Stanford GSB

Stanford GSB

Friday, March 4, 2016

Challenges for Craft Distilleries


Sitting in class on Monday sipping whiskey got me thinking about the state of craft distilleries in the US.  I know that craft beer has been exploding, but I've only ever seen 2 craft distilleries in my travels around the country

I did some research in the space and learned that while the amount of craft breweries has grown by 400% in the last decade, there are still only about 250 craft distilleries in the US.  The reason is largely due to arcane, prohibition-era rules about distillation.  These rules are still on the books largely due to successfully lobbying from the craft beer industry, which was surprising to me.  Of all parties, I would presume they would support local ventures such as this.  Instead, sensing that spirits are a substitute product and would steal market share, craft beer companies have fought hard to keep barriers to entry high.

In Indiana, my home state, there remains a law on the books that no license can be granted to a craft distiller without first holding a craft brewing license for at least 3 years.  Such a law makes entry to spirits extremely difficult.

I know that I personally would patronize both craft breweries and craft distilleries.  For wine we have Free the Grapes, maybe for spirits we need Free the Mash...


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2 comments:

  1. AnonymousMarch 10, 2016 at 3:25 PM

    Brent, thanks for your interesting post. I think you should lead the charge! Craft distilleries are a destination that I would love to one day visit (I'm yet to come across one). It really surprised me that the craft brewers were not in favour of granting licences to upstart distilleries. I would have thought both these businesses would have been able to leverage one another in a positive light. Given the legislation in place, do you think we'll start to see a trend of craft brewers opening up craft distilleries? Or do you think a craft brewer would want to focus their activities on beer and not look at expanding into craft spirits?

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  2. AnonymousMarch 10, 2016 at 6:28 PM

    Brent, this is fascinating. I'd be curious to learn the state-by-state regulations on entering the craft distillery market. In Florida, my home state, the governor passed a law in 2013 allowing craft distilleries making 75,000 gallons or fewer per year to no longer sell through middle men. This allows microbreweries to sell on site. I wonder how many states have made this change.

    http://ij.org/action-post/distillery-han/

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