Move over, Arizona’s craft breweries: Microdistilleries on the rise in state

By Rachel Leingang 
Cronkite News

Arizona Distilling Co. adds a little bit of Arizona to its products. Copper City Bourbon honors a Prohibition-era brewing company in Douglas. Desert Dry Gin incorporates a different set of Five Cs in its flavor profile: coriander, cumin, cinnamon, citrus and cardamom.

Now the microdistillery’s liquors are hitting the shelves of retailers like Total Wine, BevMo and AJ’s Fine Foods.

“It’s a labor of love,” said Rodney Hu, one of the company’s founders. “We looked at it like we wanted to do something cool in Arizona and push the envelope.”

The company is among a handful of craft distillers producing liquor varieties in the state. Similar to microbreweries, microdistilleries focus on producing small batches of spirits like gin and whiskey.

Across the country, the microdistilling industry is growing by about 30 percent each year, according to Bill Owens, president of the Hayward, Calif.-based American Distilling Institute. Every state now has at least one craft distillery, and there are 623 craft distilleries nationwide, Owens said.

Seattle, for instance, has 14 microdistilleries just within its city limits, he said.

“It’s part of the whole trend in our culture to support local businesses, to think globally but act locally,” Owens said. “All these products are undergoing this wonderful renaissance – bread, coffee, beer, produce.”

In addition to Arizona Distilling Co., Hamilton Distillers of Tucson makes mesquite-smoked whiskeys, and Desert Diamond Distillery in Kingman focuses on rums. Thumb Butte Distillery in Prescott, which makes vodka, gin and whiskey, plans to open a tasting room in April.

Hu said he expects the state to have six or seven microdistilleries by the end of the year but said that politics, licensing and legislation can create obstacles.

“People that get into this business make the mistake of thinking they’ll sell a lot of booze and it’ll be easy,” he said.

Currently, most of the licensing for Arizona microdistilleries happens at the federal level. There are no state laws specifically directed at microdistilleries, according to Lee Hill, communications director at the Arizona Department of Liquor Licenses and Control. The businesses have to follow guidelines directed at all liquor producers and secure city permits as well.

“Because we don’t currently have a microdistillery license in Arizona, there is no industry to track,” she said. “I can say that the Department of Liquor receives calls about this daily.”

SB 1397, a liquor omnibus bill, could change the way licensing is handled. It would provide a specific microdistilling license and allow craft distillers to sell directly to retailers instead of using a distributor, which is required under current law. It would also cap the amount microdistillers could produce at 2,378 gallons.

Authored by Sen. John McComish, R-Ahwatukee, the bill had won Senate approval and was awaiting action by the full House.

Tucson distiller Stephen Paul used to own a furniture design company that used mesquite wood, which inspired Hamilton Distillers’ mesquite-smoked whiskeys.

“We have this very strong identity with where we’re from,” Paul said. “We would always barbecue with our mesquite scraps. And we drink scotch. So why couldn’t we malt barley over a mesquite fire?”

At first, Paul made only about 450 bottles and sold to bars and restaurants, and they sold out much quicker than expected.

“I was kind of naive,” he said. “I wasn’t looking that far ahead at what it would turn into. It just kind of snowballed.”

Now Paul secured about $1 million from investors and will move into an industrial space and purchase more equipment to expand the business. He hasn’t made any money so far.

“I think one of the biggest misconceptions about starting a microdistillery is that you can make money on a small scale,” he said. “We lose money every time we walk in the door … This romantic notion which people have about starting a distillery, which I had, is that you can just be small. But that’s a killer.”

Since the industry is so new in the state, forging a path can be difficult, according to John Patt, owner of Desert Diamond Distillery in Kingman.

“It’s a tough area to start a business in the sense of distilling because it’s like the frontier,” Patt said. “It’s not well-established … You have to learn to adapt.”

Patt said he gets calls from all over the state asking about starting a distillery.

The industry is growing so much that it has its own event: The Chandler Craft Spirits Festival on April 26 will be the first of the sort in the state. Festival coordinator Tiffany Jarratt-Shultz said it’s part of the growing locavore trend.

“Craft spirits are kind of where craft beers were 10 years ago,” she said. “It’s something that people are looking for. They’re looking for smaller-batch stuff and things that are really good instead of something that’s mass-produced.”

As for Hu, Arizona Distilling’s product line will expand from three to six in the next few months to add rye, an agave spirit and a beer/whiskey collaboration with Four Peaks Brewing Co.

“We’re trying to figure out how to keep up with demand,” he said. “We really have to seize the moment now.”