Run of the Mill
People can be dissatisfied with commercial preparations. We have those with such highly developed sensitivities that they can distinguish between one draft ale and another. There are people who make a career out of enumerating the various subtleties of nearly identical wines; this, right down to which particular vineyard, in the same geographic area, is responsible for a particular vintage.
Frankly it eludes me. I’m one of those barbaric imbibers that taste something and decide if I like it, irrespective of lineage, cost, or history. Take that rare treat, Captain Morgan’s Deluxe rum, a dark rum in a teardrop shaped bottle. It has terrific molasses notes that I’ve found in no other rum. It is absolutely the best thing ever blended with Coca-Cola and a slice of lime.
My mother, on the other hand, was fond of Tia Maria, a thick, sweet liqueur, with very powerful coffee flavors. She thought she could make it more to her own liking, and so took to preparing her own at home, and I have to admit it was very, very good.
Do it yourself liquor
Just as small batch, custom beers and wines took off early in the 1990s, so too have micro-distilleries, making what I call Boutique Booze. And it has become quite a hit with many bars to have craft rums, gins, vodkas, and scotches available.
They’re still very small scale, being so new, amounting to less than 1% of all sales. I strongly suspect that the trend towards mixologists inhabiting the spaces behind bars in upper end establishments will drive much higher production in the near future. Don’t be surprised if Boutique Booze becomes as familiar as some of the main labels, just as the craft beers and wines did in recent history.
Don’t be fooled. One such distillery sold everything it made last year—a complete sell-out of every drop the decided to market—to the tune of $2 million. The thing is that their emphasis is on extreme quality. Unlike the mainstream distillers, they actually dispose of poor alcohol rather than sell it.
One owner noted “Poor quality alcohol is the main cause of hangovers. We use it for cleaning rather than selling it to unsuspecting consumers.”
Room at the Bottom
The “ground floor” of this market is still wide open if you have the chops to make the next big thing. At the moment Boutique Booze comprises just 0.3% of the market (which still means it rakes in millions annually). Millennials and Boomers are tending to spend more on craft liquors because of their perceived value. And there is a trend by people that want to buy locally produced products (named locavores) to seek out these neighborhood creations to support.
There are other problems with trying to break into this market. If you have the next great Scotch in mind, it is going to take time and drain your money. Scotch takes years to mature. That aging can go awry too. Just because you let it sit for five years doesn’t mean it will be drinkable. You could have wasted that entire time on a completely unacceptable product. What if you tried one method the first year, another the second year, a third method in the third year, and when the (for example) five years were up the first one was great, but the next two were utter garbage? Scarey concept, isn’t it? Scotch is hard, time intensive, and expensive, but the rewards can be tremendous.
To mitigate this some startups are working with gins, which require no aging. Some go with rums that can be ready in just a few months. Ultimately it is up to you to define your capacity for risk. If your dream is to make great craft whiskey or whisky, it might be in your best interest to build a reputation with an exceptional rum, vodka, or gin, so that when the whisk(e)y is ready to go, you’ll have some dedicated fans of your other product(s) that are all keyed-up to be enthusiastic when you launch.
The current problem (which is good for you) is that when artisans began crafting their products requiring aging, they had no idea how the market would explode and demand would go wild. They made what they thought they could sell. Now there is a shortage of all sorts of craft whisk(e)y. What was once selling for $60 per bottle a year ago is now topping $150. And it seems likely that the demand will not wane anytime in the foreseeable future, any more than in the craft beer and wine industry.
Acquiring capital is getting a lot easier nowadays. Banks are seeing how successful these startups are becoming. It would be best if you walked in with a history of home brewing/distilling skills and even some samples of your product to demonstrate them. Being able to show significant sales to local bars can be very reassuring to a lender. If you lack such expertise, you’d better have someone on staff with those skills, and a good track record.
You had also better have a good grasp of interstate trading regulations so you can demonstrate the ability to market outside of your immediate region. You can go through traditional distribution if your state laws are particularly strict, but find out where you stand before you seek money. Having a fully developed business plan will give you a lot more credibility in their eyes.
Guts & Glory
So there you have it. If your interest lies in this area, there is space for entrepreneurs to enter the market. It’s not for those with shallow pockets, or the faint of heart. It can ask a lot of you, but the rewards can be absolutely awe-inspiring!
There is an imprecation attributed to the Chinese that goes “May you live in interesting times”, but you know, I’d rather be terrified and challenged, than perfectly secure, and bored.