Ralph at Tuthilltown

In New York at a recent conference on wineries and distilleries in New York, one seminar included the Chief Counsel of the NYS SLA and a representative from the Licensing Division of the TTB. This question came up. The two looked at each other and shrugged and smiled. They acknowledged the contradictions in the law(s) relating to this question between States' laws and Federal regulations. In general the answer they seemed to be giving was that the Fed has no intention of challenging State's rights to control distribution and sale of alcoholic beverages, the Federal regulation notwithstanding. It's another version of "don't ask, don't tell". I'm willing to bet the overwhelming majority of distilleries, wineries and breweries are in violation of some Federal regulation or another but in compliance with their State regs. Best advice, stay in compliance with the laws to the best of your ability and in good faith and pay your taxes. If it comes down to a fight, the States will scream that prohibiting tastings and tours through working distilleries will eliminate all the tax the States collect on sales that result from those tastings and tours. Not to mention the loss of excise tax when new small distillers fail because they can not properly promote and sell their goods. And did I mention, pay your taxes. Both representatives agreed on one thing, all else can be resolved, but you have to pay your taxes or no mercy.

Yes Chuck, seems so. It is a toe in the door for the moment. But it does not preclude the continued organization of micro distillery owners as an autonomous group looking after their own. The comparison I usually make is that of the local patisserie and the Wonder Bread factory; both making bread, but not at all in the same business. That said, Wonder Bread has alot more clout in the world than Bill the Baker on the corner. So we should not dismiss the opportunity to participate and make our voices heard; AND continue to focus on the issues of running a micro operation among our contemporaries.

Made that Normandy trip a couple of years ago. The small distillers are open and willing to meet. They are the most interesting. You can generally make arrangements to meet them via email. Don't go in harvest season, they're too busy. And it helps to have a French speaking travel partner if you haven't the skills. Do not miss the Normandy Museum and the bunkers. Puts the whole D-Day thing in real clear perspective.

Spirits can be shipped to another Wholesale license holder or another distillery with a bonded warehouse. Perhaps you could contact a distributor in the State to which you will ship and ask them to receive it. The Three Tier System is not directly involved, except that generally goods shipped into a State must go to a licensed recipient. In Control States that means the State Liquor Authority (highly unlikely they will assist). But the more salient is the question of entering competitions. The ongoing debate, if it is worth it. As the other post commented, often the prize is taken by something not worthy (a relative term). As a veteran of "competitions" in general and as card carrying Judge of International competitions for years I can tell you honestly the winners are the best at that competition, on that day, decided by those particular Judges (all with their own prejudices) and are not a reflection of which product was "best" or "better", these are subjective decisions; and this goes for all competitions not just spirits comps. That said, if you want to introduce product and sell it on a broad scale competitions are important, because the general consumer is impressed by awards, the more prestigious the better (though truth be told, a competition is generally only as "prestigious" as it's hyped to be, money spent = prestige, not necessarily the best barometer as we all know.) So from a marketing point of view a gold or silver medal offers a small distiller bragging rights, especially if the competition includes some big brands; it is a qualifier the general public uses to gauge the product and make decisions. Some competitions are better than others, some are totally local and useful only for local and regional product lines, establishing credibility at home is the number one priority for a new brand so this is helpful. European competitions are nice to do but generally useless and often group American products into inappropriate categories (we're working to change that); and if you're going to distribute product overseas these are important. But beware of entering the lions den with whisky/whiskey; the EU is totally dominated by Scotch. In fact for the new distiller making whiskey in the US, if it isn't in wood for at least three years you can't call it "whisky" or "whiskey" in the EU. Try marketing "aged grain spirits" against "Highland Single Malt Scotch" and you'll appreciate the problem of not calling your product American Bourbon Whiskey, or Single Malt Whiskey. Who knows what to expect from "aged grain spirits"; but "whiskey" everyone knows what that is. Competitions are a luxury for the small producer till they are well enough established so the results will count, measurable in increased sales in important markets. For the distillers and the staff they are a fun way to keep enthusiasm up, nothing like a certificate or a medal hanging on a bottle in the distillery to remind the staff why we all work so hard. We just took a couple of gold and silver medals at a recent competition that really went a long way to recharge everyone, and that was for our package, not our whiskey. We are just beginning to enter whiskey competitions and very carefully. I'm not suggesting competitions are good or bad, they are both. Timing and choice of the competition you enter are the critical factors....oh yeah, and the cost per entry, don't forget that.

In NY State we are permitted now to operate a shop/tasting room in the distillery. Before that visitors were just in the way. Now we invite and promote heavily to visitors. If there are costs involved they may pale compared to the potential revenue and the PR value of inviting visitors and showing them your operation. We stage tours only on weekends so they don't really interfere with operations. The best example I have to offer is the added revenue we enjoy as a result of on site sales. Since we opened the shop in July of 2009 it has become our second largest customer, surpassed only by our distributor. It has generated over $150K in direct revenue to the distillery for product and accessory sales (tee shirts, etc.) And it creates unbeatable brand loyalty among the people who get to see how it's made and meet the distillers. Can't speak to Maine alcohol law, but perhaps you should be looking at legislation to permit distilleries to sell at the distillery, generating tourism dollars and helping to establish the brand. Ralph Tuthilltown Spirits

Read New York State ABC law. Certain Distillery licenses allow the licensee to apply for on-premise sales. It means going through the application ringer and complying with on-premise sales regulations, but you are permitted to make application for the permits. R

From the Camels' mouths..... At VITICULTURE 2010 in snowy cold Rochester. In a seminar Wednesday attended mainly by Farm Winery operators looking at starting a Farm Distillery on their winery premises, the TTB and the Chief Counsel from the NYS SLA addressed some interesting issues. They were describing to the would be distillers what would be necessary for them to comply with Fed and State Law. One slide during the TTB presentation became an issue. It detailed where a distillery may NOT be located under Fed law. Among the places listed were: where wine is produced and sold. The SLA Counsel subsequently addressed issues on the State level. I asked him if I was incorrect, based on the CFR, that every winery in NY that all Farm Wineries in NY State that acquired a Federal permit to distill and started a NY State Farm Distillery would be in violation of the Federal Code. His response, looking at the representative of the TTB, "Yes." It's a State's Rights issue after all is said and done, analogous to Medical Marijuana in California; legal for medical use, legal to grow and sell with a permit from the State, but illegal at the Federal level. The fact is that many States have laws which contradict Federal Code. We can only hope the US Attorney General would take the same posture on distillery/winery contradictions as he has recently struck on the Medical Marijuana issue, choosing not to prosecute anyone who is in that biz and licensed by the State. Another issue which arose was the mistake in the wording of the recent amendment to the Farm Winery Law in NY, which permits Farm Wineries to sell "New York State branded liquors" and offer consumers samples at the Farm Winery. A Farm Distillery may only sell New York spirits to Farm Wineries "in bulk", but may not sell it in sealed bottles. And the Farm Winery may only sell New York branded spirits it buys from all but the Farm Distilleries. So a Farm Distillery's products may not be sold on the shelves of a Farm Winery, though spirits made from non-NY raw materials may be sold at the Farm Winery. And the Farm Distillery may sell NYS branded spirits at the Farm Distillery, but if that distiller holds a A-1 Distiller license, consumer sales may not include those goods produced under the A-1 license. Okay now the good (fingers crossed) news. The SLA Counsel announced he was in the middle of the work of re-writing the NYS Alcohol Beverage Control Law using the recommendations of the State Law Revision Commission, whose final report was released in December. The draft of the new law will be online for comment upon submission to the Legislature. In a conversation with the Counsel after the seminar he told me he was using the recent proposal from Ag and Markets (for the assignment of all winery regulation be passed to the Department of Ag and Markets) as a form for shifting the Production side of regulation of wineries AND distilleries to Ag and Markets. Under this scenario the SLA comes into play when the goods leave the place of production. My suggestion, keep close to the proposals coming into play at the State level. Proceed as you are (legally). Contact your State Legislator and push them all to support total revision of ABC law as per the reports of the Law Revision Commission and most importantly, urge Legislators to include the producers in the process of composing new law to regulate them.

If the laws are "designed to ensure" failure, how is it so many new distilleries are getting open and their new products out to market? My partner and I did it alone, with our own money, with own hands and brains, from scratch in four years with no previous experience. The attitude reflected in your comment is what ensures failure. The simple answer: If you don't like the law either leave or change the law. The more difficult answer: Roll up your sleeves and get to work and stop using the law as an excuse for not producing. R

In New York State a Distillery is not permitted to sell direct to consumers or retailers, EXCEPT: Some licenses come with the right to apply for and acquire a Wholesale Distributor license allowing for self distribution (the Distillery license does not INCLUDE the Wholesale license, only the right to apply for one, pay the additional fees and carry the appropriate bonds); and Sales to consumers may be conducted at the site of a NYS Farm Distillery (DD Distillery License)and must be carried out totally at the distillery and the customer must come and get the product and pay for it there and then. Ralph

With the help of Senator Gillibrand's office and some pushing from the US Ambassador to Belgium and his Dept. of Commerce staff there has been a response from the TTB to the issue. Unfortunately the TTB Counsel who wrote me suggested, rather than free American Spirits from EU control, there is the opportunity to market American Spirits that do not meet the EU requirements for whiskey/whisky by simply calling our whiskey "aged grain spirits". The obvious response to this suggestion is: "It's WHISKEY." The more salient point however is quid pro quo; the US CFR defers to the country of origin for determination of the criteria for defining a "national spirit". This argument is strengthened by the text of EU law which specifically includes "American Bourbon and Rye" whiskey, recognizing the provenance of the spirits. The Department of Commerce and the International Trade authorities must insist the EU recognize the fact of common international agreement: definitions of National Spirits are the right of the Country of Origin. Certainly the French know this: Cognac, Champagne and Calvados may only be made in France under French rules. The same applies to Grappa in Italy and Tequila in Mexico. And of course the most obvious example is Scotch Whisky, which must be made in Scotland. It is common international trade practice. Any new distiller in the US who intends to make whiskey is affected by this inequity. Contact your Senator or Congressman and insist they weigh in on this.Remind them the dire state of our balance of trade. This is not a rhetorical suggestion. 200 American tax paying distillers calling their Legislators and the Department of Commerce would draw their attention. And your State Legislators can get on board too, since your success brings money from the EU to your State in the form of jobs creation, economic development, agricultural opportunity.

The link to the Reports section of the NEW YORK LAW REVISION COMMISSION link: http://www.lawrevision.state.ny.us/abcls.php Suggest reading the PRELIMINARY REPORT first, it is shorter and identifies the problems uncovered by the investigation of the Commission. The FINAL REPORT is lengthy and deals with issues mainly not of interest to distillers. But the sections on revision recommendations for Wineries, Breweries and Distilleries (Distillery section the smallest section) are important. Now of course, the question is: "Will the New York State Legislature act on the report?" Squaring the Alcohol Beverage Control laws of New York is one way to increase revenue to the State, create jobs and simplify the administration and enforcement for the State Liquor Authority. I am certain the report and recommendations of the Commission will get no any attention without a deliberate cooperative effort of the Producers as a group insisting their Legislators take action.

Good points all. Thanks for the comments. We have not experienced any direct benefit but it is a good point that many of DISCUS undertakings have benefited all. It does seem to me at this point DISCUS does not know what to do with us. It is unlikely any new distillers could afford the price of membership in that elite club, and the notion of a tiered membership is debatable (creation of second-class citizens and all that stuff) for a variety of reasons. That said, it is mostly easier to effect change working together, and especially at this level of industry. I hope DISCUS will find a way to include the new small distilleries without assigning us to the kiddie table. I do agree that ADI is good for what it is, but as a fully effective National governing body, it is not ready to represent distillers at the National political and industry levels. There is a middle ground. The question is: will the craft/micro distillers be taken seriously and will Big Alcohol nourish and help the small distillers? First step is to open a serious dialog and aggressively explore the various ways all of us can benefit from each other's resources. Thanks Chuck for your comments, and congratulations on your recent recognition and award. R

The NEW YORK STATE LAW REVISION COMMISSION has just released part two of their comprehensive study of NY Alcohol Beverage Control Law and the State Liquor Authority. It is available on the COMMISSION's site. It is lengthy and covers the entire range of alcohol related interests. But for the new distiller intending to operate in NY, it should be required reading; at least those sections dealing with Winery, Brewery and Distillery laws. It should be a major concern of small producers in NY and at the top of the agenda for the next meeting of the NY CRAFT DISTILLERS GUILD.

DISCUS members comprise the top 8 or 10 top alcohol companies. Till recently membership fee was $100,000 a year, needless to say this is not a welcome playground for the small distiller. When I pointed out the high cost of membership is prohibitive for the small distiller to one DISCUS representative at the last ADI gathering, his response "Oh, we just lowered membership fees to help with that." I asked the new and attractive membership fee for small producers, "$75,000." We may, as distillers and alcohol makers, be producing similar products to Big Alcohol producers, we are not the same industry. I commented to DISCUS rep and in a subsequent letter to DISCUS, noting the suggestion this reduction in annual membership fee to $75,000 is the clearest indication the DISCUS membership and Board are oblivious. Better off focusing on ADI development, join ADI and work with other small producers to address the problems unique to us little guys. The National movement to increase alcohol excise taxes is about to roll over the industry, some speculate increases nearly doubling Fed taxes. THAT is the reason for DISCUS interest in the growing small distillery movement. Craft distillers put a "face" to the cold hard Big Alcohol industry. We are small business, family business and agricultural in nature. DISCUS sees the writing on the wall having watched over the last twenty years as the micro-brewers have expanded their footprint on the beer market. But their (DISCUS members) struggle is not our struggle. Beer and Wine makers enjoy a significantly lower Fed and State excise tax than their big cousins. Micro brewers pay an excise tax rate which is 20% of that paid by big brewers. That is also the goal for the small producers, parity with small brewers and wineries. DISCUS wants small producers to join THEIR fight. But the best for small producers is to band together and strengthen the organization that represents the best interests of the micro/craft/small producers, ADI. Check Melkon's string on this forum about the proposal for reduced rate of taxes similar to that enjoyed by the micro brewers and small wineries. Remember, DISCUS views the small distillers as the "camel's nose in the tent", we are stealing an increasing amount of the market share they have had locked down for decades. We all should be thankful for their help if it is offered. But as an old climbing buddy of mine used to tell me "When you sup with the devil, best to use a very long handled spoon." Big Alcohol is about one thing: Money. Of course any business needs to be profitable so money is a concern for all of us. Remember one of the three big lies: "We're from the government, we're here to help you." DISCUS does alot of good work, for Big Alcohol; but believe me, they would prefer we all go away, I have not seen or heard any evidence to the contrary. Perhaps DISCUS will have one of their officers respond to this string and present DISCUS' case why small producers should sit down for a meal with Big Alcohol.

A recent visit to pour some of our American Whiskey for the American Ambassador to Belgium in Brussels was a great success. The Department of Commerce Representative sat in on the meeting which lasted about an hour at the Ambassador's residence. Both Ambassador Guttman and the DOC officer were quite surprised and dismayed to learn we are obligated to remove the word WHISKEY from all labels we ship to the EU and that the EU had essentially redefined American spirits Bourbon and Rye. They promised to look into it. We met with similar reaction in Paris at the American Embassy there. The EU rules do not apply in non-EU nations such as Switzerland; which we learned on our recent introductory trip to Zurich aboard the WHISKYSHIFF. We sold our HUDSON WHISKEYS over the counter to eager buyers who forked over the equivalent of $72 for a 375ml bottle of American WHISKEY. These anecdotes are related to demonstrate the general lack of understanding among diplomats and bureaucrats and us poor working stiffs about the subtle but effective ways the major producers in EU have managed to slip American Whiskeys into a sort of "non-category" thereby keeping the competition low. The EU whiskey drinkers for whom we have poured on our visits overseas are very nearly unanimous about their love both of American Whiskey and of NEW whiskeys, "Finally, something new," was the most oft heard comment at EU events in reaction to our spirits. This issue has not gone away. It is an enormous opportunity for small new American distillers. Distillers who export do not pay Federal or State excise taxes on the products shipped overseas. Export aids the balance of trade and is encouraged by the Fed. Just a reminder: Louis Armstrong, Jimi Hendricks, Count Basie, indeed many more black performers who couldn't get a bed in a hotel or a booking in white America went to Europe where their color was of less consequence than the quality of their work. Then they came back here with street cred and became the pioneer black American musicians. And you know what? It's just a plane ride away. But the EU inclusion of American Bourbon and American Rye whiskey types (called out specifically) in EU law is pure and simple protectionism and has to be addressed.

Sorry to disappoint, but the scenario you paint is highly unlikely. Home distillation, if it ever is permitted in the US, will not happen for a long long while. And the law is what it is. A serious business developer aiming at developing a distillery will take the time to know the risks AND the law and use both to his/her advantage. It is definitely NOT ADVISABLE to distill at home. If you want to join the "club" of distillers, follow the law, build your facility, get your license and start to make and sell your product. The process and legal work is so important only a very foolish person would undertake the project and start out by making illegal spirits. Perhaps you are unaware, even owning the PARTS of a still in the US without a Basic Permit is illegal. We have limited options in dealing with arcane law and the control of spirits by major corporations. The first is KNOW AND FOLLOW THE LAW; BE CREATIVE in the context of the law; CHANGE THE LAW it is possible. Both take time and money and effort, "honest" work.

Porter, reread the CFR STANDARDS OF IDENTITY from the TTB. There is no reference in the law to "aging" only "storage". It is arguable, though not a tested argument that I know of, the absence of minimum time in oak allows for overnight "storage" in new charred oak. It is no less whiskey in the law if it is new charred oak for an hour or a decade. And the "age statement" can be as simple as "aged fewer than four years". As for the introduction of other wood or treatment, these must be accounted for in your Statement of Process filed with the COLA application. No reason I can see that it would preclude treatment with other wood of any kind (except those which are poisonous of course)as long as the whiskey meets the Fed definition for the Class/Type and you declare what's in it.

Suggest you rethink the heater. If you use a crock pot you will have to have different crock pots for each color wax you use. We found the best after many other heating mechanisms was a cheap Walmart two burner electric hot plate and two cheap aluminum pots. The greatest advantage is the adjustable heat controls. One more note, get the "high temperature" wax; the lower temp waxes come undone when bottles are left in a hot place, wax softens in the heat and the warmth expands the liquid in the bottle which pushes the cork upward. R

So it appears we're still at the definition stage. I hope we'll be able to get this codified at the next ADI conference. This seems to be the most accepted version of the definition of a small alcohol producer: Micro Spirit Producers make alcoholic beverage spirits utilizing a variety of techniques and agricultural raw materials including but not limited to grains and fruit, which substantially change the character of the raw materials; up to 65,000 proof gallons of product per year in a single licensed premises. These techniques include, but are not limited to: infusion, distillation, blending, and/or rectification. Ralph Erenzo Tuthilltown

The third distillation does have effect on the spirit. On the second distillation there remains some of the character of the substrate (corn or cider for instance); but the third pass through 21 plates does the trick and the final product is noticeably smoother and less "apple-like". Beyond the third distillation though we find no further difference. I agree that most of the "thirty-seven times distilled" hype is just that, Hype. After the third distillation the main determining factor in the flavor of a vodka is the water it's being reduced with, then further on when it's proofed for drinking.

You're getting good advice here so far. And expect no one to take you seriously till you have your distillery up, producing; and you have placed it on some shelves or back-bars. It is typically a very much longer road than you expect it to be at the outset. Our NY license permits us to hold a Distributor license as well so we can "self-distribute", which is how we started selling vodka and whiskey, out of the trunk of my car from Lake Placid to New York City. In most cases no one can sell your product like you can. At a potential retail counter I would often hear someone call to the boss, "It's a liquor salesman." I would stop them and tell them, "I'm not a liquor salesman, I made this stuff myself and it's the first legal whiskey made in New York since Prohibition", that usually got their attention and I more often than not found myself being ushered past other waiting liquor and wine salesmen and into the owner's office. When you have a stable of on and off premise accounts that like you (and that is very important, cause they don't like most liquor salesmen) then you take that client list and start looking for a distributor who is sympathetic, who likes the whole "home town guy makes whiskey" story and can place you with the best restaurants and retailers. But always remember they're buying into your story and your energy and dedication as much as they are buying a bottle filled with your whiskey. Beware big distributors who offer you the world, once they have you, you are stuck with them. Vet prospective small or medium distributors and ask around among the on premise accounts you found and ask from whom they buy their spirits or wine, then take a look at those distributors. Guard also against the distributor who would bury you in the back of the warehouse. Remember that liquor and wine salesmen are on commission, and they have quotas to meet; they would rather spend the limited time they have with a buyer writing orders for such as Johnnie Walker or Absolute or Gray Goose than trying to convince some retailer to commit shelf space to an unknown brand. If the field reps are not into it, it will not move and you'll find your pallet of product stashed behind a phalanx of Cutty Sark and Gordon's Gin; lost in the archives like the Ark of the Covenant in the last scene of RAIDERS OF THE LOST ARK. Good luck.

I learned long ago from a Professor at Boston University Media department. He told us, "Don't put your name on the product." His point, you may one day be able to sell your brand for lots and lots of money, and if your brand is your name, you've sold the rights to your name. Ralph Tuthilltown

I spoke with someone working on this bill in Assembly and it seems it is unlikely to get onto an agenda this session. He agreed, upon learning we have organized (and quite surprised at the number of ag distillers in the group) it is important to step back and for the State to draw in both the Distillers and the Growers into the Legislative process, in particular the proposal of new Alcohol law or new license classes. He agreed the law needs to be simplified, not more complicated. I will compose a brief formal statement and post it here for review and comment. I would prefer to have at least a majority view (if not a consensus) of the Guild's highest priorities and thinking to present as a united group going into the Law Commission round table discussion. Many at the first Guild meeting had interesting perspectives which may be helpful in bringing together the elements of a "statement" I could read into the record at the roundtable discussion on behalf of the Guild members. Those so inclined would you please make some (terse) comments on the specific issues you'd like to see included in the discussion. Keep the list brief and focused on the most necessary changes short term, and long term. Thank you.

I have been invited to join in a roundtable discussion hosted by the NYS LAW REVISION COMMISSION June 24th. I will be asked to comment upon the position of distillers in New York on proposed changes to ABC law and SLA regulations; and I'm guessing the general state of our growing industry as it relates to law, regulation and enforcement. I believe it will be very important to speak for the Distillers Guild based upon the concensus of opinion on a very specific short list of immediate concerns; and to then present at least the skeleton of a long range plan for the future of Farm and Micro distillers in NY. Please read the bill S.2637, available on the NY State Senate website under Bills and Laws. Then please make your comments here and include brief comment on where you'd like to see the State and the industry head for the future. I will prepare a general position statement for presentation; and then be better prepared to represent the general opinion of the Distillers Guild membership. Ralph Erenzo Tuthilltown Spirits