While they operate in the shadow of West Michigan’s brewing industry, local cideries, distilleries and wineries make up a growing piece of the region’s overall craft beverage scene.
Many of the producers credit craft beer for paving the way for other locally made alcoholic beverages to make it into the craft consciousness of West Michigan consumers. With that door opened, now it’s up to them to compete for consumers’ so-called share of throat by offering high-quality products with a local story.
In fact, all sectors in the craft beverage industry share similar challenges: They’re all facing stiff competition from well-heeled international corporations, they’re fighting for space on ever-crowded store shelves in an era of distributor consolidation, and they have to do their part to educate consumers about the value of their products.
However, while hard cider producers — which are licensed as wineries — operate in a similar distribution scheme as beer, spirits face a unique set of rules that date back to the Prohibition era.
MiBiz gathered executives from local cideries and distilleries for a roundtable discussion to explore the issues and opportunities these growing sectors are facing. Participating in the discussion were:
- John Behrens, co-owner of Farmhaus Cider Co. of Hudsonville
- Joel Bierling, owner of Bier Distillery Co. in Comstock Park
- Joanna Merrill, co-founder of The Kalamazoo Stillhouse in Kalamazoo
- Andy Schaefer, co-founder of Conklin-based Schaefer Cider Co., makers of the Pux Cider brand
- Andy Sietsema, founder of Ada-based Sietsema Cider LLC
- Brett VanderKamp, president of Holland-based New Holland Brewing Co., the maker of New Holland Artisan Spirits
- Brandon Voorhees, co-founder of Gray Skies Distillery LLC in Grand Rapids
Here are some highlights from the discussion.
What path did each of you take to get into the alcoholic beverage industry?
BIERLING: I wrote computer software for 20 years and kind of got to the point in my life where I wanted to do something different, something more physical. I had been making beer for a long time by homebrewing. I looked around and saw a lot of breweries, but didn’t really see many distilleries, and I happened to like spirits quite a bit.
BEHRENS: I had a former life as a CPA. I’ve worked in public accounting for quite a few years. I’ve worked at Steelcase on the corporate side for about four or five years. This was supposed to be a hobby originally … and it just continues to grow beyond that stage. We’re out in Hudsonville on a 150-year-old family farm. One of the reasons for starting this, in terms of as an actual business, was to restore this farm that’s been in my family for five generations.
SIETSEMA: I grew up in the farming industry and it just kind of made sense to start making booze out of apples. So, that’s what we tried to do.
VOORHEES: I was just bored with my current career. I was working in food distribution, and it wasn’t super exciting every day. My business partner was living in Colorado and took a tour of a distillery out there and sent me some information saying, ‘Hey, this would be really interesting here in Grand Rapids. There’s a lot of agriculture we can use to our advantage.’ I was going to night class to get my MBA during this time, and instead of doing my regular old accounting homework, I decided to look up a pamphlet on how to start a distillery and how to make whiskey.
VANDERKAMP: I did not really have a career outside of this. I started homebrewing in college. I was just an awful student and barely made it through. I homebrewed probably more than I studied in college. One of my mentors and friends was Bill Owens, a pioneer out in California in one of the first brewpubs in the country. He and I were coalescing around spirits, and he actually helped me get started with the idea behind (distilling).
SCHAEFER: My family’s had a farm since the 1850s and my brother and I had been doing other things. I worked retail for about 23 years. I was kind of tired of that and had been homebrewing, and my brother had been making wine. So, we got together and said, ‘Well, this is silly. Why aren’t we doing stuff with apples, seeing that we have an apple farm?’
MERRILL: I had a previous life in neuroscience. I was in graduate school. I was teaching … and I left all of that when my husband Nick and I (took) a trip to visit his dad, who was originally a winemaker, but was working as a distiller at the time. I was introduced to Papa Bear, who had me run a mash that same day, and I liked it. And there was a lot of science in there that kind of matched with the neuroscience.
Does operating a cidery or distillery alongside the craft beer sector in West Michigan pose any challenges, or does a rising tide lift all boats in the alcoholic beverage industry?
VOORHEES: I think it’s two different tides, but I do think that the explosion of craft beer in this city opened up a willingness to try new things. Consumers here aren’t just stuck on, ‘This is what I know. This is what I’m sticking to.’ I think they’re willing to give it a try. That said, it is hard to get people out from the grasp of their local craft beer and say, ‘Hey, there’s room for experiences outside of craft beer as well.’
SCHAEFER: I find a lot of the folks that are trying our stuff are folks that have got a little bit of craft beer burnout because there is so much around here. And so it’s, ‘Hey this is something different. I’m tired of IPAs, I’m tired of stouts. There’s so much of it around here. And I’m kind of transitioning over.’
BIERLING: I definitely think that craft beer has educated people a little bit. … I don’t really see myself competing with breweries so much. I think it is a rising tide raises all ships. Our competitors are not really each other. The competitor is the major macro brands and the grip that they have on people.
BEHRENS: I think that’s an important part in all of this. There’s no reason to fight amongst ourselves when there is so much other stuff out there that isn’t local or is more mass-produced. That’s where the growth area still is as it relates to craft anything.
SIETSEMA: Cider for years has always been fighting (the question of) is it beer, is it wine — what is it? We get the people who are burned out on beer, but then we also get the people who will go, ‘Oh, it’s cider? I’m sticking with beer.’ So it comes with just a lot of education.
VANDERKAMP: There is going to be competition there, and we’re going to be running into each other, but that doesn’t mean that there aren’t craft experiences that we can all share and have. … I think there’s competition across segments, and that’s OK.
Craft cider and spirits parallel the craft beer sector in that these small companies are competing with these huge international corporations with longer histories and massive budgets. How aware are customers to the differences in craft and mass-produced products?
MERRILL: We’d be shooting ourselves in the foot to say, ‘I’m better than Absolut, or I’m better than Tito’s.’ … But people walk in all the time and try my vodka, and they say, ‘That doesn’t taste like X that I usually have.’ And that’s the open door for me to say, ‘Let me tell you a little bit about my process.’ This is the education point that everybody’s bringing up, and it’s my chance to talk about the process, the stuff that I’m passionate about as the owner and the distiller. I take that advantage when I can, when I have the people in front of me.
BEHRENS: I think there’s a segment of the population that obviously does care about that. … For cider, we haven’t really come up with a good way to communicate that to customers, but there’s a huge portion of the public that doesn’t care about that. They like something that’s a bit more craft, and they couldn’t care less if it’s owned 100 percent by Anheuser Busch or 20 percent by Lagunitas, or anything like that. They care more about price.
SCHAEFER: I think the problem that I usually have going with retailers is that they see the national trend about cider being soft, and so they’ve got these national brands that are in there. They’re like, ‘Well, we know these guys. We know Angry Orchard sells and this stuff sells.’ So I think one of the big things that I have a problem with is being able to say, ‘Hey, we’re local. We’re different.’
BEHRENS: And what’s the most mind share that any distributor can have at any time? How many brands is that? When you get to something like cider, which is already a smaller, niche product, it’s more often overlooked.
In this discussion with retailers or customers, how much education do you have to do around the variability of your products stemming from changing agricultural conditions?
VOORHEES: When we do tours of our facility, I like to say there’s a reason why we put a batch number on every bottle. That’s because our whiskey that we’re going to release this year is probably going to taste slightly different than our whiskey that’s going to be released in 2019. That’s not a bad thing. That’s a good thing. It’s going to reflect the farmers’ crops and a different climate at a different rainfall that year.
SIETSEMA: That’s where people don’t get cider. I press (cider) year round. … If you’re trying to meet consumer demands, you’ve got to be pressing. At least for me, I’m pressing every three weeks, at least. Apples are going to taste different in September, they’re obviously going to taste different in November, and they’re going to taste different in December, and so on. And the price fluctuates, but we can’t go to the distributor, and we can’t go to the consumer, ‘Hey, my price just went up 30 percent so I’m raising the price up.’
VOORHEES: I appreciate the science that some of these big boys have in the ability to blend in thousands of barrels to create a very consistent product, but I also (believe) in bringing this craft thing back full circle. … Every batch is going to be slightly different than the one before it.
SIETSEMA: We are like that as craft consumers. That’s what we all get geeked out about, but then the mass consumers are going, ‘Well, this tastes different.’
SCHAEFER: We’ve got to compete with the national brands where everything’s the same all the time.
BEHRENS: I think there’s a difference in package type, too. If it’s something in a bottle, I think people are willing to accept more variety from batch to batch. But when it comes to a can, they think it’s going to taste the same every time they try it.
MERRILL: One thing that I think that beer may have opened the door for is this idea of local (product). … All the little local restaurants, and they want to make their own shrubs, and they want to make their cool syrups and stuff. There’s so much seasonally that can be impacted there. There’s a lot of opportunity that I think that — at least in middle America — we haven’t really gotten to yet.
Craft beer grew because people were tired of drinking several different version of the same macro lager, but in spirits, some of the macro distillers sell some of the most coveted products. How does that affect the competitive dynamic?
VOORHEES: It’s an interesting problem in the world of bourbon. Just because this bourbon is being produced in larger quantities does not mean that it is less quality. Big bourbon has really figured it out, and they make some really good juice. And now we’re coming in and saying our stuff is better.
VANDERKAMP: I would take that further. Craft beer was solving a flavor profile problem. We were drinking macro brew and it all tasted the same, with very few differences. … Where craft spirits has the challenge is that we’re not solving a problem. There are great bourbons. So when you make a bourbon, I think that’s where you’ve got to look at your local ingredients. For us, with Beer Barrel Bourbon, it’s very clear. We say it’s aged in beer casks. That’s our point of differentiation that we want to own. If we were just making a bourbon, I’d have a hard time trying to take that brand further than probably West Michigan.
BIERLING: I only somewhat agree with you on that. I think the reason why a lot of great bourbons are great bourbons is because they’re really old bourbons. … On anything that has been aged for under two years, I think we can beat their flavor profile.
VOORHEES: You also have to talk about value to your consumer. At any given day, I could go and get an Eagle Rare 10 Year bourbon for $29.99 on any given shelf. That’s just hard to compete with. Yes, our two year juice is going to be better than most big brand two year juice. The problem is their two year goes for $15, and ours goes for $40.
MERRILL: And it’s not a big deal in (the macro producers’) pocketbooks to have set that aside. They haven’t taken over their tanks and their processes and borrowed.
The recent federal tax overhaul included provisions in the Craft Beverage Modernization and Tax Reform Act that will slash excise taxes. Do you see any real benefits for your companies?
VOORHEES: That is huge. That is amazing. It frees up a lot of cash for small distilleries throughout the country. We can now invest into more grains to make more products. Most importantly for us, we can set aside some of those funds for marketing. Marketing is a huge difference maker in the spirits industry, and that just frees up some cash.
BIERLING: One of the limitations in the long term is that it’s only a two year (tax relief). Now, it’s probable that it’s going to be renewed, but you don’t really want to necessarily plan around that. You’re not going to necessarily change your pricing just because of the tax change because you don’t know whether that’s going to stay in effect. The last thing you want to do is in two years say, ‘Oh, we’ve got to jack up our prices, just because the tax went back into effect.’
BEHRENS: For cider, it got us some of what we’re looking for. It’s not everything. Depending on what you add to your cider, that can have huge impacts on taxes right now, and that wasn’t fully addressed, nor (were limits on) carbonation levels. There are some things that really still don’t pass the sniff test, but it’s certainly a good thing overall — just not everything we wanted.
MERRILL: I would say that, sure, the federal tax changes of course are wonderful. At the state level, it could be a big difference for us though. For a bottle of our vodka at $30, it goes from $2 that I owe federally down to 40 some cents, but I pay $9.21 per bottle (to the state).
What are the issues in your industry that keep you up at night?
VANDERKAMP: The biggest issue that I see are younger generations drinking less. They are statistically speaking drinking less alcohol. At the same time … we have a consolidation on the middle tier with wholesalers. So we have less and less distributors, especially on spirit side. … If you want to go beyond Michigan at any point, you’re going to be looking at dealing with one or two people. You have two choices, and that’s pretty scary.
BIERLING: Self distribution — that’s one thing, I don’t know if I stay awake every night because of it, but it’s something that irks me pretty much every day. As a distillery, you don’t have control over distribution. If you’re more established as probably New Holland is, you have distributors that are more focused on your stuff. But as a smaller distillery … they just really have no incentive to push your product at all. I really wish that we could (self distribute) just like beer and cider. It doesn’t make any sense to me at all why we can’t distribute spirits here in the state.
BEHRENS: Being able to self distribute is a huge benefit for cider and for beer. I’m seconding that. The distributor thing is one thing that I would say keeps me up at night, because you’re seeing that consolidation, because you’re seeing all these new places come up and it’s all about local, which is great. But if you want to distribute anywhere outside of your home market — not even talking about outside your own state — good luck.