How To Open A Craft Distillery
So, you’ve decided to start your own craft distillery. The craft distilling industry has grown to over 1,600 distilleries as of March 2018, representing over $20 billion in revenue. Sales volumes have grown at 4% a year, and, in 2017, the distilled spirits industry outperformed the brewing industry. In short, it’s a great time to get into the spirits industry, and in this article we’re going to show you how to open a craft distillery of your very own.
AN OVERVIEW OF THE DISTILLERY INDUSTRY
Before we get started, let’s take a deeper look into the craft distilling industry. According to IBIS World, the distillery industry includes any producer that “distills potable liquors, blends liquors and mixes liquors with other ingredients”. It’s been deemed by the Distilled Spirits Council as the “second most valuable” industry in the world (valued at around $20 billion dollars) and continues to see record growth that just keeps sweetening the idea of starting your own distillery. The American Craft Spirits Association (ACSA) and other organizations estimate that there are over 1,600 distilleries in the US that are actively distilling spirits. Sales volume grew 2.6%, revenue grew 4%, and 2017 was the best year the distillery industry has seen, out-performing the brewery industry. And if you’re really curious, here’s a breakdown of sales and revenue by the spirit.
There’s just one problem: roughly 60% of bottle sales are attributed to only 2% of distillers. But this inequitable disproportion of sales is changing, making it incredibly feasible for new, small-scale craft distilleries to be successful.
Just as the distillery industry as a whole has been experiencing growth, so has the craft distillery industry. While there’s no exact production requirement in order to be considered a craft distillery, the consensus is that if you produce less than 50,000 gallons a year and source most of your ingredients locally, you’re a craft distillery. According to the American Craft Spirits Association, sales volume for craft distillers has increased 18.5% from last year and there are 20% more craft distilleries today than there was last year.
So what’s driving this sudden growth for smaller craft distillers? Premiumization. Premiumization is the idea that consumers are willing to pay a higher price for premium products. This is the same concept that drove the craft beer industry boon. Consumers are willing to spend more money on something that’s not mass-produced or “craft”. Thanks to this trend, a new brewery is opening up almost every hour, and now, a new craft distillery is opening roughly every day.
And if that wasn’t good enough news, thanks to this growth and renewed attention on the industry, legislation is following suit. The Republican-led tax overhaul that passed in 2017 gave smaller craft distilleries some much-needed tax relief. Tax rates for liquor producers have dropped from $13.50 to $2.70 per gallon (for the first 100,000 gallons produced or imported). This tax reduction is allowing smaller craft distilleries to retain more of their income and compete against large corporations and mass-producing distillers.