When I entered craft distilling some 10 years ago, the industry basically faced 2 major challenges. Firstly, the equipment Craft Distillers could get their hands on was grossly outdated, inefficient, and overpriced. Secondly, there was no common, unifying body of knowledge on how to distill, let alone on how to design specific drinks with the flavors that go with that spirit's category. Instead, there was a mere collection of anecdotical and archaic stories, only faintly resonating with the pre-prohibition true experience of actual distilling.
A culture of traditionalism and romanticism was fostered. Maybe because the ones that knew, didn't want to share. Probably because the people that thought they knew, didn't know that much either. Industry truths like "rerun heads and tails", "copper is king", "questioning what we've been doing for centuries is stupid", "tradition trumps innovation", and "the barrel is where it's all about" set the pace ... and choked the industry's progress.
These circumstances, and the resulting industry culture, acted as hurdles, that prevented craft distillers becoming successful. The lack of affordable, efficient, and effective spirits production equipment made it impossible to compete with Big Alcohol in terms of cost price. The knowledge gap often lead to sub-standard spirits being brought to the market. When I entered the craft distilling industry some 10 years ago, I knew where I could make a difference.
The journey so far
Looking back, I am proud to see how our efforts helped change craft distilling. By designing a line of new and revolutionary machines, iStill has been able to take down many of the hurdles mentioned above.
Due to a batch production based manufacturing strategy, we were able to drive prices of professional distilling equipment down. The fact that an iStill 2000 outproduces a traditional 20-plate copper still in every aspect at less than 25% of the purchase costs has made market entry as well as break-even management much easier.
Our innovative still designs added so much control, that producing - time and again - the same high quality spirits has become a breeze. The automation we developed furthermore limited the manual labor input to the distilling process by a whopping 80%.
Where variable run costs on a traditional 2000 liter 20-plate copper still can amount to EUR 650,-, our innovations help push these important day to day expenses down to a mere EUR 50,-. In other words: the craft distilling industry now has access to technology as efficient as Big Alcohol does.
Last, but certainly not least, we have researched distilling over and over again. All the myths have been debunked. And all that we learned has been translated to an integrated body of knowledge that we now use to train Craft Distillers and design better performing distillation equipment.
We have finally achieved a situation of parity with Big Alcohol. Craft Distillers can now produce at roughly the same costs. Craft Distillers are now able to produce at the same (repeatable) quality levels or above. Recently introduced gins, vodkas, and whiskies show this over and over again: craft distilling is ready to take over the world.
So ... what?
So ... why doesn't it? Why does craft distilling only account for a few percent of the total alcohol production? With all of the above innovations available, with a new and bright focus on challenging the status quo, why doesn't craft distilling take over Big Alcohol? Yes, the industry grows, but not by the double digits it should.
I think I know why it doesn't. We have met a new hurdle. With all issues related to producing (above) top shelve product efficiently and repeatedly out of the way, we are up to the next challenge. And guess what? It's a big one.
Craft Distillers produce locally and sell regionally. Growing a craft distillery out of its original region is proving very, very difficult. There are basically three root causes for this.
First, markets in general, and distributors in special, look at spirits in a hierarchical way. If you are successful regionally, you may be ready to grow to the national level. And only after achieving statewide or national success, will you be eligible for international distribution. Craft Distillers, contrary to Big Alcohol, do not have easy access to statewide or nation wide shelve space, making growth a catch 22. In order to grow, you need to get out of state. In order to get out of state, you first need to grow.
Costs are the second reason why a growing distribution model is hard to achieve, let alone maintain. Costs associated with small-batch distribution. A UK produced and bottled gin, by the time it hits the Japanese market, will see an increase in costs of around 80%. This rise is caused by export, import, transport, and insurance costs. The higher costs result in higher up-front investments having to be made by the Craft Distiller. They also chip away at profitability.
The third reason why international or global distribution is hard to get, has to do with the inherent and strategic collaboration between big, world wide distributors and Big Alcohol. Big production numbers translate to big distribution numbers. And big numbers amount to a big influence on what gets distributed and what gets placed on the shelve and what not. Big Alcohol and big distributors have a love affair and you are not invited to the party.
Is a solution feasible?
If our industry wants to grow and become a serious threat to Big Alcohol, we need to overcome the distribution challenges sketched above. We need to trump the hierarchical model by being local as well as international. We need to cut distribution costs dramatically. We need to find distribution partners that fall in love with Craft Distillers rather than Big Alcohol.
I have a dream, that craft distilling, one day, will overcome this next hurdle and truly become a globally competitive industry. I have a dream that, if we challenge the status quo, that day is not far off. And it is to help break through this next hurdle that we have started Portfolio Distilling.
Portfolio Distilling aims to help Craft Distillers realize a global reach. It does so in a way that cuts out most of the distribution costs associated with export, transport, import, and insurance. Portfolio Distilling fosters and grows its own distribution model, so that dependency of big distributors diminishes.
The way in which we realize these objectives is by setting-up a global network of distilleries, with each continent or market having at least one central Portfolio Distillery. The Portfolio Distillery serves as a hub for the production and distribution of out of state craft spirits that want to enter other markets.
How it works?
If you want to participate, this is how it works:
- We discuss your goals and establish if Portfolio Distilling can help you
- You become a member of the Portfolio Distilling Network
- With your help, we template your spirit in our Netherlands HQ
- Based on the template, we do a first small production run of your drink
- Your spirit then gets presented to the Portfolio Distilleries in the desired markets
- The involved Portfolio Distilleries start production and distribution
Et voila! You have now achieved international distribution. This feat helps you sell more bottles internationally as well as locally. Congratulations, you just trumped the hierarchical distribution model!
Because you now have an on-site production and distribution center in another country or on another continent, your costs will go down dramatically. You will save up to 80% on the costs of exporting, transporting, importing, and insurance. You do not just sell more bottles, you sell more bottles at a higher profit margin.
Finally, your product is now represented by what's basically another Craft Distiller. Someone that can relate to your story, understands your problems, and knows what it takes to grow a craft manufactured brand.
Different participation levels
As Craft Distillers we all have different needs. We designed a model with different participation levels to meet your specific demands:
- You just need production capacity and reach out to a Portfolio Distillery to help you out
- You need production capacity as well as distribution
- Apart from needing international production and distribution capacity, you also want to produce for other, off-continent, Craft Distillers
- You want to become a Portfolio Distillery and help other Craft Distillers with production as well as distribution.
All Craft Distillers can participate at tier 1 and 2. If you want to also produce and/or distribute other participant's drinks, you need to have an iStill distillery. The reason for that is, twofold. Firstly, the drinks are templated on iStills. Secondly, in order to make precise copies of your spirit we need the 100% control only an iStill can give you.
After having tested the Portfolio Distilling model over the last 12 months, we are now opening our first Portfolio Distilleries in the UK and the US. The Portfolio Distilling HQ near Amsterdam will serve as the Northern Europe hub. We are working on a Portugal location to cover the Mediterranean. We expect Portfolio Distilleries to open in Australia, India, and Japan in early 2019. China, more locations in the USA and Canada, and South America will follow later.
What's your next step?
We are currently opening up for customers. If you are interested in using the Portfolio Distilling model, of becoming one yourself maybe, please reach out to us via www.portfoliodistilling.com.