July 2, 2012 at 7:35 AM ET
WOODINVILLE, Wash. – When Orlin Sorensen and Brett Carlile got the idea to start a whiskey distillery, the longtime friends freely admit they knew little more about spirits than that they liked to drink them.
“We had no idea how to do it,” Carlile said.
Just a few years later, Woodinville Whiskey Co. is among the more prominent players in a surging craft distillery industry, which is drawing hundreds of hard liquor fans into the hands-on business of distilling vodka, whiskey and other spirits.
There are perhaps 250 craft distillers operating around the country right now, up from about 50 in 2005, according to a Michael Kinstlick, who runs Coppersea Distilling in New York state. He prepared an industry report for the American Distilling Institute, the craft industry’s trade group.
The explosion in interest has been fueled by more relaxed state laws, which have made it easier to set up distilleries, combined with the growing interest in hand-crafted, artisan and locally made products.
“There’s been a major renaissance in America in wine, beer, food,” said Bill Owens, founder of the American Distilling Institute. “Now it’s our turn.”
It also helps that Americans – perhaps influenced by “Sex and the City” and “Mad Men” – are increasingly favoring spirits over beer and wine. Spirits accounted for 34.1 percent of alcoholic beverage revenue in 2011, up from 28.7 percent in 2000, according to the Distilled Spirits Council, a lobbying group.
But while distilling spirits all day may sound like a dream come true, the reality is that it’s hard, physical work that takes a lot of money to get started – and may not pay off for years.
At Woodinville Whiskey, located in an industrial strip about 30 minutes outside Seattle, the day often starts as early as 6 a.m. and can stretch late into the night, especially if the founders are hosting an all-volunteer bottling marathon.
One recent morning, Carlile was bounding up and down a set of movable stairs, checking on a huge vat of water and locally grown corn that he had just milled into a fine corn meal. Cooking the grain, called mashing, is the first step in the long process of making whiskey.
As the mill roared, he turned his attention briefly to a barrel that had just been filled with "white dog," whiskey that has not yet been aged. The barrel had sprung a small leak and the stopper, referred to as a bung, had broken apart.
As he worked to fix that, he kept his eye on a gas nozzle that was being used to fill yet another massive barrel. Later, he would use a forklift to hoist the barrels into the former computer repair shop next door that serves as their warehouse. The barrels will then sit for several years while the alcohol takes on the flavor from the wood it is stored in.
Carlile, 35, said he lost 30 pounds within months of starting the whiskey company, just from the physical activity of running the distillery.
“It’s a blue-collar job,” he said. “I get sweaty every day.”
Carlile is a former construction materials salesman who quit his job to start this business. He and Sorensen went to high school and college together but say they came up with the idea of starting a distillery separately. The coincidence was so powerful they felt it was meant to be.
Sorensen, also 35, is a former pilot who was laid off after the Sept. 11 terrorist attacks. He started a web marketing business that he has kept going on the side to pay the bills while Woodinville Whiskey grows.
To learn about the business, the pair turned to Dave Pickerell, who had been master distiller at Maker’s Mark for 14 years before starting a consultancy focused on craft distillers. Woodinville Whiskey was one of his first clients.
Pickerell, who is based in Louisville, Ky., now has clients coast to coast. He thinks the weak economy and high job losses have actually helped get some people into the industry.
“There were people who had a dream and were displaced and said, ‘Why not?’ he said.
The big challenge of starting a whiskey distillery is it requires a big investment in space and equipment, but it takes several years before the whiskey is ready to be sold. That’s one reason why many craft distillers sell vodka or other clear spirits that don’t need time to sit in a barrel developing flavor.
Woodinville Whiskey has mitigated that business problem by selling vodka and the unaged white dog whiskey. They also aged some of their whiskey in small, pricier barrels so they could get a product on the shelf quicker. They started selling those this year.
The company had about $1.3 million in revenue last year and expects to see a 30 percent increase this year. But the big payoff won’t come until 2013 or 2014, when the big barrels of whiskey filled in 2010 are finally ready to be bottled and sold.
The waiting game can be stressful. Pickerell recalled a time when Sorensen and Carlile called him in a panic, certain some of the aging whiskey had been ruined. By the time he flew out there, the perceived problem seemed to have resolved itself.
“Every once in a while I’ve gotta talk ‘em off a ledge,” he said.
Sorensen said they aim for a retail price of between $45 and $50 a bottle, on par with premium competitors. They recently had to lower their prices slightly to offset an increase in other fees from new Washington state laws allowing liquor to be sold at retailers rather than just state-run liquor stores.
To fund the business, the company has borrowed about $600,000 and plans to seek more financing. Sorensen, 36, said the company is profitable, but for now the co-founders are pouring money back into the business rather than taking a paycheck themselves.
They have two full-time and four part-time employees. Once or twice a week, the company hosts bottling events for 12 volunteers who help out in exchange for T-shirts and pizza.
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The products are still only sold mostly in the Seattle area, in line with the practice of most craft distillers, which start small and local. Woodinville Whiskey has ambitious expansion plans, but Sorensen said the company will stay primarily focused on their home state.
“We’re from Washington. The people who helped build our brand are from Washington,” Sorensen said.
Although the number of craft distillers is surging, experts say they represent far less than 1 percent of total spirits sales in the United States.
Still, the increase in small distillers has been enough to attract the interest of big industry players. The Distilled Spirits Council, which traditionally limited itself to big spirits companies, recently started accepting some small distillers as non-voting members. Many think it’s also only a matter of time before big companies start buying up some of the more promising craft distillers.
Meanwhile, more distillers are expected to open up shop. Owens, the president of the Craft Distilling Institute, runs twice-yearly courses in how to start a distillery. He says the classes, which cost $3,500, regularly fill up.
To Owens, the fact that it’s difficult to start a distillery and can take years to see a real payoff are among the industry’s attributes.
“You get rid of a whole bunch or class of people that are just into greed or money,” he said. “We’re into people who have a love of the craft.”
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