One Month of Sales, Superbowl Cocktails, Ramblings

[This post was going to have pretty pictures, but I have the flu so now it doesn’t. I might ninja-edit some photos in later.]

Well, the ball is rolling. We just closed out our first full month of sales! 118 cases of Krupnikas sold in January, which is a fantastic start. It’s almost too good of a start, as we’re now effectively out of money. ABC pays on Net 30, so we’re kind of just waiting for the checks to arrive so we can start making more Krupnikas! And also um… pay our bills. That’d be good.

As start-ups go, however, these are known as “Good problems to have.” And while I’m not the type to rest once we’ve had a taste of success, this is a good weekend for some celebration. The Super Bowl is here! Woohoo!

For those who don’t know me personally, I am about the most ill-suited body type for football possible. I’m 5’10 and just over 135 pounds. Ultimate frisbee is actually my favorite sport, and one that I’ve played semi-competitively for about 14 years. And being a Lithuanian raised here in the land of college hoops, basketball is certainly my second love. But in any case, I am nearly always entertained by football. Especially terrible football and players who make weird mistakes. Like when the quarterback runs into his own guy and fumbles the ball. Not to name names or anything like that.

Well, it’s the weekend of the big game! And whether you’re one of those normal people who watches for the commercials, or one of those weirdos who’s only watching for the football, we have a few Krupnikas and Football cocktails to suggest for the occasion.

All right, one caveat: I fully understand that football is a beer-drinking game. At that, Krupnikas is great as a shooter or a sipping liqueur on its own. But even if you don’t mix cocktails and football, these are great to try well, whenever you want to. Depending on the occasion, we’ve got a couple different suggestions. Like all our other drink suggestions, we try to keep things simple.

The Shooter: Hazel Honey Bear

Mix equal parts Krupnikas and Frangelico in a shaker with ice. Shake to chill, and pour into shot glasses.

The Blender: Lithuanian Mudslides 

Mix 3 oz Krupnikas, 3 oz Kahlua, and 3 oz Baileys in a blender, add enough ice to fill. Blend. Coat (the inside, duh) of four glasses with chocolate syrup and split the delicious blended stuff between them.

The Dessert: Scottish Spiced Snowballs

Mix equal parts scotch and Krupnikas in a serving bowl or glass and add a scoop of vanilla ice cream. For the bold and adventurous, add fresh ground black pepper and / or cayenne.

Krupnikas is on shelves!

Now available in several North Carolina ABC Stores!

Now available in North Carolina ABC Stores! Also, this is a ladder, not a shelf. Photo Credit to Molly Milroy

Well, it’s finally here. Krupnikas is on the shelves in several North Carolina ABC Stores!

I was really hoping we’d make it to shelves before Christmas, but a couple delays with our packaging supply ended up pushing everything back. But we were able to get our labels printed, and made a special delivery just before New Years to the Orange County ABC.

Those six cases were put on the shelves at about 11 am on the 29th of December. Almost every bottle was sold that same day.

Getting the first pallet to the ABC warehouse took a bit of extra work. The warehouse is run by an independently contracted company. To schedule a delivery, you first fax in a bill of lading with your proposed drop-off time, then call and leave a message on an answering machine, explaining that you just sent a fax. Following this, they will light two candles if the omens favor delivery, or three if the British are invading. Then we load up our cart, hitch up our old ox Ingrid, and head out east to a midnight rendez-vous in the east carolina swampland where we made the handoff to a man named Earley with a beard that he tucks into his belt.

Okay, so we actually just rented a truck and went and drove it over to the warehouse. But it was still pretty exciting.

What’s even more exciting is that it’s selling! Of the first 60 cases we delivered, there are only 26 left. I can track the stock status online, but where they’re headed is not immediately clear until a pony express rider arrives with a invoice written in Sanskrit on a clay tablet.

Okay again, that’s not true. They use the US Postal Service. And fortunately Sanskrit is strangely close to Lithuanian so it’s not that huge of an inconvenience.

In any event. Brothers Vilgalys Krupnikas is on shelves! If you want to find some, it will also be useful to have the Case Code # for the ABC pricing system, which is 66256. That way the nice folks at your local ABC will have an easy time of looking it up. All the local ABC boards are independently run, so product selection is up to the individual boards and managers.

Confirmed ABC Boards that have ordered some:

  • Orange County ABC
  • Wake County ABC
  • Triad Municipal ABC (Winston-Salem)
  • Chatham County ABC (Pittsboro & Siler City)
  • Franklin County ABC
  • Concord County ABC
  • Durham County ABC will be ordering some on Monday, and it will be on shelves Thursday the 17th of January

Even if your local ABC is not on that list, you can ask them to stock it. They just might listen. Or pass along an email to me suggesting that I call and do my best to persuade them. If that fails, you can always make a special order, which is a case (6 bottles) at a time.

The next thing I am going to do (or the thing I keep telling people I will do) is put together a google-maps with all the confirmed Krupnikas sightings out in the wild, so that you can just enter a zip code and the magic internet thing will tell you where to get some. But that will be on the website on a when-I-figure-out-how-to-do-it basis!

Okay, think that’s everything. Cheers!

In Production! Labels Approved! On shelves soon!

I’m just going come out and answer the most common question that I’m getting there days:

Not yet, but very soon.

The question of course, is, “When can I buy some Krupnikas?”

Believe me, I understand your impatience. I’m doing all I can to be sure it’s ready by Christmastime, and it’s looking good as far as meeting that deadline.

Spices Boiling for Batch #004

Here’s where we are, right now. Our formula was officially approved at the start of October, meaning we’ve been allowed to make Krupnikas for the past couple months. So far so good. We’ve filled up our inventory with the first 4 batches, comprimising 120 gallons of Krupnikas. The facility smells absolutely delicious by the way. I’m pretty confident this might be the best smelling Distilled Spirits Plant in the country.

But wait! We still needed to get our label approved. And that has just gone through this past Friday.

So now there are two things standing between you and a bottle of Krupnikas.

The first is the logistics of getting the labels printed, along with the closures, bottles, seals, and cardboard boxes. All of those come from different suppliers, so there is a bit of wrangling to make sure everything works out. To complicate things, we’re running up against Thanskgiving, so not a whole lot of phones are being answered this week.

The second thing, which is still something of a ‘black box’ to me, is ABC approval. This is kind of a two-step deal, with the state ABC granting product listing along with space in their warehouse, and with the local ABC boards actually deciding which products go on the shelves.

But. We have our label approval, which is the last step in dealing with the federal government. And so far all my dealings with the ABC have been very straightforward and they are very nice to work with. So I do not anticipate any more major hangups.

Amidst all these unknowns, here is what I do know: Our first pallet of bottles from O-I will arrive November 29th. The T-Top corks, from Tapi, are already here. The labels will be cut and printed soon by Wright Labels in High Point. And the boxes are coming from Carolina Container. Once the stuff is packed away, the first pallet is ready to go, and ABC gives us the go-ahead, it is only a matter of days before it makes its way onto shelves. I do not know how many days 😉

Second most common question: “Where will this be sold?”

For sure: Local ABC stores here in the Triangle are my main priority. Depending on how our sales go early on, I may only be able to keep up with them. If not, I will do what I can to spread out our distribution to other states if possible. Again, this is going to be very, very crazy over the next couple months, so I apologize if I cannot make it available in your state come the Holidays. Just think of how much smoother 2013 will go 🙂

Hope all of you have a wonderful Thanksgiving. And I want to say I am especially thankful to all the fans and founders out there who’ve helped get this far. We are so, so, close to getting this product on shelves and could never have done it without you.

Hurry Up and Wait

On the bright side, our Kettle Controller is all done. This contraption keeps our reduction kettle nice and warm while it’s doing its thing.

The past few months have been a lesson in patience. We were granted our Federal DSP (Distilled Spirits Plant permit) at the end of August, a process that started back in June. After that, I put in for the ABC permit, which arrived mid-September. At this point, we are 100% legally allowed to begin producing alcoholic beverages.

However, obtaining the ingredients for those beverages, as well as putting said beverages into bottles for sale becomes a tricky matter. We’re not distilling our own alcohol, at least not for now. In order to buy it from a supplier, we’re waiting on something called a “Transfer in Bond” application, which lets us assume all the excise tax liability on the booze we buy. Because we have something called a bonded space (protected by our “magic red line” technology, patent pending), the alcohol can sit here tax-free. The taxes must be paid when it leaves our building in bi-monthly payments. Meaning, we get to pay taxes every two weeks! And who doesn’t love paying taxes?

If that sounds a bit complicated, it’s because it is.

There is a separate process for getting our label approved. Generally speaking, we have to include a few specifics about what kind of product this is, what percentage alcohol it is, and that government warning text that’s on every bottle of spirits, wine, or beer in the country. It is not a terribly complicated list of requirements, but there is a backlog of roughly a month between submission and approval.

But wait! We’re not even ready to submit that just yet, because before that can even get started, we need to get our ‘formula’ approved. Which makes sense, given that this is a consumer product, and some really terrible things can happen if you mess up during production. I submitted our formula as early as we possibly could, which ended up being in early September. But… we’re still waiting. The TTB Forumla’s and Labels division operates as something of a “black box” and answering what must be frequent phone calls about “what’s up with my application” is clearly not a priority for them. But, since it’s overdue already, we should be good any day now to submit our label for approval. And then we get to wait some more.

Since I am either an optimist or an idiot, I still believe we can see Krupnikas on shelves in North Carolina sometime in early November. I’ll be doing everything I can to get this up and running so we’re in place for the holidays. Not only is it the perfect drink for the cooling weather, it’s fantastic for sharing with loved ones, and makes a wonderful gift as well.

As always, I want to say thank you to our Founder’s Club members who have helped keep the lights on and the rent paid during this time. We are up to Ninety-Seven members. Again, 97 members! With more folks joining all the time! That’s just amazing to me.

So hang on just a bit longer. We’re gonna get there. Soon. Ish.

Our Federal DSP has been approved!

Our space in Downtown Durham

Here’s a very exciting update! Our Federal Distilled Spirits Plant application has been approved. This is the single largest hurdle in getting underway in the spirits industry.

Putting this in perspective, you can’t apply for this permit until you have a facility leased or purchased, and all your major equipment is already in place. It involves some extensive financial documentation, the purchasing of a Surety Bond, along with descriptions of security, plant premises, operations, and individual applications for each owner (fortunately we only have one). I put in the application on June 7th, and it was approved on August 30th. So it’s quite a relief to have that behind us.

We’re not through the red-tape forest just yet. The next steps are the North Carolina ABC Distiller’s Permit along with our Federal Label approval. When both of those are complete, we’ll be able to actually begin production and start working with the ABC to get our products stocked.

If you’d like to look at our label concepts, you can check them out here. We’ve been working with designer Meghan O’Brien, a graduate of the NCSU College of Design. She’s also the artist behind our logo and the woodblock prints and t-shirt that you can get through our Founder’s Club.

We’ve also had some recent attention from the press, with a couple articles in the Durham News Bulletin, the Triangle Business Journal, as well as the Independent Weekly. I’m holding off on my media blitz until I have an actual product to back up the hype, but it’s great to see such a strong local interest in what we’re doing.

A Whole Lot of Good News

Things have gotten pretty busy around here. Busy enough that this blog update is long overdue. Apologies for that. Anyway, the news!

To begin with, The Brothers Vilgalys Spirits Company now has a location! Our first start-up home will be at 803 D Ramseur St in Durham. We’ve also narrowed our focus to just making Krupnikas and put it in bottles. This meant having to shelve some of our goals such as running off biomass fuels and distilling our own spirits. However this way we can make this happen without having to raise, and risk, hundreds of thousands of dollars. To make this happen we have two wonderful lenders who we’ve met through Slow Money NC, a credit card through our local BB&T branch, and an equipment lease through Brewery Finance. Not to mention that our Founder’s Club has grown to 69 70 members, which is just amazing to me.

The other item is that as of today, our Distilled Spirits Plant application has been filed with the TTB. This isn’t the only permit we’ll need, but it’s a major step, and the most in-depth out of all the red tape that we’ve been working through. It takes an average of 60 days to process, during which time we can get to work on the other stuff. In the next two months we’ll be handling our state and local permits, putting our remaining equipment in and making sure it works, and contacting suppliers and media folks getting ready for the big day.

And then the really fun part can begin. I am so, so ready to be finally making some Krupnikas. I’m not even going to hazard a guess as to when we’ll actually be in production, but it definitely feels like it’s within sight now.

As always, you can follow our (much more up to date) progress on The Brothers Vilgalys Facebook Page.

In Praise of the ABC

The Brothers Vilgalys Spirits Company has existed, on paper, for just about a year. February 10th will be the official anniversary of our incorporation as an LLC. And just over a year ago, I put up the first blog post on this site, calling on Governor Purdue to help privatize the ABC stores. At the time, I was just getting started. I knew very little about spirits as an industry, and even less about business. And the prospect of working with a government regulating body was at first very daunting. I imagined that in a privately-run system that things would be so much simpler. I can now say will all confidence that I was wrong.

First of all, I should say that every distiller and broker I’ve talked to has said the ABC has been enormously helpful. This is especially so for North Carolina distillers. As a government-run monopoly, the ABC has flexibility that a private distributor just doesn’t have. They can afford to promote in-state products in favor of other more widely-marketed brands. North Carolina products receive premium shelf space, and are sometimes stocked in multiple places in the store. And the ABC’s transparency as a government agency makes a lot of the information we need as a start-up much more accessible. We were able to get sales records by county, and a separate record of statewide case sales by brands from the NABCA, all thanks to the ABC.

We’ve also recently seen what can happen when a state does sell off its liquor stores. A few years ago, Washington had a booming craft spirits industry. They also had state-run liquor stores, which worked closely with the Washington Distiller’s Guild to promote local spirits. Washington’s legislature had relaxed some burdensome laws, decreasing the cost of permits and allowing direct bottle sales to consumers from small distilleries. Because of this, and also because of strong support from Washginton consumers, the state has over 40 approved craft distillers, making it one of the premier states for the craft distilling movement.

As it has elsewhere in the country, the debate over liquor privatization was brought before Washington voters. The initiative was bulldozed through largely by Costco, who spent over $20 million dollars to pass the referendum. And it was Washington voters themselves who decided to pull the trigger.

The result of this was very good for Costco, who can now sell national liquor brands at a steep discount. However Costco and other large retailers do little to nothing to benefit local producers who simply can’t supply the quantities or discounts they expect. The state-run stores, in the process of winding-down, cancelled orders, while still forbidding small distillers from self-distribution. The new law also imposed high fees on direct bottle sales, meaning that the distiller now pays taxes on the production, distribution, and retail of spirits for each bottle sold from a single location.

Liquor privatization is still a pressing issue in many control states. It’s likely that Washington won’t be the last state to see this enacted, and Ohio is also making the transition. The current political climate here in NC seems to indicate that the ABC isn’t going away anytime soon. It’s a huge revenue generator for the state, and selling it off in the name of balancing the budget simply doesn’t make much sense.

There are still many areas where NC can become more helpful to craft distillers. It’s already the foremost southern state for craft beer, and with five craft distilleries and counting, we’re poised to follow suit for spirits. The best way to reform the system and help small businesses like ours would be the passage of Senate Bill 713, which we’ve talked about before. This bill would allow us to sell bottles directly to consumers, a huge step for a small start-up like ours. It’s also up to distillers themselves to ship to the ABC warehouse, even though daily delivery trucks arrive at local ABC stores to drop off spirits, then return empty. But these are small grievances compared to suddenly having your distribution upended in favor of huge retailers.

We still haven’t seen the full results of the shake-up. Perhaps in March, when the new self-distribution rules take effect, we’ll see if Washington distillers are able to adjust and thrive in the new business climate as they have in the previous one. That is supposing they can weather this transitional period at all. What’s clear from this example is that when large business interests are steamrolled through in the name of ‘deregulation’, small businesses are often those who pay the penalty. State regulation of liquor effectively levels the playing field between small and big, as every product must go through the same steps to reach consumers. When you take out a regulator, and replace them with a large distributor or retailer, you don’t see the promotion of local interests, but the same national brands as everywhere else.

The Brothers Vilgalys & The Law (Part 2)

Today marks the 78th anniversary of the repeal of Prohibition in the United States. It’s certainly a good occasion to raise a glass or two, and celebrate the American ability to sometimes back down from crazy ideas that don’t work.

At Brothers Vilgalys, we’re going to celebrate with a history lesson. We know you’re excited about that. We’re going to sit down for a drink with the ghost of prohibition and take a look at just how our seemingly bizarre set of alcohol regulations came to be the way they are.

In Part 1, we looked at the web of permits and approvals that stand between a business plan and actually making and selling some liquor. Needless to say, there’s a couple miles of red tape. The most significant difficulty facing a new distillery in North Carolina is the lack of any direct-to-consumer sales, an oversight that would be corrected by some pending legislation, NC Senate Bill 713. Obviously, this is a bill that would affect our eventual launch quite a bit.

But first, let’s back up a bit, to the days just before repeal. The ‘noble experiment’ was an obvious failure. It had absolutely failed to reduce drinking in the US, and had only driven the profits from booze away from legitimate taxable businesses and into the hands of criminals. At that, ordinary citizens routinely flouted the rule of law visiting speakeasies and supporting a booming trade of moonshiners. The government was missing out on tax revenue from alcohol, and spending even more money to try and stop its illicit trade. And to add to that, none of the social problems of poverty, alcoholism, crime, or domestic abuse had diminished — in fact they had only increased.

The only question then, was what would come next. And on that topic, there was very little public debate. Repeal was enacted, and regulation was left up to the individual states. This is the largest singular reason for why our alcohol laws are such a patchwork mess — each and every state is responsible for their own system of regulation, and every state more or less invented their own methods of control.

However one study was conducted, commissioned by John D. Rockefeller Jr. Rockefeller, himself a teetotaler, had been on the of the key proponents of prohibition. But his support had waned after seeing years of lawlessness and chaos, and now he was one of those leading the charge towards repeal. Rockefeller asked Raymond Fosdick and Albert Scott to come up with some kind of structure for “the self control and temperance as regards to the use of alcoholic beverages.”

The result was a tome known as Towards Liquor Control. This set in place the system used, in some way, but almost every state today. Well, except Missouri. But let’s be real, in Missouri you can distill your own alcohol, serve teenagers in restaurants, and drive with an open beer in the car. So pretty much anything goes there.

As for the rest of the country, we have either ‘control’ or ‘license’ states. In control states, of which North Carolina is a prime example, you have state-run control over the wholesale, and possibly also the retail, of spirits. Wine and beer are sometimes included, or excluded. Once again, see the part about every state being different.

In license states, you have what’s called a three-tier system. That is a mandated separation of producers of booze, wholesalers and distributors of booze, and retailers of booze. Any one party is prohibited from any kind of financial interest in another.

These regulations go back again to the cause for prohibition in the first place — the saloon. Saloons were pretty much the main reason we had prohibition in the first place. You had large producers of booze who would finance the saloons directly, then do anything possible to drive up sales, regardless of social consequences. Imagine if Wal-Mart was a chain of bars. Only along with low prices they offered hookers and free drinks. Then they hand you your car keys and tell you to drive as fast as you can so the cops don’t catch you driving drunk. That’s kind of what things were like, or at least it summarizes how most people felt about saloons in those days.

The main idea in the three-tier system was to protect the retailers. The tavern owners would no longer get bossed around by the big producers, who now had to work through independent regional distributors. And by removing the producers as creditors, the tavern owners would be responsible to the actual needs of their community rather than just trying to drive up sales to pay their way out of debt.

Of course, the big winner here were distributors. At one time they provided a convenient service for producers too small to distribute their own products, but now they are legally-enforced middle-men. Retailers need them to supply the booze, and producers need them to sell it. As the economy has grown, distributors have consolidated their power, and are now effectively the gatekeepers as to what kind of brands get sold where.

At Brothers Vilgalys, we’d really like to change that. We want to be a brand that connects to our consumers directly. That’s a big part of why NC Senate Bill 713 is so important to us, because that allows us to focus less on red tape and working through a good-ol-boys network, and more on the community of Durham and the rest of the triangle. This bill wouldn’t change everything, but in this modern economy, allowing us to sell our own product just makes more sense. We’re past the days of the Anti-Saloon League, and fear of the demon rum. We’re now in the era of the microbrew revolution, and thanks to recent reforms like Pop the Cap, we’re seeing a blooming of fantastic new libations made here in North Carolina. NC Senate Bill 713 offers a chance to bring the same kind of reforms to distillers, offering them a couple of the same advantages already granted to breweries and wineries. We hope to soon be joining this renaissance, and we also hope you’ll join us for the journey.

Our Approach Towards Sustainability

“Sustainability” was one of the first words that came to mind when I was drafting the company values for the Brothers Vilgalys. Everyone wants a business that is ‘sustainable’ or ‘green’ or ‘eco-friendly.’ And what sort of Eno-river-hiking NPR-listening farmer’s-market-shopper would I be were I not committed to environmental responsibility? But I want to do more than pay lip service to environmental ideals and buy recycled office products. I want to build a sustainable business from the ground up.

Think about what the word sustainability really means. In an of itself, that is the goal of any business — to sustain itself. So to make any kind of impact, our plans for the company have to be realistic and achievable. It would be great to take every single green reform into account, but we’re a start-up with limited money, so we have to focus first on what problems we want to solve and then on what we can do about them.

Global climate change is perhaps the greatest challenge faced by humanity today. The reality of these changes is beyond dispute. The only factors left to solve are how fast and how much the oceans will rise and weather patterns will change. And that likely depends on our willingness to make changes and cut down on our carbon dioxide emissions.

I set the goal early on of running a carbon-neutral company. It’s true that it would be both simpler and cheaper to use fossil fuels and commit to cutting emissions later on, but the climate crisis is not going to wait for us to “get our shit together”. And even with a small business, I’d like to do things right from the very beginning.

Making Krupnikas involves heating both a spice reduction and honey. I decided on steam-jacketed kettles as steam is one of the most efficient and affordable means of transferring heat. These kettles are also commonly used in restaurants, cafeterias, soup kitchens, and food processing, so they are widely available used. We’ve already purchased a 40 and a 100 gallon to start production.

The other issue to consider is our fuel source. Most steam-boilers run off electricity, natural gas, oil or coal. I’d read about a technology called wood-gasification that uses waste biomass material such as wood chips or sawdust to generate clean-burning syngas. The more I learned about wood gasification, the more I wanted it to be a part of this business plan.

Wood as a fuel is renewable, locally available, and largely unaffected by global energy prices. It is also cheaper than fossil fuels, and since the biomass we’re using is part of the active carbon cycle, we have the net effect of being carbon-neutral.

The only difficulty lay in finding a biomass boiler that was small enough for what I needed. They’re commonly used by large industrial manufacturers, especially those who have an excess amount of waste material on hand to burn. But to find one scaled down for my purposes took a bit of hunting. After a while, I discovered a couple models, one offered by Alternative Heating Systems, and another more ‘homebrew’ solution from Allpower Labs. We have yet to actually buy the boiler, as this will be one of the larger individual costs and will depend largely on what facility we end up renting.

The next steps will come in looking at our ingredients. We already know that some of the best honey in the world comes from here in North Carolina. We’ll continue to look for suppliers of spices and alcohol that satisfy our own commitment to sustainability. As with many aspects of starting a business, the work is never quite over.

Google Insights and Sales Forecasts

While putting together some rough sales goals, I came across something pretty interesting in Google Insights. Check it out!

Searches for ‘honey’ and ‘liquor’ take a big jump around the holidays, and so do searches for ‘spiced’. Really not that surprising (everyone loves some Krupnikas when it gets cold), but it’s good to know our gut instincts were on the right track.