proprietorship or control can have serious consequences, including forced shutdown of operations until the licensing matters are resolved and possible monetary penalties.
These are just three of the legal issues that breweries often overlook. There are, of course, many more. Engaging an attorney that understands the industry early in the process of starting a brewery and maintaining the relationship throughout the life of the business is the best practice to ensure compliance with all requirements.
Brian Kaider is the principal ofKaiderLaw, a law firm with extensive experience in the craft beverage industry. He has represented clients from the smallest of start-up breweries to Fortune 500 corporations in the navigation of regulatory requirements, drafting and negotiating contracts, prosecuting trademark and patent applications, and complex commercial litigation.
At six years old, Justin Stiefel, CEO of Heritage Distilling Company (HDC), was watching reruns of MASH with his father and wanted to know what the contraption was that the characters were constantly hanging around and pouring drinks from in their army tent. That contraption was a hand-made still, and among other things, it fueled Stiefel’s interest in chemistry and engineering. His interest culminated in Stiefel submitting a working model of a still for his seventh-grade chemistry class experiment. While he obviously couldn’t partake in any experiments from his submission, his teacher happily accepted the challenge, deeming it a worthy working model and giving Stiefel top grades for his project.
“That accomplishment felt good,” said Stiefel. “I became interested in chemistry in that process, and since distilling is a chemical process at its basic level, my interest in distilling naturally grew.”
After adding a degree in chemical engineering, he and his wife Jennifer, president of HDC, founded Heritage Distilling Company in 2011 while sitting around a campfire with whiskey, cigars, good friends and family. The name Heritage came from Stiefel’s belief that no matter who we are, where we are or where we’re from, our story, state or background, we all have a shared heritage as a country and an individual heritage based on our experiences. So the word “heritage” captures all those spirits and everything around us into one customer experience that we provide.
Later, as he and Jennifer both gained experience working in the U.S. Senate, Justin attended Law School and was ultimately put in charge of negotiating important issues and subsets related to native tribes, including reviewing past policies, academic advancement, job creation, investment issues and more.
“Subsequently, Jennifer and I enjoyed visiting the breweries and wineries for the relaxing vibe and experience, but it was never legal at that point to open distilleries until 2009 when the state of Washington legalized the process. It was noticeable from the brewery and winery experiences what benefits were available in agricultural and economic factors using local resources by allowing folks like us to open craft distilleries. Then, in 2011, when we moved back to Washington, where we grew up, Washington voters approved privatizing liquor distribution systems.”
The Stiefels’ approach to opening a craft distillery is first to consider what consumers want rather than what they prefer to drink.
“A distiller can’t fall in love with their own products,” said Justin. “If you’re opening a brewery, winery, or distillery because you love your beer, wine or spirits, that can be a recipe for disaster. If you enjoy the product that much, be satisfied with being a consumer and drink the things you like. We use a consumer-led, high-technology approach to every aspect of our distilling process, start to finish. We want to focus on what compels a consumer to choose any particular product because you only get that one shot with a consumer to trigger repeat purchases. No matter our approach, it always started and ended with the product’s taste and flavor profile. Using this approach, we’ve become the most awarded craft distillery for nine years running, per the American Distilling Institute.”
“We like to say that if it isn’t in the bottle, it doesn’t belong on the shelf,” said Jennifer. “The final products are determined in double-blind taste tests, and our spirits’ taste profiles can take up to two years to reach the point of release. We include natural ingredients and processes, including our grain and mash, and tailor them to the consumer’s needs. We have experienced, trustworthy palettes and pride ourselves on our spirits’ taste, flavors and profiles. We have internal and external protocols for testing, including blind taste tests with unknowing consumers. Those consumers are the final gatekeepers of our products, and they’ll let us know when our product is ready. We import all of our distilling equipment from Italy simply because we’ve found that equipment produces the most amazing flavor profiles for us.”
Stiefel tells Beverage Master Magazine that the six distilleries and tasting rooms HDC owns throughout Washington and Oregon serve as testing grounds for all products, including their homemade RTDs (Ready to Drink).
“We get our consumers in the door, have them do a taste trial, and hopefully convert those tastings to purchases or membership program subscriptions,” said Stiefel. “For example, we offered free samples of our newly launched RTDs in our tasting rooms in return for an in-house completion of a 27-part questionnaire regarding their honest thoughts on the products. Our guests took an average of 27 minutes to complete those questionnaires. They provided informative and thoughtful responses and proved they were interested in helping us make product decisions and being part of the consumer journey with us.”
Stiefel says that HDC has streamlined its processes and protocols for consistency, record keeping, compliance, and general tracking in case of a problem. They can track back to the particular release’s specifics and find the issue’s where, when and why.
“It’s a personal development journey as well as a consumer journey,” said Steifel. “We have 10 years of experience in consistent production, successful policies and responsible behaviors. And we believe everyone opening a craft distillery is obliged to the industry, striving to provide excellence and total responsibility within this still-young industry.
Tribal Beverage Network:Turnkey Solutions with Individual Branding
“There are 270 tribal, sovereign nations in the lower 48 states,” said Stiefel. “Because of our record of successful practices and responsible policies in opening craft distilleries, the Chehalis Tribe in Southwest Washington approached us to see if we would help them open a craft brewery and taproom with a new hotel development they had in the works. We explained that we are craft spirits producers, not brewery professionals. Additionally, we explained that, in our informed opinion, the craft brewery market is beginning to downsize, so if they wanted to pursue that market, we recommended that they go with a dual component facility that includes craft spirits.”
The Chehalis Tribe agreed, and in partnership with HDC, they were on their way to an exciting and extensive 25 million, 36,000-square-foot project when the unthinkable occurred.
“We were due for groundbreaking in February 2018 and 24 hours away from issuing the contract, complete with equipment on site ready to begin when we were issued a letter halting the project,” said Stiefel. “Citing a 1934 statute from the Andrew Jackson era, the letter stated that a distillery cannot be built on tribal land, and if it were, we would not only be subject to a $1,000 fine (a great amount back then), but the government had the right to destroy all related equipment, including the stills legally.”
“Fast forward 184 years, and we now see that many tribes own and operate casinos, bingo halls, golf courses, resorts, entertainment venues and arenas,” said Stiefel. “In fact, there are currently 524 tribally owned casinos in the lower 48 states, including some of the biggest properties and wine and beer distributors in their respective cities. They are the largest operators in their respective areas except for some Vegas casinos, but in many cases, tribal casinos are bigger than their Vegas counterparts. So, we felt that this 1934 era statute was no longer applicable and decided to do something about it.”
In April, the Stiefels introduced a bill to repeal the antiquated statute, and it was passed and signed into law by December of the same year. Their argument was simple and on point. Craft distilling is poised to take off nationally, yet only Indians are not allowed to participate in the benefits, which seems quite racist.
“It was an extremely proud moment for us,” said Stiefel. “Our project with the Chehalis Tribe, Heritage Distilling at Talking Cedar, opened in 2020. As a result, HDC is working with five more tribes and soon a sixth to open craft distilleries in multiple locations, including Oklahoma, Arizona, Washington, Oregon and Idaho. We’re also involved in talks with tribes across the U.S. in Wisconsin and along the East Coast.”
Talking Cedar is a destination brewery, distillery, taproom, tasting room and restaurant, and it also serves as the hub of HDC’s Northwest operations. All craft beverages at Talking Cedar are made on the premises by the Chehalis Indian Tribe and Heritage Distilling Company. Here, the HDC’s liquid base is distilled before being transferred to the individual tribal distilleries for final finishing, aging and any maturation necessary to get the final product the tribe deems worthy enough to reflect their heritage.
“Tribal distilleries sound like a cool venture,” said Stiefel. “But the process is costly, time-consuming and time-sensitive regarding the reports involving the TTB (Alcohol Tax and Trade Bureau). With our franchise-like, autonomous hub and spoke model, we help the tribes set up a small bottling operation with different production levels, aging and maturation levels. By getting the liquid base from Talking Cedar, we accelerate the process of perfecting spirits, putting the necessary, timely information before the TTB and gaining important brand consistency. We also negate the enormous expenditure involved in the engineering process needed to size each distillery’s equipment. It’s similar to how the tribes handle their casino openings, partnering with and using the management operations of larger casino operators for new products, support and marketing. Day one is often good because of the grand opening; we are there from the beginning. But by day two, you better be hustling and educating the consumer. Branding and marketing often get overlooked but can be a huge expense. HDC provides a marketing budget and team to create a halo marketing effort to drive customers to the locations and get products out the door.”
Through HDC’s cohesive brand advantage, tribes receive pre-opening design and construction assistance, hiring help and applicable compliance and trademark assistance. HDC is there from before opening and along the way to help with product development, new marketing support, trademark research and support and TTB compliance reporting. The entire process is streamlined to get to the ribbon cutting and being ready to go with a full-scale operation, complete with a distinctive, retail-branded location (similar to Starbucks locations nestled in or next to grocers, retail outlets or hotels) and fully constructed tasting rooms, complete with 20 different flavored spirits.
“Simultaneously, we are working with the tribes on what they want their products to be and signify to the consumer,” said Jennifer. “Each tribe has its own story comprised of its journey and history. When you visit their cultural centers, you see the beautiful and distinctive artwork, stories and historical imagery attached to the different tribes. These are all things that are not only important but need to be ingrained into their brand. You see the word ‘heritage’ used repeatedly, making HDC the perfect anchor partner.”
“As an experienced partner, we can help limit mistakes that may typically happen throughout the initial distilling journey while also providing the tribes the immediate opportunity to start aging and creating their unique products,” said Jennifer. “The tribes can promote and label their distinctive products while receiving unmatched support from our Heritage brand portfolio. Visitors can expect to be immersed and recognize each tribe’s distinctively branded spirits, including the grains, flavor profiles, and cultural attributes that reflect their heritage, culture and history.”
Stiefel says craft distilleries are significant earning opportunities for tribes when their revenues from tobacco and fuel are disappearing. Additionally, the current visitor demographic for these casinos is between 50 and 70 years of age. If the casino owners don’t have a plan for complementing and replacing the older demographic, revenues will naturally dwindle to the detriment of the business. Quality craft cocktails are a proven successful way to capture margin and tax revenue while gaining increased and repeat business from the desired 20- to 30-year-old consumer demographic.
“And the best thing about these tribal spirits is that they can go national when they become popular and resonate with consumers outside the distillery’s four walls,” said Stiefel. “We have a national distribution agreement with the largest U.S. distributor. They are always hungry for these types of unique products. We’d love to see multiple tribal products hit multiple markets across our states, regions and nation. It would truly be a fantastic and monumental day for tribal-produced brands.”
Head to Tribal Beverage Networkfor more information.
From Publicly Traded Status toSpecial Whiskey Releases, HDC Barrels Towards the Future
“With respect to our future, we’re looking at adding and nurturing more tribal partnerships and locations while focusing on our core wholesale products and expanding distribution out of the Northwest,” said Stiefel. “But while all of these other events have been happening, we’ve also been secretly distilling and aging whiskeys of our own over the last ten years and are releasing our line of Stiefel Select line of Ultra-premium single barrel picks, including a four-grain bourbon, a high rye bourbon, wheated bourbon, 100-percent rye whiskey, unmalted, which is very difficult to make, some single malt selections and some 100-percent wheat whiskeys. We didn’t want to be one of those distilleries promising to release something special in the future. We want to announce it when it’s ready to cut the ribbon and be consumed. So we decided that 2022, our 10th anniversary, was a great time to start releasing these in-house produced spirits to select markets in partnerships with retailers or directly to the consumer. Last year was five barrels, with a goal of 100 barrels released this year. They are all single barrel selections, with a few being small-batch, where we take the same barrel from the same distillation day and make a small batch, maybe a three-barrel combination individually numbered.”
But the biggest news is that Heritage Distilling Holding Company has entered into a business combination transaction with Better World Acquisition Corporation to become a publicly traded company. Heritage Distilling Group will be the corporate name of the newly public company and will be traded on the NASDAQ in the late second quarter under the ticker symbol CASK.
By the time you read this, the S-4 SEC form will have been filed, detailing an impressive, world-class board of directors that includes many well-recognized names from major corporations.
“No one in the craft space can claim this type of expertise on their board,” said Stiefel. “I want to say that this board has previously handled over 150 billion in annual revenues and is simply unmatched in expertise and knowledge related to operational expertise, marketing excellence, consumer-based product development, global general counsel experience, extensive mergers and acquisitions experience and tribal economic development.”
Of course, the primary goals in the craft beverage industry are to drive a profit, make money and sustainably secure the business. However, an increasing number of breweries and distilleries have become so entrenched in their local communities that it only makes sense to give back to charitable causes when possible.
Craft beverage philanthropy is on the rise in the U.S., and there are many creative ways in which brewers and distillers can embrace this trend of doing good while drinking well. There are some valuable lessons to learn from beverage businesses that are focusing a portion of their efforts on philanthropy, which are inspiring if you are looking to host a charity event or donate a portion of sale proceeds to raise money for local causes in your community.
How Breweries & DistilleriesCan Approach Philanthropy
Breweries and distilleries can take a variety of approaches to add a charitable element to their operations. The level of community involvement may vary based on the owner’s interests, the size of the craft beverage establishment and the number of staff members available to help with projects outside the realm of making beer and spirits.
Some craft beverage businesses are skilled at hosting events, partnering with local nonprofits and using social media to get the word out about needs in the community. Other establishments are willing to try profit sharing with partner charities and give direct donations to organizations working in specific fields of interest, such as early childhood education, homelessness or workforce development. A craft beverage producer can also give back to the community through beer or spirit collaborations, supporting local growers by purchasing homegrown ingredients and hosting art shows featuring local artists. Meanwhile, some beverage producers choose to focus on their own internal sustainability practices instead to make their operations eco-friendlier through recycling, water conservation and energy-saving programs.
Besides just feeling good about what you do and what you brew, there are many benefits to embracing philanthropy in the craft beverage industry. Getting more involved with local causes increases exposure to a business and builds brand awareness. A brewery or distillery can build greater support among like-minded and community-supporting patrons while engaging with customers on a deeper level. Adding a philanthropic element to a business can help create a more community-centered taproom, generate good press to compensate for a past issue and even result in valuable tax benefits at the end of the fiscal year.
Examples of Craft Beverage Philanthropy
All across the country, you can find excellent examples of how craft beverage businesses engage in philanthropy without sacrificing product quality or putting a compromising strain on their budget. For instance, Ex Novo Brewing, which launched in Portland, Oregon and also has a presence in New Mexico, was the first nonprofit craft brewery in America and has referred to itself as a “permanent fundraiser to support causes.” Charitable causes supported by Ex Novo include Oregon Wild, Friends of the Children, Mercy Corps and Impact NW.
Deschutes Brewery in Portland, Oregon, teamed up with Dovetail Workwear to support women’s success in pursuing non-traditional occupations.
The Phoenix Brewing Company in Mansfield, Ohio, has been involved in philanthropy since it opened in 2014 through special beer releases, apparel sales, sponsorships and fundraising events. It has supported summer camps for children with special challenges, a community theater, a winter coat drive, a homelessness initiative and a brain cancer research organization. Phoenix Brewing is unique in that it accepts requests for donations and sponsorships directly through its website and is a non-tipping establishment. If customers leave cash behind as a tip, the brewery donates it to a designated charity each month.
Pennsylvania’s Tired Hands Brewing Company is another beverage business that streamlines the funding process and outlines its donation guidelines and application protocols on its website to be refreshingly accessible to local charities.
Service Brewing, started by an army veteran who served in Iraq, is a Savannah, Georgia brewery that has donated a portion of brewery tour profits and promoted charities that include police, fire and first-responder organizations. Over the years, the brewery has raised over $110,000 for local, regional and national groups.
Franklins, a family-friendly brewery in Hyattsville, Maryland, is dedicated to giving back to its local community and donated over $200,000 through a fundraiser program for local schools, environmental groups and progressive advocacy organizations. It also supports its community by partnering with local farms to source ingredients and the town’s art alliance organization to showcase the work of local artists.
Finnegans Brewing Company in Minneapolis, Minnesota, has a policy of supporting local food banks and helping food banks work with farmers in the area.
In Milton, Delaware, Dogfish Head is a large and well-known brewery that launched a Beer & Benevolence program to support over 150 nonprofits annually. Funded organizations include the Delaware Historical Society, Delaware Nature Society and Nature Conservancy.
To dip a toe into the realm of philanthropy without going overboard right away, breweries and distilleries might consider centering giving around just one special, limited-release beverage.
For example, an Ashland, Virginia brewery, Center of the Universe Brewing, made a Homefront IPA and donated all proceeds of the beer to a nonprofit that helps military troops and veterans. It often makes the most sense to link a beverage company’s history and the founders’ interests to philanthropic engagement.
An example is SweetWater Brewing Company in Atlanta, Georgia, which started a long-term, multi-year clean water campaign to improve the local water supply and focuses its giving on environmental groups in the region.
You might also tap into the intersection of craft beverages and art, like Horse Thief Hollow in Chicago, Illinois, which has partnered with a neighborhood art alliance to turn the business walls into an impromptu art gallery that displays the works of local artists.
Another way beverage businesses can boost community involvement is to partner with local sports teams. In Indianapolis, Indiana, craft breweries have created beers that pair with the charitable efforts of local sports teams, including the NFL’s Indianapolis Colts. The local brewery and bistro, Triton, created a Pink Ribbon Saison with pink and white peppercorns to celebrate Women’s History Month and compliment the breast cancer research funding of the city’s professional football team.
Creative Ideas and Looking Ahead
For breweries and distilleries that have a handle on their essential operations and are ready to take the next step in community involvement, now is a great time to establish partnerships with local charities. Business owners can harness the trendiness and popularity of craft beer to spark awareness about people, animals and natural resources in need of attention.
Yet there is no shortage of challenges that come with pairing craft beer and spirits with philanthropy. Selling products must always remain the top priority for these businesses to stay operational, and there will always be public scrutiny about which charities they support and transparency with regard to how the money is used. The quality of the beer and spirits produced must come first so that customers keep coming back and supporting the business and the affiliated charities. If the quality declines, craft beer fans may just as well donate to charities on their own without any craft beverage connection.
There are also challenges with finding staff members who can manage charitable work, getting the word out about philanthropic efforts, establishing donation guidelines and having enough money to go around. However, this is an exciting time to get involved in the world of craft beverage philanthropy because of how prominent beverage producers have become in their local communities and the potential power and influence they hold for rallying community members to enjoy their favorite drinks with a greater purpose.
As a craft beverage producer, one of the best ways to launch a philanthropic campaign is to learn from the examples of what other breweries and distilleries have done in the past and contact their teams for details, feedback and mentorship. If corporate philanthropy is an interest within your ownership and staff, it may also be worth reaching out to the local community foundation in your area to discuss options for opening up a fund, donating to specific programs or starting an endowment. Most major cities and even broader regions serving multiple counties have well-established community foundations that can offer advice, resources and training about taking a more philanthropic angle as a charitable side venture.
Despite hard hits from the pandemic, recession and labor crisis, specialized companies are also emerging to connect the business industry to the nonprofit sector. One example is Positive Legacy, a collective group of nonprofit and event industry professionals that created the Pours for Positive campaign to engage craft beverage companies in nonprofit engagement and outreach for mutually beneficial results and a more vibrant and sustainable community. The Brewers Association also provides resources and tips for producers navigating the complex world of philanthropy. Industry-specific recommendations include adding an online donation request form to your website, hosting events that bring a charity into your business and ensuring donations boost taproom sales with silent auctions and gift cards that draw more business to your doorstep.
Starting a beverage business can be a daunting undertaking, especially for the uninitiated. One of the biggest challenges for someone wanting to bring their beverage idea to the market can be budget. The cost of starting and scaling any business can be high, and when one is developing a new consumable product, the costs can be astronomical if they are not privy to the ways of bootstrapping their new business.
Regardless of the reason one has behind bootstrapping their business, it is a valid way of building any new venture from the ground up. By being savvy with one’s budget and careful to avoid overspending pitfalls, anyone can build a wildly successful beverage business.
Bringing One’s Vision to Life
Any great beverage company needs to start with an idea. If one wants to build a business around a beverage, the idea needs to be solid, and it needs to be able to be created with consistency, meaning the formula being used should be set before bringing a beverage to the market. Seeking out the opinions and assistance of industry experts can help one avoid costly formulation mistakes. New entrepreneurs should also do their due diligence in researching the market and ensuring their beverage idea has a strong place in the market. While friends and family may all love what an entrepreneur comes up with, that particular product may not translate to a beverage that could find traction with the market at large.
The formulation stage could lead to out-of-control costs if one is not going in well-researched and prepared. There can be a good amount of information online to help one research the industry, as well as quite a few books and workshops available that can help people with their beginning stages of business building — all for an affordable cost.
Estimating Startup Costs
Even when one is bootstrapping a business, costs can very often exceed expectations. When diving into initial market research, a new beverage business entrepreneur needs to be realistic about how much it will cost to bring their beverage to the masses.
To professionally formulate a beverage can cost upwards of $20,000 to $45,000. If one is planning multiple SKUs (stock-keeping units), costs can compound quickly. There are packaging costs, ingredients, shipping, and stocking costs to consider, all of which will add dollars to one’s budget and cut into their profits.
Bootstrapping this amount requires careful planning and budgeting. Many entrepreneurs have started small and put any money they make back into their businesses. They set up booths at farmer’s markets and sell their beverages piecemeal to raise capital for professional formulation and growing the brand. Though this approach can take time, it is a great way to slowly build a brand without accruing any significant debt.
Any business, regardless of budget, will often seek out cost-saving measures when it can. Overspending on aspects of the business that do not ultimately move the needle can spell disaster for any startup. Areas where a beverage startup can save include seeking out inexpensive ingredients, packaging options, or distribution avenues.
Being that costs will rise as the business expands, how does one fund their business if they wish to create a national (or international) beverage brand? Several options are available, from personal loans, investors, and small business loans. Whatever funding options one chooses, entrepreneurs should always weigh all pros and cons to ensure the selected option is the right fit.
Finding the Right Source of Capital
Any startup is going to need funding, and there are a number of options for receiving this funding. Bootstrapping typically involves forging relationships directly with retailers in order to get your beverage on shelves. This approach can be a slow burn but ultimately successful, depending on how much pavement-pounding you are willing to do on your startup’s behalf. When one doesn’t have the financial resources to fund thousands of dollars of marketing or development costs, that momentum has to be built bit by bit. Those entering the market with a bootstrap mentality must understand that patience is a virtue and that building the brand will take more time.
Even if one begins with a bootstrap mentality, the fundraising stage may get to a point where one also wants to consider the investor route. However, finding the right investor deal for an idea can also be a long road. Going into pitch meetings with a robust business plan and vision for the future of the product can help entrepreneurs land the best investor partnership for their venture. Any pitch meeting should include samples of your beverage and an idea of how the packaging and the marketing will look.
One of the best ideas for a small startup is to consider a larger pool of smaller investors instead of putting all of their eggs in the angel investor basket. For example, instead of trying to secure a few million dollars from one investor, work on securing $10,000 in investments from a collection of smaller investors. With those combined investments, one will not only have enough money to get their beverage idea off the ground but will also have a built-in support system from a variety of enthusiastic backers. Smaller investors ride out shifts in the stock market easier than large investment firms and venture capitalists. Individual investors also may request less control over a business than large investors often require.
Finding the right investor(s) or funding route can make or break a new beverage business. As such, one should consider all options before choosing how they plan to fund their startup.
With over 2,400 beverage companies operating in the US alone, startups will really need to communicate what makes their product special in order to court solid investment opportunities. Coming at the investor search with passion and an educated approach to the market will increase a startup’s chances of landing dedicated investors in it for the long haul.
The Beverage Industry has Changed
The pandemic changed many industries, and the beverage industry has not escaped the post-Covid shift towards more direct-to-consumer sales and social media marketing. When the world shut down, beverage entrepreneurs could no longer visit investors or retail partners in person.
With this in mind, those now seeking to step into the beverage industry with a great idea need to consider how reaching a target market has changed. Anyone looking to break into the somewhat crowded beverage market should work on establishing an online presence right away. Today, word-of-mouth marketing includes chatter online, meaning entrepreneurs could be leaving a lot of money on the table by failing to put effort into their digital marketing presence.
Any startup should have a website that can be built for a small out-of-pocket cost. The brand’s website is its handshake and introduction to the market and should reflect its feel and personality. Along with a website, the brand’s social media profiles should tie into the entrepreneur’s overall marketing approach. Engaging with one’s target market is a low-cost way to build a buzz around their beverage.
When building an online presence, one needs to consider what message their beverage and brand are sending. For instance, is the brand being built based on natural ingredients and a sustainable manufacturing approach? If so, its marketing is going to be different from a brand seeking to bring an energy drink to the market.
Marketing is all about tapping into who the entrepreneur is as a brand, as a business founder, and who their consumers are. Authentic connection with one’s market can go a long way in building a brand, especially when one is not starting with a large amount of capital.
Fight Off Failure
A staggering 42% of startups fail. With those numbers, it’s a wonder why anyone dives into the murky waters of entrepreneurship. Still, many do and succeed, but not without some hard work and research.
For instance, many startups fail because they don’t research their target market. They bring a product to the market that no one is interested in or too closely resembles another product. Other startups simply run out of money, which is why it is so important to have patience while one is bootstrapping, thoughtfully invest capital, and seek out partnerships with investors that best align with the product and brand being brought to market.
Bootstrapping any business starts with believing in a vision, first and foremost. When one is self-funding their startup, the passion for and belief in their product keeps them moving through the most difficult steps of the scaling process.
The entire concept of bootstrapping is about hard work and perseverance. If market research tells the entrepreneur that their beverage idea is a winner, then it is time for them to roll up their sleeves and get in the trenches. This willingness to get one’s hands dirty sends a message that they are willing to stick with their idea, put in the hard work, and do what it takes to see their beverage hit shelves.
Starting any business is not for the faint of heart. Bootstrapping a business could be considered insanity by some, given the difficulty of that journey. However, when the business ultimately succeeds and people all over the country — or even the world — are enjoying the beverage you created, all the hard work of bootstrapping will have been worth it.
Jorge S. Olson is the author of “Build Your Beverage Empire.” He’s a beverage industry mentor and consultant who has launched over 1,000 consumer packaged goods and worked with over 100 beverage entrepreneurs, large and small. Jorge has owned companies in the beverage industry, wholesale distribution, import and export, and beverage development and sales. His over 300,000 newsletter subscribers share his insight into beverages, marketing, and growth. Jorge now mentors beverage executives and lives in San Diego, California.
Despite a recent pandemic, record-high inflation, and several years of economic uncertainty, entrepreneurship continues to thrive, with more than 31 million entrepreneurs in the U.S. In fact, Americans’ confidence in small businesses has reached record highs, even exceeding confidence in the military, the medical system, public schools, and the U.S. Supreme Court. But is your business recession-proof?
Since World War II, the U.S. has experienced 12 recessions, averaging one every six years. Recessions are more common than most people realize, and most people will encounter several over the course of their careers. Therefore, it’s crucial for business owners to prepare to survive the next (inevitable) recession.
A recession is defined as a significant decline in economic activity – including gross domestic product (GDP), income, employment, industrial production, and wholesale-retail sales – and can last anywhere from two and 18 months. While recessions are common, they can be incredibly stressful for business owners, who will very likely experience some business disruptions. The key to surviving the disruption is to plan, differentiate your business from the competition, cut spending, and create additional revenue streams.
In addition, here are ten tips to survive – and thrive – during a recession.
1. A downturn doesn’t mean doom and gloom for every business. Nearly 75% of public companies with $50 million or more in annual sales had declining revenue growth during the last four economic downturns, but 14% actually accelerated revenue growth and increased profitability. The different outcomes depended largely on the type of products or services the companies sold and how well (or poorly) they met customers’ needs. Remember that even during economic downturns, customers still buy essentials (e.g., food, utilities, household items, etc.) and need certain services (e.g., healthcare, car repairs, etc.). “Recession-proof” your business, providing what people will continuously need, to maintain sales.
2. Plan for a recession. Ebbs and flows are a normal part of the business cycle, so plan accordingly. Focus on maintaining revenue, preserving cash flow, and generating demand. For instance, running out of cash is a major concern for business owners, so assess your cash balances, expenses, and incoming cash flow. Work within your budget. Track your key performance indicators and adjust if you aren’t meeting target metrics. Pay down debt. Reduce financial waste.
3.Prepare for the unexpected. You’ve likely heard the advice to establish an emergency fund to cover personal expenses, and this is a wise move for businesses, as well. Create an emergency fund that can cover up to six months of essential costs, including payroll, inventory, rent, and utilities. Proactively collect outstanding receivables. Talk to a financial advisor about whether you should consider revolving loans, alternative financing, small business loans, and/or other options.
4. Operate efficiently. Reducing operating expenses can be a challenging task, especially as you must continue providing extraordinary products and services. Whatever expenses you cut should be invisible to customers. Determine where you can make small tweaks that can add up to big reductions, such as leveraging early pay discounts from suppliers, automating manual tasks, and renegotiating supplier contracts.
5. Multiply revenue opportunities. This strategy will require some creative thinking. Brainstorm ways to capture new revenue without making any major investments. For instance, expand your brick-and-mortar retail store’s reach by selling goods online. Adjust your business model. For example, a bakery could start offering take-home kits for birthday parties. Or a bar could sell merchandise and specialized beer onsite and online, in addition to selling drinks and food.
6. Modify offerings. Adjust what you’re selling to make it more attractive to customers and prospects during tough economic times. Think of how restaurants changed their business models during the COVID pandemic to sell to people when they couldn’t dine onsite. To adjust to the changing climate, restaurants started offering more delivery, takeout, and curbside pickup options. And, as more people worked from home, clothing retailers adjusted, offering more loungewear instead of formal suits. During a recession, pivot accordingly. In addition to altering your business model, consider changing your pricing structure and offering more incentives to entice people to buy, even if they have less disposable income during a recession.
7. Strengthen relationships. Acquiring a new customer can cost five times more than retaining an existing customer. Create and maintain strong customer relationships. Understand their changing needs and give them what they want. Offer the “value add” that they can’t get from your competitors, whether that’s free shipping, personal shopping, or a willingness to place special orders on their behalf. At the same time don’t forget your valued vendors, partners and associates. When times get tough those relationships could save the business. Or you could help save someone else’s business. Whether it’s extra time on a delivery due to supply chain issues or just a pep talk, remembering those relationships is essential.
8.Stretch your tech. Most businesses purchase technology to be more efficient and productive but haven’t taken the time to maximize the full benefits of the system or appoint an expert that can fully leverage its benefits. Before you are investing in new systems, stretch your current tech. Tech tools can also help you change distribution methods, such as pivoting from in-person tutoring, which limits you to a specific geographic radius, to online tutoring, which expands your reach.
9.Continue marketing. You may consider cutting marketing to save a few bucks but resist that urge. To maintain revenue, you’ll need to stay in front of your key audiences with social media efforts, online ads, positive news stories, compelling blogs, etc. Launch (or continue) loyalty campaigns to recapture past customers and increase touchpoints with your current customer base. Target your messages to align with customer pain points in an uncomfortable economic climate. Spotlight loyalty programs. Incentivize customers and prospects with discounts, BOGO, and other deals. Maintaining visibility via marketing can help you increase market share, particularly if your competitors pause their efforts.
10.Insulate Finances. Consult financial experts, like those at Loanmantra.com, to develop a plan to become recession-proof. They’ll help you determine how to cut costs, adjust your business model, and secure any necessary loans. If you need a loan to boost your company’s financial health, they’ll help you calculate how much of a loan you’ll need (and qualify for). Financial experts can advise you on all aspects of the loan, including the application process and what types of information you’ll be required to provide.
Raj Tulshan is the founder and managing member ofLoanmantra.com, a one-stop FinTech business portal that democratizes the loan process by providing corporate sized services and access to entrepreneurs, small and medium sized businesses. Connect with Raj and Team Loan Mantra at 1.855. 700.BLUE (2583) firstname.lastname@example.org.
How did Colin Schilling go from making cider in his teens to operating Schilling Hard Cider, the second-largest cidery in the United States? According to Emily Ritchie, executive director of the Northwest Cider Association, it’s a smart business. “That, combined with a passion for cider, has enabled them to be one of the top cider producers in the country! They’re pushing boundaries and finding shelf space for the cider category. They’re helping to lift all ships in the rising tide,” she notes.
When asked about the inspiration behind his innovative cider portfolio, Colin Schilling points to his great-grandfather. In 1881, August Schilling founded the Schilling Spice Company in San Francisco, where he became known for products that put quality over a lower price point.
Schilling grew up with cider in his blood. In the 1970s, his parents carried on this family craft tradition by pressing and making small-scale cider on their farm in rural Idaho. While he started making cider when he was 14 years old and continued homebrewing during his college days, Schilling says he never envisioned a future as a cidermaker.
Then, after a five-month stint with Microsoft, he noticed how Angry Orchard kept trending in a direction that pointed to a growing interest in ciders. In Schilling’s estimation, his cider tasted better than other ciders on the market. So he convinced his friend, Mark Kornei, to join him on a new venture. They both quit their corporate jobs and launched the cidery, with Colin taking on the title of CEO and master cidermaker and Mark assuming the role of CFO.
By November 2012, they had developed their initial concept for their cidery and filed their LLC papers the following month. At the start of the new year, they moved into a 30,000-square-foot facility south of Seattle in Auburn, with their first sales in April. Initially, raw apples were processed into juice, which was completed in Yakima in Eastern Washington, and then the juice was trucked to Auburn. They also employed a local cannery that filled and seamed their cans.
Pushing the Boundaries of Cidermaking
From the cidery’s inception, Schilling has wanted to continue his family’s commitment to craft while pushing the boundaries of what he envisions as a cidermaker. Over the years, he has maintained a commitment to producing a craft cider that fits the definition of cider in the United States. Hence, 51 percent of the apple base in all Schilling ciders is made with 100 percent fresh-pressed apples. “At its core, cider is good quality apples. Then from there, the world’s your oyster,” Schilling reflects.
Canned Cider Pioneers
Schilling proclaims they were a pioneer in producing cider in cans instead of bottles. When they started Schilling Hard Cider, ciders sold in the US were in bottles. But Schilling believed cans represented a far more sustainable way to package a beverage product. So, even though ciders had not previously been sold in cans, they committed to more sustainable practices on the assumption that canned ciders would also be popular.
After California voters passed Proposition 65 (The Safe Drinking Water and Toxic Enforcement Act) in 1986, the composition of canned liners changed from an epoxy base that contained trace amounts of BPA to 100 percent BPA-free cans. Schilling was able to access a canning process that was safer for both the planet and people. As an additional sustainability measure, they print their iconic labels directly on the cans rather than use non-recyclable stickers that must be peeled off the cans before they can be recycled.
Schilling ciders are essentially sulfite-free, which the company states is necessary to make a quality canned beverage using their current liners. To ensure their products are self-stable without adding chemicals, they pasteurize their ciders through a large state-of-the-art tunnel pasteurizer.
Among their earlier canning experiments, Schilling was the first cidery to produce a nitro cider in a can. Called Grumpy Bear, this was a nitro cider made with coffee beans that poured similar to a Guinness, replete with a foamy head. Also, they were the first to produce ciders from fruits other than apples, including grapefruit and pears.
Development of Tasting Rooms
About ten years ago, Schilling decided to open tasting rooms in Seattle and Portland because these two cities represent the two fastest cider markets in the country in terms of per capita consumption and awareness of craft cider brands. In 2014, they opened their first cider house in Seattle with 32 taps, which, at the time, was the most extensive collection of cider taps in the world.
Their number of taps has now grown to 35, featuring regional and local ciders and higher-end imports from Europe. At one point, they included two nitro taps into this mix. Because they are able to rotate multiple kegs at their cider house, they can test out new ciders and quickly gauge which flavor profiles resonate with consumers. Additionally, they now have the largest packaged selection of craft cider, with over 200 varieties in their cold cases for customers to enjoy onsite or take home.
In 2018, Schilling opened a second cider house in SE Portland in the Goat Blocks neighborhood, which boasts the country’s largest selection of draft ciders with 50 cider taps. This site also has a restaurant serving a gluten-free menu and a winery license, where they show off some small-scale techniques by producing wines in five-gallon tanks. These wines are used primarily for special events and experiments.
Expansion of Schilling Cider
Shortly after opening in 2012, Schilling ran out of space and utilized satellite warehouses to store empty cans, cases and other materials. So, two years later, they relocated to a 110,000-square-foot warehouse, also in Auburn.
This expansion gives Schilling the infrastructure to scale up while still maintaining its craft sensibilities. For example, they can now store enough apples to fresh-press apples year-round. As proof, they are the largest fresh-pressed cider production facility in the country.
Schilling also now has the fastest canning line in the world, which can run up to 1,050 cans per minute. The entire production line is fully automated, with a crew of highly trained individuals overseeing this production. Because the line is highly automated, and no one has to work shoulder-to-shoulder on the production line, they were able to assume total production during COVID while practicing social distancing.
Changing the Corporate Culture
Schilling attributes the high employee retention rate among his 75 employees to their work with Moe Carrick, an executive leadership consultant and author. “We’ve done a lot of soul searching, training and coaching regarding how I lead and run a company from the top. Then we’ve implemented policies that I think are quite different from what other folks experience in our industry.”
For example, they benchmark their employee’s pay raises to the Social Security inflation number. Also, they engage in honest real-time feedback and just rolled out a company-wide employee training program whereby everyone gets to pick a broad topic they will focus on for a year. Along those lines, they work to ensure that all employees are tuned in to the company culture to function as effective brand ambassadors for Schilling Cider.
Every year they run a campaign called Keep It Wild with Oregon Wild and Washington Wild that raises money to help keep wild spaces intact. Last year, this campaign raised $20,000 for these charities. This year, they’ve expanded the program to eight states. In addition, the company hosts cider diners designed to raise funds for hunger relief charities. Schilling is also building multiple collaborations around National Cider Month in October, participating with the Northwest Cider Association and local events, such as Cider Summit Seattle and Cider Summit PDX.
New Product Developments
When Schilling’s Excelsior line of imperial ciders launched in 2018, they had the distinction of being the first cider to produce a cider with over seven percent alcohol that was packaged into a six-pack of 12-ounce cans. In doing this, Schilling figured out a way to scale up a high-tannin exotic cider by bringing in bittersharps and bittersweet apples from Europe and France, where cider apples are still grown in abundance. They combined these apples with locally grown apples to create a tart but semi-sweet cider.
Also, through experimentation, Schilling developed the ability to produce a highly carbonated cider, a feature they employed in their Excelsior Red Glo! This one-of-a-kind dry imperial cider is made with unique and rare Lucy Glo™ apples. A cross between a Honeycrisp and an Airlie Red Flesh apple, these apples are grown by fourth- and fifth-generation growers in the heart of Washington State’s apple country.
Another new Schilling product is Vida Maté, a non-alcoholic canned drink made from Yerba Maté, a South American plant that contains naturally occurring caffeine, brewed into a tea and flavored with real juices.
Moving forward, Schilling points to their 110,000-square-foot warehouse, noting they have plenty of room for expansion. Along the way, Colin Schilling will continue to explore ways to be a sustainable leader in the industry while producing unique craft ciders.
Dubbed the Great White North, Canada has stereotypically been viewed as a country perpetually shrouded in snow – where herds of caribou and roaming packs of wild wolves play survival games in the streets, where the inhabitants (clad in parkas and donning toques and snowshoes) emerge from their igloos to dine on seal blubber and polar bear meat. And beer.
Okay, that’s pushing it a bit far. Anyone who lives in all but the most northern reaches can regale you with stories of asphalt-melting, paint-peeling summer heat. Interior British Columbia’s Okanagan Valley has literally caught fire on some occasions, with daytime temperatures reaching higher than 120 degrees Fahrenheit. In Winnipeg, Manitoba, you’re more likely to be eaten alive by ravenous hordes of summer mosquitos than a murderous hibernation-starved grizzly. No, the country’s really not a wasteland of frozen tundra. That being said, when it comes to the distribution and sale of beverage alcohol products, Canada has a ways to go before it really emerges from the Dark Ages.
For example, there are antiquated liquor laws that haven’t changed dramatically since being imposed in the 1920s, combined with an inability to shake off the chains of the Ghost of Prohibition Past. Health Canada has recently proclaimed that no amount of alcohol is safe, and any more than two drinks per week – yes, you read that correctly – increases your odds of being dead). Additionally, federal and provincial government bodies have gotten rather intoxicated on the gold they have mined from drinkers. All of these things together to create an odd cocktail of private, public and government interests. So, how does this all affect a producer – perhaps you – who wants to break into the Canadian market?
First, it’s important to understand that alcohol importation, distribution and, ultimately, sales are pretty much the sole domain of government liquor monopolies (“liquor boards”). Each province behaves somewhat differently in its approach, but all function in a fundamentally similar way. Let’s focus on Ontario (mainly because that’s where I live, and my knowledge of “the system” here is probably better than the workings of other provinces).
Second, it’s equally important to understand that provincial liquor boards exist to feed provincial government coffers. That’s it. That’s all. This wasn’t always the case. The Liquor Control Board of Ontario (LCBO), for example, was originally envisioned as a transitional mechanism to ease the province from prohibition (via a system of “controls” – many of which would likely today seem in violation of personal privacy if not being downright racist) back into the private retail sector. It wasn’t supposed to be still with us today. Of course, the original mandate was rethought over time as successive governments realized that in controlling booze sales, they had given birth to a proverbial golden revenue goose.
The upshot of this is that, though you may be convinced you’ve developed the most wondrous elixir thus far known to man (confirmed by family and friends), it really means nothing to the liquor board. What matters is how much money your concoction will rake in if the decision is made to give it a shot in the market. As with many other businesses, the salaries and bonuses of LCBO executives (which are substantial) are directly tied to “corporate performance” (read, sales numbers). If you can’t help them, they can’t help you.
There’s a saying: “If you want to make a small fortune in the wine industry, it’s best to start with a large one.” The same is true with trying to break into the Ontario market. Having a decent chest of loot socked away to market and promote your product – primarily through LCBO-controlled programs that you will be “strongly encouraged” to participate in – will significantly up the shelf space ante.
“Okay,” you say, “I get it. It’s all just business…but I still want a piece of Ontario action and I’ve got the resources to give it a serious go. So, how do I do it?”
Assuming you are a producer of “craft” products and don’t have a global corporation with an international sales force to help you, you will need someone in Ontario to act on your behalf. A “manufacturer’s representative” (aka, an “agent”) essentially acts as your sales and marketing (and often PR and government relations) wing in Ontario. A good agent likely has a decent working relationship with LCBO buyers (and possibly LCBO executives), knows how to navigate the system and work through the reams of often byzantine paperwork, knows which LCBO sales channel (and there are several) would work best for you, knows the market, can assist with pricing decisions and – perhaps most importantly – has the patience of a saint and the tenacity of a limpet. While you may luck out and get a bite on your first cast into LCBO waters, this typically isn’t the case.
Suppliers often become frustrated and blame their agents for the lack of LCBO purchase orders. Truth be told, it’s very rarely a failure on the agent’s part. Even the most seasoned of them are often left scratching their heads when it comes to explaining why a product was rejected, though there’s really no mystery (see “provincial liquor boards” paragraph five above).
Agents come in various shapes and sizes, from a one-person shop servicing Ontario only to corporations representing producers in each province and territory. Each type has its upside and down. Larger agents have a greater range, bigger budgets and more salespeople in the field. It’s also no secret that the LCBO tends to favor larger agencies when it comes to new and subsequent listings. The downside is that, as a craft producer, you may not have the volume of product to meet a large agent’s financial needs. Also, large agents often give the most attention to the suppliers in their portfolio that generate the most income. This might not be you.
A smaller agency, while not having the range or resources of the big guys, typically has a smaller portfolio and can dedicate resources to building your individual brand in the market. In any case, any agency will be projecting a bottom line and weighing the effort needed to reach it before taking on any new supplier.
Having an agent (of whatever size) doesn’t mean you can simply sign an agreement and then sit back and watch the revenue roll in. You and your agent must present a marketing plan to convince LCBO buyers to take a chance on an unknown brand. This chance will be better if your marketing plan includes numerous accolades and high scores from critics and the media.
Once accepted, you still have to physically get your goods into the province. Large orders – or orders within reach of convenient co-loading ports – are usually easy to deal with. In fact, the LCBO will take care of most of the shipping and customs clearance responsibilities (while marking up any incurred costs and applying that to the cost of your shipment). Looking to ship in five cases of craft spirit from upstate New York? Though Ontario might literally be just across the lake, getting these cases into the province can pose challenges and requires that you, the supplier, do some homework before attempting to ship.
Of course, once the goods do arrive, it’s not like the items are immediately shipped out to stores or offered for online purchase. The LCBO chemically analyzes all beverage alcohol products destined for sale in the province. It also holds the agent and supplier to specific labeling requirements (details here: https://www.doingbusinesswithlcbo.com/content/dbwl/en/basepage/home/quality-assurance/quality-assurance-policies—guidelines/labelling/-lcbo-product-packaging-standards-and-guidelines-for-chemical-an.html). Lab testing isn’t provided free of charge. If your product fails well, you have the option of having it shipped back (on your dime) or destroyed (also on your dime). If “corrective labeling” is required to make your labels compliant, you’ll be charged for that, too. Be forewarned, the time it takes to have your stuff available for sale once it landed can be frustratingly long, and the reasons given (or typically not given) for the delay will almost be guaranteed to cause further frustration.
You might also be (unpleasantly) surprised to find out what the retail price of your product will be once it’s available for sale (though, to be fair, you will know this before you even decide whether a sale to Ontario is worth the bother). To quote the LCBO’s website: “The price that is seen in a store or online is a combination of the supplier’s price plus import duties, freight, levies, a standard markup, HST and container deposit.” The “standard markup” on spirits is a modest 139.7 percent. The Harmonized Sales Tax (HST) is 13 percent. All of these costs are passed on to the end consumer.
Things aren’t much easier if you’re a craft brewer. You might have heard of The Beer Store (TBS) and think this might be a way around the burdensome LCBO process. Think again. TBS is simply another monopoly, only rather than being run by the government, Canada’s three big brewers run it. If you think they are interested in offering competing products on their store shelves, keep dreaming. As with distillers, foreign brewers really have no choice but to deal with the LCBO.
Finally (at least as far as this story goes), getting your product into the LCBO system is no guarantee it’ll stay there. You’ll be expected to meet sales quotas. If you do, reorders are likely – probably in larger amounts than your initial order. If it looks like you can’t, well, you can always try throwing more money into marketing, promotion and advertising. But in the end, if the consumer judges your product to be a dog or has no interest in trying it, it’s off the shelf – which is really no different from most retail products.
Believe it or not, I’m not trying to discourage any beer or spirits producer reading this from trying to get a toehold in the Ontario – or Canadian – market. Personally, I’d love to be able to sample your wares. It won’t be easy, but it could be worth it, given the adult populations of major centers. Look on the bright side, if things go well, you might be able to unload your entire annual production on one customer – and with that customer being a government agency, payment is hardly ever an issue. Or you might decide that the LCBO is just another four-letter word.
You want to be the life of the party, but you do not want the party to take the life out of you. So you are on the hunt for a middle ground where you can entertain and imbibe with friends yet feel refreshed in the morning. So far, you have tried mocktails and light cocktails with just a splash or two of tequila. Globally, you are not alone. Just like you, people are looking for lighter spirits that maintain a robust flavor profile. Luckily, the industry is catching on. Spirits, ready-to-drink bever-ages and beer brands create must-have light spirits and drinks to keep the party going without tip-ping the scales.
This change is a major innovation in an industry where consumers desire more than just the same thing packaged differently. Light spirits attract discerning beverage enthusiasts who seek a healthier lifestyle or simply to consume less alcohol. However, craftsmanship and ingredient still matter, and consumers are not ready to compromise quality. Brands who plan to enter this burgeoning, niche market must understand consumer demand and how and what to bring to the shelves.
What is a Light Spirit?
When discussing light spirits, it sounds like we are talking about the paranormal. Alas, we are not. However, it does seem like magic when thinking about a once hard liquor becoming less potent.
So, what is a light spirit? A light spirit, also known as a spirit drink, is an alcoholic beverage that contains a low alcohol percentage between 0.05% and 1.2%. This percentage scale is not consistent across the board and is dependent on the alcohol type. Some lighter alcohols are referred to as “re-duced alcoholic” beverages since they contain higher alcohol content than light spirits. Anything above a 5% ABV is considered a reduced or moderate alcoholic beverage. Moderate alcohol drinks contain approximately 9.5% ABV. This percentage scales up to 20% ABV for spirits, far below the higher alcohol range for spirits with a legal minimum of 40% ABV.
As the market gains momentum, lighter spirits will provide consumers an outlet to create and im-bibe quality cocktails and drinks that still taste as good as their full alcohol counterparts. One could consider lighter Scotches, whiskeys and gins as the rebellious offspring of the spirit world, having one foot in tradition and the other in modernity. An example is Scotlands’s Whyte & Mackay Light with a 20% ABV. This smooth, earthy spirit is aged in bourbon and Sherry casks. The fact that it can be enjoyed neat or over ice is a true test for a moderate spirit.
This trend has seen gains in North America and across the globe. A study conducted on alcohol consumption in the U.K. found that Brittons are either reducing their alcohol intake or opting for no or low alcohol alternatives. According to the study, by 2030, there will be a decrease in alcohol consumption per adult by 11 liters. The change is predominantly led by individuals 18-24 in the U.K. and 25-34 in the U.S.
The results provide perhaps an unexpected pivot from previous generations who viewed these years as a time when drinks were endless and throwing caution to the wind was the norm. The “vi-va forever” celebration no longer fits the ideals of many younger imbibers. Light spirits seem like an appropriate transition for these consumers, who have less desire for wild nights of binge drink-ing.
Globally, the light spirit trend is set to grow 34%, a significant marker since product selection in this category can be limited. This growth possibility opens the door for some brands to change fo-cus and become light spirits producers.
Two things that cannot be compromised when crafting lighter spirits are that they must be premium quality, and they must blend in. It is not about standing out. It is about being a welcome addition to a bar cart or restaurant menu selection. The pleasant surprise for a low ABV spirit should be that there is no compromise on taste, so much so you cannot tell the difference between it and its higher alcohol counterpart.
Taking it Light & Easy Aroundthe Globe: South Korea
Change in every industry is inevitable. The transition to lower alcohol spirits has been slowly happening over the last ten years. Notably, in 2015, Diageo debuted a 35% ABV “spirit drink” – W Ice by Windsor – in South Korea. The spirit was the first low ABV whisky.
What spurred this change in South Korea? Simply, whisky is no longer the desired spirit. There was a time in South Korea when Scotch was the drink of choice and often used to make a popular drink called poktanju, a combination of beer and Scotch. Another reason for this change, similar to other countries around the world, is affordability. Younger consumers in South Korea want inex-pensive spirits. In addition, spirits synonymous with youth appeal to this generation. Although there has been a shift and the younger generation is finding interest in what was once considered an “old man’s” drink, the creation of spirits that appeal to younger consumers has taken hold as brands observe the popularity of vodka.
As a result, the goal of whisky brands in South Korea is to entice people to see it as a viable drink choice by lowering the alcohol content and promoting it under the guise of light and conscious im-bibing.
The Sensible Imbiber
Taking something old and giving it a new image needs to encompass more than beautiful packaging. A complete product delineation needs to be undertaken to make spirits appear new and fresh. The central premise must sit within the ideal of living a healthier lifestyle. Drinking just one glass of spirit neat or over ice and not feeling the effects also signifies the end of an era of binge drinking, ushering in a new time of sensible imbibing. For the light spirits consumer, drinking is about living life while not feeling pressured to be anything other than yourself. It is not about standing out or being the life of the party. Instead, it is about connection and requires one to slow down and experience moments that build memories worth remembering.
Expertise Now Rescues Craft Brewers from Costly Headaches Later
By: Cheryl Gray
Quality, precision and productivity are just some of the elements that factor in when deciding what brewery equipment to install.
Whether for a start-up or an expanding operation, equipment is a major investment, and there are companies whose expertise is to help guide their brewery clients toward making that investment pay off.
One of them is Craftmaster Stainless, a full-service stainless equipment provider that provides an expansive list of products for breweries, wineries and distilleries. The California-based company has clients across the United States and Canada. The company prides itself on the detail and finishing of every product its manufactures, as well as the customer service it provides before and after the sale.
Mackenzie Sant is a sales and equipment specialist for Craftmaster Stainless. He says that learning about craft brewing from the ground up introduced him to the company’s products. The team behind Craftmaster Stainless, Sant explains, has multiple years in brewing, technical detail and customer service. That experience supports the company’s ability to translate a client’s equipment wish list into a customized experience. It is just one of the company’s assets that Sant believes puts Craftmaster Stainless ahead of its competitors.
“We offer every piece of equipment someone needs to start a brewery. We want to be your one-stop shop. We won’t furnish your taproom or install your walk-in cooler, but we have all the equipment you need to upscale that popular homebrew batch or to upgrade from the ugly brewhouse you have been brewing in for four years. We wish we could have in-person meetings with everyone shopping for a new brewery, but a phone call works wonders. Tell us your business plan, what styles of beer you want to brew and projected production numbers, and we can spec out the equipment you need. We work closely with other manufacturers and suppliers in the U.S. to source equipment that we don’t produce, from the start of the brew day milling the grain, to chilling and carbonating before pouring a crispy pint.”
And just what does a newly-minted brewing operation need? Sant provides a checklist of essentials, beginning with a business plan and a building followed by must-have equipment, such as a mill/auger for crushing and transporting the grain to the mash tun, a mash tun/lauter tun for converting complex malt sugars into fermentable sugars and a kettle for “cooking” unfermented beer (wort), as well as for adding hops/adjuncts and pasteurizing the liquid to ensure a clean fermentation.
Sant adds that additional essentials include a heat exchanger to cool the wort down to fermentation temperatures, pumps for cleaning or transferring liquids, unitanks/conical fermenters for the bulk of fermentation, brite tanks for conditioning, clarification and carbonation and, lastly, a glycol chiller for controlling fermentation and conditioning temperatures. The latter, Sant advises pairs well with a cellar control panel to control each tank.
Regarding some of the most popular items on the product list for Craftmaster Stainless, Sant points to a number of items that highlight the company’s unique feel for what breweries need, including one piece of equipment that takes the tedium out of a very mundane but necessary chore.
“I would say our keg washer is the most popular piece of equipment at the moment. I think I speak for most brewers when I say that keg washing is probably one of the most repetitive jobs in the industry. This machine makes that job easy. It is seriously your best ‘employee.’ Once again, our customer service is always there to help with any trouble shooting. We understand downtime is not profitable, so we are always available to help. I would say our brewhouses are popular as well. They look great and they get the job done. Our level of customization on our brewhouses will catch your eye. We do have a couple other products releasing this year that will steal the spotlight for a while.”
The company’s new product launches include the Craftmaster Stainless Semi-Auto ‘Keggernaut’ Keg Washer and another new equipment item.
“We just released our Three Gallon Hop Doser. The Hop Doser is a great attribute in our equipment line up. When introducing hops into the brewing process, you don’t want to introduce oxygen. This hop doser allows you to dry hop without oxygen ingress. It can be used for other adjuncts as well, so use your imagination. Keep an eye out for equipment to come. There is so much technology in the industry that isn’t being used, and we have big plans for the future, while staying competitive.”
From Lincoln, Nebraska, is ABE Equipment Company, which designs and manufactures a variety of equipment for breweries. The company’s brewhouse equipment is custom-built, paying special attention to solving problem areas such as low ceilings, tight spaces, ventilation barriers and utility requirements. Ashlei Howell is the marketing manager for the firm’s parent company, Norland International.
“Our sweet spot is the 1,000 BBL to 5,000 BBL per year brewery. Our products cater to much larger breweries, and much of our equipment can be used on a much smaller scale, but the niche we serve will be a bit on the higher production end.
We pride ourselves on being able to offer a complete solution at a fair price. We handle everything from grain to glass. Everything is designed and assembled in Lincoln, Nebraska, and we employ over 130 hardworking Americans to make our suite of products. Our dedicated customer service technicians train our customers and make themselves available nearly anytime to answer questions.”
When it comes to introducing new products to the market, Howell explains that ABE Equipment Company is focused on what will increase its clients’ bottom line.
“Our newly released products have changed how breweries and distilleries package their product. The new CraftCan Go is a small footprint, one operator and a dual-purpose (atmospheric and counter pressure) canning machine. Breweries are packaging so much more than just beer in today’s environment.
A canning line capable of making beer, coffee, seltzer, tea, and anything else that may be high or low in carbonation adds versatility to the brewery. It sets that particular machine apart from anything else on the market.
The Patriot Fill Station allows companies to package virtually any beverage on a budget. It is a manual fill station allowing the user to package around eight bottles per minute. This machine can handle alcohol, syrups, oils and many more viscous or non-viscous liquids. With so many craft beverage companies coming to the market, having an affordable machine to get a product into a package at a reasonable price is a must for any beverage company wanting to stay ahead of the game.”
Howell offers input on some advanced equipment choices for breweries to consider.
“There are numerous products a brewery can add to its lineup to optimize production, save time, cut costs and much more. A yeast brink allows breweries to reuse yeast and can easily be added to your equipment lineup. If harvested and stored correctly, you can sometimes yield up to 10 generations of yeast, spreading the cost across multiple brews. With rising grain costs, adding a bulk grain silo is becoming a more economical option for breweries. Buying in bulk saves time when brewing, but you can cut significant costs when ordering large amounts of grain at a time. The ROI on a silo is easier to prove now more than ever. There are also a variety of smaller, simpler items, such as brite tank monitors, CIP carts, and brewhouse automation options that help improve production within a brewery.”
MISCO Refractometer and its 70-year history have earned a place in the specialty field of refractometry. Refractometers in the brewing industry are among the equipment needs experts say breweries should have on their checklist of items designed to ensure quality control. As the singular item that the company manufactures, MISCO offers a wide range of refractometer choices for different industries, but one specifically designed for brewing. The company says that its MISCO Digital Beer Refractometer deploys a patented design specific to wort and eliminates the need to use a refractometer correction factor when placing measurements into beer calculators.
Another advanced equipment option for breweries is a set of sieve plates for the mill. According to experts like Sant, even a one percent efficiency loss in this area could cost hundreds of thousands of dollars in a single year. Along with this, brewers may want to consider keg washers along with portable and inline flow meters. Sant recommends breweries make equipment choices with long-term gain in mind.
“Can you save money in the beginning by cutting cost on your equipment? Absolutely. But what about labor cost, repair cost for failing equipment and bad batch efficiency? The list goes on. Spend less time worrying about the equipment and more time worrying about the beer you are creating. A popular beer podcast said that every 10 minutes you save brewing is a cold beer at the end of the day. Spend that extra time focusing on different aspects of the process.”