This article is written by Caroline Porsiel, CEO of Atlanta Bourbon Company. It was inspired by Fred Minnick’s article in the Forbes Magazine “Whiskey Money: How To Get A Piece Of The $8.6-Billion Bourbon Industry”.
What can we learn from European distilling traditions today, and how can we create sustainable, qualified, long-term jobs in craft distilling in the US? We believe that following established industry models might be missing out on opportunities. Let’s see why and what we at Atlanta Bourbon Company like to make different:
The major difference between European distilling traditions and the US craft industry.
There are about 29,000 distilleries in Germany, and around 24,000 distilleries in Austria – and despite a huge growth in the past years there are still just around 3,000 distilleries in the US. In Germany for example 20-30 larger distilleries maybe considered large production facilities, meaning that the remaining 28,970 craft distilleries own about a 50% share of the spirits market of which some are only available in local markets. But also, other countries like Brazil with 40,000 distilleries show that small craft distilleries can be a significant part of local industries.
Germany has about 82 million citizens, which is about 1/4th of the US population. Considering this, the potential would be to create around 115,000 small craft distilleries all over the US with an average of 8 employees – creating 920,000 direct and sustainable jobs. Creating many small craft distilleries is a better way of creating long-term sustainable job opportunities than focusing on fewer large production entities.
(As a rule of thumb the average craft distillery has 5-10 employees in the production and management. If distilleries offer additional local events and tours, this number might be higher. Automatization technology will reduce jobs especially in larger production facilities.)
There are large plants build in Kentucky– they already created a lot of jobs.
The German model is an example for “Mittelstand” business, which is basically a term summarizing only smaller sized businesses and this is not comparable to the large production facilities like in Kentucky, Indiana, or Florida etc. – large production facilities face very different market challenges than small local oriented craft distilleries. In our opinion both categories of industrial liquor production will be needed in the future – it is just a question how market shares are going to balance. And of course, large production facilities will mostlikely automize production and reduce jobs in the future whereas small distilleries can play a significant part in creating jobs being tied into local communities.
White-labeling harms the craft industry.
White-labeling is a common practice and means that distilleries do not produce themselves on-site but purchase spirits from other distilleries, then label and sell it as their own. It is against our principles at Atlanta Bourbon Company, but many start-up distilleries claim that they have to white-label until their own products come of age to create enough cash flow. But this business model immediately causes two problems: First, the distillery becomes dependent on the seller of the products; they cannot recreate the taste themselves and cannot control the sales prices either. They basically are dependent on the seller, which is normally a large production plant. Secondly, these distilleries do not build up any know-how in the art of distilling, and they don’t create sustainable local jobs either – sadly one only needs helpers rebottling and relabeling, and not qualified personnel. And this is where Fred Minnick’s argument comes in and closes this vicious circle: Investors do not invest in whiskey because they fear poorly made whiskey! “The most important variable for the success of a whiskey distillery is being able to ensure high quality, blending expertise and an experienced distiller at the helm.” For these reasons, white-labeling is the wrong path for any craft distillery, especially adding to this consideration the consumers that were misled in believing they purchased a local craft product – sooner or later such actions are going to backfire. And, this is not trustworthy for any investor.
Atlanta Bourbon Company believes in craft distilled and hand-crafted quality.
Atlanta Bourbon Company guarantees craft distilled products are only distilled by a distiller on site from grain to bottle. If we sell co-branded products i.e. like in our “While We Are Waiting Campaign” we will tell the story of both distilleries and why we decided to work together on this specific product and how it was made. We create full transparency for our consumers, and we guarantee truly hand-crafted quality.
How to finance a start-up distillery without white-labeling?
…by following the “Mittelstands” idea: This means shifting the focus from investing in “future global brands” to investing in local craft distilleries with local selling points creating many local brands and local jobs over time instead.
Fred Minnick has explained that “Standard institutional lenders have historically based their decisions on brick and mortar and are not structured to view aged spirits as proper collateral.” This is very true, and exactly this thinking leads to white-labeling practices today. It is the belief of many investors to focus only on aged sprits and preferably already established “brands” as an investment – but what if we shift this thinking to understand the distillery as a creator of local brands and being the local selling point and event facility? If people are comfortable to invest in a restaurant, a brewery or a distillery – there is not much difference considering the overall risks. All these businesses demand an experienced chef, brewer, or distiller as well as a team and concept matching to the location. These investments can be indeed very rewarding and might as well be much less risk than betting on establishing another “global brand” in a billion-dollar market.
The idea to focus on “Mittelstand” means to reduce the risks and as well to reduce the costs of establishing first cash flow. Being present on global markets needs a substantially bigger marketing budget, as well as much higher production volumes in comparison to only selling into local markets.
Does Atlanta Bourbon Company help to create jobs?
Atlanta Bourbon Company is preparing to establish a German “apprentice” system training future distillers in our facility. Our upcoming tasting series is actually one first part of our training program – because we believe it is not only essential to learn about the process of distilling but also to be familiar with the history and the global varieties of each product to create something truly special. Distilling is an art and a passion like fine cuisine – and we need to find the truly talented young distillers to enhance our world with extraordinary distillers.
Atlanta Bourbon Company is also talking to investors and venture capitalist that focus on sustainable and green projects to reconsider the “Mittelstands” investment concept – we did not cover all advantages for investors in this article but indeed there are very interesting perspectives once investors reconsider going the “local” way.
We believe in investing in long-term, sustainable quality creating many jobs and securing the investment by diversification in local units rather than betting on one shiny butterfly that may appear attractive in the global setting today. We believe the group of many will be more rewarding and a more secure investment helping to create many jobs for the future.
About Atlanta Bourbon Company: Atlanta Bourbon Company is a craft distillery in set-up phase. We have committed to our own Atlanta Bourbon Reinheitsgebot (purity law) to produce super premium quality without any additives – because we do believe the future is clean drinking.
FOR IMMEDIATE RELEASE:
April 30, 2019
Atlanta Bourbon Company
Telefon +1 404 771 4332