StateWays - March/April 2017

StateWays is the only magazine exclusively covering the control state system within the beverage alcohol industry, with annual updates from liquor control commissions and alcohol control boards and yearly fiscal reporting from control jurisdictions

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StateWays | | March/April 2017 38 cause something's local or sustainable or gluten-free or GMO-free or new and different, and for them it's not so much about quality." While some craft brands have done well packaging spirits they've sourced, rather than produced, many of the large distillers have left the bulk market and now small producers will be living or dying by what they make themselves. Retailers who feature these spirits can also be ambivalent. "It's tricky - you'll have people that will resurrect old labels with sourced juice, but sometimes that sourced juice from In- diana is sometimes better than the small-barrel stuff someone else made," says Andrew Bowman, owner of Andrew's Wine Cellar in Oswego, NY. "We'll soon be at a point when some of the real craft distillers start releasing what they've been making. That's when we'll see what stands out and which are more marketing buzz." THE COST OF ACQUISITION Now that Westland Distillery, Seattle-based maker of an Amer- ican single malt, has been acquired by Remy Cointreau USA, it falls outside the ACSA 'craft' defi nition. What sort of impact would that have on its reputation? "We have never called ourselves a craft distillery," says co- founder Matt Hofmann. "There are many great spirits made by the big companies out there. There's room for improvement, but it's a different set of circumstances. They're making great whisky in Scotland and we're not about 'us versus them.' We want to make single malt whiskey here because the Pacifi c Northwest is a great place to do so." To him, spirits like his are better compared to the advent of new world wines versus old than compared to craft beer. Hofmann points out that, given most small distillers must charge more than big companies, too much reliance on the "craft" distinction is a losing proposition. "What is the actual point of differentiation? We're one of the few American distillers making only single malt and that's what we focus on when we tell our story. I think a lot of people miss the opportunity to tell their story by focusing on 'craft' instead." It's ironic that Westland now isn't entitled to the term craft via the ACSA defi nition; American malt whiskey, made with varieties of barley developed for fl avor and aged in rare Pacifi c Northwest oak - these are the points of differentiation most likely to appeal to consumers interested in 'craft.' It's certainly what Agdern believes. "To break through in a crowded category, a brand needs an authentic history and a tal- ented founder with a strong story to share with its consumers." Bowman has found it hard to sell small-producer vodka at higher prices, although the many citrusy gins coming from small producers are creating a new market. Big issues coming up include shelf space. "There are so many more brands and you just can't carry everything," he says. American single malt, gin and mezcal have been on a steady rise for him, and given that most mezcal producers are small, inde- pendent and hand-made, the Mexican spirit fi ts neatly into the craft zeitgeist. Eddy, like others, says that the innovations and experiments - with new grains and grain combinations, wood fi nishes, barrel sizes and aging, botanicals and even packaging, make the small distillers a kind of research and development source for the large distillers, but many of the products would be best off staying local. Given the current fragmentation in the marketplace - the top fi ve brands in most categories are down about 5% in the past fi ve years, Agdern says - more regional and emerging brands are taking share. "We are seeing local and regional pref- erences on brands, and the local affi nity is driving and creating the fragmentation in the marketplace," he says. "Our focus is on incubating brands to grow regionally and potentially na- tionally, if appropriate. And things are accelerating. "We're going to start seeing a fl ood of craft-distillery products shortly, and in my opinion the growth of the craft distilleries is exceeding the demand," Hofmann says. "It's tough to succeed with a craft bourbon when you can get great bourbon from Buffalo Trace or Four Roses for around $25 in Washington. It's hard to make the case to the consumer that your product is worth that extra jump in price." The current feeding frenzy as large distillers invest in or take over the smaller fi sh is only beginning, Pickerel says. How they manage "craft" as a concept and a business will be increasingly important, especially as producers distilling 50,000 cases or so scale up. Meanwhile, whether the consumer realizes it or not, the de- bate will go on. "If you ask two of our board members, they will have differ- ent descriptors for what they do," Lehrman says. "It's a wonder- ful discussion and I'm not certain I've heard one defi nition that fi ts everything and everyone." • JACK ROBERTIELLO is the former editor of Cheers magazine and writes about beer, wine, spirits and all things liquid for numerous publications. More of his work can be found at "I THINK A LOT OF PEOPLE MISS THE OPPORTUNITY TO TELL THEIR STORY BY FOCUSING ON 'CRAFT' INSTEAD." —MATT HOFMANN, CO-FOUNDER OF WESTLAND DISTILLERY

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