Mighty Oaks from Little Acorns Grow

Here in Washington, we are fortunate to have a thriving community of distilleries.  In fact, by some estimates we have more distilleries than any other state.  [Note: I’m speaking here of licensed distilleries.  Unlicensed producers are obviously difficult to quantify and I suspect that my distant relatives in Appalachia may – by themselves – have more stills in operation than are licensed in Washington.]

But the fact that we have perhaps the most distilleries does not mean that our local industry is of a tremendous size.  Most of our local distilleries are quite small, and qualify for a reduced license fee available to “craft distillers” under RCW66.24.140.  This reduced fee is only available for distillers producing up to (but not more than) 150,000 gallons or less of spirits in a year, with at least half of the raw materials used in the production having been grown in Washington.  If you want to sample an excellent example, find yourself a bottle of Westland Distillery’s Peated American Single Malt Whiskey – I had some this morning and it was delicious.

The explosion in the number of small producers has been a boon for the imbibing public. But it hasn’t necessarily been easy for the distilleries themselves, the local regulators or the relationship between those two groups.

This proliferation of small distilleries means that no one producer has a significant amount of market share or political clout.  This is a good thing in the sense that it means that no one party can flex its muscles to the detriment of other market participants.  But it also presents challenges numerous challenges.  For one thing, it means that our producers are still vastly outgunned by the large corporate players (e.g., Diageo).  Competing head to head with market behemoths of that ilk would our largest producers to experience exponential growth for decades.

But the wide dispersion of our distilling industry is also challenging because it means that when the our market participants speak on matters of concern (e.g., in lobbying the state legislature for beneficial changes in the law), they don’t often speak with one voice.  And because the aggregate production of all the craft distillers remains, relatively speaking, quite small, the distilleries’ voice (even if unified) wouldn’t exactly amount to a shout.

This is in stark contrast to the undisputed king of spirit-producing states: Kentucky.  According to a 2014 study, the distilled spirits industry in Kentucky was responsible for a total of 15,400 jobs in the state, with an estimated annual payroll of $707 million.  That kind of economic impact essentially guarantees that the interests of Kentucky’s distilleries are very much top of mind for members of the Kentucky General Assembly in the same way that the interests of Boeing (approximately 85,000 employees in Washington) remain of critical importance to the members of the Washington legislature.

So if you’re a small producer (and in a state other than Kentucky), how can you make your voice heard on important matters?  In an industry as steeped in tradition and history as this one, the answer is clear; take a page from your medieval forebears and join a guild.

Here in Washington, the Washington Distillers Guild is a strong and consistent advocate for the interests of distilleries and other market players.  But even more importantly, the Guild serves as a meeting place where new ideas, best practices and tips of the trade can be shared.  The American Craft Spirits Association maintains a list of member guilds.  And if your state isn’t represented, what do you do then?  Well, you were stubborn enough to start a distillery – why don’t you just start a guild to go with it?  Candidly, it will be easier to set up the guild (essentially just a nonprofit corporation qualified as an IRS 501(c)(6)) than it was to get your DSP.


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