Midstate

Great Discussion...as with most debates, i tend to think all sides make some great points. A lot of people like to view the craft distilling industry from the perspective of the craft brewing industry. What a lot of people overlook is the actual history of craft brewing. If you look back at it, Sam Adams (who contract brewed his beer out of other brewing facilities early on) got started in 1984. That was 33 years ago. Take a look at the growth curve for the craft brewing industry. Slow steady growth from 1980 to 1990. Big explosive growth from 1990 to 2000. Dip from 2000 to 2005. What happen? Did craft breweries stop opening from 2000 to 2005? No, not at all. But talk to any guys who opened from about 1995 until 2005 (and who are still in the industry) and they'll tell you stories of all the "new guys on the block" who had deep pockets, saw the trend in the industry and thought they were going to take their hedge fund investment and become the next big craft brewery...well, a lot of those guys bailed out between 2000 and 2005 and so the industry as a whole saw a dip in the number of functioning breweries. I think what Dehner is talking about is a similar dip that may hit this industry. There may be a lot of new people interested in craft breweries. But the general population as a whole don't have a clue what a craft distillery is. A lot of the general population doesn't have any idea what bourbon is vs rye vs whiskey vs corn whiskey. There's a lot of education and awareness that needs to be developed within the average drinking public. What do most people go to the bar and order...and you can look at this in the Beer, Wine, or Spirits. XXX-lite, house-red, rum and coke. Now obviously in the Beer industry you're far more likely to get a beer drinker who asks "what craft beers do you have?" or "what do you have on tap?". In the spirits industry I feel we're still a few years (5 or 10) away from people asking "what craft bourbon do you have?", or "do you carry JON DOE rum? There are a lot of people jumping into this industry, and best of luck to each and every one of them. As several people mentioned, it will certainly help to have a story, have a marketing concept, and have a way to pay the every day bills. Knowing that it takes you X bottles worth of sales to pay your monthly lease payment is great. Knowing it will take X bottles worth of sales to pay off your $500,000 initial capital investment is also great. Unfortunately if you have 10 investors who are looking to recoup their money as make X% on it within a certain number of years, you may be working like a dog for that many years before you make a dime. There's certainly a good chance that there will be a fall out...it might be some people who got into this industry with the greatest intentions, but didn't understand the reality of the market, it might be some of those guys who like to try to predict industry trends, dump lots of money into those trend and then write off the loss when it doesn't work out, it might be some people who built a phenomenal business but just don't have the heart to see it through to profitability. I don't doubt that all these things will come to pass. Keep in mind that we've also been in almost 9 years of economic growth. Markets have been doing great. But that doesn't always last forever. Longest economic growth in recent history was 10 years. If the market in general takes a dump, how many people will stop paying $40/Bottle for that craft bourbon and just buy a bottle of Big Distiller Bourbon for $20/bottle. The craft distillery market certainly has many years of growth ahead of it, but its not going to be all boom for everyone, and there will certainly be growing pains, probably sooner, than later.