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A Successful Return to Diversity

By Kevin Gibson

Alltech in Lexington is one of the area’s larger operations and is involved in both brewing and distilling.

As recently as 125 years ago, small breweries and distilleries were everywhere in Kentucky – and everywhere else. In cities like Louisville and Lexington, some individual neighborhoods had multiple beer makers, and stills were nearly as commonplace across the counties as trees.

Today’s so-called “craft” distilling and brewing resurgence enjoys plenty of promise and attention in the commonwealth, but what’s happening is at least somewhat akin to how this sector operated in the late 1800s. The new paradigm it’s heading toward is quite familiar and has long existed in other local-minded marketplaces.

“I think of it as the coffee shop mentality,” John King, executive director of the Kentucky Guild of Brewers, said. “Each neighborhood should have a neighborhood coffee shop people can walk to. What’s happening with beer – it’s the same thing. I think that’s going to be the new thing: People are going to start being neighborhood breweries. You can be in a neighborhood and produce OK beers, and it’s fine because people want this convenience.”

Craft distilleries similarly bring something slightly different but more intimate and accessible than the traditional, established distilleries. Whereas a trip to the Buffalo Trace Distillery in Frankfort is an experience of tradition and culture, visiting a smaller maker such as Corsair Distillery in Bowling Green is more intimate and unusual – certainly a nod to Kentucky’s distilling heritage, but with a modern twist. And in more urban Newport only a block from the Ohio River, New Riff Distilling is celebrating its first anniversary as what owner Ken Lewis envisioned: a small distillery with old roots bringing something new to Kentucky’s bourbon tradition.

Growth in Louisville’s Whiskey Row by major distillers like Evan Williams, Michter’s, Angel’s Envy and Old Forester is driving an impressive level of bourbon tourism there, according to Fred Minnick, author of “Bourbon Curious: A Simple Tasting Guide for the Savvy Drinker.” But there is a taste for something more among some visitors.

“The smaller distilleries offer a genuine experience and an intimacy that’s sometimes lost at the larger facilities,” Minnick said.

Corsair is an example of a distillery that is doing a bit of both. While its intimate tasting room and $5 tour is the epitome of small-scale craft spirits, its distribution reach extends into 32 states; it also has a distillery and craft brewery in Nashville.

Louisville’s Copper & Kings American Brandy Co. recently expanded its distribution network and is now sold in 15 states.

Copper & Kings American Brandy Co. in Louisville, a small craft distillery focused on barrel-aged brandies, recently announced expanded distribution of its American Brandy and absinthe products into seven new states: Arkansas, Louisiana, Massachusetts, Mississippi, Oklahoma, South Carolina and Texas.

Second Sight Spirits, a small, artisan distillery in Ludlow, Ky., opened in April after Northern Kentucky natives Carus Waggoner and Rick Couch returned to the region, after working together at Cirque du Soleil in Las Vegas. It is distilling gin and rum with plans to add bourbon.

A larger operation, Lexington’s Alltech, has its feet firmly in both brewing and distilling – a “brewstillery,” as it has been called. The former is headlined by its Kentucky Ale production and the latter by the Town Branch Distillery. The Alltech Craft Brews and Food Fest is one of the region’s top beer festivals, and this year’s event served up a new distilling wrinkle: the REBELation Brewing and Distilling Symposium, featuring some top names in both beer and spirits.

Sam Calagione of Delaware-based Dogfish Head Brewery and Greg Koch of Colorado-based Stone Brewing Co. led sessions on the brewing side, while Bill Samuels Jr. of Maker’s Mark was a headline distilling presence. Meanwhile, Alltech continues to expand distribution and is in the process of expanding production.

‘A historic chapter of American brewing’

The brewing side, which currently produces about 60,000 barrels per year, will add 45,000 barrels of capacity when a new brewhouse at Alltech’s Cross Street facility goes into operation later this year, Alltech public relations representative Danielle Palmer said.

But that’s only the beginning. Another planned brewhouse on Angliana Avenue will eventually do 200,000 barrels with total capacity in Lexington eventually reaching 245,000 barrels per year, Palmer said. And an Alltech brewhouse slated for its Dueling Barrels site in Pikeville will begin construction soon and is likely to be completed by fall 2016.

Expect a new look at the existing facilities as well.

“The original brewery structure at Cross Street (in Lexington) will undergo a facelift that will allow visitors and anyone passing by to view brewing operations through two of the structure’s walls, which will be made of glass, much like the design of Town Branch Distillery, where (passers-by) can see the stills,” Palmer said.

With Alltech already distributing its craft beers to 25 states and six countries – numbers that are quickly rising – and its spirits to six states and four countries, it’s clear something big is brewing in the Bluegrass.

“We are living in a historic chapter of American brewing, with a new craft brewery opening every 16 hours in this country,” Pearse Lyons, president and founder of Alltech, said in a prepared statement. Ireland native Lyons has master’s and doctoral degrees in fermentation from the University of Birmingham in England and attended UB’s British School of Malting and Brewing.

“New distilleries are appearing everywhere, too, as domestic whiskey sales have soared by 40 percent in the past five years,” Lyons said. “This clearly is a brave new world for brewers and distillers, one in which the opportunities are everywhere for entrepreneurs willing to seize them.”

An hour west on Interstate 64 in Louisville, a boom is taking place as well. Against The Grain earlier this year launched a new $1.7 million, 25,000-s.f. brewery. Beers from that destination craft brewery now are being distributed to nearly 40 states and several countries in western Europe.

Northern Kentucky is returning to its deep brewing roots. The region’s river cities are home to Braxton Brewing in Covington, and Ei8ht Ball Brewing and Wiedemann Brewing Co. in Newport with Bircus Brewing in Ludlow and Darkness Brewing in Bellevue opening later this year.

New breweries continue to open all across Louisville, Lexington and in far corners of the state. King said 22 breweries are now in operation in Kentucky, with a possible three to five more before the end of 2015, including the new Louisville location of Danville-based Beer Engine.

“I know of, at minimum, six or seven that are in the planning stages,” he said.

One of the breweries announced most recently will be Righteous Minds Brewing Co. – it is partnering with the Capital Plaza Hotel and will be Frankfort’s first craft brewery.

Craft beer outpaces overall market

The Brewers Association reports craft beer producers claimed a double-digit (11 percent) volume share of the national beer market for the first time in the modern era in 2014. Craft brewers made 22.2 million barrels of beer and estimated retail sales of $19.6 billion. However, because craft beer retails for higher prices, craft brewers had 19.3 percent of total dollar sales.

“With the total beer market up only 0.5 percent in 2014, craft brewers are key in keeping the overall industry innovative and growing,” Bart Watson, chief economist, Brewers Association, said in a release. “This steady growth shows that craft brewing is part of a profound shift in American beer culture – a shift that will help craft brewers achieve their ambitious goal of 20 percent market share by 2020.”

Craft brewers clearly have re-energized the U.S. beer market, which in 2014 measured about 200 million barrels, a traditional measure containing 31.5 gallons each. There now are more than 3,000 commercial beer makers, not counting brewpub restaurants, after industry consolidation had reduced the count to fewer than 100 breweries by the late 1970s.

By the Brewers Association definition, a “craft” brewer must employ traditional methods, have less than 3 percent of U.S. production – a very large number – and be less than 25 percent owned by a large brewer. A recent count found 21 Kentucky craft beer makers.

Earlier this year, the Kentucky Guild of Brewers scored a political victory with legislation to limit large out-of-state breweries from effectively buying control of distribution in the state. LouisvilleBeer.com reported that beer distributors owned by ABInBev, the world’s largest brewer company, had dropped 195 non-InBev brands. Bluegrass brewers fought for and won an equal playing field with passage of HB 168 – a small win in the bigger picture but one that poises Kentucky breweries for a better future.

“It made us a name for ourselves,” King said. “I think it’s going to open a ton of doors. It lets people know we have an open door in Frankfort to go in at any time.”

Craft distillers growing, but face hurdles

Craft distilling is seeing similar growth and traction in the commonwealth, not surprising given the ongoing global boom in the popularity of premium Kentucky bourbons.

There is no absolute line of demarcation between craft distillers and their bigger brethren, but two trade associations, the American Distilling Institute and the American Craft Spirits Association, which each have Kentucky members, both place the divide at annual sales of 100,000 proof gallons. For bourbon makers who age their spirits in charred 53-gallon oak casks, that’s less than 1,600 barrels.

The number of state-licensed distilling companies had grown from 10 to 31 in three years, according to a 2014 economic impact report commissioned by the Kentucky Distillers’ Association. The report did not differentiate between craft and traditional operators, but said at least 19 qualify for the state’s new Class B distillery license for makers of less than 50,000 gallons annually.

Though it did not specify craft distillery numbers, the KDA’s study said its members reported craft distilleries employ 127 people with salaries totaling more than $4 million and that they have invested about $30 million in land, buildings and equipment since 2008 – with another $25-$30 million in investments planned the next five years.

Many craft distilleries are sticking with tradition, such as Kentucky Peerless Distilling Co. in Louisville, which is using the family name of a bourbon distillery begun in the 1880s in Henderson, Ky. To generate revenue during the years required to age whiskey in charred barrels, they are first selling “moonshine,” but there also are craft distilleries that focus on producing flavored moonshine and other products in lieu of bourbon.

Bourbon must age a minimum of two years – and much longer to be considered a “premium” form of the spirit. The overhead expense to produce, store and pay taxes on spirits with no means for income to offset cost is, to say the least, prohibitive for a small distillery. To that end, there are distilleries such as the aforementioned Corsair that create unique spirits of all kinds using a variety of experimental ingredients, from hops to oatmeal, and niche distillers such as Copper & Kings. Many of these smaller distilleries, such as Peerless, will work their way toward bourbon and rye as main products. (Peerless Rye has a hoped-for release date in winter 2016.)

A Bourbon Trail of their own

As a companion to the KDA’s well-traveled Kentucky Bourbon Trail, a Kentucky Bourbon Trail Craft Tour now connects the dots between the eight of the commonwealth’s craft distilleries. One of the first craft spirits makers in the state, Limestone Branch Distillery in Lebanon, was founded by Stephen and Paul Beam. Yes, of that Beam family.

Stephen Beam recalls getting a chilly reception when he first decided to open Limestone Branch in 2008.

“We tried a few different communities, and some were just not overly interested” in having a craft distillery. Some didn’t even return his calls before his concept was welcomed in Marion County. “Now I think everybody’s chomping at the bit to have one.”

Of course, financial resources presented a challenge for Limestone, as did creating income opportunities. The Beams came up with a unique marketing partnership, though, and the distillery has an exclusive product in its MoonPie-flavored spirits.

Limestone Branch also sold a half interest in its business to St. Louis-based Luxco, whose distilled product and liqueur line includes Yellowstone bourbon – a classic brand with a Beam distilling family heritage – that
Limestone has added to its product offerings. Limestone Branch will begin distilling the original recipe for
Yellowstone and aging product early next year, giving it another niche that will help carry the craft distillery into the future.

The long-term goal, Stephen Beam said, has always been to create bourbon and rye whiskey, in keeping with the family tradition.

Meanwhile, the craft boom and specifically the Craft Bourbon Trail will continue to feed it customers, some of whom are seeking unique spirits and others who simply want to take a day trip and get a taste of local fare and history.

The Craft Bourbon Trail “has been fantastic for us,” Stephen Beam said. “We get a lot of positive comments that it’s a breath of fresh air, that there’s a little different feel to it. They get a little bit of a different feel and taste.”

Responding to changing tastes

The newest craft brewery in Kentucky is White Squirrel Brewery in Bowling Green, which opened in mid-May with three house brews in a tiny site near the downtown square. With a one-barrel system and three two-barrel fermenters, Sean Stevens opened the brewery with home-brewing friends Damon Wilcox and Jason Heslin. Growth is the goal, but there’s no room on location to do so.

“We’re already scratching our heads,” Stevens said. “Our main problem is going to be capacity. That is going to be our biggest challenge.”

But the goal isn’t to follow in the footsteps of Alltech, Copper & Kings or Against the Grain – the goal is to make good beer, serve good food and serve Bowling Green, specifically their neighbors. That’s where the localism of the craft movement comes full circle.

Stevens said local carpenters built White Squirrel, a local artisan created the signature tap handles and local artists created portraits of famous people reimagined as white squirrels – from Col. Harlan Sanders to Abraham Lincoln – to give the brewery and restaurant a unique feel.

“I think the local movement is going on everywhere,” Stevens said. “It’s all about keeping it at home. People are tired of big box stores; they’re tired of the chains. I guess their palate is changing, and they want more.”

That, in turn, opens the door for local craft brewers and distillers to come into the marketplace. And while there is only so much shelf space – and only so many mouths to drink the products – the two craft industries so far seem poised to coexist, and even excel, quite nicely.

Heck, Louisville’s Goodwood Brewing, which formerly was a production brewery loosely associated with Bluegrass Brewing Co., recently rebranded with a commitment that every beer will be touched by wood. With a corner taproom readily available to Louisville’s NuLu and Butchertown neighborhoods, it’s sort of a local nod to Kentucky’s distilling history and one that ties brewing and bourbon together.

“I wouldn’t say distilling and brewing rival each other,” King said. “They’re kind of our cousin. We started both with the same goal. We may not want to be the big boys but we both are big fans of the artisanal aspect.”