Ralph at Tuthilltown

Melkon's numbers seem reasonable. I would suggest as the discussion moves forward with the Fed, we focus on the fact this revenue is not going to be "lost" to the Fed as a result of the adjusted rate for the new tax paying startup micros (all existing and future), since it did not exist only a couple of years ago. This is NEW revenue from a NEW and developing industry. If the Fed wants to enjoy increased revenue from a NEW growing and expanding industry, then it is easy for them to justify the rate. As to the question posted earlier about growth rates; if we are any example, Tuthilltown doubled it's first year sales in the second year; tripled sales in the third year and we expect to double that number again over the next 18 months as we rollout nationally and continue to export. And we're tiny and poor as churchmice. From zero to $1.2mil in sales in under three years, and only the last year with a distributor, before that we had a sales, marketing, distribution team of one (me). Don't skrimp on projections of growth. As the consumers learn more all our sales will increase; read aloud to legislators: This is only he beginning of the revitalization. It is my guess that the micro producers will grow in numbers, doubling in the next five years (or fewer). Considering how many small ag distillers were in NY State before Prohibition (some numbers testify to over 1,200 farm distilleries pre Prohibition) it is not inconceivable that our numbers nationwide could grow to 1,000 in the next ten years. How do the numbers fall out for NEW revenue to the Fed at that rate, I wonder. Remember all: THIS IS NEW REVENUE, we are not taking money away from the Fed or placing any additional burden on big alcohol by this proposal.

Article in this month's HEMISPHERES magazine, the inflight mag of UNITED AIRLINES. Next month in the AIR CANADA inflight mag. Upcoming, article in POPULAR MECHANICS, WINE SPECTATOR MAGAZINE. Watch for them. Collect them, trade 'em with your friends AND LEGISLATORS.

Points well taken. In NY the SLA is dead set against tastings at any site, wineries, breweries or distilleries; citing concerns for DWI, a reasonable concern of course. However, the SLA has approved regulations which stipulate the protocols for conducting samplings, the amounts to be served and the number of samples for breweries and wineries, which are based on the accepted "serving size" for each different product. For spirits the serving size is a 1.5 oz pour. The "sample" size allowed is .25 oz and a limit of three (3) samples per visitor. No regard is given with spirits sampling to the actual proof, so in that way it is not an accurate way to regulate the alcohol consumption of the visitor. At pourings we use an auto-pour that measures out exactly .25 oz so that we do not run afoul of any passing inspector. The "offensive" position is the fact that wineries and breweries are permitted to sample and sell at the wineries and breweries. The "regulated" substance, the "taxed" substance, is ALCOHOL which is the identical material, in the identical percentages content in a full "serving" of all three types of beverage alcohol. If the liquor regulators are positing that the tasting poses an unacceptable risk to the public, the risk already exists and they are saying that they are not capable of regulating the existing situation. Equal treatment under the law. This problem, by the way, is nationwide both Federal and State levels. Distilled spirits are treated differently. Until a successful effort can be mounted to level the playing field among alcoholic beverage producers (the State and Fed admitting that it's all the same alcohol), we will always pay more taxes and be more heavily regulated and constricted. FURTHER TALKING POINT: It would seem, as Melkon and I discussed yesterday on the phone, that the percentages of the tax breaks applied to our beer and wine cousins is based on the cost of making product and the risk we take. A winery has the ultimate risk of loss of crop due to weather or other conditions, that crop representing a whole year of his raw materials. Brewers and distillers can work year round. So the winery gets a higher break than the brewer. But when we take the costs and risks faced by a new micro distiller the case can be made we should have the greatest break in our Fed Excise tax. Add up the risks: laying out hundreds of thousands of dollars from private money and building out your facility BEFORE you even get license or produce product; buying raw materials; R&D and learning curve time; new make into expensive oak barrels and unavailable for sale for months to years and without any guarantee it will be good or anyone will sell it on their shelves. Add to that the enormously competitive marketplace, sewn up by consolidated distributors with big brands advertising worldwide with very very deep promotional pockets and known brands. Imagine if those first barrels turned out not so great, after two years waiting and producing..... So there is plenty of logic and cogent argument. So here's the question: how much? How much of a discount should the Micro-Producer get over his big brother Mega-Distillers? The question can be answered with the math, if someone is willing to take on an analysis of risk/cost/benefit for a startup micro-distillery vs an existing mega-distiller. Comparing that to the existing discounts enjoyed by micro brewers and micro wineries will give an interesting picture. If risk/cost/difficulty are the criteria for determining the discount, who has the most to lose or gain and how should the discounted tax rates fall out among the three categories?

Riannan Walsh of Celtic Malts is a very active woman who is putting together her Scotch distillery. And you might also consult with LeNell Smothers at LENELL'S Red Hook, Brooklyn; who is extremely knowlegable about things "whiskey". Regarding your question about "experimental stills" I am unfamiliar with the differences in the application process, but given that all distilling starts with the Fed "Basic Permit" I am inclined to believe you'd be better off simply applying for the full Basic Permit then start small. There is no bottom limit to what you can produce or the size or character of the equipment that is used, that I am aware. It is usually at the State level that the type of distillery, capacity, license, etc is determined. And damnit we NEED more Women in distilling. I'm getting tired of the same ole whiskered cheeks at our conferences. Chuck may have more insight into this. R

When taking your case for legislative action in support of Micro Producers in your State and at the Federal level, below are some talking points: AGRICULTURE: Our business is an ag based business. We buy from local growers, and contract for custom cultivation. In an era when small agriculture is under attack by foreign producers and corporate farms which siphon revenue from the local economy as well as offset the international trade balance, "buy local" is not just an advertising slogan. Successful farmers want to farm, not sell off their land to developers. They don't need subsidies and charity, they need higher margin markets for their produce. Small farmers need consumers to know what they do and support them by buying their products and value added products (like spirits). The regional and Statewide Agriculture industry is your ally. If you are not already a member of the FARM BUREAU, join. It is not costly and the Farm Bureau is the single strongest lobbying group we can depend upon. They were greatly instrumental in helping us to get our NY laws changed. TAX REVENUE: The potential revenue from the creation and sale of specialty Micro-Ag Spirits is enormous. State and Federal Excise taxes which do not exist now will grow to be a significant portion of the State and Fed revenue. Sales taxes generated by the sale of Micro Ag spirits put heretofore unavailable revenue into State coffers. At a time when the Fed is in such debt (no comment on the politics of THAT situation); and States are hurting for new revenue sources, rather than raise taxes, the creation of a new industrial base promises greater revenue with less impact on the individual tax payer. JOB CREATION: The success of small producers creates NEW jobs at the local level. Jobs include skilled and unskilled labor. Again, employment taxes paid are a NEW source, non-existant beforehand. Jobs are local, entry-level and bring enormous pride to the workforce. TOURISM: In New York the movement to promote our local farms extends to Tourism as the State educates consumers and the "buy local" movement goes into full swing. Farm stands and "you pick" opportunities are attracting families to farms and educating a new generation of consumers where their food comes from. Tourists buying farm goods return home with new products and if they are popular, the consumer is less likely to travel back to the source, instead they are likely (and we have seen this happen again and again) to take the empty bottle to their local retailer and request it be ordered, creating a new client for the producer. Tourism dollars have a multiplier effect roughly seven-fold, that is, the money gets respent up to seven times before it leaves the area. The steady increase in gas prices, coupled with a difficult national economy will have a positive effect on local and regional tourism, so for instance in NY we already are witnessing a shift in vacation and travel patterns that traditionally accompanies economic downturns and high fuel prices: Local and Regional Tourism thrives in these times. People do not cancel their vacation, they just don't drive as far and typically begin to discover local and regional attractions for the family outings. BREWERS AND WINERIES: Form coalitions with the micro-wine makers and micro-brewers, we are all in the same boat. Form a substantial constituency among the brewers, wine makers, growers and the Farm Bureau and your State Tourism offices to plead your case to the Legislators. Any other talking points or elaborations are invited. R

UPDATE ON NY LEGISLATION: S2019, we have learned, was not included in the last bundle of bills sent to Governor Paterson. So there's time still to get your cards and letters to the office of the Governor to support the legislation. This important bill will permit New York State wineries to include micro distillery products made from NYS raw materials in their tastings and sell them at the winery stores statewide. There are 240 wineries in New York State, providing the new producers with a ready made marketplace of willing sales venues and a flow of tourists who will go home and a their local retailer for your products (assuming they like them of course). Equally important, the bill defines fermented products as AGRICULTURAL PRODUCTS. This is the most important aspect as it brings the Dept. of Ag and Markets into the mix, which may mitigate somewhat the influence of the SLA on matters that concern small alcoholic beverage producers. Please write to the governor and urge him to sign this important bill. It is likely the SLA will oppose this, on the grounds they "don't want to create a whole new group of liquor stores", thereby missing the entire point of the bill. Pass this info to brewers and winemakers you know and urge them to write. R

I think it is important to stress the "agricultural" nature of the raw materials. And the inclusion of "primarily" leaves room for addition of non-ag materials such as natural flavorings and such. I do agree that it may be unnecessary to mention fruit and grain, however the idea is to make clear the traditional basic ingredients. Perhaps this revision to the revision proposed above: 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. I have added "blending" to the techniques. And reversed "Micro Spirit makers produce" to be "Micro Spirit Producers make" to maintain a "title" to the defined class of producers. Also I added "alcoholic beverage" to the first sentence for clarity and to be closer to the Fed and States' wording. Perhaps Chuck you can comment on the above from an attorney's point of view. R

Okay, taking some more of this into consideration, let's try this wording: Micro-Spirit makers produce beverage spirits primarily from agricultural raw materials, including but not limited to grains or fruit. A Micro Producer utilizes a variety of techniques in the preparation which substantially change the character of the original material, including but not limited to: infusion, batch distillation and/or redistillation. Micro Spirit Producers prepare and bottle up to 65,000 proof gallons of product per year in a single licensed premises.

Totally agreed. I think the proposed definition as it has evolved is generic enough, and casts a broad enough net to be fully inclusive and focused on the point. Perhaps the defined term should not be "craft", but "micro". Any comments anyone?

This discussion belongs with the previously posted discussion wherein Melkon lays out the proposal for reduction of taxes. Let's combine the discussion and keep that ball rolling. R

NEW YORK PRODUCERS: The DEC is moving to classify holders of the new "DD" Farm Distillers License as "industrial use", not "agricultural use" which was the original intention of the bill. We are working with Farm Bureau, our attorney and Ag and Markets to prevent this happening. The major difference is the criteria for the disposal of "industrial" waste are far more stringent than those for "farm waste". Please contact your local legislator and the Farm Bureau to make your opinion known. If you would like to join the effort on the legal side, it is advisable a group be formed to retain counsel and lobby with vigor. There is also the fact that if the State labels your Farm Distillery an industrial use, your local zoning comes into play and you may not be considered a Farm for the purposes of zoning compliance locally. It is our position, the State of NY defines a Farm Distillery as being "on a farm" and therefore if the State of NY issues a Farm Distillery license, all other things being in compliance with the definition of a Farm in NY, the other agencies of the State must also recognize the Farm nature of the operation. R

While I agree it is a worthwhile pursuit to protect to the extent possible the terms "artisan" and "craft" as they relate to distillers, they are not terms of art and therefore subjective. We would be wasting our time trying to police the use of the terms outside any legal use, for instance if a State defines the term relative to distilling ("craft distillery"). Let the marketplace decide if a maker's product is shit or not. Worry about your own product and be true to the terms as you understand them and as we all eventually accept them. But as I've said before this, there will always be those who will choose to work at the fringe of the definition, which is okay. I'd like to ask if we can begin to get some concensus on the proposed definition. It is not perfect, but all the specific qualifiers can be added down the road to sort out the types of "craft producers". Reread the latest proposed definition, of "craft producer" leaving aside the question of "distiller" vs "infuser". R

We're separating with a screw auger dewatering device (approx. $20K). A local farmer takes the dried grain solids (about 10% wet) for feed. We have installed four artificial wetlands to treat the remaining liquid effluent (so far $60K).

Bill before the Governor for signature, being considered now. Any distillers or applilcants in New York should be contacting the Governor's office and urging him to sign Senate bill: 2019. The text and explanation of the bill can be found at the New York State Senate site, type in "S2019". The bill permits holders of A-1 and DD licenses to sell their products to wineries which may then sell at retail those products made from 100% New York agricultural raw materials. It allows wineries to share tasting and retails sales space with a distillery. It defines "New York labeled liquor". The bill adds "fermented agricultural products" to the list of ag products. Anyone who has tried to get their craft small batch products into Statewide distribution knows the difficulties of trying to convince a distributor to pitch it to retailers who have limited shelf space, and where you're competing with the Absolutes of the world. This bill would create a potential market network specializing in New York produced spirits and without competition from big alcohol, on a statewide basis (there are ove 200 wineries in NYS). Please contact: The Honorable Terryl Brown-Clemons Acting Counsel to the Governor State Capitol Building, Second Floor Albany, NY 12224-0341 And ask the Counsel to lend her voice to those urging the Governor to approve this law and expand sales opportunities for New York's craft wine and spirits producers.

The differences between equipment and craft, as Melkon put it, are critical. Chuck's observation that there should be no difference in our definitions between a "craft producer" using a pot still, a column still (though some may dispute if a column contributes to the "craft" nature of the undertaking) or a teakettle still on a stovetop is well made. As Melkon and others continue to hold, it's about skill and care, ongoing education and improvement of the product, and putting some soul into your work. Though I do not personally agree with using a column to produce "craft spirits", I do agree to disagree and move forward. If we are all agreed that it's about "craft" and not about hardware, we should leave the discussion of column vs pot behind and move on.

Good points. How difficult would it be to define "agricultural raw materials"? Is a flavoring considered, in this case, to be a "raw material"? This list of qualifiers could be a mile long. May I suggest we take heed of the earlier advice to let the market sort out quality. The simple criteria are the easiest to manage at this point. I'm thinking that a producer adding artificial flavorings is not using an agricultural raw material in that case; but a producer using actual herbs and other natural ingredients is excercising a "craft" approach. The question is where do you draw the line? Is a producer who uses a concentrate of a natural ingredient (perhaps a distilled essence of some herb or fruit), using a raw ingredient or a derivative and does it matter? I'm inclined to favor any naturally developed derative like tinctures or reductions, if they are concentrates of agricultural raw materials, not synthesized compounds made in a lab. In the end the honest craftsmen will police the dishonest craftsmen and the marketplace will be the judge. And by the way, the policing and judging can be passed to the Fed at such time as we all agree on the standards and our own organizational structure and present ourselves an our position on such things to the general public through the proposed lobbying efforts. If we expect the Fed to allow a producer to enjoy reduced taxes and other considerations, we should be the community that defines the scope of our own influence. Do we go forward on parallel paths, tax reduction and defining the term "craft producer"? I think it is important. Then the Fed can decide about those who might take improper advantage of the definition to claim reduced tax obligations. An accepted term and a defined group of constituents will go a long way toward tax relief. The cheaters will be found out by either the Fed or by the community eventually. And frankly it is our feeling (as it relates to our own products) we are not in the same class or have anywhere near the same product that a blender who pours a dose of chemical flavorings into GNS. And I would not want some unfounded fear that someone will cheat to stand in the way of moving forward on a program that benefits the real craft producers. Can we try to hone down this proposal and comment on its merits or lack thereof? Any suggested clarifications or additions to bat about? The discourse is good. Now let's aim at an acceptable declaration.

Marc, the definition I'm proposing includes the stipulation for a change in the nature and character of the product by use of the craft involved. In my opinion putting juniper and whatever other ingredients into GNS would produce a substantial change in the character of the base material (GNS is grain based after all). The point of gin is the herbal character added by the infusion and perhaps redistillation. Taking GNS and redistilling it in a pot or any other still and bottling it thereafter without any substantial change in the character takes minimal technical skill and (again opinion) is not a craft undertaking. To be clear, that is not to say the making of vodka is not a craft; as I mentioned in another post, starting from the raw agricultural source materials and making vodka is another matter.

We were challenged by various spirits writers and aficianados. Eric Asimov and I had a nice conversation about the definition of Bourbon. He referenced a book (not sure the name) that had used an earlier version of the Standards of Identity and specified an upper limit to the amount of corn that could be included in the bourbon mash bill. I sent him the current Standards of Identity and he called out our discussion in his blog "The Pour" and verified that there was no limit on how much corn we could use and still call it bourbon. We also had some writers who were convinced bourbon had to be made in Kentucky; Single Malt had to be made in Scotland (even the TTB challenged us on that one); the obvious two year requirement (I reminded them it meant "straight" as you mentioned). The fact is that the people getting into serious artisan spirits production are as much faced with the chore of educating their marketplace as they are with making good product and getting it a glass in front of a customer. In our experience there is an entire population of both consumers AND "professionals" out there who know nothing about how we do our work and make what we all make. If the producers want the public to embrace the product they make and indeed "how" it is made, it's up to you all to educate them why they should love us so.

I'd like to make a slight amendment to the last sentence of this proposed definition: "Craft Spirit Producer" Craft spirit makers produce beverage spirits primarily from agricultural raw materials. A Craft Spirit Producer utilizes a variety of technical skills in the preparation which substantially change the character of the original material, including but not limited to: infusion, batch distillation and/or redistillation. A "Craft Producer" operates facility with an annual capacity of up to 65,000 proof gallons of finished product in a single licensed premises. This revision (from "craft distiller" to "craft producer") is more inclusive. I'm inclined to agree with those who feel that we should define the broad category and then address the different variations of the craft (distiller, blender, infuser, whatever). And if this is acceptable to most, I suggest we begin to weigh in on the proposal either as it is written above or with revision that may be proposed. Comments anyone? Disageements in principle? Wholehearted support? R

Important to remember, what you are making (vodka, whiskey, absinthe, eau de vie, whatever) is not the defining characteristic of "craft". Some comments earlier posts suggest that vodka is not a crafted product and there was some question if it can be made in a pot still. These are not the criteria for "craft". But to address the comments directly, we consider our vodka to be "crafted". It is produced in a pot, one batch at a time and we replumb our still to send the vapor from the pot through two columns in order to get the required alcohol content so it can be called "vodka". It is true that a simple pot still can not make vodka. Any claims of distillers they are making crafted vodka in a simple pot contradict the laws of physics. However, the pot is still a pot even when you reroute vapor to columns, and a batch is still a batch. The approach, the mindset, the care and attention to detail and flavor, the care taken with the fruit substrate we use, all of it goes to the "crafting" of our vodka. And the fact it is barely vodka, in the sense that we are following the letter of the legal definition and perhaps pushing the subjective determination of what constitutes "without distinctive character, aroma, taste, or color" since our vodka has the faint aroma and flavor of the apples from which it is made; these faint characteristics are not removed with charcoal or any other process. But the point is that the spirit is within the definition and it is therefore vodka. It never fails, whenever someone decides to operate on the fringe, there are those who are not satisfied. This is exactly what definitions and limits and agreed terms are for, to prescibe the outer limits of the defined thing. It may be barely whiskey, or just inside the definition of vodka; but so long as it's inside the box, it's acceptable and no dishonor or cheating in the decision to be on the fringe.

There is ample opportunity to create new categories and have them approved by the TTB. The existing regs are very clear about what constitutes "whiskey". The example given, Tennessee Whiskey prepared as the above post suggests, would be single malt if it is aged in NEW barrel, (regardless what the Scots use, it is after all American Single Malt, not Scotch whisky). Your recipe would be "whiskey distilled from XXX mash", the "XXX" representing the type of mash (boubon, rye, malted barley, etc.). The problems arise when the producer proposes a previously defined term to describe something which varies in content or process from that described by the existing regulation, but wants the cache of the traditional name/designation (for instance "Tennessee Whiskey"). Here at Tuthilltown we are of the opinion there is plenty of latitude in the current definitions and in the end the "type" is less important than the product in the glass and the way it is presented to the consumer. We were challenged on a variety of levels for calling our Baby BOURBON: age, NY provenence, mash bill (it's 100% corn). But in the end the regs claify the type and we feel justified calling it Bourbon; and the TTB apparently agrees. Incidentally, we went round and round with the TTB inspector when we submitted our SINGLE MALT label, the response being "You can't make single malt in the US, it's a product of Scotland." We had to actually get the inspector on the phone, have her call up the site of another US distiller to show her the bottle image with an approved label for Single Malt, proving it is not exclusively a Scottish "type". Part of the problem is the regs have changed over years and people don't have up to date "standards of identity". Equally problematic, the professionals do not read the law, the actual text of the enabling legislation and not the interpretations provided by others. Go to the original text and read. We are experimenting with various grains heretofore unused in American whiskey production. But in the end it will still be "whiskey" under the regs. If we come up with something that is an obscure combination of materials or by a process not described would be submitted under a new designation request, per TTB regs. As I mentioned in an earlier post, the regs are broad, within them there is ultimate freedom.

In New York, we have successfully lobbied for the development of a "Farm Distillery License". To do so, we hooked up with THE FARM BUREAU and pressed all the agricultural/tax/tourism/rural development, aspects of the proposal. We avoid speaking about the "alcohol" aspects and focus on the Farm aspects. This is a boon to local farmers both in the field (crops bought by distillers) and at the farm stand (farm spirits sales). The bill is S7249, go to the NY State Senate site under "Bills and Laws" for the full text. Hope this helps. By the way, it took us four years to get it in place, then another year to get amendments in place to fix the problems with it ("problems" according to the SLA), do be prepared for the long haul. But hey, good things take time. R

Perhaps there is no distinction in the big alcohol world. But for our part (meaning here at our distillery), we think it is not crafted if it's mass produced continuously. There is after all a difference between the baker hand making his pastries and a factory spitting out machine made canolis. That said, infusers often use continuously distilled raw material when using GNS as the base raw material to make crafted infused spirits, so it is a question that bears discussion.

Anyone who is not abiding by ttb regs to the fullest extent possible is taking enormous risk with his business and his partner's money. Anyone who responds here that they are not abiding by ttb regs is a fool and does not deserve to be making whiskey. Tuthilltown Spirits starts with the regs and we go from there. It is why we feel completely comfortable calling our HUDSON BABY BOURBON bourbon, it is within the regs, regardless the remonstrations of staunch self-described "traditionalists". In another string there was discussion about how making whiskey or spirits rises above utilitarian value to be "craft" or maybe even "art" because the distiller is looking for something new, something different and special that expresses a concept the distiller has first in his/her mind, and then uses his skills to render in a glass. But as with all art, craft, game, contest, competition, there are rules that describe the playing field within which the players compete, and have ultimate freedom. Mistakes notwithstanding, if you're deliberately outside the rules you aren't playing the same game as the rest of us. There's no art or honor in rebellion for the sake of itself.

All this seems to be headed somewhere. We need any group designation to be generic, brief and to encourage innovation and creativity. Of course, we do have still to address some basic questions like volume. But for the most part, if we are considering all micro-producers in the same "class" of ,producer perhaps something like this is acceptable: Craft spirit makers produce beverage spirits primarily from agricultural raw materials, including but not limited to grains or fruit. A Craft Spirit Producer utilizes a variety of techniques in the preparation which substantially change the character of the original material, including but not limited to: infusion, batch distillation and/or redistillation. Craft distilleries produce and bottle up to 65,000 proof gallons of product per year in a single licensed premises. I think that the futher distinctions can be left to sort out later by the affected groups. But for the purpose of beginning to actually participate at the State and Federal levels, this definition may be something we can all work with for now. Ralph