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Arkansas distillers eager to start

Craft spirits a growing niche nationally, also in Arkansas

By Glen Chase , John Magsam

This article was published April 13, 2014 at 3:09 a.m.

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Arkansas Democrat-Gazette/STATON BREIDENTHAL --4/9/14-- Owner Rose Cranson has plans to brew beer and distill spirits in house at the Superior Bathhouse Brewery & Distillery in Hot Springs.

The still in Jesse Core’s Springdale brewery has been gathering dust since 2012.

Now, after nearly two years of wrangling and waiting, he can dust if off - Core finally has the permits he needs to distill spirits to sell at his tasting room and distribute at select stores in the state.

“It seemed like a natural progression for us,” the bearded Core said from his office just a few feet from where his company’s selection of beers is brewed and bottled or canned. Core Brewing and Distilling Co. employs 13, has a busy taproom and distributes beer to bars, restaurants and liquor stores throughout the state.

Core wants to distill Arkansas spirits using Arkansas-grown materials like peaches, apples and grapes. The plan is to produce single malt whiskey, old-school corn liquor, commonly called moonshine, and brandy.

Nationally, craft distillers are a small but growing niche. In Arkansas, there is only one well-established maker of distilled spirits, Rock Town Distillery in Little Rock, which has been in operation since 2010. Newcomers include the renamed Arkansas Blue Flame Moonshine in Newport, formerly Arkansas Moonshine, now under new ownership; Core’s fledgling operation in Springdale; and Superior Bathhouse Brewery and Distillery, which is getting its permits in order.

Rose Cranson, owner of Superior Bathhouse Brewery and Distillery in Hot Springs, is going through the final stages of getting state and federal permits for her brewery and hopes to begin serving beer made on the premises in May.

However, with the licenses for her presently a work in progress, starting the spirits end of the operation is going to take longer. She said it will likely be early 2015 before she is fires up her copper still. Cranson opened her restaurant in July, after nearly two years of planning.

“We’re going to roll it out in phases,” said Cranson about the craft beers and spirits. But, once the process begins, she expects to have “the only brewery in the world with thermal spring water.”

The number of craft distillers nationally, defined by the federal Bureau of Alcohol Tobacco and Firearms as those that make less than 100,000 proof gallons annually, is growing. (A proof gallon is one liquid gallon of spirits that is 50 percent alcohol at 60 degrees.) According to the bureau’s annual report for fiscal 2013, the number of distillers has increased 107 percent in five years, driven by a boom in the craft segment. The craft segment has grown 122 percent since 2009.

According to the Distilled Spirits Council 2013 Industry Review the U.S. market saw retail sales of more than $66 billion. Bill Owens, founder and president of the American Distilling Institute, said less than 1 percent of the market comes from craft distillers. According to the institute’s records, there are 623 craft distilleries operating in the United States.

Owens said books, workshops and the Internet’s ability to easily disseminate information have led to a boom in craft distilling that tugs at consumers’ desire to buy local and is attractive to entrepreneurs who want to make something special.

“We’re in a renaissance, and it’s major,” he said. “People want authenticity.”BARREL SHORTAGE

Owens said distilling is not an easy business to jump into.

He notes there are a variety of permits to obtain and rules to follow at the federal, state, city and county level. Then there’s the waiting game to see whether a batch of whiskey is even good, the result being that distillers often go into products like vodka and gin that take less aging. Also on the whiskey front, the barrels needed for aging are in short supply these days.

Jay Gibbs, owner of Gibbs Bros. Cooperage Co. in Hot Springs, said that the needs of craft distillers around the country are partially driving demand for the white oak kegs and barrels produced by his company.

Beginning with flat, roughsawed white oak staves mostly cut in Missouri, Gibbs and his five-man crew fashion kegs and barrels using older equipment powered by long leather belts.

Gibbs said the combination of renewed interest in craft beverages combined with ongoing struggles to secure quality oak generates a lot of calls from people looking for small kegs and barrels.

“We get a lot of that,” he said. “It’s really our bread and butter.”

Gibbs doesn’t make the larger, standard, 53-gallon keg used by many large distillers. His company sells “charred” and “toasted” kegs ranging in size from 1 to 15 gallons.He said smaller kegs, such as a 15-gallon version, which he called a popular size, are in high demand, but he frequently has to turn away potential customers to keep his regular customers supplied.

A “charred” keg used to store and age products such as bourbon or whiskey is one with a blackened interior from being exposed to fire. Gibbs said the char filters the contents, as well as adds flavor. “Toasted” kegs are typically used for wines and have lightly browned interiors from being exposed to flames.

ROOM TO GROW

Despite the challenges, Core of the Springdale brewery is quick to say why he’s eager to jump into a market that is dominated nationally by big distilleries.

“It tastes better, it’s local and it’s fun,” Core chuckled.

He said he has great respect for Phil Brandon’s Rock Town Distillery in Little Rock and doesn’t think the newer Arkansas distilleries are competitors for the trailblazer. Instead, Core said, they’re all working to establish and educate a client base that can appreciate Arkansas spirits.

“It might seem like we’d pull market share from each other, but we’re not fighting with our buddies,” he explained.

Brandon, founder and chief distiller at Rock Town, feels the same way.

“Craft distilling in Arkansas is in its infancy,” he said. “We can all help each other.”

Rock Town has seven employees and sells 14 distilled products, including vodkas, gins, whiskies and varieties of flavored moonshine. Rock Town products are sold in 13 states and the United Kingdom.

Brandon said that making a good distilled product requires a great deal of expertise and he uses Arkansas-grown ingredients, including rye, wheat and corn. Rock Town products have won a wide variety of distilling awards. Its Arkansas Bourbon Whiskey won the American Whiskey, no age, 2013 World Whiskey Award in London and earned a double gold at the 2013 San Francisco World Spirit Competition.

“I want to take Arkansas to the world,” he said.

In developing her concept, Cranson of Superior Bathhouse Brewery and Distillery said she examined similar “distillery pubs” that exist in Colorado. She expects to produce a variety of spirits, including whiskey, rum and possibly an apple cider-based drink. She also wants to develop a source of Arkansas-produced wine that would be suitable for brandy.

RULES AND REGULATIONS

Both Cranson and Hayden Wyatt of Melbourne, owner of Blue Flame Moonshine in Newport, said that while the state permitting process is relatively easy to deal with, the federal process through the Taxation and Trade Bureau can be time consuming and a challenge. Cranson also had to work her way through the National Park Service, since her pub is located in a federally owned building that was once a bathhouse.

Cranson said the state licensing process was very “straightforward,” while the federal license has been far more complicated for her business, which now has 28 full- and part-time employees.

Wyatt said even a small operation such as his faces time delays and lots of headaches to secure a federal license. He bought the business, called Arkansas Moonshine Inc., after its founder, Ed Ward, died a few years ago. With the new ownership came a new product name, label and bottle.

“It took so long before I could really get going with the business because anytime you deal with the federal government, everything just drags on,” said Wyatt, who described his company as “kind of a startup” that produces small batches that are distributed around the state. The company doesn’t have any full-time employees, he said. He has some part-time workers who help when it comes time to distill and package.

Once in production, “there’s a lot of paperwork you have to do every month with reports, keeping up with everything you buy,everything that you put into distillation, what comes out, what the proof is,” Wyatt said. As an example, he said that getting federal approval for a new label can chew up months, even with electronic filing.

Michael Langley, director of the state Alcoholic Beverage Control Administration Division, said licensed distilling requires a far higher commitment of time and dedication than a brewery, including dealing with recipes, paperwork, testing and equipment costs

“If you’re going to open a distillery, you’ve got to be well-funded, you’ve got to have the time and either the money to hire the appropriate people or the time to commit to running the operation,” Langley said. “If you don’t have it, it’s almost impossible to be a second job.”

Langley also said the state and federal laws aren’t written in a way that work to the advantage of small-batch distillers.

“The easiest way to tell you is that in Arkansas, you can home-brew a certain amount of beer. You can’t make any distilled spirits for personal use,” Langley said. And, while brewers and distillers are allowed on-site sales, he said, brewers have the advantage of being able to self-distribute, which helps widen margins. Distillers must work with a distributor to market their product.

He said the owners of Core and Superior are committed to being at their facilities every day and have the staff in place to monitor a distilling operation in addition to their brewery operations.

Owens, from the American Distilling Institute, said there are a few craft distillers that also operate breweries and he thinks they have an advantage going into the process. Wash, which is effectively beer, is a key element used to make whiskey.

“They know about fermentation,” Owens said about brewery owners.

Core said that running a brewery has prepared him in a lot of ways, but added that there’s not a lot of overlap between brewing and distilling. He said he’s eager to start using his 120-gallon still and expects to have products to offer in his tasting room by May and will begin to bottle and distribute once his labels have federal approval.

“Now we’re going to put it to work,” he said of his still.

Business, Pages 79 on 04/13/2014

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