All in the Family


New Deal Distillery

This past week, I had the chance to visit two separate distilleries – each of which was outside Washington.  First, I got to play “distiller in training” with the folks at New Deal Distillery in Portland, Oregon – as I took their hands-on whiskey making class.  The next day, I had the pleasure of touring the Sons of Vancouver Distillery in Vancouver, BC.  In each case, I had the chance to ask a lot of questions and sample some excellent product.

I also had the chance to chat with the owners of both distilleries about the challenges and opportunities facing their businesses and their views on the distilling community.  From a HoochLawyer’s perspective, the conversations were instructive and – in at least one case – eye opening.

During both visits, I heard complaints about the myriad regulatory challenges to starting and operating a distillery.  And during both visits I inferred a bit of discomfort around the occasionally uneasy relationships between members of the local distilling community. This wasn’t really too surprising, since members of the community are competing with one another, and friendly rivalry perhaps only goes so far before it becomes something more cutthroat.  But one comment stood out to me as particularly interesting.

I asked one of the proprietors whether the tax laws in his jurisdiction offered benefit if the distillery used a certain minimum percentage of local grain in the preparation of spirits. The response?  “No – thank God!”  This was unexpected – particularly coming from someone who had just finished explaining how all of the grain used in the distillery was sourced within just a few miles, so I asked him to explain.

In the view of my host, the establishment of preferential treatment (whether through tax reduction or any other means) for distillers using a preponderance of local grains carries with it the unintended consequence of promoting infighting within the distilling community.  He pointed to Washington as an example of this outcome.

I spent a good portion of the several hours after this visit thinking about what he had said and reflecting on my interactions with members of the Washington distilling community. Certainly, there have been occasions when I’ve heard comments made by grain to glass producers that were disparaging of other approaches in the industry.  But those have been relatively few and far between.  What’s more, I don’t think I’ve heard anything particularly disparaging coming from a non distiller producer about the grain to glass contingent.

What I have heard a lot of – coming from both camps (and those who may have a foot in both worlds) – is a lot of concern about areas of common challenge.  Areas like distribution, lack of capital, competition with market behemoths, regulatory prohibitions on selling products which are imposed on spirits but not on beer and wine, and above all the federal excise tax levied on spirits.  Regardless of how they produce their products, it is my sense that Washington’s hooch companies understand that these issues pose a far greater threat to their businesses than any disproportionate tax effect which may result from a commitment to using local grain.

Still, it is worth noting that we can file this under “be careful what you wish for.”  There are obviously benefits to making preferential treatment available to some (not the least of which in this case is helping to support local farmers) – but we should be mindful of unintended consequences as we go about trying to promote beneficial changes in the industry.  What is good for one participant might be bad for the industry as a whole.

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