Springing Forward with ACSA
Welcome to the spring edition of ACSA's quarterly newsletter. We had an amazing time celebrating all things craft spirits in Nashville last month, from networking with our talented producers to collaborating with our knowledgeable suppliers. The spirits which were awarded medals at our Judging Competition are testaments to the strength and power of our growing industry. Now, though, it's time to again focus on the many topics shaping the craft spirits industry.

First, new members, each with ample energy and enthusiasm, were elected to our Board of Directors just last week, and the officer and committee chair positions are being voted on currently. Next, check in on our progress with the Federal Excise Tax (FET) and please continue to reach out to your local representatives. And last, find out which spirits are poised to surge in the market and learn about another exciting craft spirits festival and competition taking place in Chicago!
  ACSA Board of Directors 2017-2018
(Newly elected members are in bold. Officers and additional ex officio members will be announced shortly.)

EAST

Privateer Rum

New Liberty Distillery

James Montero
Dogfish Head Distilling


CENTRAL & MOUNTAIN

Blaum Brothers Distilling Company

Colin Keegan
Santa Fe Spirits

Courtney McKee
Headframe Spirits

Chris Montana
Du Nord Craft Spirits

Garrison Brothers

Revolution Spirits

Wood’s High Mountain Distiller


WEST

Osocalis Distillery

Jake Holshue
Rogue Spirits

Bentley Heritage Spirits

Woodinville Whiskey Co.


Ex Officio

Westland Distillery

Vermont Spirits Distilling Co.


Outgoing Members

It’s never easy to say farewell, particularly to those who helped to establish the ACSA foundation. This 501(c)(6) trade group will be eternally grateful to Paul Hletko, FEW Spirits; Tom Mooney, House Spirits; Ted Huber, Starlight Distillery; Nicole Austin, Kings County Distillery; Chip Tate, Tate & Co. Distillery; and Steve Johnson, Vermont Spirits Distilling Co. (who is moving into an ex officio role). Their contribution is immeasurable.
Some Thoughts from a Few of Our New Visionaries
Jake Holshue promises: “I will work as hard as I can to continue the legacy that the ACSA has started, and continue to build upon that. Please join me in thanking our outgoing board members, as they have left large shoes for us to fill. I look forward to meeting more craft producers from all over our country and representing this industry in whatever way I can. It is truly a great honor. Cheers!”

Colin Keegan shares: "I’m proud to serve on the ACSA board, and believe it gives me the opportunity to help direct the member-driven organization to fulfilling its mission to help grow the Craft Distilling Industry."

James Montero remarks: "Every time I sit with a distributor, I open with the data project info and say ‘yeah, see Craft Spirits are a real thing!’ Thank you for the opportunity to participate in the important conversation regarding this young and exciting industry."

Courtney McKee exclaims: “I'm excited to help shape our young and growing industry and to provide values-based leadership in this time of great opportunity for all of us. I believe strongly that the better each of us does, the better we all do. And I know, intimately, how challenging our work can be at times. My goal, always, is to look for ways to elevate all of us as an industry because together, we are a Big Damn Deal. 

It's critical that we maintain our focus on opportunities for education such that we're promoting safety first, followed (in no particular order) by employment, financial responsibility, legacy, and many other facets of running our businesses."
What's Happening on Capitol Hill?

Tax reform is one of the highest priorities that the new Congress has indicated it will work toward in 2017. The timetable has been accelerated in recent days, due to the apparent collapse of efforts in the U.S. House of Representatives to reach agreement on repealing and replacing Obamacare.

On January 30, 2017, Senators Ron Wyden (D-OR) and Roy Blunt (R-MO) re-introduced S. 236, the Craft Beverage Modernization and Tax Reform Act. The bill includes an 80% reduction in the Federal Excise Tax (FET) from $13.50 to $2.70 for the first 100,000 proof gallons of spirits, for craft producers. In the House, H.R. 747, a companion bill to the Senate, was introduced by Erik Paulsen (R-MN) and Ron Kind (D-WI). As of this writing, both bills have gained a tremendous amount of support in just six weeks. In the House, 109 Members of Congress have signed on as co-sponsors. In the Senate, 28 Senators have signed on, nearly a quarter of the Senate. Still, there is more work to be done. During the last Congress, 51 Senators and more than 280 House members eventually co-sponsored.   

ACSA is working toward inclusion of the craft distilling tax reduction in the larger tax bill. We are now thinking this may not come until the summer or even fall, however, we would encourage ACSA members and all suppliers to reach out to their Senators and House Members and ask for support.

What can you do to help now? You can invite your Congressman or Senator to visit your distillery. Give them the full tour and impress upon them the importance of this legislation. Alternatively, in the short term, calls and e-mails to your U.S. Senator and Congressman, asking them to co-sponsor Bills S. 236 and H.R.747 will also help

If you do not know who your elected officials are, please use these two helpful links: www.house.gov/representatives and https://www.senate.gov/senators/contact/

ACSA stands ready to help with these visits, so please contact any of our staff or Board Members if you have questions. Stay tuned for further developments in the near future on the legislative front.
Gin and Rum are Poised for a Surge
Jeff Cioletti, ACSA Contributing Writer

Whiskey and agave-based spirits like tequila and mezcal have been getting most of the media coverage for their respective stellar growth trajectories, but there are a couple of other spirits categories the industry and consumers should be keeping their eyes on.

If you were to take the category figures at face value, it would be easy to overlook the performance of gin and rum. For the calendar year 2016, gin volume was up a modest 0.7 percent to 9.9 million 9-liter cases, while rum volume was slightly down by 0.2 percent to 24.7 million cases, according to the Distilled Spirits Council. Meanwhile, American-produced whiskey was up 6.8 percent and the tequila category (which includes mezcal and other agave-based spirits) was up more than 7 percent. So, with mid-to-high-single digit increases like those, it’s easy to see why these categories are getting most of the attention. However, the real trends—especially those relevant to craft spirits producers—are hidden behind those category-wide numbers. Super-premium gin, the price tier that includes most craft gin volume, was up nearly 12 percent. The same tier in rum saw a volume gain just shy of 8 percent. Granted, the super-premium segments of both categories remain relatively small—it’s just under 1.5 percent of all gin cases sold and 2 percent of all rum cases; the percentage of each category’s total revenue is a bit higher, due to the higher price point, accounting for about 3 percent of overall gin dollars and 5.5 percent of rum sales. But consumers are trading up into above-premium segments for both, which translates to a significant opportunity for craft producers. It also means immediate profit potential, as both spirits can get out into the market faster than whiskey without being tied to the same aging requirements of the latter.

And craft should soon be able to have a greater impact on the overall category numbers, considering the segment's growth trajectory. Among the findings in the Craft Spirits Data Project—which ACSA conducted in partnership with Park Street and IWSR—was that the number of craft producers reached 1,315, as of August 2016. For some perspective, there were only 204 producers in 2010. So, there are more than six times the number of craft spirits producers in the U.S. than there were just six years prior to the study. Craft's share of overall U.S. spirits volume reached 2.2 percent; its share of spirits revenue passed 3 percent. In 2010 craft volume and revenue share were only 0.8 percent and 1.1 percent, respectively. So, expect to see overall U.S. gin and rum numbers climb, as craft producers make a more significant contribution to the market in the coming years. 

Rum already is benefiting from the tiki bar renaissance, as it’s a staple of some of the most iconic tropical drinks. Many such establishments also serve as rum education institutions. Alameda, Calif.’s Forbidden Island, for instance, offers a multi-page well-curated menu of rums, designed for sipping. The bar also offers tasting flights organized around a particular theme, region, or flavor profile.

And, to get a sense of where craft gin is headed in the United States, the best places to look are outside the country. Europe has rapidly become a continent of gin fanatics over the course of the past decade. The United Kingdom in particular has been experiencing a massive renaissance of the spirit that it put on the map in the eighteenth and nineteenth centuries. The British government reported that the number of gin distilleries in the U.K. doubled between 2010 and 2015. The growth of the country’s Gin Festival has been a major reflection of the spirit’s rebirth. The consumer tasting festival began in the English city of Leeds in 2013 and now has grown to nearly 20 such events each year in locations throughout the country.

And it’s not just England; gin production and consumption is also surging in Scotland—yes, whisky territory. Many Scottish craft distillers have been turning to gin for a couple of reasons, aside from market demand. For one thing, it’s hard for startups to compete with iconic Scotch whisky brands that benefit from massive, mature stocks. Secondly, they don’t have to wait for gin to age. That's a significant issue among American craft spirits producers as well. 

Many American craft distillers have been producing world-class gin in their own right for many years and it’ll only be a matter of time before the categories start grabbing some of whiskey’s abundant headlines here. 

Heartlands Spirits Fest
Corn – it starts as a seed and, with any luck, can take an incredible journey to advance its pedigree to a key ingredient in whiskey. ACSA will be sanctioning a Whiskey Competition, combined with the Heartland Spirits Fest on  May 18th in Chicago at the CH Distillery. Working with the Corn Growers Associations across multiple heartland states, including, Ohio, Indiana, Michigan, Kentucky, Missouri, Illinois, Wisconsin, Iowa, and Minnesota, ACSA will help host this event, offering a platform to recognize great whiskey being produced by our craft distillers in the heartlands.

The spirits judging competition is meant to recognize and honor the new breed of craft distillers. The categories of judging include straight whiskey, bourbon, corn whiskey, four grain whiskey, and more.

For more information, go to https://www.heartlandspiritsfest.com/. To register products, click here.

Craft Bourbon in High Spirits: Nielsen Design Category Audit

Over the past year, there were more than 20,000 spirit items for sale in off-premise retailers. Compared with 4 years ago, there are now 27% more whiskey items for sale and 43% more high-end whiskey items, making it more important than ever for these brands to put their best bottle forward. Consumers do most of their decision-making at the shelf—and they can’t purchase what they don’t notice; in fact, 69% of current and potential whiskey buyers agree that a whiskey’s package/label design is “very” or “extremely” important for getting them to notice it in the first place.

Nielsen recently conducted a Design Category Audit with 10 craft bourbon brands, evaluating them on a variety of metrics among 500 U.S. consumers. Package designs were evaluated on their ability to stand out, drive preference and convey key brand messages.

The study revealed that taller bottles, along with bolder colors and single focal points on pack gain advantages on visibility and share of attention. Among the packages evaluated, Iowa Legendary Rye was top-ranked for visibility—being seen by 1.9 times more consumers within the first few seconds of looking than the least visible pack tested. Iowa Legendary Rye also elevates consumer perceptions as the most broadly differentiated pack tested, establishing itself as the most “unique,” “bold,” and “masculine” pack. However, 291’s design claimed the top spot for overall likability.

In today’s competitive marketplace, best practices for creating package designs that win with consumers in the spirit aisle can make all the difference.

For more findings from Nielsen's Design Category Audit: Bourbon, click here.
Important TTB Security Update

Starting on April 11, 2017TTB Online applications will no longer support certain older Web browsers and computer operating systems. These older systems have security vulnerabilities that can put your business with TTB at risk, so this is an important and necessary change.

Windows Operating Systems

Microsoft ended support for Windows XP in 2014. Support for Windows Vista ends April 11, 2017. Without support, there are no more security updates and Microsoft has stated it is very important that customers migrate to a supported operating system.

Internet Explorer

Microsoft ended support for Internet Explorer versions 10 and below in 2016. Microsoft no longer provides security updates to patch vulnerabilities that may be exploited by malware. The only version that Microsoft supports is Internet Explorer 11.

Other Browsers

Other older browsers have similar security vulnerabilities, so TTB Online applications will not support Chrome versions 29 and below, Firefox versions 26 and below, and Safari versions 6 and below.

Action Needed

If you are running any of these unsupported browsers or operating systems, you must take immediate steps to upgrade your computer. If you do not upgrade, you will not be able to use Permits Online, Formulas Online, and COLAs Online starting April 11, 2017Pay.gov is also impacted by this security update.

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