April 13, 2014 in City

Washington leads growing industry of craft distilleries

By The Spokesman-Review
 
Jesse Tinsley photoBuy this photo

Michael Thompson, of 21 Window Distillery, holds a bottle of his vodka made from apples on Friday. Thompson said that although the state allows for small distilleries, based on using Washington products in manufacturing, the small producers can’t compete with liquor giants like Smirnoff because the state tax burden is identical and his costs are higher than the big producers.
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Industry booming in state

Washington’s Liquor Control Board has licensed 87 craft distilleries, and has applications pending from about 30 more.

Besides airplanes, winter wheat and espresso, add one more product to things for which Washington leads the nation: liquor made in small distilleries.

Almost a fifth of the 450 craft distilleries licensed in the United States are in Washington, which might be all the more impressive considering there were no craft distilleries in the state before 2008.

That was the year the Legislature passed its original craft distillery law, clearing a path for Spokane’s Dry Fly Distillery to be the first to open in the state since before Prohibition.

The recipe goes like this: Mix a friendly legislature with a local culture that already embraces microbreweries and family wineries, stir in a locavore ethic that celebrates local ingredients and pour – straight up or over ice – to consumers willing to pay a premium for specially made spirits. In six years, the state has scores of people distilling their own vodka, gin, brandy or whiskey, and dozens more making plans to join them.

People like Joel Evanson, a former science teacher with an accounting degree who says he’s been brewing everything from soda to beer to cider since he was a kid and decided to “make the leap” into distilling vodka in a north Spokane operation. He hopes to branch out into a clear whiskey with grain from the Palouse, and someday soon make and sell enough liquor to pay the rent and keep the lights on at Evanson Handcrafted Distilling. In the meantime, he still works as a substitute teacher.

“What I want to do is change people’s minds about what spirits taste like,” Evanson said, adding he never cared for the harsh taste of distilled spirits from the national producers and plans to make a more palatable product.

People like Michael Thompson at 21 Window Distillery in Spokane Valley, which started making vodka from apples in October and is up to about 20 cases a month of a product now found mainly in bars. He hopes to branch out into apple jack, a form of distilled cider that’s among the nation’s oldest spirits.

Thompson and his partners all work part-time at the distillery named for the number of windows on an old Volkswagen bus. It’s a labor of love, he said; “it’s very hard to make money.”

People like Gregory Schwartz, who with wife Trisha hopes to turn three tons of corn into a whiskey at 2 Loons Distillery by the end of the summer, and maybe a vodka after that “if we can do it cost-effectively.” They got interested in distilling after attending a bottling party at Dry Fly, then took a community college class on the craft distillery business.

“We thought we’d give it a try for our birthdays,” Schwartz said. They visited 15 or more distilleries in Seattle and Colorado before deciding to build a craft distillery on property sitting next to their small car lot in Loon Lake. Stills are in the back; they hope to have a tasting room in the front at some point. The distillery is named partly for the lake, but also a nod to the quixotic nature of their venture.

“Trish and I are the two loons,” he said. “Maybe it should have been called ‘Ass-Backwards.’ We’re learning everything from scratch.”

Smooth sailing in the Legislature

Washington’s Liquor Control Board has licensed 87 craft distilleries, and has applications pending from about 30 more. Andrew Faulkner, editor of Distiller magazine and a member of the American Distilling Institute staff, said the craft liquor business is booming all over the country, but nowhere like Washington.

“You’ve got a culture where people are paying more attention to what they’re putting into their mouths,” Faulkner said.

Don Poffenroth, co-owner of Dry Fly, cautioned that obtaining a license is not a guaranteed recipe for success. Equipment is expensive, distribution can be difficult and finding a broad customer base is a key, he said.

“The industry is at that stage where everyone is rushing in,” Poffenroth said. “It’s a faddy thing. There are some great small spirits out there, and some really bad ones.”

The owners of Dry Fly, located east of the Gonzaga University campus, were among a handful of would-be liquor makers who lobbied the 2008 Legislature to allow small distillery operations in Washington. They got support from several Spokane legislators, including then-Sen. Chris Marr, who helped shepherd a bill to let craft distillers – something akin to the hard-liquor version of a microbrewery – make up to 20,000 gallons of liquor a year. It passed with just one “no” vote in the House, and none in the Senate.

A few craft distilleries around the country were operating at the time, but Faulkner said Washington did several things differently that helped jump-start the local industry. One was a push to use local products: A craft distillery with at least 51 percent of its ingredients coming from the state gets a $2,000 license for $100.

That law also allowed the licensee to offer free half-ounce samples on site and sell up to two liters per day to a customer. At the time, the state controlled retail liquor sales in its own stores and customers who wanted to buy a distillery’s limited-quantity vodka, gin or whiskey could have had trouble finding it in a state store.

In 2010, the Legislature increased the amount of liquor a craft distillery could make to 60,000 gallons a year. In 2013, after voters took the state out of the liquor business, it allowed licensees to sell up to three liters per day at the distillery. This year it raised the production limit to 150,000 gallons per year – more than Poffenroth or Steven Stone, owner of Sound Spirits and president of the state Distillers Guild, said any craft distiller is likely to make in the near future. It also dropped all limits on sales, and allowed distillers to charge for samples, participate in special events and sell to other distillers. Like other bills before them, this year’s legislation got overwhelming support.

Most states, including California, where some of the nation’s first craft distilleries opened, don’t allow sales on the premises, Faulkner said. Most also don’t have any requirement for using local ingredients.

That provision is a selling point with legislators looking for things that support state products and state jobs. And it’s not difficult to meet, said Paul Ziegman, who plans to open Tinbender Craft Distillery in downtown Spokane this spring with brandy made from Washington and branch out into winter wheat whiskey down the road.

“Product to use is pretty available,” said Ziegman, a sheet metal worker who makes his own stills.

Poffenroth said he wished the percentage was higher. Dry Fly gets more than 99 percent of its ingredients locally, he said, and the most successful operations will have strong farm-to-market ties.

‘Good distilling starts with good fermenting’

Some people believe Washington was a logical place to anchor a boom in the craft distillery industry because of earlier explosions of microbreweries and wineries.

“Good distilling starts with good fermenting, and you’ve got a whole lot of good beer and wine in Washington,” Faulkner said.

The comparisons to microbreweries aren’t perfect because beer is perishable while distilled spirits last for years. Microbreweries can be successful selling their product in a small geographical area. Distilleries need wider distribution and can’t survive just by selling at their businesses or in a few bars or stores – or even in a single state, Poffenroth said.

The growth in craft liquors also coincides with a growing interest in specialty cocktails and other consumer trends, some believe. One Seattle company offers regular tours of distilleries and bars that serve their products. Tara Fuller, owner of Local Craft Tours in Seattle, said their visits are patterned after wine country tours, allowing passengers to sample the wares of three or more establishments while someone else drives.

“Washington is finally producing some great whiskeys, and whiskey is trending right now,” Fuller said.

Depending on the day of the week, the company’s buses may make rounds at several of Seattle’s 16 distilleries. Other nights, a bus will travel 24 miles north to Woodinville, a city of about 11,000 that has eight distilleries, to make several stops.

Earlier this month, the American Distilling Institute drew more than 1,000 people from around the country to Seattle for its annual convention. Fuller’s tour company kept busy providing tours for participants who took a break from workshops on fermenting, distilling and bottling whiskey or gin and inspecting still equipment from national and international manufacturers.

As industry grows, challenges arise

When voters took the state out of the liquor business in 2012, the game changed for craft distillers. The number of places to buy distilled spirits went from about 340 to more than 9,000 locations, ranging from the state’s small former locations to convenience stores, supermarkets and liquor warehouses. With many supermarkets concentrating on a handful of well-known national brands for their limited shelf space, some of the old state stores tried stocking craft distillery products to help them with a niche market. But caught between the convenience of the supermarkets and the seemingly unlimited shelf space of the big-box liquor stores, and facing high taxes and fees, owners of those former state stores are being squeezed out of existence and some small distilleries are losing off-site sales locations.

In addition, the craft distillery industry is beginning to experience a trend that hit the microbrewery industry when it began gaining market share a few years ago: Large national distilleries try to capture some of the little guys’ luster. They’re bottling special blends under new labels or selling liquor made in their factories to smaller operations that may add some ingredients before bottling it with their labels.

Those labels can confuse consumers, because there are no national standards for terms like “handcrafted” or “artisanal,” just as there is no national standard for a term like “natural” on food labels. A craft distillery in Washington must use a majority of state-produced ingredients, but craft distilleries in most other states don’t. The words “distilled by” mean it was produced by the company on the label, but “bottled by” could mean it was made elsewhere and shipped to a company with nothing more than a folksy name and local address – and almost certainly a higher price.

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