Distillers seek to cash in on craft libations

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Thursday, May 16, 2013

STORY AND PHOTO BY ERIC FLOWERS | OB CORRESPONDENT

05.16.13 Blog WineBrad Irwin is no stranger to a shot of whiskey. He’s picked up a bottle almost every day since the early 1990s when he started tending bar in Bend. Still, it took more than a decade of pouring other people’s bourbon before Irwin realized that his passion wasn’t serving spirits — it was making them.

In 2009, Irwin formally launched what is now Central Oregon’s second craft distillery, Oregon Spirit Distillers, in a small warehouse building just a block or two from the Parkway on Bend’s eastside. Since then Irwin and his team, which includes wife Kathy, have churned out small batches of gin, vodka and an award-winning absinthe. But the real coup came last fall when Irwin uncorked his first barrel of handcrafted whiskey, C.W. Irwin Bourbon, a three-year aged spirit, named for his younger brother who provided a key infusion of capital when the elder Irwin was still experimenting with mash recipes in his garage.

A decade ago, Irwin would have been considered a pioneer, a renegade just a step removed from a backwoods’ moonshiner. Today, he’s part of a growing class of craft distillers who are catering to the public’s appetite for artisan spirits. This year Irwin plans to move roughly 20,000 bottles of vodka, gin and the aforementioned Irwin bourbon in Oregon alone. He’s also expanded his distribution network to California and several other Western states as well as some East Coast markets.

Statewide, there are now 46 distillers actively operating and perhaps a dozen more in the works. While many of these are still relatively small operations, the industry accounts for roughly $53 million in annual sales and accounts for about 12% of total hard alcohol sales in Oregon. And if the craft brewing scene is any barometer of the industry’s potential, places like Central Oregon could be ripe for significant growth. In Bend, a third distillery, Cascade Alchemy, is already in the works. 

The growth potential for craft distilleries is huge, says Bendistillery President Alan Dietrich, mostly because they still command a relatively small share of the overall market.

“If we could get one percent of Grey Goose’s market we’d all be millionaires,” said Dietrich, whose company sold roughly 50,000 cases of its signature Crater Lake Vodka last year and expects to see double digit sales growth in 2013.

A decade ago there were four breweries in Central Oregon, two of which were doing little, if any, off-site sales. Today there are more than a dozen with many of them shipping bottled and canned beer out of state. Piggybacking on that trend, the craft distilling industry is similarly fueled by the public’s growing appetite for artisan products.

“I think as a general rule the consumer public is getting more aware of what they consume, where it is made and how it is made,” Dietrich says.

There may be another reason that the local distilling scene could mirror the craft brewing boom: The water.

Anybody who really knows what they’re doing in the beverage making business, whether it’s Crazy Dave’s Ginger Ale or Deschutes Brewery, knows it’s the water, says Dietrich. "It's  spectacular."

Enthusiasm notwithstanding, would-be distillers face significant financial and logistical hurdles. So far, only Cascade Alchemy has reached the point of pre-production and public marketing.

Seed and start-up costs for a small operation at $250,000, estimates Irwin. There’s also the delicate dance of developing and testing products, which often happens before securing a federal license necessary for such experimentation. Irwin gave away hundreds of bottles of un-aged whiskey, referred to as “white dog” that he distilled with a makeshift operation in his garage before settling on a final corn mash recipe.

And after all the money has been raised, the equipment bought, the space leased and permits secured comes the hard part – the waiting. Vodka and gin can be pumped out in a matter of days and weeks, but whiskey can’t be rushed. It has to be aged three to five years in sealed oak barrels before it can be bottled and sold. Irwin has dozens of barrels stacked floor to ceiling in orderly rows of iron racks that are filled with whiskey that needs nothing more than time.

“We’re still putting away more whiskey away than were selling, which puts us into negative cash flow but were investing in inventory,” said Irwin. While sales are good and growing (20%-30% annually), Oregon Spirit Distillers is still in the red, underscoring the importance of having enough seed money to bridge the gap between slow developing revenue and ever present expenses.

“I thought we’d be rich in three years, and we’re doing well," Irwin says. "It’s just taking longer than we thought."

But if it’s taking a little longer, the potential payoff for Irwin and other craft distillers is also growing as consumers hand them a larger and larger market share of the $21 billion spirit industry. “We are following in the footsteps of the beer and wine industry," Dietrich says. "And frankly, there is no reason to drink crappy spirits. Bad vodka is just bad."

Eric Flowers is a freelance journalist based in Bend. 

 

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