Getting in the Spirits

Dan Linehan

, Food & Drink

Taking a cue from craft beer makers, distillers have become the latest artisanal phenomenon

 

The stories craft distillers tell about how they started on the path to making vodka, rum and other spirits often start the same way. There’s a moment that hooked them.

For Michael Rasmussen, that moment came about a decade ago when he visited Distillery Row in Portland, Oregon, where he saw gin, vodka and other spirits being made on a small scale.

“I just fell in love with it right then and there,” say Rasmussen, who lives in Smyrna. While he continued to work in education policy for a local foundation, for the next few years he could talk about little else but distilling.

In 2011, he says, “My wife said I either needed to shut up about it or get to work.” So, after getting connected through a mutual friend to the person who would become his business partner, Ron Gomes, he got to work.

Before they could open the state’s first standalone, small-batch distillery, however, the partners had to persuade lawmakers to change the law to allow one. They had a simple argument: They were only asking for the flexibility already given to breweries and wineries. Lawmakers agreed, and the pair succeeded without much trouble. In November 2013, they opened Painted Stave Distilling in Smyrna.

But a new limitation soon brought them back to the General Assembly. They could only sell alcohol they made, preventing them from offering many types of cocktails.

“The following year, I walked around telling legislators that I couldn’t make them a Manhattan because I couldn’t use vermouth,” says Rasmussen. Lawmakers again tweaked the rules without much opposition, but the entrepreneurs met some resistance when they tried unsuccessfully to sell their product from farmers markets and other venues.

In response, they grew their business in a way that wasn’t in the plan, by hosting nonprofit fundraisers and private parties.

If starting a craft distillery sounds like an adventure, the kind of thing you learn only by doing, it is. Though they can consult the experts, craft distillers aren’t operating off a blueprint. They are tapping into a trend: Craft spirits are the fastest-growing part of the alcohol industry, rising at about 23 percent a year from 2016 to 2017.

Distillation is the process of boiling off alcohol, which evaporates before water does, and collecting it in higher concentrations. Distilling the essence of craft spirits often comes down to one concept: Think local.

Greg Christmas looked across Sussex County for a location for his tasting room before settling on this Lewes spot. Like many distillers, he uses his tasting room to get his product right before sending it into distribution. About five Beach Time products are available in Lewes-area liquor stores. Photo by Dan Linehan

A Leap of Faith

Among the legacies of Prohibition are the series of federal laws that largely outlaw home distilling. Starting in 1978, it’s been perfectly legal to brew beer or ferment wine at home, but liquor is mostly off limits.

As a result, craft distillers can’t pursue their passion at home, working out the kinks on small batches. For most, their first batch of liquor didn’t come until after they’d purchased equipment, chosen a location and started their business. Rasmussen says he and Gomes were confident their preparation would pay off when the time came to make their first batch, a type of brandy made from grapes called grappa.

“We felt like we’d done a lot of preparation, a lot of work,” he says.

Many craft distillers get their start in making beer or wine, which shares many principles and processes with distilling. Greg Christmas, of Milton, worked in a brewery and spent his spare time learning everything he could about distilling. He also hired an experienced consultant as a mentor for his first year.

The preparation gave Christmas, who opened Beach Time Distilling in Lewes in 2015, the ability to succeed from batch No. 1, a white rye whiskey that he still makes today. It tasted, he recalls, like hazelnuts mixed with spicy rye bread.

Others pay homage to their industry’s rebellious traditions, created over hundreds of years by outlaw moonshiners staying one step ahead of the taxman.

Bryan Quigley, co-founder of Philadelphia-based Stateside Urbancraft Vodka, started distilling with his brother in a small keg still named Old Ethel in their parents’ basement in Fort Washington, Pennsylvania.

“Maybe some of the things we did weren’t necessarily kosher,” Quigley says.

Getting started isn’t only about technical skills. Creating a tasting room to test drive your product, build a fan base and sell your spirits is a crucial first step.

Finding a Home

For Jared Adkins, founder of Bluebird Distilling, finding a solid location was initially a struggle, as four Pennsylvania townships denied him a permit to open a distillery. But it turned out to be a blessing, he says.

One day, he was driving through downtown Phoenixville, a small city along the Schuylkill River about 25 miles northwest of Philadelphia, when he saw an abandoned laundromat.

In addition to being in a fast-growing city, the area around the laundromat was a craft hub, with six breweries and four wineries on his street alone.

“It was the absolute best spot we could’ve found,” says Adkins. “It’s that old saying that a rising tide raises all ships, and that’s true in Phoenixville.”

Small cities tend to be fertile ground for distilleries, in part because they nurture a sense of place that local businesses can tap. And they’re cheaper. Rasmussen says he loves Smyrna’s small-town feel, but the price was also right.

“In Newark or Wilmington, (a location) would’ve been four or five times the price,” he says.

Learning How to Taste

Because many visitors haven’t been to a craft distillery, proprietors often have to coach them through the experience.

A newcomer who tries a spirit straight, or neat, without guidance may end up gasping or choking. It’s easy for the uninitiated to taste the burn and not the drink.

That’s why craft distillers talk new drinkers through how to drink spirits straight. First of all, they advise, don’t throw it all back in one motion.

Rasmussen asks customers to start with a small sip and let it settle.

“Once you get that on your tongue, pick out the caramel and vanilla,” he says.

Adkins draws an analogy with eating peppers.

“If you eat a jalapeno, it’s hot, but if you have one every single day for three weeks … your mouth adapts and the burn goes away, and you’re able to recognize the flavors,” he says.

Who Is the Craft Spirits Drinker?

The stereotype of the spirits drinker—as, say, a well-dressed middle-aged man unwinding in the evening—is changing, Adkins says. He says his tasting rooms are approaching gender parity.

“I see an equal amount of women, if not more women, who prefer whiskey drinks, and that’s starting as early as 23, 24,” he says.

It’s a challenge for any upstart to disrupt a consumer’s brand loyalty. Someone who has for decades reached for Smirnoff is unlikely to notice an alternative, much less pay more to try it. But Adkins says the new generation of consumer — familiar with craft beer—“is relatively easy to switch.” It also helps that younger drinkers may not have an established brand preference for spirits.

Some distilleries also look for younger drinkers by appealing to their health-mindedness, touting their products as sugar-free, carb-free and gluten-free. Alcohol, of course, is not good for your health; even light drinking slightly raises the risk for cancer.

Other distilleries don’t hit the health angle. But all of them care deeply about the product.

One truism that remains in craft distilling is that vodka is king. At Painted Stave, the top-selling product in distribution is a scrapple-flavored vodka.

Aside from a Christmas bourbon, vodka is Stateside Urbancraft Vodka’s only product. “We don’t want to be known as a distillery that does everything,” Quigley says.

Dogfish Head Distilling Co.’s core line-up of spirits. Photo courtesy of Dogfish Head Distilling Co.

Finding the Path to Growth

The success of craft brewing in recent decades has provided craft distillers with a template for growth.

Some pursue the Dogfish Head model of starting small and growing into a national brand, while others make most of their sales from their tasting rooms.

The comparisons to craft brewing are inevitable, though there are important differences between the industries, says James Montero, general manager of Dogfish Head’s distillery.

First, while craft beer represents about 11 percent of the total beer industry, craft spirits have captured only 5 percent of the total market. But the distillers are finding that craft beer drinkers have picked up a taste for experimentation.

“People are becoming more inquisitive on everything they’re consuming,” Montero says.

The two main paths to success as a craft distiller—running a tasting room and distributing your product at liquor stores—aren’t mutually exclusive and most pursue both at once.

Though it’s easy to see the allure of selling your product across the country in thousands of stores, getting your product into wide distribution isn’t easy.

Christmas, of Beach Time Distilling, says state law requires alcohol to be sold through both a distributor and a retailer. Both players mark up the cost, so when combined with taxes, his distribution sales are only a small fraction of what he makes in his tasting room.

For example, Christmas is selling ready-to-drink cocktails, ranging from $4 to $6 per can. But by the time they enter the liquor store, they’d cost more, perhaps more than what people would be willing to pay.

He could get the price down if he could sell in volume, but may not achieve that volume at a high price. It’s a chicken-and-egg problem he hasn’t yet been able to solve.

Painted Stave Distilling is an example of a business that takes a middle road. Rasmussen estimates that about 60 percent of Painted Stave bottles are sold from the Smyrna location and the rest from the 250 or so regional locations that sell his products.

“We’re growing that distribution business and investing in the distillery,” he says. That includes hosting more events and putting the finishing touches on a patio and event space the partners call a “cocktail garden.”

But the craft beer experience also includes a cautionary tale. In the past few years, a number of high-profile craft brewing bankruptcies have suggested the market is saturated.

Christmas initially planned on opening a brewery about seven years ago but saw the scene was already getting crowded.

“Just getting equipment was hard,” he says.

In some places, craft distilling may be approaching that saturation. In a business whose appeal is local, it can be hard to sustain multiple distilleries.

“I definitely have seen it take a change,” Adkins says. “Before, you could branch out quickly.”

Instead of expanding, it’s sometimes a better goal to “focus on your backyard and own that,” he says.

Premixed cocktails are increasingly seen as an opportunity.

“The reality is that no one ever drinks 80 proof spirits neat,” says Dogfish Head’s Montero. To that end, they’ve developed a bottled cocktail, Sonic Archaeology, made with whiskey, rum and brandy with fruit juices.

“It has the convenience of beer and people are freaking out over it,” he says.

In the long run, Dogfish Head would like to ride the craft spirits wave and sell them in each of the 41 states in which it sells beer.

Even if cocktails are more popular among young drinkers, many distilleries, including Stateside Urbancraft Vodka, also try to get their customers to drink neat.

“The best test of a product is trying it by itself,” Quigley says. “It’s fun to watch their expression and see they’re pleasantly surprised it doesn’t burn like rubbing alcohol.”

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