“We need to communicate to consumers what ‘real’ craft is.”
This is what people in the craft distilling movement have been saying loudly and often for the past two or three years — that there’s a dire need to separate out the “makers” from the “fakers,” those who actually use their experience and skills to produce excellent spirits, and those who merely buy in bulk and rebottle, then market and price their product as if it were handcrafted.
But the most debatable word in the quote above isn’t “craft.” It’s “we.” Because this was said to the Financial Times by Alexandre Ricard, the newly appointed chief executive of Pernod-Ricard, maker of Martell cognac, Absolut vodka, Jameson whiskey, among others, and the second largest spirits company in the world. This is the most high-profile acknowledgement to date that craft spirits may be eating into the bottom line of the major producers.
Recent financial reports from liquor conglomerates have shown slowing of sales in the U.S. market, and a likely culprit is the rise of craft spirits. A younger generation in particular seems to be looking for “local” and “authentic” and want to buy products that better convey who they are. And they emphatically are not a mass market brand.
The big players in spirits have been sniffing around the margins of the craft world for a few years, waiting to see what happens, and gathering up some low fruit. But I’d wager than in years to come, Ricard’s comment will be seen as the equivalent of the firing on Fort Sumter that launched the U.S. Civil War.
While craft producers have been fighting a low-key rear-guard war against the fakers, this opens a far larger and more fraught front, in which the major producers will fight to own the term “craft.” “I’m struggling with the definition of craft spirits,” Ricard said. “Does it have to mean small? Or an entrepreneur with a pot-still in his garage?” Or could it mean anything produced with an eye to quality, such as Jameson? He didn’t ask that, but he didn’t have to. Budweiser opted to mock craft beers in its current ad campaign, but big liquor will fight to own it.
This may also be seen as a turning point in the craft distilling world in another way. I just returned from the American Craft Spirits Association second annual meeting in Austin. Harry Kohlmann of Park Street Imports, in the best presentation of the conference, suggested that the next few years will see the Diageos, Pernod-Ricards, and Brown-Formans of the world acquiring broad regional portfolios of craft spirits. Each might acquire a half-dozen or more small spirits makers — say, one each in the Northeast, the Pacific Northwest, California, Rockies, etc. They could then flood the zone, and erect a defensive line against further encroachments from those garage-based pot stills. (This will work only if they can wrestle the definition of “craft” away from a focus on ownership and make it interchangeable with quality.)
This scenario seems completely reasonable. And it will signal the opening of yet another front in the fight over craft distilling: the battle to become the dominant craft distiller in each region, thereby inviting courtship from the majors and the potential for a huge payout.
Craft distilling was launched with a sort of boot strap mentality —“the entrepreneur with a pot-still in his garage.” The field was generally marked by congeniality, with regional producers helping one another out, since everyone was competing against the big guys.
But that era may be drawing to a close. We’ve seen much more serious money moving in and funding high profile distillery start-ups. And if there was a mantra at this year’s ACSA conference, it was “own your own backyard” — that is, focus regionally, not nationally. The unsaid part was: "Position yourself for buyouts."
Where's this all headed? No one really knows. But craft distilling looks as it will soon have more of a burn on entry, and a long finish dominated by persistent notes of redefinition.