Bill Owens' Tales from the Road

FILED DECEMBER 18, 2015

Every couple of years, American Distilling Institute founder Bill Owens gets an itch to hit the road to see first hand the growth of the craft distilling industry. Last month he returned from an epic 3-month, 18,000-mile journey that took him across the US (and briefly to Europe), during which he fit in about 130 distillery visits. Your editors sat down with Bill after his homecoming to hear about the trends he saw along the way and some of the more unique business ventures he encountered.

The number of distilleries in the US is edging ever closer to 1,000 -- current DSP count is around 970 -- and one of the most promising trends Bill documented during the trip is the increasing number of distilleries that have a tasting room, bar or gift shop on site. "Those 10 or 12 states that have that open bar situation, those craft distillers are rockin'," he says. "It really makes a big difference, because when you try to go wholesale to retail 60% of your profit's out the window." Texas, Pennsylvania and South Carolina, all of which allow distillers to sell on site, are some of the more robust states for craft distilling, he says.

Bill also says he saw more "mid-cap" distilleries than in the past. Mid-caps, as he calls them, are distilleries opening with more than the typical shoestring budget - say $3 million to $10 million. "You have this next generation of people who are -- I still exclusively classify them as craft -- they're in it for the long run," he says. "They have the money, and they have the DNA and the drive to make this happen."

New Riff Distilling out of Kentucky is one example. "New Riff, you go there and it's one of the most brilliant engineering jobs I've ever seen. Everything about it was done right." In addition to New Riff, Bill says some of the new distilleries in Charleston, South Carolina like Striped Pig Distillery and Charleston Distilling Company, were among the most impressive he visited.

"They're just rocking in the uniqueness of who they are… when you scratch the surface, like at Striped Pig, I said, 'How did you get that logo? It's a great logo,' and they said, 'Oh we put it out in a contest and some girl in Holland won the contest.' That's how they got their logo. "

Another distillery that impressed him was Five Saints in Norristown, Pennsylvania, which is in the process of converting an old firehouse into a distillery. "When you walk through this place, you can see this dream to build a [distillery]. The bar is 40 feet long, [with a] tasting room," he says. "That to me is what our industry's about, that pride of local ownership, and bringing something back to your community that people are proud to support, and to know that you're part of the fabric of that community, that you're not a carpetbagger coming into town with a franchise restaurant chain."

Another movement he's noticed is the growing number of "grain-to-glass" distilleries. "Often -- like the guys in Iowa and other places that go in as a farm distiller -- they're not dependent on that still for their livelihood. It's a value enhancement of their current business model," which means they're more likely to succeed.

On the opposite end of the business-plan spectrum, he also believes we're going to see more virtual distilleries (spirit negociants or non-distiller producers, if you prefer) where owners develop a brand, but down own any equipment. "If you're doing a great product, you have a great label and marketing, you can sell one hell of a lot of product out there, and you don't need to be part of the craft," but he warns: "if you're making that 'handcrafted' claim, you better be handcrafting it and not be contracting it out."

DISCUS, WINE INSTITUTE MEMBERS "VERY CONCERNED" ABOUT KROGER CATEGORY MANAGEMENT

WSD has learned Wine Institute and DISCUS have also reached out to the TTB with concerns about the legality of Kroger's new category management program [see WSD 12-11-2015].

In particular, the groups note in their joint letter dated December 8: "it does not appear permissible for a supplier or a wholesaler to fund the costs of a 'category management' program implemented by a retailer pursuant to the federal statutory and regulatory scheme under which industry members operate," wrote the groups.

DISCUS and WI mention their members are "very concerned" about the program and have sought out their advice on how to proceed. "Before proceeding with the requests from Kroger and Southern Wine & Spirits to participate in the program, there must be assurances that the Kroger program and its funding mechanism do not violate the FFA Act and TTB regulations… Unless these determinations are made, we cannot in good faith advise our members to give further consideration to a program of this kind."

A "MOST UNEXPECTED CHRISTMAS PRESENT:" NEW PA BILL TO DECRIMINALIZE OUT-OF-STATE ALCOHOL PURCHASES

Pennsylvania State Rep. John Taylor is sponsoring a bill that would effectively decriminalize out-of-state alcohol purchases for the everyday consumer, reports Watchdog.

The bill states that Pennsylvania residents would be allowed buy alcohol in neighboring states as long as they pay state taxes on what they bring back. Though the alcohol cannot be shipped into the state. Many Pennsylvanians already cross over into other states to buy alcohol without knowing that it's illegal as "state police sporadically enforce" the law. The bill would allow the state to gain some of the revenue they are losing as people purchase out-of-state.

Rep. Chris Ross says the bill should be taken at face value but that it could very well be amended. The bill could open the door for lawmakers to add legislation to push privatization, again.

The legislation passed the committee 16-11 and could go to a full House vote as early as today.

A BIG SWING AND A MISS: MONARCH BEVERAGE LOSES IN COURT OF APPEALS

Monarch Beverage Co. lost its appeal against the state of Indiana this week when a three-judge panel unanimously upheld the lower court's ruling in favor of the state, reports the Indiana Business Journal. Recall, Monarch sued Indiana in 2013, claiming that prohibiting a beer distributor from handling spirits was unconstitutional [see WSD 10-01-2015].

Monarch, a beer and wine distributor, lost its case in the lower court in October and immediately filed an appeal [see WSD 12-2-2015]. In the Court of Appeals, Monarch then made the argument that the state law violates the Equal Privileges and Immunities Clause of the Indiana Constitution. However, the panel felt Monarch failed to show any differential treatment.

The Achilles heel of Monarch's argument according to the panel was that Monarch could not identify a class that was receiving preferential treatment. "There can be no Equal Privileges and Immunities claim where all classes of person are treated equally," wrote Judge James Kirsch.

WSD BRIEFS:

QUINTESSENTIAL LANDS BODEGAS FARINA. You may recall, Quintessential has added Georges Duboeuf [see WSD 12-01-2015] and Ferry Lacombe French Roses [see WSD 12-04-2015] this month. Yesterday, the importer announced a deal with Spanish winery Bodegas Farina. Quintessential will exclusively import, market and sell Bodega Farina brands, including Spanish Sons, Colegiata and Dama de Toro (with srps between $14 and $50). "We welcome the opportunity to use our expertise in marketing and selling Spanish wines to help Bodegas Farina increase awareness and market share in the US," says Quintessential co-owner Dennis Kreps.

COPPER CANE & WINES' BERAN WINES RELEASES 2013 BERAN SONOMA COUNTY ZINFANDEL. The new release joins the 2013 Beran California County Zinfandel and the 2012 Napa Valley Zinfandel, released earlier this year. The Sonoma County Zinfandel is available nationwide at a suggested retail price of $35 a bottle.

MUNDOVINO HIRES NEW SVP. The Winebow Group's (TWG) MundoVino importer has hired on Diego Lo Prete as svp, reporting to TWG president David Townsend. Diego will oversee all operations relating to sales, brand management, supplier relations and work closely with wine education and marketing. Diego has over 20 years of wine industry experience under his belt, most recently he led the reorganization and relaunch of The San Francisco Wine Exchange. Prior to that, he headed global marketing at Barcelona-based Grupo Codorniu, overseeing over 80 markets.

ATTEND 4TH ANNUAL WINE & SPIRITS DAILY SUMMIT. In addition to bringing you the latest news, your editors have already started gearing up for the 4th annual Wine & Spirits Daily Summit. Next year's event is May 9-10, right after Mother's Day, at the Fontainebleau resort in Miami Beach, Florida. We are offering an early bird discount of $300 off the full-price ticket ($965). The offer is only good until January 4 and the price only goes up from there. We highly advise you to take advantage because it's a good value for a conference that ain't cheap. Visit our website to sign up: http://winespiritsdaily.com/summit.php

Until Monday,
Emily

"The only normal people are the ones you don't know very well."
Joe Ancis

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