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Small Batch, Big Smash
In the Hudson Valley we've watched as communities have filled up with breweries and distilleries; its 106 total farm breweries, distilleries, wineries, and cideries ranks it second among all state regions to the Finger Lakes. Hutch Kugeman, who was the first brewer at Crossroads Brewing Co. in Athens in 2010, was among the established brewers who saw the growth firsthand, calling the 2012-13 period after the Farm Brewery Act "that next wave of massive expansion." Kugeman joined the Culinary Institute of America in 2015 to run its partnership facility with Brooklyn Brewery. That relationship was a sign that the culinary world had fully accepted craft beer as part of the fine dining experience and recognized its profit potential. Moreover, CIA will further its reach in alcohol education by partnering with Asahi Shuzo International, which announced in February a $28 million investment to transform a vacant Hyde Park building into its first American sake brewery.
With these recent developments, Kugeman says the CIA is focused on educating students how to brew and, secondarily, how to operate a brewing facility. He sees, despite the recent wave of brewery openings and expansions, there will be opportunities for his students once they leave the classroom, and especially in smaller farm breweries servicing their local communities.
"I think the guys who are going to get squeezed are the mid-sized breweries who we consider bigger for craft," says Kugeman, talking about minimum 50-barrel brewhouses. "Most of their business is in package, in bottles and cans, and it becomes harder to differentiate yourself."
Plus, he thinks it's hard to imagine the state doing anything to stifle the growth of the craft beverage industry considering how much they've supported business.
"You never know for sure what's going to happen when it comes to politics, but I'd be surprised," says Kugeman, who added that the State Liquor Authority has been helping producers secure licenses quickly while ensuring they're compliant with regulations. "The governor is very supportive of the small craft industry; not just breweries but distilleries, wineries."
That wasn't the case 15 years ago, when according to Erenzo, one of the leaders of the SLA said to his face, "I consider you a legal drug dealer. One of these days you're gonna break the law and I'm gonna catch you."
But Erenzo's lobbying group helped craft the Farm Distillery Act and broke down doors for small-batch distillers. Ten years later, through the American Craft Spirits Association, Erenzo and lobbyists ensured a reduction in federal excise tax for small distilleries from 100 percent to 20 percent, which is in line with small craft breweries and wineries. That change came as a bill packaged with the federal tax overhaul plan of December.
Earlier in 2017, Tuthilltown announced its sale from Erenzo to William Grant & Sons, a Scottish distiller of brands like Glenfiddich, Hendrick's Gin, and Tullamore D.E.W. Irish Whiskey. William Grant & Sons already owned the Hudson Whiskey brand, which they bought in 2010, but this move brings the international titan skin into the American whiskey game while giving Erenzo a chance to watch his former business grow in ways he didn't think was possible if he continued to own Tuthilltown. He's now serving as a brand ambassador of sorts for William Grant & Sons, while focusing efforts on lobbying for producers and keeping a long view of craft's future.
"What's needed next is infrastructure," says Erenzo. "We have all these producers—we have a huge number of craft beer, craft spirits producers, all of whom use malted barley. And almost all of the malted barley used in production doesn't come from New York State."
Fleming says the state's malting barley industry was just starting in 2013, but now there are 13 malt houses across the state growing more than 3,000 acres of the crop.
Erenzo added that there's room for distillery growth, but in smart ways. One option is a bar, restaurant, or catering model that has a small distillery to meet its needs alone.
Tapping into the Future
Some distillery growth has come from established producers in other craft. Steve Osborn of Stoutridge Vineyard in Marlboro is primarily a winemaker focusing on organic, all-natural product without adding water, sugar, sulfites, or sorbates. He was interested in making spirits and installed a distillery on his property but didn't use it for nearly 10 years, partially because the wine was selling and he wasn't ready to devote time to distilling. Also, back in 2008 a distillery and winery couldn't be attached and had to have separate tasting rooms.
- The stills at Stoutridge Vineyard & Distillery in Marlboro.