Struggling craft distillers in Illinois dealt one blow after another

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No one emerged unscathed from the pandemic, but distillers were particularly hard hit. During lockdown, distillers saw a 55% decline in revenue, according to a survey by the American Distilling Institute.

Part of that loss in revenue was due to stricter rules for distilleries—especially when compared with wineries—regarding shipping, but also because craft spirits makers rely so heavily on visits to the tasting room, tours and direct-to-consumer sales, all of which were impossible at the height of lockdown.

In Illinois, where lockdown rules were particularly rigorous, distilleries like Chicago’s Judson & Moore were eager to get creative when things opened up again, in a bid to get back in the black after years of tragic setbacks.

Judson & Moore was founded by Collin Moore, his wife Elise Bergman, and her father, Judson Bergman, in 2018. Their journey has been, to say the least, littered with challenges: first a fire at their distillery, then the death of Judson and his wife in a car accident in 2019, then the pandemic.

The persevered, producing whiskeys from regional grains aged in Minnesota white oak barrels. With the whiskeys read to sell, and the distillery—finally—open, Moore and Bergman invested in building out a tasting room that could accommodate visitors, live music and a bar that served their own whiskeys and beer and wine. They applied for a Distilling Pub license and were shocked when they were rejected.

Moore contacted the Illinois Craft Distillers Association to find out if they could help them appeal the decision. We reached out to Moore and Ari Klafter, president of Illinois Craft Distillers Association (ICDA) to find out what happened, what’s next—and what it might mean for the future of Judson & Moore and other businesses like them. Klafter is also head distiller at Thornton Distilling Co., so he has a 360-degree view of the issue.

Elise Bergman and Colin Moore of Judson Moore photo credit Nicolas Gourguechon

Can you share some of the legal challenges you’ve faced in recent years?

Collin Moore: There are so many laws and regulations to navigate in the beverage spirits space. To produce beverage spirits you need to be licensed at the federal, state and local levels. We anticipated this going in — many regulations to navigate — but two of the biggest challenges we’ve encountered have been one simply identifying all the applicable regulations and two different interpretations of how certain regulations were written.

When you applied for a distilling pub license, did you anticipate having any issues?

CM: We did not anticipate having any issues. We were licensed at the federal level and we had all the appropriate licenses with the City of Chicago to operate a Distilling Pub. However, the state ultimately ruled they would not issue a Distilling Pub license and Class 2 production license at the same physical address, even though this is not clearly stated in the regulation. [Edit note: A Class 2 craft distiller license may only be issued to a licensed craft distiller, and it allows for the manufacturing of up to 100,000 gallons of spirits per year).

How will the refusal of the license impact your business?

CM: The refusal of the Distilling Pub license has had a large impact on the business of our tasting room. Without this license we are only permitted to sell spirits we have produced. While this does allow us to focus on our whiskeys, it also limits the amount we can build out the tasting room bar program. Our original business model was based on being able to offer beer, wine and spirits produced by others at our tasting room.

How discretionary are the decisions regarding licenses?

CM: That’s a great question, but not really mine to answer. I would like to think that when discretion is used to review licenses, it’s used to best support the licensee and the regulatory body alike.

Can you share an overview of the ICDA’s mission, the number of members you have and what kind of challenges you are facing?

Ari Klafter: The ICDA is a voluntary, non-profit trade organization organized for promoting the common interests of our 44 members across tiers, advancing and improving our business and regulatory environment, engaging with the public about craft distilling and facilitating industry training, education and research.

We are currently focused on initiatives that will make craft spirits available to the consumers who are looking for them. Through this work, we’re working to achieve an equal playing field with our counterparts in the beer and wine categories.

How many applications have been refused recently?

AK: When Illinois created the distill pub license, they also included a lot of unforeseen limitations, most notably that your distill pub was limited to 5,000 gallons (a relatively small amount) and thus it did not make business sense to have your distill pub license at your primary manufacturing facility, essentially requiring a craft distillery to open not one, but two locations to gain the benefit of a distill pub which is not economically feasible for the vast majority of distilleries.

Judson & Moore learned this the hard way after they had opened their main site, only to learn they couldn’t get a distill pub license because they intended to produce over 5,000 gallons. Judson & Moore and other distilleries are looking to serve beer and other distilleries’ spirits, self-distribute some of their products locally, or even have a distill pub attached to their distillery.

While it’s great to focus on their whiskeys, not everyone drinks whiskey. So not being able to serve someone a vodka cocktail, a glass of wine, or a beer — makes the bar extremely limited in who they can cater to.

How are you hoping to tackle this issue?

AK: Through ongoing lobbying efforts and making Illinois consumers aware of ways that they can support their favorite brands. Craft spirits generate loyal fans with a vested interest in their continued growth.

What else should spirits lovers be thinking about?

AK: During the height of the pandemic, distilleries stepped up to produce much-needed hand-sanitizer for first responders. My distillery alone donated free sanitizer to more than 100 EMT, national guard units and fire departments etc. Since then, the twin sting of distributor consolidation and the economic downturn has been extremely hard for distilleries.

This article originally appeared on AlcoholProfessor and was syndicated by MediaFeed.

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