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Craft Distilling - The Business Craft Distilling - The Business Don Poffenroth Kent Fleischmann Dry Fly Distilling Inc. Don Poffenroth Kent Fleischmann Dry Fly Distilling Inc.

Dry Fly Distilling

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Page 1: Dry Fly Distilling

Craft Distilling - The BusinessCraft Distilling - The Business

Don Poffenroth

Kent Fleischmann

Dry Fly Distilling Inc.

Don Poffenroth

Kent Fleischmann

Dry Fly Distilling Inc.

id10533703 pdfMachine by Broadgun Software - a great PDF writer! - a great PDF creator! - http://www.pdfmachine.com http://www.broadgun.com

Page 2: Dry Fly Distilling

Presentation OutlinePresentation Outline

Dry Fly 101

Washington Craft Distilling Law

Pre Submitted Questions

Dry Fly 101

Washington Craft Distilling Law

Pre Submitted Questions Pre Submitted Questions

Q and A from the Group

Pre Submitted Questions

Q and A from the Group

Page 3: Dry Fly Distilling

DisclaimerDisclaimer We are only a year old

I�ll give the best answers based upon what I know or have been told

We really only know our way

We are only a year old

I�ll give the best answers based upon what I know or have been told

We really only know our way We really only know our way

Our limited success thus far is the result of 2 guys working 14 plus hours a day - 6 days a week.

We are nowhere close to turning a profit - we are however closer than we were 12 months ago

We really only know our way

Our limited success thus far is the result of 2 guys working 14 plus hours a day - 6 days a week.

We are nowhere close to turning a profit - we are however closer than we were 12 months ago

Page 4: Dry Fly Distilling

Our PhilosophyOur Philosophy We fully support the development of other craft distillers

in Washington.

Dry Fly nor anyone else associated with our company will ever talk down another craft distilled product.

We welcome visits to our distillery and only ask that prospective distillers identify themselves.

We fully support the development of other craft distillers in Washington.

Dry Fly nor anyone else associated with our company will ever talk down another craft distilled product.

We welcome visits to our distillery and only ask that prospective distillers identify themselves.prospective distillers identify themselves.

We are not in the position to teach anyone distilling, share our business plan, or help anyone with their planning process. We simply don�t have the time.

However, Once you have commercial equipment on order, and have secured space, we will do our best to help you with anything we can.

prospective distillers identify themselves.

We are not in the position to teach anyone distilling, share our business plan, or help anyone with their planning process. We simply don�t have the time.

However, Once you have commercial equipment on order, and have secured space, we will do our best to help you with anything we can.

Page 5: Dry Fly Distilling

Our PhilosophyOur Philosophy We believe distilling is an agricultural practice and that

a Craft or Artisan Distiller takes a raw product all the way to the bottle without employing any shortcuts.

We appreciate those whose business plan includes the use of purchased NGS, however what they do and what we do is very different.

We believe distilling is an agricultural practice and that a Craft or Artisan Distiller takes a raw product all the way to the bottle without employing any shortcuts.

We appreciate those whose business plan includes the use of purchased NGS, however what they do and what we do is very different.

This is supposed to be fun - it�s OK to relax and have a cocktail and work though our differences.

This is supposed to be fun - it�s OK to relax and have a cocktail and work though our differences.

Page 6: Dry Fly Distilling

Defining Craft DistillingDefined by the ADI

Defining Craft DistillingDefined by the ADI

Craft Distillers produce alcoholic beverage spirits by distillation, or by infusion through distillation or re-distillation. Maximum production for a �craft� or �artisan� distiller should not exceed

Craft Distillers produce alcoholic beverage spirits by distillation, or by infusion through distillation or re-distillation. Maximum production for a �craft� or �artisan� distiller should not exceed �craft� or �artisan� distiller should not exceed 50,000 proof gallons per year. The �craft� or �artisan� distiller utilizes a pot still, with or without rectification columns, for distillation of Beverage Spirits. A distiller starting with neutral spirits produced by others, who redistills without substantially altering the neutral character of the spirit may not be said to be a �craft� or �artisan� distiller.

�craft� or �artisan� distiller should not exceed 50,000 proof gallons per year. The �craft� or �artisan� distiller utilizes a pot still, with or without rectification columns, for distillation of Beverage Spirits. A distiller starting with neutral spirits produced by others, who redistills without substantially altering the neutral character of the spirit may not be said to be a �craft� or �artisan� distiller.

Page 7: Dry Fly Distilling

Why all the talk on �Terminology?�

Why all the talk on �Terminology?�

It�s possible to produce most products without ever distilling a drop

Production volume is important because it

It�s possible to produce most products without ever distilling a drop

Production volume is important because it Production volume is important because it separates us from major manufacturers

Smaller manufacturers face difficulties that are far different than large producers.

Production volume is important because it separates us from major manufacturers

Smaller manufacturers face difficulties that are far different than large producers.

Page 8: Dry Fly Distilling

Small Distilling �Organizations�Small Distilling �Organizations�

American Distilling Institute - ADI

Washington Distillers Guild

American Distilling Institute - ADI

Washington Distillers Guild

Page 9: Dry Fly Distilling

Dry Fly Distilling Inc.Dry Fly Distilling Inc.

Project Started in 2005

Incorporated in March 2007

Project Started in 2005

Incorporated in March 2007

Fully licensed by September 2007

First Distillation 9/25/07

First bottling 10/13/07

Fully licensed by September 2007

First Distillation 9/25/07

First bottling 10/13/07

Page 10: Dry Fly Distilling

Dry Fly Product LineDry Fly Product Line

Dry Fly Vodka

Dry Fly Gin

Dry Fly Wheat Whiskey

Dry Fly Single Malt

Dry Fly Vodka

Dry Fly Gin

Dry Fly Wheat Whiskey

Dry Fly Single Malt Dry Fly Single Malt Whiskey

Dry Fly Bourbon

Dry Fly Rye Whiskey

Recently won a gold metal for our packaging

Dry Fly Single Malt Whiskey

Dry Fly Bourbon

Dry Fly Rye Whiskey

Recently won a gold metal for our packaging

Page 11: Dry Fly Distilling
Page 12: Dry Fly Distilling

Our EquipmentOur Equipment

Two 450 liter CARL Pot stills

Two 4 plate columns for Stripping

One 21 plate column for rectification

Two 450 liter CARL Pot stills

Two 4 plate columns for Stripping

One 21 plate column for rectification One 21 plate column for rectification

Hand Bottling Line

Assorted blending tanks

One 21 plate column for rectification

Hand Bottling Line

Assorted blending tanks

Page 13: Dry Fly Distilling

Dry Fly Expansion 2008Dry Fly Expansion 2008

Addition of Second Still for Stripping

Addition of complete Wash House

Fermentation capacity to 15,000 liters per week

Addition of Second Still for Stripping

Addition of complete Wash House

Fermentation capacity to 15,000 liters per week Fermentation capacity to 15,000 liters per week

Annual capacity of 10-12,000 cases

On site grain milling for increased efficiency

Project will be complete in 4 weeks including the addition of our first full time employee

Fermentation capacity to 15,000 liters per week

Annual capacity of 10-12,000 cases

On site grain milling for increased efficiency

Project will be complete in 4 weeks including the addition of our first full time employee

Page 14: Dry Fly Distilling

Our ObjectivesOur Objectives

2000+ cases of sales in year 1

Grain to bottle

Strong Agricultural tie

2000+ cases of sales in year 1

Grain to bottle

Strong Agricultural tie Strong Agricultural tie

Precise and professional branding

Appear much larger than we are

5 states by end of Y1

Lose less money in month 12 than in month 1

Strong Agricultural tie

Precise and professional branding

Appear much larger than we are

5 states by end of Y1

Lose less money in month 12 than in month 1

Page 15: Dry Fly Distilling

Dry Fly by the NumbersDry Fly by the Numbers

Total investment YTD is close to $1 million (includes expansion)

Total Sales YTD close to $500,000 Total cases YTD 2400

Total investment YTD is close to $1 million (includes expansion)

Total Sales YTD close to $500,000 Total cases YTD 2400 Total cases YTD 2400 Total investment in Marketing/Brand

Development/Sales $150,000+ YTD

Total cases YTD 2400 Total investment in Marketing/Brand

Development/Sales $150,000+ YTD

Page 16: Dry Fly Distilling

Dry Fly by the NumbersDry Fly by the Numbers

Washington grown raw materials used 275,000 pounds - 99.97% Washington grown YTD

Bottles sold at the distillery - about 350 since July 1st

Washington grown raw materials used 275,000 pounds - 99.97% Washington grown YTD

Bottles sold at the distillery - about 350 since July 1st1st

Tastings Completed - 580 Placed in 265 liquor stores in Washington Distributed in Oregon, Idaho, Montana, Alaska,

and Illinois Pending distribution in Tennessee, Utah,

Wyoming, Minnesota, and Colorado

1st Tastings Completed - 580 Placed in 265 liquor stores in Washington Distributed in Oregon, Idaho, Montana, Alaska,

and Illinois Pending distribution in Tennessee, Utah,

Wyoming, Minnesota, and Colorado

Page 17: Dry Fly Distilling

Washington Craft Distillery LawWashington Craft Distillery Law

Aimed at agricultural and raw material to bottle producers

51% of monthly raw materials must be grown in Washington - NGS only if based on WA raw

Aimed at agricultural and raw material to bottle producers

51% of monthly raw materials must be grown in Washington - NGS only if based on WA raw Washington - NGS only if based on WA raw ingredients

$100 annual license fee Ability to sample product ONLY at the distillery Ability to retail your own product up to 2L per

person daily 20,000 proof gallon annual production limit

Washington - NGS only if based on WA raw ingredients

$100 annual license fee Ability to sample product ONLY at the distillery Ability to retail your own product up to 2L per

person daily 20,000 proof gallon annual production limit

Page 18: Dry Fly Distilling

Washington LawWashington Law

Still plenty of work to do to balance what breweries and wineries are allowed to do, and what is still against WA law for distilleries

Dry Fly is a member of DRAW - Distillery

Still plenty of work to do to balance what breweries and wineries are allowed to do, and what is still against WA law for distilleries

Dry Fly is a member of DRAW - Distillery Dry Fly is a member of DRAW - Distillery Representative Association of Washington

DRAW has an active legislative group which will assist with new issues as they arise.

Dry Fly is a member of DRAW - Distillery Representative Association of Washington

DRAW has an active legislative group which will assist with new issues as they arise.

Page 19: Dry Fly Distilling

Pre Submitted Questions and Answers

Pre Submitted Questions and AnswersAnswersAnswers

Answers are only as good as the answerer!

Answers are only as good as the answerer!

Page 20: Dry Fly Distilling

As I understand it all sales of craft distillery productions are

sold to the State the Washington, but what are the regulations for selling to merchants outside of

As I understand it all sales of craft distillery productions are

sold to the State the Washington, but what are the regulations for selling to merchants outside of selling to merchants outside of the state of Washington. How

are internet sales of spirits regulated?

selling to merchants outside of the state of Washington. How

are internet sales of spirits regulated?

Page 21: Dry Fly Distilling

Yes and No. Sales into Liquor stores must go through the state warehouse. Sales through the distillery can be done via transfer from bond.

Your federal permit allows you to sell anywhere -WA has no input or control here

Yes and No. Sales into Liquor stores must go through the state warehouse. Sales through the distillery can be done via transfer from bond.

Your federal permit allows you to sell anywhere -WA has no input or control here

Internet sales are basically non existent except for 2-3 companies - all outside of WA - not an easy thing to break into - distribution issues

Binnys came to us - we hear trying to solicit them is very difficult

Internet sales are basically non existent except for 2-3 companies - all outside of WA - not an easy thing to break into - distribution issues

Binnys came to us - we hear trying to solicit them is very difficult

Page 22: Dry Fly Distilling

Note: Sales/Marketing is the most overlooked piece of this business. Our selling 3000 cases in year one makes us one of the largest US small distillery startups thus far. Competition is fierce and from very well established companies with

Note: Sales/Marketing is the most overlooked piece of this business. Our selling 3000 cases in year one makes us one of the largest US small distillery startups thus far. Competition is fierce and from very well established companies with and from very well established companies with deep pockets. It is a complex system that requires significant daily attention. Marketing costs are both significant and real.

and from very well established companies with deep pockets. It is a complex system that requires significant daily attention. Marketing costs are both significant and real.

Page 23: Dry Fly Distilling

Washington is a control State Initial orders are all special order Stores hate special orders Listing program requires that you approach the

market just like a major manufacturer - PR campaign, Professional POS, Professional merchandising support, targeted and specific sales

Washington is a control State Initial orders are all special order Stores hate special orders Listing program requires that you approach the

market just like a major manufacturer - PR campaign, Professional POS, Professional merchandising support, targeted and specific sales merchandising support, targeted and specific sales objectives

Listings come in 3-4 formats 30-120 stores Bailment - you provide inventory at no cost to the

state and are paid once it ships to a store.

merchandising support, targeted and specific sales objectives

Listings come in 3-4 formats 30-120 stores Bailment - you provide inventory at no cost to the

state and are paid once it ships to a store.

Page 24: Dry Fly Distilling

What size still and equipment did Dry Fly start with and how much

product did it produce?

What size still and equipment did Dry Fly start with and how much

product did it produce?

Page 25: Dry Fly Distilling

We started with 1 450 liter pot still, a 4 plate and 21 plate column and 5000 liters of weekly fermentation space. This allowed us to produce about 3000 cases.

We started with 1 450 liter pot still, a 4 plate and 21 plate column and 5000 liters of weekly fermentation space. This allowed us to produce about 3000 cases.

Note that 450 liter is an average fill rate at stripping (foaming) - we run these same stills at 650+ liters for finishing runs.

Note that 450 liter is an average fill rate at stripping (foaming) - we run these same stills at 650+ liters for finishing runs.

Page 26: Dry Fly Distilling

Is it feasible to sell 100,000 bottles of product a year? What could you expect with your first

year in bottle sales?

Is it feasible to sell 100,000 bottles of product a year? What could you expect with your first

year in bottle sales?year in bottle sales?year in bottle sales?

Page 27: Dry Fly Distilling

Anything is feasible. Apple brandy - Cranberry Schnapps -

probably not. More main line products maybe. Whiskey - not for a couple of years!

For a first year distillery to do that would be

Anything is feasible. Apple brandy - Cranberry Schnapps -

probably not. More main line products maybe. Whiskey - not for a couple of years!

For a first year distillery to do that would be For a first year distillery to do that would be amazing. It would take a full time sales force of 3-4 people, $400,000 plus in Y1 marketing, 24 hour plus distillation on a 1000 plus liter pot still or a small column still

For a first year distillery to do that would be amazing. It would take a full time sales force of 3-4 people, $400,000 plus in Y1 marketing, 24 hour plus distillation on a 1000 plus liter pot still or a small column still

Page 28: Dry Fly Distilling

100,000 bottles = 8333 12/750ml cases 30,000 bottles on a 450 liter pot still at an average

of 42 hours of distillation time per batch. In distillation - flow rates do not vary, so 3 times

our volume would require 126 hours of distillation time on a 1350 liter still (144 hours in 6 full days),

100,000 bottles = 8333 12/750ml cases 30,000 bottles on a 450 liter pot still at an average

of 42 hours of distillation time per batch. In distillation - flow rates do not vary, so 3 times

our volume would require 126 hours of distillation time on a 1350 liter still (144 hours in 6 full days), time on a 1350 liter still (144 hours in 6 full days), plus a fermentation capacity of 15,000 liters weekly. Two 700 liter still could accomplish the same in half the total time. (Vodka/Gin for this example)

Then you have to sell that production!

time on a 1350 liter still (144 hours in 6 full days), plus a fermentation capacity of 15,000 liters weekly. Two 700 liter still could accomplish the same in half the total time. (Vodka/Gin for this example)

Then you have to sell that production!

Page 29: Dry Fly Distilling

Could we locate the tasting room away from the Distillery?

Could we locate the tasting room away from the Distillery?

Page 30: Dry Fly Distilling

In Washington, No. The tasting room has to be part of the distillery. This requires a bit of TTB wrangling as you need to �unbond�

In Washington, No. The tasting room has to be part of the distillery. This requires a bit of TTB wrangling as you need to �unbond� of TTB wrangling as you need to �unbond� that portion of your facility that holds retail product and sample product.

of TTB wrangling as you need to �unbond� that portion of your facility that holds retail product and sample product.

Page 31: Dry Fly Distilling

Could we make Apple Brandy?Could we make Apple Brandy?

Page 32: Dry Fly Distilling

Absolutely ! Absolutely !

Page 33: Dry Fly Distilling

The process of getting a federal & state license requires that we have a location, but we're not sure of what's required for the build-out of the facility, so we'd like to know what departments are involved

with the oversight of developing a

The process of getting a federal & state license requires that we have a location, but we're not sure of what's required for the build-out of the facility, so we'd like to know what departments are involved

with the oversight of developing a with the oversight of developing a distillery and what their requirements

are: i.e, Heath Dep., Fire Dep, Building Department and Liquor Board

requirements.

with the oversight of developing a distillery and what their requirements

are: i.e, Heath Dep., Fire Dep, Building Department and Liquor Board

requirements.

Page 34: Dry Fly Distilling

I think that varies by locality. We spent 6 months prior to leasing our space

working with all of these named agencies, insuring that we would not have any issues as we built out.

The WSLCB really has no requirements The TTB requires that you have a �facility ready

to produce� - all major equipment must be in

I think that varies by locality. We spent 6 months prior to leasing our space

working with all of these named agencies, insuring that we would not have any issues as we built out.

The WSLCB really has no requirements The TTB requires that you have a �facility ready

to produce� - all major equipment must be in to produce� - all major equipment must be in place.

Health department was no issue for us - at 80 proof everything is pretty much it�s own sanitizer.

Fire Department is important. We had to file a special use permit and detail our warehousing plans.

to produce� - all major equipment must be in place.

Health department was no issue for us - at 80 proof everything is pretty much it�s own sanitizer.

Fire Department is important. We had to file a special use permit and detail our warehousing plans.

Page 35: Dry Fly Distilling

Licensing: the best path for obtaining Fed, State and Local

licensing.

Licensing: the best path for obtaining Fed, State and Local

licensing.

Page 36: Dry Fly Distilling

Federal permit first

1 page application - ours had 247 pages of backup.

Must be �ready to produce�

State license last

Federal permit first

1 page application - ours had 247 pages of backup.

Must be �ready to produce�

State license last State license last

5 year financial tracking on every dollar that goes into your distillery.

Full financial disclosure for any investor

State license last

5 year financial tracking on every dollar that goes into your distillery.

Full financial disclosure for any investor

Page 37: Dry Fly Distilling

We're interested in knowing what the facilities need to look like; If

it needs to meet professional kitchen requirements with

stainless steel sinks, specific

We're interested in knowing what the facilities need to look like; If

it needs to meet professional kitchen requirements with

stainless steel sinks, specific stainless steel sinks, specific drainage, sprinkler systems, then it might make more sense to rent

a facility with a professional kitchen.

stainless steel sinks, specific drainage, sprinkler systems, then it might make more sense to rent

a facility with a professional kitchen.

Page 38: Dry Fly Distilling

Somewhat depends on what you want to be!

Look at any professional brewery or winery and model yourself after that.

Somewhat depends on what you want to be!

Look at any professional brewery or winery and model yourself after that.and model yourself after that.

Sprinkler system will probably be required by your fire department.

and model yourself after that.

Sprinkler system will probably be required by your fire department.

Page 39: Dry Fly Distilling

Interested in knowing more about the "Craft" law. Can we sell our

product off site from our distillery. Can we have a booth at Pike Place Market or a fair, or

Interested in knowing more about the "Craft" law. Can we sell our

product off site from our distillery. Can we have a booth at Pike Place Market or a fair, or at Pike Place Market or a fair, or

farmer's market?at Pike Place Market or a fair, or

farmer's market?

Page 40: Dry Fly Distilling

In short - No to all of these questions. You can only sell product in your distillery.

In short - No to all of these questions. You can only sell product in your distillery.

Page 41: Dry Fly Distilling

Interested in knowing an exact break down of State and Federal

Taxes, per bottle.

Interested in knowing an exact break down of State and Federal

Taxes, per bottle.

Page 42: Dry Fly Distilling

Federal tax is $13.50 per proof gallon - 1 gallon of alcohol at 100 proof

At 80 proof that equates to $2.14 per bottle Washington adds all tax at the point of sale

Federal tax is $13.50 per proof gallon - 1 gallon of alcohol at 100 proof

At 80 proof that equates to $2.14 per bottle Washington adds all tax at the point of sale Washington adds all tax at the point of sale Average markup with taxes and commission at the

State level is 100% - ie your $16 bottle wholesale becomes $32 on the shelf. And out of the $16 you charge, you pay the federal tax and transport to the state warehouse.

Washington adds all tax at the point of sale Average markup with taxes and commission at the

State level is 100% - ie your $16 bottle wholesale becomes $32 on the shelf. And out of the $16 you charge, you pay the federal tax and transport to the state warehouse.

Page 43: Dry Fly Distilling

Federal TaxesFederal Taxes

Federal tax is $13.50 per proof gallon - 1 gallon of alcohol at 100 proof

Both Breweries and Wineries that are

Federal tax is $13.50 per proof gallon - 1 gallon of alcohol at 100 proof

Both Breweries and Wineries that are Both Breweries and Wineries that are �small� producers pay a lower tax rate than �large� manufacturers.

The ADI is working on lobbying efforts to get a reduced tax rate for small producers

Both Breweries and Wineries that are �small� producers pay a lower tax rate than �large� manufacturers.

The ADI is working on lobbying efforts to get a reduced tax rate for small producers

Page 44: Dry Fly Distilling

Interested in knowing average production costs per bottle.

Interested in knowing average production costs per bottle.

Page 45: Dry Fly Distilling

This is an impossible question to answer -too many variables and too much proprietary information here to give you our

This is an impossible question to answer -too many variables and too much proprietary information here to give you our proprietary information here to give you our costs.proprietary information here to give you our costs.

Page 46: Dry Fly Distilling

Interested in knowing if this can be a viable business at low

production and/or what level of production and sales needs to be

Interested in knowing if this can be a viable business at low

production and/or what level of production and sales needs to be production and sales needs to be

met before profits can be realized.

production and sales needs to be met before profits can be

realized.

Page 47: Dry Fly Distilling

Viability depends on your investment and what kind of return you expect.

Sales level for profit - Don�t know - haven�t got there yet!

Our accountant tells us we lose less money

Viability depends on your investment and what kind of return you expect.

Sales level for profit - Don�t know - haven�t got there yet!

Our accountant tells us we lose less money Our accountant tells us we lose less money each month! (except for this August)

Our goal for our second year is to exceed $1 million in annual sales - and we still will not probably see much profit. We expect to become profitable in year 3.

Our accountant tells us we lose less money each month! (except for this August)

Our goal for our second year is to exceed $1 million in annual sales - and we still will not probably see much profit. We expect to become profitable in year 3.

Page 48: Dry Fly Distilling

What happens once a Craft Distiller produces more than the

WA Craft Distilling Law�s designated 20,000 gal per year

production

What happens once a Craft Distiller produces more than the

WA Craft Distilling Law�s designated 20,000 gal per year

production production capacity? Specifically, does the craft distiller lose the ability to

sample & sell directly?

production capacity? Specifically, does the craft distiller lose the ability to

sample & sell directly?

Page 49: Dry Fly Distilling

As the law sits today, yes. There is a �National� movement to set this number

at 60,000 pg annually. At some certain point you open the door for larger

As the law sits today, yes. There is a �National� movement to set this number

at 60,000 pg annually. At some certain point you open the door for larger At some certain point you open the door for larger

producers to work their way into our classification.

This would have to be addressed via the legislative process.

At some certain point you open the door for larger producers to work their way into our classification.

This would have to be addressed via the legislative process.

Page 50: Dry Fly Distilling

How will the 20,000 gallons per year be measured under the WA craft distilling law? (i.e. proof

gallons?)

How will the 20,000 gallons per year be measured under the WA craft distilling law? (i.e. proof

gallons?)gallons?)gallons?)

Page 51: Dry Fly Distilling

Yes, via proof gallons

20,000 proof gallons is about 10,500 - 12 pack 750 ml cases at 80 proof.

Yes, via proof gallons

20,000 proof gallons is about 10,500 - 12 pack 750 ml cases at 80 proof.pack 750 ml cases at 80 proof.pack 750 ml cases at 80 proof.

Page 52: Dry Fly Distilling

Does the WA Craft Distilling law have any guidelines regarding

contract distilling? (i.e. producing a spirit product for a 3rd party�

example being producing a

Does the WA Craft Distilling law have any guidelines regarding

contract distilling? (i.e. producing a spirit product for a 3rd party�

example being producing a private label product for a bar or

hotel under contract)private label product for a bar or

hotel under contract)

Page 53: Dry Fly Distilling

No. Although contract distilling is not a common practice. Each item produced requires it�s own COLA (label approval) and the Washington system is really not set up to do specific shipments to specific stores that then go to specific accounts.

No. Although contract distilling is not a common practice. Each item produced requires it�s own COLA (label approval) and the Washington system is really not set up to do specific shipments to specific stores that then go to specific accounts.stores that then go to specific accounts.stores that then go to specific accounts.

Page 54: Dry Fly Distilling

How does the bonding process work & what are the bonding requirements for distillers?

How does the bonding process work & what are the bonding requirements for distillers?

Page 55: Dry Fly Distilling

A Federal Bond - minimum of $15,000 I think, is required to cover you anticipated tax liability and storage bond.

A Federal Bond - minimum of $15,000 I think, is required to cover you anticipated tax liability and storage bond.tax liability and storage bond.

We have a $25,000 bond that costs us $1300 annually.

tax liability and storage bond.

We have a $25,000 bond that costs us $1300 annually.

Page 56: Dry Fly Distilling

Who is our local TTB agent and how can we contact them?

Who is our local TTB agent and how can we contact them?

Page 57: Dry Fly Distilling

The TTB assigns one of 2-3 people from the NW to work with each distillery. They usually don�t work with you until you are in

The TTB assigns one of 2-3 people from the NW to work with each distillery. They usually don�t work with you until you are in usually don�t work with you until you are in the licensing process. Those questions can be answered by the group in Cincinnati.

usually don�t work with you until you are in the licensing process. Those questions can be answered by the group in Cincinnati.

Page 58: Dry Fly Distilling

What are some best practices when communicating with the TTB and local WSLCB with

regards to our distillery

What are some best practices when communicating with the TTB and local WSLCB with

regards to our distillery operations?operations?

Page 59: Dry Fly Distilling

TTB through Cincinnati

WSLCB will assign an inspector to you once you enter the licensing process.

TTB through Cincinnati

WSLCB will assign an inspector to you once you enter the licensing process.once you enter the licensing process.once you enter the licensing process.

Page 60: Dry Fly Distilling

As long as we satisfy the 51% ingredient rule of the WA Craft Distillery Law ~ are their any

limitations as to the ingredients we can use in our products? (any

As long as we satisfy the 51% ingredient rule of the WA Craft Distillery Law ~ are their any

limitations as to the ingredients we can use in our products? (any we can use in our products? (any chance we can receive a copy of

the TTB/FDA approved ingredient list?

we can use in our products? (any chance we can receive a copy of

the TTB/FDA approved ingredient list?

Page 61: Dry Fly Distilling

To the best of my knowledge there is no TTB approved ingredient list.

I also am not aware of any FDA approved

To the best of my knowledge there is no TTB approved ingredient list.

I also am not aware of any FDA approved I also am not aware of any FDA approved list for alcoholic beverages.

I also am not aware of any FDA approved list for alcoholic beverages.

Page 62: Dry Fly Distilling

What was the time frame from setup of the still to full

production?

What was the time frame from setup of the still to full

production?

Page 63: Dry Fly Distilling

For us it was about 10 minutes. We had all licenses and permits in hand. We also had all of our COLAs approved.

For us it was about 10 minutes. We had all licenses and permits in hand. We also had all of our COLAs approved.all of our COLAs approved.

If the term �full production� means maxing our capacity - then that took a bit longer.

all of our COLAs approved.

If the term �full production� means maxing our capacity - then that took a bit longer.

Page 64: Dry Fly Distilling

What additional item(s) did you forget to plan for when you

started your production?

What additional item(s) did you forget to plan for when you

started your production?

Page 65: Dry Fly Distilling

480 volt electrical service required our own power pole and about $20,000 of electrical work.

480 volt electrical service required our own power pole and about $20,000 of electrical work.work.

Packaging - Our average buy is 22,000 bottles - $40,000 - printing, corrugated and shipping adds another $40,000. Significant costs prior to one case being made.

work.

Packaging - Our average buy is 22,000 bottles - $40,000 - printing, corrugated and shipping adds another $40,000. Significant costs prior to one case being made.

Page 66: Dry Fly Distilling

Did you create contracts with your suppliers for their raw

materials and costs?

Did you create contracts with your suppliers for their raw

materials and costs?

Page 67: Dry Fly Distilling

Yes

Annual commitment for grain this year is 500,000 pounds

Annual glass commitment is 50,000 units

Ditto on cork and corrugated.

Commitment on capsules is 81,000 units

Yes

Annual commitment for grain this year is 500,000 pounds

Annual glass commitment is 50,000 units

Ditto on cork and corrugated.

Commitment on capsules is 81,000 units Commitment on capsules is 81,000 units

Negotiated prices with other suppliers

Kent was a VP of purchasing for Sysco Minnesota and is a professional buyer and negotiator.

Commitment on capsules is 81,000 units

Negotiated prices with other suppliers

Kent was a VP of purchasing for Sysco Minnesota and is a professional buyer and negotiator.

Page 68: Dry Fly Distilling

What points do you have for dealing with the local agencies?

What points do you have for dealing with the local agencies?

Page 69: Dry Fly Distilling

The City of Spokane, via the Mayor�s office assigned us an ombudsman to work through any city issue with us. Saved us months of work.

The City of Spokane, via the Mayor�s office assigned us an ombudsman to work through any city issue with us. Saved us months of work.work.

Be proactive. Make sure you know the answer before you ask the question.

Get all of the issues settled prior to taking possession of your space.

work. Be proactive. Make sure you know the

answer before you ask the question. Get all of the issues settled prior to taking

possession of your space.

Page 70: Dry Fly Distilling

What is the biggest obstacle you faced or had to address?

What is the biggest obstacle you faced or had to address?

Page 71: Dry Fly Distilling

$30,000 in freight damage on our first still shipment

Utility placement costs

$30,000 in freight damage on our first still shipment

Utility placement costs Utility placement costs

Packaging inventory costs

Marketing costs

Expansion 10 months into a business plan

Utility placement costs

Packaging inventory costs

Marketing costs

Expansion 10 months into a business plan

Page 72: Dry Fly Distilling

Q and A from the GroupQ and A from the Group