Happy Veterans Day to my dad and all veterans out there!
In case you didn’t know, our nation’s founders, including George Washington, were big into spirits. In Last Call: The Rise and Fall of Prohibition, Daniel Okrent recounted that “[George] Washington kept a still on his farm, John Adams began each day with a tankard of hard cider, and Thomas Jefferson’s fondness for drink extended beyond his renowned collection of wines to encompass rye whiskey made from his own crops. James Madison consumed a pint of whisky daily.” From 1790 to 1810, the number of U.S. distilleries increased five times, “to more than 14,000.” History is repeating itself today.
More recently, craft distilleries have not been treated as well as craft breweries. This hurts, especially considering that craft distilleries cost a pretty penny to start. They take upwards of $5 million to fund and years before turning a profit. This is due to the fact that spirits are often barrel-aged for years. Distilleries need a little help at the start or, at least, as little interference as possible.
Thankfully, states have been updating regulations of the industry. For example, Illinois recently adopted a law allowing self-distribution to retailers. It also doubled the amount that may be sold on premises and permits distilleries to offer beer and wine. Illinois now has “more than 30 craft distilleries, up from just three in 2011.” Meanwhile, Florida may allow its distilleries to serve craft cocktails and sell/ship out of state. Minnesota dropped the the cost of license fees from a staggering $30,000 to $1,000. This more favorable treatment has led to 1,600 distilleries in 2017 “compared with fewer than 300 just seven years” prior.
These regulatory updates often receive heavy bipartisan support. This is due to the increased taxes , employment, and tourism that craft distilleries bring. In Kentucky alone, 20,100 jobs are tied to the distillery industry, with payroll of $1 billion, and overall revenue of $8.6 billion. These numbers have led Kentucky to modernize the state’s alcohol laws.
The increase in distilleries has led to greater competition. In response, some distilleries decided to enter the European Union (EU) market. However, the U.S. placed tariffs on the EU, resulting in a reciprocal 25% tariff on whisky and bourbon. This caused significant damage to U.S. craft distilleries that relied on EU exports. “Catoctin Creek began exporting to the EU in 2013 [based on enhanced domestic competition], and by 2017 these exports accounted for 11% of Catoctin Creek’s revenue. One year later, EU exports drastically declined, contributing to just 1% of total revenue.”
These tariffs affect more than the distilleries. They affect businesses that provide equipment and supplies to make the spirits, like farmers. They also slow hiring. Although the U.S. and E.U. desire to roll back these harmful tariffs, they remain in place to-date.
Even with increased competition and tariffs, growth in craft distilleries will continue. Relaxed laws are the reason. With continued industry development, U.S. spirits may shortly be at the top of the worldwide game. Our nation’s founders would be proud.