Thursday, August 25, 2011

Micro-Distillers And The "Just Till We Get Going" Trap.

One of the recurring themes among new micro-distillers is: "We're going to make vodka just to get going, but what we really want to make is whiskey," or its variation, "We're going to buy and bottle bulk whiskey just to get going, until we can make and age our own."

So simple, so reasonable and, therefore, so alluring. But is it realistic?

After observing this pattern for the past half-dozen years or so, I have concluded that when new micro-distillers say that is their plan, they are in most cases either lying or naive.

Why is the "Just Till We Get Going" strategy a trap? Two reasons.

(1) People seem to think it's easy to build up a profitable business making and selling vodka, or buying and bottling bulk whiskey, as if you can work on that for a few minutes, just until the cash starts to roll in, and then go do what you really want to do. Not only will the business practically run itself, it will bring in enough revenue to fund the whiskey program.

Well, it's not easy. What's more, you can work very hard for a long time, become successful, and discover you're in a completely different business than the one you wanted to be in, no closer to realizing your dream than you were when you started.

(2) If you want to make whiskey but intend to start with a bulk product, you'll never be able to transition to whiskey you made yourself because it will never be the same or even similar enough to make such a transition. If you try to do both you risk diluting your brand and confusing your customers.

Great Lakes is a micro-distillery but they recently released a product that combines bourbon made by a major Kentucky distillery with malt whiskey made at Great Lakes. St. George has announced a similar project. This can work for them because they are established, have distribution channels, and have loyal customers. They have a receptive audience for anything they choose to produce, whether it's made by them or not. They can be perfectly honest about what they're doing and the vast majority of consumers, who don't pay very close attention, will still assume they made it because they have a reputation as micro-distillers.

But what about examples of startups that began that way? Templeton Rye has been around for six years and when they finally admitted the product isn't theirs, they said they were going to use bulk whiskey just until their own whiskey was old enough to bottle. In reality, they have made no effort to replace their LDI-made whiskey, though they have stopped pretending that they ever will. They have even admitted that, if they wanted to make it themselves, they would need a completely different distillery than the one they have in Iowa now.

High West's highly acclaimed Rendezvous Rye is a similar story. High West is now selling products it made, but they will never replace the current Rendezvous Rye, a bulk whiskey product, with whiskey made by them in Utah.

Last month I told you that Michter's plans to build a micro-distillery in Louisville. Even if, after aging, they mix their house-made whiskey with their sourced whiskey, the ratio will  be 10 to 1 or more, a drop in the bucket. The Louisville project is a way to give a company that doesn't have a distillery a symbolic one.

Another example is the Pogue family. Old Pogue has been on the market for seven years and just this year the Pogues are beginning the process of obtaining necessary permissions to start a very small (25-50 gallons a week) distillery in Maysville, Kentucky. Old Pogue has, by all evidence, been a successful product and, as such, sells a lot more than you can produce at a rate of 25 to 50 gallons a week. In fairness, they don't claim they are starting the distillery to produce the current Old Pogue Bourbon. They just want to bring whiskey making back to Maysville, where the family's historic distillery was located.

Aspiring micro-distillers, take note. The Pogues have come nearest to realizing some version of the "Just Till We Get Going" dream and it will, if all goes according to plan, have been a decade-long project the day their first drop comes off the still.


Nathan said...

What part of the plan do you find unrealistic? I can think of lots of new distilleries that started with making white spirits or bottling bulk whiskey, and have since brought an aged product to market or at least have one on the way.

Similarly, I can't think of any large whiskey-producing companies who don't also produce white spirits to boost their bottom line.

Have any microdistillers actually told you, "We're gonna drop our white spirits and bulk whiskey once we get our own aged product on the market"? I agree that would be unrealistic/naive, but I don't personally remember hearing that line from anyone.

M Lange said...

I agree with Nathan. Dry Fly made vodka and gin from day one, and recently released a whiskey. I don't see why this is a bad strategy.

Chuck Cowdery said...

Dry Fly is a relevant example and people should look to them to see what it really takes to get as far down the road as they are, though they still have a way to go, as they would be the first to tell you.

Scott said...

We're doing well making a youthful product that many people enjoy. Agreeing with what you've written, we're not doing something "just til we get going." We unapologetically make a youthful whisky that tastes great young, and it is selling well in our region, and we are doing reasonably well at it.

People ask us if we will ever make something older, to which I snarkily reply, yes, when we are older. We'll have a ten year old whisky in about 8 years. (Do the math.)

Another great example of someone doing well at it our way is Koval in your hometown. Young whiskey that tastes good young and competes well for what it was intended to be.

Steffen said...

Kilchoman sold MacBeathe but they seem to be doing very well these days