Jump to content

Branding idea: certified micro spirits


Recommended Posts

The only thing I personally don't like about this is the 60kpg limit. I think the 95kpg limit proposed by DISCUS is more realistic. What are the limits set by each state? In NY state a small distillery can have the A-1 and/or the D farm distillery permits. Each with a 35kpg cap. But if you have both, that's a total of 70kpg. I'm sizing my new place to be able to produce up to that 70kpg cap, and plan to do so within a few years. This may be a lot of cases, but not a factory size distillery. 70kpg is about 36k cases a year. There are several artisanal distilleries producing more than that.

Link to comment
Share on other sites

Marc- Actually, none of the folks in this discussion are employees of ADI. Even us administrators. Bill Owens is ADI. With a select few of his staff. So this isn't ADI's position, but part of an ongoing discussion of distillers, who use this forum, and have talked in person over the past few years.

If this is ADI's position to exclude distilleries such as mine, send my membership fee back.

Link to comment
Share on other sites

Jonathan,

It's all cool. We're just talking.

As far as the size limits for micros, 65,000 PGs may seem like a walk in the park...until you hit your first steep incline. Then it turns into a rigorous hike...with rainfall...which turns to sleet...until wind chill freezes your clothes to your body...and then the hike turns into a slippery rock climb...with moments of oxygen deprivation...and you're just halfway to the peak of the upper limit...which turns out is actually base camp.

Anyway, it's not that easy.

Link to comment
Share on other sites

The FET discount for small distillers bill proposes to classify all DSPs making 100,000 gallons or less as "small distillery". The FET discount applies to the first 65,000 proof gallons produced. All goods from 65,000 pg to 100,000 pg are taxed at the full FET rate. A facility which passes the 100,000 pg figure would then be reclassified as a "Tier 2" distillery, a big-guy and all that distillery's FET will be charged at the full rate, no more discount on the first 65K pg.

And as Melkon notes, the first few thousand proof gallons may appear to be a walk in the park, but when you get up to and pass 30,000 proof gallons production rate it's a whole different ball game. In NY a distiller can hold both the A-1 and DD distillery licenses simultaneously and the 35,000 gallon per license maximums are cumulative, so the overall total permitted to the distiller with both licenses is up at 70,000 gallons. By way of perspective, Tuthilltown Spirits made a total of roughly 3,800 gallons in 2009. And we're working our butts off.

The question of the upper limits of production dividing a "micro" from the big boys will remain debatable, but a decision had to be taken and the forum pointed the way during the period of discussion. It was not arbitrarily decided. All involved in the discussion were aware that scale is a major component of price; and that simple equipment upgrades can make an enormous difference in the final costs and potential output of a distillery. The question with which we struggled was "when does increase in scale change the nature of the small distillery?" And in the end it came down to "what is 'small' and what is 'big', and where do you draw the line? The line ends up most effectively drawn based on volume, for better or worse. And the number arrived at was 65K proof gallons.

The main topic in this thread is how to leverage our own uniqueness and make the consumers aware we are NOT big alcohol and there's good reason to try our goods and pay the price of high quality NEW American whiskeys. The main response is, we should do it together.

R

Link to comment
Share on other sites

A certification program is a great idea but the diversity (with perhaps some perversity) of the reaction here shows why nothing is ever simple.

To have credibility such a program needs good rules, much better than the ADI has managed with its competitions. The rules need to be unambiguous and written so as to avoid unintended consequences.

The use of NGS is a good example. Do you distinguish between people who use NGS but add value through artisan flavoring and those who merely buy NGS and bottle it? What kind of verification/documentation do you require?

How do you effectively prevent a major producer from seeking certification through a subsidiary? Would such a rule also disqualify Tuthilltown because of its relationship with Grant?

Would ADI membership be a prerequisite?

The rules should be guided first and foremost by what message they convey to consumers. That's the only way it will be useful to consumers and thus useful to the producers that qualify.

Link to comment
Share on other sites

Chuck,

Diversity (and perversity) of opinion is how we seem to roll on this board!

And the devil is certainly in the detail of executing an idea like this. The simplest approach, of course, would be to apply "micro spirit" certification to any spirits bottled at a DSP that qualifies as a Micro Spirits Producer (e.g., selling less than 65,000 PGs per year) and the label reads "made by _________" (the producer itself vs a DBA).

Emphasis here would be on size, which is verifiable, versus specific production processes, which would be tricky or impossible to verify. Without verification, I'd recommend not even bothering with the program.

At this stage in our industry's evolution, I think enough people care about "little guy produced booze" that the certification would deliver value to the marketplace by helping consumers find genuine "micro spirits."

Who'd be left out? Most subcontract manufactured brands and brands created by big producers designed to look & feel like they came from small producers.

What about the really fine print -- like small brands produced by subsidiaries of big brands or big companies spinning off small brands to become micro? I'd welcome everyone to weigh in on these issues with as much detail as possible and recommendations for how to execute their suggestions.

Specific to your question about Tuttletown and William Grant, I thought that WG just purchased the marketing and distribution rights to their whiskey, not their whole product portfolio or the distillery itself. If that's true, then I think all Tuttletown products should qualify as "certified micro" until they cross the max sales threshold.

If enough of us see value in this idea, I'd be up for preparing a formal proposal for voting and adoption at the ADI board at the conference in April.

Melkon

Link to comment
Share on other sites

Point exactly. Grant bought the Hudson Whiskey brand and all distribution rights for all Hudson Whiskey brand products (I'm sure Ralph will clarify if this is not spot on.) Ralph et.al. still own the distillery at which all products sold under said brand name are produced. We want Ralph in and Diageo out, but if Diageo contracts with a true micro (a distillery that produces less than 65,000 PGs per year) to produce something like Moon Mountain, then that would seem to get them in too. And maybe that's okay, as the product is still being produced by a true micro, but these are the things that have to be defined before we blithely roll out a sticker. (Maybe I've been involved with ADI too long...)

Under the proposed definition, an entity could be a 'micro spirits producer' and not even own a still. Maybe that's okay too.

Link to comment
Share on other sites

I haven't been following this thread closely, so perhaps this has been discussed. But I think any certification should be done by an independent organization, much like organic certification is done. It shouldn't have much to do with ADI though ADI members are most likely to benefit.

But, I think that issues and problems in the distribution system where the large wholesalers control access to bars and retail outlets and dictate what appears on the shelves and backbars for consumers to buy is a much more important problem to address, though much more difficult to change.

Link to comment
Share on other sites

To Chuck's point re: THT and Grant's: I've encountered retailers that don't want to stock their product any longer because it's NOT LOCAL. Or they're no longer small. Or they believe that THT doesn't make the product any longer, that someone else does.

Link to comment
Share on other sites

To Chuck's point re: THT and Grant's: I've encountered retailers that don't want to stock their product any longer because it's NOT LOCAL. Or they're no longer small. Or they believe that THT doesn't make the product any longer, that someone else does.

I've personally had retailers tell me the same thing about Stranahan's now that Proximo (Cuervo) owns them (not the same situation as the Tuthilltown Distillery) . I usually point to a bottle of Cuervo, which is never hard to find, and say, "well, why do you carry that, then?" And then go on to point out that Stranny's employs more Denver locals than we do.

Link to comment
Share on other sites

While Proximo's parent may technically own the Cuervo brand I think as a practical matter what they own is the distillery. Diageo has sole world-wide distribution and marketing rights for the Cuervo brand. Proximo owns and markets 1800 Tequila.

So, at least until it surpasses 65,000 PGs per year in production, is Stranahan's a micro-spirits producer?

Link to comment
Share on other sites

While Proximo's parent may technically own the Cuervo brand I think as a practical matter what they own is the distillery. Diageo has sole world-wide distribution and marketing rights for the Cuervo brand. Proximo owns and markets 1800 Tequila.

So, at least until it surpasses 65,000 PGs per year in production, is Stranahan's a micro-spirits producer?

I think Stranahan's, Tuttletown, Hangar One should all be considered micro spirits if their DSPs sell less than 65,000 PGs. This should be the case regardless of how they sell and market their products.

This should protect our collective interest adequately, as the odds of a major company starting up a bunch of small DSPs just to qualify for our certificate is virtually nil. (Moon Mountain, for example, is NOT produced at a qualifying plant and probably never will because its price point can't support the operations of small-scale production.)

Finally, DSPs that do not distill but practice other crafts, like maceration and blending, should qualify because they add value to the final product.

Melkon

Link to comment
Share on other sites

great idea, lets be as inclusive as possible with our like sized dsps. we need to stop eating our young and remember to look at the big picture. we are working with our congressman to address excise tax rates and i recieved 17 replies that were positive and almost as many picking the idea apart. there is strength in numbers. lets stick together and if you dont like an idea rewrite it and subit it. melkon has done alot of great work on this and on excise taxes. thanks jimmy

Link to comment
Share on other sites

  • 2 weeks later...

We have road maps – Craft beer, craft cheese, craft coffee, craft tea – on and on.

The big guys will always knock off the best characteristics of craft and claim as their own via bigger marketing budgets, or if nothing else confuse the consumer.

Ultimately they will fail when consumer 1. Catches them lying. 2. Gets educated.

I was on the Board of Brewers Association for 6 years dealing with this same issue – result – small independent, traditional; translate no rice-no big guy ownership/share, size limit tied to federal law.

If going down the definition road/Good Housekeeping Seal of Small Distiller:

Expect a counter attack on "Small" distillers who – Have big distillers Shareholders, rectify, do not distill, do not have distilleries.

The definition will take time – in the meantime as individuals and ADI as our Club need to be more active on the PR front – NOW.

With the recent Moon Mountain discussion here and the growing interest by large producers to create brands that look & feel like they're crafted by small producers, I recently spoke with Bill Owens about simple, cost-effective ways we could help consumers and the trade identify the genuine article.

The idea I mentioned involved branding bottles of spirits produced by qualified micro spirits makers -- e.g., those who sell less than 60,000 PGs per year -- with a sticker that would clearly identify them as "certified micro spirits."

This approach, where ADI would issue certification of each producer's "micro" status, would offer us a number of advantages:

- easy marketability to consumers and trade buyers for our brands and the category and

- a more defensible barrier to entry against big producers than trying to claim terms like "craft", "artisan" or "small batch" for micro spirits producers' exclusive use (though that would be great, too).

There would be some costs, as well, for instance:

- obtaining certification as a micro spirits producer from ADI

- buying and placing the stickers on our bottles

- changing our label art (for simpler production down the road)

I invite all to comment on this approach to promoting and protecting our turf (as well as my attempt to create the stick art). The next ADI meeting is a few months away and, if we get consensus that this is a worthwhile idea, I'd like us to have a more formal discussion there about implementing it.

Melkon

Link to comment
Share on other sites

  • 2 weeks later...
Guest Liberty Bar - Seattle

I make fantastic absinthe and gin using NGS, and you want to relegate distilleries such as us to the sideline? This is the definition (from Ralph) we should be looking towards "The proposed qualification for a "micro spirits producer" and membership in the new ADI will be the permit and an operating licensed DSP; that pretty much covers it. And if a producer qualifies for the discounted FET rate, that qualifies that producer as "micro"."

Marc, where does this idea (has it left from 'idea' to reality stage yet?) suggest that distilleries such as yours would be excluded?

Link to comment
Share on other sites

Good idea, Melkon! keep up the good works!

See you in April on our turf!

Diane Paulson at Organic Nation

p.s. and thanks for sending the young woman who is starting an Organic restaurant in Portland OR our way!

Link to comment
Share on other sites

All,

I certainly like the idea of separation of craft distilleries from "factory" producers, however I have some concern about the ability to protect the certification. While a trademark may protect the specific ADI (or whatever issuing body) certification, what means will there be to prevent and enforce encroachment by the Diageo's of the world? In other words what prevents Diageo and/or others from establishing similar type of certifications (other certifications have already been mentioned in this thread). If a multitude of certification programs can be created, the idea of creating a unified designation separating us from the "factory" producers faces the threat of significant dilution, not to mention confusion in the market place. Don't get me wrong I am fully in support of a verifiable classification, I just have some reservations about the ability of ADI (or other issuing body) to enforce the classification. I strongly recommend that all involved in this discussion follow Melkon, Ralph, Denver, and others' guidance that this remain a unifying and inclusive endeavor. I fully support the idea of including those who employ NGS in their craft providing they meet the criteria mentioned elsewhere (e.g. holding of a DSP license, etc...). If Distillers are adding unique "craft" type value to their products, in my opinion NGS is just another ingredient and they should qualify. What distinguishes NGS from any other ingredient? Mandating that a DSP be required for certification, appropriately excludes NGS users who are simply bottling others' craft work. The exclusion of distillers who use NGS is equal to censoring the creative spirit of craft distilling, why not exclude those using corn as a grain, or coriander, or citrus, etc...

One note on the FET volume designation: If your producing in excess of 60k PGs/yr do you still need a tax reduction? I am just starting at a very small scale and the proposed FET reduction translates to the difference between red and black ink for me. At >60k PGs/yr I would anticipate making a hefty profit. At some point the economy of scale kicks in and the FET reduction becomes a bean counter's issue. I am tremendously in support of the FET reduction for the simple fact that it may the deciding factor in my goal to create unique personalized spirits as a profession. Legal separation of "craft" from "factory" producers, independent of the volume designation, will hopefully translate to a legal recognition of the burdens small produces face in the absence of economy of scale.

Cheers!

Link to comment
Share on other sites

There is nothing inherent in the nature of craft distilling that would prevent a certification system from being established. The devil is in the details. It's been tried here before, but there hasn't been a really fruitful discussion about exactly how "craft distilled" should be defined. Agree on that and setting up a system to administer a certification system would be no big deal.

In nearly 40 years in the marketing business, I have observed that the most common mistake people make is focusing on tactics (e.g., promotional videos, certification programs) when they haven't worked out their objectives and strategies yet. Remember the parable of the blind men and the elephant. That's where this nascent industry is now.

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
×
×
  • Create New...