The Monthly Mash: January Update

The Monthly Mash

Volume 3.1

Member-Owned, Industry-Driven

ACSA Mission:

To elevate and advocate for the community of craft spirits producers.

From the Desk of Margie A.S. Lehrman, Executive Director

Dear Friends in Our Beloved Craft Spirits Community:

When January rolls around, I’m sitting still long enough to reflect on the past year with an eye toward what’s up ahead. Knowing the imprint you’ve already made on the craft spirits movement in America—and beyond—has me optimistic for 2018.

Five years ago this month, ACSA was created by and for craft spirits producers. As the only national trade group representing the community of craft spirits, nothing is more important than being governed by a team of elected, talented, hard-working entrepreneurs, who know the business, as they each are a part of a DSP. If you have any inclination to run for a board of directors seat, now is the time. The item immediately following this letter details the attributes necessary to succeed in such a role.

At this time last year, we were disheartened that the Craft Beverage Modernization and Tax Reform Act provisions were not a part of any tax extenders bill. We vowed to keep alive the fight to reduce your Federal Excise Tax (FET)—and we did. Read on for the brief history and historic result of that FET battle. And, be sure to tell us how you intend to reinvest your tax savings.

Education is a driving force in our association. This month we have several offerings—don’t miss out on our Craft Spirits Classroom where we save you a seat in the comfort of your own distillery. We’ll be covering trademark issues and distribution. It’s not too late to join in the conversation—bring together your employees for a team treat. We’ll supply the knowledge and you break out the pretzels.

The hallmark of ACSA education is our Annual Distillers Convention and Vendor Trade Show. Have you registered? If not, we’ve made it easy to do so now and have supplied you with some of the convention highlights.

Going to Chicago soon? If so, check out the distilleries in the surrounding community.

And, if you’re curious about freight costs, learn a thing or two from Top Shelf Logistics, an innovative provider of transportation and logistics solutions for the spirits industry.

Looking forward to all we can accomplish in the next year.

Cheers,

Margie

Nominations for ACSA Board of Directors Now Open

Are you ready to step up to lead your industry? We are now accepting nominations to fill six positions on the ACSA Board of Directors, open to all qualified DSP members of ACSA. The successful candidates will help govern the association, one that is dedicated to elevating and advocating for the community of craft spirits producers. Together, leading an organization that is built by and for craft spirits producers, we can change the face of the industry.

The successful candidates will replace the following outgoing members whose three-year term will expire: Dan Farber, Osocalis Distillery; John Jeffery, Bently Heritage [Pacific Region]; Mike Blaum, Blaum Brothers Distilling Company [Central/Mountain Region]; Maggie Campbell, Privateer Rum; Tom Jensen, New Liberty Distillery [East Region]. In addition, there is one vacancy to be filled. All elected will serve on the ACSA Board of Directors for three years, with staggered yearly terms, for the 15-person board (plus ex officio members).

Interested parties should contact Election Chair, Renee Bemis, Driftless Glen , located in Wisconsin, at [email protected] . You may self-nominate or be suggested by another member of our craft spirits community. Renee will contact you for additional information so please supply relevant contact information.

Nominations must be received no later than Friday, February 2nd. You will have the opportunity to address the membership with a statement of your candidacy on Tuesdaymorning, March 6 ^th , during ACSA’s national convention. National elections will take place in mid-March with successful candidates announced in early April.

Benefits of serving as a volunteer leader include:

Playing a significant role as a thought leader in advancing the craft spirits industry when it is growing at an unprecedented rate [CRAFT SPIRITS DATA PROJECT ©2017 ACSA/Park Street/IWSR estimates there are close to 1600 craft spirits producers now operating in the U.S.]
Having an opportunity to enhance the value of ACSA and the craft spirits community
Accessing up-to-date information about the challenges facing the alcohol industry
Exchanging ideas and perspectives with other DSPs

Desired attributes for ideal candidates include:

Being committed and aligned with ACSA as a DSP voting member in good standing
Possessing relevant expertise in the disciplines of organizational management. Examples include, but are not limited to: marketing, fundraising, guild or chapter relations, finance, lobbying, export, and strategic supplier alliances
Committing to participate in 3-4 board meetings a year via teleconference and 1-2 in-person meetings. ACSA board members are asked to provide leadership support to legislative affairs, membership, education, convention, judging of craft spirits, and, special events and/or campaigns
Demonstrating positive leadership attributes, including but not limited to emotional intelligence, ability to work collaboratively and engage in appropriate debate and discussion when needed
Being a visionary and strategic thinker as ACSA enhances membership services and benefits

Coming Soon: The 2018 Craft Spirits Data Project Survey

It's time once again for the Craft Spirits Data Project to query you on the economics of the industry. We will be launching this year's study in early February 2018. Keep an eye out for the distiller survey, which will arrive in your inbox the first week of February. We'll be collecting data throughout the following month and will issue the full report later this year. The Craft Spirits Data Project, which ACSA conducts in conjunction with Park Street and the IWSR, provides the industry's most detailed picture of the size, scope, growth trajectory and economic contributions of the craft distilling industry. This information will be critical as we continue our fight to keep the reduction in the Federal Excise Tax. We need your participation!

A Lower Federal Excise Tax Is Now a Reality but the Work to Ensure Its Permanence is Just Beginning

On December 22, 2107, the President signed into law H.R. 1, the Tax Cuts and Jobs Act of 2017. Contained in this significant tax overhaul was the first major legislation in modern history that will directly support and grow America’s nearly 1,600 craft distillers, by reducing the federal excise tax (FET).

The Craft Beverage Modernization and Tax Reform Act (CBMTRA) has been one of ACSA's biggest priorities for a number of years and its passage marks a major victory for the craft spirits industry. It also finally provides parity for our industry with our counterparts in craft beer and wine.

The legislation reduces the FET from $13.50 to $2.70 per gallon for the first 100,000 proof gallons removed from bond. Additionally, it provides regulatory relief by allowing distillers to transfer spirits between bonded facilities in approved containers other than bulk containers without payment of the excise tax.

The need for legislation was clear, as the then current tax policy allowed for a reduced excise tax rate for small producers of beer and wine while it kept craft distillers at the same rate as major corporate producers. In fact, craft spirits producers pay five times more FET than a craft brewer and 16 times more than a small winery for equal quantities of beverage alcohol. Fairness for our industry was a driving force in support of this entire legislative effort.

Getting this across the finish line, however, was not easy. Prior to its passage in the Senate, the ACSA, alongside five other major beverage industry groups, worked tirelessly to rally support for two key FET reduction bills in the U.S. Senate and House of Representatives. In the House, we had more than 300 co-sponsors of this legislation, introduced by Rep. Paulsen (R-MN) and Rep. Kind (D-WI). In the Senate, we had more than 50 U.S. Senators who supported sponsors Sen. Ron Wyden (D-OR) and Sen. Roy Blunt (R-MO). Nevertheless, when the House considered the tax overhaul bill, the CBMTRA was not included. It was not until the Senate Finance Committee considered the bill and, late in the process, Senator Rob Portman (R-OH) made a major push to have this included that it finally found its way into the Senate tax bill.

ACSA still had to work hard to ensure that it was not removed when the full Senate considered the tax bill, and that the House would accept the Senate’s provision. In the end, the Senate and House agreed to keep this part of their Conference Committee and our victory was secured.

To our disappointment, but bowing to the realities of a complicated budget process, the FET reduction is for the years 2018 and 2019. This is typical of many new tax provisions that have time deadlines. Many have been “extended” for years and then made permanent.

ACSA is already working on our own plan, and with other alcohol beverage groups, to make this a permanent part of the tax code. A summit of the key organizations is set for early February where we will plan our next steps on the road to a permanent fix. Meanwhile, the TTB has put out some initial guidance for craft distillers and ACSA plans to meet with them soon to make certain there is a smooth transition for the new tax law.

SPIRITED RESPONSE: POLL OF THE MONTH

What's the No. 1 way the FET reduction will benefit you in 2018?

It will enable my company to buy new equipment.

Select

It will enable my company to hire more staff.

Select

We will be able to pay down our debt.

Select

We'll be able to boost our marketing budget.

Select

We'll be able to expand our facility or move to a larger site.

Select

It will not benefit my company at all.

Select

EDUCATION - Where Knowledge is POWER

2017 was a big year for ACSA education. It saw ACSA's first regional Master Class Program in Denver in August, 10 webinars, and 30 hours of educational programming during ACSA's Distillers Convention and Vendor Trade Show in Nashville, TN. Regular education opportunities are important for the craft distiller and ACSA is proud to be a part of the educational process. In 2018, we plan to expand the Master Class program and double the Craft Spirits Classroom webinar series. We are excited to provide two pre-convention Master Classes this year: Building Your First Distillery, presented by Dalkita Architecture & Construction, and WSET Level Two in Spirits. You can also expect a robust line-up of technical, sales/marketing, and business essentials presentations at our Pittsburgh convention.

CRAFT SPIRITS CLASSROOM: Quenching Your Thirst for Knowledge

TWO Upcoming Programs

Ripple Effects

L to R: MSK attorneys Daniel Hayes, Aaron Wais and Blake Baron

This webinar follows the story of the CEO/Founder of a fictional company, Ripple Effects, a maker of lime-infused vodka. The CEO/Founder faces a number of theoretical legal issues including trade dress design, trademark infringement, and contract dispute with its manufacturer, presenting them to the MSK attorneys. The attorneys then walk him through not only where he went wrong so he can identify mistakes to avoid in the future, but how to navigate the challenges ahead with the litigation he’s facing. In addition to learning what NOT to do, attendees of this presentation will receive tips on how to smoothly & successfully launch their businesses, and what to do should they find themselves in the midst of a legal hurdle."Ripple Effects" will be presented by Mitchell Silberberg & Knupp, LLP, a full service law firm with deep roots in Los Angeles's entertainment industry. Since 1908, MSK has developed a national presence in a variety of complementary industries and practice areas, including digital media & interactive entertainment, intellectual property, litigation, labor and employment, corporate, immigration, regulatory, and tax.

When: January 24, 2018 3-4 PM EDT

Where: Online Webinar

Who: Daniel Hayes, Aaron Wais and Blake Baron, attorneys at Mitchell, Silberberg & Knupp, LLP

$39 for members, $59 for non-members

Email [email protected] for member discount code

Tips for Successful Distribution Amongst Rapid Changes and Consolidation in the Three-tier System

LibDib Founder and CEO Cheryl Durzy

Distribution oftentimes can be tough. You make a GREAT product but cannot seem to sell beyond the confines of the tasting room. What should you do? Current problems with distribution in the three-tier system, market access, and the impact of consolidation of distributors will be explored by LibDib Founder and CEO Cheryl Durzy. As a small producer, she recognizes the pitfalls. Come learn how she navigated the system and hear firsthand positive outcomes for a small brand successfully working with distributors.

Join us next Wednesday to learn:

What Cheryl is seeing in the market right now
5 things you can do to get distribution
5 ways to make sure your distributors are working for you
Top things you can do to keep distribution going

When: January 31, 2018 3-4 PM EDT

Where: Online Webinar

Who: Cheryl Durzy, Founder and CEO, LibDib

$39 for members, $59 for non-members

Email [email protected] for member discount code

Convention Education Update

Join ACSA March 5th and 6th in Pittsburgh to see what ACSA’s Education Committee created to assist you in “Bridging the Future” of craft spirits. In March, attendees can look forward to increasing their technical know-how with presentations ranging from fermentation, aroma, and flavor optimization to how to engineer distilleries capable of producing different types of spirits under one roof. The marketing and sales track will include how to make the most of tasting rooms, as well as media relations and trends in craft spirits. And in business essentials, attendees will learn to traverse complex topics like acquisitions and routes to market in a consolidated distributor landscape. We've programmed more than 30 hours of information-packed sessions for the conference. Here's are some highlights of what you can expect to learn:

Technical Track

• Equipment and facility design with health and safety in mind

• Critical process considerations when producing multiple spirit types

• Scaling equipment for your present and future production output

• Fundamentals of peated and specialty malts

• How the tools and techniques of British distillers can benefit American craft producers

• How to control dust and prevent fires in your facility

• Mastering the art and science of fermentation

• The evolution of distillery equipment and solutions tailored to today's and tomorrow's craft distiller

• The fundamental importance of modern filtration equipment and techniques

Marketing and Sales Track

• Key considerations when choosing an e-commerce platform

• Insight on how to effectively promote your online store to both consumers and trade

• Sales and marketing data analytics, as well as cutting-edge management tools and tips

• The critical components of a well-planned and cohesive marketing strategy

• Expert advice on engaging the media and telling your story

• Everything you need to know to navigate and embrace the complexities of Control States

Business Essentials Track

• The ins and outs of raising capital and the nuances of the various funding mechanisms available to you

• Making sense of state and federal securities laws and how they impact your ability to raise capital

• Rules and techniques for building brand and company value to attract strategic investors

• The importance of trademark ownership and clean financial records

• Data-driven decision-making techniques: Knowing which data to collect and how to interpret it

• Process safety & OSHA compliance: How to protect yourself and your business

• World-class execution strategies for craft distillers

• How to target, develop and grow specific markets within the U.S.

• Successfully navigating the consolidated spirits distribution landscape and making it work for you

• Structuring your business for lawsuit protection and prevention

• Best practices in succession planning

Besides Education, What Else is Featured in Pittsburgh?

Expanded Trade Show Hours

Why wait for a good thing? This year, we're helping you get more from your convention experience. Upon arrival on March 4th, come visit us at preregistration beginning at 4 p.m. and enjoy a complimentary libation and snack while visiting the trade show floor PRIOR to the official opening. Avoid the crowds and spend more time with suppliers and friends in our industry .

And, to our booth exhibitors, please e-mail your list of booth attendants to [email protected] and indicate whether you're planning to attend the consumer event at the Heinz History Center ."

Town Hall Meeting Keynote Address: Fawn Weaver

[Monday, March 6th]

Kicking-off the convention is Fawn Weaver, a New York Times and USA Today bestselling author, national speaker, TED talk presenter, and founder of the Nearest Green Foundation—an organization devoted to honoring Nathan "Nearest" Green, the first African-American master distiller on record in the U.S., the first master distiller for Jack Daniel's, and the person who taught Jack Daniel the fine art of making Tennessee Whiskey

Pennsylvania Consumer Tasting Event at the Heinz History Center

[Monday, March 5th]

ACSA has partnered with the Pennsylvania Guild to co-host a consumer tasting event at the Heinz History Center, an affiliate of the Smithsonian Institution. Luckily, we timed our convention with the last stop on a nationwide tour: AMERICAN SPIRITS - THE RISE AND FALL OF PROHIBITION. Come learn more about our industry and witness the first comprehensive exhibit dedicated to bringing to life the story of Prohibition.

Craft Spirits Judging Awards Dinner

[Tuesday, March 6th]

Help us close our convention with an unparalleled night of fun. Be a part of our community to celebrate medalists from our annual Craft Spirits Competition and toast our 5th year as a trade group created and run by licensed craft spirits DSPs.

PRECONVENTION PROGRAMS

Master Class: WSET Level 2 Award in Spirits

[Saturday, March 3rd - Sunday, March 4th]

**Separate Ticketed Event**

Do you wish to gain immediate credibility and a deeper understanding of spirits and liqueurs? If so, we've made it easy by offering a pre-convention Master's Class with Nicholas King and Antony Moss, MW, of Wine & Spirit Education Trust (WSET). After two days of learning, followed by a certification exam, you'll earn a professional certification recognized globally in the spirits industry. Come witness in-depth distillation techniques and the specific factors that influence the final character of the finished spirits.

Making Sense of Plans & Blueprints:

Building Your First Commercial Distillery

[Saturday, March 3rd - Sunday, March 4th]

**Separate Ticketed Event**

Dalkita Architecture and Construction, through its principals Scott and Colleen Moore, will provide the nuts and bolts of building your first commercial distillery. They will unveil the knowledge necessary to construct a safe and work-friendly distillery and provide practical advice on the concepts a distillery business owner must know.

Regional Focus: Chicago

Chicago is home to chilly temperatures, an abundance of music and cultural history, and some of the best universities in the country. The Windy City has also become a top destination for some of America’s best food and drink. Chicago has 25 Michelin-starred restaurants for 2018 and some of the best cocktail bars in the country . Chicago’s innovative and creative culinary side has opened the space for top-tier craft cocktail bars and distilleries.

Farmhouse , located in the River North neighborhood, offers seasonally-sourced food and locally distilled spirits. Swing by Fountainhead in Lincoln Square to find plenty of craft whiskeys and delicious food. Inside the ACME hotel, you’ll find The Berkshire Room , one of Chicago’s standout cocktail bars. Enjoy some upscale bar food and a tasty cocktail at the end of your evening. Billy Sunday provides thoughtfully prepared cocktails and small plates in Logan Square. Enjoy a relaxing weekend afternoon in this unpretentious, chic bar. If you’re looking for Asian-inspired fare paired with seasonal cocktails, stop by Mott Street .

Visit CH Distillery in Chicago’s West Loop neighborhood for a wide variety of spirits, ranging from CH Bourbon to CH Fernet-Dogma. Pair a house cocktail with a small bite to eat before touring the distillery. Logan Square is packed with great spots to eat and drink like Revolution Brewing, Longman & Eagle, and the Whistler. While you’re there, stop into the Chicago Distilling Company’s tasting room. Sample through CDCo’s spirits or enjoy one of their cocktails . Rhine Hall produces several brandies, grappas, and whips up creative cocktails in the Downtown Chicago tasting room. They also offer cocktail classes for those interested in crafting their own cocktails at home. Few Spirits , one of ACSA’s founding members, has become known nationally as one of the better producers of whiskey and gin. Try their spirits at the Evanston distillery, located just 30 minutes north of Chicago. Quincy Street Distillery , in nearby Riverside, makes spirits that are inspired by historical distilling tradition. Reserve a tour ahead of time to explore the distillery and taste some of the heritage products. Sleek and modern design is a big part of the Oppidan Spirits brand. Oppidan produces an American Botanical Gin, Malted Rye Whiskey, Solera Aged Bourbon, and a Barrel Reserve Gin, which is coming soon. Find cocktail recipes for these spirits on their website.

Welcome Newest Voting and Affiliate Members!

ACSA extends a warm welcome to a few of our newest members:

Cerberus Craft Distillery (FL)
Coastal Bend Distilling Co. (TX)
West Fork Whiskey Co. (IN)
Restless Spirits Distilling Company (MO)
South Texas distillery LLC (TX)
Texacello LLC (TX)
Liquor Bottle Packaging International, LLC (KY)
Flow Design (MI)
Dida's Distillery (VA)
MISCellaneous Distillery (MD)
DeMarco Cream Liqueur (NJ)
Cathead Distillery (MS)
Grand Traverse Distillery (MI)
Royal Foundry Craft Spirits (MN)
Yellow Rose Distilling, LLC (TX)
K J Wood Distillers, LLC (CO)
In-Line Packaging Systems, Inc (SC)
Rockwell Automation (OH)
Paul Menta (FL)
CIE, LLC (IN)

Find out more about becoming a member here .

A Q&A with Your ACSA Family

We asked Richard Baduini of freight services company Top Shelf Logistics (pictured) about critical issues associated with the complexities of the beverage alcohol supply chain in the United States. Read on to get some of Richard's expert insights.

Can you describe your role at Top Shelf?

Richard Baduini: Our role is to improve supply chain processes for our customers. By first listening, then collaborating, we create and sustain processes for the distillery which usually revolve around inbound and outbound transportation. In daily practice, we operate those sustainable processes as an outsourced provider, improving distillery throughput and freight capacity reliability.

What are some trends you've noticed in the craft spirits industry?

RB: In the context of transportation, in general there’s not much awareness at the distillery of freight costs which are often included in FOB dock distributor shipments or when receiving loads from suppliers where the freight costs are built in. Or how much those costs eat into profit margin. If the distillery isn’t aware and managing/negotiating those freight costs, then they’re probably paying more than they should be. Especially relevant since after a 3 year lull, freight costs are on the rise again. Remember that Bailment/Control states expect the distillery to handle the freight arrangements, so sooner or later you will need to engage directly. Sooner is better.

What have been some specific transportation concerns for craft distilleries?

RB: In the many interactions with craft distillers I often hear about poor service from their transportation providers. Late deliveries of raw materials (e.g. grains or bottles) ruin planned run dates, resulting in wasted labor costs and missing related promise dates to either to distributors or bailments. Meanwhile, late pickups of finished goods create space issues on the limited distillery floor and can cause a negative perception of the distillery from those same customers.

Are there any shipping methods that you've found are more successful for transporting spirits?

RB: Most craft distilleries are shipping a few pallets of product. This is known as a “less than truckload” or an “LTL” shipment. Generally, the larger the shipment, the lower your cost per unit (case) on finished goods. Most importantly they should partner with an established and well respected third-party logistics (3PL) provider who negotiates with many LTL carriers on the aggregate of all their customers' freight and receives discounts—and, in turn, passes along lower rates to the distillery. When doing so, always use your third-party company bill of lading (BOL), which ensures you get the discount they negotiated.

Did You Know?

The TTB has issued 2,567 DSPs! Find the full list here.

The British novelist Alec Waugh was initially credited as the inventor of the cocktail party in 1924, the true creator of the concept—at least in recorded history—was wealthy St. Louis, Missouri socialite Clara Bell Walsh some seven years earlier. An May 1917 article in the St. Paul Pioneer Press detailed the mixed-drink-centric soiree, with a guest list of 50 VIPs. Read more about the world-changing event in the St. Louis Post-Dispatch.

Ready for Super Bowl LII? Try these cocktails to get you through the game, via Town & Country

Don't miss these upcoming drink holidays:

January 25: National Irish Coffee Day

January 31: Brandy Alexander Day

February 7: Pisco Sour Day

February 22: National Margarita Day

Social Media

Do you have a new spirit release, an upcoming event, or some news to drop?

Follow our social media channels and tweet at us (@craftspiritsus), connect with us on LinkedIn, or post to our Facebook Page and we'll be sure to share it!