How New York's Microdistillery Law Is Building a New Industry

"If you're thinking of starting a distillery, here's a tip: Don't put it on the second floor of a building with nice wooden floors," Colin Spoelman laughs. "Sometimes, the sour mash spills and burns the wood."

The 31-year-old Spoelman knows what he's talking about. The New York-based architect is also the owner of Brooklyn's King's County Distillery, the oldest legal whiskey distillery in New York City. This April, it will celebrate its first birthday.

A Kentucky native, Spoelman has long been fascinated with "moonshining and distilling culture," but he found that New York was sadly lacking when it came to distilling. Following a few successful experiments with what one might call "informal, extralegal alcohol production," he decided to see what he needed to do to create a legal distillery.

Partnering with his college roommate, David Haskell, he was surprised to discover that New York offered a special, inexpensive permit for small-batch distilleries. To qualify for the license, which the state launched in 2002 and expanded in 2007, the pair had to go through a quick interview, pay a small fee and agree to source half of their ingredients from New York farmers.

"It was actually serendipitous," Spoelman remembers. "Originally, we used a generic flake corn, but we started using organic corn that was grown near the Finger Lakes. It made a big difference, and the finished product tasted much better."

The Distilling Promised Land

Depending on whose estimate you use, somewhere between 150 and 250 promising microdistilling startups are operating in the U.S. right now. Of these, New York has roughly 18, putting it in a close contest with Oregon as the top state for small-batch distillers. Given the Western state's reputation as a hotbed for microbrewers, it's not hard to see why Oregon would be so popular with microdistillers as well. Some beer makers, like Ashland, Ore.'s Rogue brewery, have even made the transition from brews to booze. Distilling since 2003, Rogue has built a slate of seven highly regarded rums, gins and whiskies.

New York's preeminence is more of a quandary. After all, while the city was once home to hundreds of breweries, wineries and distilleries, prohibition wiped out the industry. Later, when the microbrew boom hit in the 1980s, high rents made it difficult for beer makers to get a toehold in the city. Today, one of its few successful alcohol producers is Brooklyn Brewery, which opened in 1986. Initially based in Upstate New York, the company moved to a Brooklyn factory in 1996.

The company's founder, Tom Potter, is also emerging as one of the driving forces in New York City distilling. Although his New York Distilling Co. won't begin making alcohol until later this year, it's poised to be the biggest alcohol producer in the city. Potter has high hopes: "We have a 1,000-liter distilling system. Ultimately, we hope to produce 500 to 1,000 cases per month."

In addition to Potter's and Spoelman's operations, Brooklyn is also home to microdistillery startups Breukelen Distilling, which makes a gin, and Van Brunt Stillhouse, which plans to open later this year. Some might argue that the distilling community is getting overcrowded, but Potter thinks the city is fertile ground. "I think New York can support multiple distilleries. It will ultimately have several 500 to 1,000 liter distilleries."

Locavores Take to the Bottle

A big part of New York's distilling promise lies in its growing love for locally produced foods. Potter notes that one of Brooklyn Brewing's biggest challenges in the mid-1980s lay in the fact that New Yorkers could get great food from around the world. "Twenty years ago, New Yorkers were less interested in locally made products. We're an international city, and people were interested in the best international brands." He notes, however, that "within the last five to 10 years, New York has embraced local products with joy. They're willing to spend more for good, locally produced foods."

Sponsored Links

This wave of "locavorism," which helped Brooklyn Brewing become profitable, continues to expand. In addition to several greenmarkets that feature regional produce, other food startups -- like pickle and chocolate producers -- have found that New Yorkers are eager to support local companies.

While regional pride can certainly account for some of New York's microdistilling growth, the lion's share of the credit should go to New York State's class D distilling permit, an inexpensive license that has made New York one of the easiest areas to start a distillery. It was the success of a 1976 farm-winery law, which paved the way for New York's now-strong winery industry, that led the state legislature to created the distilling permit in 2002.

Under the licensing law, small-scale liquor producers are allowed to make up to 35,000 proof-gallons of liquor per year, can give tours and are allowed to operate tasting rooms. As an added benefit to the state's agriculture industry, the law requires distillers to source at least 50% of their ingredients from New York farms.

Small-Batch Distilling Can Work

Almost as soon as the initial law was passed in 2002, some upstate farms began small-scale operations, generally making unaged corn whiskey and vodka. One, Tuthilltown Spirits, quickly moved on to bourbon and rye whiskies, quickly producing small-batch liquors that captured worldwide interest. In 2009, soon after launching its whiskey line, Tuthilltown partnered with international distilling company William Grant and Sons of Scotland to open its ryes and bourbons to international distribution.

In addition to producing first-class liquors, Tuthilltown showed that small-batch distilling could work in New York, a lesson that dozens of other entrepreneurs have heeded.

Some analysts have argued that small-batch distilling in America is roughly where microbreweries were in 1985, but Potter disagrees. "Actually, it's more like 1988," he laughs. "In 1986, I attended a craft brewer's convention in Portland. At the time, there were 25 small brewers from all around the country. They represented all the breweries out there."

By comparison, he sees today's microdistilling industry as much more robust: "Every major metropolitan area has a distillery up and running, and many cities have more than one."

Building a Staff

It remains to be seen if Potter's optimism for New York's distilling future will bear fruit, but Spoelman's operation showcases the promise that distilling holds for the city. Less than a year ago, King's County Distilling was little more than an idea and a small amount of funding ("Roughly the price of a small car," Spoelman jokes) that the two owners had managed to cadge together from family and friends. Today, it's a thriving small-batch distillery -- a "nanodistillery," in Spoelman's words -- that provides income for upstate corn farmers and delight for New York-area liquor fans.

Kings County is also becoming a small employer in the area: To keep up with demand, Spoelman and his partner have hired a staff of five employees to keep the stills running all week. Still, the future is uncertain. Spoelman worries about competition in the New York market and notes that "If we get much larger, we'll either have to hire someone to promote our whiskies, or we'll have to work with a distributor."

In the meantime, the stills are running, and the liquor is selling.

See the full Special Report:
From Prohibition to Microdistilleries: Changing How America Drink
Bringing Cheer to the Local Economy
Pennsylvania's Small Liquor Makers Bottle a Heritage
Colorado's Microdistilleries Follow an All-American Path