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Would appreciate some help with the logistics of a unique idea for a micro-distillery

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Hi all, first post here. So, my idea is to start a distillery which would allow customers to come in and create custom whiskies or other distilled products. The customer could help create a semi-custom mash bill, and "help" in the distillery during mashing and/or distillation. They would leave with an aging vessel of their choice, likely an oak barrel somewhere between 1 and 5 gallons, and leave with their product bottled in 1.75L (maximum legal container size as far as I am aware) containers to put into their barrel to age on their own.

I live in Washington state, which does not have a three tier distribution law, and would allow me to sell limitless (I think) quantities to customers at the distillery, in the non-bonded "tasting room" area. I am fairly sure that legally, this would check out. I don't think there would be any issue with customers being around "helping" during the process, but maybe some of you have more info on this.

Washington has a large market for "bourgie" products and experiences, and I think a unique offering like this would allow my starting costs to remain fairly small, while still bringing in income during the stage when most distilleries are aging product. I would of course be making product to age simultaneously.

I have a close friend who owns a cidery/winery, and would be willing to partner with me to create apple/grape brandy as well, which would be another semi-unique offering, Ias I am not aware of anyone making Washington apple brandy. In addition, I have a...friend who has been home distilling and getting to understand the science and processes required for creation of tasty products.

My question to all you experienced artisan distillers is mainly this: is this anywhere near a feasible idea? This endeavor would likely start with a less than 100 gallon still, and mainly be a weeknight/weekend operation at the start. Am I missing some glaring flaw in my plan? What are your thoughts?

Thanks for reading, and spending the time to help a newbie!

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No thoughts on the business model, but I will say, Gibbs Brothers Cooperage has some amazing small format barrels. 

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There is a new distillery in Fort Worth, Blackland that is doing something similar.   They will make a custom batch whisky and give customers approx. 10 gallons of whisky for $5000.    not sure how many people have plunked down on it, but they offer it.

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Ill have to look into that! I think most people would hesitate to drop that kinda cash, but as a super-micro startup, I think it would be profitable (especially in terms of marketing) to go as low as a gallon or two at the start. I'd imagine it would be a cool thing for a group of people (maybe a bachelor party) to go make the whiskey that you could then serve at your wedding or something. I think I could have a decently high markup for the experience of the thing as well, besides just the cost of the whiskey. the trouble would be finding the right price though, high enough to cover costs, but low enough to be attractive as an "experience"

 

The lower quantity batches could also be made on a much smaller and cheaper to operate still, maybe 26 gallons

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1 hour ago, Julius said:

No thoughts on the business model, but I will say, Gibbs Brothers Cooperage has some amazing small format barrels. 

Funny you should mentions Gibbs, my /friend/ has used their 5 gallon barrels and is very happy with them.

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1 hour ago, city_stiller said:

I don't think there would be any issue with customers being around "helping" during the process,

Actually, there may indeed be a problem with this, in that it may wind up as a labor issue. If your helpers are causing a potential for an employee not to get work or pay for work they would normally do - I would check into this carefully. There is an article devoted to this topic in one of the Distiller magazines. Unfortunately, off the top of my head I can't remember which edition.

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Also, I'm sure many distillers will tell you - the last thing they want while working are helpers. Nothing slows down the process faster.

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I'll try to find that article, thanks. In terms of employees, I imagine beginning with only myself and possibly a partner. Very small scale. 

I actually recently attended a "bottling party" hosted by Copperworks Distillery in Seattle. A group of volunteers came and helped label and fill bottles for a couple hours in exchange for tours and tastings. I might reach out to them to see what hurdles they had to overcome to be able to do that.

For real batches of non-custom products, the work would be done without "helpers."

 

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We’ve had far more people ask us about coming in and having a more hands-on experience - that they would pay for - than people coming in to ask about buying a barrel of whiskey.

I take that back, they ask, but are often surprised at the price.

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1 hour ago, city_stiller said:

I'll try to find that article, thanks. In terms of employees, I imagine beginning with only myself and possibly a partner. Very small scale. 

I actually recently attended a "bottling party" hosted by Copperworks Distillery in Seattle. A group of volunteers came and helped label and fill bottles for a couple hours in exchange for tours and tastings. I might reach out to them to see what hurdles they had to overcome to be able to do that.

For real batches of non-custom products, the work would be done without "helpers."

 

https://issuu.com/artisanspiritmag/docs/artisanspirit_issue021_web

The article you are looking for is in this issue, it specifically calls out the legal issues surrounding "volunteer" labor. Starts on page 110. In addition to labor laws, you also have to consider insurance, food codes and occupational hazards (OSHA).

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Why not run it as a distilling workshop.  They pay you for the workshop and you give them the option of  buying and taking home a barrel of the spirits that they helped create. Also this may get you around those labor rules.

 

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It would be an OK side biz I suppose, but very few people are going to pluck down a grand and their time to take home a little barrel that they will have to watch for 2-4 years before they can touch it. I would think that segment of your revenue (if you have a nice facility, good finished products and a tasting room in a good area) would be less than 3-5% of your gross.

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Tom thanks for digging that up for me, really helpful to know the complications involved with volunteer labor. 

After reading the article I think that a workshop is the way to go, good idea Southernhighlander. All actual labor would be performed by legitimate employees, the only thing customers would do would be "observational". More of a learning experience rather than a lifting sacks of barley or labeling bottles. 

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Just now, Roger said:

It would be an OK side biz I suppose, but very few people are going to pluck down a grand and their time to take home a little barrel that they will have to watch for 2-4 years before they can touch it. I would think that segment of your revenue (if you have a nice facility, good finished products and a tasting room in a good area) would be less than 3-5% of your gross.

After becoming fully established, I think you are absolutely correct. This would be something that would likely be phased out if the distillery became a success with much higher production. This would be more of a "help getting off the ground" idea to fund the beginning of the distillery. 

 

As far as waiting for the aging, I think I would leave that in the hands of the consumer. They take the white dog and the barrel home, they age it until they are happy. Based on what I have read (read: experimented) with, a whisky can become fully fledged after as little as 4 months in a very small barrel. 

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Heritage Distilling in WA and OR already does this with their My Batch classes and Cask Club (https://heritagedistilling.com/collections/my-batch).  Seems successful for them

4 hours ago, city_stiller said:


I have a close friend who owns a cidery/winery, and would be willing to partner with me to create apple/grape brandy as well, which would be another semi-unique offering, Ias I am not aware of anyone making Washington apple brandy. In addition, I have a...friend who has been home distilling and getting to understand the science and processes required for creation of tasty products.
 

I can think of at least 5 apple brandy distillers in Washington and probably there are two dozen more I have never heard of. 

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Well I guess I am now aware of apple brandy being produced in WA. My point was that I think that market is less crowded and I have a good "in." 

 

Heritage is doing something similar, but at the end the customers are still just taking home the normal product that heritage produces, not a product that they have played a major role in producing (grain bill, distillation technique, aging style, etc.) It is good to know that similar offerings are well received though. 

 

 

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I've asked a local small distiller if a group of friends and I could come in and make a batch and end up with four 5 gallon barrels we could age at home for as long as we wanted.  His stripping still which he uses to mash and ferment as well will produce 20 gallons of barrel strength from a single batch after cuts in a strip/spirit run.

I had guessed the price per barrel about right, and he'd be open to it, but his read of the TTB rules didn't lead him to believe that he could send out the whiskey in anything other than the bottles that he has gotten label approval for.  We'd be willing to pay the full price of the output, including duty and local taxes, but he said he'd have to send us out with the liquid in his bottles and with an empty barrel that we could always refill from the bottles once we got it home...

Short answer was, we were ok to leave the barrel in his bonded warehouse aging to be bottled by him in the future, or we were welcome to take the output home in legal bottles to dump in a barrel of our own at home, but we couldn't leave with a barrel full of new make to age at home.

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The only way to legally allow aging at home would be to bottle at cask strength as a dss since it’s white and then sell the bottles.  That way taxes are paid and it’s been sold in a bottle.  The new owner of the bottles would be free to put them back in a barrel for aging.  It could be a fun project, but I am not sure you could build a business around it as I think volume would be too low.  

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To sum this up:

All the advice about not removing product in bulk (in containers of more than one gallon) is spot on.  See §1.80. So you would bottle it in an approved size (§5.47a),  labelled with a label for which you have an approved COLA (§5.55) and make a record of tax determination before removing it.

You could probably ad lib a batch record that capture all that TTB needs to know about the production and processing of the product.  I don't see that as a hurdle.    

As someone else said, it won't be whiskey because won't see oak before you bottle it.  that's okay, I think.  While you could solve that by using your nano distillery to nano store in a used oak container, t why bother?  the customer knows what they are getting and what they are going to do with it.

As someone said, without oak it would be a specialty item, since it does not conform to any standard in §5.22.  For an example of a label like this, see the Jack Daniels specialty that is unaged spirits distilled from grain at 140 proof.  You can hunt that up on TTB's public COLA registry.

As no one else has said, by rule, you have to have an approved statement of production procedure before you can distill.  It have to show the grains used in the mash.  the statement must .   to be on your registration.  but that need not be a problem if you write a procedure with enough generality that the product will conform to the designation you claim on the label whatever grains might use in whatever combination you might use them.    

Finally, you could report it as alcohol under 160 on the production reports. 

So, what you propose is certainly achievable under federal regulation. 

I can't comment on the viability of the business model, but I'm sure you will have to make your market for the concept.  Check out how others have done that.  I have at least one client in Washington who has done "custom" production to retail clients' specifications.  But that was done in an ambiance that screamed class.  

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Tons of helpful info, thank you. Good to know that there are not any glaring legal flaws with the idea! I'll check out the statement of production registration details. That sounds like it could be a bit tricky. 

 

I do agree that the distillery space and ambiance would have a huge impact on the feel of the experience of distilling. It could go from feeling like hiding in a shed making corn likker or it could feel like a highly luxe and classy endeavour of gentlemen. Something that could attract the C-suite of a business for a team-building activity rather than frat guys looking to make a ton of hooch. 

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I

24 minutes ago, city_stiller said:

That sounds like it could be a bit tricky. 

 

 

It ain't tricky - its experience :-).

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In our area there are several distillers who will happily fill and age a barrel with your name on it. Generally, you can come by whenever and ogle it, caress it, give it a hug and then eventually, the distillery will bottle it and send it home with you. Although we don't do this ourselves, it must be a good business because people are still at it. I'm not sure what size the barrels are but from what I've seen the cost is around the $5K mark. Custom labels extra.

We run a micro distillery and I'm so busy just trying to keep up there is no way I could offer something like this. Its only the bigger distilleries who I've seen, who have enough capacity and excess storage space to devote to this kind of project. I keep threatening to make whisky, but I just can't find the time. Don't forget, running a distillery is more than distilling. There's ordering the supplies, doing the marketing, handling the paperwork, dealing with all manner of customer from the individual to the mega corp. Being at all the tastings, running your tasting room. Finding and dealing with labor. Bottling and packaging, yada, yada yada... it goes on.

When we started, we had visions of many of the same ideas, but to create a product that you can be consistent with and that the customer will come back for is very difficult. Each sku is an entire project unto itself. So keeping track of barrels and ages and owners is going to be a real head scratcher in short order, made even more difficult as you struggle to remember what happened to your own alcohol. 

Ambience is everything, no matter what size of a place you have and so is the Instagramability of your space. There are a couple of other recent threads discussing small distilleries, what expect and still sizing you could check out as well.                                                                                                                                                                                                                                                                                                                                                                    

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