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Prepair for the FALLOUT!!!

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The sad thing about the Re-bubblers is the joe public does not know and 99% of people don't care. So If people don't know or don't care then why go through all of the steps? Think how much money is saved / made.

You can't hate someone because they have a different business plan than yours. If they are doing it legal then they are not really cheating.

Who wouldn't what .22c for a bottle of vodka when all you have to do is make a phone call and it just shows up.

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Was just thinking about something that was said as I was driving home today.

something about " the end of stills in crappy buildings"

It makes sense. If there are more distilleries coming on line and more of those distilleries are super nice. Well, when someone goes to a not so fancy distillery it just could possibly make that crappy building distillery look a lot crappier. And if you had a cocktail room in a crappy building, then no one would go to your run down place and you go out of business. POOF>>> your gone......... unless your distribution is awesome.

Just thinking.

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Roger    23

On the off chance that "who wouldn't want the .22c vodka" is not rhetorical, I will say that the person/s that don't want it, are those who have spent the time to search out and discover non national brands, who end up paying a craft premium price for warmed up industrial ethanol.

Its hard to determine which is actually worse for our industry

a )vodka warmers who charge a craft premium for a commodity product

b ) vodka warmers who put "hand crafted by my sweet old granmother" on a tilted label, who then wholesale at $8.00 per, and it sits on a shelf beside a much more expensive actual craft distilled products that can't be brought to market for NGS  price. 

Take your pick, but neither are good for anything other than individual businesses that care little about the integrity of the industry and the price points that will allow actual independent distillers to survive. 

Private label has been practiced since industry inception, but it was very seldom sold as "hand crafted" so as to carry a premium price. We must now be careful that the excess capacity building in our industry does not flood the market with inferior or low priced "pretend craft" product.

Large established distillers generally have the financial backing and marketing machines to take their brands in multiple directions, and at varied price points. In a typical small craft distillery we however have only one main marketing strategy "hand made" . If you don't understand that, and strongly defend it, you are either not looking at it closely enough, or a practitioner of a or b.

 

 

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18 hours ago, Dehner Distillery said:

Was just thinking about something that was said as I was driving home today.

something about " the end of stills in crappy buildings"

It makes sense. If there are more distilleries coming on line and more of those distilleries are super nice. Well, when someone goes to a not so fancy distillery it just could possibly make that crappy building distillery look a lot crappier. And if you had a cocktail room in a crappy building, then no one would go to your run down place and you go out of business. POOF>>> your gone......... unless your distribution is awesome.

Just thinking.

Just personal opinion and experience speaking, but by far the most innovative and carefully made spirits I've tasted were made in old warehouses, barns, and outbuildings, but when I taste in a gleaming fancy distillery I expect the spirit to taste like marketing, rather than quality. I've been wrong, some, of course, and Woodinville Whisky makes a very nice bourbon in an upscale "distilling palace".  YMMV.

ZBob

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philstill    4

There have been some good points made for and against overcapacity. For and against the new buildings with the best German stills vr. econo operations in a old warehouse.

IMO a rising tide floats all boats.Mostly.

"The spirits industry can raise a glass to yet another strong year.

The volume of spirits sold at retail locations rose 2.4% in 2016. Alcohol suppliers said sales rose an even faster 4.5% last year to $25.2 billion in the United States, spirits advocate Distilled Spirits Council reported on Tuesday. Even more impressive, it was the seventh consecutive year that spirits stole more market share from brewers. The spirits industry now commands 35.9% of the total alcohol market vs. 47% for beer and 17.1% for wine. Beer made up close to 60% of the alcohol market in the 1990s....

The strong sales in the U.S. bode well for big industry players like Diageo (deo, +0.42%), Pernod Ricard (pdrdy, +0.69%), and Brown-Forman (bfb), as well as the emerging, fast-growing craft spirits industry that is mirroring the success craft brewers had in the beer world.

Volume for U.S. whiskey—which includes bourbon, Tennessee, and rye—jumped 6.8%, with revenue up 7.7% to $3.1 billion. ...

Distilled Spirits Council reports that volume for vodka, which represents about one out of every three spirits sold, was up 2.4%. Even flavored vodkas returned to growth. ...

the industry buzzword that explains how liquor brands have had success selling consumers on the idea that they should drink less, but "better." ...

Volume for "super premium" spirits jumped 10.8%, while the next-highest priced grouping "high end premium" posted a 5.5% increase. That made up for weakness on the bottom shelf, where volume actually decreased.

http://fortune.com/2017/02/07/liquor-industry-strong-sales-2016/

" In a broad study backed by the American Craft Spirits Association that is being billed as a first-of-its-kind deep dive into the craft spirits movement, the industry has reportedly achieved $2.4 billion in retail sales in 2015, growing at a compound annual growth rate of 27.4% in volume. The market share for craft spirits reached 2.2% in volume last year, up sharply from 0.8% in 2010. ...

This growth—bolstered by the 1,315 craft distillers that are active in the U.S. today—is expected to get continued support from retailers and wholesalers, likely because they've seen the success craft brewers have achieved in the beer world. Within beer, craft producers now control about 12% of volume and are posting growth that far exceeds the total category. There are also well over 4,200 craft breweries today, far more than the amount of distilling peers.

Interestingly, much of the craft spirits industry's growth is concentrated in just a handful of states. The top five states by number of craft distilleries—California, New York, Washington, Colorado and Texas—make up almost 36% of the industry's players. Those states were also popular destinations for craft brewers. That concentration implies that there is a lot of potential for the craft spirits industry to find firmer sales in regions where there isn't a lot of attention today. ...

The big challenge for the craft spirits industry: spreading the wealth. Just 2% of producers today are responsible for 60% of the cases sold. The smaller producers have tiny distribution and are almost always bleeding cash. These young businesses will need to win shelf space at local bars, restaurants and retailers in order to hunt for growth, facing a similar battle that craft brewers confronted before their market got broad support. "

http://fortune.com/2016/10/18/craft-liquor-growing-sales/

Better is where the craft distilling business enters the equation. Its the combination of taste, experience and the total marketing that puts your bottle on the liquor store shelf, or on the consumers table.

Bleeding cash for a small producer can only go on for so long. For some the pain will become the death of the enterprise.

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Scalawag    6

Fantastic well thought out and delivered reply. Seems accurate to me!

Thanks....

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philstill    4

As legal marijuana grows in popularity, domestic beer brewers are starting to take big profit hits in states where recreational pot is legal.

https://smallbiztrends.com/2016/12/legalized-marijuana-impacts-alcohol-sales.html

"If marijuana is legalized in Canada, we will see a decrease in purchases of beer, wine or spirits. So that's something that the alcohol industry is going to have to understand and think about and try to anticipate what that means," said Mark Whitmore, who co-authored the study on recreational marijuana.

http://www.cbc.ca/news/canada/nova-scotia/alcohol-pot-sales-decline-1.4048519

So far the fears of declining beer drinkers may be just that: fear. In Colorado, 2016 taxes received by the state on alcohol sales actually increased between January and November. Beer tax receipts climbed 4.5%, spirits rose 4.0% and wine increased 3.3%. Tax receipts did decline in the months of April, July, September and October for each of the alcohol categories. It's possible that on certain occasions like 4/20 and the fourth of July, consumers switch to cannabis, but overall alcohol is thriving in Colorado.

https://www.forbes.com/sites/debraborchardt/2017/03/13/beer-industry-could-lose-2-billion-from-legal-marijuana/#306a746228c1

 

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nabtastic    12

^ who would've thought the peeps already smoking and drinking would still do it when legal ;)

There's actually been some "joint" ventures with marijuana infused alcohol already.  I suspect that will be a big play ground for whoever tackles it properly. 

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I know they have reported record taxes from pot, even more taxes than alcohol, but I expect that is mostly driven by tourism.  Anyone I know who smokes, buys medical or black market, they won't buy the rec stuff since it's highly taxed.  I do see out of state tourists buying when they come to visit.   It will be interesting to see how it plays out in the long run.   I would guess that once bordering states allow sales, the rec market will dry up a bit. 

 

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Foreshot    12

I'm going to patent marijuana infused Vodka flavored tortilla chips. Satisfy all the cravings at once. 

I can also see someone on a tour: "Do you mean it's got weed in it when you say it's pot distilled?"

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Philstill,

 

I have no problem with pot smokers.  I have known many professionals that smoked over the years.  One is a Neurosurgeon.  The other is a VP at a big motel chain.  I knew them when I had my Landscaping business in Scottsdale AZ. Just like people who drink, not all pot smokers are lazy and jobless.  Some of them run multi million dollar companies.

Anyway, my wife and I have friends that smoke weed and I can tell you that their social drinking is not affected by how much weed they smoke.  They seem to drink the same whether they are smoking or not.  For people who both drink and smoke, smoking does not slow down drinking.  The affects of the 2 drugs are different.  Smoking weed does not increase the affects of alcohol or vice versa., so I don't understand why anyone would think that the legalization of MJ would decrease alcohol consumption.  One thing that it is proven to decrease in states with legal MJ, is the consumption of prescription opioids .  Big pharma made some huge donations to the campaigns of several politicians last year to keep MJ illegal in MO, but that's alright.  We will get it done in 2018.

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Foreshot,

Actually, you can combine ethanol and cannabis in such a way that you can get the affects of both alcohol and cannabis.  You can even combine them with no added flavor from the cannabis, so that your whiskey and or vodka will give the same affects as cannabis, but with no flavor change what so ever.  I know this because I own a business that builds process equipment for the extraction of oils from plant material.  In some of my equipment butane is used as the solvent, but we also have a line of extraction equipment that uses ethanol as the solvent.  Both lines of process equipment are very complex.  Much more complex in fact than  our vodka stills.  The ethanol extraction process is done at -60°F. Once that process is completed you have around 5% oil in 95% ethanol.  After extraction,the ethanol is reclaimed in one of our jacketed short path vacuum stills. So distillation occurs  at less than 100° F. If someone where to be processing cannabis oil,  they would  place it in  a thin film, rotary evaporator that also operates under vacuum.  The oil is broken down into 3 fractions in the evaporator.  One fraction is trash, the 2nd  fraction is pure CBD and the 3rd is something called "the clear"which is around 85% THC and almost translucent.   Some  concentrations of THC such as "the clear" do not have a smell because the components that make up the smell get fractioned out.  A person can be using  ultra pure oil or the clear in an e cig vaporizer, standing right next to you and you would never know the difference. These concentrates are also used in food.  Concentrates are a big part of the cannabis business because, all of the states where it is legal  have quality control standards.  If the bud is not potent enough,or if it has a little pollen on it then the state says it cannot be sold for the purpose of smoking.  Also none of the trim from the buds or leaf from the plants is potent enough for the state to allow it to be sold to smoke, so all of that  must be made into concentrates.  Hash is still made,but good hash is typically less than 40% THC and the concentrates created using sub critical extraction with solvents like butane, CO2 and ethanol are twice as potent.  Again very complex equipment is used in these extractions.  CO2 extraction equipment operates at over 6000 psi.  Anyway, I have already figured out a way to combine the clear with any spirit with no flavor impact.  Once cannabis becomes legal at the federal level I'm sure that at some point you will see cannabis spirits of all sorts.

 

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Foreshot    12

Paul - so what you're saying is that if I buy a deep fryer you can sell me the rest to make my Pot/Vodka tortilla chip dream come true??? hahaha

Actually I never new any of that, pretty interesting, thanks!

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Foreshot- You bet!  If you have the deep fryer and the tortilla chips, we can figure out the rest of it.  Once it all becomes legal of course. ;o)

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Any way...

Time to steer this train back on its tracks.

Prepare for the fallout..... 

I see it happening now. People selling off they equipment before they even use it. Other people snacking it up like candy only to maybe suffer the same fate because they are some how smarter.

Does the average person realize how many bottles it take to pay the monthly bills and pay for the loans and running cost. If you were to only pay in bottles how many would that be? Now how many bottles can you sell in a month, it is on thing to get your new product in the store but to get it out is another.

I know people that put so much money is making Bourbon, now it is starting to get over oaked so they are dumping and storing in totes because they can't sell there product very fast. They over produced. Think of all that money just sitting there....

I can't imagine someone thinking there going to hit it, they are going to do something thats never been done before...... more power to you.

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adamOVD    1

Perhaps what we actually need are more small distilleries. If people have a local distillery they are stoked on, and a connection will the people who run it, then they will seek out new distilleries when they they travel or as they open. Especially if they can go there and try a flight of there products without dropping 20-80$ just to try it. Think we have a lot to learn from the craft beer model, and cooperation between distilleries. It doesn't work if everyone is trying to take away business from everyone else.

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Glenlyon    4

Meanwhile, late a night Glen broods about his future....

Hmmm. What can I do to make a living? Let’s see. Gotta be nine to five and the pay has got to be great...

Jeez, that means I’ll have to get an actual job! That sucks. Wouldn’t want to waste my days working. Hmmm. anything else?

Wait! I know, I’ll start my own business! Let’s see... Be my own boss. Do what I like... Sounds perfect. But, what kinda business could I start? Corner store? Na. Too boring. Gas station. No, cars are going outta style. Amway? Possibly...

Hey! I like to drink! I know how to make some moonshine - I know! I’ll start a distillery! That’s a great idea. I can’t wait to get started! How hard could it be?

Hmm, How much money is in the old investment account? I’ll clean that out first as my seed money. I’ve made millions in the TV biz, so that should be OK...

Type. Type. Type. Hmmmm. Type. Type.

‘Your balance in your investment account is: $437.94.”

...Or not.

OK let’s see what’s in the ‘ol current account.

Type. Type. Type.

$103. 54

Alright then, my working capital $541.48. Although, once I subtract the mortgage, car and other essential living expenses, that should leave me with about $-6547.96 in my account.

Good times. Good times.

Well, that doesn’t look too good.

Oh well, no worries. Let’s do some research here and see about what’s up with getting this off the ground. Let’s see... I’ll just surf over to alibaba here. Hey look! I can get a still for 2K USD. Gee that doesn't sound too bad... I could build a whole distillery for the price of a used pick up truck.

Cool. Although, it does seem a little too good to be true, I wonder what the catch is? Perhaps some more research is required...

Five months later...

Man I wish I hadn’t written this business plan, it sure is depressing. No matter how I push the numbers around, it looks like it going to cost way more than a pick up truck, new or used by hundreds of thousands of dollars. Shit.

Hey what’s this? I need to rezone my property before I do anything else?

Eight months later...

Man, am I ever gonna get through this process? Sigh. Fucking neighbors.
Why did I decide to start a distillery again? Could someone please remind me?

Fame, fortune, lifestyle, great whisky, a better gin... you were looking for something different to do, remember?

Oh yeah, right. Thanks.

Without question, alcohol is a business of patience.

So, clearly, the question is, considering the daunting odds why would you bother? Also with more distilleries going out of business and a crowded market, doesn’t that make it harder?

Consider the story of two competing coffee companies I know. This is a true story unfolding even as I write.

They both started at the same time. They both bought the same equipment and they both were equally geographically challenged.

Company One struggled from the beginning because almost immediately they felt overwhelmed by the market and they always felt they weren't making money and ultimately, they had missed the coffee boom. Eventually, they sold their coffee machine and their company and went in a different direction.

Meanwhile Company Two, clearly understood that in the modern era, something like coffee would never pass today’s tough food guidelines and, even better - was an addictive substance. Also, who the hell would drink bitter bean juice? They clearly realized, the key to success was to simply sell a (or their idea of) a better bitter bean juice. Simple really.

They were recently bought out for 214 million dollars. All of this in a terribly over saturated North American coffee market dominated by big brands.

The moral of the story is whether or not you are rich or bootstrapping - the eager distiller should not be scared by the idea that they’ve missed the boat. There are billions of people in the world. Nobody can produce enough of anything edible to meet demand. The trick is, can you produce something people want?

Why do they want it? It it better? A cleverer story? Geographical placement?

In the case of the coffee companies, a geographically bad location made (well one of them anyway) work harder to get their ‘better’ products out and as a result, built a wider market faster.

I’ve found that by going through the rezoning process, an interesting thing happened. People began to follow the story as it periodically appeared in the local newspaper. People were both for and against it. Everywhere we went people would ask us about it.

Eventually, we realized this was the very market we were seeking to create. We now have a clear sense of how much product we might sell when we open the doors. In fact, I can’t believe how much people are interested in alcohol.

And of course, I’ve realized I’m woefully underfunded and under equipped.

Good times.

‘Course you knew that. And really, so did I after checked the accounts at the beginning.

So if everything is so hard and jaw droppingly expensive and difficult to achieve and make a profit, why proceed?

Because, here in BC Canada (at least for now), you can make a profit in this business if you work at it. As really in any business, if you are financially prudent, run a tight ship and ultimately, make sales.

But more importantly, because others won’t.

They’ll dream. They’ll make some home made hootch. And, they’ll happily tell you how to run your place better. But they won’t have it in them to actually run the gauntlet and take the risk. Yet, with over a billion people in North America alone there will never be enough brewers, wine makers or distillers.

Those who do make it through and can build their customer base always have the potential to do well. As my old fishing skipper told me as advice when I was young:

“Sell something people want more of.”

Empty bank accounts and no plan B? Awesome. Count me in.

Glen.

 

 

 

 

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Thatch    1

Nice story Glen.  But I knew you were either from the future or puling our leg when you said there were over a billion people in North American.  It have to do with the loonie vs dollar exchange rate I suppose :rolleyes:  Thanks for taking the time to write it.

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Roger    23

Which brings you to the moral of the story: "Count on spending at least double what you budget for, and have your sales be less than half."

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philstill    4

Not specifically spirits news but industry related anyway.

https://www.bloomberg.com/news/articles/2017-01-18/half-of-u-s-wineries-might-be-sold-in-the-next-five-years

 

A host of trends outlined in the SVB report explain the current land rush from the buyers’ perspective, as well as why it will continue in 2017. Among the most important are the stronger dollar, improving economy, and ever-increasing consumer demand worldwide—especially for more expensive wines as drinkers jettison cheap generics.

 

All just a part of the consumer move upscale from "cheap generics".

 

 

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JustAndy    11

I feel like the wine buyouts are quite different, as even non-viable or hobbyist wineries may possess valuable vineyards/plantable acreage which larger entities want to gobble up (they aren't making much more land...) Distilleries will be much more likely to simply go out of business, as unless they can find someone that wants a turn-key operation there isn't a larger company that will be interested in their brand or assets. 

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Evidently a lot of distilleries are doing really well.  Several of my customers, who  purchased equipment from me 3 to 5 years ago have come back and purchased larger equipment.  Some of them traded in their original equipment, while others kept the original equipment and just added more capacity.  One of my customers purchased a 300 gallon Ultra Pro Vodka Still, 300 gallon Pro Series Mash Tun, Rite low pressure steam boiler and several fermenters.  2 years later he added an 800 gallon Ultra Pro Whiskey Still two 800 gallon Mash Tuns and several 800 gallon Pro Series Fermenters.  He is having trouble keeping up with demand and may soon add a complete 1500 gallon set up, which will put him at 2,700 gallons of still pot capacity.  If distilling fallows the same path as craft brewing, then we still have room for thousands of distilleries.  All industries have a some businesses going under, while some succeed and others succeed really, really well.  The SBA tells us that on average, about 50% of businesses fail in the first year.  I don't know the figures exactly, but I know enough to know that way more than 50% of distilleries survive the first year.  Because of the demand for craft spirits, craft distilling is a great business to get into right now and it will be for some time to come.  If you are well funded this is one of the best times to get, in my opinion.  It's just like anything else, some will not do so well, but others will go really really far and some of the biggest winners aren't even in the game yet.

http://distillery-equipment.com

http://moonshine-still.co

 

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Ironton    0

Very interesting find here. Some good points and I would have to agree with the side that says there is plenty of room for growth. The way I see it, is this is a changing industry as growth continues. No offense, but if you are sing an end near, then you have already given up. I get it, people are afraid of change, but change is constant and an opportunity to do things different with added knowledge. Time for people to embrace change and evolve with the business. The same thing happened in the craft beer segment and that is exactly why I am here. Rather than opening another brewery and trying to adapt with the saturation I saw a chance to get into and industry that is years behind craft beer. Most distilleries before me have focused on the mass production and distribution model. I have decided to follow the craft beer model (as mentioned before) and go with a tasting room forward and innovative model. Were are slated to open by the end of the year and have a 2500 sqft tasting room with another 3000sqft outdoor "drink garden". Our production will be based on laughter with clean/closed fermentation and 1 stripping still and 2 spirits stills, one for botanical and one for flavor positive starches. We will produce about 30 different labels a year, some seasonal and one-offs. All small bath on a 10bbl brewhouse yielding about 60 gallons per batch. Intentions are to sell as much in-house and whatever is left over to liquor stores. Rather than trying to flood all liquor stores we will have a product that will only be on certain liquor store shelf's who are brand loyal ensuring that our product has proper pull-through. One comment I found interesting was the 1000g for beer at $8 a glass. In my area its more like $7 a glass, but non the less that is about $56,000 on a 1000g batch. On the same 1000g system with a 10% yield you get $170 $68,000 assuming you sell a 1.5 oz shot for $8. Now get your yields up to 20% and sell your drink for $10 (comps in my area) you get $170k. Sounds pretty good, right. I might be a little ambitious, but I've been in the beer industry long enough to know that if you work hard and produce a quality product for a local market building a loyal brand all while being innovative, then you will be successful. I am not afraid one bit at all and I am excited to be a part of the upswing of a budding industry.

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