50% of Craft Distillers Sourcing Product; 80% Increasing Capacity

FILED NOVEMBER 18, 2015

If you know where to look, there is a lot of readily available data collected on how the craft spirits category as a whole is doing. But in our humble opinion what's missing from the market is a look at how craft distillers of different sizes are growing and what strategies they are employing to maintain that growth. As such, WSD sent out our first craft distiller survey asking a host of questions covering topics such as operating strategies, growth percentages, retailer/distributor relations and what topics they think are most important right now.

WHO WERE THE DISTILLERS? To clarify, when we say "distiller" we mean spirits supplier, whether they actually distill their own product or not. We ended up with a sample size of just over 30 craft distilleries: 3 of the respondents said they make less than 1,000 (12-pack) cases; 10 of the respondents said they make between 1,000- 6,000 cases; 7 said they make between 6,000-10,000; 7 said 10,000-20,000; and 3 said they made more than 20,000.

As for sourcing product, 50% said they rely on another company to sell them spirits; 23% said they produce spirits for someone else and 39% said they do it all themselves.

"For us there still is an increase in locally produced spirits. However there is an increase in local producers in the market, which seems to be a trend across the country," said one distiller.

CRAFT GROWTH IN DOUBLE DIGITS. You may recall, we already gave a sneak peek on the reported growth while the survey was still open [see WSD 10-19-2015]. Out of all craft distilleries surveyed, none of the distillers reported a decrease in sales. In fact, the final results showed the vast majority are growing in the double-digit range with only two reporting less than 10% growth.

-- 24% claimed 80%-100% growth
-- 24% claimed 20%-40% growth
-- 24% claimed 10%-20% growth
-- 12% claimed 40%-60% growth
-- 8% claimed 60%-80% growth

"Interesting year so far, our growth has been based on one brand's growth even though our portfolio is fairly large and comprehensive," said a distiller.

"The Ultra-Premium tequila category continues to be robust; our hand-crafted brand continues to grow at more than 3 x the category growth percentage," said another.

1-5 NEW MARKETS A YEAR IS AVERAGE. Although our survey respondents were a variety of sizes and ages, adding about 1-5 new markets a year seems to be the common rate. 76% of distillers claim that is how many markets they will have added by the end of the year. 7% said they did not open any new markets this year, and only one reported opening between 11 and 15 new markets. The rest of those surveyed (14%) will open six to ten new markets this year.

"Well established craft distilleries are seeing a big growth curve now. Ones starting out are not," said a respondent.

80% INCREASING CAPACITY. To get an idea of how many distillers were planning for the future, we asked how much they would spend on building capacity this year and found that the vast majority of those surveyed (83%) planned to open up their wallets.

-- Nearly 47% will spend a fairly minimum amount of less than $500,000.
-- 30% will spend between $1 million and $5 million.
-- 7% will spend between $500,000 and $1 million.

"It has been a very good year. Trying to produce enough and keep my head above water level without running short of product," said a distiller.

"A totally insane time to be in the Bourbon industry. We went from dead-in-water thanks to barrel shortage summer 2014, to working 95% of capacity, January 2015, to 50% fermenter expansion in summer 2015," said another.

Stay tuned for Part 2 of our craft distillery survey coverage later this week.

PUBLIC "SPLIT ON THE ISSUE" OF NEW WINERY REGULATIONS IN SONOMA COUNTY

Yesterday, a public forum was held in Santa Rosa to gather input on the potential new regulations for winery development in Sonoma County. Nearly 500 people showed up and rural residents, environmentalists and industry experts spoke on the issue, reports the Press Democrat.

CRITICS AND ADVOCATES. Those strongly in favor of new, stricter regulations believe that "the proliferating operations are drawing unruly crowds, traffic and noise to their bucolic settings, threatening public safety, natural resources and a rural quality of life." On the other hand, the wine industry reps said that most wineries follow the rules. They suggest that rather than enacting new regulations, the county should better enforce the existing ones.

BRAINSTORMING. Critics and advocates alike were more than willing to offer possible solutions. Ideas proposed at the meeting included, hiring a county event planner, capping industry-wide events and limiting the number of events, especially in the Dry Creek and Sonoma valleys. Many ideas were tendered and "such suggestions drew heated and sometimes emotional exchanges."

You may recall, Napa has had similar issues and discussions to crack down on winery expansion [see WSD 08-25-2015]. In fact, one attendant said that what they are "trying to do is stop the 'Napafication' of Sonoma County."

This meeting was the first in a series planned to take place over the next six months, while county officials draft recommendations to be presented to the Board of Supervisors.

WSD BRIEFS:

JAGERMEISTER APPOINTS MIXOLOGIST WILLY SHINE AS NEW BRAND MEISTER. Willy Shine will be the new Brand Meister, effective November 23. He brings with him more than two decades of industry experience, including founding a large beverage consultant agency called Willy Shine Consulting. As Brand Meister, Willy will work with the PR team as a representative of the brand, travel the country as a resource for the on-premise team, develop Jägermeister's trade education program, focus on brand education and completely run brand-building educational programs at large-scale trade events and cocktail weeks. Moreover, he will also "create impactful concepts for engaging accounts with new drinks," per a release. "Leveraging his stature within the spirits community, Willy will forge fresh paths for Jägermeister by sharing the story of this premium herbal liqueur with an ever-widening audience," says cmo, Jägermeister at Sidney Frank Importing Marcus Thieme.

B-F'S SOUTHERN COMFORT SELECTS DANNY MCBRIDE TO LEAD LATEST BRAND CAMPAIGN. The campaign is called SHOTTASoCo, literally meaning a shot of Southern Comfort, with the tagline "Whatever's Comfortable." Danny "genuinely loves Southern Comfort, and his personality perfectly align with our every day mantra, 'Whatever's Comfortable.' We know there's no one better to pioneer the SHOTTASoCo movement," says brand director Lisa Hunter. The campaign also includes an anthem airing on Spotify and Vevo's YouTube channel (video featuring Danny McBride) with the hashtag #SHOTTASoCo.

FLORIDA-BASED WICKED DOLPHIN DISTILLERY RELEASES GOLD RESERVE RUM. The Gold Reserve Rum is the latest edition to the portfolio, alongside Florida Silver, Florida Spiced, Coconut and Rumshine. Gold Reserve is made with Florida sugarcane, aged for three years in bourbon barrels and bottled at 40% abv. The rum is currently available at the Wicked Dolphin Distillery in Florida and through RNDC at a suggested retail price of $33 a 750 ml.

ALACRAN TEQUILA LAUNCHES ALACRAN CRISTAL. Alacran Cristal is made from agave harvested from the highlands of Jalisco, matured for 14 months in American Oak barrels from bourbon and bottled at 40% abv. It is available in Miami, New York and Texas and retails between $49 and $59 a 750 ml.

Until tomorrow,
Emily

"Take care of your body. It's the only place you have to live. " -- Jim Rohn


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