DBC: Destination distillery

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New charred White Oak barrels bare the initials QW for Quentin Witherspoon, who runs River Rum, a distillery in Lewisville which produces rum and blended whiskey.
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Local distillery one of eight in Texas making product on site

Editor's Note: The following article appeared in the August 2013 edition of the Denton Business Chronicle.
 

Every Thursday afternoon at 4 p.m., Quentin D. Witherspoon opens the loading dock of his 5,000 square foot distillery in Lewisville, and begins to make homemade ice cream.

For three hours, he and his father welcome customers from their rocking chairs and serve them ice cream instead of the bourbon and rum that’s crafted inside the space to show people that quality liquor can be made locally by people they know.

Witherspoon’s Distillery, founded in 2010, is one of eight distilleries in the state manufacturing spirits on site, according to the Texas Alcoholic Beverage Commission’s online permit system. There are 34 “operating and active” sites where at least some part of the process takes place, and 56 total companies registered but not necessarily actively manufacturing liquor.

Between June 2008 and June 2012, the number of Texas distilleries grew by 400 percent, the TABC reported in its fall 2012 newsletter.

The commission reported the increase was based on the relatively new distilleries with more than half licensed in the past two years.

Glazer’s Inc. distribution represents Witherspoon’s and other companies to get products on Texas shelves. Louis Zweig, senior vice president of marketing and strategy for the company, said Glazer’s, too, has noticed the increase in local spirits, and store owners and consumers are embracing the craft distilled spirits.

“In the past few years, there has been explosive growth of local and state distilleries, and local and state developed products across all types of spirits,” Zweig said in an e-mail. “The owners and managers we’ve met with are entrepreneurial, passionate, industry-savvy and dedicated to making great products.”

Other craft distilleries in Texas have noticed the uptick, and formed the Texas Distilled Spirits Association last year before the legislative session, said Paula Angerstein the organization’s secretary.

Her business, Paula’s Texas Spirits, was the second in the state to receive a distilling permit, and said while she isn’t sure why the increase has occurred, she is sure the industry is in on the upswing.

“I have kind of watched the industry grow, and up until recently I knew every single distiller,” she said. “It’s sort of a bigger trend — local buying, local eating, and it’s been good for us.”

The local aspect is an important portion of Witherspoon’s business model, he said. The molasses he uses in the rum is from a provider two blocks away — the same man his family has purchased molasses from for the past four generations. The only part of his product not made in Texas or the United States is the label for the bourbon whiskey, which will be made in Lewisville in the coming months.

Considered a sustainable business model for liquor, the company’s product has already been selling, said Kevin O’Donovan, a manager at Fossil Creek Liquors in Lake Dallas, which has been selling Witherspoon’s Distillery products for about two months.

“I think they definitely have a budding potential market,” O’Donovan said. “The company does amazing here. ... I think his product is actually going to start doing well and is going to blow up really, really soon.”

In addition to the local feel of the product, Witherspoon also makes a point to be accessible, using direct marketing to connect with clients. He frequently accompanies his staff to tastings at local liquor stores and bars, buying rounds for customers.

“It’s the most effective way of promoting if you don’t have money,” Witherspoon said. “What’s effective is getting your customer one customer at a time, the old-fashioned way. We build a really good relationship with everyone we deal with. We like to treat them like family.”

One of the bars Witherspoon visits is Tierney’s Café and Tavern in Lewisville, where there has an increased interest in Texas spirits. Every Tuesday night, the happy hour special is “Texas Tuesday” where specialty cocktails made with Texas liquors are discounted and selling the local product is easy, owner Greg Tierney said.

“First off, [Witherspoon’s] is easy for us to sell because it’s so local,” he said. “Just asking ‘hey, do you want to try this product? It’s made half a mile away from here’ — people are really interested in that.”

People shopping at liquor stores are also interested in the local products, said Zweig. In many shops statewide, storeowners have started “Texas spirits” sections to promote local brands, and consumers like being able to interact with the distiller.

“Our retailers seem to be genuinely interested in promoting local/state producers,” he said in an e-mail. “In many cases, the owners are working in the stores and the on-premise accounts, doing promotions and tastings, and the retailers welcome this kind of hands-on approach.”

The market also has room to expand, as the local distillers are all in demand, Zweig said.

“It’s hard to name a local player who is not doing well. Consumers and retailers seem to be embracing the category,” he said.

The U.S. beverage alcohol industry is a major contributor to the economy, responsible for over $400 billion in total U.S. economic activity in 2010, generating nearly $90 billion in wages and over 3.9 million jobs for U.S. workers, according to the Distilled Spirits Council of the United States’ website.

In 2010, distilled spirits accounted for over $120 billion in total economic activity, or 30 percent of total economic activity from all beverage alcohol, the organization said.

In September, the economic benefit may continue to expand, at least for Texas, said Angerstein. This legislative session, the Texas House and Senate passed a law allowing for destination distilleries, meaning licensed distilleries in the state can now sell their products from the distillery, as well as serve beverages.

This will help introduce a new business model that means small craft distilleries may be able to bypass distributors when they first start out, avoiding a large cost and allowing for smaller, specialty batches, she said.

“It’s going to really skyrocket when people realize they can have a distillery and can create a business model that doesn’t’ involve some of the bigger road blocks today,” she said. “You’re not going to get rich selling that much, but you can get a loyal customer base.”

With this legislation, Witherspoon’s is already in the process of starting a destination distillery, looking at historic properties in the area that are larger and would help diversify the business, Witherspoon said.

“So we’re in effect going to be a manufacturer, liquor store and bar all in one building now, with limitations — but those limitations are so generous that it attracted some serious investment potential to our company,” he said.

He and the other founders are planning to launch new products as more of the liquor ages in special batches and they work on a spice blend for a spiced rum, and they hope to continue to expand and prove that Texas can manufacture quality spirits, Witherspoon said.

“I’d love for us to be the Samuel Adams of distilled spirits in America,” he said. “It’s wholesome — it’s genuine. I mean, those are people you want to be your neighbors. ... I don’t think there’s a company like that in distilled spirits. It’s all kind of cut-throat and new-wave.

“I don’t see us making a whole slew of products, I just want the ones that we have to be really good.”

 

JENNA DUNCAN can be reached at 940-566-6889 and via Twitter at @JennaFDuncan.
 

Distilleries based in Texas

Swift Distillery, LLC, Dripping Springs

Rocking M. Ranch Distillery, Henrietta

Garrison Brothers Distillery, Hye

Toddy Distillery, Katy

Quentin D. Witherspoon Distillery, LLC, Lewisville

South Congress Distillery, Manor

The Original Texas Legend Distillery, LLC, Orange

Rebecca Creek Distillery, San Antonio

Source: Texas Alcoholic Beverage Commission Permits


Additional information

Since 2002, 16 states have adopted Sunday sales

– Now adds an additional $260 million in annual sales

• CT, GA, AR, CO, WA, KY, RI, OH, ID, KS, VA, DE, PA, MA, NY, OR

– 38 states now allow Sunday spirits sales

• Spirits tastings support modernization, contribute to premiumization

– Since 2002, 17 new states have allowed tastings at liquor stores

• KS, WV, TN, WA, NJ, VA, CA, MI, ME, VT, AR, AZ, CO, OR, SC, MA, PA

– 44 states now allow some form of spirits tastings

Localities across South and West increasingly vote to go “wet”

– Since 2004, 491 of 619 TX wet-dry local elections have been successful (79%)

– An additional 2 million Texans now reside in wet communities

– Since 2002, 113 of 188 KY wet-dry local elections have been successful (60%)

Source: Distilled Spirits Council 2012 Industry Review, New York City, Feb. 6, 2013 presentation

 


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