Category: Distillery

Build Your Business Fast and Get it Right.

Cyndi
brewing and distilling machines

By: Kris Bohm of Distillery Now Consulting

Building a business fast and getting it right is hard to do. Many breweries and distilleries start with a far-flung idea that often takes months or years to initiate the process of bringing the idea to life. The thousands of steps needed to bring a big idea to life will take you down a path that is not obvious and certainly not direct. Going from concept to operation is a massive challenge, but with the right help and guidance it can be done quickly. There are many ways to fast track building a new business. Many of these fast methods are fraught with traps and mistakes that are expensive. The sure-fire way to build a business fast and to do it right is to work with those who have done it before. Let’s take a look at some of the biggest learning lessons from building multiple distilleries i’ve seen and help set you on the path to building your business fast and getting it right.

  Talk to any business owner of a brewery or distillery, and I guarantee you that the owner will have some stories about how they did not do some things right the first time. Whether the equipment they bought was too small, or the location was not ideal, there are always lessons to be learned from a first time start up business. One lesson that is particularly painful and hard to fix is poor location selection to start the business. Many challenges such as location selection and selecting the perfect equipment for that location can have long term problems that only an individual with direct experience can foresee. Another factor that is often forgotten in a new business is planning for growth. These are just a few factors critical to starting right and starting quickly. Let’s go over some real world examples of these situations and share some lessons learned the hard way.

  Selecting the optimal location can make a massive difference in the speed your business can get up and running. Finding a building that is zoned correctly is a huge step forward in starting the business. In many instances a business is planned to be started in a building that is not zoned for manufacturing aka light industrial use. To get a building rezoned or to get a zoning exemption can take months if not years and can be a costly endeavor. Seeking out a building that is zoned correctly to start with will help avoid this problem entirely. At first glance, hunting for the correctly zoned property can be so specific that it can feel like a hindrance to starting the business, but taking the extra time needed to find the right property with the correct zoning can save an immense amount of time to start up. In one instance it took a distillery an entire year to get a property and building rezoned and in this case the zoning had to be approved before construction was allowed to start.

  A major cost in building a distillery or brewery is bringing all the proper utilities to the building. The cost of adding sprinklers can be astronomical. Bringing fire water for a hydrant and or sprinklers to a building then installing fire sprinklers is not only costly, but can add months to the timeline of a construction project. The other primary utilities that are needed for a business to function are another factor that is important to consider. Manufacturing equipment often has large electrical demands for motors and requires 3 phase power. Seeking a building that has enough electricity to service the business is another factor that will help to fast track the construction and reduce construction cost. The 3 other critical utilities are sewer, water and gas. All 3 of these utilities have critical use in the business and when possible, finding a building with properly sized utilities in place can save hundreds of thousands of dollars on construction. Buildings that were previously used for manufacturing are often the best option that can potentially have all utilities needed. We recently helped a distillery open up in which the previous building tenant was a water bottling plant. This building already had all necessary utilities in place and floor drains. As a result this distillery was built out extremely quickly. The construction cost of this distillery was also quite low as there was minimal construction related to utilities.

  One challenge many businesses face as they start to grow is the room to grow. It is essential in selecting a location to seek a place with room to grow. Room to grow can mean many different things. Opportunity to grow can be as simple as a location with an empty lot or adjacent buildings that could be added to the operation. When a business outgrows the space it operates in, daily operations can become painful to manage. It can be hard to plan for growth when so much time and energy is being given to just getting started. Considering long term growth during location selection can be so valuable when it comes time to grow.

  When the ideal building is found to build your business, the location is often less than ideal in consideration to foot traffic into a tasting room. Oftentimes the perfect building is tucked far away into an industrial neighborhood that no one would ever stumble upon. This can be challenging for the business as a tasting room or cocktail lounge is often an important revenue center. As foot traffic is non-existent in most industrial neighborhoods, bringing visitors to an onsite tasting room can be difficult. One creative solution that solves this problem is the satellite tasting room. In some states an offsite tasting room is allowed with a distillers permit. A satellite tasting room is often a small tasting room or cocktail lounge that is located in a downtown or Main St setting. A downtown location like this is a great way to introduce people to your brand. A downtown location is also often an impossible place to build a manufacturing business. The satellite tasting room creates the opportunity to expand your business in a tourist area or location with strong foot traffic, to support the manufacturing operation with revenue.

  With such an extensive list of qualifications for the ideal location, it can seem a bit like chasing a unicorn to find the perfect building. It is unlikely you will find a building that checks every single box on my list. A location can certainly be found that checks most of the boxes if you hunt hard enough. For every key feature you find in a potential building these things can save you months of build time and large amounts of money. Finding the ideal space will take lots of diligent hunting. Further it takes the resolve to say no to a space if it is less than ideal. Saying no can be hard, as many spaces can be tempting to say yes and take the steps forward to start construction. It is actually quite common that the first or even second potential location selected for a business does not work out. In some cases I’ve seen several potential locations not end up working for a location.This is not to say that you must have all of these utilities in place for a location to work, but if the building does have it all you will be up and running really fast.

  When starting a manufacturing business, the right location can sometimes mean the difference between success and failure. Take the time to find the right place before you take the big leap to build the business. If you are unsure whether or not a location is right, then hire an experienced consultant or professional to help you consider your options. That professional could save you from making a costly mistake. Building it fast and getting it right can be done but must be done with care.

Proactive, Protective Measures to Avoid Liquor Liability

Cyndi
2 people negotiating showing hands

By: David DeLorenzo

There is a plethora of things business owners in the hospitality industry need to oversee and manage. Bars and restaurants that serve alcohol have the added challenge of serving their customers while also avoiding the liabilities associated with a guest’s alcohol consumption — and the choices they make upon leaving an establishment.

  One of the biggest dangers bar and restaurant owners should steer far clear of is becoming part of a lawsuit related to drunk driving. It cannot be overstated that establishments serving alcohol need to be extremely diligent about their protocols and also vigilant about their insurance policies. They should ensure they not only have proper coverage to protect their business and staff in the event of an alcohol-related lawsuit, they should also stay on top of the ever-changing liquor laws. This is for the safety and protection of all parties. 

  First and foremost, bar and restaurant owners should have good insurance. They also need to be aware of what their policies cover — and what they don’t. Though understanding the ins and outs of insurance may not seem like something that a hospitality business owner has time for, it is vital to the success of their business. Ideally, a bar or restaurant owner should work with an insurance agency that specializes in their industry and is well versed in the laws that impact it. They should also work with an agent who keeps current on the ever-changing laws that pertain to things like liquor policies. Keep in mind unexpected changes such as the ability to sell cocktails and other alcoholic beverages to go during COVID as well as marijuana usage and weapons exclusions, too, which are impacting today’s businesses in new ways.

  It’s always recommended business owners have their policies reviewed at least once a year. This way, they can be notified of changes or new exclusions or endorsements and take stock of whether they need to modify or add to their current policies to better protect themselves. This is also a good time to make note of any changes to the company that need to be reflected and protected in their policies. The “better safe than sorry” adage is not too cliché for this scenario. Just one incident can put a company out of business if they are not properly covered. Just as with auto insurance, some people may not understand they didn’t have the right coverage until an accident — and then it’s too late. This is where an agent that specializes in the hospitality industry can best guide and protect the business, staff and customers alike.

  Beyond air-tight insurance coverage, there are many things bar and restaurant owners can take into their own hands to ensure the safety and protection of staff and customers. Bar and restaurant owners should ensure they have the current certificates for serving alcohol in their state.

  Education is crucial. Employees must understand how liquor law works, how they can notice intoxication and know what steps that need to be taken in order to avoid overserving of alcohol.

This begins with safety training for all staff as well as training staff on how to properly identify an intoxicated person before they even enter the bar. Is it also vital that staff understands how to detect whether a customer is becoming intoxicated during their service.

  It is illegal for an establishment to allow an intoxicated person onto their premises — so safety begins at the door. It is important that a bar have door security to do ID checks to ensure first that guests are indeed of age and also that they are not intoxicated before they even step inside. In addition to door security, bars may want to invest in security personnel for their exterior or parking lot areas as well.

  Upon entry, it is also essential that staff understands how much is too much when it comes to serving their patrons. Training staff on the obvious symptoms of intoxication can help prevent a lawsuit. Signs to watch for can include slurring speech, becoming loud, the pace of their drinking, red eyes or flushed face. It is also important to note that it is illegal to serve an intoxicated person whether or not they are driving.

  Obviously no bar or restaurant owner wants to turn away customers or have to cut them off during their service. However, these measures need to be seen as non-negotiable safety protocols for staff and customers. It could be a matter of life or death if an intoxicated person decides to leave, get in their car and drive away. They are then not only putting their own lives in danger but putting others’ lives at risk.

  Another strategy bar and restaurant owners can employ to help protect themselves is the use of surveillance cameras in and around their property. This can be a lifesaver. Video surveillance can provide timestamped evidence of an incident, such as a fall in the kitchen or a server-customer interaction that can help prove vital in a court of law. Surveillance cameras are a wise investment and are there for safety and protection of all parties.

  It’s also crucial to think about specials bars and restaurants are offering. While happy hour drink specials are a great way to bring in much-needed customers to help boost sales, this can be a risky move — especially reverse happy hour specials that are offered at the end of the night or right before the restaurant is closing. It’s also a good idea to avoid “last call.” These measures can be construed in a lawsuit as encouraging patrons to order more drinks before alcohol will no longer be served or to order more alcoholic beverages because they are being offered at a discounted price.

  It is also key to stay up to date on liquor laws. Knowledge of any changes should be a red alert to check with the company’s insurance agent to see how that might impact current coverage. Staying in communication with their insurance agent can also help bar and restaurant owners ensure they are properly covered as laws and policies change.

  I understand that is a lot to keep up with, especially while trying to operate a bar or restaurant in today’s unstable climate. That is why I created my Connector and Protector Hospitality Series on YouTube. It features videos and interviews with experts on topics such as liquor liability and more to help guide bar and restaurant owners. It is a goal of mine to help my clients and everyone in the hospitality industry be successful — and safe.

  The bottom line is that no one wants an accident to happen to their customers or their staff. Putting simple protocols in place to avoid an incident may seem tedious. However, they can be lifesaving and could save a business if it is hit with a liquor liability lawsuit. Taking proactive and protective measures is for the benefit of all.

  Out of his passion to serve the restaurant and hospitality industry, David DeLorenzo created the Bar and Restaurant Insurance niche division of his father’s company The Ambassador Group, which he purchased in 2009. For more than 20 years, he has been dedicated to helping protect and connect the hospitality industry in Arizona. For more information visit barandrestaurantinsurance.com

Yeast Considerations & Management for Beer, Cider and Spirits

Cyndi
close up of beer liquid

By:  Alyssa L. Ochs

Without yeast, there would be no such thing as the modern form of beer we have come to know and love. This fascinating microorganism is responsible for the essential fermentation process of this beloved beverage. As a living organism and unicellular type of fungi that consumes sugars to produce carbon dioxide and create alcohol carbonation, esters and phenols, yeast influences the quality of a beer and the properties that make it unique.

  Meanwhile, yeast is also valuable for making cider and spirits by impacting flavors and alcohol content during fermentation. Certain yeast strains have proven beneficial for these purposes, while proper yeast measurement and management are critical for a successful craft beverage. To learn more, Beverage Master Magazine connected with industry experts to explore the topic of using yeast in breweries, cideries and distilleries.

Types and Variations of Yeast

  Various kinds of brewery yeast are available to aid craft beverage production, including ale, lager, wheat beer and Belgian yeast strains. Yeasts, such as champagne, wine, beer, wild and cider-specific yeast, are also available for making cider. Craft spirit distillers have traditionally used the saccharomyces cerevisiae species of yeast because of how it converts sugars and produces consistent alcohol without adding off-flavors.

  Hybrid yeast strains that cannot be categorized into the typical types are available and work well when other yeasts are too warm for lagers or too cold for ales, for example. Hybrids can be beneficial for altbier, Kolsch, blonde ale, cream ale and American wheat beer styles. Gene-edited yeasts are genetically modified to achieve more creative flavors and opportunities to mix beer yeast strains to achieve complementary characteristics. While non-saccharomyces were once considered contaminants in brewing and winemaking, recent research suggests they may provide unique sensory characteristics and future potential. All of this goes to show that there’s a lot more to yeast than what you might initially expect in the craft beverage industry.

Fermentation Products for Spirits – Lallemand Biofuels & Distilled Spirits

  To discuss the distilling side of yeast, Mitch Codd, the technical sales leader for Lallemand Biofuels & Distilled Spirits, told Beverage Master Magazine about his company’s role as a leading supplier of fermentation ingredients and how it provides distillers with high-quality yeast, nutrients, enzymes, bacteria, tech support and education programs.

  Codd explained how saccharomyces cerevisiae have been utilized, domesticated and bred for thousands of years. He said that in doing so, humans have selected traits advantageous to whatever application they need, such as baking, brewing beer or making whiskey. Because of this domestication and selection, we now have different types and strains to choose from, each exhibiting unique characteristics from one another.

  “In distilling, there are several important factors that should be considered when choosing a yeast strain,” Codd said. “In the production of spirits, our main goals for fermentations are to utilize all available sugars while also producing desirable flavors and aromas. We may also wish to reduce the production of flavors as much as possible, in the case of making vodka. Both flavorful and neutral spirit productions are feasible and may require a specific yeast selection.”

  “Interestingly, some strains of yeast will utilize maltotriose, a common sugar found in whiskey fermentations, while others may not use them at all,” Codd continued. “The same goes for rum yeast or agave yeast. Molasses will contain high amounts of sucrose while agave fermentations can be high in a sugar called fructose, which can be difficult for some yeast to fully utilize. If we choose a strain of yeast specifically intended for rum or agave, the fermentation will finish dry, and we won’t be sending these valuable sugars to the still. The esters and congeners that each of these strains produce are quite specific to the genetics of each strain. A rum yeast may produce a very high level of isoamyl acetate, responsible for the ripe banana flavor in a heavier rum while a whiskey strain may produce lower levels of Isoamyl acetate but higher levels of phenethyl acetate which would bring a rose or floral note to a good rye whiskey. The strain of yeast we choose for our fermentation can dramatically impact our total amount of spirit produced, as well as the actual flavor and aroma of the final spirit.”

  Customers often ask the Lallemand Distilling team whether a beer or wine strain of yeast can be used for spirits. Codd says that the answer is “maybe” because the strain of yeast chosen is often very specific to the type of final product.

  “Some beer strains can produce a lot of aromas and flavors,” Codd said. “For example, saison strains will generally produce a lot of isoamyl acetate. If that is specifically something we want in a whiskey, it may be possible to use this strain for that fermentation. Oftentimes, however, this will come with fairly significant drawbacks. In the case of using a beer strain for whiskey, one of the more common issues would be with sugar utilization. Earlier, I mentioned that maltotriose, the three-chain sugar molecule, can be very difficult or impossible for some yeast to utilize. A lot of beer strains will never use this sugar, as it is usually desired to have some sweetness left over in the final beer. In distillation, this sugar will never actually show up in the spirit, but it will burn in the still and create off-flavors in your final spirit.”

  “The same concept goes for using wine strains in distilling,” said Codd. “There may be some cases where this practice could make sense and produce a great spirit, but more often than not, a quality distilling strain will produce a far superior product than a beer or wine strain in the same conditions. Since the science of distilled spirits production has advanced so far recently, there are great yeast strains specific for distilling that will help you achieve any goal with respect to flavor production.”

Yeast Measurement and Management – Aber Instruments

  Not only is the type of yeast important in beverage production, but also accurate yeast management and understanding how many live yeast cells are helping you achieve your production goals. Aber Instruments Ltd., UK, headquartered in Aberystwyth, UK, specializes in yeast measurement and management solutions for the brewery industry. They also have an office in Alexandria, Virginia to better support their customers in the Americas. Aber’s yeast monitors are designed to be used in real-time to measure live yeast concentrations. Its Online Compact Range features the flagship Compact Yeast Monitor, the Compact Adapt and the recently released Compact PerfectPitch mobile skid to improve pitch performance and consistency. Meanwhile, Aber’s Countstar Yeast expedites and automates lab yeast readings.

  All major brewing groups and many innovative craft brewing companies, including Summit, Marble and Meantime, have trusted Aber to optimize their pitching and production processes. But in addition to offering these products for effective yeast management in the brewing industry, Aber is engaged in industry research and has published the findings of multiple studies in scientific journals and magazines.

  For example, Aber Instruments introduced the concept of a portable yeast pitching skid for craft brewing and aimed to scale this new technology for smaller breweries. The London-based Meantime Brewing Co. performed a case study to assess the PerfectPitch product’s functionality and found significant improvements in yield and predictability in the pitching process, concluding that the unit ultimately pays for itself. In the case of the Meantime Brewing Co., the Aber PerfectPitch helped reduce fermentation times and improve productivity by up to 25 percent without needing to invest separately in real estate. In a separate study, Aber reported on the process improvements of a yeast monitor tested in South Africa after checking the real degree of fermentation and ferment rates before and after its installation.

  To assess a new rapid automated yeast cell counter that uses a bright-field microscopy and dye-exclusion method, the Aber Countstar Yeast, the company published an article with promising findings in the Journal of the Institute of Brewing & Distilling. According to the report, “The automated cell counter successfully reduced inter-operator errors, a major hindrance with manual analyses. Tests carried out at a brewery in the UK demonstrated that the cell counter provides consistent counts for assorted yeast strains. External tests highlighted the instrument’s ease of use and consistency among different strains of brewing yeast and various stages in the brewing process.”

Yeast Recommendations and Innovations

  Dr. Aditya Bhat, the vice president of technology for Aber Instruments, told Beverage Master Magazine that in his experience of supporting the craft brewing industry over the years, depending on the size of the brewery, craft brewers either acquire yeast from a yeast supplier or they grow and propagate their own yeast. Yeast purchased from a supplier, usually in dry form, must be rehydrated before it is used for pitching and fermentation and monitored for the yeast’s quality and viability.

  “Typically, larger brewers have a cut-off viability percent, below which they will discard the yeast,” Bhat said. “Depending on the brewery, this is typically around 85 to 90 percent viability. The presence of dead cells is detrimental to the final quality and flavor of the beer, hence the importance to check viability. For craft brewers, you would want to use a simple, easy-to-use, plug-and-play technology for this estimation. Something like the Aber Countstar Yeast works really well. It is sometimes known in the brewing world as a ‘lab-in-a-box’ – technology that calculates parameters like live cell count, dead cell count, viability, cell size, percentage aggregate and circularity index in just a few minutes from preparation to measurement.”

  For yeasts propagated in-house, Bhat said that monitoring the propagation in real time has several benefits and can be done using the Aber Compact or Compact Adapt Yeast Monitor.

  “Aber technology will enable you to track the entire propagation process, identify whether the process is going well or is deviating from expectation, activate troubleshooting steps if necessary, save time and energy because of real time monitoring and action and identify when there are enough yeast cells in the propagator to pitch the next brew,” Bhat said. “It makes planning a lot easier, and better planning typically leads to an increase in productivity.”

 There are many things to look forward to with craft beverage yeasts and exciting innovations, such as gene-edited yeast strains. Codd from Lallemand Biofuels & Distilled Spirits explained that a strain of yeast that has been gene-edited is a natural yeast but has been “steered” towards expressing specific characteristics through the intervention of lab methods and DNA editing.

  “Sometimes this has a sort of ‘spooky’ connotation to it, but in reality, using these methods can be incredibly safe and specific with the results that are achieved,” Codd said. “With modern day methods, the changes that are made are precise, and oftentimes they are just changes that boost or suppress natural pathways the yeast is already expressing.”

Codd said that gene-edited yeast strains are a fairly new concept to the distilling industry, with no real precedent yet for use but plenty of promise. In adjacent industries like brewing, these strains seem to have been embraced with open arms, and use was adopted very quickly when they became available.

  “Strains like Lallemand’s “Sourvisiae” beer yeast, which is able to produce sour beers in a single-step fermentation without the need for kettle souring or bacterial additions, are now commonplace in breweries across the country,” Codd said. “I believe the distilling industry would be a fantastic next step for the use of these strains, and there are plenty of really interesting opportunities that it presents. With the recent focus across our industry, and the world, on sustainability, gene edited yeast could help us make big strides in reducing the footprint spirits production has on the environment.”

  But while it is easy to get wrapped up in these more “flashy” innovations on the horizon, Codd said there’s also a lot of promise in some of the more traditional strain development methods.

  “The microorganisms that are responsible for fermentation have an incredible amount of genetic diversity, all with their own unique characteristics,” Codd said. “It’s reasonable to assume that, with that much diversity, there are some really exciting expressions of yeast strains just waiting to be found out there. Every strain we use today has to be discovered at one point in time. The exciting thing is that now we have whole laboratories and companies devoted to searching for or prospecting for these future strains, Lallemand being one of them.”

  “We may find that we can breed various strains together and get an even better flavor expression from the new yeast, or we can search in interesting historical environments and bring a historical strain to market that creates a whiskey similar to what George Washington would have produced,” Codd said. “With new methods, we can screen enormous libraries of yeast and use powerful analytical methods to see exactly what congeners they produce and how well they ferment our intended mash or wash. Most of the next generation of yeast strains will likely be from our tried-and-true species saccharomyces cerevisiae, but there are also several other genres of yeast that seem interesting, colloquially known as ‘non-sacch’s.’ These may prove to be a valuable addition to the distiller’s toolbox in the future.”

Contract Packaging Agreements

Cyndi

Purpose in Brand Owner and Manufacturer Relationship and a Look at Some Key Provisions

2 people shaking hands

By: Brad Berkman and Louis J. Terminello, Greenspoon Marder

Brewers and brand owners both, do not underestimate the importance of a well drafted “contract bottling agreement.” First, for the uninitiated let’s briefly explore what in fact, a contract package arrangement is and brand development within the context of that arrangement.

  Breaking into the realm of manufacturing alcoholic beverages can be a very expensive endeavor. Startup costs for opening a brewery, distillery or a winery can be immense. Even startup costs at the “craft” level are significant. Land and facilities must be bought or leased, mechanical, electrical, and plumbing systems need designing and buildout, and of course, manufacturing equipment such as tanks, stills, bottling lines, and pumps must be purchased and installed, among many other things. The costs can be very high. Hundreds of thousands of dollars, likely even more, will come out of pocket before the first bag of grain is poured into a mash tank, distilled, and bottled, labeled, and a corked brand comes rolling down the bottling line. Of course, merely producing an alcoholic beverage brand is just the beginning. The idea is to sell bottles, boxes, pallets, and container loads of happiness in the bottle. This of course requires tremendous expenditures on brand marketing, sales, and promotional initiatives. Happiness in the bottle can quickly turn into weeping in one’s glass if poor planning is exercised.

  Enter the contract package arrangement. A business deal that benefits the independent brand owner and marketer and the skilled brewer, distiller, or wine maker. It is the foundation of a symbiotic relationship that cuts costs for both parties and goes a long way in increasing the likelihood for the economic success of each. In the simplest terms, in a contract package relationship, a brand owner will “contract” with an existing manufacturer to produce and bottle and alcoholic beverage for the owner. All production and labor are contributed by the producer, paid for by the brand owners, ultimately leading to a finished product owned and ready for sale in the market by the brand owner.

  For manufacturers, contract packaging, in addition to bottling their own labels, can be a significant and badly needed additional stream of revenue. For the brand owner, the significant cost savings from avoiding building out a plant are immense and allows for valuable financial resources to be directed to advertising and marketing activities. After all, a bottle is not going to come off the retailer’s shelf by itself.

  With the above in mind, this article will examine some of the key provisions that must be addressed in any well drafted contract packaging agreement that are likely concerns of both parties to any agreement of this sort. When crafted properly, the agreement will ensure that the rights, duties and obligations of both parties are clearly defined, ideally leading to an unambiguous business relationship. It is important to note that every deal is different, and the terms of a well drafted agreement will be deal specific. The below provides general but important guidance on some essential terms.

A few Key Provisions:

  Intellectual Property Rights and Licensing

The brand owner almost always has spent significant treasure in developing a brand name and identity. The first step in protecting brand ownership commences in fact prior to entering into a contract packaging agreement. The brand owner should make every effort to trademark the brand name and logo in the appropriate trademark categories prior to bottling and sale in the marketplace.

  Building brand equity or value is a labor intensive and costly exercise. Trademarking the brand name is an absolute requirement to ensure brand value remains with the owner. As for the contract packing agreement, the brand owner will grand a limited, non-exclusive license to the manufacture to produce and bottle the product for the duration of the agreement. At termination of the relationship, the limited license shall cease to exist, and the manufacturer will generally have no future rights to the brand name.

Formulation, Ownership

  Product formulation must be addressed in these agreements as well. Both the manufacturer and brand owner must agree prior to production, the formulation specifications and method of manufacture of the liquid in the bottle. A well-crafted agreement should address deviations from the agreed upon formula. If a dispute arises between the parties in regard to formulation and product quality or integrity, a means for determining fault should be incorporated into the agreement. It is highly recommended that third party laboratories are identified in the agreement where the finished product can be sent for testing and ultimately assignment of responsibility.

  Compensation to the injured party for out-of-spec liquid should be codified as well.  The contract should also address formula ownership and use of the liquid. Common place vodkas, as example, are drastically different from unique formulations with unique ingredients. Assignment of ownership of the formula should be addressed in any contract packaging agreement in a similar fashion as usage of the brand name as described above.

Raw Materials, Packaging

  Every beverage product produced requires raw materials and packaging materials. Grains, malt, yeast, and other ingredients are required as well as bottles, labels, stoppers, and cases. These items can be secured by the manufacturer as part of the contract arrangement, or they can be secured by the brand owner and delivered to the producer’s plant (producer is used interchangeably with manufacturer). The acquisition of these items is very important for many reasons including the quality of the materials used and the costs involved.

  Ultimately, the costs of these materials will determine the price of the finished product on the shelf. The parties to any agreement should establish roles and responsibilities for obtaining these items to ensure adequate supplies of the same at the right cost point. Storage of inventory of both raw materials and packing and how to deal with defective materials should be sorted through by the parties with the costs assigned accordingly.

Production Quantities

  Production amounts are an essential element of negotiations and memorializing them in an agreement is vital. Both the manufacturer and brand owner need to align their expectations on this issue. Either party will quickly cry breach of an agreement if the manufacturer cannot produce the quantities the brand owner requires and conversely, the manufacturer will do the same if the brand owner does not contract and purchase the quantities bargained for. 

  Realistic volume expectations need to be established for both parties to the agreement. As an offering of sage advice, if there is not a meeting of the minds on this issue by the parties, it is best to walk away from any arrangement. Further, it is advisable to incorporate reasonable and realistic annual volume growth expectations, year over year, in a multi-year agreement.

Payment Terms

  It goes without saying that payment terms may be the most important part of a contract packaging agreement. Clearly both parties need to know when they will make and receive payment and the timing of the same. In some instances, manufacturers may be willing to provide favorable credit terms, (most likely offered to a long-standing brand owner partner who has well established credit).

  In many instances manufacturers may require all monies to be paid prior to production. In other instances, they may require one-half of the production amount prior to commencing manufacturer, the remainder due at pick up of the finished product. Once again, this essential term must be negotiated and memorialized in a well drafted contract package agreement.

Quality Control and Product Recall

  This provision was briefly mentioned above but is worth restating here. Ideally, production moves along without a hitch and product quality and integrity remains excellent. Of course, that is not always the case. There are times when product formulation is off or foreign objects make their way into the bottle. The parties to a production agreement must memorialize issues such as the right to inspect finished product prior to leaving manufacturers warehouse, the procedures and allocation of costs if in fact product must be recalled.

  As a final thought, contract packing agreements must be beverage law compliant.  Additional terms in the agreement must comport with and be legal under alcohol beverage law and the parties to the agreement must be licensed accordingly.

  The above is very much a sketch of some important issues that must be addressed in a well-crafted contract package agreement. There are many other areas that must be negotiated between the parties and included. A word to the wise, it is always beneficial to both parties to consult with attorneys who are experts in this area. Ideally, the agreement should provide a business framework that makes for a productive relationship between manufacturer and brand owner and anticipate problems that may arise and incorporates mechanisms and procedures for addressing reasonably foreseeable issues.

Holladay Distillery

Cyndi

Missouri Bourbon With Real Historical Origins

facade of holladay facility

By: Gerald Dlubala

If the name Ben Holladay doesn’t sound familiar to you, you’re not alone. But Holladay is probably one of the least known yet most influential figures in not only Missouri history but in American history as well.

“He really was,” said Jordan Germano,  Communcations Manager for McCormick Distilling Company. McCormick packages their family of brands on the same historic Weston, Missouri site where Holladay Bourbon is distilled. “Ben Holladay was born and raised in Kentucky and moved to St. Louis, Missouri, at 17 years of age,” said Germano. “From there, he moved to Weston, Missouri, aptly named because, at the time, it was the westernmost city related to the trade centers. While living in Weston, Holladay was known as a serial entrepreneur and transportation tycoon.”

  Holladay’s string of successes led him to be known as the “Stagecoach King,” named for creating the Overland Express stagecoach line that he ultimately sold to Wells Fargo. Holladay also owned steamships, streetcars, a railroad, and even the Pony Express for a brief time. He also became the first postmaster and owned a saloon, silver mine and hotel. Holladay was the largest individual employer in the US in the late 1800s, building an empire that spanned the country. His lasting legacy, however, is that of quality bourbon distiller, beginning when he purchased a parcel of land in Weston, Missouri, that included a natural limestone water supply. Born and raised in Kentucky, Holladay and his brother, Major David, already knew the advantage of having a limestone water source on site. So, in 1856, the Holladay brothers began their whiskey journey by making their first batch and officially launching the Holladay Distillery. The following year, in 1857, that batch sold. Now, 167 years later, the distillery is still located on the original site and is recognized on the National Register Of Historic Places as the oldest distillery west of the Mississippi.

  “The distillery never really closed down during all of those years,” said Jordan Germano, “During prohibition, Holladay Distillery was one of the few distillers granted a license to package and distribute their whiskey for strictly medicinal purposes. When prohibition ended, Holladay again began producing bourbon until 1985. At that time, and I know it’s a little hard to believe in our current market, bourbon just wasn’t popular. It wasn’t a trendy drink or something people would seek out, so we stopped making bourbon and concentrated instead on making clear spirits, which were all the rage at that time. In 2015, we refocused and realized we were sitting on a historic property with everything we needed to make great-tasting, quality bourbon, including our own limestone water source and iron-clad historic rickhouses. These things are not common outside of Kentucky, so much so that we are the only Missouri distillery to have them, so we asked ourselves why we weren’t distilling bourbon when everything on the property told us we should.

Everything Necessary For Quality Bourbon Is On Site

  Germano told Beverage Master Magazine that the first structure on the property dates back to the early 1900s, the second one is from the 1930s, and the third and most prominent structure, enough to house up to 12,000 barrels, is from the 1950s. After ensuring the structures’ soundness and integrity, two of the three are currently being filled for aging.

  “When restarting bourbon production, we knew we had the location, resources, and the ability to wait at least six years to produce a truly authentic and quality product, so that became our goal,” said Germano. “In 2022, we released Ben Holladay Bourbon, using his original recipe with a traditional mash bill of corn, barley and rye. Then, about a year into the process, our president wanted to distill and age a bourbon with wheat, something similar to a Maker’s Mark or Willet, by swapping out our rye for wheat in the mashbill. It makes a huge difference. Our president’s reasoning for doing this was as simple as he liked it and wanted to make his own. No one knew or anticipated six years ago that this style would be popular now and in demand, so when we introduced our Holladay Soft Red Wheat this past March, it was a huge success. Our president has always been a creative thinker focusing on what is next for distilling and us.”

  Ben Holladay Bourbon and Holladay Red Wheat are Bottled-in-Bond, and even though these two premium bourbons are popular and widely distributed, the Holladay Distillery also has barrel-strength versions of both, called rickhouse-proof releases.

  “Yeah, we wanted to be a little different, so we call our barrel strength products rickhouse-proof,” said Germano. “Every month when we bottle, whether it’s our Ben Holladay Bourbon or our Holladay Soft Red Wheat, we’ll fill some cases at rickhouse proof to be sold here on site. We also do on-site barrel picks and try to keep at least one or two expressions of a Holladay One Barrel Bourbon, our version of a single barrel bourbon. At our welcome center, you’ll always find a one-barrel bourbon of both Ben Holladay Bourbon and Holladay Soft Red wheat to sample and hopefully purchase, but they sell out almost immediately. We released our first Soft Red Wheat one barrel this past weekend, and it was gone before the weekend was over. You can always taste an individual sample, and we have flight options to taste something you’re interested in.”

  Ben Holladay handcrafted bourbon is made using the distillery’s original methods and authentic recipe. Each batch is aged in level three, charred Missouri white oak barrels, and is non-chill filtered. Holladay’s master distiller blends the batches that are pulled monthly from different barrels spread out on different floors of their two, seven-story rickhouses on site. The Ben Holladay Bourbon label allows consumers to identify the blending process by displaying a blending chart that distinguishes the individual batches. Blending is done due to the temperature variances between the top and bottom floors that can produce differences in taste between the barrels. The first-floor barrels age in cooler temperatures and higher humidity versus the warmer, drier conditions of the higher floors. Although the differences diminish over time, Holladay’s distiller notes conclude that they are still present to a lesser degree at the six-year aging stage. The master distiller ensures that all blended batches match Holladay Distillery’s strict criteria for flavor profile.

Learn The Process Behind Real Missouri Bourbon And Taste The Quality Results

  “We’ve used all local ingredients since 2019”, said Germano. “Our bourbon is made in Missouri, using Missouri corn and Missouri-made barrels through Independent Stave Company in Lebanon, Missouri, earning us the classification of being a real Missouri Bourbon, a classification made legally available in 2019.”

  “We don’t like to tell our consumers what they should experience or taste when drinking our bourbon, simply because we’ve found that all people are different and pick out different notes,” said Germano. “But at minimum, I can tell you that Ben Holladay Bourbon is not overly oak forward and typically described as a solid bourbon, with traditional yet distinctive notes of rye, baking spice, vanilla and corn. Our Holladay Soft Red Wheat features vanilla and caramel and is softer, sweeter, and maybe a bit lighter on the mouthfeel.”

  Holladay Distillery offers tours Friday through Sunday, allowing visitors the opportunity to see first-hand Holladay’s water-to-table abilities and process, all done on-site. Enjoy a cocktail on the 90-minute tour while visiting the water house and learning how Holladay Distillery creates its bourbon, including information on how their still works, the fermenting process, and Holladay’s use of the on-site aging warehouses. The informative tour culminates with a proper tasting. Holladay Distillery’s welcome center is ideal for shopping and retail. Also, it houses a full-service craft cocktail bar for visitors to hang out and enjoy a craft cocktail or choose a tasting flight to satisfy their curiosity about any products.

  “We also have an on-site, state-of-the-art event space,” said Germano. “We transformed an old open-air pavilion area to now feature glass garage doors on two sides that open for a more outdoor feel when desired. It seats about 100 for corporate events, birthday parties, or other well-attended get-togethers. It’s a great place for fun, interactive, or specially ticketed public events, and it’s where we host bourbon masters panels that feature master distillers and other bourbon experts.”

Excitement And Anticipation Fill The Future

“We have another structure on site that we call the ancient cave,” said Germano. “It was actually the first structure on site and originally used by Holladay Distillery to age barrels. More recently, we’ve used it for entertaining, activities and as a cool venue to show our tour guests an introductory video about our distillery. But our master distiller started getting into using experimental barrels and needed a proper place to store and age his creations, and this ancient cave met all of his needs. So now, it’s used for the experimental barrels, which we will eventually release as our Ancient Cave Collection. We currently have 15 different types of barrels aging and waiting for their second finish, including French Oak Heavy Toast, Apple Hickory Smoked, and more. We have no specific timeline for releasing these collections other than saying they will be released when they are ready. But we can’t wait to share this unique collection with our on-site visitors and in the welcome center when they are ready.”

A Diverse Portfolio To Satisfy Your Taste

Germano tells Beverage Master Magazine that Holladay Distillery’s bourbon distribution is continuously increasing, with Iowa being the latest to get the products on shelves. Bourbon distribution tends to be a slower rollout, but orders are accepted online through Seelbach’s, an online retailer dedicated to craft distillers. The Holladay Distillery family includes 360 Vodka, Tequila Rose Strawberry Cream Liqueur, and Five Farms Irish Liqueur. Tequila Rose has been produced since the 1990s and was the first cream liqueur to hit the market other than Irish Cream, paving the way for the wide distribution of many other cream liqueurs like Rumchata. The popular Five Farms Irish Cream contains 17% alcohol, 10% of which is premium Irish Whiskey. Competitors in this market typically only include 1% Irish Whiskey, with the balance being neutral grain alcohol like vodka. Germano says that McCormick wanted to offer something a little different in the Irish Cream market, so Five Farms Irish Cream uses quality ingredients from only five known family farms, allowing McCormick Distilling to know precisely where the cream is coming from rather than relying on co-ops to provide the necessary ingredients through various sources.

The Northwest Whiskey Trail Pays Tribute to Pacific Coast Distilleries   

Cyndi
northwest whiskey trail cup

By: Becky Garrison

Launched in June 2023, the Northwest Whiskey Trail has the distinction of being the first distillery trail to cross an international border. The brainchild of Graeme Macaloney, Ph.D., CEO, and Whiskymaker at Macaloney’s Island Distillery & TWA Dogs Beer, this self-guided trail guides visitors in a quest to sample award-winning whiskies that speak to this region.

  Traditionally, whiskey is known for its consistency and heterogeneity with each bottle distilled so that each bottle of a given branded whiskey tastes identically. In comparison, Northwest whiskies are informed by the local climate and locally sourced raw materials that result in expressions of whiskey that are unique to that particular distillery. While the term terroir is typically used to describe the different types of soil for growing wine grapes, as Doug Frost notes in The Oxford Companion to Spirits and Cocktails, simply put, “terroir” is the terrain. “The factors that can vary with a spirit’s place of origin include climate, weather, season, topography, geography, proximity to specific flora, soil, subsoils, and the place and conditions under which these beverages are stored, and even the local traditions and regulations that can affect decisions made by the people who are producing the spirit. (Page 722-723)

  While Scottish-born Macaloney first fell in love with Uisge Beatha (“water of life”) during a summer job bottling whiskey, upon arriving in British Columbia, he became enamored of the BC craft beer industry. Upon deciding he wanted to make his own beer and whiskey, he assembled a team of experts: Dr Jim Swan, the foremost whisky maturation expert in Scotland, and Master Distiller Mike Nicolson, who worked in over 18 renowned Scottish whisky distilleries. Together they sought to create a brewery and distillery that encapsulated the spirit of Vancouver Island where their facility is based. As a nod to their success, their Kildara, an island whisky made from their triple distilled single potstill range was awarded the World’s Best Pot Still Whisky at the  World Whiskies Awards.

  Macaloney was joined in his effort to create this whiskey trail by Copperworks Distilling Company, who stated on their website that their goal for working with this tour is to generate more awareness of single malt whiskey in the Pacific Northwest and provide whiskey lovers (either local or from far and wide) a fun, educational experience across a range of places and producers.

  Kelly Woodcock, Partner & Vice President, Guests Experience & Whiskey Club, Westward Whiskey spoke to how this trail is in line with their mission, which she describes at its core is about the place and people from which it comes. “We rely on the inspiration and ingredients found in the American Northwest, so when we heard about the Whiskey Trail we knew we had to be a part of it — it’s a natural fit for us. Our Distillery Tasting Room was designed to be a home for both whiskey enthusiasts and those who are looking for a fun way to spend their afternoon, and this Whiskey Trail helps spread that message to both the casual traveler and those who are seeking out whiskey experiences like the ones we offer.”

  Also, Tyler Pederson, Westland Distillery Manager, pointed out how this trail allows them to showcase the flavors of the Pacific Northwest through their American Single Malts. “We fully support the Northwest Whiskey Trail’s mission to guide whiskey lovers through the geological tapestry of whiskey-making, and introduce guests to the caliber of whiskeys coming out of Seattle.”

  This tour begins in Oregon before traveling to Washington State and then concluding in British Columbia. The initial tour comprised of seven distilleries: Westward Whiskey in Portland, OR, Copperworks Distilling and Westland Distillery in Seattle, WA, Macaloney’s Island Distillery in Victoria, B.C., Goldstream Distillery in Cowichan Valley B.C., Shelter Point Distillery in Campbell River, B.C., and Deep Cove Brewers & Distillers in Vancouver, B.C. Since then, Goldstream Distillery shuttered its doors due to a real estate issue. Also, Deep Cove Brewers & Distillers’ tasting room is temporarily closed as of this writing. These changes point to the ongoing challenges of arranging any self-guided tour of distilleries given the volatile nature of this industry.

  Macaloney chose to focus on distilleries situated along the Pacific Coast because their spirits are all informed by a similar coastal ethos. For example, Shelter Point Distillery is surrounded by 380 acres of farmland and located right alongside the ocean where the salty sea air adds a distinctive flavor to the estate of barley used in their spirits. Also, the sea salt and winds inform both the production of whiskey, as well as the aging process.

  Any distillery situated along the Northwest Pacific Coast is eligible for inclusion in this tour provided they produce at least one single-grain whiskey albeit barley, wheat, rye, corn, or a non-traditional whiskey grain. Also, they need to have a tasting room open to the public with opportunities for visitors to interact with their products.

  Those wishing to participate in this tour need to grab a Northwest Whiskey Trail passport at any participating distillery and collect a stamp at each destination. As the passports do not expire, travelers can see these distilleries on their own schedule. Once the passport is full, it can be redeemed at the final distillery for an exclusive, limited-edition Northwest Whiskey Trail Glencairn glass.  A list of current participating distilleries and additional information about each distillery can be found at the Northwest Whiskey Trail’s website: https://northwestwhiskeytrail.com.

Challenges in Launching a Whiskey Trail

  In Macaloney’s estimation, the biggest challenge in launching the Northwest Whiskey Trail was lack of funds, as many craft guys, himself included, don’t have much of a budget. They discovered it requires over $35,000 US dollars annually to design a website, print out brochures, conduct PR, and other marketing measures. He recommends that distilleries interested in starting a whiskey trail for their unique region pool their resources together. Also be sure to connect with local tourism organizations such as tourist boards and Convention & Visitor Bureaus, as well as explore what funding opportunities might be available from local and regional governmental sources. While he sees this tour as initially appealing to whiskey aficionados, over time, he predicts others interested in experiential tourism will be drawn to the interactive experiences available at a distillery.

The Rise of American Single Malt As a Spirits Category

  The announcement of the Northwest Whiskey Trails comes amidst the American Single Malt Commission’s advocacy efforts for a formal establishment of a “Single Malt whiskey” category.   In 2020, the American Distilling Institute established the “American Single Malt Whiskey” category for those whiskeys. This category was made according to the ASMWC’s proposed statement of identity, which is as follows:

•   Made from 100% malted barley.

•   Distilled entirely at one distillery.

•   Mashed, distilled, and matured in the U.S.

•   Matured in oak casks of a capacity not exceeding 700 liters.

•   Distilled to no more than 160 (U.S.) proof, or 80% ABV

•   Bottled at 80 (U.S.) proof or more, or 40% ABV.

  On July 29, 2022, the TTB published in the Federal Register “Notice No. 213, Proposed Addition of American Single Malt Whisky to the Standards of Identity for Distilled Spirits. In this notice, they propose to amend the regulations in 27 CFR part 5 that set forth the standards of identity for distilled spirits to include “American single malt whisky” as a type of whisky that is a distinctive product of the United States. After closing comments on September  20, 2022, the TTB has not made any further announcement regarding Notice No. 213. 

  While this new spirit’s category only impacts U.S.-based distilleries directly, Macaloney points to how the rise of American Single Malt benefits Canadian whiskeys as well. “Scotch dominates the whiskey market, and of course, Scottish Single Malts is the flagship spirit known internationally. So, whiskey snobs gravitate towards these single malts thinking they’re the best whiskeys in the world. This new American standard for single malt whiskeys is helping to spearhead a sea change with consumers starting to realize the quality of single malt whiskeys coming from outside of Scotland such as the United States, Ireland, Canada, and Japan.

Innovative Strategies to Secure Funding for Beverage Companies

Cyndi
chess pieces with dollar signs

By: Jay Avigdor, President & CEO — Velocity Capital Group

Securing funding is crucial in the modern hypercompetitive beverage industry. Without the necessary capital, beverage companies can struggle to fuel growth, invest in research and development, and expand into new markets. Yet, in my experience, many beverage companies frequently tend to overlook some of the most advantageous financing options available to them. Here, I will explain several key innovative strategies to help your beverage company meet (or even exceed) its funding goals.

The Problem with Bank Loans 

  Securing conventional bank loans is notoriously difficult for beverage companies because loan officers at banks often consider beverage companies a risky investment, and they aren’t entirely wrong. Like most fresh ventures, the vast majority of new beverage companies do fail.

  According to CEO and senior Consumer Packaged Goods (CPG) advisor Manoli Kulutbanis, only about 20% of food and beverage brands manage to achieve $1 million in sales. For Coke’s Venturing & Emerging Brands Team, a threshold of $10 million in revenue is necessary to prove a beverage concept, and only 3% of beverage businesses reach it.

  Bank loans also require an intense vetting process, which involves a hefty amount of paperwork. Beverage companies are asked to supply a long financial track record, and the review process itself can take months — a timeline that is often all too slow to help businesses when they need it most.

Given these difficulties, beverage companies are often encouraged to seek other sources of funding. The good news is that there is a wealth of options.

Small Business Administration (SBA) Loans

  The US Small Business Administration (SBA) offers loans to companies of all kinds, including those in the beverage industry. Since the US government helps protect lenders from some of the risks associated with providing businesses with financing, these loans can be easier to secure than conventional bank loans.

  The SBA offers many different types of loans, starting with “microloans” of $50,000 or less that help fledgling enterprises get off the ground. These funds can be used for anything from buying machinery and other equipment to purchasing supplies and furniture, and can also be used as working capital.

  Additionally, if you need to purchase a major asset, the SBA 504 loan program provides long-term loans that provide fixed interest rates on amounts up to $5 million. Another program is the 7(a) loan, which gives up to $5 million for a variety of other purposes, including buying real estate, purchasing equipment or supplies, refinancing debt, and facilitating changes in ownership.

  While these loans can be a good way to raise funds, it’s important to keep in mind that they do not establish a long-term relationship. Rather, SBA loans are considered one-off financial agreements.

Angel Investors & Venture Capitalists

  A few lucky beverage companies have benefited from the largesse of angel investors: people who give capital upfront, usually in exchange for a minority stake in the company or as a loan. A notable example is Liquid Death, the punk-rock-themed Virginia water company with a dark sense of humor, which received nearly $2 million this way.

  Venture capital (VC) works slightly differently. While VC firms will grant capital upfront, just like angel investors, they use other people’s money or an organization’s funds rather than their own.     Angel investors are wealthy individuals in their own right, whereas venture capitalists are professional financial analysts who identify promising companies to invest in.

  It’s difficult to overstate how challenging it can be to secure capital through these means. As Harvard Business Review puts it: “Venture capital financing is the exception, not the norm, among start-ups. Historically, only a tiny percentage (fewer than 1%) of U.S. companies have raised capital from VCs.”

  Given these long odds, conducting research is vital before approaching angel investors and venture capitalists. These individuals expect a personal touch, so consider partnering with an experienced advisor who not only knows the relevant investors in your sector, but can also coach you on how to pitch to them best.

  Each pitch needs to be carefully crafted with the specific recipients in mind. Make sure not only to cover all the relevant elements of your business plan, but also to frame your venture in the form of a compelling narrative. You should also address any potential concerns upfront, and be prepared to answer tough questions.

  Given the high stakes involved, you also don’t want to walk into a meeting with potential investors, only to end up tripping over your words. An advisor can help you practice your pitch and ensure an effective delivery before you take your shot. That way, you can go into pitch sessions with confidence, knowing you’re prepared.

  Many websites have compiled lists of angel investors and venture capitalists, including those who support the beverage industry, such as Signal and CrowdCreate. Due to the extensive work involved in every pitch, it’s best to start with those investors whose preferences match your business most perfectly.

The Power of the People

  If your beverage already enjoys a following, con sider tapping into the power of crowdfunding. Cannabrew, for example — the CBD craft brewery — shattered its approximately $250,000 goal in less than a single day. The company has announced it will use the funds for outreach to liquor stores and supermarkets to expand access to its products.

  Similarly, when soft drink company Square Root wanted to expand from glass bottles to cans, it smashed its crowdfunding target by more than 200%, raising the equivalent of $715,000.

  When the crowd believes in your product, this funding method can bring in a welcome infusion of cash, but be aware that these campaigns require a significant amount of work. According to crowdfunding platform Indiegogo, preparing to launch one effectively requires sending out at least 10,000 emails, and that’s just one of their recommended tasks.

  Crowdfunding campaigns also need to be used strategically to be successful. Projects should be visually appealing and delineate concrete, easily understandable goals and measurable outcomes. That’s because crowdfunding campaigns often fail if the initiator asks for too much or their content fails to inspire people.

Merchant Cash Advances

  The best funding is reliable funding when you need it. Securing this type of capital requires good relationships with the right strategic partners, such as companies that give merchant cash advances.

  In my experience, many people misunderstand how merchant cash advances work. When you get an infusion of capital from a merchant cash advance, it isn’t a loan. Instead, the company buys a portion of your future sales, and you don’t part with any of your equity.

  Since these companies rely on your future sales for their own revenue, they also tend to be highly invested in your future success. For this reason, businesses like mine aren’t interested in giving startups an advance if doing so would dig them into a hole, like when they routinely struggle to make payroll.

  On the other hand, when a beverage company gets an unexpectedly big or time-sensitive order and needs to temporarily surge operations to fulfill it, that’s a good reason for a merchant cash advance. These advances are also good for buying new equipment, renovating or repairing facilities, adding a tasting room, or getting over a temporary cash-flow issue.

  Another great thing about merchant cash advances is that they are usually easy to secure. All a beverage company would need to provide, for instance, would be their last three months of bank statements demonstrating a minimum of $20,000 in revenue each month, as well as a FICO Score equal to or greater than 500. This means even new startups can hope to acquire infusions of capital this way.

  Merchant cash advances are also fast, so if you’d like to receive money on the same day you apply, a merchant cash advance is the way to go. This means beverage companies — which often have to wait long periods before receiving payment from customers — can use a merchant cash advance to fulfill their accounts receivable in good time.

Take a Long-term Approach

  By far, the best approach to successfully funding your company is to cultivate long-term, dependable relationships with partners who will help you when you need it. However, in my experience, building these connections entails a paradox. Lenders, investors, and other sources of funding are usually eager to fund businesses when they are healthy and profitable (i.e. when they don’t need the funding), but businesses often apply for funding when they are feeling some kind of financial strain.

  That’s why it’s important to develop your business’s funding strategies over the long term. Applying for capital when your business is strong and they want to partner with you gets your foot in the proverbial door. That way, if you encounter unforeseen difficulties later, you’ll be able to fall back on your established connection with those important investors and financial institutions. Funders often consider your previous track record with them when considering a new request for funding.

Sweet Success

  Whether you are a craft brewer, vineyard, distiller, or other beverage company, attracting investment will enable you to leverage opportunities and fuel your growth in this competitive industry. If you approach this process wisely, take a long-term perspective, and cultivate relationships with the right strategic partners, then the widest possible audience will enjoy your drinks, and both you and them will be able to relish the sweet taste of your success.

  Jay Avigdor is the President & CEO of Velocity Capital Group, a direct funding platform located in Greater New York that funds small businesses nationwide, servicing over 15,000 clients since its founding in 2018. A noted funding expert with a 13-year career, Avigdor has developed an extensive network of over 40,000 relationships with clients and brokers, contributing to an impressive $850 million in sales. His innovative technological approach is setting new trends in the industry by merging finance with technology through automation, thus allowing a quicker and smoother process for merchants and brokers serviced. Avigdor is a graduate of Touro University and currently lives in Cedarhurst, New York.

Can You Reinvent the Beverage Marketing Wheel?

Cyndi
2 people holding 2 small wheels

By: Hanifa Anne Sekandi

A lot of people believe that marketing a brand is an arduous task. Yes, it requires work. But if you hate this part of building a business, you may find yourself in the marketing denial loop. What is this?

  It is when brands do extraordinarily little marketing and expect big results. It is when brands put in less than what they desire to receive. This mindset leads to a sense of disillusionment and disappointment. We are sure you have encountered individuals who say running a brand is hard. The truth is, creating and growing a brand requires work. But the work should not be regarded as hard. It is important to eliminate this mindset. Embrace a simple, thought-out marketing plan and strategy whether you are a new brand, a mid-range brand or one of the big guys. Understanding how to market your brand should never be approached begrudgingly or negatively. Last Beverage Master issue, we focused on the “why,” as in why is your brand so unique? Why should consumers purchase your beverage rather than Bob’s beverage? Why is your brand making this beverage? Is there a story? The “why” is your first building block, and this will lead you to the most important phase of your simple marketing strategy — who is this for? 

  Nowadays, you do not have to look too far to see the dos and don’ts of marketing. You are in a time where the triumphs and tribulations of top-tier brands are well documented. As of late, major marketing blunders have been put to the forefront. The common mistake among all these brands, not just those in the alcoholic beverage industry, is that they forget the most important marketing building block: the “who,” and I’m not referring to the classic and iconic English rock band. In this case, the “who” refers to your audience, the consumer. Understanding their buying decisions and why they select your brand or your competitor’s brand when purchasing beer and liquor should be at the forefront of your marketing strategy. 

Who is Your Consumer?

  All your marketing initiatives are built from understanding who your consumer is. A concept that seems obvious and basic, yet both new and old brands make it complicated. Since you and your beverage experts are creating the beverage, tasting it and perfecting it, start here. What would appealto you? What would make you run out and purchase your alcoholic beverage over a top-shelf or legacy beverage? Also, what do you wish some of your favorite beverage brands did? How does your brand fill this missing element? A large list is not needed. You are not going to be loved by everyone. Focus on three key features your “who” (consumer) would look for. Look at their lifestyle and how you can highlight that your beverage compliments their personal ethos. Remember, people attach feeling to their purchases. This is why the “why” story is such an essential first step in brand development. It lets you clearly map out how to appeal to and reach the “who.” 

  There are many ways to find your audience. The above is a simple and effective method. If you cannot sell this magical beverage to yourself or your team, then you will not sell it to anyone else. For those who have an existing brand and are struggling with your brand in a marketing landscape, which has become quite cutthroat with the advent of social media platforms, taking a trip back to where you started and your initial goals will help you zero in on your consumer base. Do not be greedy. Do not strive to be all things to everyone. If your brand has been performing relatively well and you are looking for more brand visibility to boost sales.

  Simple changes, more times than not, are needed. Creatively amplifying your existing message can increase your reach and growth. You do not need to burn the building down and start again, so you target a new demographic to buy your beverage. What about the people who have kept you afloat? Your loyal consumer bases? Some brands conduct surveys. Ask the people who have already purchased your drink what you can do better. Or what is on their wish list? Conduct a poll. This will give you some great ideas or help you re-strategize and expand your existing marketing methods.   

Should You Reinvent the Wheel?

  If you are a new brand, the alcoholic beverage world is truly your oyster. You can be outlandish and try something new. You have leeway to reinvent the wheel. Why? Aside from making a quality beverage, there is no sense in trying to copy the marketing strategy of a legacy top-tier brand. Their consumer is loyal. This does not mean that they will not become a fan of your brand. It is like football; people love the team they love, but when it is the Superbowl and their team has not made the cut, they will root for the team they like second best. Some people drink the beer their granddad drank and pass the love of this beverage on to their kids. It is a staple beer at all family events and their go-to beverage when dining out. Whatever the hook was that appealed to their granddad was passed on to them, and so on. Consider this a legacy brand. Legacy brands must strive to expand the wheel, but they should not reinvent it or break it unless they want to lose a loyal consumer base. Ignoring your “who” so you can reach a new consumer is sloppy marketing and a hasty marketing method often spurred on by newer brands going viral on social media. 

  You might be wondering how you would know who your consumer is. What other methods can you use to understand them better to build a formidable marketing strategy? This may sound contradictory to what was stated above. Start by identifying three brands that you are comparable to, your competitors. Study them, but do not copy them.

  Moreover, analyze them and look for what you do not like first. What would you do better, and what is missing? Make this list small. Next, look at the elements you like and what you would do better from a consumer’s perspective. For example, some beverage brands have made different-size offerings for their beverages. This is a simple yet effective difference that sets you apart and boosts sales. Who does not love those single-serve wines or a small-can imperial stout? Your consumer’s needs are not hard to understand if you start with yourself, assuming you are making a product you believe in, and then look for like-minded individuals with the same sensibility. Stay faithful to your plan, even when no one is looking, because someone looking for what you are offering will eventually turn into a large, loyal consumer base that will tell their like-minded friends to purchase your beverages too.

Enforcing Your Trademarks: How Far Should You Go?

Cyndi
corporate man punching the letter R

By: Brian D. Kaider, Esq.

You’ve secured federal registration for your trademarks and you’ve been building your brand recognition.  Per your trademark attorney’s recommendation, you’ve had quarterly searches conducted to find similar marks.  Lo and behold, a new entry to the market is using your trademark.  Now what?  Stop and take a breath; let the initial surprise or anger settle. There is a lot to consider before taking any action.

Take Stock of the Situation

  First, take a look at your own trademark.  Is it the name of your company or of one of your products?  Is it a national brand or one that is distributed in a small geographic area?  In what classes of goods and services is it registered (e.g., class 033 for vodka, class 040 for “rectification of distilled spirits for others,” etc.)?

  Then look at the competitor’s mark.  Is the mark identical to yours or similar?  How similar?  Is it broadly distributed?  Is it used for the same goods and services as your mark?  If not, how similar are the goods and services?  Are your products marketed through the same trade channels?  Are consumers likely to encounter both your products and theirs?  Have they attempted to register their trademark and, if so, where are they in that process?

  No one question will be determinative in any given case, but on balance, they will help develop a sense of how much effort should be expended to enforce your rights.  As discussed below, there are numerous paths, each with its own set of risks and potential rewards.  An international brand that is known throughout the industry, like Jack Daniel’s®, must be far more protective of its marks than a small brewery in Oregon that has a registered trademark for an IPA product only distributed in the Pacific Northwest.

First Contact

  As the owner of a registered trademark, it is your duty to “police” your mark; that is, to monitor unauthorized use of your mark by others and to enforce your right to exclusivity of that mark.  When large corporations learn of potential infringement, their immediate response is generally to have their attorneys send a cease and desist (C&D) letter.  For smaller companies, a personal attempt to contact the owner of the infringing business is often effective.  Sometimes the other party simply did not know about your mark.  If you found their use of the mark before they spent considerable time and money developing it as a brand, they may be willing to simply let it go.

  When making these calls, it is important to maintain a demeanor that is both friendly and firm.  There is no need to accuse the other side of wrong-doing or of violating your trademark knowingly.  However, you should simply let them know that you do have a registration for the mark and that their use is likely to cause confusion in the market as to the source of your respective goods.  If you give them a reasonable amount of time to work through any inventory bearing the infringing mark and to rebrand, this can often be the end of the matter.

Cease and Desist Letter

  If the friendly approach doesn’t work, the next step is generally a cease and desist letter.  This is most effective if drafted and sent by an attorney.  The tone of these letters tends to be more matter-of-fact.  They identify your trademark(s); explain that you have spent a considerable amount of time, effort, and money to build your brand around the mark; identify the other party’s infringing use; state that the use is unauthorized and likely to cause economic harm and loss of goodwill in your brand; and demand that they stop using the mark within a given time frame.

  While these letters can sometimes be effective, especially against smaller companies, they have become so commonplace that often they are simply ignored by more savvy companies who may wait to see if further steps are taken before deciding whether to rebrand.  Accordingly, you should carefully weigh all of your options and decide in advance whether you will escalate the matter if your C&D letter is ignored.

Letter of Protest / Trademark Opposition

  If the other side has attempted to register their mark, there are two ways to try to prevent the registration.  First, you can file a “letter of protest” with the U.S. Patent and Trademark Office (USPTO).  The letter simply informs the trademark examiner of the existence of your trademark and the reasons why you feel that registration of the other party’s mark would damage your mark.  The benefit of this approach is that it is quick, easy, and relatively inexpensive as it generally only takes a few hours for an attorney to prepare and file the letter.  Often filing the letter will prompt the USPTO to issue an office action refusing the registration in light of your trademark, forcing the other side to argue why registration should be allowed.  The downside to the letter of protest is that once it is filed, you have no further opportunity to engage in the process.  If the other side responds to an office action with arguments as to why registration should be permitted, you cannot respond to those arguments. 

  Whether you have filed a letter of protest or not, if the USPTO’s trademark examiner determines that the mark is registerable, it will publish the mark in the Official Gazette.  This publication opens a 30-day window for anyone who believes they will be harmed by registration of the mark to file an opposition to the application.  

  This process should not be entered into lightly.  In some cases, simply filing the opposition will be enough to get the other side to give up its mark.  But, if they choose to fight the opposition, you will find yourself in a litigious process that takes time, effort, and money to complete.  As in civil litigation, the parties to an opposition file motions and briefs, request documents from the other side, take depositions, serve interrogatories that must be answered, and present their evidence to the Trademark Trials and Appeals Board for its consideration. 

  If the opposition goes all the way to the trial stage, it will generally take at least 18 months from when the notice is filed to when the last brief is due and will cost each side in the tens of thousands of dollars.  As with civil litigation, most oppositions do not reach the trial stage, because the parties are able to come to terms and settle the dispute on their own.  But, this often does not occur until sometime in the discovery phase, after both sides have spent a considerable amount on legal fees.

  It is important to note that the object of an opposition proceeding is to prevent registration of the other side’s trademark and, if you are successful, that is your sole remedy.  There are no monetary damages awarded, nor can you recover your legal fees from the other side.  Moreover, while they will lose their ability to register their trademark, it does not necessarily mean the other side will stop using the mark on their goods or services.  In that case, you would have to file a trademark infringement litigation (see below) to get them to stop using the mark, entirely.  In practical terms, succeeding in an opposition will often be enough to get the other side to abandon their mark, because if you were to follow through with a civil litigation, they could be on the hook for treble damages for willful infringement.

Trademark Cancellation

  If you discover the other side’s trademark application after the 30-day opposition window has expired, your only option to challenge the mark at the USPTO is to wait until the trademark actually registers and then to file a trademark cancellation proceeding.  Though there are some differences between cancellation and opposition proceedings, particularly if the challenged mark has been registered for more than five years, they are similar in most procedural respects. 

Trademark Infringement Litigation

  As one might expect, filing a trademark infringement case in federal court is the nuclear option.  Depending upon the jurisdiction, the time frame for completing a litigation may be faster or slower than an opposition or cancellation proceeding at the USPTO.  But, whereas those procedures will likely cost the parties tens of thousands of dollars, a civil litigation will likely reach six figures, or more. 

  The reason for this higher cost is that there are more issues to consider in these cases.  If you are successful in a civil litigation, you may not only obtain injunctive relief, foreclosing the defendant from all future use of the mark, but also may obtain monetary damages associated with the defendant’s past use of the mark, as well as attorney’s fees expended in the proceeding.  Moreover, if the defendant is found to have willfully infringed your trademark, they may be required to pay treble damages. 

  These issues, which are not even addressed in an opposition/cancellation, add breadth to the scope of discovery taken, which increases the cost.  Further, whereas most opposition/cancellation proceedings are decided without an oral hearing, a civil litigation generally requires live testimony and argument in front of a judge or jury.  These proceedings require a great deal of attorney preparation, dramatically increasing legal fees.

Conclusion

  As the owner of a valid trademark registration, you are obligated to police your mark and failure to do so can result in a dramatic diminishment of your rights or even outright abandonment of your registration.  But, that does not mean you have to file a civil litigation against every minor infringement.  Determining the appropriate path in any given situation requires a careful evaluation of all the circumstances and balancing the risks of action versus inaction.  It is critical to engage a knowledgeable trademark attorney, who will properly assess these risks, your likelihood of success, and the most effective course of action in your case.  

  Brian Kaider is a principal of KaiderLaw, an intellectual property 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. 

Minglewood Distilling Company

Cyndi

Rising From The Ashes

facade of a distilling company building

By: Gerald Dlubala

In the 1880s, in Northern Lawrence County, Ohio, James Mullins noticed an abundance of coal mines popping up. The area was rich in coal, and Mullins decided he wanted to cash in on the surging coal mining business, so he purchased a plot of land between the already-operating Beechwood and Oakwood mines to open his own coal mine. However, before opening, he was reminded by his new hires, many of whom were local and in need of work, that it would surely be bad luck to open and operate a coal mine without properly naming the mine, similar to the naming of ships before launch. Mullins’ wife mentioned that their coal mine settled nicely between the neighboring mines, mingling between them. That single comment launched the beginning of the Minglewood Coal & Ice Company that has now, well over 100 years later, become home to the Minglewood Distilling Company, a small-batch micro-distillery located in Wooster, Ohio.

  Mullins sold coal from his mine and ice procured from the nearby lake when frozen until 1921, when he added a second building on the property. It was heavily insulated with natural cork and used specifically as an ice factory, providing sanitary or electric ice made from distilled water.

  As the years passed, electric refrigerators and natural gas availability sharply reduced the vast need for purchased ice and coal. That demand reduction led to Minglewood Coal & Ice Company closing its doors in the 1950s. An auto repair business took over the smaller building, and the larger, cork-insulated building that once housed an ice factory was transformed into a beer and wine carryout store. The carryout liquor store sustained heavy fire damage in the 1970s and sat in ruin from that day forward, including a massive amount of burnt cork waste. The damage was so bad that the city had plans to demolish the building until current co-owner Mark Morrison purchased the land with the remains of the two buildings included. The city also halted demolition plans on what remained of the damaged buildings providing Morrison would start working on and improving the property immediately. This land purchase began the beginnings of the Minglewood Distilling Company. Morrison opted to keep the Minglewood name out of respect for the area’s history, a trait that continues throughout the distillery, its story and its products.

Carrying on the Minglewood Name

  “We still have two buildings on the property,” said Andrew Morrison, son of Mark and now co-owner and distiller. “The larger building is the original 1880s icehouse heavily damaged in the fire. The smaller building had at least a partial roof and some electricity availability, making it the more practical place to start the restorations and renovations. We started distilling in 2016 and opened to the public beginning in 2017.”

  “The larger building, the former ice plant, has been under renovation for the last four years. It took a lot longer, not only because of the extent of the fire damage but the cleanup included so much burnt cork insulation waste. It must’ve been at least five feet deep, and we actually began by digging it out by hand,” said Morrison. “Additionally, the pandemic slowed everything dramatically. But in May 2023, we were able to host our first event in the space, and it is now open as an event venue for weddings, get-togethers, parties, corporate events and anything else that would benefit from being held in a private space. The back half of the building now houses our production area, and the smaller building we originally used for production is now a permanent bottling facility. We had been rolling out temporary tables to use as our bottling solution, but now, with updated production facilities and available bottling solutions, we hope to increase production and extend our reach substantially.”

  Morrison tells Beverage Master Magazine that patrons will enjoy a rustic, classy space when visiting. The tasting room vibe is reminiscent of the 1940s and 1950s eras, featuring industrial décor with brick walls, concrete floors and exposed ceiling beams.

  “I wouldn’t call it trendy or hip,” said Morrison, “But rather, it’s a place with a throwback feel that reflects and showcases our pride in doing things in the older, traditional ways. Our customers can immediately sense they’re in for a quality experience with owners who care about their products and the visitor experience.

  The Morrisons currently use a stainless steel, hybrid reflux column pot still with a 500-gallon capacity that feeds into a 12-plate reflux column. Their current production schedule is distilling two to three batches a week from November through April, when the city water temperature is perfect for their needs.

  “We use a lot of city water for cooling processes, and in those winter months, the water temperature hovers around 40 degrees, which is perfect for our operation,” said Morrison. “Additionally, our equipment is big enough that, for now, we can make what we need for the year during those months. We generally produce a barrel out of each distillation, which comes to about 50 barrels a year, mostly bourbon and rye, and we distill corn whisky for our flavored whisky products. So, we do have the option to ramp up production rather quickly if and when needed.”

Reigniting the Area’s Historical

Passion with Rye

  After the Revolutionary War and in the 1800s, Germans immigrated to Ohio, including Wayne County. They brought rye from Europe with the intent of farming. Rye is a winter crop that fits extraordinarily well with Ohio’s temperature fluctuations and extremes, including the high freeze and thaw rates in the winter months. When a successful harvest came in spring, farmers found themselves with an excess of rye grains and looked for additional uses, leading to small pot stills on the farms to distill the grains and raise extra money. However, during the Civil War in the 1860s, excise taxes became a reality. As you can expect, farmers didn’t want to deal with the taxes, so many became moonshiners while local granaries became distilleries. Morrison also speculated that with the proximity of Route 30, a major thoroughfare running from the East Coast to Chicago, it’s not a far stretch to think that moonshining and moonshine distribution were also lucrative businesses.

  “Most people don’t remember that the Cedar Valley Distilling Company operated in Wooster between 1862 through the 1940s,” said Morrison. “We like their story and try to keep it alive in our tours with historically accurate retellings. The owner started with a grist mill, purchasing grain from local farmers and hiring additional local farmers and construction workers when other work was unavailable. The distillery was successful enough that they eventually moved to a larger facility, and from all accounts, they could produce 25 barrels a day during their peak production in the late 1800s.”

  “That’s simply unfathomable to me,” said Morrison. “If we ran 24/7 here, we could produce two barrels daily. Cedar Valley Distillery only made rye whisky, and they suddenly found themselves with a very large backstock when prohibition hit. They were able to get a license to distribute medicinal prescriptions, so their backstock ended up being distributed through prescription only. By the time prohibition ended, their backstock was dwindling away to almost nothing due to their prescription distribution and likely a bit of bootlegging. So, they started selling a 65 percent Cuban Rum liquor cut with six-month-old rye whisky aged with wood chips. We actually found some of the bottles over the years, and as you would expect, the concoction was horrible and definitely not a money-maker, causing the distillery to close its doors. Cedar Valley’s buildings and memories are now gone, and it’s rare to find someone in Wooster who remembers them, but we want to keep that history alive. Like them, we make our rye whisky using all local ingredients. We enjoy highly communicative and exceptional relationships with our farmers, who have become more like partners than suppliers. Our corn is grown about five minutes away, just outside of Wooster. Our rye comes from about 15 minutes away, in Dalton, which is eastern Wayne County, and our wheat comes from a co-op just north of us in Seville.”

Community and Partner-Suppliers

Are Critical

  Mark Morrison originally opened Minglewood Distillery with help from a friend that owned and operated wineries in the region. His son Andrew would work with them when he was available. In 2019, Andrew finished his studies, and when Morrison’s partner wanted to return to his true passion, meaning his wineries, the Morrisons bought him out. From that day forward, the father and son team became 50/50 partners, co-owners and distillers.

  “We’ve been using the same farmers for six years since beginning our distillery,” said Morrison. “We are fortunate to have no worries about the consistency and quality of our ingredients or products, and our communication couldn’t be better. Even when our suppliers had a bad year, causing lower overall yields, they told us they had a crop dedicated to us, so we shouldn’t worry. That type of communication and partnership is invaluable.”

  The future looks bright and tasty for Minglewood Distilling Company. Morrison tells Beverage Master that they are looking forward to increasing production and bottling capacity thanks to the updated availability of both buildings. They plan to bump up their bourbon production, eventually offering bottled-in-bond bourbon and rye selections and expanding the overall lineup with more variety and premium offerings.

  For those following the path to owning a distillery in a state that controls licensing, Morrison says that those future distillers should apply to get their license early. He waited, and because the process was a lengthy one, Minglewood initially was only allowed to distill and provide small samples (one ounce per person, per day, cut into quarter-ounce samples) to their patrons, which wasn’t enough for proper tastings to be held or sell their liquors by the bottle. Morrison said that selling cocktails is critical to the bottom line, so obtaining that serving license is important for customers to get to know your products and want to purchase them regularly. Minglewood Distilling Company’s best sellers have been their flavored offerings, with peach leading the way. It really took off in 2020 and hasn’t slowed. Their upcoming pickle whisky is set to be a hit, and a much-anticipated root beer whisky will be available this fall.

  In addition to being able to taste their product lineup at their distillery and tasting room, Minglewood Distillery offers a kitchen and full bar for service and menu offerings featuring meat and cheese boards.

To learn more about Minglewood Distilling Company and its products, visit:

Minglewood Distilling Company

437 East South Street

Wooster, Ohio, 44691

(330) 601-1600

info@minglewooddistilling.com