Posted on | January 19, 2015
Written by | Ryan Malkin
Craft—to the surprise of no one in the industry—is hot. Last year, American craft spirits sales were up nearly 50%, according to analysts at GuestMetrics, while domestic non-craft spirits saw a slight decline over the same period.
But what are “craft spirits” really, and how many of them are there? The answer depends, of course, on what you mean by craft. The Alcohol and Tobacco Tax and Trade Bureau (TTB) counts 1,350 distilled spirits plants (DSPs) in the United States. That number is barely relevant, though: a supplier does not need to be the distiller to bottle and market a spirit as craft. Since it is not a category, craft is officially undefined.
Perhaps “flexibly defined” is a better way of looking at it. The Small Distiller Affiliate Membership program of DISCUS presently has over 100 members in 31 states and continues to grow. The American Distilling Institute’s “Certified Craft Database” is nearing 900 brands, originating in 44 states and Canada. GuestMetrics defines craft spirits as brands “(1) produced in the U.S., and (2) not owned by the top dozen or so largest spirits suppliers.” Seen through their lens, craft accounts for about 6% of the overall spirits industry volume.
Interestingly, Tito’s Handmade Vodka is the largest craft spirits brand in the GuestMetrics system of data. Tito’s, circa 2015, also happens to be the subject of three lawsuits—all of which speak directly to the problems that can be created via terminology. At issue is whether Tito’s misrepresented consumers by stating on the label: “Handmade” and “Crafted in an Old Fashioned Pot Still by America’s Original Microdistillery.” Plaintiffs claim the vodka is not handmade; rather, it is “actually made via highly mechanized process devoid of human hands.” The allegations—which Tito’s vigorously disputes—are that the company knowingly sold this misbranded product to consumers with the intent to deceive them.
Pushing the legal envelope
And the lawsuits don’t end with Tito’s. Templeton Rye, Tincup American Whiskey, Angel’s Envy and Maker’s Mark are also defendants in separate suits. The plaintiffs allege, respectively, that Templeton is not “small batch” and made in Iowa; Tincup is not a Colorado whiskey with a “unique mash bill;” and Angel’s Envy is not “handcrafted and bottled” in Kentucky. Instead, the plaintiffs claim all of these products are distilled at MGP, a massive industrial complex in Indiana. If not for these allegedly false claims, the plaintiffs say they would not have paid higher prices or bought these brands. In the case of Maker’s Mark, origin is not the issue; plaintiffs argue that the brand creates the false impression of superior quality by virtue of being labeled “Handmade.”
Collectively, these class actions—all of which are being defended actively by the brand owners—suggest that 2015 may be the year that craft spirits get dragged out of the marketing rooms and distilleries into the public arena.
Small still Beautiful?
The image of craft spirits certainly began with the notion of a small distillery with small production. In part this stems from states limits. In Illinois a “craft distiller” may produce 35,000 gallons; in New Jersey it’s 20,000 gallons; and 60,000 gallons in Washington. Therefore, local, small production has been part of the definition of craft since the beginning. Naturally, many of these distillers, even Tito’s, started small. Given the explosive growth of previously small brands, size may now be too limiting.
Spirits were not first to go through these growing pains. Beer struggled first. Echoing the Brewers Association, the American Distilling Institute (ADI) identifies three pillars for certification. Craft distilled spirits:
• have a TTB-approved label stating “distilled by,” followed by the name of the DSP
• are no more than 25% owned by another industry member
• produce less than 100,000 proof gallons.
Tellingly, however, ADI has a separate certification for blenders—recognizing the reality that many artisanal spirits (gin and liqueurs in particular) begin with purchased base spirits that are then purposefully transformed.
Perhaps the American Craft Spirits Association (ACSA) has it right. Rather than defining the term by size limitations, ACSA takes the approach of not defining the term at all, instead adopting a code of ethics that calls for honesty and transparency from ACSA members.
Seeing + Believing
While the ADI standards of certification emphasize the product’s provenance, the certification itself is designed to help market the brand. Craft certificate holders can use the ADI seal in promotional material and on their labels. The certification functions as it would would with other consumer goods. And it brings into the role of perception.
“If customers believe it is a quality product, made by hand, made by an artist, with care, it is a craft spirit,” says Ryan Dettra, managing director of the Ice Plant bar in St. Augustine, FL. He says a product can be craft regardless of whether it’s blended, distilled from neutral grain spirit, distilled from grain or cane, small batch, or single barrel. In his view, “marketing has more to do with whether a spirit is accepted as a ‘craft spirit’ [than production].”
For Dave Kaplan, co-owner of Proprietors, LLC, which operates bars such as Death & Co, 151 and Nitecap in New York and Honeycut in LA, the definition of craft has evolved. Kaplan originally associated craft with being a small producer. Now he sees craft as brands having complete control over the process. That means, “no matter what the volume, the brand grows or sources the ingredients, ferments, distills and bottles the product.” He believes that brands that buy distillate and redistill “fall outside the definition of craft.”
Care in production process is not necessarily limited by the size of the supplier. Hangar 1 Vodka’s head distiller, Caley Shoemaker, says distilleries can maintain “the same strict quality standards as they did when they were making smaller amounts.” The key is to stay “focused on quality of craftsmanship and authenticity in ingredients.” So can large companies make craft spirits? According to Pernod Ricard USA’s director of brand education, Chris Patino, big suppliers can “make craft spirits as long as that production is based on the quality and heritage of their brands, not the size of the supplier company.”
Meanwhile, small distillers abroad are are relegated to the sidelines in most craft conversations, strictly based on their not being American. With three single-ingredient vodkas (potato, wheat, rye), Chopin Vodka certainly fits the craft mold. Owner Tad Dorda, shares a kinship with U.S. distillers in terms of “some human involvement and some human passion.” He believes people will pay more if they know the person making it. It’s certainly easier to visit a domestic distillery than Chopin in Poland. Still, “we are looking for a connection, that something extra,” he says.
In the end, of course, this all boils down to sales. Craft spirits are selling. At Bottlefork in Chicago, a farm to table restaurant operated by Rockit Ranch Productions in addition to its five other venues, customers are being more experimental and ordering craft spirits at dinner. However, when it comes to nightlife and bottle service, Rockit Ranch president Arturo Gomez says the Grey Gooses of the world are still king. “People don’t like to experiment with bottle service; they are committing to things they know and trust,” he explains.
In the off premise, many shops have craft sections. Some are are even catering specifically to craft customers. Just take Ezra’s liquor store, also in Chicago. Ezra’s prides itself on selling primarily craft spirits. When making a buying decision, owner Parker Newman, has a five word checklist to gauge whether a product is craft: “quality, passion, innovation, creativity, and genuineness.” He tries to find producers making a grain to glass product. Admittedly, he says, there are always exceptions; but even the exceptions are, in Neman’s opinion, “made with integrity” and not “just another mass-produced product.” However, then we’re back to talking about production size. Perhaps the true definition of craft may, like art, elude us; but we know it when we see it.
Or perhaps, like art, the concept of craft is appropriately fluid—and ready to be redefined by those serving and selling. In the case of Fountainhead—a Chicago gastropub deep and broad in whiskey and beer—the menu declares “craftsmanship” as their core objective: “It’s in the drinks we serve, it’s in the food we make, and it’s in the décor we’ve chosen to surround us… [T]he crafts we’ve chosen to champion are decidedly collaborative and require an audience and a community to appreciate them.”
With passionate advocates both on- and off-premise, and with more and more brands being launched by entrepreneurs and distillers big and small, the what-is-craft conversation is only going to get louder. Whether “craft spirits” achieve a meaningful standard, or get watered down à la “greek yogurt,” remains to be seen.
craft: questions abound
If one thing is evident, it is that craft as a term is being used with greater frequency, in turn raising more questions than answers.
How important are degrees of craftiness? Do farm distilleries, who grow, ferment and distill using estate-grown ingredients, deserve more “craft cred” than distillers who buy wine or wash for distillation? And what about producers who take neutral grain spirits then transform them, or blenders who start with finished spirits? Interestingly, for Michter’s, success in curating small batches of barrel-aged American whiskey set the stage for them to begin distilling their own as well. And where does “local” fit into the spectrum of craftiness? American Harvest Organic Spirit, based in Idaho, it has little local market to speak of, but the estate-based “field to bottle” operation, using organic wheat and water from the Snake River, hits all the right craft notes.
Why is craft all-American? Most discussions about craft presume an all-American context. But what about American entrepreneurs who go abroad to source artisanal spirits, such as Brenne, the Cognac-barrel-aged single malt whiskey sourced by Allison Patel; or the ultra-rare casks tapped by Nicolas Palazzi of PM Spirits?
Image vs. origin: Who wins? Brand image does not always correspond to the point of production. To wit, Coors is not made with Rocky Mountain water; and Kirin and Beck’s beers sold in America are brewed here, not in Japan and Germany. The recent spate of class-action lawsuits is clearly pushing spirits suppliers to embrace greater transparency. Templeton Rye is a perfect example. Co-founder Keith Kerkhoff explains, “We’ve been very open about Templeton Rye from when we first launched the brand. We combine the distilled rye whiskey from MGP located in Indiana with our proprietary formula and Templeton, Iowa water—every drop is bottled in Templeton, Iowa. To eliminate any confusion we have changed the label in an effort to be the most transparent brand in the industry.”
Can macro go micro? It happens all the time in wine; no one bats an eye when seeing the name Mondavi on a bottle of Reserve Cabernet as well as on a $9.99 Central Coast blend. And who questions how Penfolds can bottle both Grange and Bin 389? The push for premiumization in varied spirits categories has led many large producers to develop high-end micro-batch offerings, such as Absolut’s Elyx and Elit by Stoli in vodka; Diageo’s Orphan Barrel Project; and Jim Beam Signature Craft. Corporate ownership has proved to be a real boon for small operations like Tuthilltown (bought by William Grant & Sons) and Bulleit (Diageo). And Heaven Hill proved that a large firm can be as innovative as any craft operation, creating Bernheim, the first truly new variety of American straight wheat whiskey introduced since Prohibition in 2005.
Are labels billboards? Packaging has always been critical in spirits marketing, but never more so than among entrants in the craft arena. Is moonshine craft? It is if the label can make its case. Consider a bottle of Black Button Distilling Apple Pie Moonshine, replete with the trademark-pending catch phrase “Live Large in Small Batches.” Or the portfolio of 35 Maple Street, launched in 2012. According to company president August Sebastiani: “Distinctive bottle shapes, batch numbers and labels that evoke authenticity are some of the embellishments that make a statement, and add to the visual and tactile experience of all of our spirits brands.”