Starting a Gin Distillery: What to Know

By Larry Taylor

If you are seriously considering getting into the distilling business, the first thing you’ll need to understand is that you had better be passionate about spirits and all the work needed to gain traction. You’ll likely need enough self-awareness to understand that you’ll have to have a good bit of courage to back up your passion. Being adequately capitalized certainly doesn’t hurt either. As an aside, I’d say the joke told the most at distilling conventions is:

How do you build a million-dollar distillery? With two million dollars!

All joking aside, you’ll be faced with several barriers to entry. Be prepared to bleed money for at least three years.

But once you’ve cinched up your belt and decided to move forward with your new distilling adventure, you’ll need to come up with a recipe or two and get some honest feedback from a group of friends (or not friends) that will act as your sensory awareness panel. Oh wait, let me back up a bit.

Distilling is illegal without a Distilled Spirits Permit (DSP). That complicates things. How are you going to learn how to produce a distilled spirit if you don’t know how to distill and can’t learn unless you commit to acquiring your DSP, along with all that entails? More on this later.

So, let’s then start with a concept of how you see yourself creating your brand. What flavor profiles do you prefer in your gin? How many SKUs will you have? How will your bottles look? What style will your labels be? Will you have a tasting room? How will you market yourself beyond your physical presence?

Once you start to put some of your ideas down on paper, you can move on to the operating costs and capital expenditures. I assume that you’ll need to produce enough finished spirits for sale to at least cover your operating costs and hopefully slowly pay back the capital expenditures. To do this, you’ll need to assign a price to your finished bottle of spirits, and then determine how many bottles need to be sold in a month to cover your monthly expenses. Pretty basic, right? For example, let’s say your monthly expenses are $12,000 and your finished product nets you $7 per bottle through distribution. You’ll need to sell 1,714 bottles per month.

But the goal here is not to cheap out and size your commercial gin distilling equipment to produce only enough finished spirits to meet the monthly nut, right? The goal is to have the capacity to scale up as the business gains traction.

You can do this by adding more shifts. But this invariably means higher labor costs, chipping away at your net profits. Therefore, sizing your commercial gin distilling equipment to optimally exploit the economy of scale is very important if your goal is to make money. A 500 L still will have to be run 14+ times per month to produce 1200 / 750 ml bottles. Will you have enough time to also market, do the recipe development, clean the distillery, pick up supplies, bottle, deliver inventory, get home in time for dinner (so forth and so on) if you are handcuffed to the still every other day during the month? It’s something to think about.

Gin Production

Let’s move on to the fun stuff – making gin. There seem to be two models that have evolved for gin production:

1. The distillery produces the neutral spirit needed as the base for the gin recipe.
2. The distillery procures the neutral spirit beforehand and only redistills to pass alcoholic vapor across the botanicals for vapor extraction.

The former can be very time consuming without the right tools for the job – namely, a very tall rectifying column. Though pot stills can be used to make a clean spirit, the time needed to do so is far more than a proper column.

The latter has drawn criticism from spirits purists and industry professionals. Ultimately, what is most important is to not be deceptive about the production methods and, of course, to bottle a quality finished product that is worthy of sale. If it tastes good and is worth the price, then that is all that really matters to the consumer.

The next tier of production protocols has more to do with how to install the botanical goodness into the finished spirit. Again, there are two methods:

1. Botanicals maceration in an alcohol / water solution followed by distilling
2. Vapor infusion with a botanical basket installed somewhere in the vapor path

In some cases, master distillers do both, as either method does render botanical goodness differently. You’ll need to decide for yourself which you prefer. But why do both? Why not take the opportunity to create as many different flavor profiles as possible, especially since we are focusing on starting a gin distillery?

Flavor Profiles

Speaking of flavor profiles, one problem that can exist with respect to creating a reliably consistent finished product year after year is that your botanical supplier may be sourcing from various locations that may experience completely different weather patterns. As you can imagine, temperature, rainfall, and soil composition will affect a single botanical differently. Also dried vs. fresh botanicals will also yield their goodness differently. So how do we create a profile that will reliably taste consistent year after year?  How do we charge the gin basket this month with botanicals that have been dried because that is all that was available, as to opposed to last month when we had all fresh-picked botanicals?

Well, one method is to only do single botanical batches rather than combining all the botanicals into a single basket charge. Distill each botanical individually and build a stockpile of bulk for each botanical. Then blend each rendering individually according to a specific, desired profile. Additionally, hold back about 20% of each individual bulk distillate to blend back with the next forthcoming batch to ensure a more uniform consistency. This will help to manage seasonal changes in the botanical’s goodness profile. This method provides a technique in which producing a flavor profile could be likened to mixing a paint color according to an exact formulation.

There are arguably dozens of ways to skin this cat, so you’ll need to think this through and find the best way to utilize the tools you’ll have available. For a more comprehensive look at gin styles and production methods, check out the StillDragon Gin Basket Operation Manual.

BRANDING AND MARKET SATURATION

If your state has favorable tasting room laws on the books, you’re in luck. The margins for bottle sales and cocktails can be very rewarding. But how do you keep from being eclipsed by the big boys with their deep pockets? How do you get that top-shelf position in the liquor stores? How do you stay relevant if your state has a distillery or two in every city? Don’t panic! The answer is that this market oversaturation strategy has been working well in other industries for a good long while now. Think about the fast-food chains, drug stores, grocery stores, and car dealerships. These businesses are on every third street corner.

If you go out and win your own backyard, you can make this work. Get your neighbors excited about what you are doing. Educate them. Teach them why your gin is going to be the most amazing gin they have ever experienced. Tell them about the process. Get them involved. Be friendly. Be excited. Learn how to court everyone’s attention. Do not isolate yourself. Be bold. You must sell yourself. You must claim your own backyard. There will be enough business to support your little boutique gin distillery.

Obtaining a DSP

Let’s circle back to discuss the legality of first learning to distill without a DSP. You cannot. It is illegal to distill without approval from the federal government. So, how do you learn to distill before committing the resources needed to start your gin distillery business? Restaurants usually don’t hire chefs with no experience, right? How can a distillery succeed without an experienced distiller?

It would be in your best interest to attend one of the annual distilling conferences held by the American Distilling Institute (ADI). This organization focuses on newly minted distillery owners as well as people looking to get into the industry. ADI’s conferences provide valuable classes that teach various elements of distilling as well as offer breakout sessions that cover the business and marketing components. Additionally, there are experienced distillers in attendance with whom you can network and gain valuable insight into the business of distilling. The annual conference is also a valuable resource for finding suppliers for all manner of supplies and commercial gin distilling equipment.

In addition to attending conferences, there is quite a bit of reading material available either online or through actual printed books. 

There are also several distilling schools available with courses that range from just a few days to a few weeks or more. And lastly, you can always solicit a distillery in your area to participate in an apprenticeship.

Good luck moving forward, and don’t hesitate to contact our team at StillDragon North America at info@stilldragon.com for any assistance.