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Washington Craft Distiller Dry Fly Sees Rising Sales, But Tougher In-State Market Ahead

March 12, 2012

Spokane, Washington’s Dry Fly Distilling, founded by former marketing executives Kent Fleischmann and Don Poffenroth in 2007, has been one of the more successful brands of the craft distilling movement of recent years. Touting its use of only Washington-grown ingredients, Dry Fly has expanded its footprint to 30 states. But with Washington still accounting for about 60% of sales, the company says upheaval caused by the state’s recent spirits privatization could make for a markedly tougher climate for small producers looking ahead.

Dry Fly’s largest brands are its vodka and gin labels, both selling for $29.95 a 750-ml. “We started out at $32.95,” Fleischman tells Shanken News Daily, “but during the down economy we found that $30 was a pivotal point, and if we could get just below that we could keep people from dropping down a shelf.”

Whiskey is now becoming a focal point for the company as well. Its 100% wheat whiskey ($49.95) is the only one of its kind on the market, Fleischmann says (Heaven Hill’s Bernheim wheat whiskey is distilled from just over half wheat). Dry Fly is now producing 18 barrels (about 450 cases) of whiskey a month: 10 barrels of wheat; four barrels of Bourbon (the first batch of which sold out immediately); and four barrels of what Fleischmann calls “Whiskey X.”

“Whiskey X is made from a grain that no one’s used for whiskey before. It should be ready by December,” he says. “We’re also working on a number of specialty whiskies that we’ll sell in 375-ml. bottles. Some will be cask-strength, some unfiltered, maybe a Port finish. Things like that will be coming down the pike.”

Overall, Dry Fly sold around 6,000 cases last year on 15% growth, and is forecasting a 20% advance for this year. Whiskey plays a major part in its expansion plans. “We have a next phase in mind that includes building a new whiskey plant and turning our existing plant over entirely to vodka and gin,” Fleischmann says. “We’re seeing the same increasing demand for whiskey that’s happening all across the market.”

Still, small producers like Dry Fly expect challenges ahead in Washington. Due to fees to be imposed on wholesalers that are meant to cover lost revenue from the state’s former retail spirits stores, Fleischmann says Dry Fly vodka’s shelf price could “very easily go from $29 to $43,” as wholesalers and retailers protect their margins. Selling direct to retailers is also an option under Washington’s new law, but many craft distillers believe selling through a wholesaler is necessary to attain a substantial presence. Dry Fly may pursue “a hybrid approach, assuming our distributors will play along,” Fleischmann says.

Either way, he believes a shakeout is coming to craft spirits, much as it did craft beer in the late 1990s. “When we first started, I think there were 14 craft distilleries in the country; now there are 400, and they’re coming online every day,” Fleischmann says. “I think the industry has more than peaked.”

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