Craft Beverages – The New Black? Part 1

24th April 2017

When you talk to people in the craft beverage industry, you have to speak in volumes; not decibels, but barrels, gallons and litres, and whether you’re just starting out, or a larger but still independent operation, craft alcohol is big business. It’s trending so much right now, we decided to find out more, both from the realms of craft distilling and craft brewing. We flew to America – the largest market of craft consumers and the country that is seeing the biggest influx of new businesses in the market, to get to the bottom of it. In Part I, we focus on craft distilling (anyone producing under one hundred thousand nine-litre cases per year, as defined by the Distilled Spirits Council of the United States).

We made our way to Baltimore, Maryland to attend the American Distilling Institute’s (ADI) 2017 Spirits Conference & Vendor Expo. Involuntarily shunning the sunshine and taking the down escalator into the lower level of the Baltimore Convention Center, row after row after row of equipment manufacturers, bottle importers, bottlers, bottle decorators, grain salespeople and label specialists, were set up much like an exhibition at fashion week, less the menswear.

Distilling equipment from Specific Mechanical Systems Ltd

It was all a bit overwhelming, but if you’re looking to set up your own gin, vodka, rum or whiskey distillery, an event such as this should be your first port of call. We dove right in, trying to make heads or tails of it all, by first speaking to Reo Phillips, president of Specific Mechanical Systems Ltd – a company that specialises in stainless steel and copper brewery and distillation equipment – surrounded by their huge, beautiful copper stills. When does Phillips think that craft distilling started getting so much attention? “Craft distilling really came in around the mid-2000s.” He clarified that while clandestine home-distillers have been at it for centuries, licensed businesses have been on the up for about ten years.

The ADI confirms that in 2003, there were sixty craft distilleries and by 2016 there were over seven hundred and thirty, with two hundred more being built, and that steep, upward trajectory shows no signs of wavering. Phillips continues, “The last three to five years have been huge…all across North America, in the US, Canada, and other parts of the world actually. If I had to pick one global region, I would have to pick the United States. It’s seeing the largest boom.”

Phillips has no doubt that the thirst for craft, distilled beverages will see a rise around the world citing fatigue of huge, globalised offerings and a more localised approach to consumption, “I think that society is coming back around or has started to come back around to supporting their local economy, their local community, and at the same time wanting to have a good, quality product…and if you can get if from maybe even somebody that you know, then why wouldn’t you do it? It’s sort of that old hundred-mile diet that started ten years ago.”

Making your own craft distilled products is quite a leap from drinking them. Why would someone, when you can just go to your local off-licence and buy a craft spirit, or hit a nearby bar for a cocktail? We talked to Toronto’s Adam Szymkow of Kannuk Vodka (‘a bottled celebration of Canada’s multiculturalism and awesomeness’), who got into distilling five years ago after he went to the LCBO (Liquor Control Board of Ontario) looking for Christmas gifts. His only options were big, global vodka brands and he didn’t feel that they offered any value as unique, gift-worthy products: “I thought they should do something more special with their bottles.”

After watching an old Polish film where people were making their own home-brewed ‘moonshine’, he thought if they could do it without any special equipment, he could do it, so he started researching. His first task was getting a spirits license and getting a business plan together to start Kannuk in his attached garage. Garages, as Adam relays, are not ok to run a distillery from (at least a legal, licensed distillery). So he searched out an off-site location and got to work. “I was making horrible, fermentations and mashes. I just didn’t know how to make it. It took me two years to kind of figure out that I can make a better vodka if I distil after grain, as opposed to distilling on the grain. It sounds so simple, but it’s only simple once you realise it, right?” Right.

Before trying his hand in booze, Szymkow trained to be a stockbroker, he also trained to get his pilot’s license, worked as a Canadian customs inspector and then went on to get his a master’s degree in business to become a chartered accountant. He then went from working at Deloitte to becoming a tax expert and still does tax consulting on the side; and yes, he does the taxes for Kannuk. “I don’t sleep,” says Szymkow, which is not surprising when you learn that he hand-makes all the wooden tops on every single bottle of Kannuk, and can only make six in an hour, and needs to make enough to top bottles for an order to fill a hundred stores…

…Kannuk won a taste contest at the LCBO and will be available to purchase in a hundred stores from May. The brand will focus on the Canadian market before approaching international markets. Thinking ahead though, the red on all Kannuk bottles is Pantone 0485: “It’s the same red used in the Canadian flag;” and having that global, standardised colour will make it easy to produce the packaging in different countries if need be.

A lot of people around the world are like Symdow, they just want to make something, and the opportunity for growth in craft distilling is immense (when compared to brewing), which is good news for those with an inkling to slap their name on the front of a bottle of gin. Reo Phillips says, “I think craft distilling still has a huge growth curve ahead of it; [to] where it reaches that maturity level.” Phillips was also kind enough to share his top tips to get your own distillery off the ground, and hopefully make some money:

Business Plan
“The ones who are successful and getting out of the gates the quickest are the ones who put a business plan together that doesn’t just look at now, but looks at what they’ll be doing in five years and ten years.”
“If you’re not selling your product, then why are you doing it? Distribution is hard,” he warns, “and it’s key.”

Selling within your own community is slightly easier, but Phillips says, “as soon as you start selling outside of your local community, you’re really another label on the shelf. What makes you stand out? What differentiates you?”
Dennis Sones from Quest, a luxury bottle decorating company adds that, “a luxury lifestyle deserves a luxury brand of spirits that makes [consumers] happy.” Sones goes on to say the packaging is “everything; packaging sets the standard by which it is experienced in the mouth. The packaging is the brand that you see, and it defines what the experience is going to be.”

A selection of decorated bottles from the Quest portfolio.

“The product’s got to be excellent,” Phillips continues, “you’re product has to be good and that’s where consistency comes in; so people aren’t going back to the store the next day and picking a different product to try, because they don’t like yours.”
*There are hundreds of other steps that you would need to take, but we’re talking basics.
What are the most popular distilled products? Whiskey makes up the lion’s share of the market (but it’s harder to start with due to the ageing process) followed by and gin, vodka (great for immediate revenue generation) and rum.

Where is the greatest opportunity for growth? The word around ADI was distilled agave or mescal – known globally as tequila, but like champagne, you cannot call it tequila, unless it’s from Santiago de Tequila in the state of Jalisco in Mexico.
Final tip from us: go to an ADI conference, where you can talk to anyone and everyone in the industry and procure all the tricks for the trade. In Part II, we’ll explore the world of craft brewing, and even find out if the word ‘craft’ is still relevant.

Main image: wild rice from Kannuk Vodka – one of the four main ingredients used in the brand's distilling process.

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