Craft, Marketing and Sales, New Brands, People

Koval Distillery: Black Sheep of Booze

March 24, 2015 No Comments

Chicago’s first distillery since the mid-1800s

The word Koval means “blacksmith” in many Eastern European languages. In Yiddish, the word also refers to a “black sheep” or someone “who forges ahead”…or, someone who does things that are out of the ordinary.

I can’t think of a better description of the company founded in 2008 by the husband and wife team of Robert and Sonat Birnecker. Both came to Chicago from Washington DC and gave up successful careers to start a family owned business that paid homage to their grandfathers. One was considered a black sheep of his family for leaving Austria to become a Chicago businessman and the other was a distiller whose last name was Schmidt which is German for Smith, as in blacksmith.

That grandfather, by the way, was the person who taught Robert the art of distillation.

Koval Distillery is more than just a craft distiller. Much more.

What makes them special?

Let’s start with Robert Birnecker’s background. He’s a 4^th generation distiller whose family still runs a distillery and winery in Austria. So, you can safely say that he combines traditional techniques with contemporary equipment.

This is a true craft distillery making grain to bottle products. The grain is certified organic and sourced from the Midwest Organic Farmers Cooperative. The water is from Lake Michigan using a natural charcoal purification method. All the enzymes and yeast are also organic. To top it off, all their products are certified Kosher by the oldest and most trusted certification body.

But wait, there’s more.

Unlike some distillers who purchase or bottle premade spirits, Koval makes its organic spirits from scratch and using only the “heart” cut of the distillate for a cleaner whiskey taste. All of the whiskies are single barrel and aged in 30 gallon charred barrels. In fact, each of the bottles identifies the barrel number from which it came. They control every step of the production process.

The Products

So far I’ve tasted three of their whiskies – Bourbon, Four Grain and Rye. Sensational. The mashbill of the Four Grain is oat, malted barley, rye and wheat and it’s smooth as silk. The Bourbon is aged under four years and tasted smoother than products I’ve had that are twice as old. Most of all, I loved the Rye whiskey.

When I interviewed Sonat Birnecker, I told her how much I liked the rye and how different it tasted from most ryes I’ve had. She called my attention to the back label, which indicated that the product contained 100% rye. Many ryes on the market are 51% (which is the minimum amount necessary to be called rye whiskey) plus other ingredients (usually corn or malted barley).

In fact, what you see and read on their ‘transparent’ label is what you get. No coloring, no added ingredients, no neutral grain spirits, no nothing but what you are paying for.

By the way, their Rye Whiskey was awarded 1^st place at “Best International Whisky” at Europe’s 2013 InterWhisky Competition. Who said I didn’t have good taste?

The Master Distiller

I have not as yet met Robert Birnecker but from what I’ve heard or read, he is a distiller’s distiller.

I found this about him on the Chicago Sun Times website:

The Birneckers are the stateside and English-speaking representatives of Kothe, the German still-maker responsible for the copper behemoth eating up their warehouse space. With that job, the couple’s workshops and their craft-distilling consulting business, Sonat estimates that the pair have advised one-third of the craft distillers that have opened in the U.S. and Canada in the past five years.

Yes, that’s right, in addition to running Koval, Robert and Sonat consult and teach distillation. Robert is also a key lecturer at the Siebel Institute in Chicago. Among the distilleries he has helped set up stills are Journeyman Distillery in Michigan and Few Spirits in Illinois (see my earlier blog post on Few). These are top of the game craft distillers, I might add.

Other products

In addition to the three whiskies I mentioned earlier, Koval also makes Oat and White Rye products. Interestingly, they

produce a whiskey I’ve never heard of before – Millet Whiskey, described on their website as, “Millet is a prized grain in Asia and Africa and popular base for spirits in Nepal, though this is the first whiskey to be made out of millet.” Definitely on my ‘must try’ list.

There is also Koval Dry Gin, which my friends in Chicago think is the best on the planet. Here’s how Koval describes it… Made with a unique variety of woodland spices… Juniper and wildflowers envelop the nose, while the taste is dry, yet vibrant – clean and nuanced by emerald grasses, golden citrus, and white pepper with a round, floral body.

Finally, there is a line of seven liqueurs ranging from the expected (coffee, ginger) to the exotic (orange blossom, rose hip, chrysanthemum and honey, caraway, jasmine).

Marketing

At the risk of offending my craft distiller friends and readers – most craft distillers are outstanding at production but very few seem to realize that there is a consumer at the other end of the bottle. Koval gets it.

Their labeling, or should I say award winning package design, speaks to the product and it’s craft/artisanal composition. As I mentioned, the label tells you which barrel it came from and what it’s distilled from.

The website is top notch, easy to navigate and easily lets you know where you can buy it locally or online.

They understand consumers and how to break out of the clutter with excellent PR and very highly praised distillery tours. They even have a barrel program in which you select the barrels and it’s customized to a store, bar, restaurant or even an individual. (Unfortunately, you have to buy the 25 to 30 cases that comprise the barrel. I’m saving up for it. Maybe a Kickstarter campaign?)

They are also available internationally in Europe and Japan.

* * *

Koval Distillery is a company in the finest tradition of the spirits industry. A company where they care about what they produce and how they produce it… where tradition and heritage are embraced and built upon… where state-of-the-art is not marketing hype. Above all, this is a company that’s here for the long run and building for the future.

There aren’t many like them these days.

Craft Confusion

March 3, 2015 22 Comments

When is the term ‘craft’ authentic and when is it marketing hype?

The spirits industry has seen amazing growth of craft distillers and brands. The Distilled Spirits Council of the US (DISCUS) has reported that there are nearly 730 “small” distilleries producing 3.5 million cases in 2014 (up from 700,000 in 2010) and with revenues of nearly half a billion dollars.

This craft spirits development is here to stay based on a number of factors including the interest in whiskies of all types; consumer trends regarding connoisseurship, craftsmanship and artisanal products in general; the focus on ingredients, process, and the distiller; and, attention to what’s in the bottle.

There are other forces at play here, particularly the rejection of mass-produced products in favor of small batches and hand crafted. A phenomenon affecting all consumer businesses from packaged goods to durables.

So it’s not surprising that the power of the words, “craft” “handmade” “small batch” would be adopted by large brands and used despite the intent of these words. When a brand sells hundreds of thousands or millions of cases, one needs to wonder whether the use of these words is marketing hype (as in “smooth”) or outright fraud. At the same time, there are also small distillers jumping on the bandwagon without the real credentials.

The lawsuits

The best and most succinct coverage of what is going on is to be found in the Feb 16, 2015 edition of Wine & Spirits Daily, under the headline, Truth Squad Discusses Transparency in Labeling Lawsuits. The “Truth Squad” is a panel of WSD readers (manufacturers and wholesalers) who express their professional views on a range of issues affecting the wine and spirits businesses.

There are a number of cases involving court action related to labeling:

Templeton Rye was sued for claiming it was made in Templeton, Iowa when in fact it is made in a large multi-brand distillery. The implication was that the brand was a small batch product. They have since revised their label.
Tito’s Vodka is being sued in California and Florida for the label claim that it is handmade as in, Tito’s Handmade Vodka. At roughly a million cases, how can you call yourself handmade? Unless, of course, you count turning on
Tito’s label

the lights as part of the process.
Maker’s Mark is also being sued for claims related to “handmade.” According to USA Today, “The lawsuit…accused the distillery of deceptive advertising and business practices with its “handmade” promotion on the labels of its bottles, known for their distinctive red-wax seal.” I know that they hand dip each bottle in the wax but can you totally hand make 1.3 million cases?

Don’t get me wrong… I think these are outstanding, well-made products. I’m a fan of each of them but the words in question are not marketing hype words like “smooth” or “premium.” To many people, the misuse of these words appears to be deceitful.

Enter the Truth Squad

One member thinks too much is being made of this issue and suggests that the consumer doesn’t know or care. Maybe. But, how about the genuine small batch or craft distiller who has invested their life savings in a distillery and whose livelihood depends on it?

Another view was that it’s the lawyers “who make a fortune” with spurious lawsuits that are behind it all. Perhaps. People who are looking for the real deal deserve not to be cheated with misleading claims. And, if the regulatory people won’t deal with it, then the courts should.

A distributor executive put it nicely when he/she said,

“I think that the average consumer feels better about purchasing something with the perceived or real support to a small company, and dislike it when they find out it’s just part of a huge corporation. It would be…like someone buying… produce at a big box store, and then taking it to the Farmer’s Market on a Saturday wearing overalls, and making money on the perception that they are a farmer.”

What’s the answer?

Simply put, there needs to be a standard by which those using of the word ‘craft’ (and related phrases) are held accountable. Don’t expect the alcohol governing body (TTB) to do it. Even if they were so inclined, they don’t have the resources to police these types of label claims. For the same reasons, forget about the Federal Trade Commission.

I think the craft distillers associations like American Distilling Institute or American Craft Spirits Association should tackle this but, for whatever reason, seem to be disinclined to take a stand.

But, a fledgling craft organization seems more than willing to provide a solution.

Robert Lehrman, an alcohol industry attorney (Lehrman Beverage Law) together with a number of craft distillers has formed the Craft Beverage Association and its mission is to tackle this subject. This is from their (in development) website:

“The Association was formed to try to find a way to set standards for the seemingly simple, yet hitherto amorphous and elusive — but fundamentally important term: craft.”

What they have in mind is analogous to the Good Housekeeping Seal of Approval or the Certified Organic Label. Their mission is: “To set craft standards for beer, wine and spirits, in a fair, modern, flexible, enforceable way, so the term can be filled with meaning and saved from abuse, for the benefit of consumers and craft beverage producers everywhere.”

* * *

There’s a major shift occurring in the beer and spirits industries and it’s called craft and/or handmade and/or small batch. Large manufacturers have lots of options as to how to deal with this growing consumer interest. They can ignore it and present the merits of their brands as is. They can attack it, like Budweiser’s advertising. Or, they can buy legitimate craft-made brands, then screw it up, again like Budweiser. But to co-opt or misuse these terms is just plain wrong.

I prefer the industry to clean its own house but, until then, I guess we’ll continue to make the lawyers rich.

Handcrafted Sorel -- Jack From Brooklyn. — Handcrafted Sorel — Jack From Brooklyn.

The State of the Spirits Business

February 12, 2015 No Comments

What’s behind the continuing growth of liquor?

Last week the Distilled Spirits Council of the US (DISCUS) presented its 2014 Market Report, which indicated that spirits (liquor) sales were up 4% to $23.1 billion and volume grew 2.2% to 210 million cases.

In addition, market share versus beer increased for the fifth year in a row. Overall, spirits sales share went up 6.4 points since 2000 to over 35% of revenue. Most interesting to me, supplier revenue in 2014 just about doubled from 2000. Sales went from $11.7 to $23.1 billion.

The DISCUS release went on to report a number of factors contributing to the industry growth, all of which make sense. However, I have my own take on the factors and trends that are driving liquor sales and they can be best summed up as changes in consumer attitudes and behavior.

Changing consumer taste preferences

Let’s take a brief trip down drinking memory lane.

From the 50s to the 70s, whiskey dominated drinking preferences. The ‘silent shudder’ that came from the first sip of an American or Scotch whiskey was worth the effort “once you got used to it.” From the 1980s to the 2000s, consumers stampeded away from whiskies into vodka, the ubiquitous alcohol that provided the kick but mixable with almost anything that masked or camouflaged the taste.

Over the last ten years, a new generation of drinkers has turned to whiskey for its perceived greater depth of flavor and its newfound mixability thanks to the cocktail resurgence. (By the way, that desire for taste and depth of flavor is what is also driving the craft beer growth.)

Also, the vodka suppliers shot themselves in the foot with the flavor explosion that went from the sublime to the ridiculous; from citrus to esoteric, from serious to such choices as whipped cream and marshmallow. (See a previous posting on vodka.) The result has been the ability to purchase over 600 flavors and slower growth. Vodka sales are underperforming the overall spirits category as a new generation of drinkers goes back to what their parents or grandparents had rejected.

What’s in the bottle and how did it get there?

This new generation has brought with it a conversation about the craft of making spirits and, like many changing values, it has spread to other age groups. While once upon a time consumers focused on the alcohol effect, today the focus is on ingredients, process, the distiller and artistry among a host of other manufacturing factors.

In short, some categories of the spirits industry are becoming much like the wine business and craft beers with an emphasis on quality, taste and small batch production. In fact, DISCUS reports that small distilleries grew from 92 in number in 2010 to 700 in 2014 and from 700K cases in volume to 3.5 million today.

It’s not about mass production or even consumption. Quality rules. Are you listening Smirnoff and Budweiser? Run all the clever ads you like, you won’t stop this trend.

Women and whiskey

Let’s take another trip down memory lane. Once upon a time, whiskey was the domain of men and distillers tended to shy away from marketing and advertising toward women. It wasn’t until 1987 that DISCUS lifted a voluntary bam on advertising directly to women. In a recent article in Huffington Post, Meghan O’Dea of The Whiskey Women had this to say, “We’re seeing a move toward gender-neutral drinking.” (Check out her website, it’s interesting. The home page has this slogan, which I just love, “Fill your mother’s crystal decanter with your father’s drink of choice.”)

I think the days of “girl drinks” are over. And, I think that the recent tutti-frutti direction in vodka is a contributing factor. Again according to O’Dea:

“Women are consciously realizing that the beverages you enjoy have a lot to say about who you are as a woman…women are shying away from drinks that infantilize them.”

Clearly, whiskies have benefited from this change in attitude and, while flavored whiskey may have played a role, it’s by no means the sole driving factor.

(For an interesting historical perspective on women and whiskey, see this article from The Denver Post.)

The outlook

With more positive attitudes toward spirits consumption among consumers, I expect that the growth of the category will continue. DISCUS does a good job in promoting market access and helping to change archaic purchase laws. After all, how do you tell the public that state after state is legalizing marijuana but you can’t buy liquor on a Sunday?