The Craft Spirits Industry Sounds Off on International Trade Tariffs
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The international trade conflict set off by President Trump’s tariffs on imported goods could have far-reaching, effects on the craft spirits industry as the U.S.'s global trading partners impose retaliatory tariffs of their own.
In the July edition of the ACSA Monthly Mash, we asked subscribers how they expect tariffs to impact their businesses, especially since the number of craft spirits producers that export continues to rise.
“As a growing American craft distillery we are actively looking to international markets as a path for expansion,” says Tyler Crowell, chief operating officer at Corsair Distillery in Nashville, Tennessee. “The recent retaliatory tariffs have presented a new challenge for us and our distributor partners. Specifically, we have had several EU orders put on hold due to the tariff while we evaluate our pricing structures and determine the best route forward.”
Nearly 49 percent of respondents who represent companies that export or are considering exporting said the issue has impacted their export plans for 2019, while just under 45 percent said it’s already affecting their decisions for the remainder of 2018.
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“Due to the erratic nature of the time, our export business has become less of a priority for us,” says Ryan Christiansen, president and head distiller at Caledonia Spirits in Hardwick, Vermont. “While we continue to supply our existing export partners, we're not pursuing new business outside of the US right now.”
Meanwhile, 57.5 percent of those who export expect an overall decline in sales as a result of the tariffs. Perhaps most stunning is that a plurality of respondents—25.5 percent—said they expect a sales decline of more than 40 percent. That’s followed by 19.1 percent who reported that they expect sales to fall between 31 and 40 percent, 19.1 percent who said the decline would be between 10 and 20 percent and 17 percent who predicted that sales would drop between 21 and 30 percent.
“The uncertainty around tariffs has cost us a major (six-figure) investment, as well as the opportunity to expand into China as no one is willing to take on new products until they have a clear picture of the tariffs that will be in place,” says Josh Morton, owner/founder of Barrow’s Intense Ginger Liqueur.
ACSA has been actively working with other industry organizations to urge the governments of the world to work out solutions to avoid a full-scale trade war. ACSA Executive Director Margie A.S. Lehrman was among the executives of nine of the world’s top whiskey and distilled spirits organizations who participated in the W9—Spirit of Collaboration Summit, hosted by the Kentucky Distillers’ Association on July 25 and 26. The organizations joined together to speak with a united voice, calling on global leaders to engage in timely dialogue that results in the prompt removal of tariffs—particularly those imposed on spirits exports.
There have been some encouraging signs that the U.S. and its trading partners could de-escalate the crisis through ongoing trade talks. The U.S. and European Union agreed to de-escalate the trade dispute and strike a deal on tariffs, though critics have said that the deal lacks specifics. The U.S. also has been meeting with Japanese officials to negotiate a deal between the two countries.
However, an announcement this week in Turkey underlined just how much work has yet to be done on the issue. The Turkish government announced that it would increase its duty on alcohol to 140 percent.
The spirits industry leaders who attended the W9 Summit all signed a decree, calling for action from world leaders. Read the document
here
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In another recent edition of the ACSA Monthly Mash, we asked craft spirits producers about their companies’ commitment to safety training. Our poll found that 48.1 percent of respondents have implemented in-house safety programs, while 51.9 percent have not.
“Distilleries are unfamiliar places for many people in the United States for many people in the United States,” says Rob Ingersoll, operations manager and co-founder of Ghost Coast Distillery in Savannah Georgia, whose company provides in-house safety training for employees. “When new hires are brought on, each and every one receives a safety walk-through that informs them of inherent and hidden risks, our safety systems and emergency plan. That is just the beginning—ongoing safety meetings are held to ensure that all employees view safety as part of the culture.”
Regional Education Program: Distillery Safety Management 101
Safety training should be on every distillery’s priority list, as it is at Ghost Coast. For that reason, ACSA has made safety a core element of our education programming this year. We’re just a few weeks away from our next Regional Education Program, Distillery Management 101, September 6 and 7 in Long Beach California.
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Learn about hazard recognition, requirements of written safety policies, regulatory training, general OSHA compliance and much more over this two-day class. The registration fee is $399 for members and $699 for non-members. To register an additional participant, the fee is $299 for members and $529 for non-members.
Register here
.
We've negotiated a discount room rate of $149 a night at the event's host hotel, the Courtyard Long Beach Downtown.
The rate expires on August 24
, so don't delay!
Book your room now!
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Spotlight on a Member of the
ACSA
Family:
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5 Questions with Co-Owner Mike Sherman
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Vendome Copper & Brass Works, Inc. is one of the oldest copper fabricators in the world serving the distillation industry. This family-owned, fourth-generation business is located in Louisville, Kentucky and has been providing process equipment to distilleries worldwide since the early 1900’s. Vendome handcrafts batch and continuous distillation systems of all sizes. Each piece of equipment is custom designed and engineered. In addition to the stills, Vendome fabricates all related stainless steel and copper equipment including fermenters, cookers, condensers, coolers, receiving tanks, etc. We caught up with vice-president and co-owner Mike Sherman to talk about some of the key trends driving craft distillers' equipment purchases.
From your perspective, how has the craft distilling market evolved over the past five years?
Mike Sherman:
It’s been an interesting decade for the craft distillery industry. At the beginning, the systems were pretty small (75-gallon and 100-gallon batch systems) as it seemed everyone wanted to just have a small niche in their local region. Then about five years ago it seemed like most systems we fabricated were 500-gallon and 750-gallon systems as people wanted to make more product and maybe try to get into a few more regions rather than just their local region. Now, most of the systems we are fabricating are continuous systems (18” diameter and 24” diameter)—systems that are capable of producing quite a bit of product; the more product the better.
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So does that mean producers are moving away from pot stills?
Sherman:
I think nowadays distillers are wanting continuous column systems with control packages on them so they can make a much more consistent product with less labor expense. We are still fabricating both pot stills and column stills, but I do believe the interest has shifted to the continuous column over the last 18 months.
What are you recommendations for new distillers whose equipment needs likely will change in a couple of years as they scale up?
Sherman:
These are some of the first things we discuss with our potential customers—how much product do you want to make in the first year, in three years and in five years. We want to size the equipment for them so they can grow into it when they are ready and not have to purchase a lot of new equipment within the first year or two. Some people say that’s taking sales away from ourselves, but we look at it as taking care of the customer and making sure they are getting what they need to grow.
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Is whiskey still king among small distillers or are you having more conversations with customers about brandy, gin, etc.?
Sherman:
From day one, the majority of our customers have always wanted to make a whiskey/bourbon; but the time it takes to age it properly in a barrel was the key reason they also made vodka, gin and other products that did not need to be aged. They could get those products out on the market and start marketing their brand and bringing in some revenue while their whiskey/bourbon was aging.
What trends will drive craft distilling in the next five years?
Sherman:
That’s always the million dollar question! I’m excited to see what will be next for this great sector. Craft distillers are so creative and talented with the spirits that they produce, so I can’t wait to see what they come up with next!
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Save the Date:
Upcoming Events
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September 6 & 7, Long Beach, California
ACSA has partnered with Industrial Safety and Training Services to present the second of our 2018 Regional Education Programs. Learn about hazard recognition, requirements of written policies, regulatory training, general OSHA compliance and much more over this 2-day class.
Register here
.
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November 14 & 15,
Orlando Florida
Stay tuned for more details on the East Coast edition of Distillery Safety Management 101.
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February 10, 11 & 12, 2019: Minneapolis, Minnesota
Attendee and exhibitor registration is now open for "Craft on Ice," ACSA's 6th Annual Distillers Convention & Vendor Trade Show at the Hyatt Regency Minneapolis. Join fellow producers and other industry experts for the largest gathering of licensed craft spirits producers in the U.S. Register now to take advantage of our early-bird registration rates and discount room block!
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Thank you to our Sponsors!
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Sincerely,
American Craft Spirits Association
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