What Are Craft Spirits?
A Clear-Cut Definition of Craft
The cat is out of the bag.
What once was a secret is now common knowledge, even outside of the circle of distillers, bartenders, and spirit geeks…
The shelves at any given liquor store are full of bottles that appear to be very different products, made in different places by different companies.
But peek behind the curtain, and the majority of the “craft spirits” in those bottles are manufactured at a handful of huge distilleries.
We’ll talk about this problem a little deeper in a minute, but for now, here is my working answer when someone asks me ‘what is craft?’…
Craft spirits are local, high-quality, and small.
Local means the distillery is not owned by an outside holding company. It is owned by the people running the distillery. There are lots of companies using “local” in their marketing-speak these days, so this term is getting blurry. Essentially, if the majority of profit stays in the community where the spirits are made, it’s local.
High Quality means the distiller is focused primarily on making a great product. All companies need to make profit to survive, but craft distillers should be focused on quality first, and increasing margins second. Let the big guys worry about the $10/bottle vodka market. This also could be defined as a market segment like “craft is premium or ultra-premium”. A friend once walked into a small woodshed in the middle of a forest and found beautiful wooden slatwork and intricately carved filigree, on the inside. The builder did that because he cared about quality, even if no one but he ever saw it.
Of course some of the huge distilleries are making incredible products — my current favorite gin is Nolet Silver. But they are definitely not small. Which leads me to…
Small means the company fits the SBA’s definition of a small business. SBA defines a small business concern as one that is independently owned and operated, and has a maximum of $7.5 million in annual receipts, averaged over the past three years. This is a hard number, and can’t be faked with words like “small-batch”. If you’re doing over $7.5MM a year, you’re doing really well, and have outgrown the term “craft”.
Examples of Not-Craft
McDonald’s is a local restaurant, because it’s in your neighborhood and employs your neighbors. But they ship in lowest-cost materials, make a shit ton of badburgers, and ship the profits back out. Not quality. Not craft.
There is a local Budweiser brewery in many states, but none of the beer drinkers I know considered Bud Light craft beer. It’s owned by AB-Inbev, a multi-national conglomerate. The profits from Budweiser don’t stay in the town where it’s made, they are sent overseas and spent on hovercrafts and dolphin caviar (things rich people crave).
Woodford Reserve is one of my favorite big-batch bourbons. Their distillery site was originally established in 1838 by Elijah Pepper — it has a wonderful history. But it’s now owned by Brown-Forman ($20 billion market cap). Not craft.
Side Note: When I asked my friend Barrett Garese (creator of CraftCheck App) what their users care about most when they are deciding on a beer, he says that they talk about ownership — Blue Moon can be as delicious as nectar from a fairy’s breast, but if it’s made by AB-InBev the craft beer geek won’t buy it. Craft beer drinkers want to know the beer is made by the owners.
Whiskey Lovers Are Losing Trust
When a customer buys a bottle of Jim Beam, they assume that the whiskey inside was made at a distillery called Jim Beam. And they’re pretty much correct — Beam is made at the Jim Beam distillery… which is owned by Suntory Holdings, a multi-national conglomerate that makes orange soda, fitness clubs, and the world’s first blue rose (come on, that’s awesome).
When that same customer buys a bottle of Templeton Rye, they also assume that the whiskey inside was made by a distillery called Templeton. They would be wrong. Same goes for Bulleit, Redemption, Angel’s Envy, and others that have garnered bad press recently.
Why would customers still buy Templeton by the truckload if they aren’t actually making the stuff? Because the brand tells a story that evokes the rebellious spirit of gangsters. The customer is buying a bottle of fluff, not the spirit. There’s nothing wrong with telling a great story to sell a product, as long as the story doesn’t obscure the truth.
There are examples of labels that claim “Handcrafted” on bottles that are literally never touched by human hands. There are labels that state “Produced By _______” when their definition of “produced” just means “bought from a big distillery and bottled”.
Let me pause here to say that the whiskey in these ‘crafty’ bottles is usually high quality spirit. The distilleries producing the vast majority of the bourbon and rye in our country are doing great work, and in my opinion should not be faulted for the dishonesty of their customers.
The marketers are being unclear — purposefully unclear — about the spirit in an attempt to fool the customer. Fool me once, shame on me. Fool me twice...
The point is this:
Branding and marketing companies that buy bulk spirits, bottle it, and market it as their own, need to be more clear about what they’re up to.
Ok that’s the problem − what’s the solution?
Truth In Labeling
At the inaugural American Craft Spirits Association (ACSA) conference in Denver this February, the newly elected board of directors announced the formation of an Ethics Committee, whose task would be to develop a set of guidelines for truth in labeling. This code is being developed this year by craft spirits distillers, for craft spirits distillers. Enforcement recommendations will come soon after.
I’m excited to be a part of the ACSA’s Ethics Committee, led by board member Paul Hletko of FEW Spirits, along with a handful of other incredibly talented distillers.
ACSA Ethics Committee
Paul Hletko — FEW Spirits
John Wilcox — Rogue Spirits
Ryan Burchett — Mississippi River Distilling Company
Adam Quirk — Cardinal Spirits
Maggie Campbell — Privateer Rum
Meredith Grelli — Wigle Whiskey
Andrew Webber — Corsair Artisan
Christian Krogstad — House Spirits
Hans Breur — Big Fat Pastor Spirits
Brent Ryan — Newport Storm
John Jeffrey — Santa Fe Spirits
So far, we’ve succeeded in first developing a general code of ethics for all distillers to follow. This will be the pledge by which all members of the ACSA will agree to operate.
ACSA Code of Ethics
“We operate in an honest, transparent and non-deceptive fashion. We inform consumers truthfully and accurately about the sources and methods used to make our spirits through our labels, materials and communications. We expect fair dealing and respect amongst members. We obey all federal, state, and local laws.”
Let me break that down and explain each part.
“We operate in an honest, transparent and non-deceptive fashion.”
That might seem like three descriptors of the same thing, but each part is actually important. Honest means that we are truthful. Transparent means that we are clear about our product origins. Non-deceptive means that we don’t use deception to skirt disclosure, by using super-small fonts or other shitty tricks.
“We inform consumers truthfully and accurately about the sources and methods used to make our spirits through our labels, materials and communications.”
This also could seem like overkill, since the first sentence really hammers down about honesty. But we felt that it was important to distinctly call out the importance of honestly informing consumers. Labels, materials, and communications covers just about everything a distiller or bottler says and does.
“We expect fair dealing and respect amongst members.”
We’re a small industry, and need to be civil with each other if we want to have a chance of growing the way craft beer has. Fair dealing and respect amongst members will allow us to work together. The rising tide lifts all boats.
“We obey all federal, state, and local laws.”
This is sort of a given, but we wanted to call it out because the federal code actually has some verbiage that would help clear some of this nonsense up if it were properly enforced. It’s called TTB 5.36(d) and requires the bottler to disclose the state of distillation on the bottle. There is a lot of discussion about it online if you care to Google it. But the TTB does not have the resources to police every bottle on every shelf, and I’m not sure anyone wants that anyway. So we’re requiring ACSA members to voluntarily comply with existing TTB labeling code, because generally it’s good law.
According to ACSA president Thomas Mooney, “This brief but powerful code of ethics reassures consumers and the spirits trade that our members’ products are both honest and authentic. The future of the craft distilling revolution depends on our transparency.” — ACSA Press Release
Some More Good News
With all these “crafty” spirits hitting the shelf, actual craft distillers are getting nervous. But I don’t think we need to worry too much, and here’s why.
Big companies can’t buy community. They can try to copy everything a craft distiller does, even recipes and brands (see Old Blowhard), but they can never replicate your story. They can’t buy you.
A small distillery has absolute control over it’s own story, whereas mega-conglomerates have agencies and hundreds of people sending messages, and those people are generally not dedicated to the highest level of quality/service. I’ve worked with agencies — they are primarily concerned with winning awards, not selling products. They report to a main office. They can fail and still get a paycheck. We can’t fail, because it means we don’t get paid. That skin in the game means we have an advantage.
Agreeing on a Definition of Craft
It’s going to be difficult for craft distillers to come to an agreement on this definition, because many people want “craft” to mean “whatever I’m doing”. That’s not just true in distilling, it’s people in general. Life is messy. And we’ve already tried once.
But distillers are used to doing difficult things. It’s really, really difficult to start a distillery in this country. I think the kind of person who distills is the kind of person who thrives on solving problems.
What I want is an open conversation about our association’s definition of craft…
Like this, but with more women, and less nuclear options.
I hope this is something we can define at next year’s ACSA conference in Austin. Pretty much every distiller I talk to is ready to work on this. I don’t know if there is anything on our agenda that is more important to the future of our industry.