Can small spirits producers stay on a roll?
The U.S. craft spirits business has increased exponentially during this decade, growing from fewer than 200 distilleries to more than 1,700, according to the industry’s trade association. The increase has been fueled by legal changes in many states that make it possible for craft distillers to sell their product directly to consumers. New York state pioneered these changes with a “farm-to-flask” law that made it relatively easy for farmers to distill and market spirits using their home-grown produce. At least 13 other states have followed suit, swayed by the potential of the craft spirits business to generate jobs and economic opportunities in agriculture, tourism and other fields. A 2017 reduction in the federal excise tax on distilled spirits also has facilitated growth. One potential obstacle startups face is the need to properly age some craft spirits, such as whiskey; this has led some new distillers to buy someone else’s product and sell it as their own, creating the potential for brand confusion.
Here are some key takeaways:
Millennials are a key target market for craft spirit producers because of their preference for unique and varied alcoholic beverages.
As the number of craft distilleries has grown, the industry’s employment footprint has increased as well, more than tripling between 2014 and 2017.
Unlike craft beer producers, craft spirits distillers are less likely to have an adversarial relationship with the bigger, established companies in their industry.
Resources for Further Study
Fireman, Payton, “Distillery Operations: How to Run a Small Distillery,” Payton Fireman Attorney at Law, 2016. An attorney and founder of the West Virginia Distilling Co. describes all aspects of distilling operations from fermentation to bottling.
Rodewald, James, “American Spirit: An Exploration of the Craft Distilling Revolution,” Sterling Epicure, 2014. A journalist and former drinks editor for Gourmet magazine takes an in-depth look at the U.S. craft distilling industry.
Edwards, Dave, and Helen Edwards, “The economics of selling craft beers and spirits just got a lot better,” Quartz, Jan. 22, 2018, https://tinyurl.com/
Finkle, Victoria, “With a new distillery, two women make their mark on D.C.’s craft liquor scene,” The Washington Post Magazine, June 16, 2016, https://tinyurl.com/
Henderson, Tim, “‘Farm to Flask’ Distillers Lifting Local Spirits,” Pew Stateline, Oct. 10, 2017, https://tinyurl.com/
Kell, John, “Why Craft Liquor Is the Next Big Thing,” Fortune, Oct. 18, 2016, https://tinyurl.com/
Reports and Studies
“Annual Craft Spirits Economic Briefing,” Craft Spirits Data Project, Park Street/American Craft Spirits Association/IWSR, October 2017, https://tinyurl.com/
“Craft Spirits Market Analysis By Distiller Size (Large, Medium, Small), By Product (Whiskey, Vodka, Gin, Rum, Brandy, Liqueur), By Region (North America, Europe, Asia Pacific, South America, MEA), And Segment Forecasts, 2018 – 2025,” Grand View Research, October 2017, https://tinyurl.com/
“Global Alcoholic Spirits Market Forecast 2018-2026,” Inkwood Research, https://tinyurl.com/
The Next Step
Chang, Momo, “How a New California Bill Could Change the Game for Small Distilleries,” East Bay Express, May 7, 2018, https://tinyurl.com/
Moomaw, Graham, “Virginia distillers push ‘booze equality’ legislation to loosen state rules on liquor tasting rooms,” Richmond Times-Dispatch, Jan. 23, 2018, https://tinyurl.com/
Murphy, Erin, “Iowa distilleries are thriving under new state law,” Quad-City Times, Jan. 26, 2018, https://tinyurl.com/
Gutierrez, Andres, “Local craft distilleries concerned over China’s tariff on bourbon,” KSHB Kansas City, July 6, 2018, https://tinyurl.com/
Leary, Patrick, “Central Standard Craft Distillery releasing first re-barreled spirit: bourbon finished in wine barrels,” Milwaukee Business Journal, July 20, 2018, https://tinyurl.com/
Torres, Chris, “Seeds of new rye whiskey market are growing,” American Agriculturalist, Aug. 15, 2018, https://tinyurl.com/
Alcohol and Tobacco Tax and Trade Bureau
1310 G St., N.W., Box 12, Washington, DC 20005
A bureau of the U.S. Department of the Treasury that regulates and collects taxes on trade and imports of alcohol, tobacco, and firearms within the United States.
American Craft Spirits Association
PO Box 701414, Louisville, KY 40270
National trade group representing the U.S. craft spirits industry.
American Distilling Institute
22752 Bayview Ave., Hayward, CA 94541
Founded in 2003, the oldest and largest organization of small-batch, independently owned distillers in the United States.
Grand View Research
201 Spear St. 1100, San Francisco, CA 94105
A market research and consulting company that provides research on a range of industries, including food and beverage, energy, health care and technology.
169 Harrison Ave., Boston, MA 02111
A marketing and research firm that offers trends and analysis on a number of industries.
1000 Brickell Ave., Suite 915, Miami, FL 33131
A market research firm that provides consulting services to alcoholic beverage companies.
Virginia Distillers Association
PO Box 136, Richmond, VA 23218
An industry group focused on improving the regulatory, legislative and promotional environment for Virginia distillers.