Category: Distillery

Ontario’s Strict Liquor Laws

Cyndi
bottled beers in a grocery stall

By: Alyssa Andres

In Canada, each province is governed under its own liquor laws. In the province of Ontario, there is a multitude of guidelines, fees and licenses required to successfully become a producer or supplier, many of which are not found in other provinces across the country. The restrictions, guidelines, and costs associated with the production, importation and sale of alcohol in the province impact the market for producers and consumers alike. By enforcing such strict laws, the Ontario government limits the province’s ability to showcase its top quality products and dissuades international suppliers and manufacturers from importing their goods from other regions. 

  Manufacturers in Ontario must prepare for substantial start-up costs and to spend a lot of time in the initial phases of business planning before starting production. Separate licenses are required before producing, selling and storing alcoholic beverages, and packaging guidelines, as well as chemical analysis of each product, are required once these licenses are obtained. For suppliers, it means facing mark-ups of well over 100% and tight restrictions on the import, distribution and sale of products. For consumers, it means selections tend to be limited, prices are higher than average and there are very few places to obtain alcoholic beverages.

  The body controlling the alcohol, tobacco and cannabis industries is the Alcohol and Gaming Commission of Ontario. This body is responsible for forming the Liquor Control Act and administering liquor licenses beyond the federal license required to produce alcohol in Canada. The AGCO also oversees most aspects of alcohol sales and service in Ontario. This means they not only control the manufacturing of alcohol but also the distribution and sale of any kind, including bars, restaurants and private events.

  The initial step in becoming a brewer, distiller or winemaker in Ontario is to obtain a federal license to manufacture alcohol in Canada. According to the Government of Canada website, one must prove that they are of legal age and have sufficient resources to conduct a business before applying for the license, which does not carry with it any fees on its own. This license allows producers to manufacture alcohol in bulk, but producers must pay an excise duty once the alcohol is packaged to store it on-site. In Canada, as of April 2020, spirits containing more than 7% alcohol by volume are subject to an excise duty of $12.61 per litre of absolute ethyl alcohol. The only way around paying an excise duty at the time of packaging is to apply for an excise warehouse license that allows manufacturers to store non-duty paid packaged spirits for an extended period.

  Once a producer is licensed by the federal government to produce bulk alcohol, the AGCO requires a separate manufacturer’s license to sell the wine, beer or spirit within the province. The AGCO has strict guidelines surrounding where alcohol may be sold in the province. The Liquor Control Board of Ontario is the main outlet for alcohol sales in Ontario. There are 666 LCBO stores across Ontario responsible for providing the Ontario public with spirits, wine and beer in quantities of less than 12 units per case. A separate chain known as The Beer Store, also mandated by the AGCO, provides Ontarians with cases of beer. If a producer or supplier does not have this license, they will not be allowed to sell their product in the province.

   In 2017, Ontario started allowing a limited number of grocery stores with proper licensing to carry beer and wine, but, according to the AGCO website, these premises must also sell a variety of food products that must occupy at least 10,000 square feet of the retail space. Therefore, only large chain grocery stores are eligible for these permits, and there are only about 450 grocery stores that carry alcohol in the province.

  For breweries and distilleries to operate retail shops out of their own facilities, another license must be issued, even once producers have successfully obtained a manufacturer’s license. Yet another license is required to operate a “Tied House” or restaurant facility out of a brewery or distillery. Each of these licenses carries with it separate fees and must be renewed every two years. Since many Ontario breweries and distilleries are in remote towns across the province, the best way to get their product into the hands of the general public is to apply to have them on the shelves of the LCBO.

  According to the LCBO, they review over 50,000 submissions annually from producers and suppliers trying to sell their products through this system. Even products already approved must reapply for the license every two years. Per the AGCO licensing guide, to be eligible to apply for a Liquor Sales License, producers must submit their federal license to manufacture, a registered business name, a summary of their business plan, including detailed floor plans of their facilities, a marketing plan and images of the bottle/packaging of the product. The roughly nine-week process of approving product submission ends with an LCBO chemical analysis. This LCBO analysis is done on every active product on the shelves once a year, at the suppliers’ expense, to ensure quality. Once approved, the product then has to go through label and packaging reviews.

  The LCBO also has extremely specific requirements surrounding the labeling of not only the packaging of alcoholic beverages but also on shipping containers and cases. While many provinces follow general Canadian guidelines for packaging requirements, Ontario has developed its own set of rules. A 64-page document entitled LCBO Product Packaging Standards dictates not only what information is present on the bottle but also gives incredibly detailed guidelines on everything from the size and placement of this information to the “print contrast standard.” If a product doesn’t adhere to these standards, a producer must go back and have the label or shipping package redesigned.

  Once the product makes it to Ontario liquor store shelves, the LCBO must adhere to the LCA standards for minimum pricing. This means, according to the LCBO Pricing Standards Guide, updated in April 2020, a 750mL bottle of Canadian whisky sold by a supplier to the LCBO for $6.16 and charged a federal excise duty of $3.71 ($12.61/LAA) would end up on retail shelves for $27.50 after being marked up a standard rate of 139.7%. Of that total revenue, $16.17 goes to the Ontario government and $4.92 to the Canadian federal government, with only $6.21 making it to the supplier after a $0.20 container deposit. Manufacturers must adhere to this uniform pricing even when selling from their own bottle shops, with most of the revenue going to government bodies.

  These taxes and guidelines mean the selection and quality of products on the shelves at the LCBO are not always impressive. Many international producers will not bother applying at all. Many of the province’s most talented producers are too small and cannot afford to. As a result, the representation of Ontario beer, wine and spirits in the LCBO doesn’t always showcase the incredible quality of the local industry.

  However, the Ontario government has made some changes to its liquor laws this past year to aid businesses in the food and beverage industry that have struggled with closures and other factors related to the COVID-19 pandemic. The government started allowing restaurants and bars to sell sealed alcoholic beverages for takeaway. They also amended a law prohibiting alcohol delivery to private residences, allowing third-party services such as Uber Eats to deliver liquor from restaurants without a special license. These laws, originally considered temporary, have become a permanent amendment to the Liquor Licence Act as they encourage consumers to support local sources when purchasing alcohol for their homes.

  For a brief moment, on December 4, 2020, the LCBO attempted to offer this same delivery service from its stores by pairing with SkipTheDishes but was met with serious backlash from local restaurants who are now relying on alcohol takeout and delivery to pay their bills. As a result, on December 6, 2020, the LCBO paused this initiative.

  As the COVID-19 pandemic rages on and the entire province of Ontario remains in lockdown until at least January 23, 2021, the Government of Ontario will have to continue making adjustments to its rules and restrictions to allow businesses in the province to continue to operate. The hospitality industry has been one of the hardest hit by pandemic restrictions, with most indoor dining in the province’s major cities suspended for most of the year. Those allowed to operate have been limited to 50% capacity and forced to close by 9:00 p.m. each night. This means the licensee sale of alcohol dramatically decreased in 2020. There are many businesses in Ontario that are depending on government subsidizing to stay in operation.

  As the AGCO and the federal government continue to collect from the soaring sale of alcohol in Ontario, while manufacturers, suppliers and licensees in the liquor industry continue to suffer, the province’s small businesses rely on the provincial government’s aid. It is the hope that as the world evolves with the COVID-19 pandemic, so too will the laws surrounding liquor in the province of Ontario.

Ontario Craft Spirits

Cyndi
distilling equipment in a facility

By: Stuart Laidlaw

For over a century, Canadian liquor meant one thing: rye whisky. But in the early 2010s micro-distilleries started popping up across Ontario, focusing on high-quality, locally produced spirits that tell a story about the communities they come from. Today there are more than 30 craft distilleries in Ontario, producing millions of litres of gin, vodka, white rum, single malt whisky, and, of course, rye. But as the public’s thirst for locally produced drinks grows, distilleries are starting to test the waters with more adventurous, niche products.

  Dillon’s Small Batch Distillers was a founding member of Ontario’s current gin boom, and was an early mover in this new wave of Ontario craft spirits. Founded in 2012 by Master Distiller Geoff Dillon, they opened with a pair of gins, a white rye and a vodka, as well as Ontario’s first homegrown cocktail bitters. At that time, bartenders in the province’s burgeoning craft cocktail scene were keen to get their hands on local spirits that told a story about where they themselves were from. Nick Nemeth, at the time a Niagara-area restaurant manager, now Senior Manager for Beverage Development at Boston Pizza, recalls visiting  Dillon’s Distillers in fall 2012, pre-opening: “What was great about visiting Dillon’s from the onset was that, even though there were other Ontario craft distilleries already, they were experimenting with new spirits and flavours in a way that no one else was at that point.”

  Licensees unexpectedly became a big market for Dillon’s from day 1. “I was shocked by the amount of attention and excitement in the licensee scene,” says Geoff Dillon. “I was excited about making pure, real rye whisky, that was my big thing, that and gin; and the licensees’ [interest]…changed the whole business immediately.”

  In the intervening years Dillon’s has added sweet vermouth, absinthe, black walnut amaro, bitter lemon aperitivo, cassis, peach schnapps and golden plum schnapps to their collection.  Craft cocktail culture continues to inform the product range at Dillon’s. “Bartenders are the ones who have their fingers on the pulse,” says Geoff. “That’s why Adam D’Intino [Dillon’s Sales Manager] is so important. He’s nicely dialled in with what’s going on in the scene, and it really is how we decide what we’re doing moving forward. That’s probably where all the amaros and fun things came from.”

  The amaro that Geoff mentions is his Black Walnut Amaro. It is something of a benchmark for the kind of progressive local spirits that Ontario is starting to produce: an old-world style, made unusual and new by focusing on locally sourced ingredients. “We try to use stuff that we have. My house next door’s got a bunch of big walnut trees,” says Geoff. “We’ve got all these walnuts that fall and we want to get rid of…The community gets together and picks up all the walnuts, and dumps them,” he continues. “I love walnuts. My dad [Peter Dillon, now Head Distiller] is obsessed with bitterness and he loves that pith of the walnuts. So maybe six years ago, we told our neighbours to drop them here if they want. We threw them in 95% ethanol on the pith and let them sit there for two years, and what came out was this incredible bitter, pithy, pitch black liquid.” They blended it with their sweet vermouth base and, after some trial and error, hit on a unique liqueur that tastes smoky, herbal and bittersweet – clearly an amaro, yet unlike anything else.

  Local ingredients play a critical role in everything Dillon’s makes. Its Unfiltered 22 Gin is distilled from locally grown grapes, and their other spirits are distilled from 100% Ontario-grown rye. Their Cherry Gin, Peach Schnapps and Golden Plum Schnapps are all made with locally grown fruit too. Nemeth, reiterating Dillon’s importance in the early days, says, “Other [local] craft distillers 66 Gilead (now Kinsip) and Still Waters…were really only focused on whiskies, whereas Dillon’s was working with local fruit and botanical spirits way more than anyone else.”

  One factor that has contributed to both the number of distilleries and the increased variety of artisanal spirits has been the launch of Niagara College’s Teaching Distillery. Opened in 2018, it looks to have an impact on Canada’s spirits landscape similar to that of the college’s successful Teaching Winery. Students in the college’s Artisan Distilling diploma program are given the opportunity to put their education to practical use throughout the eight-month-long course. They gain valuable hands-on experience with every step of the distilling process, whereas in other programs, students spend about one week in a working distillery. Here again, Dillon’s stamp is indelible: Geoff Dillon helped to write the curriculum, Head Distiller David Dickson was formerly Head Distiller at Dillon’s, and students from the program tour Dillon’s Distillery every semester.

  Although the Teaching Distillery is only two years old, it is already bearing fruit. In 2019 they released their first student-made spirits, including an eau de vie made with grapes grown by the college’s Teaching Winery. And last year, they released their first barrel-aged spirit, a dark rum, followed by an escubac (a long-forgotten type of botanical French liqueur). Graduates of the program have also started to pop up at other distilleries and to start their own ventures, with the Teaching Distillery acting as an incubator for new product ideas. Greg Junop, one of the team who developed that escubac, is now Head Distiller at Niagara Distillery in Niagara Falls. Craig Mann, previously a coffee roaster and café owner, recently graduated from Niagara College and is set to open Manns Botanical Spirits. His inaugural product? A white tea gin made with a tea he was familiar with from his previous career, based on a recipe he experimented with while studying at the Teaching Distillery.

  Still, there are barriers to new spirit producers that are inhibiting growth in Ontario, and forcing the province’s distilleries to focus primarily on the most profitable products. The most obvious is the taxation of spirits. For a bottle of gin that retails at $40.00, $18.37 is paid as tax to the province. Another $9.46 is paid to the Federal Government, leaving the distillery with $12.17 to pay its bills and turn a profit. It is no wonder that micro-distilleries have been reluctant to make more niche products like amaro or aperitivo. It has not prevented distilleries from exploring less well-known drink styles – recent releases include spirits as diverse as saffron liqueur, pastis, Shochu and dry vermouth – but it does present an unnecessary obstacle to experimentation.

  Of course, no discussion of obstacles in 2021 would be complete without mentioning the ongoing Covid-19 pandemic. It has been devastating for the food and beverage sector, with one result being that distilleries, breweries and wineries in Ontario have lost most of their restaurant and bar sales. For operations that rely heavily on those sales accounts, it could have been disastrous. But one of the advantages small distilleries have is the ability to pivot quickly. In early March, Dillon’s committed its stills to the manufacture of sanitizer and disinfectant, leading Ontario’s micro-distilleries in an effort to fill the overwhelming immediate demand, even offering it for free to frontline healthcare workers and other essential services.

  The pandemic did have a positive effect on one particular Dillon’s product: their bottled Negroni . “When we released the Negroni two-and-a-half years ago, it was too early. We thought it was going to blow up and change the world,” says Geoff. The landscape has changed rapidly though. “We’ve sold very little of anything else to licensees,” he laughs. “But we’ve set volume records just selling Negronis. A palette a week was just going to licensees.” Dillon says that it was all mom-and-pop Italian grocery stores and restaurants beside parks in Toronto where, all summer long, people could just crack open chilled, single-serving Negronis to drink outdoors. In fact, it has been so successful that Dillon’s plans to make bottled cocktails a bigger part of their program. “That’s the future,” says Geoff. “We’ve got four or five new ones coming out this year. Most of them are classics, but we’re going to do our own spin on the classics using local cherries, strawberries and that kind of thing.”

  In a marketplace where ‘ready-to-drink’ (RTD) canned cocktails and hard seltzers have exploded in popularity, and at a time when takeout dining has all-but replaced the restaurant experience, it makes sense that micro-distilleries would look to sell more exciting RTD cocktails than Jack-and-Coke. Plus, they give customers an idea of how to use a less well-known product from the distillery, like sweet vermouth or bitter aperitivo, and a chance to sample it before buying a whole bottle. At a time of great uncertainty, when it feels as though much of life is on pause, Dillon’s is still finding ways to develop new, exciting products. Hopefully the rest of Ontario’s craft distilleries continue to follow suit.

A Trend No Longer, Zero-Proof Spirits Rise to Any Occasion

Cyndi
3 alcoholic bottles

By: Tracey L. Kelley

Crafting with spirits is an art that provides endless possibilities for the maker and mixologist alike. But the growing demand for spirit alternatives also demonstrates there are even greater opportunities to present flavor complexity and style.

  Whether through herbal tonics such as those found at Dr. Andrew Weil’s True Food Kitchens throughout the U.S.; spirits “for those partaking” and non-spirits “for the whole family” at Vena’s Fizz House in Portland, Maine; special juice and botanical potions at Shine Restaurant in Boulder, Colorado; or booze-free craft cocktails at the Modernist in San Antonio, Texas; producers of zero-proof options seek to expand the marketplace to allow consumers a bounty of choice.

  “There’s a knee-jerk reaction in some people when they hear about spirit alternatives. I get it — I love spirits too! I promise we’re not here for your guns,” Marcus Sakey, founding partner of Ritual Zero Proof in Chicago, told Beverage Master Magazine. “Our products aren’t meant to replace liquor. It’s a complement, a way to enjoy when you’re driving, dieting, training, making a baby, looking for balance or just have [stuff] to do tomorrow. The need goes way beyond the sober-curious. It’s like almond milk or the Impossible Burger — 90% of purchasers aren’t vegetarian or vegan. People want options, ways to mark a moment without the alcohol or calories.” Ritual produces high-rated gin, tequila and whiskey alternatives.

Tapping Into What Consumers Want

  As Sakey points out, there are numerous reasons why someone might choose not to have alcohol on a particular day, but frequently don’t have alternatives when going out with friends or wanting something to accompany dinner. So while movements such as Dry January or Sober October might have planted the initial seeds for alcohol-free selections, abstinence isn’t the only reason for their popularity.

  “We’ve received great support and encouragement from the sober-curious movement since day one, but we’re seeing the trends becoming habits amongst the 75% of drinkers who switch between alcoholic and non-alcoholic drinks,” said Mark Livings, co-founder and CEO of Lyre’s Non-Alcoholic Spirits, a London-based company with production facilities there as well as Melbourne, Australia and Montreal, Canada.

  “Over time, people are reducing consumption, so for a venue to retain patronage, it’s important to have a quality range available when a drinker inevitably looks for a non-alcoholic option.” Lyre’s extensive award-winning non-alcoholic spirit line includes American Malt, Dry London Spirit, Italian Orange, Dark Cane, Apéritif Rosso, Coffee Originale, White Cane, Amaretti, Italian Spritz, Orange Sec, Spiced Cane and Absinthe.

  Formerly the bar director of chef David Chang’s famous Momofuku Restaurant Group and mixologist for the speakeasy PDT in New York City, John deBary, creator and CEO of Proteau, wanted to solve another problem for customers. “Drinks that didn’t rely on alcohol were always a challenge. Drinkers tended to think of overly sweet and simple ‘mocktails,’ and finding zero-proof drinks that paired well with food was almost impossible.” Also the author of the cocktail book Drink What You Want, deBary crafted Ludlow Red and Rivington Spritz as ready-to-drink, zero-proof botanical options.

  “From a technical standpoint, zero-proof drinks are a fun challenge to a bartender because alcohol, since it’s a solvent, is a great base for flavors. Plus, we have access to thousands of uniquely-flavored products: gin, whiskey, liqueurs, fortified wines – to name a few,” he said. “These challenges are what led me to create Proteau as a way to test my abilities as a bartender/mixologist, and to find a way to create delicious beverages that everyone — not just alcohol drinkers — could enjoy.”

Intent Focuses on Taste and Versatility

  “A well-made cocktail is about taste and mood as much as it’s about alcohol, maybe more so. I wanted to introduce some balance to my bar cart; to be able to enjoy evening cocktails and a morning workout,” Sakey said. “Echoing the taste, smell and mouthfeel of spirits was incredibly difficult. Distillation turned out to be a rabbit hole — the cost was impractical, but more than that, it wasn’t possible to get the flavors right while still keeping it truly non-alcoholic.”

  Sakey said Ritual’s solution was to treat the process like cooking, building upward and layering tastes with quality ingredients such as all-natural botanicals. “The trickiest part was trying to replicate the kick of spirits. Over 500 iterations, we crafted a complex blend of ‘mouth-punch’ botanical elements — some spice, some cooling, some tingle, a few exciting additions I’ll keep under my hat — that work together to trick your taste buds,” he said.

  “Throughout the process, we worked closely with some of Chicago’s best mixologists and chefs. After more than a year of development, one of them said, ‘You know, in a cocktail, I’m not sure most people would be able to tell the difference.’ That was when I knew we had it,” Sakey said. In 2020, the industry-standard Beverage Testing Institute gave all of Ritual’s products three top honors and ranked its Tequila Alternative as the highest-rated non-alcoholic spirit in the world. It also has plans to roll out another spirit alternative in early 2021.

  Livings’ interest in zero-proof options evolved from his personal wellness journey, combined with an awareness of how friends’ and colleagues’ deliberate drinking choices. “They all expressed a common problem: they missed the drinks they knew and loved, and they weren’t impressed with the available alternatives.”

  With a long career in the beverage industry, he had the resources to pull together a team of bar staff, liquor marketers and liquor salespeople. “We figured that if anyone was going to change the way the world drinks, it should be a group of people who have plenty of drinking experience and would never compromise on taste. The big breakthrough was the ‘ah-ha’ that you didn’t have to take the alcohol out of a spirit product to produce a non-alcoholic spirit.”

  The single most important challenge, Livings said, was to provide true non-alcoholic versions of each classic spirit. “The flavor, aroma and appearance of each Lyre’s variant had to meet our high standards and basic test of, ‘Does it feel like I’m having a drink with booze in it?’” he said. “Over two years were invested in breaking apart flavors of the classics. It was very important that each was as close as physically possible to the classic spirits we are paying homage to. We don’t distill our products, as it’s not required when you craft the flavors using essences, extracts and distillates on a non-alcoholic base.”

  Proteau isn’t distilled either, as deBary chooses instead to blend a proprietary mix of botanical extractions with clarified fruit and artisanal vinegar for a low-sugar beverage. “For me, the eureka moment was when I sampled test batches with friends and colleagues, and they didn’t believe there wasn’t alcohol in the recipes. This is when it really dawned on me that the sensation of drinking a complex, intellectually-engaging drink wasn’t reliant on alcohol, and if we could disentangle that, we could open up a whole new world for people.”

Crafting a Solid Future

  Data points to a consistent rise for hand-crafted or small-batch zero-proof spirits, even if on-premises sales are skewed by 2020 pandemic repercussions. Future Market Insights in London indicate key demographics for spirit alternatives — considered part of the functional beverage market — includes 18 to 24 and 25 to 39, with product growth projections of nearly 3% each year for the next five as individuals seek “a multi-sensory drinking experience.” So innovation in the bottle must extend into well-positioned partnerships for marketing and promotion, and our makers know this all too well.

  “Again, people want options. This isn’t just me saying it — sales data bears it out,” Sakey said. “Across 90 days, we have a reorder rate of greater than 40% from major players like Binny’s Beverage Depot, Total Wine & More and ABC Fine Wines. If you extend the period to 120 days, it jumps to 70%. Better still, because Ritual Zero Proof is an ‘and’ product, it leads to higher sales, while serving a set of customers that liquor retailers often couldn’t otherwise capture.”

  Sakey and his team rely on integrated efforts to attract attention. “We’re cocktail aficionados, both leaded and unleaded, and so we love to work closely with mixologists. Some of our favorite Ritual recipes, like The Green Go-Go, have been created by artists like Carley Gaskin [of Hospitality 201 in Chicago], who was selected as The World’s Most Imaginative Bartender in 2018,” Sakey said. “But one challenge we often find is that retailers aren’t sure how to place spirit alternatives. We work closely with them, sharing best practices and providing POS materials. By showcasing a set, including components and mixers to create no- and low-ABV beverages, our partners see notably higher cart rings. It’s a win all around.”

  Livings said the company produces much faster now due to experience and “what the ‘rules’ are of non-alcoholic flavor architecture.” This enables the brand to span the world, broadcasting “an unparalleled range of drinks that you can make with Lyre’s. We have over 20 brand ambassadors, all classically-trained bartenders, so their expertise is the perfect base to help educate and collaborate with other bar staff and mixologists,” he said. “We’ve also worked closely with influencers, bloggers and passionate supporters.”

  In keeping with virtual outreach as venues’ occupancy ebbs and flows, Livings said the company offers one-on-one mixology classes through video chat programs. “When you purchase Lyre’s via our e-commerce site, we set up a private, 15-minute class with one of our brand ambassadors to demonstrate how to make delicious non-alcoholic cocktails at home,” he said. “It’s a unique offering, and we love the opportunity it gives us to meet our Lyre’s drinkers.”

  The primary message deBary reinforces with customers is “they don’t need to lift a finger to enjoy Proteau as intended.” But he trusts what his colleagues can do to provide a unique drinking experience. “Bartenders are naturally creative and experimental people, and we’ve been really happy with how they’ve used Proteau in their recipes and will continue to support that.”

  He also understands the unique value of providing people with a range of selections to fit their desires. “When I was bar director for Momofuku, and we would expand the non-alcoholic drink options at one of our restaurants, we noticed an overall increase in beverage sales,” he said. “The expanded options didn’t cannibalize from any other category and showed us, in real numbers, that we were reaching people who had previously been left out of the conversation. Accessibility is the core of hospitality, and it’s not just the right thing to do; it’s also great for business.”

Raising Capital for Craft Spirits Through Crowdfunding

Cyndi

By: Becky Garrison

Since its founding in 2013, Seattle-based Copperworks Distilling Company developed an award-winning portfolio of spirits with accolades such as the 2018 Best Distillery of the Year award from the American Distillery Institute. Yet, according to Jason Parker, Co-Founder and Presi-dent, they found themselves at a crossroads in growing their distillery last year. Even though they had more than 260 barrels of whiskey aging in inventory, the current demand for their American Single Malt whiskey exceeded their supply of mature whiskey.

  “The only way to win sales in the whiskey market is to have whiskey to sell,” Parker told Beverage Master Magazine. “If we are only growing through cash flow generated by vodka, gin and a little bit of whiskey sales, we won’t have the whiskey to compete in the market against those businesses who received capital investments to produce whiskey. In essence, we must produce whiskey faster than our current cash flow will allow.” 

  Rather than resort to traditional ways of generating capital, they wanted to explore a way to ex-pand their business that would get their friends, family, customers and other supporters involved as brand ambassadors. “We wanted to give them an opportunity to own a little piece of the work and be with us as we grow,” said Parker. 

Choosing Equity Crowdfunding

  Copperworks decided to raise money via equity crowdfunding through the WeFunder website. In Copperworks’ estimation, this approach enables individuals to become part-owners of a privately held company by trading capital for equity shares. This method of generating capital became available in 2016 with the passage of a new law called “Regulation Crowdfunding.” This shift made it legal for anyone to invest small amounts of money in startups.

  Copperworks chose equity crowdfunding over more established crowdfunding platforms like Kickstarter, Indigogo or GoFundMe because, with equity crowdfunding, a company issues equi-ty, such as shares of company stock, to participating investors. A company like Copperworks may also choose to offer perks, but the major incentive is the opportunity to become shareholders in the company.

  In comparison, traditional crowdfunding is more rewardsbased, whereby those who contribute to the campaign receive a perk, such as a discount or an advance copy of the product, but they have no equity in the company. Furthermore, a traditional crowdfunding campaign often offers their products at a discount to generate interest. Should the campaign take off, companies can find themselves unable to meet market demand at this low price point.

  According to Parker, a key advantage of equity crowdfunding is the company’s opportunity to utilize its investors as brand ambassadors. While this component of Copperworks’ strategy has been put on hold due to COVID-19, they are currently in the process of building a brand ambas-sador kit for their investors. In this kit, investors will be given the details of how to approach a restaurant, bar, grocery store or liquor store on behalf of Copperworks.

Challenges of Using Equity Crowdfunding

  Parker acknowledges the need for a distillery to ascertain if equity crowdfunding is the right ap-proach. For example, this approach to raising funds may not work for a business that has only been around for a year or less and has yet to build up a loyal following. “Equity fundraising is a good thing when you’re mature enough for the company to attract the appropriate investors for the valuation,” he said.

  From a company’s point of view, equity crowdfunding requires more upfront costs and financial discipline. The company’s records need to be reviewed professionally, an expensive process that took Copperworks three months to complete. In addition, WeFunder takes 7% of the funds raised, unlike a bank loan where one receives the entire amount upfront and then pays interest over time. Depending on the terms of a loan, a company may pay more in interest through a traditional loan. However, for those companies needing the full amount upfront, a bank loan may be their best option.

  Also, with equity crowdfunding, Copperworks had to be totally transparent with their financials, a process that included having this information readily available for public viewing. For Parker, this transparency fits in with their business model. “We believe transparency is one of the things missing in businesses today, so we want to model that behavior.” In the issue of transparency, they chose to share with their investors why they needed to raise money and how they intended to use these funds.

Promoting and Implementing the Equity Fundraising Campaign

  Copperworks promoted their campaign through their mailing list of 12,000 individuals. In addi-tion, they reached out to the 3,600 folks who liked their Facebook page because they had a high rate of customer engagement on this platform. They were also featured for five weeks in the American Distilling Institute newsletter. Their campaign, which ran from the end of February to April 2020, netted a total of 409 investors and $776,480 in funds.

  Parker admits to the challenges of raising funds right as COVID-19 began impacting the econo-my starting in mid-February. “It’s not very easy to ask people to spend money on a company when they may not have a job, their life savings may be losing 30% of its value, and they don’t know who around them is even going to be alive in a few months.”

  However, he said that since Copperworks had been around for a long time, many people emerged who really liked the company and their products and were looking to support something they cared about. 

  Regardless of the amount of their investment, each investor receives an annual report along with an invitation to every quarterly meeting. For those who invested $1,000, they get 10% off all Copperworks goods for life. Other perks were offered to those investing at higher increments, such as an offer to pick a single cask whiskey, a free event rental or an invitation to be on the board of directors.

  As per the SEC regulations, Copperworks disclosed to their investors the risks associated with capital works. While some of the risks noted are associated with investing in any company, others are specific to the distilled spirits market or Copperworks in particular. For example, the cur-rent distilled spirits market growth could slow or stop in the future. Along those lines, due to the threetier distribution system in the alcohol industry mandated by U.S. law, Copperworks is reli-ant on distribution companies. The distribution system has experienced consolidation in recent years, and should this consolidation continue, distilleries may face difficulty in expanding the distribution of their products.

Outcome of Equity Fundraising Campaign

  Copperworks successfully raised enough money to continue production during the COVID-19 shutdown and produce whiskey at their all-time maximum rate. All employees kept full-time hours, even though the tasting room was (and remains) closed. Therefore, the distillery could de-vote some of its resources to producing hand sanitizer, a product badly needed at the start of the pandemic. 

  Even better than simply raising money, which a bank loan could have accomplished, Copper-works was able to fully engage the support of their loyal fans. Customer engagement through social media, email and quarterly calls increased the opportunity for Copperworks to share their story and their customers to become brand ambassadors. New customer acquisition, which is much more difficult while the Copperworks tasting room is closed, increased through word-of-mouth, and online sales increased due to these outreach efforts.

  As Copperworks looks to expand their production area and event space, they have solicited their new investors’ network to help them find even more opportunities to grow their business. Copperworks is truly building an army of brand ambassadors and getting new talent and ideas through the use of regulation crowdfunding.

Continuously Improving Your Incentive Program

Cyndi
beer leaning to a bar graph

By: Nichole Gunn, Vice President of Marketing & Creative Services, Incentive Solutions

The first years after launching an incentive program are an exciting time for craft beer producers: supply chain trading partners, drawn by the excitement of new promotions and an improved channel partner experience, are more responsive, more motivated and more likely to recommend the brand’s products to restaurants and retailers. During this time, craft beer producers often experience a period of rapid sales growth or improvement in other KPIs the program was designed to target, such as improved partner data profiles or increased referral business. The incentive program’s ROI grows exponentially.

  However, often after 12-30 months, growth begins to stagnate and the ROI curve starts to flatten. If left unaddressed once an incentive program’s novelty starts wearing off and supply chain trading partners become habituated to the program’s value proposition, the incentive program’s ROI may start to decline, leaving craft beer producers scrambling to find ways to replicate the program’s success.

  The good news is that by planning ahead, craft beer producers can anticipate this drop off in interest level and continuously improve their incentive program in order to sustain a competitive advantage in their channel.

Keeping Incentive Programs Fresh

(and Profitable!)

  In order to stay relevant, a channel incentive program has to be able to evolve with the interests of its participants, scale its value proposition over time and respond rapidly to the tactics of the competition. Below are several factors that craft beer producers can focus on in order to continue to drive ROI once program growth begins to stagnate:

•  Evolving incentive program technology.

•  Incorporating elements of gamification.

•  Adding new, richer reward-earning opportunities.

•  Personalizing brand interactions to build loyalty.

•  Re-launching the program with updated features and branding.

  Ideally¬, these are all elements that craft beer producers will consider from the inception of the program, with plans for program expansion at certain intervals. However, these factors can also be incorporated to bring new life to existing programs.

Evolving Incentive Program Technology

  Today, incentive programs are a technology platform, and craft beer producers should be as mindful in selecting incentive program technology as they are in selecting any B2B software platform. From an administrative standpoint, this means choosing an incentive platform that integrates with existing CRMs and other business software and provides streamlined admin tools and generates detailed reports on engagement and ROI.

  However, perhaps more importantly, craft beer producers should focus on selecting incentive software that is fully supported and will be continuously updated to improve the user experience for their supply chain trading partners. More and more, B2B customers expect a seamless B2C-style user experience. Partners will be less likely to engage with a rewards program that uses stale, outdated software, no matter how exciting the reward offering.

  Additionally, agility is key. Craft beer producers should look for incentive software that allows them to quickly go to market, adapt to the tactics of the competition and launch new promotions. These factors will offer an edge when it comes to maintaining engagement throughout the lifetime of their program.

Incorporating Elements of Gamification

  Gamification is the use of game-like elements – such as points-scoring, interactive leaderboards and other competitive components – to increase engagement with a web-based application, such as an incentive program. Gamification is a powerful tool that supply chain trading partners already seek out in their day-to-day lives, from collecting likes on their Facebook page to scoring achievements on Peloton bikes.

  When interest in the program begins to stagnate several years after launch, adding gamification features can give the program new life. Interactive trivia, spin-to-wins, badges and achievements, personalized leaderboards and limited-time point bonuses make the program more compelling and can give a sustainable boost to the program’s effectiveness over time. Additionally, by not relying strictly on reward value to drive engagement, craft beer producers can help lower program costs to increase their ROI.

Adding New, Richer

Reward-Earning Opportunities

  As mentioned earlier, one of the reasons an incentive program can lose its effectiveness overtime is that participants become habituated to the program’s value proposition. Top performing supply chain trading partners may have already redeemed for their most coveted rewards and find themselves with more points than they know what to do with. The competition may have launched their own reward program with comparable, or even more compelling, rewards.

  It’s up to craft beer producers to constantly up the ante with their program’s value proposition. For instance, launching a points-based merchandise reward program alongside an existing debit or gift card program will offer new value for participants. Elevate a points-based program by offering top performers a concierge service to redeem for custom rewards – using their points to buy a new truck, renovate their home or pay for their child’s college tuition will personalize the reward experience and boost the program’s value proposition in a way the competition will struggle to match.

  Additionally, incentive travel promotions can be added onto any program type, giving craft beer producers an opportunity to connect with their supply chain trading partners on a deeply personal level. Given recent restrictions, the demand for incentive travel is projected to be particularly high once it is deemed safer.

  If minimizing rewards cost is a concern, try setting higher qualification thresholds for these more exclusive reward opportunities. Doing so can also help tap into supply chain trading partners’ competitive drive, keeping them more engaged as they compete for a limited number of higher tier rewards.

Personalizing Brand Interactions

to Build Loyalty

  In their early stages, incentive programs are typically geared toward growth. However, if well designed, the program will be able to convert that initial interest and motivation into brand loyalty over time. Loyalty is about more than rewards; rewards appeal to self-interest while loyalty is rooted in creating mutual interest. Craft beer producers can create this loyalty by using their incentive program to provide a highly personalized experience and to help their channel partners become more effective salespeople.

  This personalization should extend through every phase of the incentive program, from designing program communication to be relevant to each segment of their channel partners to basing reward selection on participant lifestyle and interests. Craft beer producer can use engagement metrics from their incentive program to identify which of their supply chain trading partners have a high level of buy-in and which of their partners might need a little more help. They can provide enablement to their partners by providing online courses and certifications and using their incentive program as a platform to educate partners on their brand and product lines, equipping them to more effectively sell their products.

  By using personalization and focusing on partner experience, craft beer producers can build loyalty with their supply chain trading partners in ways that make extrinsic rewards less important. This makes trading partners drastically less likely to lose interest in the program.

Re-Launching the Program with Updated Features and Branding

  Finally, when the growth of an incentive program begins to stagnate, it might be a sign that it’s time to re-launch the program. A program re-launch gives craft beer producers the opportunity to step back and figure out what their prior program did effectively, as well as what they can do better. During this time, craft beer producers should also explore other pain points they would like their new program to target.

  A pause between programs can help build anticipation, as supply chain trading partners realize the value proposition of the previous program that they had begun to take for granted. Once the new program launches, with updated branding and new features, supply chain trading partners will enthusiastically re-enroll and craft beer producers will experience a renewed period of growth. Better yet, by using the knowledge gained from the previous program, craft beer producers can make their re-launched program even more effective than the first.

Planning Ahead for Program Management

  Additionally, craft beer producers can enlist the help of incentive companies to design and manage their programs. Just like crafting an excellent brew requires years of experience, so too does managing an effective incentive program. Working alongside an incentive company with a proven track record can help craft beer producers avoid potential pitfalls and take advantage of decades of experience in managing successful programs.

  Whether a craft beer producer is looking to launch their first program or improve a program that is currently underperforming, the initial investment of partnering with an incentive company can pay dividends down the road.

  Nichole Gunn is the VP of Marketing and Creative Services at Incentive Solutions (www.incentivesolutions.com), an Atlanta-based incentive company that specializes in helping B2B companies improve their channel sales, build customer loyalty, and motivate their employees. Nichole Gunn can be reached at ngunn@incentivesolutions.com.

Intellectual Property for Beverage Manufacturers

Cyndi
intellectual property law

By: Brian D. Kaider, Esq.

While many people are familiar with the four main types of intellectual property: patents, copyrights, trademarks, and trade secrets, often they don’t know the distinctions between them or what they are meant to protect.  This article is meant to cut through the confusion and explain these distinctions and how each property right applies to the beverage industry.

Patents Protect Ideas – sort of

  Most people have a general understanding that a patent protects an “invention” or an idea.  In a very general sense, that’s true.  But, even though the Congressional authority to grant patent rights comes directly from the U.S. Constitution (Article 1, Section 8, Clause 8), exactly what is patentable is the subject of tremendous confusion among the U.S. population, examiners at the U.S. Patent and Trademark Office, lawyers, and even judges; sometimes requiring clarification from the U.S. Supreme Court.  The purpose behind the grant of a patent is to encourage innovation by granting exclusive rights to one’s discoveries for a limited time.  In other words, it gives the patent holder a short-term (20 years from the date of filing) monopoly on his invention.  Generally, new machines, chemicals, electronics, methods of production, and in some cases, methods of doing business, are eligible for patent protection.

  But, not all ideas are patentable.  In fact, ideas alone cannot be patented.  They must first be “reduced to practice,” meaning that either you must have actually created your invention or have described it in sufficient detail that someone skilled in that area could follow your disclosure and create it themselves.  So, you can’t get a patent on a time machine, because (at least for now) no one has figured out how to defy the time-space continuum.  In addition, to be patentable, ideas must be novel, meaning that no one else has ever disclosed that idea before, and non-obvious, meaning that your idea cannot be an obvious variant on someone else’s invention.

  Given that humans have been making beer for thousands of years, one might think that coming up with something novel in the brewing process would be impossible.  Not so.  In preparation for this article, I ran a quick search of patents containing the word “beer” in the title and got 491 hits.  Some recent examples include U.S. Patent No. 10,570,357 – “In-line detection of chemical compounds in beer,” U.S. Patent No. 10,550,358 – Method of producing beer having a tailored flavor profile,”  and U.S. Patent No. 10,400,200 – Filter arrangement with false bottom for beer-brewing system.” 

  Improvements in any area of the alcoholic beverage industry may be patentable including, new types of bottles, cans, growlers, and kegs; new types of closures and caps; improved methods of separating hops from bines and leaves; new processing equipment, improved testing procedures and equipment, improved packaging, etc.  Essentially, anything that lowers costs between the farm and the consumer, improves the quality of the beverage, or enhances the consumer experience is worth considering for patent protection.

  One word of caution, however; time is of the essence.  The America Invents Act, effective March 16, 2013, brought the U.S. in line with most other countries in being a “first to file” system, meaning if two people develop the same invention, the first to file for patent protection wins, regardless of who first came up with the idea.  Also, any public disclosure of your idea (such as at a trade show) starts a 1-year clock to file or you may lose your eligibility for patent protection.

Copyrights Protect Creative Works

  The authority for copyright protection stems from the same section of the U.S. Constitution as patent protection, discussed above.  Our founding fathers recognized the valuable contribution made to society by authors and artists and, therefore, sought to encourage creative expression by providing protection for artistic works.  Examples of copyrightable materials include, books, paintings, sculptures, musical compositions, and photographs.

  Unlike inventive ideas, which are only protected when the government issues a patent to the inventor, copyrights attach at the moment the artistic work is “fixed” in a tangible medium.  So, for example, if a composer develops a new musical score in her head it isn’t protected, but the moment she translates that tune to notes on a page or computer screen, it becomes protected by copyright.  In order to enforce that copyright in court, however, it must be registered with the U.S. Copyright Office.  While it is possible to wait until an infringer comes along before filing for registration, doing so can severely limit the damages that may be available to the author of the creative work.  So, early registration is the better course. 

  In the beverage industry, copyright issues often crop up with regard to labels and advertising materials.  But often disputes arise relating to who owns the artwork contained within a label, for example.  Generally, the author of a work owns the copyright.  But, if an employee of a brewery, acting within the scope of their employment, creates an image that the brewery owner incorporates into its labels, that picture is considered a “work made for hire” and is owned by the brewery.  Where disputes often arise, however, is if the brewery hires an outside artist or a branding agency to develop the artwork.  In that case, the brewery should include language in its contract requiring assignment of all copyrights to the brewery for the created artistic works.  The same would apply for any artwork commissioned for use inside the brewery tasting room or for marketing materials.

Trademarks Protect “Source Identifiers”

  People generally associate trademarks with the protection of a brand.  In fact, I have often described trademarks as an “insurance policy for your brand.”  But, in more technical terms, what a trademark protects is a “source identifier.”  The purpose of trademark law is to protect consumers from being misled or mistaken as to the source of a product.  So, for example, if a consumer sees a pair of shoes with a certain famous “swoosh” image on the side, they should be reasonably able to assume that pair of shoes was manufactured by Nike, Inc. and was made with the same degree of workmanship and quality that they have come to expect from that company.  That “swoosh” symbol, therefore, acts as a source identifier to tell the public that the product was made by Nike, Inc. 

  What may function as a trademark can be quite broad, including: the name of the business (e.g., Triple Nickle Distillery®), a logo (e.g., the “swoosh”), a color (e.g., the Home Depot orange or the UPS brown), even a scent (e.g., Verizon owns a trademark on a “flowery musk scent” it pumps into its stores to help distinguish them from competitors’ environments).  Not everything can be trademarked, however.  Slogans, words, and images that appear merely as decoration as opposed to a means of identifying the supplier will not qualify for protection unless the applicant can demonstrate that the item has achieved “secondary meaning,” i.e., that the public has come to associate that item with the manufacturer.  As an example, in the 1970’s McDonalds used the slogan, “You deserve a break today” in its commercials and other advertising.  People came to associate this phrase with McDonalds and in 1973 they were granted a trademark registration.  Incidentally, McDonalds briefly let this trademark go abandoned in 2014, but quickly re-filed and the mark is still active today, more than 45 years after it first registered.

  In general, marks also cannot be descriptive of the product or geographically descriptive of the source in order to be registered as a trademark.  For example, one could not obtain a registration for just the words “India Pale Ale.,” because it simply describes the product and does nothing to differentiate it from every other IPA on the market.  Similarly, an attempt in 2019 to register the name “Philly City Brewery” was refused as “primarily geographically descriptive,” because the applicant could not demonstrate that people had come to associate that name with its business as opposed to the many other breweries in Philadelphia. 

Trade Secrets Protect Valuable Confidential Business Information

  Unlike other forms of intellectual property, there is no registration system for trade secrets, because, by their very nature, they must be protected from all unnecessary disclosure.  Trade secrets can be just about anything that is confidential to your business and gives you a competitive advantage.  Some examples, include recipes, client lists, manufacturing processes, marketing plans, and client lists.  These are things that, if publicly disclosed, would harm the competitive position of the company and, therefore, must be vigorously protected. 

  One of the most famous trade secrets is the formula for Coca-Cola.  This formula has been protected for more than 130 years, sometimes through extraordinary measures.  In 1977, The Coca Cola Company withdrew its product from India, because in order to sell there, they would have had to disclose the formula to the government.  They decided it was more prudent to forego sales to one of the biggest populations on earth rather than risk disclosure of their secret recipe.

  Protecting trade secrets requires constant vigilance in two ways.  First, the information should only be disseminated to people within the company, or outside consultants, who need the information in order to perform their duties for the company.  In other words, the information is on a strictly “need-to-know” basis.  Second, those few people who are given access, should sign non-disclosure agreements with harsh penalties for breach of their duty of confidentiality.  Once the information gets out, it’s nearly impossible to un-ring that bell, so there must be severe financial consequences to someone who leaks the information.

  Brian Kaider is a principal of KaiderLaw, a law firm with extensive experience in the craft beverage industry. He has represented clients from the smallest of start-up breweries to Fortune 500 corporations in the navigation of regulatory requirements, drafting and negotiating contracts, prosecuting trademark and patent applications, and complex commercial litigation.

For more information please contact Brian Kaider at…
240-308-8032; BKAIDER@KAIDERLAW.COM; www.KaiderLaw.com

Empowered Makers, Spirited Women

Cyndi

By: Tracey L. Kelley

In the spirits world, female master blenders and head distillers are creating more buzz than ever, not simply for being “the first” but for their positions as innovative navigators of taste, brand and industry.

  With this angle in mind, we reached out to a few notable makers who could share valuable insight to help propel your efforts. We asked all of them three questions:

1.   What are you most proud of regarding your craft?

2.   What’s the top lesson you’ve learned as a businessperson/distiller?

3.   What advice would you give women entering the industry?

  Here’s what they shared with Beverage Master Magazine.

Connie Baker—Head Distiller and Queen Bee

Connie Baker—Head Distiller and Queen Bee—Marble Distilling Co. 

  A former pharmaceutical sales consultant, eco-minded Baker went to distilling school in 2010. She now leads a family- and friends-owned and operated business in Carbondale, Colorado, that includes the distillery, two bars and an inn. Maintaining local sustainability is important: her grains, water, and filtering marble are all sourced in the state.

  Signature Spirits: Moonlight Expresso, Gingercello, Vodka 80°

1.   Marble Distilling Co. has a first of its kind Water & Energy Thermal System (WETS) that reuses 100% of our process water and harvests the energy created through distillation, saving more than four million gallons of water and reusing 1.8 billion BTUs (20 homes) of energy annually. I’m proud that while we’re creating award-winning craft spirits, we’re being sustainable and thoughtful about the planet and natural resources. Water is our most precious resource in Colorado, so we’re doing everything we can to “drink sustainably” and “save the planet one bottle at a time.”

2.   Never give up, and believe in yourself and your craft: fear is failure, and work ethic is second-to-none.

3.   Do your homework—maybe even work for an existing distillery for a time. And don’t be intimidated by the fact that the distilling industry has been historically male-dominated. We women have great noses and palates, are thoughtful, creative and bring unique perspectives to a previously male-run industry.

Krystal Goulart—Head Distiller

Krystal Goulart—Head Distiller—Spirit Works Distillery

  Spirit Works Distillery owners Ashby and Timo Marshall celebrate female-driven innovation at this small distillery in Sebastopol, California, and give Goulart and her team plenty of opportunity to craft with skill and instinct. In July 2020, the American Distilling Institute named the organization Distillery of the Year and extended its Bubble Cap Award for diversity and community engagement.

Signature Spirits: Sloe Gin, Barrel Reserve Sloe Gin, Vodka, Four Grain Straight Bourbon

1.   First, an absolute trust in my palate, which is necessary when making “cuts” at the still, blending and product developing. Sensing subtle flavor and textural nuances within a run is what helps maintain a house profile as much as it also defines a distiller’s signature. Second, my ability to understand equipment and process timing so that I can develop efficient methods of working to increase speed and productivity. The best production hand is one who maintains speed with the least amount of movement.

2.   Being part of the craft distilling industry is, first and foremost, a passion play. The goal is to provide an environment of inspiration, education and exploration so you can stand together on new frontiers. Though deadlines and malfunctioning equipment might get in the way, cultivating employee and client relationships creates a robust team that can withstand any challenge.

3.   Learn all aspects of the business, from pressure-washing drains to making cocktails. Share respect and value with your team members, your production space and the products you make. Embrace opportunities for future growth or change. Be fearless in the face of challenge, enjoy the ride and embrace your personal evolution.

Becky Harris—Co-Founder and Chief Distiller

Becky Harris—Co-Founder and Chief Distiller—Catoctin Creek Distillery

  Harris, a former chemical engineer, formed Catoctin Creek in Purcellville, Virginia, with husband Scott, in 2009. Considered Virginia’s “Most Awarded Spirits,” Harris celebrates her state’s heritage and history through many aspects of the brand and produces a vibrant private single cask expression program.

  Signature Spirits: Roundhouse Rye, Rabble Rouser Bottled in Bond, 1757 Virginia Brandy XO

1.   I’m incredibly proud of how our vision and product have matured in the past several years. Catoctin Creek has always been grain-to-glass, but we have really leaned into our identity as the Virginia Rye Whisky, incorporating the regional grain, terroir and even wood to highlight our primary and unique focus on 100% rye mashbill whiskies. It sounds simple, but really learning who you are as a company is an evolution.

2.   As a chemical engineer, I always appreciated the technical challenges and achievement of making delicious whisky. Over the past 11 years, I’ve grown to appreciate the visual and story aspects of this business. Engaging more on the marketing aspects of what we do has not only improved my communication skills but also made me more confident as a founder and leader in a business that I entered in my 40s.

3.   I would recommend this to everyone: join one of the professional organizations available to you—volunteer to serve. You’ll gain knowledge, friendships and a better understanding of the industry and the best ways to navigate it for your company, your employees and even yourself.

Lein and Michelle Ly—Co-Founders and Head Distiller

Lein and Michelle Ly—Co-Founders and Head Distiller—Vinn Distillery

  Seven generations of the Ly family have crafted Baijiu, a 4,000-year-old Chinese rice liquor. In 2009, Phan Ly and wife, Kim Trinh, started Vinn Distillery in Portland, Oregon, to carry on this “white liquor” tradition in the United States. Today, five Ly siblings share various operational roles, with Lein as head distiller and sister Michelle handling sales and marketing.

  Signature Spirits: Vinn Baijiu, Baijiu Family Reserve, Whiskey, Vodka

1.   We’re most proud that we make everything from scratch using our family’s traditional methods, and to introduce one of the oldest and most-consumed spirits in the world to the general market here in the U.S. Using non-GMO rice products, we were the first to produce Baijiu, a rice vodka, a rice whiskey, and flavored Baijiu in America.

2.   The top lesson we’ve learned is that introducing something different, like Baijiu, to the market, is extremely difficult. Every sale requires an explanation of what the product is and how to consume it.

3.   My advice would be to have a target audience in mind, find a niche and dominate it.

Julie Shore and Arla Johnson—Co-Founders and Head Distiller

Julie Shore and Arla Johnson—Co-Founders and Head Distiller—Halifax Distilling Company

  Business and life partners Shore, a former dental hygienist, and Johnson, a counselor, previously owned and operated Prince Edward Distillery, home of Canada’s first potato vodka, before launching Halifax Distilling Company in Nova Scotia in 2016. Shore, a fourth-generation distiller, now focuses on a Maritimes favorite, rum.

  Signature Spirits: J.D. Shore Rum Cream, Black Rum, Gold Rum

1.   I love creating and visiting other distilleries to taste their creations. It’s so exciting! This industry has grown so much since we first distilled in 2008. It has brought such awareness to the public and gained much support! This is no small feat when the big conglomerates dominate the industry—to be able to carve out a piece from them is a very proud feeling!

2.   As a businesswoman, I’m still learning. Seems we learn everything the hard way! I think the top lesson that I’ve stumbled across is I try to be a real part of my community—and not just for the social media posts either. We want to help out when we can. If someone asks us for something, we really want to be there for them. Johnson adds: “’No’ does not mean no—you have to push back.”

3.   Follow your dream, and don’t take anyone’s shit! Seriously, there are folks who will get in your way—don’t waste time with them. Figure out how to get it done without them. If—and this will happen, too—you have to work with them, swallow hard and compliment the hell out of them. These folks trying their best to prevent you from succeeding typically have huge egos, and complimenting them really works. Just try not to sound sarcastic. Johnson adds: “You have to have passion and tenacity. You have to push through the challenges.”

Joy Spence—Master Blender

Joy Spence—Master Blender—Appleton Estate Jamaica Rum

  The grand dame of master blending, chemist Spence has spent nearly 40 years crafting Appleton Estate’s centuries’ old tradition for the modern age—first working with the master blender, then assuming that role in 1997. Along with creating special blends for presidents and princes, she mentors Nassau Valley high school students in chemistry. 

  Signature Spirits: Appleton Estate Signature Jamaica Rum, 12-Year-Old Rare Casks Jamaica Rum, 8-Year-Old Reserve Jamaica Rum

1.   As a master blender responsible for the legacy of our rum, I’m most proud of the several limited-time releases that we have introduced, such as the Appleton Estate 50-Year-Old, the Appleton Estate 30-Year-Old and the Appleton Estate Joy Anniversary 25-Year-Old. These offerings have created greater focus on the premium quality of the Appleton Estate range while showcasing the depth of very old rums in our inventory.

2.   During my career, the top lesson I have learned as a master blender is that every failure leads to an improvement, and being pragmatic is a key success factor.

3.   My advice to any woman entering the industry is to focus on your craft and not your gender. Become an expert in your field and pass on your knowledge. It’s your passion, skill and creativity that will make you successful.

Chanel Turner—Creator

Chanel Turner—Creator— FOU-DRÉ Vodka

  Once a government contractor, Turner spent more than six months researching distilleries with the technology to produce the quality of crisp, clean vodka she wanted. Today, her “lightning” brand has robust Asian sales and a strong online market. She’s also the founder of the Black-Owned Spirit and Wine Festival in Washington, D.C.

  Signature Spirits: FOU-DRÉ Vodka

1.   I’m most proud that we’ve been able to sustain in an industry that sees many brands come and go. Looking back, I identified a problem that many can relate to, with vodka being a spirit that people tend to grow out of. At 25, I knew I wanted a “better experience” when consuming spirits without having to use sugary mixers. I realized I would have to source the right distillery to bring my vision to life. It took months of research, formula tests (87!) and market surveys to come up with the infused formula that’s found in a bottle of FOU-DRE today. We’ve not compromised the unique taste or exquisite packaging of FOU-DRE in any way—that truly makes me proud.

2.   I’ve learned to celebrate the small wins and appreciate the journey. The older I get, this matters more than ever before. Essentially, I’ve grown with the business, becoming a proprietor at such an early age. Outside of what it takes to build a spirit brand, I’ve learned patience!

3.   My advice would be to make the right alliances early on. Though we’re seeing more women come into this space, it’s still a male majority industry. So it’s important that we unify, join together and share moments of pains and progress. We can learn so much from one another and get ahead of the game by tapping into each other’s resources. When I first started, there was a small percentage of women owners/distillers in the industry. Even more disheartening, there was an absence of platforms for community-building and very little visibility for women in the field. We’ve come a very long way but still have far to go. I encourage women coming in the industry to network, network and network some more! Make your presence in the industry known. When one wins, it’s a win for us all.

Kaitlin Vandenbosch—Head Distiller/Brewmaster

Kaitlin Vandenbosch—Head Distiller/Brewmaster— Mill Street Brewery

  After earning a master’s in brewing and distilling at Heriot-Watt in Scotland, Vandenbosch started at Mill Street in Toronto in 2013, just when it was expanding into micro-distillation. She advanced in many management positions since then, helping Mill Street refine its line. In 2019, she became the organization’s brewmaster.

  Signature Spirits: Single Barrel Canadian Malt Whisky, Tankhouse Bierschnaps, Small Batch Gin

1.   There are two things I’m proud of: first, Mill Street brought distilling back to the Distillery District in 2013, and I was the first head distiller. Spirits hadn’t been distilled on-site since the mid-1980s! Second, during my time as head distiller, I set down two barrels of whisky. Since it was very small scale, I was able to take a lot of time and care with the recipe design, aging and blending. I am really happy with how both turned out (released in 2017 and 2018).

2.   It’s fairly technical, but one of the most useful skills that I learned from my former boss, Joel Manning, is benchtop trials. This comes in handy when determining flavor additions, final alcohol strengths, barrel blends, cocktail designs, and so on. It’s extremely useful to dial in on a small scale the flavor profile you’re aiming for and then adapt it to a larger scale.

3.         Network! I believe it’s really important, especially in craft distilling, to meet others in the industry or similar industries. There’s also a lot of overlap between brewing and distilling and wine/cider making and distilling. Similarly, it’s good to meet people who are the end-users of your product—bartenders and customers. Networking is a great way to share ideas, learn about events, ask questions and make connections.

All About Boiler Use in the Distillery

Cyndi

By: Alyssa L. Ochs

There are many different things to think about when operating a distillery. However, one often-overlooked detail is the distillery’s boiler and its quality, condition and features. There are various kinds of boilers available to craft distilleries today, which is why it’s a good idea to learn more about them and know what questions to ask before either buying your first boiler or upgrading your current one.

The Importance of Distillery Boilers

  Boilers are used in distilleries to heat the kettle, for sanitation and sterilization, for pasteurized heating, to maintain precise temperatures and to meet production demands efficiently. Boilers are essential in the distilling process because making spirits requires hot water to be at specific temperatures, and a boiler helps the distiller control temperatures. The ability to control this heat improves the quality of the spirit and ensures the distiller’s safety.

  Boilers create high-quality steam that impacts a spirit’s taste and are commonly used to sanitize and sterilize distilling equipment. In some instances, boilers can even help control a distillery’s air temperature where tastings and tours take place.

Boiler Types

  Modern water tube boilers start producing steam faster than older models, while older fire tube boilers take longer to heat up and can be out of commission for longer during servicing. Distilleries use low-pressure and high-pressure steam boilers or steam injection boilers that are typically affordable to buy and install, supply steam with no filters needed and provide hot water for various distillery needs. Low-pressure steam boilers are efficient and low-cost to operate, less noisy than steam injection boilers and pass inspections more easily.

  Dave Baughman, President of Allied Boiler & Supply, told Beverage Master Magazine that low-pressure boilers produce and supply steam below 15 PSI. These boilers come in various designs, including fire-tube, water-tube, tubeless and cast iron sectionals.

  “Some of these boilers are great at handling low-pressure steam heating loads, such as a church, school or apartment building,” Baughman said. “But they aren’t as conducive to a production type of application.”

  He also said that the type of boiler used in a distillery should be dictated by the distillery equipment and the associated steam load requirements.

  “A small craft distillery may be able to utilize a boiler that produces steam up to 15 PSI, which is ASME Section IV construction,” Baughman said. “As the pounds of steam per hour load demand increases with larger distillery equipment, then a power boiler of ASME Section I construction–which produces steam greater than 15 PSI–may be required in order to hold a steady steam pressure at the equipment. Holding a steady steam pressure at the distillery equipment is extremely important as steam pressure relates to temperature. The distillery equipment needs to have steady pressure in order to perform properly. If the steam pressure fluctuates, then temperature fluctuates accordingly, which affects the performance of the stills and other distillery equipment.”

  Allied Boiler manufactures fire-tube and tubeless boilers, both Section I and Section IV construction, from six to 2,000 horsepower. Baughman said that each installation and its particular steam load determines the type of construction the boiler needs to be.

Boiler Features

  Many modern boilers are narrow enough to fit through a standard doorway and easily install into a distillery building. Boiler companies make over a dozen different sizes ranging from five to 150 HP. Options for craft beverage producers of varying sizes are generally between five and 120 barrels per batch. Commercial distilling boilers are usually over 50 gallons. For example, a distillery can get a 150-gallon steam injection boiler that produces 337 pounds of sanitary steam per hour. For regulatory purposes, boiler and pressure vessels should have a stamp of approval from the American Society of Mechanical Engineers.

Questions to Ask Before Buying a Boiler

  One crucial question to ask about is the start-up time for a new boiler. It is usually unnecessary for a boiler to run 24 hours a day and waste energy, so quick-start-up boilers are designed to be turned on and start producing steam within a few minutes. Also, ask a boiler salesperson about energy efficiency because you’ll want to pay attention to fuel costs and not run up utility bills unnecessarily.

  Confirm the exact boiler measurements to ensure that it fits in your distillery space and also fits well alongside other equipment and any tasting or tour areas. Ask about the maintenance process, because if routine maintenance shuts down the distillery for a long time or if repairs are complex, this could hurt future business. Newer models of boilers typically have lower emissions for a reduced environmental impact. However, it still doesn’t hurt to ask about any emissions or harmful substances that may come from the boiler. It’s also good to know if extra parts will be readily available if they’re needed later.

  “The boiler itself is a powerful piece of equipment,” said Baughman. “If operating personnel are not properly trained, or if the boiler and support equipment are not properly maintained and serviced, then the boiler can be deadly.”

  He recommends asking the following questions before purchasing a first boiler or upgrading a current one:

•   Do you offer boiler training?

•   Do you perform start-up commissioning, boil-out, combustion tuning and jobsite operator training with the purchase?

•   What are some installation references from distilleries that have had your boiler for at least three years?

•   Do you have 24/7 personnel available for service?

•   What makes your boiler, support equipment and company different from others?

•   Why should we purchase this design boiler versus a different one?

When to Upgrade a Current Boiler

  For existing distilleries that have been in operation for a while, the time may come when you need to consider replacing or upgrading your current boiler. Common reasons to upgrade are a boiler that’s too noisy in public areas, high utility bills resulting from energy inefficiency and inconsistent steam pressure. It may also be time to replace your boiler if it can’t produce steam quickly and on-demand.

Maintenance Considerations

  No one likes to think about a brand-new boiler breaking down, but maintenance should always be part of the decision-making process when making a significant distillery investment. Fortunately, many modern boilers require minimal maintenance and need to be blown down at the end of the day to flush out the sediment that settles at the bottom. The blowing down process should be quick and help prevent damage to drains and plumbing lines.

  Routine maintenance should also involve checking chemistry levels to ensure the pH is ideal for steel. There are mandatory state inspections to adhere to as well. For ease of operation, consider installing an alarm system to tell if the feed tank is running low. Some boiler systems can be easily maintained by distillery staff; however, older models may require an expert maintenance specialist to come onsite for repairs.

Boiler Placement

  Concerning placement, it’s vital to keep boilers away from other equipment and isolated with a vapor barrier. Place the boiler at least six feet from still parts that are 18 inches or less from the floor. Also, place the boiler at a minimum of two feet from still parts above that 18-inch mark.

  Most boiler experts recommend placing boilers as close to the still and fermenters as possible to minimize the distance that cold water and steam have to travel to and from the equipment. This placement helps control heating and cooling loss, as well as piping costs. Boilers are often located in a separate room from other distilling equipment, but not every distillery separates their boiler in this way.

  Another consideration is the floor strength in the distillery. Older buildings may require custom installation because of inadequate floor strength, building materials or availability of utilities.

  Baughman said that the best placement of a boiler is in a separate boiler room because the boiler is a pressure vessel that is hot and typically has a water level sight glass, gaskets and other parts that can leak or blow.

  “By definition, wherever the boiler is placed becomes a boiler room,” he said. “Because of this, the boiler room has certain code requirements that must be met. From an environmental standpoint, a boiler likes to operate where there is not a lot of moisture. A separate boiler room affords this environment typically, whereas, if the boiler is out in the distillery, it may be subject to moisture from the wash down of the floors and cleaning of the equipment. So, from a safety and operational standpoint, a separate boiler room is the best.”

Boiler Accessories

  New boilers come with accessories that need to be added to the budget and stocked for repairs and maintenance. For example, CRT and VRT return tanks are used to collect condensate from the system and recycle it back to the boiler. Copper coils are used to make potable hot water for sterilization and keg wash-down. There’s also the blow-down separator used to flush out sediment and keep everything working well.

Choosing the Right Boiler

for Your Distillery

  Like grains, extracted juices and sugars, boiler steam is an essential ingredient in many spirits. The right boiler will meet your steam demands at production time without waiting hours for it to provide steam. It should be able to handle multiple processes simultaneously for greater efficiency and be capable of adjusting the steam supply on demand to save fuel costs and reduce energy waste. Other things to think about when choosing a boiler is proper roof venting for boiler operation, and whether to hire a licensed steam boiler technician to install the boiler and service it in the future.

  No matter what you’re looking for in a boiler, ask a lot of questions. There is a lot more that goes into this piece of distillery equipment than you might think. And, as Baughman said, the only bad question is the one that doesn’t get asked.

Varieties of Gin Botanicals in the Pacific Northwest

Cyndi
assorted spices in a table

By: Becky Garrison

The recent sale of Aviation Gin to Diageo in August 2020 put the Portland, Oregon, distillery scene, and gin in particular, back on the national map. Aviation’s history can be traced back to 2004 when Christian Krogstad and his wife, Christina, launched House Spirits Distillery intend-ing to make American single malt whiskey. However, as whiskey requires a significant time in-vestment, they decided to generate some revenue by redistilling a neutral grain spirit-based gin that could be brought to market relatively quickly.

  They chose to deviate from the other gins on the market at the time, which they found to be juni-per heavy. They began experimenting with different botanicals and spices in a quest to manufac-ture a truly American spirit.  

  “When I started a beer business, I learned from my brewing experience that you really have to innovate. You can’t just do what other people are doing,” Krogstad said.

  A year later, Ryan Magarian joined the team and came up with the term “New Western Dry Gin.” The first taste of Aviation’s new style of gin was not juniper, but a balanced blend of bo-tanicals that included cardamom, coriander, French lavender, anise seed, sarsaparilla, juniper and two kinds of orange peel.

  These botanicals are steeped in neutral grain spirit for about 18 hours and then combined with water and distilled in a steel still for about seven hours. The resulting product is 142 proof initial-ly but cut to 84 proof for bottling.

  The name Aviation came from the iconic Aviation Cocktail created in the early twentieth centu-ry. Their bottle design, Krogstad noted, is “almost reminiscent of the Chrysler building in New York City,” and brings to mind the style of the TV series “Mad Men,” circa 1960.

  In 2016, owners Christian Krogstad, Thomas Mooney and Ryan Magarian sold the Aviation brand to Davos and put their money and energies toward expanding production of Westward Whiskey. (Incidentally, Westward Whiskey is also partly owned by Diageo).

Cask Finished Gin at Copperworks Distilling Company

  Jason Parker, first head brewer at Pike Brewing Company and co-founder of Copperworks Dis-tilling Company in Seattle, Washington, took a somewhat similar route to Krogstad when he founded Copperworks in 2013 with fellow craft beer maker, Micah Nutt. They began distilling their small batch gin so the proceeds could keep their business afloat until their American single malt whiskey matured and could be marketed. Their gin is distilled from a base of Washington-grown malted barley with a balance of juniper and hints of coriander, citrus and other exotic bo-tanicals.

  They also began experimenting with cask finished gins. Copperworks New Oak Cask Finished Gin is finished for roughly three months in charred, new American Oak barrels, the same barrels used to age Copperworks’ single malt whiskies.

  Cask finishing brings forward floral, coriander and cinnamon notes and softens the juniper. Also, the presence of caramel and vanilla comes from the barrel. “The other spices really pop forward, and you get this kind of burnt character to the orange. It’s really delicious,” Parker said.

  This venture led to an experimental cask finished gin series that includes limited-edition gins fin-ished in casks that previously held spirits such as Laphroaig Single Malt Scotch Whisky and Caol Ila Single Malt Scotch Whisky.

Surveying Other Gins in the Pacific Northwest

  In what appears to be a trend, Freeland Spirits in Portland, Oregon, founder Jill Kuehler also be-gan distilling gin while waiting for their bourbon to mature. Named in honor of Kuehler’s grandmother, Meemaw Freeland, this women-owned distillery seeks to capture the flavor of Meemaw’s garden gin. Kuehler’s team combines traditional heat distillation with vacuum distil-lation to turn fresh Pacific Northwest grains, ingredients such as cucumber, rosemary and mint, as well as other dried botanicals, into the small-batch gin. They also produce an award-winning canned gin and tonic cocktail, and Geneva, a spirit inspired by genever that showcases Oregon-grown rye with savory botanicals.

  Scratch Distillery in Edmonds, Washington, was born out of Kim Karrick’s passion for making gin– from scratch–using locally sourced organic ingredients. Scratch Gin is crafted from the dis-tillery’s organic, non-GMO, wheat-based vodka, and vapor infused in the still using a gin basket. Customers can choose from a barrel-finished, martini-style or gin-and-tonic-style gin, depending on their taste preferences. Knowing that each person has a unique palette, Karrick also developed the GINiology program. Here, participants choose from more than thirty different botanicals, spices and other flavors to create a personalized gin to take home.

  AJ Temple of Temple Distilling Company in Lynwood, Washington, distills his gin using a cus-tom stainless steel and copper bain-marie style pot still. This double boiler heating method lends an even and soft heat to the botanicals. Temple Distilling’s first and flagship spirit, Chapter One London Dry Gin, was made to showcase a love for old world-style gins. Other offerings include Navy Strength gin, aged in once-used bourbon casks, and a limoncello. Since Temple discovered citrus oils play better at higher strengths, they use fresh lime peel and dried grapefruit, as well as cassia bark for added body, when making their Navy Strength gin.

  Rusty Caldwell, co-owner at 503 Distilling in Oregon City, Oregon, views gin like a calling card. Every distiller tells their story by showing what they find tasteful and elegant through their choice of botanicals. “Like wine, our Circa 17 gin tells the story of terroir,” Caldwell said. “Our use of Oregon juniper, fresh-cut spruce tips, gardened rosemary and other herbs represents a taste of our environment in the Pacific Northwest.”

  Distilled in Seattle, Washington, Big Gin is named after founder and third-generation distiller, Ben Capdevielle’s father, Big Jim. The juniper, sourced in Italy, Albania and Macedonia, along-side cardamom, cassia, and Tasmanian pepperberry, gives the gin a complex peppery or spicy flavor, while the angelica, coriander and bitter orange peel add citrus and savory flavor. Now owned by Hood River Distillers, Big Gin offers a London Dry gin, along with Big Gin Bourbon Barreled, Big Gin Peat Barreled and other Big Gin Single Barrel releases.

Aria Gin: Dry London Gin Infused With the Pacific Northwest Spirit

  In response to this ginned up craze, Aria Portland Dry Gin, established in 2012, set out to pro-duce a top-shelf classic dry London gin. As much as co-owner Ryan Csanky loved gins like Avi-ation, he found they did not work when he would make a classic martini for his older clientele. 

  “Distillers would use all these innovative and creative flavors like prickly pear, spruce tips and lavender, and build a drink around them. But they don’t always plug directly into some of the classic gin cocktails that people like,” Csanky said.

  Rather than push the boundaries of flavor even further than Aviation, Csanky decided to pursue another route. “We had this aha moment where we decided to take a big step back and shift our focus to doing something that is not being done. For us, that was a high-quality, independently-made alternative to the mass-produced gins.”

  They experimented with traditional English botanicals, searching for the right harmony and bal-ance in crafting a classic dry London gin. “I didn’t want the gin defined by a single ingredient or a single component of the flavor profile,” Csanky said. “The art of this gin is all about how we paint the picture with the botanicals.”

  Two years into product development, they realized they did not need to use nearly as much product. So they moved away from the heavy-handed, intense flavors Csanky found were present in many independent gins, in favor of flavor combinations that were bold but also delicate. Even-tually, they settled on a recipe that combines the ten-ingredients they list on the bottle: juniper, coriander, angelica root, grains of paradise, cubeb berry, orris root, lemon zest, orange zest and cassia bark. 

  Presently, Csanky does not plan on distilling other products. “I don’t want to make a little bit of everything and do it all kind of decently. I want to make one thing and be known for doing it well.”

  Moving forward, Caldwell of 503 Distilling offers a reflection on the future of gin. “One of the things I love about gin is that within recent years distillers–and consumers–have opened their minds to appreciating gin like they would whiskey. Until recently, gin has always been given the distinction of a mixer spirit, which means that it must be neutral enough to be blended into an-other substance. However, among craft distillers, there is now the trend to treat botanicals like a brewer treats hops.”

Distillery Startup: Where the Journey Begins

Cyndi
distillery equipment set

By: Gerald Dlubala

“You want to start a distillery? Try not to be overwhelmed, but by all means, prepare to be overwhelmed,” said Patrick Kelty, President of VITOK Engineers, Inc. VITOK Engineers help design and optimize every element of the distillation process, from raw material receiving to proofing and bottling. Their clients range from craft distillery startups to the likes of Wild Turkey and Jack Daniels. And if nothing else, Kelty wants potential distillers to remember a few things.

  “Educate yourself about the distilling process and business,” said Kelty. “Talk to other owners. Learn from their mistakes and successes and apply them to your situation. Get to be best friends with your Fire Marshal, insurance agents and inspectors. They are the ones with intimate knowledge of the specific rules and regulations of your location. Base your design on your current situation, your forecasted production numbers and goals and your target customers and marketing plans.”

  Kelty said that too many distillery startups begin with the owner blindly agreeing to options and amenities before obtaining proper cost estimates, causing hard decisions regarding cost-cutting and expense squeezing later. Collecting accurate cost measurements before startup is a lot of work, but it ensures that the owner gets the equipment and machinery based on what they have right now and what they want in the future.

  “For example, going with a column still means you’ll be installing the entire system upfront, even if you don’t yet need it,” said Kelty. “You may only run it on a part-time basis, but with a column still, once you reach max productivity, you have to install additional column stills to increase production. One fermenter is generally needed per eight-hour shift, so if you run continuous shifts, you’ll need up to three fermenters per 24-hour cycle. A simpler pot still can be run on a batch basis and, if needed, can also be used after fermentation as pre-bottling holding bottling tanks. They are multi-functional and can be added to, but they require more attention than a column still.”

  Kelty told Beverage Master Magazine that using experienced professionals in distillery design is a must. Roughly half of VITOK’s distillery design business includes the trendy retrofitting of old buildings into new distilleries. Often, these buildings need redesigning to accommodate the potential hazards of distilling. New construction is costly upfront but allows optimal design based on current and future plans. 

  “All architects, designers and engineers must have a safety-first mindset because of the inherent dangers of distillery operation. VITOK started as chemical plant engineers, so safety is ingrained in our way of thinking. Others may not necessarily have that same mindset,” Kelty said. “Did you know that commonly installed PVC drains installed under slab concrete floors can melt if distillery wastewater is pumped through them at too high of a temperature? Neither did the particular distiller that this happened to. That’s just one example of things that experienced distillery professionals know, and some unexperienced general contractors in the distillery construction field may not.”

  Future goals and expansion plans should include the possibility of increased deliveries, the need for additional raw materials storage and what happens to your spent grain. Farmers used to take all they could, but in Kentucky, Kelty said there’s now an overabundance of distilleries and spent grain, so farmers are now charging to haul it from the distillery, meaning additional costs.

  A project manager is also critical, he said, to keep the project on deadline, within budget and moving smoothly.

  “And then assemble as much of a dream team as you possibly can to keep all parties moving in the same direction towards the same goal. The owner, architects, engineers, lawyers and marketing consultants need to start at the same time to be on the same page and working towards the brand story or identity that the distiller wants to convey. Having that singular vision helps avoid cost overruns and delays.”

  “Just learn as much as you can, talk to those that have gone through it, and partner with those having verified experience in distillery startup equipment, procedures and practices,” Kelty said.

Don’t Forget About Grain Handling

  “Grain handling is usually an afterthought,” said Adam Dubose, Sales Engineer at ABM Equipment (See their ad on the Inside Front Cover). “It’s just how it is. By the time we get involved, it’s usually the last step, and we have to deal with the leftover space. But that’s okay because that’s what we do.”

  “Most brewers will mill their grain if they can,” said Dubose. “If you can do that, you have total control over the coarseness, the makeup and the content while saving significant money. You’ll find out just how quickly you go through grain when you only buy small bags of pre-milled grain. The costs will add up quickly, so if possible, it’s best to mill it and start with one silo. Just keep in mind a plan and a place to install two or three more down the road.”

  ABM Equipment helps brewers design a future-friendly brewery layout to efficiently use the available space to maximum advantage. They take the needed time to go through plans and goals and develop an agreed-upon design to match each brewery’s specific needs. This method heads off potential problems and headaches before installation begins.

  “Good planning with good future projections is the key,” said Dubose. “With grain, milling and conveyance equipment, you need to plan as far into the future as you can. Budget will always be a factor. Get what your budget allows, and add the needed equipment later, but good planning and foresight with design and space will make any future additions easy to implement.”

Been There, Done That, and Willing to Help

  Starting up a distillery is unlike any other business startup. It’s critical to take advantage of the information and help from those that have traveled the path. People like Patrick Heist, Ph.D., Chief Scientific Officer of FermSolutions and Co-owner of Wilderness Trail Distillery, are a wealth of knowledge, from questions about the startup process through full-service consultation and design of your distillery.

  “We engage with customers from the conceptual phase through the distillery construction,” said Heist. “FermSolutions was started in 2006 and works directly with hundreds of distilleries on process optimization and problem-solving. By starting Wilderness Trail Distillery as an extension of FermSolutions, we have real-life experience in the right versus wrong ways of doing things to help solve issues for other distillery startups. Once they are running, we offer our expertise-driven fermentation products like yeast, enzymes, lab services and more to make sure the process is optimized and producing the best possible yields and flavor. We’ve expanded three different times since, from a one barrel per day operation to now being the fourteenth largest bourbon producer and the eighteenth member of the Kentucky Bourbon Trail.”

  Heist said that there are numerous questions to consider when starting a distillery, and as expected, the big one involves funding. “Make sure you are properly capitalized, not only for seeing the project through but for any unforeseen situations that will arise. Make sure you can wait, if you haven’t already, for the aging process before you start realizing a cash flow. Some distillers are trying to get initial cash flow through products that can be ready to sell in short order, like moonshine, vodka or gin. I will warn you that sometimes the marketing required to get any meaningful revenue out of these types of spirits is cost-prohibitive. Make sure you have your priorities in order. You should already know the types of distillate you plan to produce along with what feedstock you’ll use for each type. What recipes will you follow? Are your sources reliable? What are your plans to meet future growth and demand? What type of equipment do you need to meet these goals? Are your building utilities proper for your distillery plans?”

  Heist suggests that just as you use your budget efficiently and wisely, so should you use your time. For example, if you’re planning on making a straight whiskey, you likely have at least two years to design a bottle and work on marketing plans, so stay focused on the current operation itself, including yields and great flavor profiles. Legalities, laws and regulations must be precisely met and followed, so it’s mandatory to get help in these areas. FermSolutions can provide guidance, but the Distilled Spirits Council of the United States (DISCUS) and the Alcohol and Tobacco Tax and Trade Bureau (TTB) are also great resources. Tap into other nearby distilleries that have already navigated those waters, and don’t be afraid to ask for help and guidance.

  “Be a student of the process,” said Heist. “Take the initiative to get yourself going and choose help based on actual need. A lot of money can be spent on non-essential consulting services that could be put to use in production. Because when you get down to it, it’s about what you can afford. Some say to go with bigger equipment, like stills, to support future growth and production increases, but along with that comes more energy requirements, the need for bigger boilers, chillers and so on. Focus on getting equipment that will serve your immediate needs within your current budget constraints.”

Addressing COVID-19 During Startup

  “You normally have the big five concerns when starting a business: namely, your business model, portfolio mix, funding, appropriate licensing and equipment, but 2020 has put a whole new spin on things, especially where the public is concerned,” said Donald Snyder, founder of Whiskey Systems, a complete craft distillery management service. “You’ve now got to also ask yourself how you’re going to comply and maintain the safety requirements for your area, including OSHA-based requirements and more, and of course, social distancing if it’s still mandated later this year. In my experience, most new startups don’t consider the current requirements for their locality. How are you going to achieve and continually manage the mandates needed to comply with your local safety, health or fire regulations?”

  Snyder told Beverage Master Magazine that while opening and building anticipation of a new distillery in today’s market can be done within local requirements, it’s a different story moving forward. “You’ve got to have some sort of system in place to build on and meet your needs while remaining current on, and working within, those state and local allowances and restrictions. You may, for example, have to prepare to spend money upfront and wait the necessary number of years to age and produce a quality product. White spirits and moonshine age faster and are available to sell quicker, so you just have to be creative and use what you are given.

  “A good example is the option to sell your full bottles, mixed cocktails and related items to go,” said Snyder. “If you’re in one of the states that allow that, then great, that’s a quality feature you can build and design your business model around while waiting for the restrictions to ease up, hopefully in a reasonable time. If you aren’t allowed to do that, then for now, at least, your storefront has to be built around merchandising and awesome consumer experiences. When I walk into your place, the customer experience should be your number one concern, followed by the tasting and the tasting room experience.”

  Snyder believes in having something to show for your investment, so it’s best to purchase or lease-to-own quality equipment. Financing can work, but the thing to remember is that, unlike the beer or wine industry, distilling equipment holds its value exceptionally well. It won’t depreciate like other manufacturing machinery, so, many times, you’ll get your full or near full investment back. With leases, it can be easier to have someone take over the lease and be on your way. A lot of the equipment for wine and beer can be interchangeable, but distillery equipment is different.

  “Little things that have big meaning for distilleries can be overlooked if you’re not using engineers and architects experienced in distillery design,” said Snyder. “One mistake I see made a lot is the absence of roll-up or dock doors. How are you going to move your glass, cans, grain, spent grain and materials? Prepare for the cost of employees, rent, any leases, etc. You’ve got to stay aware of long-term logistics for business expansion or the addition of future lines or products. Don’t layout your distillery in a way that restricts or financially inhibits future growth and expansion. Safety is another important area of concern, so it’s important to consult with engineers and architects that are familiar with and understand the workings of a distillery and the relatable OSHA regulations. Distilling and grinding your grain produces natural explosion hazards, so it’s critical to design your spaces accordingly.”

  “As important as all these other things are, it’s just so critical to stay in compliance with state and federal reporting regulations,” said Snyder. “It’s so important to start your reporting and tracking before you get audited. Choose a system similar to Whiskey Systems that fits your needs and provides an audit-ready place to manage your records.”