Big Spirit Country 

The rise of Montana’s microdistilleries

On a recent Wednesday evening, most of the activity at the Rhino in downtown Missoula is concentrated around a cluster of cocktail glasses and liquor bottles at the end of the bar. Each label brandishes some quirky name, like Orphan Girl, Glacier Dew and Whyte Laydie. No two are the same. There’s gin, vodka, rum and a whiskey that one distillery rep describes as “Montana-style tequila.” But every bottle shares at least one bragging right: The word “Montana” enjoys a prominent spot on the label.

Rhino owner Kevin Head lingers near the bar, soaking in his latest Cocktail Corral tasting event. He’s managed to gather people and product from four microdistilleries, each within a few hours of town. Glacier Distilling has come the farthest—160 miles from its still up in Coram. Montgomery Distillery is so close you can practically see it out the window, just across Front Street.

click to enlarge Missoula Independent news
  • Cathrine L. Walters

“These distilleries have really sparked a resurgence for Montana’s cocktail culture,” Head says. “We’re seeing new and unique recipes coming out of the tasting rooms, and some really old ones that no one’s served in a long, long time.”

The chatter at the event sways from new developments at the distilleries to the all-Montana sourcing of ingredients. Each bottle seems to be a celebration of the rich agricultural commodities of the Treasure State, from mint and basil to barley and Flathead Valley wheat. A few newer bottles dot the counter. Glacier Distilling just announced the release of Mule Kick, a jalapeño, garlic and black pepper infused whiskey that happens to be one of tonight’s main attractions. Headframe’s tasting room manager, Heidi Rosenleaf, singles out a bottle of Destroying Angel on the bar—the Montana-style tequila referenced earlier.

“We name each of our products after an old mine in Butte, and at one point, there were 420 or 430 mines there,” Rosenleaf says. “We’ve got a lot of products to name.”

The microdistillery industry has grown fast in Montana in recent years. The first—Bozeman’s RoughStock Distillery—opened for business in 2009. According to the Montana Department of Revenue, there are now nine microdistilleries operating statewide, with three more in the works. State tax revenue generated by retail sales of spirits in Montana tasting rooms totaled a mere $2,179 in 2011. That figure jumped to $22,000 in 2012 and $44,000 so far in 2013.

The trend has mimicked the surge of microdistilling activity nationwide over the past decade. There were fewer than 70 licensed craft distilleries in the United States when the American Distilling Institute was founded in 2003. The organization now has 400 members, and projects that there will be between 600 and 800 microdistilleries in the United States and Canada by 2016.

“This is a viable industry in the state,” says former state Rep. Brady Wiseman, D-Bozeman, who sponsored a bill in 2005 enabling microdistilleries to operate in Montana. “It’s a viable business model that you can come up with this $300,000, $400,000, $500,000 or more investment and produce a product and actually be able to compete.”

Back in 2005, the microdistillery movement was only just beginning in the United States. Montana hoped to capitalize on the trend, but Prohibition had left much to change before the industry could take root in the state.

“A hundred years ago, the country was awash in saloons and public drunkenness, and the reason it was happening was that the national producers of both beer and spirits were basically running franchise bar operations,” Wiseman says. “You didn’t have to have any money to start a bar. You just needed to rent a joint and the beer company would come in, completely furnish it and provide you with beer. All you had to do was pay the bill. Same with liquor.”

click to enlarge Missoula Independent news
  • Cathrine L. Walters

With the repeal of Prohibition in 1933, Montana handed the responsibility of pricing and distributing liquor over to the state Liquor Control Board. Eventually that duty passed to the Department of Revenue, which continues to control the sale of distilled spirits at the wholesale level. Every bottle of liquor sold in Montana passes through a state warehouse, where it’s inventoried, taxed and marked up for retail. The taxes leveled at that warehouse were one of the key hurdles to microdistilling in the state, a cost-restrictive system that Helena attorney Mike Uda—who had dreams of opening Vigilante Distilling—vowed to change in 2005.

Wiseman sponsored a bill on Uda’s behalf in the 2005 Montana Legislature. House Bill 517, better known as the Microdistillery Act, sought to establish a Montana distillery license and knock the high tax rates down for liquor produced in-state. Wiseman had come to Helena largely to improve Montana’s economy, and says he’d seen a friend succeed wildly in the craft brewing business in Bozeman. He simply saw microdistilling as “the next logical step.”

“From an economic standpoint, it just makes perfect sense that we make it for ourselves,” Wiseman says. “We grow the barley. Why would we ship in beer from St. Louis or Milwaukee or Seattle when we can make it for ourselves, and have a really virtuous economic cycle where those entrepreneurs are building equity and ownership and employment? So when the microdistillery bill got put in front of me, I thought, ‘Hell yeah. It’s the same thing.’”

The bill passed neatly in the House, 70 - 27, and went on to the Senate, where it was picked up by then-Senate President Jon Tester. HB 517 was revised and amended and passed 37 - 13. Then, in Wiseman’s words, “all hell broke loose” on the House floor. Former supporters turned on the legislation, Wiseman explains, after “a faction” of the tavern owners “went ape-shit.” Several provisions in the bill were altered. The number of bottles and drinks microdistilleries were allowed to sell on-site were reduced. But the bill passed, and newly elected Gov. Brian Schweitzer signed it into law May 6, 2005.

“Then, nothing happened for quite some time,” Wiseman says.

Four years passed with no microdistilling activity in the state. Only after Wiseman revisited a second liquor tax during the 2009 session did the floodgates finally open. That same spring, in the halls of the state Capitol, he got word that Montana’s first microdistillery had finally opened: RoughStock Distillery in Bozeman.

click to enlarge Missoula Independent news
  • Cathrine L. Walters

Ask Bryan Schultz which of the whiskeys he distills is his favorite and he’ll tell you it’s “like asking which kid you love most.” So he defaults to RoughStock’s most popular bottle—the Pure Malt, which, to extend Schultz’s metaphor, happens to be his first child.

Schultz had first thought to open a microdistillery in 2005, following the passage of Wiseman’s original bill. But with the state’s liquor excise tax still set at 16 percent even for small producers, the distribution end of the business was financially unfavorable. Once Wiseman’s 2009 tax revision had leveled the playing field for microdistilleries, Schultz moved on to the next hurdle: brand recognition.

“Starting a new distillery from scratch, being a small guy and growing into our distribution shoes, so to speak, as far as what we could make, took a lot of education,” Schultz says. “It took a lot of just going out and talking to liquor store owners, bar and restaurant owners, [and] trying to get everybody to notice and realize there was something here, that we weren’t just some rebranded bulk alcohol made somewhere else that had some fancy marketing behind it.”

Schultz had traveled widely in Europe and seen firsthand the operations in Scotland and Ireland that perfected the art of distilling whiskey. RoughStock never really had much of a plan to manufacture anything else, Schultz says. The grain-growing regions of Montana reminded him too much of northern Europe for him to be interested in much beyond whiskey.

“The abundance of grain and natural water—good water—we have in the western part of the state was kind of the formula for what we wanted to do,” Schultz says. “We kind of modeled ourselves after a lot of the scotch distilleries and some of the other smaller whiskey distilleries that you never hear of that dot the western European landscape.”

Schultz and his wife, Kari, both came from agricultural backgrounds in the state. Through bottles of booze, the two thought to give Montana “a spot on the map.” Their tasting room, situated on the corridor between Bozeman and Big Sky, draws mostly tourists curious about what Montana can produce. That exposure helped the couple “put something in a bottle that’s representative of Montana agriculture.”

Tourism, in fact, has become the main driver for many of the state’s distilleries. As Brady Wiseman puts it, Montana’s population is a deceptive figure. The state may only have one million residents, but it averages nearly 10 million visitors a year. Each bottle of Montana spirits acts as a sort of ambassador, a sentiment shared widely among state distillers.

But these ambassadors didn’t arrive overnight. Microdistilling requires a hefty investment up front. Schultz estimates the initial overhead of legal fees, still equipment, raw materials and other necessities came to well over $500,000. Distillers have to secure licensing and equipment before they can even begin producing a product. Whiskey in particular requires aging, sometimes for years, so Schultz found himself looking far ahead from the very beginning, before the customer base was even there.

“We knew we weren’t going to make any money for a very long time,” Schultz says. “Talk to me here at the 10- to 15-year mark and I might have a better report for you as far as money making.

“We didn’t get into this to make a million dollars overnight,” he continues. “It’s a slow-growth process. We can’t make whiskey any faster than we do, and we certainly can’t age it any faster.”

For the first two years, Schultz and his wife did everything at RoughStock themselves. They’ve since moved to a larger facility, hired nine employees and opened a tasting room in May 2011. This year, the distillery is planning to move again. Schultz says that at this point, “we’re making enough to keep the lights on and increase production without amassing a huge debt.”

Brian Anderson, co-owner of Whistling Andy Distillery in Bigfork, knows all too well the pains of sitting on an aging product. Whistling Andy opened New Year’s Eve 2010, and Anderson wasted no time perfecting his recipes for vodka, gin and, particularly, his hibiscus coconut rum. He filled several barrels with bourbon close to two years ago, which he hopes will be ready later this year. Whistling Andy has already released an unaged whiskey—or moonshine—as well as a whiskey aged for just over a year. The first release of the latter, about 375 bottles, sold out in a day and a half during St. Patty’s 2012. The third barrel sold out just as quickly last holiday season.

Standing in the distillery’s backroom, Anderson talks about the ups and downs of the business over the last few years. The rum’s been a big seller, he says, and even won a platinum award at the Spirits International Prestige competition in fall 2011. Whistling Andy now distributes in nine states, three Canadian provinces and Australia.

click to enlarge Missoula Independent news
  • Cathrine L. Walters

“We just wrapped up negotiations for another distribution deal a couple days ago,” Anderson says. “We’re going to be in Taiwan now, too.”

Anderson has always had a passion for liquor. He’s a self-proclaimed science geek and former geo-hydrologist who grew up in the Flathead. The mash tank in his distillery is a repurposed 600-gallon ice cream maker, once a “God-awful battleship blue color,” that used to make Eskimo Pies. Beakers and test tubes litter the place, along with huge oak casks from Kentucky. Anderson can’t imagine being surrounded by anything else.

“I make liquor,” he says. “I could be servicing port-a-potties. I could be sitting in a cubicle in Kansas.”

The scene down at Montgomery Distillery in downtown Missoula isn’t much different. Co-owner Ryan Montgomery has his desk and worktable situated in the shadow of a two-story-tall copper still column. After nearly a year of business his Front Street space already looks well-worn. On his desk are one bottle each of his Quicksilver Vodka and Whyte Laydie Gin. The bottles and labels, he says, come from a company in London that dramatically discounted the cost for both on account of Montgomery’s small size.

Visit the Missoula tasting room any given day of the week and bar space will be at a premium. The cocktail menu changes with each season, sometimes faster if a bartender invents a tasty new concoction.

“In general, things are going great,” Montgomery says, his eyes shifting occasionally to a set of temperatures gauges on the wall. “Basically what our strategy is is to, production-wise, meet the demand for vodka and gin and spend all of our spare production time and spare money making whiskey. It’s a difficult proposition because all the money goes in up front, and you don’t see any revenue from that for years in the future, however long you want to age the whiskey.”

Montgomery has kept the business predominantly local during his first year. The distillery’s products are in roughly 40 Montana state liquor stores and scores of bars across the state, but only within the past few months has he been working toward out-of-state distribution. “You’ve gotta prove yourself in the home market first, build a following and a loyalty there,” he says.

The modest start is just one of the many threads casual observers tend to tie between the microdistilling world and the craft brewing industry. Montgomery acknowledges those similarities—the emphasis on locally sourced ingredients, the biennial struggle in Helena to make Montana law more flexible—but feels there are some key differences as well. When the craft beer movement started roughly two decades ago, the major competitors were primarily domestics like Budweiser and Coors that put out a generic product. When craft brewers hit the market with an array of stouts and IPAs and porters, it meant instant and almost guaranteed success with consumers, Montgomery says.

Microdistilleries, on the other hand, are up against an array of established companies, from Grey Goose to Jameson, many of which put out excellent products. That’s largely why Montgomery is taking it slow, and why distillers like Anderson celebrate when they receive international accolades. Both owners anticipate an industry-wide shake-out in the future, when the newness of microdistilling wears off and small businesses will need to rely on something beyond novelty to compete with major labels.

“Flavor ultimately wins out,” Mongomery says. “You can throw a lot of money into packaging and marketing, but if it doesn’t taste good you’re not going to last.”

Schultz can see that industry shake-out on the horizon, and to him it appears much closer than one might expect. After four years, he’s continuing to tweak his whiskey recipes, always with an eye for consistency and flavor. The results of any given experiment could take many years to unfold, so “we don’t experiment too wildly,” he says.

Restraint is part of staying competitive in a market dominated by Kentucky distilleries that have been dialing in recipes for 80 years, or by Scottish and Irish distilleries that perfected the system a century or more ago. Even as Montana’s first distillery, RoughStock has just four years of experience. And already Schultz is noting shelf space for other products dwindling.

“Every large major brand right now makes 30 different flavored vodkas, so [retailers] are starting to cut down on some of that stuff,” Schultz says. “You’re starting to see a lot of these unaged moonshine-type products come in, which is a very cool novelty. We make one, too, an unaged corn whiskey. But there’s a lot of distributors and retailers that will not take any more or hold any inventory whatsoever of the unaged whiskeys … They’re done with it. They’ve moved on, moved past it.”

If and when the nation’s microdistilling industry reaches that consumer saturation point, many of Montana’s businesses will theoretically be ready. Distillers are constantly working on new products and expanding certain aspects of their respective operations. For example, Montgomery Distillery recently began bottling its non-alcoholic mixing syrups and shrubs for sale at the Clark Fork Farmers Market, allowing consumers to recreate those same cocktails at home. Anderson’s staff at Whistling Andy has been busy over the past several weeks preparing to move its distilling operation into a larger space behind the existing tasting room, doubling the distillery’s size and freeing the company to increase its production, bottling and experimentation in new types of spirits.

“I think we have everything here to make this an outstanding industry in Montana,” Anderson says. “We’ve got the best raw materials. Our grain is top notch. And fruit? We’ve got tons of apples, cherries, pears ...”

At the Rhino, the distillery reps gathered for the Cocktail Corral seem to focus more on the next big thing than the bottles already set out on the bar. Headframe opened just 18 months ago, Heidi Rosenleaf says, and through Chicago-based Binny’s Beverage Depot, they’re already distributing online in over half the country. About six months ago, Rosenleaf adds, Headframe owners John and Courtney McKee decided to start manufacturing small-column stills for other start-up microdistilleries nationwide. Headframe Manufacturing is delivering its first still to a client in late July.

Lauren Oscilowski, lead distiller at Glacier Distilling, is also touting new features at her facility. After getting fed up with using small pots, Glacier recently purchased a 55-gallon drum of honey from East Glacier. They’ll use it to sweeten up a new product coming out this fall, Oscilowski says, “just in time for Cabin Fever Days,” an annual event that features live music and bar stool races. She stops there, not wanting to ruin the surprise.

See also: BUT HOW DOES IT TASTE? The Indy partakes in a blind test to see how local spirits stack up
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