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January 7, 2019

CT craft distillers say tight laws holding back industry's growth

HBJ Photo | Joe Cooper Hartford Flavor Co. co-founders Tom and LeLaneia Dubay.
HBJ Photo | Joe Cooper Tom and LeLaneia Dubay, co-founders of Hartford Flavor Co., sell their liqueur products to 1,000 bars, restaurants and liquor stores in eight states.
Photos | Contributed Brothers David (left) and Jack (right) Baker, co-owners of Litchfield Distillery, produce a variety of craft bourbon, vodka and gin. A family business since 1914, the brothers spent most of their lives distributing Crystal Rock Water until they added craft spirits production in Dec. 2014.

The state's growing craft distillers industry is banding together to push for legislation that would allow them to sell cocktails at their production facilities and offer visitors more bottles for off-site consumption, with the hope it will build greater awareness for their alcoholic concoctions, similar to the way beer brewers have grown their fan base.

State law only permits craft distillers to serve a 2-ounce sample to visitors during tours or tasting events, which industry experts say is too little to showcase their offerings and limits their ability to lure patrons on-site.

Meantime, breweries and wineries don't have on-site drink restrictions, and can sell more bottles for off-site consumption. Distillers say they want more parity in the law.

“Samples don't allow us to properly showcase how our spirits should be used,” said John Taylor, the majority owner of Bloomfield's Waypoint Spirits, which makes vodka, gin, whiskey, rum and coffee liquor. “We watch our revenue walk out the door every single day.”

Despite those limitations, Connecticut's craft distillery industry has grown steadily since 2015, and now includes 14 licensed distillers, about eight of which are in full operation. Four to six distilleries are in the planning stages, industry experts say.

Taylor and the owners of Hartford Flavor Co. and Litchfield Distillery are collaborating with some state lawmakers as they decide the specifics of their legislative wishlist, but it could include a bill that would not limit on-site drink sales. They're also seeking to sell at distilleries more than two bottles of liquor (totaling 1.5 liters) per person for off-site consumption. (Breweries and wineries can sell up to 9 liters of beer and an unregulated number of wine bottles for off-site consumption, respectively.)

A chief concern distillers may have to overcome is the higher alcohol content in some cocktails. But local distillers say having one or two drinks is less dangerous than beer or wine drinkers consuming an unregulated number of beverages throughout an afternoon or evening at a brewery or winery. Bars and restaurants can also offer patrons as many cocktails as bartenders deem appropriate, distillers note.

Distillers say opposition could come from bars and restaurants that fear the extra competition, but they argue that increased brand recognition, through tasting-room growth, would also help increase cocktail sales at those establishments.

Securing parity with beer and wine producers, distillers argue, would allow them to expand their businesses and spur entrepreneurship. Distillers also pitch craft distilling as an agricultural business because of their dependency on locally grown grains, corn and malted barleys.

“What we are looking for is to actually sell a cocktail,” said Tom Dubay, who co-founded Hartford Flavor Co. with his wife, LeLaneia, in April 2015. “That will help us fill a new larger tasting room, create more jobs and more revenue for the state.”

Industry scope

Distillery laws vary greatly state-by-state. That is why nearby states like New York, New Jersey, Massachusetts and Vermont have far more distilleries than Connecticut, which is known to have tighter regulations within the industry, according to Alexandra Clough, a spokeswoman for the American Craft Trade Spirits Association.

“Regulation has held back the industry's growth,” Clough said. “Connecticut has historically always been a tight state as far as legislation.”

Nationally, craft distilling is a $3.7 billion industry and is considered the fastest-growing alcohol market. The number of distillers nationwide grew by 15.5 percent over the last year to 1,835 in August, the trade association said.

In 2017, the industry's workforce grew by almost 4,000 to more than 18,300 workers. Investments in equipment and staff also soared by over $190 million to more than $590 million last year.

The national market is fairly top heavy with five states — California, New York, Washington, Texas and Colorado — owning nearly 34 percent of all U.S. craft distillers. About 318 distilleries are in planning, the craft spirits association said.

In Connecticut, the industry supports over 100 jobs as far west as Mine Hill distillery in Roxbury and as far east as Westford Hill Distillers in Ashford — the 15th oldest distillery in the country.

The local distillery market is concentrated in central Connecticut, and also includes Onyx Spirits Co., currently looking for a new location, and Central Connecticut Distillers, known as Peel Liqueurs, in New Britain. Several new distilleries are planned along the shoreline and in Fairfield County.

Like brewers, Connecticut distillers say adding more competition will benefit the state's booze industry. Creating a cluster of distilleries, they say, will encourage foot traffic and participation on the Connecticut Spirits Trail, which showcases the state's craft distillers through production tours and tasting events.

Distillers doubt Connecticut will ever have as many craft distilleries as it does brewers — there are more than 80 breweries operating in the state — but they see that gap closing over time if state lawmakers help foster tasting-room growth through business-friendly legislation.

“At the end of the day we need both avenues to be successful,” Dubay said of growing on-site and retail sales. “Everyone is itching to get that business parity.”

Expansion pledges

While local business owners say they feel slighted on certain issues, Connecticut currently provides at least one pro-distillery measure.

Banned in certain states, Connecticut law allows distillers to sell their products outside the state's borders to boost sales. And with more relaxed tasting-room laws, many distillers say they will continue to expand their local footprint.

Litchfield Distillery, producers of several craft bourbons, gins and vodkas, currently maintains a 35-seat, 1,500-square-foot tasting room and 15,000 square feet of production space. Owners Jack and Peter Baker are plotting to build a new barrel house spanning over 4,500 square feet.

The brothers, which sell roughly 3,500 cases a year to about 1,100 businesses, said they would like to see bottle-sale laws mirror what is permitted for breweries.

Legislative changes would likely mean more square footage and a larger workforce at their Litchfield facility, the Bakers said.

Taylor, of Waypoint Spirits, producers of about 2,000 cases this year, said his business would likely launch a satellite tasting room at a second location if Connecticut loosened its grip on the local distilling industry.

The company, which has nine employees and 12,000 square feet in Bloomfield, plans to add to its workforce and production capacity in 2019. Waypoint currently sells six spirits year-round to 400 stores, bars and restaurants in Connecticut, New Hampshire, New Jersey, Tennessee and Florida. It also plans to enter the Asian market next year, selling mainly to distributors in Hong Kong, Taylor said.

A law change would also mean increased production at Hartford Flavor Co.

The Arbor Street-based business distributes its seven products to 1,000 bars, restaurants and liquor stores in eight states — Rhode Island, Massachusetts, New Hampshire, New York, Colorado, and modestly distributes in Florida and California.

With expanded tasting-room laws, Dubay and his wife have pledged to increase their workforce and open a larger tasting room and possibly a satellite location in a town like Mystic, creating new synergies across the state.

Dubay envisions a new tasting room that can host both private and public events. Due to restrictions, however, the couple regularly turns away customers who are seeking event space.

For now, local distillers are mulling how to best advance their wishlist in the early portion of the 2019 legislative session.

“We are bootstrapped, so we don't have tons of lobby money,” Dubay said. “We just have to be smart about how we approach it. It's going to be about effort and about getting the dialogue going.”

Clarification: A previous version of this story said that liquor stores could oppose expanded laws for Connecticut craft distillers. In fact, the Connecticut Package Store Association supports legislation that would increase on-site sales for distilleries.

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