Republican Tax Bill Contains FET Reduction


Dear Client:

Drinks all around this evening! Congressional Republicans have reached a deal on a tax reform bill that includes a reduction in federal excise taxes for alcohol producers.

As a refresher, details of the Craft Beverage Modernizations and Tax Reform amendment include:

-- For distillers the tax rate will drop from $13.50 to $2.70 for the first 100,000 proof gallons.
-- For wineries the tax rate will be 90 cents per gallon on the first 100,000 gallons.
-- For brewers the tax rate will drop from $7 to $3.50 on the first 60,000 barrels.

Next step is for the full House to vote for it, which is expected to happen early next week. Then on to the Senate and conventional wisdom says it should reach President Trump's desk next week.

We'll have more as the story develops.


Earlier this week we published the first part of our interview with New York Distilling co-founder Allen Katz. Today we'll pick up right where we left off in the conversation.

Wine & Spirits Daily: Where are you concentrating your efforts this year?

Allen Katz: Our bread and butter...has been on-premise for a variety of reasons. One, we're super conscientious about price. Yes, we're a craft distillery. We're in an urban setting here in Brooklyn. There's significant expenses, as there would be for anyone. However, no one's gonna use these products in a cocktail unless they can make their margins as well. If we don't get it into people's mouths, it's not gonna move anywhere.

In our earliest beginnings until now, we've had a little bit more concentrated focus on-premise, but that's shifted a nice amount where I would say at one point it might've been 80-20 [on-premise to off-premise]. It's probably 60-40 now. Part of that is a new package has a reasonable presence, if not, dare I say, style on a retail shelf or a home bar.

WSD: When did you roll out the new packaging?

Allen: These just rolled out this year, the beginning of the summer time. So that's another effort from a sales and marketing standpoint. And then the truth is, coming in to 2018 we'll be looking to add on some folks to the pound the pavement.

I think our best sales tool is what's in the bottle, no joke. If that sounds cliche, but it really is letting people taste it. I think often [consumers are surprised] at the price points we're offering at a wholesale level.

WSD: What are the price points?

Allen: The gins, on a case, are around $25 a bottle. Ragtime Rye, on a case is $32 a bottle, and this is not a 6, or 12, or 18 month whiskey, this is 3 to 5 year old whiskey, and I'm not asking people to buy it at $45 wholesale.

WSD: Your distillery also has a public bar called The Shanty, which is pretty unique.

Allen: It is. We have a couple of licenses, one is the Class D Farm Distiller's License from the State of New York, which gives you some options. Of those, you could have a tasting room, or a little retail outlet, or if you so choose, a public bar. We chose that route, again in part [because of] my background, and I would say that's also part of our marketing - we wanted to offer a full bar.

We offer tours on the weekends. It's a different crowd for different days of the week for The Shanty, but people definitely come here with a curiosity about tasting our products. So if you don't like gin or whiskey, have a beer, a cider, tequila, rum, cognac, whatever you like. If you do, we're also delighted to show our expertise of what we can do with our spirits, so you might be inclined to have them when you go out to a bar/restaurant and see them there, or maybe even get a bottle from a retailer and take it home and have a gin and tonic, or a negroni, or a manhattan, or an old fashioned, and use one of our products.

WSD: Does a larger portion of your business come from the bar?

Allen: Not necessarily to date. When we first opened, it was vital. When you're starting at zero miles per hour from a sales standpoint, you're just getting production underway, then having the bar was vital for the first couple years. It's important and very valuable today, but by necessity, the wholesale distribution of our products now far outpaces revenue from the bar, as well it should.

WSD: What does your distribution network look like?

Allen: We're primarily with larger distributors. We have a relationship in New York with Southern Glazer's Wine & Spirits and we're in a few other states with them as well. The only place we're with a smaller distributor is in Louisiana. We pick and choose, but the nature of distribution, one is its own challenge, and two, seems to be evolving very rapidly from the standpoint of consolidation in some markets.

Something we're very much still learning about is where the best pockets are for us, specifically domestically, to make an effort to sell these products, the gins and the ryes, because everybody thinks of, "Hey, let's just go to the big markets. Well we're here [in New York]. We're living and working in the biggest market, and thank goodness it's vital and valuable to us, but once we get outside of New York, does it make sense to go to some vital secondary or tertiary markets, or just to try and stick it out where every big brand and every little brand is trying to compete? It's very easy to get lost in the shuffle, unless you can really put energy and effort into education and marketing, and follow up. All of it counts.

WSD: Thank you for your time Allen.


DIAGEO'S BULLEIT DISTILLING CO. INVESTS $10 MILLION INTO VISITOR CENTER. Earlier this year Diageo opened the new $115 million Bulleit distillery after more than two years of construction [see WSD 03-14-2017]. Now, the company plans to spend another $10 million on a visitors center at the new distillery, per the Lexington Herald Leader. On Wednesday, the Kentucky Tourism, Arts and Heritage Cabinet approved $2.5 million in incentives for the new visitors center. The 9,000-square-foot center will include several tasting rooms, a large retail footprint and Tom Bulleit's office. It will also be used to highlight other Diageo brands including Blade and Bow and I.W. Harper. Construction could begin as early as next month and the company expects it will take about a year to complete.

DRIZLY BRINGS 1-HOUR DELIVERY TO MICHIGAN. Drizly has expanded its alcohol delivery services to Central Michigan, partnering with Big 10 Party Stores in Lansing, East Lansing, Okemos and Holt. Drizly is now available in more than 70 cities across the US and Canada.

ST. FRANCIS WINERY & VINEYARDS NAMES NEW CEO. Rich Bonitati has been named the new ceo for Sonoma County-based St. Francis Winery & Vineyards, effective January 2, per North Bay Business Journal. Rich will take on this new role in addition to being svp for the Western Operations of French American Vintners. He brings with him more than 30 years of industry experience, most recently working as coo at Paul Hobbs Wines. Rich succeeds Christopher Silva, who died in June.

Until Monday,
Your Editors

Emily Pennington -
Sarah Barrett -

"Always do sober what you said you'd do drunk. That will teach you to keep your mouth shut." -- Ernest Hemingway

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