Small Stills, Big Spirits

January 1, 2001 By Rick Lyke

In late 1970s, if anyone had predicted that, by the turn of the century, American cities big and small would almost universally have at least one thriving hometown brewery–in some cases, multiple breweries―their friends might have wondered about their sobriety. Now, it seems, microbreweries can be found almost everywhere.

The microbrewery movement started small, catching steam along the West Coast and then in the East. During the same time frame, California wineries gained world attention. Now, domestic wines from places like New York’s Finger Lakes and Oregon’s Willamette Valley can be found on wine lists in great restaurants.

While the renaissance of small, handcrafted products is well established among the beer and wine segments of the drinks industry, the spirits segment has continued to be the playing field primarily for mega brands and for importers who bring in limited bottlings of certain products to exploit upscale marketing opportunities.

That is, until now.

Led by entrepreneurs who sound much like the pioneers of the microbrewery movement, the spirits industry may soon see a rush of local pot stills. Please, rest assured, I’ve not had a drop of Wild Turkey today.

“I think [the trend toward small distilleries] has the potential to get as big as the microbrewery movement,” said Ansley Coale Jr., cofounder of Germain-Robin Alambic Inc., a Ukiah, CA, maker of brandies that many experts proclaim as good as anything coming from Cognac.

Germain-Robin is one of the more established small distillers, having been around since 1981. It now has products in 38 states.

“Single malts always existed and were used for blending Scotch. It was the marketing of the single malt whiskies that made them take off. [Sales of] single malts are driven by information and the singular nature [of the beverage]. The individuality of the product is able to show through, and that’s what has made the market,” Coale said.

He believes that once consumers get a chance to sample products from small distilleries and taste the unique qualities of each brand, the market for these products, like that for single malts, will develop quickly.

Market Development

For Coale to be correct, it will take a legion of dedicated and patient people ready to invest in the category. One of the first to make the leap happens to be one of the first who saw the unmet consumer demand for craft beer. Fritz Maytag, the man behind Anchor Brewing Co., is president of Anchor Distilling. Anchor has been running what Maytag calls a pilot distillery in the corner of the brewery since 1993.

“I wanted to do this for many years,” Maytag said. “My theme was to take beer to the next step, and that means grain distilling. My goal was to make rye whiskey because rye is the original American whiskey. George Washington had a distillery making rye whiskey near Mount Vernon.”

Maytag says that, while records of early American distilling are almost “nonexistent,” it is clear that whiskey and rum makers in colonial America did not age their products. He believes that the first true aged whiskeys were introduced around the 1830s. These “red” whiskeys were the precursors of today’s bourbons.

And because Maytag wants to mirror earlier all-rye whiskeys, Anchor Distilling is not concerned at the moment with aging.

“We sell our whiskey as soon as we think it is nice,” Maytag said. He says that after six months, the whiskey, which is stored in new American oak barrels, has “good color and good taste.” At about 13 months, Maytag bottles the product as Old Potrero Single Malt Whiskey, at a barrel strength of 123.5 proof.

“I don’t apologize for one minute for not aging the whiskey,” he said, noting that, for his taste, bourbon has too much oak and Scotch, too much peat.

Challenges in Distilling

The time and financial resources required to age many styles of whiskeys and brandies are reasons that the artisan distilling movement will likely face a much harder growth curve than microbrewing.

“It takes five years before the first bottling and 10 to 12 years for something that is great,” Coale says of many traditional brandies and whiskeys. “Who’s got that time?”

The challenge for new distillers becomes one of having the resources, or other products and business ventures, to get them through the months–and years–between distilling and selling the first ounce to a consumer. It becomes quite a strain, especially for a new company that does not have an established market or even a clear idea of how consumers will react to the finished product. Without that track record, finding a bank to finance a distillery is a long shot.

In Morgantown, WV, Payton Fireman and partner Bo McDaniel have found a way to avoid the need for aging a whiskey. In fact, the label on the bottles coming from the West Virginia Distilling Co. proudly proclaims, “Less Than 30 Days Old.” Mountain Moonshine comes in 80 and 100 proof varieties and is made with corn whiskey and a blend of corn grain neutral spirits.

“We’re learning our trade. I think our whiskey this year is much better than last year,” Fireman said in a matter-of-fact tone. Fireman is a lawyer by trade, who says he has always been a spirits consumer. McDaniel is an “automotive repair genius” who, Fireman says, “knows something about the backwoods production of whiskey.” West Virginia Distilling occupies part of a building that also houses McDaniel’s transmission repair shop.

Fireman says that, while corn whiskey is the critical raw ingredient in bourbon, don’t expect to get a hint of Elijah Craig 18-year-old when drinking Mountain Moonshine. The clear whiskey is more like tequila or plum vodka, according to Fireman.

When they first started working together, the partners disagreed on what they should charge for their product. McDaniel argued it should go for a premium price, but Fireman prevailed, and you can get a 750-ml bottle for around $13.50. The product can be found in West Virginia, Maryland, Pennsylvania, Ohio and Washington, DC.

“I thought there was a lot more profit in this business, but economies of scale are key in distilling. That’s why the business is made up of big, dominant players,” Fireman said. “I don’t live in a state where people will pay $35 a bottle for specialty vodka.”

To create Mountain Moonshine, the company distills about 20 percent of final product, the corn whiskey portion, and buys the rest from a bulk corn grain neutral spirits producer at about a quarter of West Virginia Distilling’s cost to make the 192 proof spirit. “I blend the corn whiskey to the taste I want,” Fireman said. “It allows me to run my spirits spicier than normally would be true.”

The end product can be sipped straight or used as a “tequila substitute” in mixed drinks. The company is also promoting some signature drinks, such as the “Mountain Jewel,” which is Mountain Moonshine mixed with cranberry juice and 7 Up.

Getting into the Business

Many of the small distillers in the United States are starting out making vodkas and gins. One of the primary reasons is that these products do not require aging and are very popular with consumers, guaranteeing a good level of trial at retail.

Jim Bendis started the process of opening a distillery about four years ago. “The first two years was all paper work. Everything from the BATF to plans to handle waste water had to be documented,” Bendis said. The federal Bureau of Alcohol, Tobacco and Firearms is one of the tougher approvals that would-be micro distillers must get before going into production, but, according to some reports, local zoning laws and state regulations are even tougher hurdles.

Bendistillery finally made the jumps through the regulatory hoops and is operating in Bend, OR. The company makes Cascade Mountain Gin and Crater Lake Vodka and sells the products in Oregon, California, Washington, Idaho and Illinois. It also has a hazelnut espresso-flavored vodka.

“We’re ramping up right now. We have the capacity to do about 20 times the volume,” Bendis said.

One of the primary issues confronting micro distillers, similar to that faced by microbrewers, is that gaining the necessary distribution to get the product in front of consumers does not happen overnight. Finding the right sales team is half the battle. “The liquor distributors are used to working with huge companies that come in with all sorts of sales materials, even baseball caps. We sell our product much like a small winery sells its wines,” Bendis said.

Bendis says his company started out to make gin because “we are in the middle of the world’s largest juniper forest.” Unlike many gins now on the market that boast up to 20 botanicals as ingredients, Cascade Mountain sticks pretty much to juniper berries and filters the end product through volcanic rock.

“We wanted to take a step 100 years back in time. Gin started out pretty simple. It was a pure product that was predominantly flavored with juniper,” Bendis said.

In addition to its rye whiskey, Anchor Distilling also makes Junipero, a gin that has been on the market since 1995. “A good gin is a wonderful thing,” said Maytag. “Distilleries had beaten themselves up over price. I thought consumers would pay for a more flavorful gin, kind of like the beer world back in the 1960s.” Maytag will not talk much about the ingredients or special distilling techniques that Anchors uses, other than to say that “we use more than 12 botanicals” in Junipero, which sells for around $30 a bottle.

“Gin is like perfume; everyone has secret formulas,” Maytag said. He has been told that one famous gin manufacturer actually buys one type of botanical and immediately throws it away, just to confuse the competition about the recipe for the product.

Education is Key

Bendis believes that a key factor enabling small distillers to flourish is teaching consumers how to make great cocktails. “We work a lot with fresh fruit-infused products,” Bendis said. “You can have a commercial Lemon Drop all day long and think that it’s just fine, until you have one made with fresh lemons. It’s a great drink that people can make.”

Bendis’s recipe for fresh Lemon Drops is pretty simple. He cuts up 20 lemons into a 2-gallon mason jar. He then adds vodka to fill the container and closes the jar for two weeks. After the vodka is full of the flavor of the fresh lemons, he adds pure sugar to taste, and the Lemon Drops are ready. “You serve them in a martini glass rimmed with sugar. It’s a great drink,” he said.

Flavored vodka drinks are exactly the way Tito Beveridge got started along the path to distilling and the formation of Fifth Generation Inc., an Austin, TX, company. “My uncle taught me how to make flavored vodkas and I used to give them to friends as presents,” Beveridge explained. “I started to play around with my own stills and boilers over a five year period.”

“The more I found out about it, the more I learned that it was a serious offense to be doing this without a permit,” Beveridge quipped. “I made a bunch of bad stuff for a long time before I figured out [the recipe].” Now he expects to make 10,000 cases during 2001 of Tito’s Handmade Vodka. “My deal is going back to the old ways. Kind of like microbrewers and boutique wineries. We use a pot still, not a column still. And we use multiple distillation because it makes a smoother product.”

Beveridge notes that a number of spirits on the market being sold as small batch are actually made by major companies that market small selections of barrels warehoused beside some of the leading national brands.

Beveridge says that distilling is hard work and, with $33 in excise tax on each case of vodka, a difficult business in which to clear a profit. He started his distillery by using credit cards and feels that being under-financed hurt the company’s early development. Now Tito’s Vodka is stocked in about 1,000 liquor stores in Texas, Louisiana, Arkansas, New Mexico and Colorado.

“We’ve been back ordered for about nine months and we are finally catching up. Our plans are to double capacity, and we just hired a former Brown Forman sales executive. We’re selling everything I can make right now,” Beveridge said. “Now we need money to cover additional salaries and for advertising.”

Catching up with craft brewers and wineries may take some time for the new breed of artisan distilleries, but the market for quality beverages clearly continues to grow.