Craft distilling adds new dynamic to spirits category
To a distiller, beer is essentially undistilled whiskey, but in the world of craft distilling, craft beer is much more than that — it might even reveal the future for craft distilleries in the United States.
The number of craft breweries in the United States recently hit 2,000, according to the Brewers Association, Boulder, Colo. Even though overall U.S. beer sales decreased approximately 1.3 percent by volume last year, craft beer sales increased 13 percent by volume, selling 11,468,152 barrels last year, the association stated.
Although craft spirits haven’t achieved as much success as the craft beer segment just yet, experts see them following a similar growth pattern. In the book “Alt Whiskeys,” author Darek Bell, owner of Corsair Artisan Distillery, Nashville, Tenn., writes that craft distilling currently is at the point where the craft beer segment was in the late 1980s, showing great potential for growth. At the most recent American Distilling Institute (ADI) conference, co-founder of Coppersea Distilling LLC Michael Kinstlick said in a presentation that the number of new craft distilleries has been doubling every three years. Today, approximately 350 operating craft distilleries exist in the United States with 50 under construction, according to Bill Owens, founder and president of the ADI, Hayward, Calif. They’re opening at a rate of about six each month, he says.
“There were more craft distilleries pre-Prohibition than there were breweries, so there’s no telling how many craft distilleries this country can support,” says Mark McDavid, co-founder, sales and marketing for Ranger Creek Brewing & Distilling, San Antonio.
“… The brewing side’s showing that we can support at least as many breweries as we had pre-Prohibition; if the same thing happens on the craft distilling side, then we’re going to have a whole lot of really cool distilleries.”
Coppersea’s Kinstlick predicts that the number of craft distilleries will grow to more than 1,000 in the next 10 years. Experimentation, quality and passion for the craft are key factors to the segment’s growth. Conversely, strict regulations and illegalized home distilling could impede the category.
Craft distilling is more heavily regulated and a larger source of tax revenue than craft brewing, says Sonja Kassebaum, co-owner of North Shore Distillery, Lake Bluff, Ill. Plus, it’s more difficult to get into because people can’t experiment at home, she adds.
Ranger Creek’s McDavid agrees, citing the importance of home brewing for the craft beer segment.
“[Home distilling] was a big driver of the craft brewing industry, so when [former President Jimmy] Carter legalized home brewing in ’78, you saw the craft brewing industry in the ‘80s really start to ramp up and then they continued into the ‘80s, ‘90s and through today,” he explains. “So there might need to be some legislative changes in order for home distilling to be legalized to drive the industry on, although you do see a lot of breweries driving craft distilling forward, and especially those that understand that whiskey is just distilled beer.”
Linking beer and spirits
Ranger Creek crafts its spirits to showcase the relationship between beer and whiskey. For instance, the brewery/distillery created a mesquite smoked whiskey that’s currently aging in barrels until this fall. Head distiller and co-founder T.J. Miller distilled the wash from the company’s mesquite smoked porter and aged it in its own used bourbon barrels. Oftentimes, whiskey distilleries obtain wash from existing breweries and used bourbon barrels from other distilleries, McDavid explains.
Also in the works is a straight bourbon, which will be aged for more than two years. The company’s flagship spirit, Ranger Creek .36 Texas Bourbon Whiskey, uses the same distilled product as the straight bourbon, but ages it in small barrels for a shorter period of time. Small barrels accelerate the aging process from a number of years to a number of months, McDavid says. The .36 Texas Bourbon Whiskey is the first in the company’s Small Caliber Series, which will feature a lineup of innovative whiskeys aged in small barrels for a short time.
An increasing number of craft breweries will begin distilling, ADI’s Owens predicts. For instance, craft breweries including Milton, Del.-based Dogfish Head and Newport, Ore.-based Rogue both started off brewing beer and later added craft spirits to their portfolios. Dogfish Head makes flavored vodkas, rums and gin, while Rogue offers whiskeys, rums and gins.
“When you build your own equipment, your mash tun can go either one way [with] the wort coming out of the mash tun … for making beer, or the pipe can go the other way and it magically turns from wort to wash and all we do is ferment and distill [to create whiskey],” Owens says. “So you’re ready in three days, but the beer guys have to boil, they have to add hops, they have to ferment, they have to age it, they have to carbonate it and then they bottle. That’s a long, complicated process, but if you’re a brewery/distillery, you’ve got a machine to do both of them.”
The convenience of distilling for brewers coupled with the special relationship between beer and whiskey might have sparked growth in the whiskey category, McDavid suggests. According to Kinstlick’s presentation at the ADI conference, the percentage of craft distilleries making whiskey increased from 40 percent in 2006 to nearly 55 percent in 2010-2012, making it the fastest growing category in the segment.
With growth comes innovation
Corsair Artisan Distillery is known for its experimental whiskeys. Nevertheless, craft spirits haven’t completely broken the mold yet, Bell explains.
“When you look at the history of craft brewing, the first brewers that came out of the gate were kind of just [mimicking] the [major beer brands],” Bell says. “And when they broke, they broke really hard.” Craft brewers started making innovative beers, such as India Pale Ales, stouts and Belgian-style beers, he explains. Similar to craft beer’s beginnings, craft spirits haven’t broken away yet, he says. Therefore in Bell’s “Alt Whiskeys” book, he details dozens of innovative alternative whiskeys to help push the segment to the next stage.
Some of Corsair’s innovative products include Hopmonster hopped whiskey, Old Punk pumpkin and spice flavored whiskey, Triple Smoke malt whiskey, Oatmeal Stout whiskey, Ryemageddon rye whiskey, Buckwheat Bourbon, Quinoa Whiskey, Blue Corn Bourbon, Millet Moonshine and Grainiac 9 Grain Bourbon. The company’s hop whiskeys tend to appeal to craft beer drinkers, while its smoked whiskey offerings often appeal to traditional whiskey drinkers, Bell says.
“We have a distillery in Kentucky that’s in the shadow of all the gigantic bourbon distilleries, and then we have a Nashville distillery that’s in the shadow of Jack Daniel’s,” Bell explains. “Because we’re in the shadow of all these massive companies, we really wanted to go a really experimental route to be different.”
Furthermore, Corsair makes other spirits, such as Barrel Aged Gin, Spiced Rum, Vanilla Bean vodka and Red absinthe. Bell notes the resurgence of gin and a particular interest in barrel-aged gin. Like the high-volume spirits market, spiced rum and flavored vodkas remain notable trends in the craft distilling segment, according to experts. Absinthe, on the other hand, captures a smaller, niche audience, experts say.
Among other spirits, North Shore Distillery makes Sirène Absinthe Verte, which features traditional ingredients anise, fennel and grande wormwood as well as a proprietary blend of herbs and spices. Because of its black licorice flavor profile, absinthe has never been hugely popular in the United States; however, it’s a spirit that founders Sonja and Derek Kassebaum — along with a group of others — love, Sonja says.
“Absinthes are very expensive to make and, therefore, very expensive to buy, so you have to appreciate what’s special about them in order to want to make the investment,” she explains. “But there’s definitely an audience for it.”
However, North Shore is best known for its gin. Of the craft distilleries that launched between 2009 and 2011, 34 make gin, which is approximately a 1.7 percent increase from pre-2006 entrants, according to Kinstlick’s presentation. North Shore makes two different styles of gin: Distiller’s Gin No. 6 is a modern dry gin featuring citrus, spice and floral notes, and Distiller’s Gin No. 11 is a classic dry gin based on the traditional London dry gin flavor profile, the company says.
To enhance the flavor of its products, North Shore heats its still with electricity rather than steam, providing a gentle heat, Sonja says.
“One of the things we’re often noted for is the fresh herb flavors in our spirits and the ‘not cooked’ quality that they have — that we preserve the freshness of whatever it is we put into it because we can tightly control that,” she explains.
Derek Kassebaum also built the filtration system that the company uses for its vodka. North Shore offers a regular vodka as well as a chamomile citrus flavored vodka, which currently is the distillery’s best-selling product.
“We actually hand-peel oranges, lemons, limes and we take chamomile blossoms and a couple of spices, we infuse them into the spirit and then we actually distill it to lock in the flavors,” Sonja says.
The distillery also makes Aquavit, which Sonja says has become very popular, as well as a variety of limited-release experimental spirits. Last year, it launched Eldergin, which blends the company’s Distiller’s Gin No. 11 with elderberries. It also crafted a new whiskey and rum, which currently are aging in large barrels long-term, she says.
In the overall spirits industry, vodka still takes the No. 1 spot, ADI’s Owens says. According to Kinstlick’s presentation, just more than 50 percent of all craft distilleries are making vodka, which makes up the highest category share.
Downslope Distilling, Centennial, Colo., makes three types of vodka as well as a hybrid whiskey, gin and a variety of rums. Its vodkas are made from cane juice or malted barley and rye in a custom-designed still. Made from cane juice, the company’s Pepper Vodka is infused with New Mexico dried red chilies and Indonesian black pepper. Its Double Diamond Whiskey is made from Maris Otter floor-malted barley and North American rye. It is aged in wine barrels solara style, which means that whiskeys of different ages are combined in the same barrel. One of its newest releases, Ould Tom Gin, is distilled from cane juice and infuses 11 botanicals in a small hybrid still. Historically, Ould Tom was a style of gin that bridged the gap between Dutch gin and dry gin, the company says.
A personal touch
Although experimental and high-quality offerings are key to the craft spirits market, Corsair’s Bell adds that the “foodie” and “local” movements also have helped the segment.
“People really want a real connection with their food and drinks,” he explains. “They like to see something that’s actually made by someone and they like to know where it came from. That’s another huge thing that craft distilling has is that people love to come in and check it out and talk to the distillers directly and go on a tour of the whiskey.”
ADI’s Owens agrees, adding that the public is seeking “green,” natural and authenticity claims to showcase the people behind the product. He cites Short Mountain Distillery, based in Woodbury, Tenn., as an example. The distillery makes bourbon, whiskey and moonshine — which essentially is unaged whiskey — from corn that is grown and stone-milled on a 300-acre farm in Cannon County, Tenn. Workers even use a mule team to plow the fields to plant their corn.
Los Angeles-based Modern Spirits LLC took their portfolio of craft spirits a different direction. Its entire portfolio of Tru vodkas, Tru gin, IXÁ tequila, Crusoe rums, Fruit Lab liqueurs, Bar Keep bitters and a soon-to-be-released whiskey are U.S. Department of Agriculture certified organic, addressing the demand for sustainable and natural products.
Packaged to sell
Most brands use packaging to help sell their product. However, for unknown brands such as many craft spirits, packaging takes on a new significance.
“Packaging is obviously key on the spirits side,” Ranger Creek’s McDavid says. “That’s one of the first things you learn in the industry. A lot of people are shopping at the store and making decisions based on your label, so we definitely try to highlight the fact that we’re a Texas bourbon, so it says ‘Texas bourbon’ large on our labels, and we try to make the feel of our package kind of that premium Texas ranch house feel.”
To showcase its handcrafted nature, Ranger Creek employees label every bottle by hand and write the bottle number, batch number, season and age on the label. Likewise, Derek Kassebaum from North Shore Distillery signs and/or writes the batch number on every one of its bottles. North Shore also selected a distinct shape for its bottles to help them stand out on the shelf.
In order to target a younger adult audience and differentiate itself from competitors, Corsair designed labels that feature high-contrast silhouettes of three men “out on the town,” Bell says.
In the whiskey category, many of the bottles had an old-fashioned look, he explains. “It was all very old timey, so we wanted to go in a very different direction. These are all saying old, old, old, so we wanted to say new, new, new. We wanted to essentially put our target demographic on the map, which is younger people out on the town having fun, and so that’s essentially where our logo came [from]. It’s very different on the shelf, it stands out … and it’s worked really well for us.”
Ole Smoky Moonshine, Los Angeles, packages its flavored moonshine in 750-ml. mason jars to highlight its craft nature and stand out on shelves. The company recently launched new flavors Peach Moonshine and Blackberry Moonshine in Tennessee.
Despite the success of whiskey and bourbon, ADI’s Owens notes that moonshine and brandy have a limited market. However, from 2006 to 2012, the Brandy & Other category was the second most produced category in the craft spirits segment, according to Kinstlick’s presentation. Nevertheless, craft distilleries are making less brandy and other spirits than they did in the past — production decreased approximately 27 percent from 2006 to 2010-2012, according to the ADI presentation.
Poised for future success
Although some craft spirits categories are more popular than others, the segment as a whole is growing, according to experts. When the ADI was founded in 2003, there were 69 craft distillers holding Alcohol and Tobacco Tax and Trade Bureau-issued distilled spirits plant licenses, according to ADI’s website. By the end of 2015, the institute expects there to be between 400 and 450 craft distillers in the United States and Canada, it says.
“We still have a whole long way to go before we get to pre-Prohibition numbers, so I definitely feel like we’re on the front edge of what’s going on,” Ranger Creek’s McDavid says. “Over the next 20 years, everyone’s going to be trying to be the next Sam Adams or Sierra Nevada or New Belgium, and we’ll have to see how it all shakes out.” BI