Hot Takes from a Craft Spirits Convention

FILED MARCH 9, 2018

Hoards of craft distillers came together this week in Pittsburgh for the annual American Craft Spirits Association convention despite the fact that an enormous icicle had recently fallen through the roof of the hosting hotel (which is just about the most Pittsburgh thing that could have happened).

Below are a few takeaways from the event.

CRAFT GROWS UP. There was plenty for craft distillers to celebrate this year. "The industry is maturing rapidly," Jeff Clark, Live Oak Banks' wine, beer and spirits expert, tells WSD. "I see an increasing level of sophistication in production, finance and distribution in the last three years."

The group is also moving beyond cyclical conversations about "what is craft," and instead turning to best business practices. We noticed both presenters and attendees alike repeating the phrase "own your home market first," like they were praying the rosary.

Industry veteran and consultant Robin Robinson observes that "there was more of a subdued energy at the event, and I'm ascribing that to the fact that most of the companies have been in the marketplace for a while getting their knees skinned, and that sort of takes away the superficial energy from a crowd like this, placing more emphasis on focused areas of attack."

"As to be expected, we are seeing the weak business models fail (read: lack of distribution…) and well thought out business models not only succeeding but also being purchased strategically," says Jeff.

CELEBRATING FET BENEFITS. The craft segment has grown to over 1,600 members, and the federal excise tax reduction passed last year will benefit all of them. In a live poll, ACSA calculated that the distillers present would use the FET savings primarily to 1) hire employees, 2) purchase equipment, 3) expand/build, or 4) increase marketing.

But you'll recall, the reduction that was included in the larger federal tax reform bill is only for two years [see WSD 12-15-2017]. "It's like winning the super bowl, but the next season started a week later," says ACSA lobbyist Jim Hyland.

"Our goal is to make [the reduced FET rate] permanent" but the industry may have to accept short term extensions for a while, he says. Jim also mentioned that there's talk on Capitol Hill that Congress may do some fixes for the larger tax bill soon - possibly by March 23. Though, he cautions that for them get something like this done early is not consistent with how Congress typically operates.

RUM ON THE RISE. Rum looks to be the next category craft distillers are latching on to. In fact, two out of the last three years a rum has won the best in show judging prize for ACSA. This year it was Arizona Craft Beverage's Regalo De Vida rum, and the 2016 winner was Maggie's Farm Single Barrel rum.

"I am surprised, I've seen a lot of really great rums here," said IWSR's Brandy Rand. "I think that's is an interesting trend we're going to be paying attention to in the future."

Stay tuned for more in deptch craft convention coverage. If you also attended the event and want to share your own observations, send to emily@winespiritsdaily.com

TTB PLANS TO "SUBSTANTIALLY INCREASE" TRADE PRACTICE INVESTIGATIONS

The Alcohol Tobacco Tax and Trade Bureau (TTB) raked in about $21.8 billion in revenues, with just over $8 billion from wineries, breweries and distilleries in fiscal 2017, representing about 38% of its total revenues.

In f2017, TTB received about 170,000 label applications and 14,500 formula applications. Moreover, the number of wineries, breweries and distilleries was way up yet again.

-- Wineries grew nearly 40%, with small wineries driving the increase.
-- Breweries increased 140% overall.
-- Distillery count has increased 107% since 2013, driven by a boom in small distillers.

TTB INVESTIGATIONS. Thanks to a $5 million increase in the TTB budget in May 2017, TTB created an Office of Special Operations within its Trade Investigations Division, and the funding is available through the end of fiscal 2018. "With these additional resources, TTB intends to substantially increase the number of trade practice investigations and increase outreach to the regulated industry to prevent and address violations," per the report.

You may recall, TTB is currently involved in three large-scale investigations in Florida and Illinois, and earlier this month announced an investigation into consignment sales in California [see WSD 03-01-2018].

WSD BRIEFS:

DESTILERIA CASA DE PIEDRA TEQUILA EXPANDS IN US. Destileria Casa de Piedra is planning to expand into New Hampshire next month through MS Walker. MS Walker already sells its tequilas in New York and New Jersey, and the portfolio is also available in Florida through Park Street Imports. The portfolio includes Tequila Cobalto Blanco ($40) and Reposado ($50) and Tequila Terraneo Silver ($65). Its US business is handled by Whalebone Spirits Consulting.

OLD REPUBLIC DISTILLERY INKS DEAL WITH WORLDWIDE LIBATIONS. Pennsylvania-based Old Republic Distillery has named Worldwide Libations as its national sales and marketing agent, per a release. As such, Worldwide Libations will exclusively handle all sales and marketing for the distillery's labels for the US. The distillery's portfolio includes Battlefield Vodka ($32), Blackberry Vodka ($32), White Rum ($40) and Golden Plough Dark Rum ($50).

PIPING ALL HANDS. We are starting to plan for our second annual Distributor Productivity Summit later this summer, where distributors of all sizes come to trade best practices, and we need your help. Nobody knows what sort of topics distributors are interested than distributors themselves. So please ping me back with the sorts of speakers and topics you'd like for us to address, and let us know if your company has had a successful innovation that you'd like to share as a case study, perhaps with a vendor. Send ideas to rena@beernet.com or get more info on the website.

Until Monday,
Your Editors

Emily Pennington - emily@winespiritsdaily.com
Sarah Barrett - sarah@winespiritsdaily.com

"I write to discover what I think. After all, the bars aren't open that early." -- Daniel J. Boorstin

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