How To Start Your Own 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!
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.
The first step in starting your own craft distillery is to decide what type of distillery you want to own. There are two basic types of distilleries and then a multitude of hybrids in between them. The most common type of distillery is the distillery bar. In the states where it is allowed, a distillery bar is primarily focused on making spirits for its own retail sales. These sales are typically by the glass in the form of cocktails or straight spirits. While the volume of spirits sold at a distillery bar are smaller than other models, they typically have much higher margins and lower equipment costs. Distillery bars also are able to turn a profit sooner—sometimes even in their first year. One important consideration to make that can decide whether a distillery bar is right for you is to research the regulations that exist in the state you’ll be operating your distillery. We strongly suggest looking up your state regulations at the start of your business planning to ensure you will be allowed to do what you want to.
On the other end of the spectrum is the distribution distillery. In a distribution distillery, the sale of spirits are most commonly to distributors and at wholesale prices. In this model, the sales volume is typically much higher than a distillery bar, but the margins are the lowest of any distillery model. What most people think of when they think of a distillery is the distribution distillery—the model where you become the next Jack Daniels. It takes time to succeed as a distribution facility, both from the time it takes to get brand recognition and the time it takes to create and mature your spirits. Generally, a distribution facility will need more startup capital to purchase larger equipment and a bigger facility in order to produce higher volumes of spirits and more operating cash to survive the “workup” period when you’re gaining recognition and getting your spirits ready for distribution.
In between these two models is where more distilleries fall. While the initial plan may be for purely retail sales, it’s very typical for a distillery bar to also have a barrel aging room in order to start working on storing away their dream bourbon in quantities that can go to distribution once they’re properly matured. One of the more common hybrid models that we’ve seen in the industry is the distillery bar that is hoping to can their specialty cocktails and distribute them. The canned cocktail or RTD spirits market is something that appeals to a lot of distilleries for a few reasons. First, you are able to use spirits that aren’t matured as long, so the time to volume distribution is shorter. And, since you aren’t using as much of the spirit, the taxes per unit volume are lower. Lastly, smaller equipment can make a larger volume for distribution.
Knowing what your goals are for your distillery is another very important consideration when figuring out the right distillery model. Without measurable goals, it is easy to miss-size equipment or pay for the trendy downtown location that doesn’t benefit from the thousands of people that walk past it every day. 10-20% of the distilleries that we build typically choose the distribution model and a similar percentage choose to just be a bar. While that leaves roughly 60-80% to choose a hybrid of the two models, the vast majority are distillery bars that either have additional space to expand their equipment and grow into distribution in their current facility or are considering the canned cocktail market for their early distribution plans.
Selecting the true middle-of-the-road model of, say, a semi out-of-the-way facility with a bar and low enough rent to also do distribution, is rarely a good idea and something we strongly discourage. Trying to do both will likely end up diluting your revenue streams and the attention and recognition you’re trying to create. And while your spirits may be good, the bar and the market plan both tend to be executed poorly. Instead, think carefully about your distillery and where you want it to go to select the right model.
Once you’ve chosen how you want to get your spirits to market, it’s time to decide what you want to sell. There are two major concerns to think about here. First, you need to look at actual data to get a sense for demand. Then, you need to do some general surveying of your community to see what people are drinking. If you are thinking about opening a gin bar in a town of 100 people where you and your partner are the only gin drinkers, you probably won’t be successful.
Volume & Sales Data By Spirit Type
We’ll start by looking at national data for the spirit industry to get a sense of trends in the US. Distilled Spirits Council of the US (DISCUS) provides data that will show you what’s selling and where. There are also several places where you can get a state-by-state breakdown of spirits consumed by volume and revenue, but generally you have to pay for those (which is worth the investment to ensure your able to turn a profit). Below is a chart that represents consumption nationally. High-End Premium and Super Premium is typically the craft market that DISCUS tracks.
Survey Your Community
Having a national overview of spirit consumption is great, but it’s simply meant to give you an initial idea of the ratios for your spirits. Now, you need to get out into your community and start surveying people to figure out what the locals are actually drinking. This looks different depending on your distillery model, but understanding what people in your community are actually drinking will be extremely important. If you’re going to be starting a distillery bar, you really need to get out and talk to local bartenders and bar managers. If you are only planning on making bourbon and American single malt (which is a pretty common choice), then it’s probably a safe bet to make 2.79 barrels of bourbon for every barrel of single malt—at least until you find out you make a killer single malt but only average bourbon, or you find out that people in your area mainly drink single malt and not bourbon.
The next thing to look at is how spirits are produced. The easiest way to make spirits that taste great is to get the right equipment to make that type of spirit. If you’re like most distillers that are starting out, you can’t afford to have a separate still for your on-grain bourbon and your off-grain single malt, with a third (column) still for your vodka and a fourth for your gin. And there is very little chance you’ll have enough room for all of those production types. There are two common ways to solve that problem: one is to buy one of those “do everything” stills. However, they tend to be more expensive than a single-purpose still and don’t do any single task quite as well. The other option is to look for spirits that have similar production methods and only produce those. For example, if you want to produce whiskey, select on-grain or off-grain, design your products to all be made that way! Sure, your bourbon may not be made the traditional way, but that doesn’t mean it won’t still be excellent. Generally, we lump spirits into four categories; grain-based, sugar-based, vodka and flavored vodka.
Grain-based spirits are all of your spirits that need to convert starch into sugar as the primary step (basically whiskey, thought a grain-based distillery can also make the inputs for a vodka or flavored vodka spirit using rice or potatoes).
Sugar-based spirits are those that already have sugar present in the fermentable material. These would primarily be brandy, fruit brandies, agave spirits, and rum. If you specialize in these, they can also be an input to a vodka or a flavored vodka distillery.
Vodka is different despite coming from a grain or sugar-based feedstock because it needs to be distilled to such a high purity that it is difficult to use the same still for vodka to make anything else. In 2017, testing was done to all of the spirits submitted to the ADI spirit competition and 80% of the vodka submitted had chemicals in them that indicated that it had not been distilled above the 95% alcohol required to call them vodka. Therefore, if you want to make vodka, we strongly suggest buying a specialized still.
Flavored Vodka is a category we use to refer to spirits that add flavor to neutral bases. This includes things like gins and liqueurs as well as the outrageously-flavored things like bacon flavored vodka (yum). Adding flavor requires different equipment than a traditional still whose job is to simply remove flavor. At minimum, it requires a tank where hot or cold macerations can be done all the way up to stills that put botanicals into the spirit or the vapor path during distillation.
While it certainly isn’t the wrong to produce spirits from all four of the groupings, it will likely require much more time, planning, and investment to get each spirit ready for market. Which means you may have to make other compromises later down the road.
Now that we know what spirit(s) we’re going to be selling, it’s time to sit down with your business plan and determine how much you will need to manufacture. From here on out, understand that the details of your distillery—from production methods to the production floor—will be an iterative process: you will have to make some assumptions, test them out, learn from those tests, and go back to revise your assumptions. It can be extremely helpful at this point to talk with people who have done this before, who can save you a lot of time, money, and frustration by helping you avoid some common pitfalls. We’ve found that most local distillers will happily share their story and “lessons learned” with you. Another option is to talk with a distillery consultant like the folks here at Distilling Craft. We’ve helped countless soon-to-be distillery owners get on the right path to success.
There are three different ways we can determine adequate production volumes for your distillery. This will give us a well-rounded idea of what our production needs will be—similar to a good, better, best scenario.
A SIMPLE BREAK-EVEN ANALYSIS
The first method is the easiest: how much do you need to make in order to stay in business? Another name for this calculation is your break even analysis. In this method, we’re going to assume a startup amount that we’ll need to start the distillery and then subtract the costs of actually starting the distillery—from construction costs and equipment to lease expense and marketing. What we’ll be left with is our operating funds. Then, we’ll take the sales price per bottle and subtract out the cost to manufacture our spirit(s)—like ingredients, taxes and salary—which will hopefully leave us with a positive number. From there, we can figure out how much we need to sell to cover the costs of staying in business and see how many months our operating capital will last. For instance, if it costs $3,000 a month to keep the lights on and you are retailing your only product (a white rum) for $20 a bottle with a $10 profit margin, you need to sell 300 bottles per month to stay in business. Therefore, you better make sure your equipment can produce 300 bottles per month (at minimum). Since it is costing you $10 a bottle to make that rum, you also need to look at how long it can take you to ramp up to the sales level you need to maintain (300 bottles per month). Using the same scenario, if your operating funds are only $2,000, you won’t be able to make enough product to stay in business for a month, which means you’ll have to go back to the drawing board. While it is critically important to know your minimum production level, it should only be used for setting the floor of your production model.
Average Production Levels
The next way to determine your production volume is to look at what similar business are doing. If you are a distillery bar, look at the bars around your distillery and see how much they are selling in a night, in a week, a month and a year. If you are on the distribution end, talk to distributors and liquor stores to see what other distilleries have done. Here are some general rules of thumb for very early-stage distillery bars. Your tasting room should average 60% occupied over the hours you are open. So, for example, if you have a 49 seat tasting room that is open 40 hours per week, you will need to have about 1,176 people per week in your distillery. Now, the average person drinks 1.5 drinks per hour (men generally have 2 drinks an hour and women 1). That means that you should serve 1,764 drinks per week. If an average bottle serves 12 drinks per bottle (actually, there are 25.36 oz per bottle so perfect 1.5 oz pours would be 16.9 drinks), you should produce 147 bottles per week. (Keep in mind we are still using our scenario from earlier.)
For distribution facilities, we’re going to take a different approach. Let’s look at what your sales force can accomplish. An account should average at least one 6-bottle case per week to be worth your time. A good salesperson in a good area (i.e. not much driving between accounts) should spend approximately 30 minutes per account. Let’s take a single month, say February. On average, a salesperson could visit 320 accounts in a single month (spending 30 minutes with each account). If you have one full time sales person, they should be able to sell 25.8 bottles per account, per month or 8,256 total bottles per month. As you can see, those two rules of thumb illustrate the vast difference between the two distillery models: a distillery bar will need to sell 13 times less booze than the distribution facility.
PLANNING FOR GROWTH
The last (arguably the most important) method in determining your production volume is to look at your projected growth path for the life of your facility. Planning for expansion from the start will enable you to size your equipment correctly from the very beginning. For example, if you project that you’ll double your sales volume every year, it won’t be ideal to buy a new still every year. It will also ensure that you don’t outgrow your facility too quickly. Some things to keep in mind when thinking about your growth: a distillery bar will peak fairly early and then settle down to a constant revenue stream. But without adding to the square footage of your drinking space, it will be difficult to grow sales volume (which is why planning for growth from the beginning is important). For a distribution facility, it is useful to look at a step-function of growth. Entering a new state/market or adding a new distributor will require having volume to meet this new demand, so your growth tends to jump first then ramp slowly after you pick up the initial “easy” stores.
Now that we know how much of each spirit we need to make in the worst, average and best-case scenarios, it’s time to start looking for equipment to meet our production volumes.
In order to ensure that all of the equipment gets evaluated and included in your budget as well as your floor plan, we prefer to write out how the booze will be made first for each product. Let’s take bourbon as our example and write out the entire production process for it.
Receive; 650 pounds of whole kernel #2 dent corn, 400 pounds of whole rye, and 250 pounds of 6-row malted barley in 50-pound sacks on one combined pallet. Weigh out and mill 638 pounds of corn through the hammer mill at 1,250 pounds per hour, then place corn flour in storage hopper. Weigh out and mill 363 pounds of rye and 250 pounds of malt at 1,250 pounds per hour and store in a separate storage hopper from the corn. The next morning, the lauter tun will be filled with 255 gallons of water from the hot liquor tank, then the corn flour will be added while being agitated to prevent dough balls and heated with direct injected steam to 200°F and held there for 30 minutes. 113 gallons of 70°F water will be added to the tun to drop the temperature to 160°F, then the Malt and Rye flour will be added after the pH is adjusted to 5.5. The mash temperature will be maintained for 45 minutes before the temperature is reduced to 135°F by adding 123 gallons of 70°F water and the pH dropped to 5.3, which will be held for another 45 minutes. The lauter tun will be drained through a wort chiller to drop the temperature to 70°F before pumping it to the fermenter. The first rinse water will also be pumped to the fermenter while the second and third rinse will be returned to the hot liquor tank, while the spend grain will be stored in 550-gallon totes until it can be shipped to a local farmer. The fermenter will contain about 500 gallons of wort. 0.75 kg of yeast will be rehydrated in 1.25 gallons of 104°F water in a ten-gallon stainless milk jug. The wort will be pulled from the fermenter and added to the rehydrated yeast three times to lower the temperature to pitch temperature, each time will be equal to the total volume of yeast (1, 2, & 4). After the temperatures are equalized, the rehydrated yeast will be pitched into the wort. Fermentation will take 6 days with the fermenter maintained at 75°F. After fermentation, the wort will be 10% ABV and it will be pumped to the 500-gallon stripping still. It will take 1 hour to heat up the still and then 6 hours to strip the wash with 150 gallons of 30% ABV low wines collected. 350 gallons of 1% ABV pot ale will be disposed of down the sewer. The low wines will be combines with the 50 gallons of tails (30% ABV) from the previous run and used to charge the 200-gallon finishing still. It will take 1 hour to heat up the finishing still and 6 hours to collect 1 gallons of heads (95% ABV), 60 gallons of Hearts (60% ABV) and 50 gallons of tails (30% ABV). 89 gallons of 10% ABV pot ale will be disposed of down the sewer. The heads will be used to clean the distillery while the hearts will be placed in a 200-liter new oak barrels with a #4 char. The barrel will need to be rehydrated with steam prior to the hearts being placed in the barrel. The bourbon will be matured for 4 years. A single barrel of bourbon will be pulled, once mature, at a time for bottling. The barrel will be emptied through a cheesecloth filter into a 75-gallon stainless steel tank. Over the next month, the proof will be dropped to 100 proof by the addition of one gallon of R/O water every other day. Once proofed down, the 63 gallons of bourbon will be filtered through a 1-micron filter prior to being sent to bottling. 317 bottles will be filled per batch.
By detailing out the distillation process (like example above), it starts making it easy to walk though both your inputs and outputs. *If you noticed that there are 7 gallons of bourbons hearts unaccounted for in there, great job!* In this example, we’ll need to account for what we do with that remainder over time: either buy an extra tank to store it in until we have enough to barrel or, in this case, dilute it to 20% ABV and store it in a 20-gallon barrel to use to dilute the barrel to bottle strength.
From the above process we can see everything we need: a way to move a 1,300 pound pallet with 26 sacks on it, storage for a pallet of grain, a hopper to dump the sacks into for the mill, a hammer mill capable of at least 1,250 pounds/hour, two storage hoppers (~150 gallons), an auger system to move the grain from the mill to the hoppers, a dump system from the hopper to the lauter tun, a 500-gallon lauter tun, a 500-gallon hot liquor tank, storage for chemicals to reduce pH, a wort chiller, a 550-gallon spent grain tote, at least one 500-gallon fermenter, 10-gallon stainless steel milk jug, dry yeast storage, wort pump, 500-gallon stripping still, 150-gallon low wines storage tank, high proof spirits pump, 200-gallon finishing still, 1-gallon heads receiver, 60-gallon hearts receiver, 50-gallon tails receiver, steam system for barrel, new barrel storage, maturation storage for 4 years of barrel production, 75-gallon proofing tank, R/O system, 1 micro filter system, bottler, labeler, and a heat gun.
Now that we’ve written down the entire distillation process from start to finish for our spirit—from the moment your ingredients arrive to bottling your spirit to be sold—you can look at the required equipment and begin to see what can be used in multiple parts of the distillation process for other spirits. For instance, you probably only need one wort pump and one high proof pump for all of your spirits.
One important note: Since each process is only written for a single batch of your spirit, it is important to look at how often you’ll need to make that spirit. If this process was used for our 50-seat distillery bar and bourbon was our only spirit, we would need to make a batch a little over once every two weeks. Of course, you’d need to make that booze 4 years in advance of your bar opening to allow for aging. For the distribution facility model, you need 26 batches per month, so plan on spending your weekends making bourbon too! This is a good point for iteration because there are 2 pitfalls that can happen here: if you’re running your still 24/7, you won’t have time to run the rest of your business, like finding and training qualified people, paying your taxes, building your brand, etc. But on the other hand, if you’re rarely running your still, you’ll have trouble meeting demand and will need to compensate by buying smaller, cheaper equipment.
Looking at the number of batches you need to run is only one part of production planning, the other part is your total system utilization. The easiest way to do this is using a simple table in Excel. Write out five weeks (by day) across the top of your table and major pieces of equipment down the side. Here is a shortened example using our bourbon process from above.
You can see that this distillery has the weekend off (awesome for them) and that, with 5 fermenters, they are at 100% total system utilization. In fact, they will be working pretty hard to mash, distill twice, kick off a fermentation, and clean everything each day. This represents roughly 10-12-hour days. If this distillery were to try and grow their production, they would need more equipment. A table like this should be generated for each production volume scenario that we created to determine how much equipment is needed initially and what space should be left for expansions.
DISTILLERY EQUIPMENT USES & FUNCTIONS
Now that we have an inclusive list of the equipment we need and we know how many pieces of each we need in order to operate efficiently, it’s time to do two things simultaneously: start shopping for our equipment and plan out our production floor. Each piece of equipment will have slightly different requirements for heating, cooling, electricity, and water. The better you understand the function and requirements of each piece of equipment, the better job you and your engineers can do in making sure that the building is built appropriately but not over-built. Then, we’ll need to lay out the equipment to make sure that we have enough space. If you do this before you get a building, you can get a good idea of how many square feet you need and in what configuration so you can find the right space that also meets the power, water, and gas requirements of your equipment. If you already have a building this is when you can take your current floor plan and see how things are going to fit, or if you will need to knock out some walls or get smaller equipment.
When you are shopping for your equipment, each piece should be picked out based on how you’re going to use it. The more your equipment is tailored to you and your spirit, the better job it will perform. In a lot of cases, if you’re not trying to get a “multi-use” item that is capable of three jobs, it will also be less expensive. We’ll now walk through the major components of a distillery and talk about some of the features you may or may not want for your craft distillery.
The two main types of mills in the craft distilling industry are hammer mills and roller mills. There are some burr mills and cage mills floating around, but if you’re shopping for one of them, you probably already know why. Roller mills are popular in the brewing industry because they do a good job of separating the husk from the malt and tend to leave a larger grist size that works well for the lauter tun (most common in the industry). Because roller mills are so common and a lot of people come to the distilling industry from the brewing industry, they are pretty common on this side of the industry as well. Typically, brewers are using two-roller mills. But is a two-roller mill right for you? If you are looking to mainly do malt and malt-like products (mainly wheat since rye is a lot smaller) or if you are doing off-grain fermentation, then the two-roller roller mill will do the job nicely for you. There are also 4- and 6-roller roller mills. These are capable of giving a finer grind than a 2-roller roller mill, or are at least doing it much quicker since you can decrease the spacing between the rollers as you go (rather than expecting a single set of rollers to do all of the work). Generally, roller mills are more expensive than hammer mills, mill slower, and require more maintenance. But they have life spans that are 4 times longer than a hammer mill and can separate out the in-fermentable husk.
Hammer mills are mainly used in the grain business and are used for making flours. Hammer mills can mill a lot of grain quickly and can make a much finer grist than is possible in a roller mill. The benefit of a finer grist is that it takes less time for the water, heat, and enzymes to act on the grain particle, which means mashing times decrease and yields increase. But finer grist will also pack tighter, increasing lautering times and even blocking off the screens. Hammer mills are also required to work with potatoes and corn, so if you’re looking to branch out with your mill, you will be better off with a hammer mill. The fine grist from a hammer mill works best with on-grain fermentations or when using a mash filter.
A mash tun is where you will be performing the conversion of starch to sugar, so it’s not needed for sugar-based spirits. Though, with most of them, a little bit of heat (less than 135°F) can help with the sugar absorbing into the water. People that have a mash tun available have been know to use it to heat the water and mix in the sugar, agave, honey, molasses, or whatever else they desire.
There are a couple of things to look for when you are converting starch to sugar: the first is what your heating mechanism is. Direct electric heat is really only useful for small kettles and generally not recommended once you get over 100 gallons. Direct steam injection, on the other hand, is the most energy efficiency mechanism. But, you will need steam that is not treated with chemicals that could hurt your mash or fermentation. And you need to account for the volume of water from the steam in calculating your water volumes. Another heating mechanism is indirect steam. It’s less efficient but allows for the use of cheaper steam. Cheaper steam is important because most plants can’t afford multiple steam systems and you will likely be using that more expensive steam in other places as well. Depending on the indirect method you use—coils or steam jacket—there will also be issues with cleaning and agitation.
Speaking of agitation, there are a couple of different methods you can deploy. The simplest method of agitation is a good ol’ paddle. This typically requires an open-top mash tun that is fairly small so you can reach across the mash tun and touch the bottom. Once you get to 500 gallons or more, you’ll need mechanical agitation in order to access all of the tun and keep things moving. Once you add agitation, a common option is a high shear mixer that will not only break up dough balls that form but can also break up any grain particles that they encounter, helping to decrease grist size in the tun. Of course, a high shear mixer doesn’t help a lot in a lauter tun or if you’re trying to keep your particle size up. The other type of agitation that is useful in lauter tuns specifically are grain rakes and a bottom scraper (to help clean the screen if there is a plug). These tools are mainly only options on lauter tuns, though some combo tuns will still have them when the screen is removed.
We’ve talked about lauter tuns a lot and now is a good time to explain exactly what it is. In its simplest form, it is a screen in the mash tun approximately 6-12 inches above the bottom that keeps a liquid layer below the screen. The idea is that a grain bed will build up on the screen after the majority of starch has been converted to sugar and once the mashing is done. The wort filters through this grain bed, absorbing any sugars that remain attached to the grain particle. Additional water is added and filtered through this bed until all of the sugar is removed from the grain. Some of this water is sent to the fermenter and the amounts with lesser sugars will be reused as the water to start the next mashing. If you are lautering, you will not be able to ferment or distill on the grain.
Fermenters are probably the most overlooked piece of equipment in a distillery because most of the time, when they are working properly, you just ignore them in the corner. They simply do their thing and all you do is fill and empty them when you need to. This unfortunately leads to a large number of distilleries that are fermenting in plastic totes or 55-gallon drums. Although, to be fair, if that’s what you’re intending to do with your spirit, it can work.
The simplest thing a fermenter needs to do is contain the liquid of your wash, wort, or mash while letting the CO2 come out of solution. The easiest way to do this is with open top fermentation and with a vessel that is about 20% larger than your fermentation. This will keep your foam in the fermenter and easily allow the CO2 to get out. Some people object to open fermentation due to the risk of critters and microbes getting into your fermentation and contaminating it, so they add a bug screen or a solid top. If the solid top is added, then typically an airlock is used (a hose into a bucket or a home brew bubbler are the most common) to allow the CO2 to escape. For smaller fermentation, fermentation types that are not temperature sensitive, or rooms that are kept slightly below the desired fermentation temperature, this is typically enough of a fermenter.
Temperature control is typically the first complexity that people like to add to their fermenter. The reason for this is twofold: one is that various yeast strains act differently at different temperatures and the other is consistency. If you want to put extra banana flavor in your rum, you can run your fermentation a little hotter, or if you want to make a rye vodka, then a colder fermentation can help mitigate some of the rye spiciness. When it comes to consistency, if your distillery is 90℉ in the summer and 60℉ in the winter, your fermentations will behave differently depending on the time of the year—both in taking different amounts of time and putting out different flavors. This can be turned into a marketing benefit or you can make different spirits in the winter than in the summer. But for those of you who want to make the same spirit year-round, temperature control on your fermenters is the easiest way.
Most of the yeast used in the distilling industry will rise to the top of the fermenter when they are most active, which then tends to make the top of the fermenter hotter than the bottom. In order to keep the temperature consistent throughout the fermenter, the cooling jacket is broken up into multiple zones with multiple sensors. As that zone gets out of range, it is cooled independently; basically, the top of the fermenter will be cooled more than the bottom. Sometimes an additional zone will be placed in the cone (if you have one), and this zone is kept particularly cold so that yeast that settles down to the bottom at the end of their activity cycle will shut down and not produce off flavors.
Speaking of cones at the bottom of fermenters, that is one of the most common questions: “Do I need a conical bottom or a flat bottom?” And, as with everything else, the answer depends on what you are going to be making. The purpose of the conical bottom is to give solids (dead yeast, molasses solids, or grain solids) a place to settle out so you can minimize the liquid volume they occupy and rack the fermented wash off the top and then clean out the junk. If you are not going to be fermenting solids, except for dead yeast, they really don’t service a purpose because the dead yeast won’t hurt your still or distillation process. Also, if you’re not going to separate the solids from the liquids in your fermenter (either because you’re going to distill on the grain or you’re using a mash separator after your fermenter), then they have no real purpose. Beer is generally done once it comes out of the fermenter so they try to separate out the yeast at that point, but the still works well to separate solids from liquid (actually vapor). So, as long as your solids won’t put off weird flavors when they heat up, you’re ok. Where we see conical bottoms most commonly used is people from the beer world who are doing what they know; people fermenting on the fruit and racking off, also people fermenting on the grain and racking off. It is common for the last two types to clog the conical bottom and have trouble getting the solids out through that two inch opening. In most cases for distilling, a flat bottom (actually slightly sloped) is what you are looking for.
There are a couple of ways to look at stills by how they operate. First off is the question between continuous and batch operation. In continuous operation, the wash or beer is fed into the still continuously while pot ale, hearts and heads come off the other side (there are a couple of different ways for the out products to come off but that’s the most common). Batch operation is the most common in the craft distilling industry because we typically aren’t operating 24 hours a day or even the 16 hours a day where the continuous still becomes more efficient. In batch operations, the still is charged with wash or low wines, or a neutral charge, and then distilled until it is finished. Heads come off the still first, followed by hearts and then tails (again there are some other splits used but this one is pretty common). Once the charge is finished, the still is emptied and then refilled before the next batch begins.
The other way to look at still operation is how it creates reflux—which is what creates the separation between ethanol and water (as well as all of the other chemicals in there). In the simplest case, the wash is heated until the most volatile components are volatilized and then these components are condensed back into liquid in a single step. This operation isn’t really done in modern stills and is practically only seen in those old alchemy set ups with an alembic still. Even in pot stills, there is reflux performed in the head of the still as the vapors expand, cooling down, and the least volatile components turning back into liquid and running down into the pot where they interact with the rising hot vapor. Also, heat is lost through the copper in the head, which contributes to the reflux. Lastly, the height of the head can cause reflux and is one reason for the height of the swan necks in Scotch stills.
While pot stills create ‘natural’ reflux by removing heat from the volatile vapors, other stills cause active reflux. The most common of these professionally is in plated stills, where either a perforated plate or a plate with bubble caps allows for the rising vapor to pass through a liquid leg. In that liquid, heat is exchanged between the vapor and the liquid, causing the vapor to collapse to a liquid and the most volatile components in the liquid leg to volatilize. Basically, this action forces the single distillation above to happen again and again on each plate. There are a couple of other mechanism going on in a plated still but that is the major one. An alternative design to a plated still is a packed column. These are traditionally used either in really large stills (think cracking towers for making gasoline) or the tiniest home rigs. There are some professionals that have upsized their home rigs and some of the less expensive professional stills use them too. By packing the column, you give the rising vapors places to condense and run back down the column to interact with the vapor. Rather than have set plates where this occurs, the interaction occurs throughout the column. There are ways to calculate how many theoretical plates that a packed still has to ensure that you get the separation that you are looking for.
The other type of active reflux involves cooling the top of the still. Historically, this was done with external plates where ice or cold water could be placed. In modern stills, it is done by circulating cold water through a coil or jacket at the top of the still. The nice thing about this design is that the amount of forced reflux can be changed over the course of the distillation and, in some designs, all of the heat can be removed from the vapor, effectively stopping distillation from happening. By controlling your reflux, you can dial a still up to create vodka or have no reflux to make it a pot still. You also have to match the heat input to the cold input in order to use these systems effectively, so they do take a little more experience to run effectively.
When selecting your still, the most important thing to think about is what spirit you want to make. If you are creating a lot of funk in your fermenter using high fermentation temperatures and lots of dunder, then you don’t want that all to be stripped from your spirit by your still, so choosing a design with a high amount of reflux isn’t desirable. On the other hand, sometimes a still with enough reflux that you can jump from your 10% beer to a 60% barrel on a single pass will bring along more flavor than a double-distilled spirit.
There are many different distilling system and generally our advice is to select one that you know makes the kind of spirit you like. If your primary goal is to make American single malt in an Islay style, then we would point you towards a scotch still and make sure you know that your bourbon is going to carry a bit more funk than would be common on a 4 plate American whiskey still. We’ll also remind you that your bourbon being different isn’t a bad thing.
Once you have your finished spirit, you’ll need to prepare it for the market. While assembly lines are still commonly used, exploring ways to automate the bottling process will increase your efficiency. A few places to look for these include Race Label and Xpress Fill.
It may seem that we’ve put the cart before the horse here and gotten carried away talking about selecting the right equipment before we’ve even considered a building. Most of our clients don’t have the time to fully know what their equipment needs are before looking for a building. However, it really helps understanding what equipment you need because knowing you want a 20’ tall still before signing a lease on a cramped downtown shopping center where building height is limited to 18’ is going to cause a big problem.
We recommend the equipment selection be done first because then we know how much power, water, gas we will need in our distillery and can understand if we are going to need major modifications to a building. It’s also helpful in knowing if you’re operation will stay under the MAQs or if you have no choice but to sprinkler the entire facility. These can be major construction costs to discover after you have purchased a building or signed a lease, and we’ve seen many clients who have to compromise what they want to do with their distillery in order to fit into a building and ,oftentimes, that unfortunately means changing the business plan too.
The first thing to look for when you are trying to find a building is what your local zoning department will consider your distillery. It is good to sit down with zoning officials or your your local Chamber of Commerce early in the process to understand how they are going to view your business. If you want your distillery to be located downtown, it’s good to make sure that they won’t consider all distilleries as industrial activity. This is also a good time to get the city government excited about your project (i.e. the jobs you will be creating and the contributions to the local economy you’ll be making). Once you understand where you can be located, the next step will be to start looking for a building.
One of the biggest, and often overlooked, things to look for in your location is sprinklers. While it isn’t required that all distilleries have sprinklers, we will say that all but the tiniest probably need them. And, if you have any plans to grow in your location, you don’t want to hit a wall because you don’t have sprinklers. We won’t spend a lot of time rehashing building and fire codes, however, the basics are that you are required to have sprinklers throughout your building if you have more than 240 gallons of alcohol greater than 20% ABV in closed containers greater than 1.5L. While there are a lot of other parts to that, that one sentence covers the situation most distilleries run into.
!!PICTURE HERE . PLEASE!!
The first way in which you need sprinklers in your distillery is if you are using a double distillation process and are charging you stripping still with greater than 20% ABV and if your finishing still is greater than 240 gallons (908 L). Having a 250-gallon still that you promise not to fill over 240 gallons is not an accepted work around in most location. The other common way to need sprinklers is if you plan on storing barrels. There aren’t many using 1.5L barrels, so all barrels will count against your Maximum Allowable Quantities (MAQ). Take the volume of your barrels and if they are over 240 gallons, then you need sprinklers (4.5 53-gallon barrels is over the limit). Even if you only have 4 barrels, that leaves you with only 28 gallons to do all of you other operations like bottling or producing more hearts or low wines. Generally, the facilities we see that don’t exceed the MAQs are not aging barrels and are using a single distillation process and don’t bring in totes of NGS. To reiterate, even if you don’t need sprinklers, having a space where they are already installed does add a nice extra layer of safety.
After sprinklers, the next thing to look for are your building’s electrical, gas and water capabilities. Most distilleries don’t use a ton of water, but you don’t want to have to sit around all day filling a 500-gallon tank with a garden hose. Electricity is normally in abundant supply, unless you are trying to run your whole facility on it. Directly heated mash tuns and stills burn a ton of power while they are coming to temperature and it isn’t unusual to need to increase the power coming to the building when electric equipment is used. Outside of that, you will be running your ancillary equipment and chillers on electricity and generally we recommend 400 amps of 3-phase power (not knowing anything else about your facility). Of course, if you’ve already selected your equipment, you can just add up the loads to get a basic idea of how much electricity you need and then check that against the building capabilities. Lastly is natural gas, which is a bit trickier since you have to look at the BTU requirements of each piece of equipment and then add in the inefficiency of a system that isn’t designed, plus the natural inefficiencies of the boiler. On average, a 500-gallon double distillation facility needs somewhere between a 750,000 BTU boiler and twice that based on how they are going to operate their facility.
While it may seem odd to say that the last thing to look for in a building is square footage, it’s actually quite true. Mainly, this is because there are several ways you can work with a small facility, particularly because distilleries need to be tall around the still, which for most buildings means they are tall all over. You can build equipment platforms, mezzanines or stack equipment to utilize unused vertical space. Alternatively, you can also try to find tanks and equipment that are tall and skinny instead of short and fat. At the end of the day, it is very helpful to take the floor space of your prospective building and fill it with the general shape of you equipment. Make sure you put in walking paths and consider how you’re going to get the equipment into the building. Drawing up a quick floor plan can answer a lot of questions about whether or not the building will work for your distillery.
A commonly asked question about a particular building is “Is this space going to be big enough for my distillery?” The answer is always the same: “It depends on what you’re going to put in it.” The smallest distillery we’ve build fit in just over 750 sq ft, while the largest is just under 90,000 sq ft. So, if you’re building is in that range, it’s probably very likely to fill it and make it work. If you’ve got a space that your heart is set on but the equipment just won’t fit or you can’t get enough power or gas to make the facility run, it’s time to go back to the business model and iterate to figure out what distillery business model will fit in the space. Once you get past this point, it gets very expensive to make major changes, so be sure you’ve considered all aspects carefully.
Before you sign a lease, it’s time to think about your business and how you want to structure it. The big questions are how do you want to structure the business and what is your growth plan for the distillery. You’ll also want to make sure your business is registered appropriately with your state and you get an EIN from the federal government. This is also the right time to talk to an insurance agent to make sure your new business is properly covered and, depending on what you plan on doing, your insurance company can help you stay as safe as possible.
There are a lot of resources for starting a business. We’ve listed just a few to get you started:
Once you have a building selected and your company structured, the next step in the process is scheduling a sit down with the local fire marshal. However, it is important to understand what the fire code is before you meet with the fire marshal. The purpose behind this meeting is to demonstrate to the fire marshal that you understand how to safely operate your distillery and explain to them just how you will operate safely. Doing this early in the process allows the fire marshal to understand your business model and build trust, ensuring him/her that you don’t want to make a jet fuel refinery in the middle of town! If will also give the fire marshal a chance to read up on distillery regulations since most towns don’t have a distillery yet and this may be new territory for them. In our experience, giving the fire marshal a “cheat sheet” on where to look is greatly appreciate it. This is also a good opportunity to talk about any grey areas in the code and make sure they are on board with your interpretation of it.
DEVELOPING YOUR FLOOR PLAN
Once your fire marshal is on board with your safety precautions, it is time to get the floor plan officially drawn up for our building. This means bringing in the Architecture, and Mechanical, Electrical and Plumbing (MEP) team. The floor plan work you’ve done up to this point needs to be put into CAD and any other building changes need to be figured out. This is also where the safety systems you proposed to the fire marshal start becoming a reality. We typically suggest having a distillery consultant sit down with your Arch and MEP team and all of the written plans for your distillery to go over the concept and goals for the building, that way everyone can ask questions and see how they need to interact with each other to accomplish your goals. Sometimes environmental and structural engineers are also brought in at this stage, depending on the scope of your project.
An important job for environmental engineers can be figuring out what to do with the distillery waste. From the infancy of the industry, waste has been an afterthought. Distilleries dumped their liquids down the drain and gave their solids to a happy farmer. As the industry has grown and evolved, there has been a greater impact on the local sewer systems and now distilleries are typically regulated on the pH, temperature, BOD/COD of their waste and any copper content contained within. For this reason, we have been putting more and more waste treatment into the facilities that we build. The solids also have become harder to give away, as there are more distilleries competing for the same number of farmers and ranchers. While not everyone has to deal with this waste problem, it is one that is becoming more common in the industry and we’re actively working with more experts in waste treatment to create long term solutions.
Structural engineers depend primarily on where the project is located. For instance, projects in California typically need a structural engineer to make sure that the tanks are earthquake safe and won’t tip or collapse. When building a distillery over a basement, it is common to need to reinforce the floors to make sure that the high weight per square foot of large tanks doesn’t end up with them in the basement. And of course structural review can be necessary when going up into the air, either with a new roof or building a second floor on a building that didn’t have one.
An important point to interject at this time is discussing with your Arch and MEP team about how long the process will take—both for them to complete their designs and how long construction will take. This is important because it is normal for your equipment to have a 6-month lead time, and you want to start working your timeline back from their projected launch date to make sure your equipment is here in time. It is also helpful to get CAD drawings of your equipment from the manufacturers, which they are much happier to share after you’ve ordered and paid your deposit. The manufactures will also work with your MEP team to make sure that the exact specifications of their equipment will be met.
The mechanical design of the building has a lot of ground to cover—from the HVAC plan for the building, which we like to incorporate into the safety systems, to the production heating and cooling systems. While most mechanical engineers will have a lot of knowledge of these types of systems, it will be important for you to explain how distilleries are different from breweries (as breweries are much more common than distilleries) and that even though you start off with the same equipment, you are using it differently. And then you have all of this additional equipment completely unused in the brewery world. Generally speaking, you will want a low-pressure steam system for your entire facility, but it can be useful to get basically an industrial size instant hot water heater added into your system so you can run hot water through your equipment and lines to clean it or have on demand hot water instead of a hot liquor tank. We also recommend that you split your mash crashing system off from your fermenters and still, since their load cases are very different and you can shrink your systems equipment if you don’t just design for maximum load. For the HVAC, you can use the air flow rate to declassify your distillery and save you money on equipment costs, but that is a fairly specialized calculation.
If you declassify your facility, then the electrical engineers’ job is fairly easy in that they just need to run electrical to the equipment in the right amounts. If you don’t declassify, then all non-low voltage equipment within 5’ of an ethanol source or within 25’ of the source within 3’ of the floor needs to be classified. Depending on your layout, this can mean lots of circuits running in and out of classified zones. The other big job of electrical engineers is making sure that all of your equipment is bonded and grounded. By pumping and flowing liquid, we can create a static charge that can build up and spark. And when that spark is into or near a stream of ethanol-filling tanks, really bad things can happen. The number of mobile tanks in most distilleries makes this job much harder than usual and most likely they will use bonding reels that you can connect to a tank once you locate it in its temporary location. It is very important that you understand and use these systems.
Your architect or civil engineer will be the project coordinator and detail out a lot of the construction. They will also be working with the occupancy of the rooms and making sure exits, fire extinguishers and other safety features are located correctly. Once they get a handle on the MAQs for your floor plan, it tends to go fairly smooth from here on out. One of the big things you’ll need to watch for at this stage, particularly if you’re a distillery bar, is the designing of your walls. Most of the time, distillery bar owners want to have a giant bar and a giant window looking from your bar back to the distillery. Now, there are a lot of distillery designs that have gotten away with this, but you will likely hear from your consultant or architect about the giant window you’re wanting. Not only is it very expensive, it’s not code compliant. The window can only be 25% of your wall space (which can be measured a couple of different ways) and the prettiest way to do it is with very expensive fire glass. As with all things, there are other ways to get it done safely and to code, but you’re going to have to work closely with your architect to make sure your vision is implemented.
Once the plans for your distillery are done, it’s time to start thinking about the hardest part of this industry; the regulations. First off, your distillery will be regulated by the Alcohol, Tobacco, Tax and Trade Bureau (TTB) on the federal level. Then, every state has an agency that regulates the manufacturing and sale of alcohol. Their names and scope vary enough that it’s useless to list here. Instead, a simple Google search will help you find the website for your state’s governing agency. Furthermore, you will be regulated by your fire marshal (remember meeting them earlier?) to ensure that your facility is safe. And there will be at least two or more groups that will license your business and ensure you are getting taxed appropriately and, if necessary, collecting sales tax accordingly.
FEDERAL REGULATIONS & THE TTB
The TTB wants to know what you will be doing at your facility. More specifically, they’ll want to know about the vessels you will be using to hold your spirits, where they will be located, and where your bonded area is. Even if you will be small enough to not need a bond (we highly recommend you get one anyhow), there will still be an area designated as your bonded area. There’s a very specific reason we haven’t discussed permit applications until now, as we begin to dig into federal regulations. During the MEP and Architecture design phase, tanks and walls will still be moving around. Once they are done, you should be confident that this will be the final layout for your distillery. As you begin to fill out your permit application, you need to understand that you are certifying that this is how your distillery will exist once it’s built. However, there is some grey area in whether that refers to when you sign the application or when the permit is approved. As of now, the TTB has not performed any inspections on distilleries prior to permit approval to see if they match their permit, so most craft distilleries operate under the assumption that their distillery must match their application upon approval. To be safe, you’ll need to check the approval times on the TTB website and align your submittal so that you can fire up your distillery the day you get your permit approved. Filling out the TTB permit isn’t overly onerous if you’ve gone through the planning process outlined above. And, as long as you’ve read CFR 27, you should know the answers to all of the questions between the two.
State permitting varies too much to cover in any kind of depth, but most states have a similar website to that of the TTB that will tell you how long their permitting process takes. Despite the variations from state to state, you can expect to use a similar process to your TTB permit. Unfortunately, most states have not staffed their distillery regulation departments appropriately to accommodate for the craft boom, so it’s likely that permitting times from your state government will be longer than the TTB, though this wasn’t always the case. Since you should have looked up your state regulations way back when we were deciding on our distillery business model, these questions will likely be easier than familiarizing yourself with CFR 27.
Construction will be a very stressful time for you—from looming deadlines to get your TTB permit to equipment showing up. And of course, you can anticipate something going wrong, whether it’s a contraction with great recommendations showing up and installing everything wrong, materials being delayed, or being unable to building anything due to weather. This is by far the worst part of the journey in starting a distillery, but pull through because you’re almost ready to officially open doors.
Once construction is done, it will be time to start installing your equipment. If the planning process went well, every connection you need should be there waiting for the supplier to hook up the equipment and then run through a test. If you have your license at this point, it’s great to make a batch of your spirit with the equipment while the supplier is standing there to make sure that everything works like it’s supposed to (e.g. the valves don’t stick or things don’t heat up). It’s much easier to work through these small issues with the supplier while they are standing there than once they’ve moved onto their next job. It may also be necessary to involve your engineers or contractors if the equipment doesn’t work. Some issues will need a profession diagnosis. For example, if your still is slow to heat up, he steam line may be undersized rather than the still being improperly designed.
Once you have your equipment working and your permits in place, it’s time to start making spirits!
So, you’re ready to officially start your craft distillery. Now it’s time to talk about turning a profit. Unfortunately, having a great spirit doesn’t mean that it’ll sell. You need to make sure that you, in an efficient and compelling way, get the word out about your distillery.
Step number one in digital marketing is creating a website. You’ve invested all this time and money into a business. Now, it needs to have representation on the most popular medium ever, the internet. Your website is where you get to personify your craft distillery and showcase the amazing vision, products, and spirit that your distillery embodies. Step number two in digital marketing for your craft distillery is releasing a press release. Write a simple 500-1,000 word release talking about your distillery’s journey to open, what your vision is, and give people a compelling reason to stop by. Whether you have budgeted for a big grand opening or not, find ways to make it a newsworthy event. You can send that press release to your local news publications, big distribution sites like PR Newswire, and industry-specific sites like Spirited.
Social media is one of the cheapest ways to market your business. But before you go out there and create a profile on every single social media site out there, first look at where other distillers are. In our experience, Instagram, Facebook, and Twitter are the best channels for craft distilleries to use. Some things that you can share include information about your team, the events you’re having, behind the curtain of your production floor, your products and labels, and even tips or tricks of the trade.
Remember that the boom in the craft industry is the higher value people are placing on products that aren’t mass produced. Shopping local isn’t just a tagline that American Express coined; it’s a serious movement that is gaining momentum and changing the way consumers buy. Find ways to tap into your local community through fairs and farmers’ markets. Look for ways to reach out to local reports who are willing to cover the opening of your new distillery.
Craft distilleries are finding many different ways to grow. Some are entering new markets (even international markets), others are creating new spirits. Finding ways to grow can even involve bringing in an outside perspective to evaluate your business and find new and innovative ways to grow. Our team has helped more than 30 craft distilleries across the US find and execute changes that boost productivity, efficiency, and profitability.
READY TO GROW YOUR DISTILLERY?
Let’s transform your dream of owning a thriving distillery into a reality. Our craft distillery consulting services will steer you clear of pitfalls, uncover system inefficiencies or flaws, improve your spirits, and increase profits.