by Mark Meyer
Distributors are a spirits maker’s only way to get her products to market in states that do not allow small distilleries to sell directly to consumers. Distributors also have an interest in protecting their national brands against the smaller upstarts. Southern Wine and Spirits, one of the nation’s largest distributors, for example, raked in $10 billion in 2012. And upwards of 40 percent of a distributor’s revenue can come from a single supplier.
Currently, there are a limited number of distributors that will work with small distilleries, which creates a daunting barrier for small producers trying to reach a retail environment. This is why direct-to-consumer legislation, like that which exists in Michigan, New York, and Pennsylvania, is so critical to the future health of the craft spirits industry.
All of these historical, commercial, and economic developments have ultimately led to a fairly staid and singular mix of consumer offerings. If we take Pennsylvania as a case study, we can see how consolidation has played out on the shelf. Pennsylvania is an important state for whiskey makers. It ranks fifth in spirit consumption in the nation, consuming more than 3 percent of the nation’s spirits, behind only California, Florida, New York, and Texas. It’s also the largest single liquor purchaser in the country. Because of this, manufacturers devote significant resources to the offerings in this state. Yet in 2013, a full 98 percent of American whiskey sold in the state of Pennsylvania was just one type—corn whiskey, or bourbon— produced by a small handful of companies. In the very same state where Monongahela rye whiskey originated, less than 2 percent of the whiskey sold was made from rye grain.
And it only gets worse. Because if you break down where that 2 percent of rye whiskey came from, you can see that the vast majority came from just two distilleries. One, Beam Suntori, you probably have heard of, but the other, called Midwest Grain Products, or MGP, you might not know about. Headquartered in Lawrenceburg, Indiana, MGP is one of the largest distilleries (by gallon production) in America. MGP turns out lots of rye whiskey as well as vodka, known in the industry as Grain Neutral Spirit or GNS, and bioplastics. Turns out they made about 40 percent of the rye whiskey sold in Pennsylvania in 2013, leaving Beam to make most of the rest.
MGP and Beam ryes are bottled under a variety of different labels. So even when there really isn’t a heck of a lot of choice for consumers, the companies can create the illusion of choice. For all intents and purposes, that meant whiskey buyers in Pennsylvania were left with only two rye whiskeys to choose from: Beam or MGP.
This bulk rye certainly gets around in the industry. Craft distillers, as well as companies that bottle whiskey, regularly receive emails from America’s bulk whiskey suppliers. In 2015, they offered to sell their bulk rye whiskey from $3.66 to $4.09 per bottle. That’s a good deal; there’s some nice room for margin between $4 bulk whiskey and a $30 to $50 price tag on the shelf. But it just goes to show how the American rye whiskey industry is one that has profited from consumer confusion and obfuscation and a whole lot of clever marketing.
An industry with just two dominant suppliers is not a healthy or interesting one from a consumer perspective. An industry in this kind of shape is one that’s begging for companies whose margins are built on consumer education, not on consumer confusion. This is the argument for grain-to-bottle, craft spirits.
It may be hard now to imagine our country filled with tens of thousands of distilleries—a world where different regions produced their own distinctive style of whiskey or spirit. At the turn of the twentieth century, America had a distillery for every 9,500 citizens. These days, even with the current boom in small distilleries, there is a distillery for every 210,000. In a mid-size city like Pittsburgh, this is the difference between having one distillery versus having thirty-two. So in spite of the hordes of new entrants into distilling, and the growth of small brands, we still have a long way to go to come close to pre-Prohibition levels of diversity in the American distilling landscape. With 1,400 craft distilleries in America and counting, we are certainly making progress. And as curious drinkers renew their interest in lost styles of American spirits, we are on the brink of a sea change in American distilling.
The burgeoning consumer demand for craft spirits will continue to eat away at the consolidated supplier market. Some people in the industry anticipate a day in which the top twenty spirits brands will carry half of the spirits market, while the remaining half will be split among a multitude of craft brands. This will force distributors and suppliers to change their current mindset. Instead of looking for the next big national brand, suppliers may look to embrace regionality in their sales and marketing and acquisition strategies.
If this is the state of the spirits world we’re looking at ten or twenty years from now, we should probably get a good handle on what craft spirits are exactly. While it seems like a simple question, the definition of craft in American whiskey is, perhaps, the most central and nuanced issue facing distillers and consumers today.
CHAPTER 4
The Rebirth of Craft
Over the course of this short book, we’ve sped through the long trajectory of rye whiskey’s history in America. Whiskey began as a necessity in the frontier economy of western Pennsylvania, then grew into a national force that fueled twentieth-century American industry, before suddenly crashing with Prohibition, to be largely erased from our national consciousness. Today, craft distilleries represent an opportunity to regain this lost heritage and rediscover the regional diversity of American spirits.
At the heart of the current boom in craft distilling are consumers who are seeking authenticity and spirits that reflect the place they come from. But what is a craft spirit exactly? Do you know it when you taste it? When you see it? These are questions that have divided people in the current craft community.
In fact, the question of what makes a craft spirit brought three separate lawsuits against one company, Templeton Rye, which has represented itself as a craft distiller. Once featured on National Public Radio as a darling of the craft rye renaissance, Templeton became an industry lightning rod. While the company itself marketed its rye whiskey as an Iowa rye—made in small batches using a family Prohibition-era recipe—it turns out it was sourcing its rye from Midwest Grain Products. MGP, as America’s largest supplier of rye whiskey, has built its operation on continuous industrial distillation; it doesn’t produce its whiskey in small batches. It’s also located in Indiana, a geographically inconvenient fact for a whiskey company claiming to be from Iowa.
After Templeton achieved national distribution and strong sales, consumers began asking questions, which ultimately resulted in a number of class-action lawsuits claiming that the company deceived consumers. In July 2015, Templeton settled all the suits for an undisclosed amount. The company was forced to set aside a cash reserve to refund customers who had purchased bottles under false pretenses.
The Templeton case is a clear case of consumer deception, but the question of what exactly makes a craft spirit often sits in a much grayer zone. It’s a question that has created contentious debate in the beer and wine industries for decades. The Craft Brewers Association has gone out on a limb and created a definition for the kind of work they do: “An American craft brewer is small, independent, and traditional.” The association then goes on to define each of those adjectives. “Small” means an annual production of not more than 6 million barrels of beer, which, at about 3 percent of America’s annual beer sales, leaves quite a bit of room for growth for most small brewers. “Independent” means that less than a quarter of the brewery is owned or controlled by an external interest. And finally, a “traditional” craft brewer creates “a majority of its total beverage alcohol volume in beers whose flavors derive from traditional or innovative brewing ingredients and their fermentation.”
For spirits, the conversation around craft at this early stage in the industry is rapidly evolving, but it’s much more basic. For the first s
everal years that the industry trade group, the American Craft Spirits Association, existed, the big question concerning craft was simple: Do you make the stuff yourself or do you buy it from a larger manufacturer and then bottle and label it? If you are a bottler, then you should not pretend to be otherwise on your label. But this would not necessarily disqualify you from being a “craft” producer.
However, as the craft spirits industry continues to mature, patience for bottlers of bulk spirits appears to be waning among both consumers and professionals in the industry. Collectively, the craft spirit industry is coming around to the notion that the only way to return to the dynamic, regionally-driven spirits landscape that existed pre-Prohibition is for distilleries to make things themselves, preferably from local ingredients.
This is the primary hallmark of craft distilling. By fermenting and distilling ingredients—grains, sugar, fruit, molasses, honey—from their own regions, small distillers bring a needed diversity and regionality to the distilled-spirits landscape. This local sourcing and grain-to-bottle production methodology is the heart and soul of craft distilling. This is the same kind of production that led to a rich array of regionally-specific spirits in the past—Monongahela rye versus Maryland rye versus Kentucky bourbon, for example. This “taste of place,” or terroir, is precisely what created such dynamic and varied American whiskeys in the past, which makes it the central attribute of craft distilling today.
A second hallmark of craft distilling is a dedication to education and transparency. If craft distillers are going to succeed, they have to create an educated and curious consumer base. This principle guides distribution strategy—leading to tasting rooms with direct sales to consumers—and perhaps most importantly, consumer engagement methodologies, including lots of tours and education events.
One thing is clear: if you’re going to invest in making your consumers really smart about what they’re drinking, they’re going to start asking lots of questions. And so, craft distilleries must operate with higher standards around transparency and consumer engagement. A company’s value should grow as consumer understanding grows. This focus on education and transparency is a marked turn for the spirits industry, which has previously reveled in marketing mythology.
The third hallmark of a craft spirit is a resource-intensive focus on innovation. This is definitely an exciting time to be a spirits drinker. With 1,500 distilleries playing around with craft spirits in different ways, there is a tremendous amount of new expressions to try across all categories, and those who claim to be an expert on anything these days are making a big claim. Harry Kohlman, an industry consultant, charted the number of new spirit label filings per year to the Alcohol and Tobacco Tax Trade Bureau, and found that from 2002 to 2013, the annual number of labels filed had more than tripled. A.C. Nielsen data backs up this trend, showing a 27 percent growth in the number of spirits on shelves in early 2017 versus four years prior.
This focus on innovation can be a sticky wicket in an industry as tradition-driven as whiskey. After all, the primary message the industry has communicated to consumers over the past fifty years has been all about how long something has been sitting in a barrel. A whiskey’s age is important, but it’s also an aspect of distilling that’s relatively simple to communicate—it’s easy to post a number on a bottle and mark the price up accordingly. Broadening the conversation beyond the barrel—to include fermentation and distillation methodologies, and the types of grains, malts, botanicals, and yeasts used—requires much more consumer education and curiosity.
The fourth and final hallmark of craft distilling is inclusivity. As you’ve likely noticed, American whiskey, in its most recent history, has suffered from a narrow communication strategy. When we began working on our distillery in 2010 and talked to people about what they thought of when they thought of whiskey, the image we heard most frequently was of an older gentleman, sitting on a leather couch, smoking a cigar. While entirely understandable, this is a strangely anachronistic and narrow view of whiskey. For most of its long history, whiskey was a drink of the people—of all the people. If you were attending a wedding, a funeral, or even having lunch, you were very often drinking whiskey—man or woman, rich or poor.
Modern whiskey aisles do not reflect whiskey’s true democratic roots. They are filled with brown parchment, hunting scenes, and language aimed at a very particular audience—a club that many consumers do not feel a part of. Much of the work of the craft industry is to make whiskey relevant again for all those people who strongly believe that it is not for them. And if the industry can successfully do that, it will have an enormous population to drink with. Today’s craft distillers are interested in telling this story; opening whiskey up to a wider audience has the potential to yield great returns.
Now, in none of the above hallmarks have we tried to define the word “craft.” It is a word that is now applied so liberally that it risks becoming meaningless. In 2014 alone, the word “handcrafted” appeared on bar and restaurant menus 68 percent more often by the end of the year than it had in the first two quarters. And in the distilling world, the word “craft” is bandied about all over the place. Right now, consumers have been left to figure out exactly what that word means to them.
Certainly there are distilleries that identify as craft that rely on commodity grains, that do not focus on innovation, that are still focused on the old man with the cigar at the expense of the rest of the population, or that don’t spend much time thinking about or developing consumer education. But taken as a whole, the attributes of modern craft spirits—small-scale production from regional ingredients, consumer engagement, innovation, and inclusivity—are driving the craft renaissance.
Perhaps as importantly, each of these hallmarks were part and parcel of American spirits in the past. And as the industry’s pendulum swings back toward smaller, regional producers, the renaissance in American whiskey is truly a rebirth of craft. We, as whiskey drinkers, should not take this for granted. Who knows how many decades we have until the strong pull of consolidation swings the pendulum back? But for now, let’s revel in whiskeys packed with the flavor of their place—produced on the pot stills we can see up close by the people who work with regional farmers.
THE PROCESS
START WITH ORGANIC GRAIN FROM LOCAL FARMS
TO CONTINUE A JOURNEY FROM GRAIN TO BOTTLE
GRAIN IS GROUND INTO GRIST AND TURNED INTO A MASH IN THE MASH TUN
MASH IS TRANSFERRED TO THE FERMENTERS AND FERMENTS FOR FOUR DAYS
FERMENTED BEER IS DISTILLED TWO TIMES TO 110 TO 125 PROOF
DISTILLED WHISKEY IS BARRELED INTO NEW CHARRED OAK BARRELS
BARRELED WHISKEY IS AGED IN THE BARRELHOUSE ONE TO FIVE YEARS
THEN EMPTIED AND PROOFED WITH WATER IN STAINLESS STEEL HOLDING TANKS
AND BOTTLED AND CORKED BY HAND FOUR AT A TIME
EACH BOTTLE IS HAND LABELED
AND READY FOR CRAFTING COCKTAILS OR DRINKING NEAT
COCKTAIL RECIPES
STRAWBERRY SHRUB
Angela Smalley Nemacolin Woodlands
Origins in seventeenth-century England where vinegar was used as an alternative to citrus juices in the preservation of berries and other fruits for the off seasons.
2 oz. Wigle Organic Straight Monongahela Rye Whiskey
2 oz. strawberry shrub syrup*
½ oz. lemon juice
1 oz. soda water
Garnish with lemon zest and fresh black pepper
NOTES: Add the rye whiskey and strawberry shrub syrup in a shaker with ice. Shake, then add lemon juice and soda water. Strain into a martini glass; Garnish with lemon zest, and fresh ground black pepper.
*Strawberry Shrub Syrup
In a bowl, let three cups sugar and zest of three lemons rest for one hour before pressing zest to release oils. Remove zest and
pour the sugar over a bowl of four cups of strawberries, hulled and quartered. Place lid on bowl and set aside in refrigerator for two days. It is ready when the syrup has formed and the berries have turned to pulp. In a glass jar, strain the strawberries leaving only the syrup. Add one cup balsamic vinegar, one cup white vinegar, and one cup champagne vinegar to syrup, and store in a refrigerator for three days. Shake occasionally to help the sugar dissolve.
WAR OF CONQUESTS
CECIL USHER BUTCHER & THE RYE
Name is inspired by the French-Indian War. The French would call these battles the war of the conquest. The cocktail has two French ingredients, dry (French) vermouth and absinthe and then American staples rye and apples. Enjoy!
1 oz. Wigle Organic Straight Monongahela Rye Whiskey
1 oz. Wigle Apple Brandy
¾ oz. dry vermouth
¼ oz. demerara syrup
1 dash Wigle Organic Pomander Orange Bitters
