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Craft Whiskies Start To Nibble Away At Tennessee and Kentucky’s Dominance

August 15, 2013

The American whisky industry is still concentrated in Kentucky and Tennessee, with eight big distillers there producing more than 90% of the whisky consumed in the United States. But the craft spirits movement is nibbling away at Tennessee and Kentucky’s dominance. Penn Jensen, executive director of the American Craft Distillers Association, estimates there are nearly 400 craft distillers in the United States today, up from 60 a decade ago and around 180 five years ago. He predicts that the total will swell to 1,000 distillers by 2015.

A single state, Washington, is home to 70 distilleries—far more than Kentucky has—with an additional 30 distilleries under construction and another 30 in various stages of planning. Most craft distilleries are tiny thus far, and they’re estimated to represent less than 1% of the U.S. market’s total whisky sales. But clearly their presence is growing.

“Indiana currently has four distillers, and that total will double soon,” Jensen notes. New legislation recently signed by Indiana’s governor allows distilleries to maintain tasting and sampling rooms, which is key to expansion. “Sampling is vital,” Jensen declares. “States are waking up to the potential for increased tax revenue and new job creation.”

Brian Ellison, a 40-year-old one-time economic development consultant who opened Death’s Door Distillery near Madison, Wisconsin, in 2007, recalls that his state was home to two distilleries—his own and one other—when he got his start. Now Wisconsin has a dozen distilleries. “Lots of people are throwing their hats in the ring, and money doesn’t seem to be an obstacle,” says Ellison.

States including California, Oregon and Colorado have become major centers of the craft distilling movement. The Distilled Spirits Council (DISCUS) now has 73 craft distillery affiliate members from 29 states, a number that has been growing steadily. And in early August, New Jersey became the latest state to legalize craft distilling.

The stakes in the industry are clearly rising for the more visible craft players, who are attracting the notice of the whisky giants. Acquisitions are already popping up. Last year Diageo purchased family-owned Cabin Fever Distilling Co. And Tuthilltown Spirits of Gardiner, New York, sold its Hudson Whiskey brand to William Grant & Sons in 2010.

“William Grant has a global distribution network, and it made our lives a lot simpler to hand over distribution to them,” says Ralph Erenzo, 62, a former rock climber and health club owner who founded Turhilltown Spirits a decade ago. The Hudson brand now sells in all 50 states and throughout Europe and Australia. “Our way of doing it may become a trend,” Erenzo adds. “The big distillers are starting to see craft distillers as the wave of the future and will view them as potential acquisition targets. At the same time, the craft players need somebody to distribute their products.”

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