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Spring is the perfect time to clean up your wholesaler finances and make ready for the summer selling season.
In this post, we’ll share 3 Spring Cleaning Tips to Make your Finances Sparkle:
Organize your corporate documents: Use the checklist to scrub your important papers
Count your inventory: Borrow the process to keep your inventory records nice and tidy
Review the balance sheet: Download the White Paper and learn how to keep your financial statements squeaky clean
Spring Clean Tip #1: Organize Wholesaler Corporate Docs
If you’re like most wholesalers, you have corporate records stashed everywhere. Some are tacked to the wall, others are in your desk drawer or saved on your laptop.
Corporate records are important because they show that you have the proper licenses, filings and legal standing to operate your wholesaler business.
Corporate records are critical to maintain your ‘corporate’ status and the liability protections this provides.
Examples of corporate records include:
Articles of Incorporation
Bylaws
Stock certificates
Stock ledger recording each stock issuance or transfer
Minutes of meetings of the directors
Corporate seal
If you don’t have the time or patience to locate and organize your corporate records consider hiring an attorney to do it for you. They won’t be cheap, but they will make sure all the necessary docs exist and are properly filled out.
Corporate docs are super important to preserve the ‘corporate veil’ and protect you from liability.
If you plan on borrowing money, banks need to see this information. If you plan on bringing on an investor, or eventually selling, investors / buyers will insist on complete and accurate corporate docs.
If you want to do it yourself, use the Corporate Docs Checklist as a guide to get started. Spring is a great time to locate, organize and clean up those corporate documents.
Spring Clean Tip #2: Count your Inventory
Counting inventory can be difficult, time-consuming and un-productive. But these things only happen when you do it the wrong way.
You’ll find it takes less time and will get you the results you want: accurate inventory on the books. Everyone wins.
Spring is a great time to clean up your inventory. Use the process, and make it count.
Spring Clean Tip #3: Reconcile the Balance Sheet
Your balance sheet reports on your assets, liabilities and equity. It shows what you own, what you owe, and the net worth of your business.
Unfortunately, the balance sheet is often filled with financial mistakes.
Assets may be listed on the balance sheet that don’t exist any longer. Lost kegs anyone? How about that old inventory you haven’t written off yet?
Prepaid expense is another hiding spot for balance sheet errors. Items get booked here and never removed. Prepaid hops or prepaid insurance are common items that get stuck in here.
Spring is the perfect time for a financial clean-up. Start with a purge of your old financial records. Throwing things away feels good.
Use the document retention guide to identify what can be tossed out. Hire a shredding company to do the dirty work.
Next, do a full physical count of your inventory. You wouldn’t dream of delivering inaccurate customer orders, don’t operate your business with incorrect inventory records.
Finish the spring clean-up with a review of your balance sheet. Lots of financial mistakes get stuck here and need to be scrubbed clean.
Warm weather, sunshine, and increased sales are on the way. Now is the perfect time to make ready with a financial spring clean-up.
Your subscription includes access to the library of online courses, back issues of the Beer Wholesaler Financial Newsletter, webinars, podcasts, tools and resources to help you drive sales and profits in your beer business.
The global beer market, both in volume and value, has seen great expansion for many years. This growth in demand has seen both a rise in the number of breweries and an expansion in beer style diversity. Among these styles, one of them is emerging significantly around the world: no and low-alcohol beers (NAB-LAB).
A bigger market provides a larger consumer panel with different expectations and desires. Low-alcohol beers emerged to meet a need which only existed moderately in the past. Indeed, an entire segment of consumers has grown with an education around well-being, the “well-eating” and now the “well-drinking”. Modern beer drinkers pay special attention to the product’s caloric intake, have an increased knowledge about a product’s health benefits and the desire to consume locally if possible. While the third point is not always substantiated, low Alcohol answers the two first consumption trends: in a consumer mindset, less alcohol implies less sugar and a better health benefit, and generally alcohol always has a negative connotation. All other factors being equal, especially taste and price, there is no doubt that for this kind of consumer low-alcohol beer is a viable alternative to “classic beer”. Generally, we can bring this low-alcohol trend closer to the “free” trends, such as additive-free, gluten-free and alcohol-free.
To these new consumers, we must add those who’ve always had this “need” for a low-alcoholic beer. For health reasons, like pregnant women for example or for a religious conviction. Although this need always existed, it has strengthened during the last few years, due to the fact that beer is now a societal phenomenon. Consumers, by wiling to be part of the society, wants to consume trendy product. Therefore, the product must adapt itself to the consumer and give him this possibility. This is the reason behind the rise of low-alcohol beers.
Although demand is quite recent, we must go back much further to find the origin of low-alcohol beers. It’s the year 1920, in the USA and it’s the Prohibition: this constitution signs the interdiction to produce, transport, import and sell alcohol in order to reduce criminality and corruption in the country. Taking place from 1919 to 1933, this law pushes breweries to reinvent themselves to survive. Low-alcoholic beers were born!
Although the style emerged under constraint, nowadays it’s really the brewer’s choice to produce no or low-alcoholic beers to answer the growing demand. When going for this particular style, the question of the process arises: how does a brewer significantly reduce alcohol quantity without changing production process? Because Yeast is the key for alcohol production, it was our duty to help brewers in this task. We, at Fermentis, have been solicited to develop a solution.
Firstly, we had to do the work of screening among all the strains we know, a long-term task to select the ones that could match our research criterion: technical criteria but also sensorial criteria to answer to brewers need. Simon Jeanpierre, Technical Sales Support Manager Asia Pacific, tells us more about it: “To perform our first screening, our target was to list Saccharomyces and non-Saccharomyces strains able to produce only little alcohol. To narrow this list, we looked at microorganisms also able to reproduce as much as possible the expected beer flavours, as we traditionally know. This naturally led us to maltose-negative strain unable to ferment complex sugars (i.e. polymers of glucose), with yet a strong ability to produce higher alcohols, Esters and phenols, participating into the beer aromas.”
To understand our decision to steer our choice towards maltose-negative strains, you just have to look at the classical composition of a beer wort on the schema here below. Unlike the other strains of Fermentis range, maltose-negative strains only have the capacity to ferment glucose (DP1, single sugar chains), the equivalent of 10 to 15% of total sugars in wort. Less fermentable sugars imply a lower alcohol production in the final beer.
This done, the next step was to verify our hypothesis with a trial protocol, it’s Simon who explains it: “We started with the beginning: a recipe. This recipe had to produce a classic wort at a standard density of 15, 10, 8 and 6°P (1061, 1040, 1032 and 1024 in specific density) fermented at 20°C (68°F). It was then fermented with all screened strains and accurately followed-up on sugar consumption and alcohol production. A tasting with a panel of experts finally allowed us to choose the winning strain that would not only perform well in low alcohol production but also provide essential aromas expected in the beer during a proper fermentation.” Moreover, this yeast produces “clean beers” without off-flavours that are commonly found in NAB.
The strain we have selected after duplicating this trial protocol many times is a Saccharomyces chevalieri that we named SafBrew™ LA-01, LA simply for Low Alcohol. We chose this strain because it showed excellent results during our fermentation trials as demonstrated hereunder. For every tested density, the fermentation reached its plateau after 60hrs for an alcohol level between 0,4 and 1,2% ABV, corresponding to an apparent degree of fermentation about 14%. We have noted a positive correlation between final degree of alcohol and wort initial density, so we are able to say that an initial density of 7°P (1028 in specific density) is ideal to reach 0,5% ABV which is the maximum alcohol level tolerated in many countries to write “No-alcoholic beer” on the label.
As previously presented, this strain is maltose-negative, it only consumes simple sugars (glucose, fructose, sucrose) leaving behind the maltose and other complex sugars such as maltotriose and dextrins. Logically, we find more residual sugars in our low-alcoholic beer. The below graph confirms that in numbers, DP2 means disaccharides which are mainly maltose and DP3 means trisaccharides which are mainly maltotriose.
We have seen that in purely scientific terms, SafBrew™ LA-01 allows us to brew a NAB-LAB, but what about the sensory profile of the beer itself? This is a legitimate question because such a high level of residual maltose doesn’t exist in “classic” beers. Maltose is a sugar able to bring a clean sweetness. In the majority of beers, it doesn’t have the chance to express its potential because it’s turned into alcohol and CO2 by yeasts. Therefore, it’s the alcohol which will mainly bring the roundness and sweetness perception in the mouth (or to Mouthfeel). In a NAB-LAB, residual maltose can play this role because alcohol is present in small quantity only. However, if sweetness level in your final beer worries you, it’s easy to balance it with several brewing tools as Simon explains to us: “Bitterness level plays a great role and anything above 15 IBU for 0.5% ABV is a good target to balance the sweetness level. Increasing your water hardness gives a firmer bitterness too. On the cereal side, limit the use of caramel malts and the sweet flavour associated with them. To finish balancing the bill, there is of course the acidity. You can either pre-acidify your wort prior to fermentation or use greater carbonation and its associated carbonic acid which also propels aroma.”
Another important thing when we are talking about sensory profile is the fact that SafBrew™ LA-01 is a POF + strain. By being classified positive (+), SafBrew™ LA-01 owns a gene which expresses the POF character, POF meaning phenolic off flavour. In other words, this yeast has a specific enzyme that decarboxylates phenolic acids, like ferulic acid and coumaric acid, present in wort and thus producing respectively the flavour-active compounds 4VG and 4VP. These compounds contribute to spicy, clove-like flavours which, depending on the concentration, may produce a spicy and complex character. Note that in a NAB-LABs brewed with SafBrew™ LA-01, this phenolic side will be very light as described by Simon: “From a sensory perspective we really enjoyed the slight phenolic expression it develops. Keep in mind that the expression of a POF character depends on the amount of ferulic acid you have in your malt. In a NAB-LAB, you will therefore only have a limited expression from the recommended lower amount of malt”.
Last but not the least, the pasteurization topic. Pasteurization is a technique invented in 1865 by Louis Pasteur for food conservation by killing all living microorganisms in the product. The process is theoretically quite simple: you heat the product between 62°C to 88°C (144 to 191°F) before brutally cooling it. Pasteurization is not popular in the craft beer industry because it’s linked to standardization of the product or because, with this process, the beer is not really “alive” anymore and will not evolve over time.
But in regard to our recommendation for NAB-LAB, pasteurization is mandatory. You are certainly aware of how much yeasts and microorganisms like sugars and how much residual sugars we still have in a NAB-LAB at the end of fermentation. If a pasteurization is not done, any living microorganisms could eventually ferment maltose and totally alter the beer or even create overcarbonation in bottles, which could be dangerous. Different Pasteurization techniques exist such as tunnel pasteurization, whichever technique is chosen, Simon explains how much you have to pasteurize: “As soon as you have reached your max ADF of 13-15%, it will be important to inhibit eventual living friends from further fermenting. We studied different cross-contamination levels with Saccharomyces cerevisiae and observed a minimum safe limit of 80 PU in order to prevent growth in a brew fermented with SafBrew™ LA-01. We recommend the range of 80-120 PU.” PU signifies Pasteur Units, in terms of affect, one PU is equivalent to heating to 60°C in one minute. To calculate your pasteurization level, the formula is the following:
PU= t x 1,393 (T-60)
Where t is the time you heat in minutes and T is the temperature in °C.
A true alternative to pasteurization doesn’t really exist, it remains the best technique for ensuring optimal microbiology of a beer. We know that this technique is not accessible to every brewer and as Simon explains, we are constantly looking for solutions for small breweries: “Fermentis is aware that such equipment can be limited to big scale breweries. This is why we are working on alternatives to offer craft brewers the best performance in fermenting flavourful NAB-LAB with our SafBrew™ LA-01. Such alternatives exist through intrusive (biotechnology) or non-intrusive methods (cool chain). Feel free to reach out to us to learn more and receive tailor-made advice on your NAB-LAB fermentation management and hygiene practices.”
Years ago, it all started with the dream of your own whiskey. Through meticulous planning, hard work, blood, sweat and tears your dream of a craft distillery became a reality. Then the real work began, with long days and nights of distilling. Barrels were filled with whiskey and tucked away to age. The whiskey aged and what came out of the barrels was not only delicious but loved by all those who tasted it. The distillery you dreamed of and built up is no longer in its infancy. The spirits of your distillery have been embraced by the public and sales growth is strong. Now here comes the harsh reality. The whiskey your distillery has created and the brand that you built up does not have enough supply to meet demand. The problem gets worse as your equipment is nearly maxed out, since you started with a small budget and limited equipment. With no immediate way to keep up with the demand for your whiskey, you stand at a crossroad where critical questions arise and important decisions must be made.
How will you meet a demand for whiskey that greatly outstrips supply?
The good news is there are solutions that can allow your business to sustain the growth curve. We will take time to consider the problem in detail, by examining the routes others have taken to solve this exact problem. Some solutions presented here are simple and inexpensive, while other growth options are costly and complex. To help prepare you for the future, let’s break down production growth options with pros and cons of each option to help you find the optimal path to grow your business.
Outsource Your Problem: There are companies who produce spirits that are already aged, finished and ready to go in your bottles. Sourcing whiskey from another distillery is the most direct path to an abundance of ready to bottle spirits. Barrels of aged spirits can be obtained faster than producing them yourself and in large quantities. In some cases, distilleries will blend their whiskey with sourced whiskey to stretch their house made supply for the short term. Barrels of aged whiskey are often expensive per proof gallon, but this is certainly the quick route to continue to meet your growing demand.
Is sourcing whiskey the right choice? If more whiskey is needed immediately, it is likely that sourcing is your only option.
Bringing in aged whiskey from another distillery is an immediate solution to fulfill the demand you worked so hard to create and certainly do not want to lose. Sourcing is the least expensive path forward worth considering. When it comes to cost, other than buying the whiskey, there is no requirement to spend money on equipment when you source whiskey.
What is the downside to sourcing? Sourcing will require a change in label to disclose the use of sourced spirits.
Spirits from another distillery are unlikely to have identical flavor profile to spirits distilled by your distillery. This can be a challenge if your whiskey has a unique flavor profile.
Sourced spirits are not always received well by an increasingly aware consumer and furthermore may require changes to your marketing story to match the sourced spirits.
Make More Whiskey: If there is room in your existing distillery to grow, producing more whiskey is often the most logical decision to meet growing demand. The addition of another still, or a stripping still, and more fermenters may be the best choice for you. An equipment addition can greatly increase your output. The decision to add equipment is often the first step a distillery will take to increase output. To grow in this way, a distillery must have additional capacity to add this equipment. Additional capacity is measured several different ways.
First things first, do you have the space to grow? Additional space is needed to add the equipment, raw materials, and more barrels. A bigger still, more fermenters, and many more barrels of whiskey need to go somewhere and the space must be found first and foremost. The second constraint of additional capacity is heating and cooling. The boiler and chiller must have enough capacity to heat and cool the additional equipment, without overly stressing the equipment. If you have the additional capacity, let’s weigh the pros and cons of going this route.
Upside of Adding Production Capacity: The addition of new distilling equipment can greatly increase output of spirits produced daily. This allows you to continue producing your product from grain to glass, and maintains existing flavor profiles and processes to produce the exact spirits you are after. The addition of another still and fermenters is not nearly as expensive as an entirely new distillery build out, as long as the boiler and chiller have capacity for additional load.New equipment added to existing equipment can quickly increase output to work toward catching up with demand.
Downside of Adding Production Capacity: The new still you add will be hungry and more spirits mean you need more raw materials. Increasing production will invariably increase operating expenses. This sharp increase in spending on raw materials, like grain and whiskey barrels, must be planned for in advance to ensure you have the capital to produce more spirits.Adding a new still will take months to procure, install, and get it up and running. This means it will be sometime before you are able to increase output. An extra still will certainly increase output, but may not be a big enough increase to meet demand in the coming years. This leads to a critical question one must carefully consider when planning to add capacity. Will this planned addition of equipment meet the expected demand in growth for the next 5 years?If the answer to this question is no then it is worth considering jumping into the big leagues of distilling whiskey with a continuous column still.
Big Distillery Growth: For many distilleries that are making good spirits, they hit a ceiling rather quickly in their whiskey production that requires the consideration to build a new, larger facility to produce enough. If your distillery is on a growth track that many distilleries are currently seeing of +100% growth of sales year over year, the addition of another batch still may not meet your long term demand. Sales growth at this rate requires a massive jump in output of spirits that the addition of another still can not meet. You can look up to nearly any whiskey producer in America where their products are found nationwide and you will find they distill their spirits on a continuous column still. A continuous column still has a proof gallon output level that far exceeds the daily output of even the largest batch stills. There are many unique challenges that come with operating a continuous column still, but their capacity is massive in comparison to pot stills. If your distillery needs large production quantities to keep up with fast growing sales, a continuous column should be considered.
The Mighty Continuous Still: The output of a single pass continuous still can easily produce seven hundred proof gallons of whiskey in 8 hours. Continuous column stills are extremely efficient and require less labor and energy cost per proof gallon produced. More proof gallons per pound of grain can be distilled on a continuous column still versus with a batch still as well. Distilleries running a continuous column often have excess capacity and can use that capacity to contract distill and create additional revenue streams. This means you have room to grow in your own production as needed.
Downside of the Continuous: The manufacture, build out, and installation of a continuous column is a much more expensive project than the simple addition of a batch still. Producing large quantities of distilled spirits requires large amounts of raw materials and its downright expensive to operate. Distilling spirits on a continuous column requires an abundance of operating capital to purchase grain and barrels to keep the still running. When running a continuous column and producing dozens of barrels weekly, the need to store those barrels becomes a new challenge. A large barrel storage area or rickhouse is a must when planning to operate a continuous column.
What is the Best Choice for You? First off, let’s take a moment and celebrate! You have built a successful distillery with growing demand. Hats off to you and your team as this is a massive accomplishment.
Where to go from here is a daunting decision as the long term success of your business very well hinges on it. Careful planning and consideration is key here as you plan to make this critical decision. There are plenty of options and ways to go to create the opportunity for your distillery to grow. Long term strategic planning must be employed if the next stage of growth is going to work to support your business. If you are unsure which path is the right one for you, drop us a line and let’s talk about it. Dream big and plan well for it.
Kris Bohm runsDistillery Now Consulting and has helped oversee expansions for several distilleries. When he is not distilling Kris can be found racing cyclocross or defending his beer mile record.
For those hoping to realize their dream of starting a craft brewery, the number of tasks can be overwhelming and it may be difficult to know where to begin. Building the right team to help achieve each objective can smooth the path considerably. One of the first members of that team should be an attorney knowledgeable in the industry. The information below is not a comprehensive list of everything a brewery needs to do, but is intended to provide a rough estimation of the time and expense required for the major events that may require an attorney, as well as identifying opportunities to save expense by doing some tasks in-house. These items are listed in a sequential order that may be useful, but is certainly not a requirement.
Form Corporate Entity
In most cases, a limited liability company (LLC) is the best structure for a startup brewery, though it is wise to first consult a CPA or tax professional familiar with breweries. Secretary of State offices often have simple online forms for the Articles of Organization of an LLC that do not require the services of an attorney. However, some States, such as California, New York, and Delaware, require an LLC to have a signed operating agreement. As explained below, the operating agreement should be drafted by an attorney and in some cases the attorney may offer a package that includes creation of the operating agreement along with creating and filing the articles of organization. Though it varies state-to-state, the filing fees for Articles of Organization are typically $100-200 and it generally takes 2-3 weeks for the application to be accepted by the state, though it can sometimes be expedited for an additional fee.
Once the corporate entity is formed, the business can apply for an Employer Identification Number (EIN) using the free online form on the IRS website. The EIN is needed to then open a bank account in the name of the business.
Trademarks
There are two reasons why filing for federal trademark registration should be the next step. First, prior to the COVID pandemic, it generally took at least eight months to secure trademark registration. Post-COVID, it is now taking closer to one year, at a minimum. Second, if there is going to be a problem getting the mark registered or a competitor in the market is going to oppose the application or use of the mark, it is better to find out as soon as possible and preferably before spending money on developing a brand image, signage, and customer recognition of the name.
Many breweries attempt to register their trademarks themselves and sometimes they are successful. But, even registration of the mark does not ensure freedom-to-operate using the name. Competitors may attempt to cancel the mark post-registration or may have developed common law trademark rights based on prior usage of the name even though it was never federally registered. A skilled trademark attorney will conduct a thorough “clearance search” before filing an application to uncover potential obstacles to registration or problematic common law usage.
In addition, there are many technical requirements governing how applications for trademark registration must be filed. It is common for trademark applications filed without an attorney to be rejected based on a technical flaw and then abandoned because the applicant did not know how to fix the problem.
The costs to obtain federal trademark registration can vary significantly. In most cases, the application can be filed online using pre-existing descriptions of the associated goods and services. The filing fees for such applications are $250 per class of goods and services (i.e., international class 032 for beer, class 043 for taproom services, etc.). Additional government fees will depend on whether the application is filed as “actual use” versus “intent-to-use,” whether extensions of time are requested before filing a Statement of Use, etc. Also, attorneys’ fees for conducting a clearance search, filing and prosecuting the application can vary dramatically. As a very general guide, one should anticipate about $2,000 total cost per trademark, but discuss each mark with an attorney for a specific estimate.
Operating Agreement
All LLC’s should have a written operating agreement. For single-member LLCs, they help to distinguish the business financial interests from the owner’s personal financial interests. For multi-member LLC’s they are critical; they are essentially a “pre-nup” for the business owners.
There are three reasons why breweries should hire an attorney to draft an operating agreement from scratch. First, online or “standard” operating agreements are generally drafted very poorly. Second, states vary in terms of what is required to be included in an operating agreement, so using one from the internet may not satisfy the law in a particular state. Third, and most important, drafting and negotiating an operating agreement forces the owners to discuss issues that might otherwise be left unaddressed. The resulting document is tailored to the owners’ specific needs and can prevent unnecessary expense, disagreement, and hardship if problems develop in the business relationship down the line.
The legal fees for drafting the operating agreement will depend on the number of members and the level of agreement between the members on important issues. Five to ten hours of attorney time is a good starting estimate.
Financing
Given the expense, very few breweries are built purely from the owners’ savings. Whether the project will be funded by friends and family, through loans, through investors, or some combination thereof, having a knowledgeable CPA involved is essential. In addition, if funds will be raised from investors, an attorney should be part of the team, to ensure that the owners do not run afoul of securities laws.
Lease
Most breweries are built on leased property. Often a commercial landlord will have a “standard” lease that they want the brewery to sign. But, unless a landlord has already had a brewery tenant, they are likely unfamiliar with the particular needs of a brewery and their standard lease will reflect this lack of understanding. Having an attorney that not only understands commercial leases, but is familiar with brewing equipment and operations, can prevent the costly mistake of signing a long-term lease for a property that will not meet the brewery’s needs. Some of the issues that should be addressed include water and electrical supply, puncturing walls and ceilings for ventilation, sloped floors and trench drains, noise levels, odors, use of outdoor space, etc. It is impossible to estimate the cost of an attorney’s involvement in this process as every lease and situation is different. But, getting the attorney involved in the beginning is the most cost effective option as it is easier to prevent a disagreement than to resolve one.
Equipment Purchasing
Breweries have a lot to buy: a brew house and fermenters, furniture, glassware, grain and hops, and much more. Generally, owners make these purchases on their own, but for large expenses or long-term supply agreements, it’s never a bad idea to have an attorney review the terms.
File Brewer’s Notice with TTB
Some breweries have their attorney prepare and file the Brewers Notice and accompanying documentation with the TTB and certainly that can take some weight off the owners’ to-do list and ensure things get filed correctly the first time. But, for those looking to save on legal fees, this is one area that it makes sense to DIY. The forms are long and detailed, but they are not especially difficult. The TTB has excellent online resources and guidance and the personnel at the TTB are quite friendly and helpful on the phone.
As a rough guide, it will take about 1-2 weeks to learn what information the TTB needs, gather the materials, and fill out the forms. As of January 2022, the average processing time for a new application at the TTB was 34 days.
For those that do have their attorneys prepare the application, a rough estimation would be two to five hours of attorney time. The more complete the information provided to the attorney the first time, the lower the cost.
File for State Manufacturing License
As with the TTB application, the application for a manufacturing license from the state, and any necessary local licenses or permits, are something that can be done by the brewery owners to save legal fees. Though it varies state-to-state, the online resources tend not to be as complete or user friendly as those of the TTB and the response to telephone inquiries can be… inconsistent. However, with a bit of patience the forms are not terribly onerous. Being on good terms with other breweries in the area can be valuable, too, as they may be willing to help with any questions about the local forms.
Distributor Agreement
Most breweries start with taproom sales and some keg sales to nearby bars and restaurants, especially if they can self-distribute, but growth eventually leads to the need for a distributor. Breweries should never sign a distribution agreement without it being reviewed by an attorney. State laws on the subject are heavily slanted in favor of distributors and the contracts can be nearly impossible to terminate even if the distributor is failing to meet its obligations. A knowledgeable attorney can help to level the playing field as much as possible, particularly though negotiation of what constitutes “good cause” for termination and how to calculate the fair market value of the distribution rights. The legal fees will depend on the circumstances, but this is one area where breweries should not try to cut costs.
Conclusion
Successful entrepreneurs do not try to do everything alone. They surround themselves with experts to help navigate difficult issues. Bringing an experienced attorney onto the team at the beginning of the process of starting a brewery can save time and money by preventing costly mistakes.
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.
In late October of 2021, Mark Zuckerberg announced his company’s intention to rebrand from Facebook to Meta and build an immersive platform fueled by augmented and virtual reality (AR/VR). This platform — the Metaverse — will further blur the boundaries between our online digital lives and our more tangible, physical ones. In his 2021 Founder’s Letter, Zuckerberg remarked how the Metaverse “will touch every product we build,” and will allow users to socialize, attend events, create, work, shop, and more in ways that transcend how we think about the internet and digital technology.
If the past few years have shown the liquor industry anything, it’s that staying on top of emerging technologies and shifts in consumer trends is vital to the success of our brands and businesses. Look at the growth of omnichannel marketing and sales, for example. Between December of 2019 and November of 2020, retail wine sales at multi-outlet stores in the US grew by some 11.4%. For some businesses in the industry, this operational pivot spelled the difference between surviving or closing during the initial stages of the pandemic.
With these notions in mind, it’s difficult for us not to consider how the Metaverse could impact the liquor industry as a whole. According to Zuckerberg, the Metaverse aims to become a new central hub of e-commerce and consumer activities. As such, brands in the liquor industry will be forced to rethink how its integration into their operations, marketing, and sales will reshape the future of their business, those of their competitors, and even their consumer markets. Furthermore, brands and businesses must possess the capability to remain agile as they integrate more deeply within the Metaverse, and take notice of how this integration might spur shifts throughout the liquor industry.
Unique VR Dining Experiences
Within the Metaverse, customers won’t be confined by geographical distance or other physical limitations in exploring the dining or drink options available to them. Rather, upon entering the Metaverse, they will have the availability and opportunity to talk with chefs, foodies, and beverage makers all around the world in the palms of their hands. This will inevitably create a deeper integration of and connection to other cultures, as customers will be able to connect and chat with anyone anywhere in the world at practically any time, and open the door for businesses to provide them with truly unique dining experiences.
For instance, imagine logging into the Metaverse and browsing a list of restaurants you wouldn’t normally be available to visit in person. Upon selecting a restaurant, you and your party can enter that restaurant’s virtual space within the Metaverse and begin browsing menus for the dishes or drinks you’d like to have. Once your orders are selected and placed, the restaurant’s e-commerce sales system will automatically register the items ordered and be able to virtually send them to you and the others in your party, even without any of you being physically present. Additionally, this method of sales could be utilized for those guests who may not want to show up in person, but still want to try food or drinks they otherwise wouldn’t be able to.
This blend of convenience and experience, fueled by the AR/VR technology the Metaverse is founded upon, will grant brands the ability to offer customers a truly personalized, customizable experience. Through integrating their sales platforms into the Metaverse, businesses can not only reach a far larger range of customers directly, but also indirectly by allowing their customers to send meals and drinks to family or friends who cannot be physically present with them.
Because such integration of businesses’ operations with the Metaverse will allow them to provide each individual customer with a one-of-a-kind dining experience, this will inherently create greater competition between brands. Much like we saw with the rise of omnichannel sales during the pandemic, those brands and businesses which are able to capitalize on such value earlier on will be far better positioned to outperform their competitors. Likewise, as the technological capabilities of the Metaverse continue to evolve, the businesses that are better able to remain agile to those evolutions and pivots will likely be the ones who see the most success from their integration with the Metaverse.
Adapting to a Hybrid World Amidst Growing Competition
Whenever a new technology or trend emerges that impacts our business, it brings with it new sources of competition. This is simply the nature of business. Liquor and beverage industry brands seeking to integrate with the Metaverse will need to take note of how this hybrid digital space could affect their initiatives and create new competitive advantages both for them and their competitors.
For example, dining experiences in the Metaverse will likely become a blend of futuristic physical features of restaurants and high-tech interactive technology. Knowing this, one method businesses could use to stand out from the competition is by making customers part of this immersive and interactive dining experience. Perhaps a craft brewery or small distillery might offer customers a VR-led tour of their facilities to learn more about their business, its history, and its available products. Maybe a gastropub offers new customers a coupon for a certain percentage off of their first purchase in the Metaverse, or offer them a redeemable code that customers can use to virtually send food or drinks to others. Because our appearance in the Metaverse will be one not of our physical selves, but instead a VR-generated avatar, another possibility might be for businesses like these to offer a free side dish or drink to customers whose avatars are sporting their brand’s logo on a piece of their avatar’s clothing. These are just a handful of examples of how businesses in the liquor and beverage industry could remain agile in adapting to growing and emerging consumer trends after integrating with the Metaverse.
As a virtual universe that is speculated to become a converging point of consumer activity and e-commerce, it can be assumed that the AR/VR technology used to explore and interact with others will inevitably expand the possibilities businesses have to innovate. Although there is still much we don’t know about the Metaverse — and likely won’t know about for the better part of a decade, at least — this should not stop businesses from forming strategies to implement once they are more deeply integrated into the Metaverse itself.
Implementing a Metaverse Strategy
Consider for a moment the ways in which the emergence and subsequent growth of social media platforms have impacted business over the last decade. If your own business was in operations prior to the rise of Facebook, Instagram, TikTok, or other social media platforms, it’s safe to assume that the way your business functioned then is vastly different compared to its current strategies and initiatives. When thinking about how your business can integrate successfully with the Metaverse, it’s likely that there will be similar variances — albeit to different degrees or extents — between its current strategies and those used in a realm driven by AR/VR technology.
For starters, contemplate the initiatives your business has implemented for its marketing strategy. You might be paying for ads on social media to cast a wider net to rein in a greater amount of potential customers, or targeting existing customers with regular email newsletters to alert them of upcoming events or deals you might have. In the Metaverse, those paid ads might transition from sponsored posts on users’ social media feeds into a virtual brand ambassador traveling throughout different e-commerce sectors in a VR-driven environment to offer exclusive tastings or VIP events. Likewise, your business’s email newsletters could transmute into a kind of exclusive membership program for customers to use solely within the confines of its virtual establishment in the Metaverse.
As another example, look to your business’s current strategy for handling reservations or private parties for events. When integrating these operations into a fully-virtual space, the tickets or codes used for referring to reservations could become their own kind of non-fungible token or NFT; a digital token representing a reservation. If your business boasts a signature dish or beverage, each sale of this item to a VIP member could come with a transferable NFT that could be redeemed at a later date for additional rewards like a free entree, bottled spirit, or customized apparel for their avatar in the Metaverse. Eventually, it may even be possible for chefs or brewers to mint the dishes or beverages they create as NFTs themselves, offering them greater creative freedom and additional means of providing (and earning) value from niche sectors of consumer markets.
Each aspect of your business in its current state will need to eventually evolve to integrate with the Metaverse. Whatever that means or looks like will be subjective for each liquor and beverage brand seeking integration with the Metaverse, but nonetheless must be made if you wish to remain relevant and competitive in this next iteration of the digital world.
Final Thoughts
Regardless of how far off we truly are from integrating our businesses and lives into the Metaverse, its influence has already left a lasting impression on markets and industries the world over. Though selling virtual drinks, beverages, food, or other consumables to customers sounds like a counter-productive initiative better left to the realm of science-fiction, the Metaverse’s projected capacity to blur the lines between our digital lives and physical ones could easily turn this into reality in a matter of years.
Indeed, the Metaverse is perhaps the most literal representation of a “Brave New World” if there ever is one. The potential for brands integrating their business with this new frontier of virtual reality to experiment with marketing, e-commerce sales, and communication with customers will be essentially limitless. In turning passive consumption into active participation with their brand, the first round of businesses in the liquor and beverage industry to successfully integrate with the Metaverse are bound to set new precedents for the industry’s next generation of innovative technologies and tools.
StillFire Brewing is the first brewery in Georgia to accept cryptocurrency and customers are invited to use Bitcoin as payment for beers and other beverages, as well as, their merchandise, which includes t-shirts, caps, gift cards, and more. The small business decided to accept crypto so customers could use a fast, secure payment method, and the brewery owners appreciate crypto’s benefits, including no third-party involvement or bank fees. StillFire uses CoinBase, a Bitcoin payment processor, to handle the payments. CoinBase offers fast, next day deposits and a low fee – just 1% of transactions, as opposed to 2-4% typically charged by credit card companies. Notably, the brewery has joined more than 30% of U.S. small businesses that now accept cryptocurrency, as this payment method becomes more mainstream and popular.
Threes Brewing, with locations in Brooklyn and Long Island, is also accepting cryptocurrency. The pandemic forced them to adjust their business model, which included updating their website and offering beer delivery direct to consumers. People were excited to buy the brews online and asked the brewery owners to start accepting PayPal. The owners decided to go one step further, offering a cryptocurrency option, as well, which was easy to integrate with their Shopify. Like StillFire, Threes Brewing uses CoinBase as their payment processor.
Cryptocurrency is a digital medium of exchange that relies on peer-to-peer blockchain technology. It’s decentralized, meaning no central bank or government regulates or backs crypto. Buyers transfer funds directly to sellers without the third parties traditionally used to process payments. And people store their crypto through an encrypted wallet and are the only ones with a key to unlock it.
Part of the appeal of crypto stems from the surge in credit card fraud that was accelerated by the pandemic. In 2020, the dollar volume of attempted fraudulent transactions rose 35% in April 2020 vs. April 2019, and, sadly, small businesses are often the targets. In contrast, crypto is considered to be a secure form of payment, with merchant protection, lower transaction fees, and other benefits.
Increasingly, small businesses are accepting cryptocurrency. It’s innovative and trendy, attracts customers and prospects who use crypto, offers more e-commerce opportunities for beer retailers, and can reduce fraud. And companies like Shopify and Square make it easy to accept crypto. Square even has a crypto team to support development. But is crypto right for your business?
When determining whether to go crypto,consider the following pros and cons.
Pros:
• It offers lower transaction fees than credit cards. As StillFire and Threes discovered, there’s a lower transaction fee when using crypto vs. credit cards. While each credit card transaction costs a company 2-4% of the total transaction, crypto reduces these costs to less than 1% of each transaction. Over time, these seemingly small fees can amount to a substantial savings.
• It provides another loan option for businesses. Small businesses often need to take out loans, especially during these disruptive post-pandemic times. Some business owners – especially those with large amounts of cryptocurrency – are opting for a crypto loan, where you pledge an asset (in this case, your cryptocurrency) to secure financing. Crypto loans often come with a host of benefits, including low interest rates, same-day funding, and no credit check.
• You’ll get your money faster. Tired of waiting several working days for a bank transfer to clear? Crypto is much faster and can be processed almost immediately. Small businesses that need and want their money faster will appreciate this perk.
• It’s more secure than credit cards. Crypto-
currency is considered more secure than credit and debit card payments since crypto doesn’t need third-party verification, as these other payment types do. When someone pays with cryptocurrency, their data isn’t stored in a centralized hub, where breaches commonly occur. Instead, their information is stored in their own secure crypto wallet – and they’re the only one with the key to unlock it.
• Crypto offers some merchant protection. Crypto, with its decentralized set up, protects merchants from fraudulent chargebacks. Transactions are final because no third party can reverse charges, as is the case with credit card purchases. As crypto regulation continues to evolve, there may be more merchant protections introduced in the future, especially as crypto becomes more mainstream and accepted by more small businesses.
• It opens up more e-commerce opportunities. As Threes discovered, customers want a fast, easy, secure way to shop online. Now, they are selling to people in more than 30 states, accepting crypto as well as PayPal to give their customers purchasing options. Threes was able to expand their audience, moving beyond their New York customer base to sell beer and merch on a bigger, more national, scale.
• It’s another option for customers. Accepting cryptocurrency offers customers additional ways to pay and provides them with extra protection and security for their transactions.
While cryptocurrency offers avariety of benefits, there are also some risks associated with it, and smallbusinesses should be aware.
Cons:
• Customers might not be ready for it. Since this type of currency is still relatively new, many people still don’t understand or trust it. Crypto might not be appealing to tech-averse or risk-adverse customers. Using crypto also requires some effort, as customers would need to set up their own digital wallet and learn how to buy with this type of currency.
• There may be technical barriers for business owners. While Shopify and Square make it easy to add a crypto purchasing option, if a small business doesn’t use those platforms, it might be a bit trickier. Businesses need to set up a digital wallet on a digital currency exchange to accept crypto, which some people find difficult, especially if they aren’t particularly tech-savvy. Also, since cryptocurrency is an ever-evolving, information-dense space with a steep learning curve, it can be an overwhelming option for some business owners. It is volatile and unpredictable.
• Digital currency is volatile and unpredictable, so if you’re a risk-adverse business owner, this might be too much drama for you. Keep in mind that Bitcoin was first valued in pennies in 2009 but rose to more than $65,000 per coin in February 2021. That’s obviously a huge range! Using a merchant service company, like BitPay or Coinbase, helps protect small businesses against price volatility by immediately exchanging digital currency for its current cash value. Be sure to do your homework, carefully researching cryptocurrency to decide if it’s right for your business (and your personality type!).
• It’s not completely safe from cybersecurity threats. Crypto reduces the risks associated with credit card fraud, but it’s not completely safe from cybersecurity threats or breaches. There’s no proven way to completely prevent cybercriminals from accessing users’ crypto wallets, and crypto isn’t backed or insured. Some cryptocurrency companies are working to reduce the risks of security breaches by fully insuring losses, but insurance doesn’t currently cover personal accounts, so you’re still responsible for securing your personal wallet. But if a crypto company like Coinbase is breached, your funds would be protected.
• There’s uncertainty around crypto regulations. The regulations around cryptocurrency will likely continue to change and evolve over time, which means business owners will have to follow – and adapt to – these changing rules. Since cryptocurrencies are relatively new, the government is still looking at regulations and rules about things like reporting gains and paying proper taxes on crypto transactions.
• It doesn’t cover basic business expenses. Businesses typically can’t use crypto to cover operating expenses, such as rent and payroll, so they’d need to convert payments to cover these monthly costs.
Some breweries have adopted cryptocurrency and are proud to be early adopters of this technology. Others are sticking to the tried-and-true cash and credit payment options. There are pros and cons to crypto, so give it some thought before deciding whether to accept this form of payment. Also, consider your personality and whether you’re willing to learn about crypto – and accept that it’s volatile – before finalizing your decision.
About the Author
Neeraj (Raj) Tulshan is the founder and managing member of Loan Mantra, a financial advisory firm with best-in-class and proprietary fintech, BLUE (“Borrower Lender Underwriting Environment”). Loan Mantra, Powered by BLUE, is next-level finance: a one-stop-shop for business borrowers to secure traditional, SBA or MCA financing from trusted lenders in a secure, collaborative, and transparent platform. Clients turn to Raj because they know he will always pick up the phone and offer unparalleled financial counsel in a remarkably human—even friendly—way.
About Loan Mantra
Loan Mantra is a financial services company designed to serve small and medium businesses with offices in New Jersey, Charleston, SC and New York. At Loan Mantra your success is our success. This means that our attention, purpose, and intention are all focused on you, our client. We are your ally to overcome obstacles, bringing peace through uncertain times to achieve your highest goals and aspirations. Your friendly, responsive agent will listen respectfully, and service your account actively through one of three locations in the US. We speak your language whether it’s English, Spanish, Hindi, Bengal, Hospitality, Laundry or Manicure.
Let us help you today!Connect with us atwww.loanmantra.comor call us at1.855.700.BLUE (2583)
Bartley Blume may work twice as hard to produce both beers and spirits in Minnesota’s first combination brewery-distillery, but he also enjoys twice the opportunity to roll out new products that come from his ever-creative brain. They include a hoppy IPA without bitterness and a whiskey aged in American white oak and finished on toasted pimento wood to complement the spice of the grain.
“When I opened the brewstillery, I wanted to bring more diverse beverages to the market, so we were not always drinking the same old pale ales, IPAs and sours,” Blume told Beverage Master Magazine. “We wanted to get away from mass consumption to a true appreciation of craft beverages, to sip and not swill.”
As the brewstillery’s name “Bent” implies, beers and spirits are “bent” and not made strictly to style. “This sometimes comes from combining the best parts of two different styles,” Blume said, “and sometimes from just making something I think my friends and family will like.”
Judging by the brewstillery’s success, not to mention its multiple awards, innovation-on-tap has been a big hit with consumers. Clearly, this is the place to go when you want to try something distinctive.
A Way to Make Money Off a Hobby
Like many craft brewery owners, Blume started making beer as a hobby. While working as an engineer in the aerospace industry— and tiring of the corporate world — his wife gave him a Mr. Beer Kit. “This was in 2007,” he said. “I started brewing little batches of beer and quickly became addicted. I thought to myself, ‘This could be a way to make money off of a hobby,’ so I sat down and wrote a business plan for a brewery.”
During that time, another brewery opened near Blume’s home in the Twin Cities, adding to the fifth or sixth already in the market. To Blume, that was too many, so he switched his interest to distilling. After poring over distillation books—and crafting whiskey and bourbons on his back porch — he rewrote a business plan for a brewstillery. Combining a brewery and a distillery seemed logical to Blume because the processes are similar, and the skills are complementary. “At the time,” he said, “there were only six brewstilleries in the country. Mine would be the first in Minnesota, which was pretty exciting.”
Blume introduced the Twin Cities to his first product — and his innovative spirit — at the 2013 St. Paul Summer Beer Fest, wowing the crowd with an American Imperial Stout infused with ghost peppers, the world’s hottest chili pepper. At the time, he was brewing his beers under contract at Pour Decisions Brewing Company in suburban Roseville. Through working together, the two entities decided to merge under the Bent Brewstillery brand. The partnership was serendipitous for Blume. He now had a “home” when breweries and taproom locations were hard to come by. He also acquired the talents of Pour’s head brewer, Kristen England, long-time brewer and Grand Master Beer Judge from the Beer Judge Certification Program.
After renovating the taproom in Roseville, Bent Brewstillery opened a 1,700-square-foot space in 2014. The taproom seated 115 customers and offered 10 beers on tap. Within months, Blume added the distillery. From the beginning, the brewstillery’s mantra was to set itself apart by creating fresh products and staying at the forefront of innovation. “Even if the market wasn’t ready for it, we’d do it anyway,” Blume said.
As enthusiastic as Blume was initially, the business presented — and still presents — some challenges in operating as both a brewery and distillery. “Yes, there are some parallels,” he said, “but it isn’t quite as complimentary as I’d hoped it would be. You have to do all the work you need to do for a distillery and all the work you need to do for a brewery.”
Specifically, Blume explained that he has to rely on different ingredients, bottle suppliers, distributors, and even different marketing strategies for each entity because the audiences are different. “It’s really twice the amount of work, which is why most people haven’t decided to bite this off.”
According to Blume, there are currently only several dozen brewstilleries in the country. “It’s good for me because I’m a workaholic,” he said. “It’s a true family thing. My wife is the bookkeeper and CFO. Even the dog comes to work.”
Despite the work, or maybe because of it, for a brewer who started with a two-and-a-half gallon Mr. Beer Kit, Blume has seen his vision surpass expectations. Now in its eighth year, Bent Brewstillery has grown into a 20-barrel brewhouse with four 40-barrel fermenters, plus three-, five- and ten-gallon fermenters that allow for the production of small-batch brews. The distillery features a column reflux still with four plates. The still can be converted to a pot still with a restrictor plate on the bottom, designed specifically by Blume for maximum versatility. Annual production is 2,000 barrels of beer and 2,000 gallons of liquor. Beer is sold in the taproom by the glass, pint, growler and crowler. Whiskey is sold straight or in cocktails. Besides offering products in the taproom, Bent Brewstillery distributes 16-ounce cans and liquor bottles to liquor stores and kegs to bars and restaurants. The brewstillery has 450 accounts in Minnesota, the south side of North Dakota and the west side of Wisconsin.
Invent, Innovate and Inspire
With Blume at the helm as distiller and England as head brewer, Bent Brewstillery continues to invent, innovate and inspire. Since the beginning, it’s brewed over 200 beers. “When we started, we made lots of sour beers, reawakening old-style beers that no one had made until recently,” Blume told Beverage Master Magazine. “Now we have a whole line of sours, including barrel-aged sours and straight-up kettle sours.”
One of their most unique products is a Chilean Stout, made in collaboration with a local brewery in Santiago and created from ingredients that England brings back after judging an annual beer competition there. Next on the agenda is a cold-fermented IPA. “Fermenting an IPA cold as opposed to fermenting it warm is extremely rare,” Blume said. “The process makes it more crisp, clean and clear. It’s the opposite of the hazys.”
In the spirits category, Bent Brewstillery offers a traditional vodka and a nontraditional gin with 14 different botanicals. Blume prefers to use fresh botanicals when he can get them, which means the gins will vary from batch to batch. Some products are especially distinctive: Flame Bringer, a bourbon barrel sriracha-infused rum, and Tropical Whiskey, brewed and distilled like any other whiskey, but includes passion fruit, guava, coconut and citrus, added during distillation. “These are the little fun things that make us distinctive in what we create,” Blume said. “These spirits are all great by themselves, but they really compliment a cocktail. Our signature drink is the Old Fashioned created from our whiskey, and the sriracha-infused rum makes a great spicy Margarita or Bloody Mary.”
According to Blume, it took a while for the public to accept his distinctive beers and spirits. “At first,” he said, “people would say, ‘Oh, that looks weird. It’s different. I’m afraid of that,’ but now I can’t keep those products on the shelves.”
Customer preference is mixed, Blume said: 50% like the same beer all the time because they are familiar with it; the other 50 percent want something new. It’s the same split in the liquor stores and bars. Blume also sees a mixture in beer versus spirits preferences. “Having a taproom that serves both beer and cocktails is huge for us,” he told Beverage Master Magazine. “We get so many ‘mixed couples,’ where one likes beer and the other prefers spirits. Instead of drinking a beer here and then leaving to get a cocktail, they simply stay here. It’s been pivotal to our growth.”
Pandemic Problems…and Solutions
Like all breweries and distilleries, Bent Brewstillery’s growth took a big hit during the pandemic. But, again, like others, it turned lemons into lemonade by making hand sanitizer. Blume dived into this project with both feet. The brewstillery bought tankers of ethanol and produced 65,000 to 70,000 gallons of hand sanitizer. It provided supplies to a large portion of the police and fire departments in the state and to hospitals and support companies. Bent also offered raw materials to distilleries at cost so those distilleries could help their local communities. “We went all out,” Blume said, “and it’s a great feeling to know we did so much to help. We had a supply of beer and spirits in our taprooms, so at least we were able to sell products to-go. We survived just fine.”
With the pandemic waning, Blume plans to go “full-throttle” ahead, both in creating new products and staging events. Traditionally, the brewstillery has offered a winter luau, beer dinners, a St. Patrick’s Day dinner and car shows in their large parking lot. This year Blume hopes to bring back one of the brewstillery’s biggest events — a crawfish boil that attracted 2,500 people. Bent also plans to hold its annual barbecue competition on the anniversary of September 11. The competition, which draws 25 to 30 cooking teams, is a fundraiser for the Invisible Wounds Project. The local charity provides services to Minnesota’s military, first responders, front-line medical staff, corrections, dispatch and their families relating to mental health, PTSD and suicide issues.
Blume and his staff (the brewstillery has seven employees, not counting the dog) will continue to innovate, always looking for new opportunities. “We’re always looking to grow,” he told Beverage Master Magazine. “On the brewing side, we want to keep giving people something different to try. With the sheer number of breweries out there that are coming out with new beers, people can literally have a beer every day and never have the same beer twice. On the distilling side, we are playing around with different products that people will hopefully like. Growth is difficult, but it’s the challenge we signed up for.”
According to research from the International Wines and Spirits Record Drinks Market Analysis, agave spirits represent one of the fastest-growing drink categories in the United States. The agave spirits category is forecast to grow by 4% compound annual growth rate through 2022. The most popular agave spirits, Tequila and Mezcal, posted respective gains of 8.5% and 32.4%.
Tequila represents an internationally recognized geographic designation, or, Appellation of Origin. As such, Tequila may only be produced in the Tequila region of Mexico, which includes the state of Jalisco and some municipalities in Guanajuato, Michoacán, Nayarit and Tamaulipas. Along those lines, agave spirits can be certified as mezcal in all or some of the municipalities within Oaxaca, Zacatecas, Durango, Guanajuato, Guerrero, San Luis Potosí, Tamaulipas, Michoacán, Puebla and Sinaloa.
However, hundreds of agave species grow throughout the world, with a diversity of distillation methods. In particular, 100% agave spirit brands and blends are being developed in the U.S., Peru, Australia, France, South Africa and India.
On May 4, 2020, TTB Notice No. 176 governing agave spirits sold in the U.S. went into effect. The notice proposed to create, within the standards of identity, a class called “agave spirits” with two types within that class, “Tequila” and “mezcal,” replacing the existing Class 7, Tequila. Hence, Tequila and mezcal are now considered types within the Agave Spirits class, and the standards of identity for those products are not changed.
The proposed standard would include spirits distilled from a fermented mash, of which at least 51% derives from plant species in the genus Agave and up to 49% derived from other sugars. Agave spirits must be distilled at less than 95% ABV and bottled at or above 40% ABV. Aging, blending, flavoring and coloring of agave spirits are allowed and provide distillers with the ability to develop a unique brand within this category.
Currently, most agave spirits distilled in the U.S. use syrup imported from Mexico. For example, State 38 Distilling in Golden, Colorado, and NOCO Distillery in Fort Collins, Colorado, obtain 100% organic Blue Agave from Mexico. Each distills and bottles agave alcohol using pristine alpine water from the Rocky Mountains and then adds its unique signature to the spirit. According to Don Hammond, owner and managing partner of State 38 Distilling, they age their spirits in North American oak barrels. Sebastien Gavillet, co-founder of NOCO Distillery, said they triple distill their agave spirits for a smoother finish.
Distilling Agave Spirits in the United States
The San Francisco Bay-Delta/Sacramento region, internally described as the “farm-to-fork” capital of the world, shows signs of emerging as a hub for growing agave. Situated at an edge of hardiness zones nine and 10, it does not have a prolonged frost or severe winters, making the region an ideal growing climate for various products, including agave.
Craig Reynolds of California Agave Ventures, LLC in Davis, California, began experimenting with growing agave and producing spirits in Northern California after receiving seedlings of Agave Tequilana Weber Azul (Blue Weber Agave) from a grower in Southern California. Agave Tequilana has a higher sugar content and a faster time to maturity than other agave species. It’s also the type of agave exclusively used in Tequila.
In Reynolds’ estimation, the appeal of growing this hardy plant in California is that it can be grown in numerous environments with different variables and soil conditions. Also, as this plant requires very little water, it can be an ideal crop for drought-prone areas. Depending on the species, agave plants take between five to eight years to mature. Hence, growers need to allow time before seeing a return on their investment.
Because the agave spirits industry is still in its infancy, Reynolds sells his agave to distillers via word of mouth. Also, he custom cooks his agave in a traditional stone pit for clients upon request.
Reynolds’ clients include Karl Anderson and Jason Senior, co-founders of Shelter Distilling in Mammoth Lakes, California. Anderson became interested in agave spirits after one of his investors, coming from a long line of landscape artists, had a friend pull a 700-pound Agave Americana from his yard and donate it to Shelter Distilling for experimentation. Typically, this variety of agave is used in landscaping, but is now harvested for distilling purposes in the U.S.
Agave Americano produces flavors more in line with mezcal’s earthiness and vegetal notes than Blue Weber Agave Tequila. However, due to the scarcity of this particular species being used for distilling, Anderson and Senior began buying Organic Blue Agave Nectar from Mexico in 50-gallon drums. “Unlike grain, fermenting agave nectar is really difficult due to the lack of nutrients,” Senior said.
As Anderson and Senior came from the craft beer industry, they did not want to be known as distillers who purchased other producers’ wares and sold them as their own. “Making a spirit from the plant or the grain all the way to the bottle is important to us. If we can use ingredients from our region, all the better,” Anderson said.
Anderson connected with Reynolds because he sees him leading the charge in growing agave plants in the United States. “We have an opportunity to grow new and interesting varieties that are new to the U.S. market and are different and higher quality than all those gold tequilas on the shelf,” Reynolds said.
Senior and Anderson started experimenting with their fermentation techniques to see if they could make something work. “The agave sugars are such that most yeasts can’t easily consume the sugars to produce alcohol. We have to make sure we have the correct yeast and that the yeast is healthy before pitching it into the agave fermentation,” said Senior.
After purchasing the raw agave plants, brought over the Sierra Nevada in a boat, Senior steams the agave hearts in a mash tun for a few days until the plants are soft and sweet. Next, they send the plants through a wood chipper to shred the hearts and allow the yeast easy access to all the agave sugars. They add these agave fibers to a fermentation tank with pure alpine water, pitch yeast, add nutrients and allow the fermentation to proceed. Once fermentation is completed, and sugar has been converted into alcohol, they pump the liquid and fibers into the still.
Then, they distill the agave wash twice in a hybrid pot still. The first distillation is a quick run to separate the solids and water from the alcohol and flavor components. The second run is the slow finishing distillation, where they separate the heads and tails from the hearts of the spirit. “The nice flavors of an agave spirit really only come out when the agave fibers are in the fermentation and distillation,” said Senior.
Shelter Distilling primarily set up its distillery for using malted barley as a raw ingredient. As it doesn’t have room to install a dedicated facility for processing agave, Senior finds making agave spirits time-consuming and labor-intensive. “It’s not just dumping bags of barley into a mill. It’s chopping, splitting, pounding, steaming, pounding some more. It’s sweaty and difficult work, but it’s well worth it when you pour yourself a splash, and you can taste the product you’ve been working on for a month. With agave, you really get to taste the terroir and varietal of the plant. It’s always different, much like wine.”
Assessing Consumer Demandfor Agave Spirits
According to Anderson, while customers are drawn to the nuance and flavor of their agave spirits, they need to be educated about the agave spirits market. In his experience, most people remember Tequila and mezcal from their college days and haven’t learned the nuances of sipping premium agave spirits.
Presently, consumer demand for Shelter Distilling’s agave spirits exceeds the amount available. Anderson attributes this to the lack of agave being grown in the U.S. and the difficulties of processing the plants.
Along those lines, the growth of the agave spirits market has altered the availability of quality agave plants in Mexico. Lou Bank, founder and Executive Director of S.A.C.R.E.D., a nonprofit organization working to improve the quality of life in the rural Mexican communities where heritage agave spirits are made, has concerns that, as agave spirits increase in popularity, consumers will love the plants to death. “If you drive around Oaxaca today, it looks significantly different than it did 10 years ago. Where you used to see a lot of wildlands, now you see more and more agave farms popping up.”
Bank is concerned that the greater quantity of plants may come at the cost of quality, that mass agriculture methods will raise lower quality agave, leading to lower quality spirits.
With the TTB beginning to define agave spirits, Anderson predicts more distillers and growers will look to enter this new market. “We do what we can with putting out promotional material and educating our guests. The more U.S.-based distilleries who get into this market and educate their customers, the more people will understand that this is an American product that can be as good as, if not better than, what’s being produced in Mexico,” Bank said.
In the flavoring industry, it’s all about chemistry. Literally. Food chemists work to identify, develop and improve upon a good thing. For beverages regulated by the TTB, the balance is in creating new tastes for drinks such as beer, distilled spirits, sake, wine and kombucha without comprising the integrity of the product.
Food scientists pair expertise with artistry, combining knowledge of the chemistry of flavor with the analytical techniques involved in creating new flavors.
If You Can Imagine It, We Can Create It
Just askMother Murphy’s Flavorings, headquartered in Greensboro, North Carolina, and servicing multiple industries in 30 countries around the globe. In business since 1946, its research and development team has created a catalog of more than 60,000 flavors, lending credence to the company motto: “If you can imagine it, we can create it.”
For the beer and spirits industries, Mother Murphy’s focuses on fruits and botanicals to enhance the naturally occurring flavor notes and characteristics in aged alcohol and infused liquors. It also works with craft brewers and distilleries to develop trademark, recognizable flavors. Neither size nor season matter – the company provides small-batch flavoring needs for small breweries and distilleries and much larger orders for international conglomerates.
Al Murphy, whose grandfather and great uncle started the family-owned business, is co-President of Mother Murphy’s. He is a member of several industry trade associations and has traveled abroad to learn about the beer and spirits industries. His knowledge includes the processes involved in producing gin, whiskey, botanical spirits, brandy and wine.
Murphy told Beverage Master Magazine why creating flavored beers and distilled products requires specific skills. “A person that knows how to create flavorful beverages has a unique skill set in itself,” he said. “It takes a different skill set to make a blended spirit, unique skill set to create a distilled spirit, a different skill set to be a brewer and different skill set to create a flavored product.”
Murphy said business savvy brewers and distillers recognize how uniquely flavored products can draw new consumers.
“Flavors create memories, and people want to have a product that tastes good,” he said. “The spirits industry has been able to achieve a lot of success through flavors, which brings more people that wouldn’t drink a traditional non-flavored spirit to try a product.”
There are some precautions, though, Murphy warns, that every craft brewery and distillery should heed when entering the flavoring space.
“Flavor by itself is one aspect of building a flavorful product. There are other factors, such as acid blends and sugars, that are a part of the overall experience of tasting a product. If you don’t know how to build a beverage product without the other ingredients, then it is like building a car without an engine.”
Beyond flavorings, Mother Murphy’s provides various services for its craft brewers and distillers, lending invaluable expertise in many different areas.
“We have expert folks within our organization and a variety of solutions to help all types of people in the category,” said Murphy. “We are constantly solving problems for small guys that need more than flavors. We provide market trends for different aspects. We also offer beverage services depending on the customer needs in the marketplace.”
Made From the Real Thing
Potomac Distilling Company knows its way around the world of flavored rums. When Todd Thrasher launched his Washington, D.C.-based distillery in the wharf district near the banks of the Potomac River, he did it with his flagship Thrasher’s Green Spiced Rum, created with an original blend of herbs that he started out growing in his backyard.
Now, nearly four years later, Potomac Distilling Company grows those same herbs on its rooftop garden. A combination of green cardamom, mint, lemon balm, lemon verbena, and lemongrass creates the spirit. The distillery uses it in cocktails like Thrasher’s signature Rum and Tonic, conjured from his traveling adventures to the West Indies and South Pacific.
“There are many contributing factors to the increased popularity of flavored rums. I like to think of Thrasher’s Rum as ‘vacation in a bottle,’ and I think we all crave a dreamy sense of escapism!” said Thrasher. “Flavored rums also make it really easy to mix cocktails at home because the spirit provides a depth of taste. Flavored rums and their aromas have provided a true sense of place for me – transporting me to my island-hopping adventures as a scuba dive instructor.”
Potomac Distillery boasts six signature rums. Among them is Thrasher’s version of a dry – not sugary sweet – Thrasher’s Spiced Rum, made from a combination of allspice, cinnamon, clove, orange peels, star anise and vanilla bean, all steeped in Thrasher’s White Rum to create a flavored product.
Still another of the distillery’s flavored spirits is Thrasher’s Coconut Rum, among the few on the market made without extract. Instead, Thrasher uses 60 pounds of raw Thai coconut heated at 180 degrees Fahrenheit. He then places the coconut mix into a gin basket to transform its vapors into liquid. From there, the liquid is “proofed down,” dehydrated, toasted and left to sit for 80 days at room temperature. The result is a coconut rum made from the real thing.
These variations of flavored rum do not come by accident. Thrasher has an extensive background in spearheading multiple well-known bars throughout Washington, D.C. He received his training at Moonshine University in Louisville, Kentucky, alongside gathering information from other distillers.
In all, Thrasher has created six rums, including one just introduced last year, called Relaxed Rum, which is aged in American oak barrels for 24 months. The result, Thrasher said, is a rum with a smooth flavor touched by hints of vanilla and the smoky notes of tobacco. The Thrasher Rum collection is featured at the adjoining bar, Tiki TNT, and is also available for ordering through partner locations.
Teasing Taste Buds With Flavor
Cream Ale is just one of the creations of 2 Silos Brewery in historic Manassas, Virginia. This award-winning brewery has launched flavored beers and ales with catchy monikers like Citralicious American IPA, featuring whole tangerine puree, and Squared Pants, a fruity sour made with pineapple and guava purees.
The idea for 2 Silos Brewery took shape in 2014 when co-founders Forrest Morgan and Marcus Silva began trading ideas for creating a brewery that could become a hub for hospitality. That idea is now a popular destination spot in Northern Virginia on the Farm Brew LIVE campus at Innovation Park in Virginia’s Prince William County. The brewery draws locals and tourists alike, who come to sample beers flavored by a combination of fruits, spices and other natural sources. The facility also houses canning and keg operations and an in-house quality control lab.
2 Silos creates products with the goal of teasing taste buds with flavors that are familiar but with surprising twists. Its Hua’ekola – translated as fruit beer – is ladened with purees of passion fruit, blood orange and pink guava. Seasonal options include a Gingerbread Ale infused with ginger, cinnamon and clove. Another is Pumpkin Ale which, as the name implies, features pumpkin puree. The brewery’s Indulgence Series showcases a dessert-worthy Fudgetastic Imperial Stout –a blend of the brewery’s Old Dominion Barrel Reserve Series with an infusion of chocolate fudge, coconut and natural almond flavors.
Though the flavor names are quirky, 2 Silos Brewery is committed to serving its area through philanthropy, funded by one of its flavored creations. One hundred percent of the proceeds from sales of its Raspberry Cream Ale support The Sweet Julia Grace Foundation, a Virginia-based nonprofit servicing children with serious medical challenges.
Blending flavorings for beer and distilled spirits is a craft unto itself. Get it right, and breweries and distilleries can create a niche market for their products that broaden their appeal to consumers looking for new ways to enjoy old favorites.
