Small artisan B.C.-based spirit producers have been snagging market share from larger distillers, thereby encouraging even more entrepreneurs to get into the business of producing hard alcohol.
British Columbians bought 6% less hard alcohol in 2010 than they did in 2009 and 10.3% less than they did in 2008, according to British Columbia Liquor Distribution Branch (BCLDB) statistics.
Small B.C.-based producers, such as Island Spirits Distillers, Victoria Spirits Inc., Pemberton Distillery and Okanagan Spirits, meanwhile, have been boosting production.
Their popular products have prompted newcomers such as Shelter Point Distillery principal Jay Oddliefson to make his first whisky this spring, and others, such as Von Albrecht and Associates principal Marcus Von Albrecht, to contract out production of his own branded vodka.
Oddliefson’s spirit won’t be available for release until it has been aged in barrels for at least three years but Von Albrecht has already sold most of the 3,000 bottles of vodka that he contracted Okanagan Spirits to produce last July.
“I couldn’t find a good vodka to import so I decided that, with my background having an honourary doctorate in gastronomy, that I would try to make it,” Von Albrecht told Business in Vancouver.
He played around to create the recipe, originally experimenting with blueberries and other fruit to create an infused vodka. Finally he settled on a brew made from corn, rye and water.
Most people believe vodka, which is B.C.’s most popular spirit, can only be made from potatoes or wheat. In fact, other grains such as corn and rye work just as well, Von Albrecht said.
“It has to be clear and tasteless so it goes through a charcoal filter. I experimented distilling it four times, five times – up to seven times. I found there was no difference after four times so that’s what I settled with,” he said, explaining why he branded his vodka “Four.”
Most of Von Albrecht’s $1.5 million in 2010 revenue came from distributing meal replacement products, wines and Scotches.
Before he contracted Okanagan Spirits to produce Four, he dipped his toe in the bottling business by buying a cask from well-known Scotch distillery Laphroaig. He then hired U.K.-based Cooper’s Choice to bottle the 550 litres that the cask contained and sold that Scotch in B.C. under the Cooper’s Choice Laphroaig label.
Doing this was more lucrative than simply importing and reselling pre-bottled Laphroaig. It also enabled Von Albrecht to select the cask that he thought had the perfect flavour profile.
Von Albrecht spent about $100,000 on bottles and branding for his vodka and expects to take an initial loss by selling the bottles for $12 to the BCLDB, which then sells it to private liquor-store owners for $40 so they can retail it to customers for $52.
Eventually Von Albrecht intends to make a profit, particularly if he is able to strike a partnership to be the BC Lions’ official vodka supplier.
Okanagan Spirits co-owner Frank Dieter launched his Vernon operation in 2005, when sales were less than $20,000.
Dieter has grown sales to about $400,000 in 2010. The lion’s share of his revenue comes from producing his own Taboo-branded absinthe, grappa, eau de vies and liqueurs, but Dieter has started to leverage the $250,000 that he spent on distilling equipment and vats by accepting business from aspiring spirit producers, such as Von Albrecht, on a contract basis.
Sometimes, for a fee, Dieter teaches aspiring distillers how to make spirits. He will also supply equipment.
Otherwise he produces spirits by following the client’s recipe and then simply pockets a fee for the work.
“We have to stay alive somehow,” said Dieter, who has accepted venture funding from silent partners and aims to grow his business into millions of dollars in sales.
He rails against the BCLDB’s monopolistic distribution system, as do other spirit producers who do not mind staying small.
“We don’t want to become a huge company. We have a plan to be a regional distillery and focus more on producing exclusive products that sell at a higher price rather than doing large-volume products at a lower price,” said Pemberton Distillery co-owner Tyler Schramm.
Island Spirits Distillers co-founder Peter Kimmerly has a similar business plan. He bought out co-founder John Grayson in 2009 for more than $100,000.
Island Spirits operates out of a $200,000 building and makes its products using the $150,000 worth of distilling equipment that the duo originally spent to found the venture. Operations at the distillery are now profitable.
The company generated less than $20,000 in inaugural 2007 sales. Revenue has grown to $65,000 and Kimmerly spent at least that much on an additional custom-modified still that he is having shipped in from Germany.
“I want to run a little, profitable business not a huge one,” said Kimmerly, who is a retired BC Ferries captain. “I keep turning down requests from people who want to give me venture capital.”