Portland craft distillers grow up, evolve

Portland craft distillers grow up, evolve

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Lee Medoff (left) and Christian Krogstad (right), the founders of House Spirits, are parting ways. Medoff plans to open a new distillery called Bull Run Distillery in Northwest Portland. House Spirits will continue to offer tastings of its Aviation Gin and other spirits in the onsite Apothecary room.

Within House Spirits, the most recognized label on Distillery Row, founding owner Lee Medoff is parting ways with Krogstad to open a new distillery called Bull Run Distillery in Northwest Portland. Medoff, a beer brewer before he became a distiller, compares distilleries to craft brewing 20 years ago. Back then passionate but inexperienced brewers over-supplied the market until more focused businesses rose to the top of the barrel.

“The first flush of excitement is leading into a more expansive approach,” Medoff says. “Now distillers are saying, ‘I love spirits and I’m going to go do this, but I’m going to go into it with a really good business plan.’”

David Ozgo, chief economist for the Distilled Counsel of the United States, says it’s not unrealistic for those business plans to include future buyouts. He says the nation’s 250 craft distillers (up from merely a handful in 2000) aren’t competing with the major distilling companies, such as Bacardi, Diageo and Jim Beam, because they’re developing local, niche markets. Someday, craft distillers and those niche markets could entice corporate distillers into buyouts, Ozgo says. “It hasn’t happened on any great scale just yet, but I suspect the day is coming.”

Erik Martin, president of the Oregon Distillers Guild, agrees. “There will come a time when national brands will buy out smaller local brands, following the same form as the microbrew market,” he says. “Many of the microbrews out there are not owned by small companies but are actually owned by the big guys.”

While 28 companies hold Oregon distillers licenses, only a handful distill from scratch; many import spirits or bottle finished products. The Oregon Liquor Control Commission has no way of classifying “craft distillers.” As a whole, the broad category of Oregon distillers sold $413 million worth of spirits from May 2009 to May 2010.

But for now, House Spirits’ ambitious growth plans remain an anomaly on Distillery Row.

The Row itself was formed last year as an afterthought, Martin says. “It was like, ‘Hey, we’re all neighbors, so let’s work together,’” he says. Common goals among Distillery Row members included sharing tasting room hours, printing maps, promoting the Row through hotels and eventually producing signage.

Up until April, Martin with a co-owner ran Artisan Spirits from a warehouse on the east side, and was one of the five original members of Distillery Row. “While it was nice to have the visibility of being a part of Distillery Row, any cash flow from being part of the Row was minimal,” Martin says. In part, he blames the distillery’s location, which lacked direct street access.

Even so, Martin says that with a staff of just three people, it was hard to cater to visitors. “Being a small operation where each of us [the principals of the company] have day jobs, our main production time was during the weekends when we would get the most walk-in traffic,” he says.

“Though I enjoyed taking the time to speak with each and every visitor, many times it would serve as a distraction from the task at hand — distilling.”

Artisan has since closed the distillery and is looking to outsource its vodka production. In the meantime, they continue to sell leftover product. While the future for Artisan remains murky, Martin refuses to admit defeat.