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Before You Go Any Further, What is your Value Proposition?

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The alcohol beverage market is a closed system. In the US what this means is that that ~136.8 million people account for the ~211.6 billion dollars in alcoholic beverage sales each year. It is important to note that this number of drinkers has remained essentially unchanged for over 40 years, despite an onslaught of alcohol advertising.

What that means if you are an alcohol beverage producer is this - you are stealing your customers from somewhere. The question is where. 

Now here, there are a number of options.  If you are producer in a certain category, perhaps you are winning over some drinkers from another category - say beer to wine, or vodka to gin. But the switch we are most interested in is this one - commodity to craft.

Surprising as this may seem to some, the person who determines what somebody is going to buy isn’t the guy who made it, or some marketing exec, or social media influencer, brand ambassador, bartender or distributor.  The person who determines what alcoholic beverage they are going to ask for is, guess what, the consumer.

So, in a closed system where success is measured by winning a consumer from someone else’s product over to your own, it comes down to one thing. The value proposition.

One such value proposition is simple and straightforward - price. The top 10% of drinkers, or 14 million people, account for almost 75% of all alcohol consumption. They only care about one thing, and that is cost. If you are a craft producer, forget these people. They are not your customers.

That leaves you 25% of the drinkers to fight over.

Right now, craft spirits account for 3.8% of market. That means there are 21.2% more commodity drinkers available for you to win over to craft. In that conversation, what is your value proposition?

If it’s that you make great spirits, then you are missing the point. All your competitors make great spirits, even the commodity ones. Especially the commodity ones. They make better spirits and a larger variety of expressions too. You can’t win anyone over with that value proposition, because they can make them cheaper too.

Your value proposition is that you are craft. And micro. And local. These are all qualifiers that set you apart.  They are conditional terms a consumer can use when asking for a product, and they simply cannot be met by a commodity brand.

If we can get 1% more people asking for craft at the bar, restaurant, and liquor store, that is 1% more sales for every craft producer in the market. How do we do that? Through content marketing that communicates the value proposition of craft.

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Too bad you had to pause on the magazine - Its a very nicely styled publication, with a gentle insight - I was just reading it earlier today. Its a tough world for print these days.

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@Glenlyon - thank you very much for your kind words!

We really enjoyed making it, and we aim to again. To be honest, it wasn't really the printing so much as it was the lack of advertisers. Our model was designed such that subscriptions covered print costs and provided for profit, but production had to be supported by ads and sponsored content. We found selling subscriptions to be relatively easy - it was getting micro-producers to support the platform that proved exceedingly difficult.

At MicroShiner, we have made a commitment to only promote small, independent businesses. To us, it undermines what we are trying to do in creating a content marketing platform for the craft movement to promote anything but craft products. Which means we depend upon other businesses in the craft ecosystem to help us grow.

It goes to our point about the craft value proposition that we posted above. From a marketing perspective, craft spirits are better served to consider themselves in the craft horizontal than the spirits vertical. Making craft approachable - nicely styled, with a gentle insight - is what MicroShiner is here to do.

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I've always found it kind of ironic - the people who will likely benefit from print or television the most, often seem the least likely to support a media project. We produced a wine series for two years. We had no shortage of audiences and all kinds of companies that we're eager to help. But, every time we approached the wine industry for sponsorship, they blew us off.  Yet, they were begging us to come film them. When the power of what we had done for them finally sank in and they came back the third year and wanted another series, we said no. It was a tough call to be sure, but in the end - the right one - for us anyway.

I do understand though why small producers/businesses are reluctant to spend on advertising. Its hard to measure the return sometimes. On the other hand, being mentioned in a publication can do strange and wondrous things. One funny example: one of my DVD products was mentioned, ever so briefly, in a local yachting newsletter somewhere in Florida. A copy of this newsletter wound up in a dental office - and, while that newsletter was in that office - we had a steady stream of orders. They started as if by magic and ended a month later just as abruptly!

I checked out your 360 concept on your website. Its a neat idea and I'm looking forward to the next episode.

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@microshiner I'm surprised that you missed a key element in your original post.  Your focus is primarily the value proposition of the product, and I'd argue that isn't the case at all.   

Buying local has no tangible component in the value proposition unless it results in a lower overall cost.  It was made close to me, and didn't need to be shipped, so perhaps it should be less expensive?  Otherwise, this is subjective, emotional.  Do I have some connection to local products and they make me feel good.  What's the marginal difference in product prices will I pay that keeps me feeling good?

Buying something "craft-made" is slightly more tangible, as most will feel that craft products are higher quality than commercial, thus potentially justifying a higher market price, or higher quality at the same price (thus value).  But this too is subjective, and it's very easy for large-scale producers to portray this same kind of image.  If they can't, they can always hire Mila Kunis, and she is way prettier to look at than your ratty looking distiller.

But what is missing is, at what point is the product of the craft distiller actually the experience?  By focusing on the experiential aspects of craft, the tasting room, the distillery, the tour, the community, the brand as it exists in the local environment, the people, the stories, the local perception.  These then become true points of differentiation, especially in younger demographics who are valuing the experiential nature of these things at a value higher than the product price would justify.  Now we are talking value proposition.

Both a major benefit to craft producers, as well as a curse.  The benefit is extent of the penetration in your local addressable market.  You can offer "experience", and the major commercial producers can offer bottles on shelves.  The curse, how far can you extend the reach of this market?  Suppose that depends on how much of a destination you can create, how far you can extend the influence of the experiences you create.  Can you control the "experience" provided by a retailer 250 miles south?  Perhaps not.  That doesn't mean you can't be successful, but does it mean you are now on equal footing with the other non-local brands?

There are people that can afford to take the last train to whiskeyville, but we're talking about a very small number of people.  Compare this to the number of people in your local market that can take part in your experience, just by dropping in on a Saturday?

It would be interesting to see if this translates into actual business success over the next few years.  Is success correlated to the size of the locally addressable market when you are experience focused?  If you placed the same distillery in an exurb and an urban location, which would do better?

If we are talking about the value proposition of the product, it's irrelevant, they are on equal ground, if we are talking about the value proposition of the experience, it might be another matter entirely.

If your model is micro, I see no path to success that it's incredibly focused on experience first.

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Yeah @Silk City Distillers, @Glenlyon and I sort of hijacked the thread. Apologies for that.

To your point, we are talking about the same thing. Beyond the price point of inflection, it all depends on your value proposition, those values you evoke in the mind of the consumer, which is subjective.

As you state, whether your locality has any bearing on your price point is strictly a matter of economics.  We could do the math, but essentially it correlates to the cost of oil and how far you are from source and market, and there is a hard point in that equation at which sourcing from and serving the local market yields diminishing returns. This is again where that subjective value proposition enters in.

I love what you are saying about experience, and about offering a physical experience and sense of community.  Your conversation around this speaks to my other favorite talking point in craft, which is the matter of appropriate scale.

What I am really working to say is, micro producers can compete with commodity products on the shelf and particular on premise, at least in that 25% cohort who cares about something other than price, if the consumer knows the keyword and your product contains it. But you have to actively promote the lifestyle and culture that is associated with this keyword, own it and make it known.

I hear what you're saying about Mila Kunis, but I disagree on two points. One, I don't believe the people influenced by the Wild Turkey/Matthew McConaughey ad are in the 25% that is in your customer base. Two, the craft producers have a lot more money, collectively, to spend on effectively marketing an authentic craft meme then they think they do. And my argument is that doing this - marketing the craft lifestyle and your association with it - will make any and all of you realize a lot more growth then marketing your individual brands in a sea of cheaper and more readily recognizable options ever will.

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This is a great question...

41 minutes ago, Silk City Distillers said:

at what point is the product of the craft distiller actually the experience?


For any small M&P/Family operation at a micro level, the bottle(s) the customer buys is merely the souvenir of a great experience. It is the one thing that a bigger or commercial operation can't really duplicate in the same intimate way.

 

Win your backyard.

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I will probably hear back on this, but here goes: It's all good stuff, but my own opinion is that the very name of your organization is in and of itself part of the problem with broader acceptance of our craft. No offenses to those out there who produce moonshine, but I can count on one hand the number of people I know that have ever bought moonshine, and even then it is usually as a novelty or gift. 

There are no doubt areas of our country where moonshine is local/historical and I am sure it does fine there, but that market it incredibly small in relationship to the issue at hand I.e. How do we regularly serve 20% + of the US population ?

We also know that many new distillers start their journey by selling "white whiskey" while they are waiting for their real whiskey to develop and mature. Even that is problematic, because most consumers find moonshine harsh, and once they try it they paint all craft spirits with that "harsh brush". Many new distilleries end up with a bad reputation, just because they are trying to move their first products out the door as "moonshine" instead or waiting for it to mature. 

Moonshine is a fine product, and those who make it well should be proud of the heritage that goes along with that product. At the same time, if there is an effort here to push craft spirits on the populous at large, you are potentially harming that intent by attaching the initiative to a product category or name that is not universally accepted as of significant quality. 

I understand the "cute name" idea behind this, but to me it is an automatic fail for any serious distillery that is trying to broaden their market base into the mainstream. 

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Just so the point of this thread isn't lost - craft doesn't serve 20% of the US population, it serves 3.8%.  How best to capture the other 16.2% (we believe it is 21.2%) that are potential craft customers is what we are discussing.

Our position is that content marketing that communicates the value proposition of craft over that of conglomerate is the most effective and efficient method to do that.  We provide a platform for content marketing. If you don't ascribe to the values of our platform, we recommend that you align yourself with one that aligns with your values and the value proposition of your brand.

CRAFT by Under My Host and The Alchemist (if you are in BC) are two great options.

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Yep, I am aware of your hypothesis, that the 20+% is the potential market for "craft". 

What I was mentioning is that a wonderful intent may in fact be hindered by a moniker that is perceived as less than desirable by the bulk of said market.

 

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Roger,

 

You should never put down any spirit as being inferior to another. There are some great moonshines out there. One of the best spirits that I have on the shelves, in the bar in my man cave is a sweet mash, corn whiskey moonshine made by Ozark Distillery.  It has a wonderful buttery corn on the cob flavor that reminds me of my grandfathers sweet mash moonshine.  My grandfather always said "sweet mash for the jar and sour mash for the barrel".  His barrel aged, charter shine was some of the best bourbon that I have ever tasted.  He understood that sour mash white dog is not it's best as an un-aged spirit, and that the charred aging barrel does not improve sweet mash corn whiskey.  Sweet mash corn whiskey moonshine is an age old tradition that has been around since long before the moonshiners started using sugar.  My grandfather would never sugar anything.  His corn whiskey was made from large kernel white corn, spring water and my families yeast strain and that was it.  The only varieties of corn that he would use were hickory king or hickory cane.  Those were the only varieties of corn that the East Tennessee Mountain people would use for their liquor, for the table and for their livestock, for generations.  They believed that yellow corn was inferior, especially for whiskey.  

Here in the Ozarks and in many places in the South, you will sell far more moonshine than vodka.  Most southerners don't care for vodka, because to them it has no flavor and body, just the rubbing alcohol flavor of ethanol.  I'm not knocking vodka here.  There are some wonderful vodka's out there and there are many Southerners that like Vodka, but  the predominantly Scots Irish ancestry of the Southern Highlander demands whiskey.  There are some great, wonderful, legal moonshines being produced all over the South and many of us Southerners love them, because  we grew up drinking the real thing.  There are many grades of moonshine: Spittin Whiskey (you spit it on a camp fire to make fireballs), Fightin Whiskey, Sellin Whiskey, Sippin Whiskey and Courtin Whiskey.  Courtin Whiskey is what you take with you to loosen up your potential father in law, when you ask him for his daughter's hand and of course, it was the highest grade of moonshine.  Sippin Whiskey and Courtin Whiskey would typically be barrel aged Charter Shine (Bourbon).

Something else that you should know.  I find that in general  Southern Highlanders, Middle Kentuckians other Southerners and PA Dutch have more general knowledge, concerning distilling and especially the distillation of whiskey than people from other parts of the US.  That is not to say that there aren't some great distillers in other parts of the US.    I think that we have this knowledge because whiskey making is a family tradition for many of us and we have access to basic knowledge that is passed down through generations, going all of the way back to our Scots Irish (Irish Protestant), Scottish, Irish and German ancestors.  My ancestors were almost all Scots Irish with a sprinkling of PA Dutch, English and Irish.  Most of the American distilling traditions come from us Southerners and the PA Dutch.

 

Personally I would never put down any particular type of spirit as being inferior to any other type.  A judge would never judge Vodka against Whiskey.  I can say what my preferences are, but that's different.    I would rather drink a good sweet mash, or charter moonshine any day, than any vodka ever produced, but that does not mean that I think vodka is inferior to moonshine.  It just means that vodka is not my favorite.   I love Bourbon, Tennessee Whiskey, Scotch, Irish whiskey, Rum, Sweet Mash Moonshine, Charter Shine and I have even tasted some Sugar Head Shine that was pretty good.  I never used to like Gin, but lately I have tasted some American craft Gins that I loved.  I really like good Brandy and Snaps.    i have tried lots of vodkas and I find some less disagreeable than others, however I judge vodka against vodka not against whiskey or moonshine.  How many moonshines have you tried?

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I did not read Rogers post as putting down moonshine in anyway.  He is just pointing out that the term "shine" is specific to one type of distilled spirit, that not everyone views it as a positive, and that perhaps its not the most accurate term to use when describing the broader craft spirits market.

I branded my first product as a "White Rye" rather than a moonshine, as I wanted people to think of my distillery as a whiskey distillery not a moonshine distillery. 

All the same, what microshiner is doing is pretty cool and certainly a net positive for all of us!

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I think the idea of 'shine' or 'moonshine' is a generally accepted idea and I think it has become less burdened by the historical source of the term as more and more legitimate distillers use it. I'm starting to view 'craft' as alcohol producers of all kinds who are producing for a larger, but not fully commercial market. I think of the smaller 2 - 3 person operations as being more associated with the 'artisan' moniker.

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Roger wrote,

"my own opinion is that the very name of your organization is in and of itself part of the problem with broader acceptance of our craft"

"What I was mentioning is that a wonderful intent may in fact be hindered by a moniker that is perceived as less than desirable by the bulk of said market"

 "most consumers find moonshine harsh, and once they try it they paint all craft spirits with that "harsh brush". 

I think that the above quotes speak for themselves, especially the last one.  Roger is entitled to his opinion and I have no problem with that.  I like Roger, he is a good customer and i hear he makes great Vodka. However the fact is that there are some great Moonshines out there and he should try some good ones before he knocks them. 

Also I was pointing out that in certain parts of the country and with certain types of people, moonshine is very popular with the "bulk of the market".     Also, I have tasted several charter shines that were comparable to the best Bourbons and Whiskeys.  I have a much better understanding of moonshine and the people that love to drink it than Roger, because I grew up around it, drank it and helped make it as a teenager (before I turned 18).  I grew up in a dry county in east Tennessee and up the hollers around my home town, there were at least 50 people who were producing and running moonshine at any given time.  Though many locals consumed it, the bulk of it was sold to certain families in NY and Chicago.  Up there it retailed for over $120.00 per gallon and they could never seem to get enough of it.  I was around it in the late 70s and early 80s, but this had been going on since the early 1920s when the first Kingpin in my home town hooked up with the Chicago and New York families. 

I remember as an 8 year old kid, coon hunting with my dad on a full moon night, as a light snow was falling.  Our hounds had a big coon treed on a ridge above a little farm.  I said "dad how come Garnet's barn, and outhouse have snow on the roofs but his shed doesn't have any snow".  My dad said, the shed doesn't have any snow on the roof because Garnet's running his still and the heat from the still is melting the snow off of the roof. 

A few years later I went in that shed after the feds busted Garnet.  The revenuers had went at the still  and fermenters with axes, pistols and shot guns.  They had killed two of Garnet's bear dogs and had thrown them up into the fermenters.  The dogs were big Mountain Curs, and it still does not make sense to me why they made the effort to throw them into the fermenters.

Garnet was caught making liquor several times, however my grandfather made liquor for many decades and was never caught.  My grandfather was called Uncle Dillard Hall, by all of the mountain people of that area.   The uncle moniker was a term of great respect in the Southern Highlands.  He was a good man who adopted 18 children during the depression and he put 3 of those children through college.  He had over 600 acres of land with over 100 acres in tobacco at one time.  It was moonshine money that helped raise, clothe and pay for college for those kids.    My grandfathers charter shine sold to Doctors, Lawyers, Politicians and Judges all around that area.  It was considered to be far better than any bonded liqueur, by the people who drank it.  I did get his recipe wrong.  It was Malted Corn, my families strain of yeast and a quart of my families honey for every 100 gallons of mash. He also added a powdery looking stuff that was not yeast. He also added some slimy looking stuff that he kept in a bucket, to the sweet mash. It had a funny smell, almost like butter.  He would add mash to the bucket to "replenish it".  He had stuff in a different bucket that he would add to the sour mash that was used to make his barrel aged Charter Shine, that had a different smell that I can't really describe, but it was almost like raw potato.   After grandpa died, I asked my dad about the stuff in the buckets and the powder and he said that Grandpa got that stuff from his grandpa and that the sweet mash one created flavors that worked for the white whiskey and the sour mash one created flavors that worked for the sour mash and the barrel.  He said that the powders got rid of bitterness.   I think that the stuff in the buckets was 2 different types of bacteria, but I have no clue what the powder was.  i know that the stuff from the buckets had to be added at a different time during fermentation, than the honey because he said that the honey could kill it if they were added together.

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@Glenlyon - this comment speaks to the conversation at hand 

1 hour ago, Glenlyon said:

I'm starting to view 'craft' as alcohol producers of all kinds who are producing for a larger, but not fully commercial market.

We feel it is important to approach this from the consumer's perspective. If I am a 'craft' consumer, if I subscribe to a 'craft' lifestyle, define and consider myself in that light, and I am at the liquor store, what am I looking for?

The purpose of our post here is to try to point out that your customer base already exists. They just don't know that you do, and they most certainly don't know that you are the 'craft' option they are in search of.

We are very confident that a craft cohort exists. Beyond our own research, we don't have to look beyond the specialty coffee and craft beer examples to substantiate this. It seems, however, that there is a misconception that these are separate cohorts, delineated by category. They are not. They are the same. The people who drink specialty coffee are the same people who drink craft beer. And they are the same people, predominately, that are, or want to be, the craft spirit customer base.

The trouble is, you are not as accessible as beer or coffee, and therefore you must market. Craft beer and coffee's market inroads were built off grassroots, cash flow models - they became sustainable, even profitable, selling out the front door, then moved into distribution. Spirits are not consumed, let alone financed, in the same way, so we must utilize different methods in their marketing. But the facts remain: the craft consumer exists, is ~25% of the total market, and has not been educated adequately enough (i.e. marketed to) to know what his or her spirit option is.

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Southernhighlander, I think you may be too personally invested in the moonshine culture to appreciate Roger's point.  I, like Hedgebird, made a conscious decision to avoid calling our white whiskey moonshine.  The term moonshine means a lot of things to a lot of people around here, not all of them positive.  While I appreciate a good moonshine, I also see a lot of shortcuts taken by some who simply purchase GNS, create dozens of flavor options and throw it in a mason jar.  People seem to love it, especially the non-whiskey connoisseurs (trust me, you don't want to be at a tasting event right next to the moonshine guy and try to get non whiskey drinkers to appreciate your aged whiskey right after sampling a variety of apple pie, strawberry panty dropper, pink lemonade, etc).  

Moonshines definitely have their place in the craft world, Roger's point was simply (I think) that including "shiner" in your name may very well prejudice the craft consumer you are trying to capture? 

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Microshiner,

 

i agree with what you are saying about the industry on a macro level but I have a different, or lets say additional view point concerning things at the micro level.. 

 

you said:

"The trouble is, you are not as accessible as beer or coffee, and therefore you must market. Craft beer and coffee's market inroads were built off grassroots, cash flow models - they became sustainable, even profitable, selling out the front door, then moved into distribution. Spirits are not consumed, let alone financed, in the same way, so we must utilize different methods in their marketing."

Actually your statement above is not entirely correct.   Here is what I mean.  Different craft distilleries have different business models.  The business models differ due to different state laws, circumstances and approaches.  Many craft distilleries are very accessible and their market inroads are built from grass roots cash flow models where they sell out the front door and then later move to distribution or sometimes not. 

I know of a craft distillery that started out only selling bottles out of their tasting room.  They are very near a tourist town with a sign out on the freeway that brings customers in every day, all day long.  They were getting $25.00 to $30.00 per bottle and they were selling enough to make a good profit.  Then they went to distribution, but they only did that for a short period of time because they were only getting around $12.50 per bottle from their distributor and it was really lowering their profit margin.  So they built a bar there on site and they have a blue grass band on weekends.  So, now they are getting over $100.00 per bottle in the bar selling drinks and they are still selling 25 to 50 bottles a day out of the tasting room.  They are doing  really well now.  Also they and all of the other distilleries that sell out of their tasting rooms and especially those that are in and near tourist towns are introducing new people to distilled craft spirits every day, which is broadening our market share over time.  I was first introduced to craft beer when visiting a craft brewery and i have been drinking craft beer ever since.  I try new ones every chance that I get.

 

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@Southernhighlander - absolutely. In select markets - or as you said, at the micro level - this is very feasible, and I wholly support and encourage this model.

My statement was, again as you graciously point out, directed at the macro.

However, any craft distillery regardless of business model, unless it is to scale and exit, will benefit from communicating to the craft consumer that they are craft.

 

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45 minutes ago, Huffy2k said:

Roger's point was simply (I think) that including "shiner" in your name may very well prejudice the craft consumer you are trying to capture? 

Just so you know, I started a new thread for this discussion.

 

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Huffy2k,

 

I completely understand Roger's point and I think that your view point concerning moonshine is probably the common veiw point where you are and that you have made the correct decision in not selling moonshine there. 

At the same time my point is that that down here in the rural small town south, people have a very different view point concerning moonshine.  It is part of our heritage and culture.  Our moonshining ancestors created the distilling traditions in the US and we are very proud of that.   If I have vodka as my flagship product here, I am not going to do well because most people here see vodka as something that teenagers mix fruit juice with to get drunk.  We have no vodka or gin traditions here.  On the other hand, if my flagship spirit is a very good sweet mash moonshine, it will sell really well to locals and tourists alike.  Most of the drinkers here are loggers, sawmillers, truck drivers, heavy equipment operators, cattlemen and farmers and they typically drink a lot more than Whiskey and Vodka Snobs.  No offense meant.  Also the quality and taste matter far more than what you call it after the first bottle is sold because they are going to tell their friends if it is good. 

I have owned successful business's since I was 14 years old.  My business's currently bring in millions every year.  The 3 most important things to me are #1 making the best possible products for my customers, #2 making my customers happy and #3 making lots of money.  My business models always revolve around those 3 things in that order and I believe that is why I have been so successful time after time.   However, if I were in New Hampshire, I certainly would not be selling moonshine.  I would probably call my sweet mash moonshine, New Hampshire's Finest Sweet Mash Corn Whiskey.

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35 minutes ago, microshiner said:

 

However, any craft distillery regardless of business model, unless it is to scale and exit, will benefit from communicating to the craft consumer that they are craft.

 

I wholeheartedly agree.  Also, I really like your name:D.

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Paul

As I was drafting my original post above, I was thinking of you and how important your "moonshine heritage" is, and as such was very cautious to not paint moonshine or moonshiners as "wrong" in any shape, manner or form. In fact I would equate Moonshine as the one true American craft spirit. Nor was I comparing  Craft Moonshine production to Vodka production. We make vodka (on one of your great columns) but that's not what we really aspire to, nor is it even 10% of our product base.  We make Brandy, Rum, Bourbon (straight) , Wheat Whiskey (straight), Bourbon barrel aged Corn Whiskey, and Vodka The one thing we however do not make is Moonshine.

We do not make Moonshine for one primary reason, and that is because there is so much bad white product out there masquerading as Heritage Moonshine, that it has given the craft distilling industry and Moonshine a bad name. I can tell you for a fact after working in my tasting room for 3 years, there is one constant comment from customers, and it always goes something like: "Wow, I assumed your products would suck, because I've had.......", which ultimately ends up with their describing their journey into craft distilleries across the county selling  "moonshine".

The thing is, it's not really Moonshine (because there of course really isn't a definition of Moonshine) and arguably most customers have not ever had a real Moonshine. What they instead typically have tried is yet another "craft distiller" trying to pay their light bills by selling the first raw products that there shiny new stills spit out. That is bad for the industry and I believe it's bad for the serious Moonshine distillers.

Real Moonshiners who have taken the legal path, need to look at what is happening to their brand, and non-Moonshiners need to be aware that attaching themselves to a brand in turmoil is not necessarily a good idea.

So once again this is not an attack on those distillers who embrace and actually set their sights on producing Moonshine. This is a commentary on a problem in our fledgling "legal industry" with perception by the masses.

 

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