What is Craft Spirits? - Should there be a legal definition?

First published on Distillique's website 2015 GM Bosman

“Craft Spirits”

“Craft Distilleries”

“Handcrafted”

The list goes on.

 Over the last couple of years the massive boom in the spirit industry in this sector of the market has led too much and continuous debate over the subject of what exactly constitutes Craft.

 In the United States especially, there have been multiple law suits against producers using terms such as “Handmade”, “Handcrafted”, etc. on their labels and marketing material. Most of them due to there being no real definition for what constitutes a Craft product.

What exactly does “Craft Spirits” and “Craft Distilling” mean?

 

General Descriptions of Craft Spirits

As part of Distillique’s Craft Distilling Business Training Course, we always have workshop session discussing exactly what is Craft, and how your definition and practical application of it can be utilized in Brand and Product Positioning, Marketing, Branding, etc.

 Now keep in mind, the attendees in these classes are well-educated individuals, already purchasing and consuming Craft products (Spirits, Beers, Cheeses, etc.) and have already given a lot of thought to Craft Distilling as a business (otherwise they would not be attending the course).

 Even so, there are normally some confused looks in the beginning, and then the first adjectives start coming out:

Handmade         Small Batch                     Niche                    Innovative              Unique               Owner Operated             Honest                Top-End               Expensive           Different                           Local                   Farm to Bottle                   Trendy                 Traditional                       Modern              Experimentation              Small Quantity   Art                                     Regional             High Quality

 The list goes on …

 Should you ask the normal man on the street, he/she will probably end up giving you the same descriptions, but normally they stick to Different, and Expensive.

 Now here at Distillique, and especially within our “spin-off” organization SACDI (South African Craft Distilling Institute), having an actual definition of what constitutes Craft Spirits is quite important, firstly to protect the industry from Mega Producers or Disreputable Distillers putting products on the market as Craft, charging a premium, and then ripping customers off with poor quality products. We want to protect the Honesty of the Industry, as well as its reputation.

Secondly, and this is specifically applicable to South African Liquor Law, we want a specific category for Craft Distillers and Craft Products in South African Liquor Legislation, that protects our interests and operations. To achieve this we therefore need a Legal definition of Craft Spirits and Craft Distillers. But more on that a little later.

Recently I read an article on www.thespiritbusiness.com entitled “Top 10 Craft Spirits Descriptions”. These are now descriptions given by Distillers, Ambassadors and Commentators across the Spirit Industry (in the USA).

The descriptions clearly portrayed what the Mega Distillers and Micro Distillers WANT the definition of Craft Spirits to be.

Here are some extracts from their definitions:

“You don’t have to be a tiny company to be craft: it’s more a mentality and a mindset than a specific definition. But at the end of the day, it’s the consumer who decides what they believe to be handcrafted.” - Wes Henderson, Louisville Distilling Company

“Craft distilling should not just mean small batch; it‘s not something that can be defined by numbers – it’s not the difference between 60,000 litres of 6,000. Craft should mean the ability and understanding of distilling. You’re probably working in much smaller quantities as craft distillers, but it’s not necessarily about the size of the still – it’s about innovation. The big players simply don’t have the time to innovate on the scale we do, and so I find it difficult to accept them as craft gins.” - Alex Nicol, The Spencerfield Spirit Company

“For me, it means integrity, quality and being inventive. It’s not all about size and big companies could be involved in the craft sector. Size alone isn’t a valid definition. You could be a smaller company that isn’t being creative and just copying other styles out there.” - Lance Winters, St. George Spirits

“Craft is about artisanship, passion, experience, great liquid, great products. Not all small distilleries are craft, and not all craft distilleries are small.” - Ewan Morgan, Orphan Barrel Distilling Company (part of Diageo)

“Craft is definitely a word that’s banded around a lot. There’s craft everything; craft, craft, craft. Craft means a real sense of care; real care in your liquid, your packaging, care in how you execute in store, in how the world sees you. I think it absolutely applies to Diageo’s gin brands. I kind of reject the notion craft needs to be small because every single batch that’s produced of our brands is what I would consider as crafted.” - Charlie Downing, Head of Gin at Diageo

 From the definitions above, one thing seems VERY clear – many producers are shying away from anything that limits their production size, especially the Mega Distillers who are producing spirits that they label as Craft.

 Chip Tate, founder of Tate & Co, made this clear in his definition:

 “There’s always room for debate about what craft really is. It has to be smaller output, but it’s not obvious what exactly this should be. You can’t necessarily produce 100,000 cases and call yourself craft, that’s just savvy marketing. I think the most important thing is transparency as there is a lot of doubt about what craft spirits are.

 “Personally, I see craft as a performance art and forming traditions through innovation. There’s also an aspect of independence and having the ability to be creative. So the important thing is to have some understanding of your craft – take what you have been given, respect it and ad something fresh to it. I don’t think implementing a size cap is the most helpful conversation to have right now. My concern is to do with what is obviously not craft. The specifics are going to take time, but bare-faced misrepresentation is an issue.”

And Nicolas Cook, Director General of The Gin Guild, put it even more bluntly:

“I think the term craft is being abused. There’s a big gap as to what it means and what consumers understand it to mean. The industry does seem to recognize gins that aspire to being small, or made by hand, small batch or having some sort of heritage – even if it was only yesterday – as being craft.

“I think it’s perfectly right that there’s the use of that word for brands in the industry who actually make the spirits themselves. But there are a few brands I am not going to name who do embellish their story by blatantly lying or alluding that they make it and they do a big disservice to the consumer. If people abuse that terminology in an attempt to bamboozle consumers then they will suffer. I don’t think we’re going to see a legal definition any time soon.”

Maybe the time for a legal definition is closer than we think. But what would that definition be?

The Challenge - A Legal Definition for Craft Spirits and Craft Distilleries

Now I am not a Lawyer or Legal Expert – let me be honest about that from the start. But referring back to my couple of varsity semesters of Commercial Law some 15 odd years ago, I do seem to remember that a legal definition needs to be measurable (quantifiable), clear (not open to interpretation), objective and relevant. To this we could also add legal precedent (which is always a useful basis when adding new definitions).

If we then take these requirements, and look at the list of descriptives mentioned earlier, what do we see?

 Handmade         Small Batch                     Niche                    Innovative              Unique               Owner Operated             Honest                Top-End               Expensive           Different                           Local                   Farm to Bottle                   Trendy                 Traditional                       Modern              Experimentation              Small Quantity   Art                                     Regional             High Quality

Innovation, Niche, Unique, Honest, Different, Trendy, Traditional, Modern, Experimentation, Art and High Quality are all terms we cannot use in a definition, as they are not Measurable, Clear or Objective.

Some people may disagree with this, but let us look at one of them – Innovation.

A favorite used by many distillers to describe craft (as clear in the earlier quotes). When the first bottle of Jack Daniels was produced, it was innovative. When the first bottle of Jameson was produced, it was innovative. When the first bottle of Smirnoff was produced, it was innovative. Each time a new product comes out, it is innovative. Would we today consider those products as Craft? No! So does that mean there is a time-limit on the use of the word? “You are a Craft Spirit for 3 years, but if you don’t change your recipe after that period you are no longer Craft.” That would be ridiculous and unenforceable. So NO … Innovation cannot be utilized in a LEGAL definition for Craft.

Farm to Bottle is Measurable, Clear and Objective, but is it Relevant? No. Because not all spirits is or can be produced in that way – i.e. a Rum Distillery would not necessarily be able to manufacture its own molasses. Raw Material to Bottle – implying Fermentation, Distillation and Spirit Enhancement on the same premises IS however Relevant. The same is true for Local and Regional as definition terms, for if I wanted to open a Pineapple or Banana Schnapps Distillery in the Western Cape (South Africa) while the closest Pineapples and Banana’s grow in Natal or Mapumalanga, I will not be sourcing locally or regionally.

Top-End and Expensive can be quantified and measured (with a sales price range for instance) and that would be clear and objective, but again, where is the relevancy?

That leaves us with 5 possible definitions:

Handmade                          Small Batch                         Owner Operated             Small Quantities                           Raw Material to Bottle  

Now how would we define each of these terms?

Small Batch and Small Quantities

Just because it is the easiest to discuss, let us start with Batch and Quantity Sizes. Here much of my reasoning is based on the South African Liquor Law and its precedents, so I hope International Readers will bear with me, and apply it to your own legal requirements.

Firstly, South African Law only allows for two still types. Continuous stills, and Pot Stills. But in terms of the legal definition of Pot Stills, all batch operated stills, whether they are Pot Stills, Alembic Stills, Adjustable Reflux Column Stills or Fractionating Reflux Column Stills (Plate Column Stills) are considered to be Pot Stills.

Secondly, South African Law allows for National Distillers (more than 2 000 000 litres AA) and Micro Distillers (less than 2 000 000 litres AA, roughly 5 900 000 bottles per year).

What we propose is a third category, Craft Distillers limited to a production capacity of 200 000 litres AA per year (590 000 bottles) – 10% of the capacity of Micro Distillers. This would satisfy the requirement for a Craft Distillery being a “small” distillery.

Now in terms of a proposed batch size definition for Craft Distillers. If we continue along the reasoning already in use, and say that the maximum production allowed for a craft distiller is 200 000 litres AA or 590 000 bottles per year (10% of a Micro Distillery), we can work that back to relevant batch size.

 200 000 litres AA per year                                                                                                  16 666 litres AA per month                                                                                              750 litres AA per day (assuming 22 working days per month)                                    830 litres AA in Fermentation (assuming 90% recovery in the still)                          8 300 litres Fermentation Size (assuming 10% ABV Fermentation)                           9 200 litre total boiler Size (allowing 10% head space)

 That means that a Craft Distillery will only be allowed a total distillation capacity of 9 200 litres, i.e. a single 9 000 lt boiler, two 4 500 lt boilers, four 2250 lt boilers, etc.

 Or worded differently (in South African Legislation) …

 “A Craft Distiller will only be allowed to use a Pot Still (Batch Operated Still), no larger than 9 000 lt in terms of Boiler Size, and with a total Distilling Capacity of no more than 9 000 lt at a time.”

To expand on this however, we also need to define batch size, to allow for popular claims of “Small Batch” distilled products.

Here we would like to see a size limitation of 100 lt AA per batch. This does however mean that the actual boiler size used per batch would differ from product to product based on the amount of absolute alcohol in the actual fermentation, i.e. 1 000 lt boiler for a 10% Potato fermentation vs a 600lt boiler for an 18% Rum fermentation.

The wording therefore changes to:

“A Craft Distiller will only be allowed to use a Pot Still (Batch Operated Still), no larger than 9 000 lt in terms of Boiler Size, and with a total Distilling Capacity of no more than 9 000 lt at a time, where the total recovered alcohol does not exceed 100 lt of Absolute Alcohol per batch.”

Raw Material to Bottle

One of the greatest threats to Craft Spirits is the loss of the trust that consumers place in our products. This can happen very quickly with disreputable producers using “Craft” on their labels to validate a high price for a substandard product. A perfect example would be individuals purchasing Neutral Spirits in bulk from Industrial Sources, then flavoring that product with artificial flavoring or essences, bottling it, and placing it in the market as Craft.

It would therefore be essential as part of any definition, that we ensure that all 3 Sprit Production Steps, Fermentation (which would include Starch Conversion if applicable), Distillation, and Spirit Enhancement (which would include blending, bottling and maturation) must happen on premises.

Or worded differently …

“A Craft Distiller has to Ferment, Distill and Enhance his product at the Licensed Premises – such activities to be defined as per the Annexure.”

Owner Operated

Why is it important to us that Craft Distilleries be Owner Operated?

Firstly for the customers and consumers it is important to know that they are buying a product that they can trust, in terms of quality, consistency and honesty. Trust like that is not easily achieved with large corporations. People tend to reserve it for individuals.

Secondly, it would be the end of the trust and respect for craft spirits, if the same was to happen with Craft Distilleries than what is currently happening with Craft Breweries, where the Mega Brewers (SAB Miller in South Africa for instance) is buying controlling interest in any Craft Brewery that shows a semblance of becoming a threat in a particular region of the market.

It is therefore essential that the Master Distiller that developed a product maintain a stake in the Distillery and its activities. My arbitrary number for this is no less than 50% - allowing neither the Craft Distiller, nor his financial backers or investors to operate unilaterally.

Therefore …

“In a Craft Distillery, the Master Distiller needs to maintain ownership equal to a minimum of 50% of the value of the Distillery and its profits.”

Handmade

Finally, the Handmade requirement of the definition.

The term Handmade or Handcrafted adds a perception of effort, attention to detail and therefore value to a product. We also need to look at and consider the language application of the word craft. People tend to forget that Craft is not only a Noun (as in “I practise a Craft”) or an Adjective (as in “This is a Craft Gin”) but also a Verb (as in “I have Crafted this product”).

It therefore only seems right that our legal definition should include all possible uses and perceptions of the word Craft.

This probably makes the most sense, but it is the most difficult to define.

From a process and hygiene point of view it is obviously not possible to make the spirits by hand completely, but certain things we can make clear:

Limited Automation – Automation only allowed for temperature control (during starch conversion and fermentation)

Manual or Semi-Automated Bottle Filling, Closing and Labelling – No Bottling Plants or lines, but personal handling, filling, closing and labelling of each individual bottle by a person. Preferably with each label signed by the Master Distiller.

With these limitations, each customer or consumer will therefore have the peace of mind to know that their bottle was personally inspected and handled by the person responsible for producing the spirit – again enhancing the trust in the product.

Put succinctly …

“Automation within a Craft Distillery is limited to Temperature Control of Starch Conversions and Fermentations, and all Bottling and Bottling related activities are to be accomplished by manual or semi-automated means only.”

Craft Distillery VS Craft Spirits

Now we have our proposed Legal Definition:

1. A Craft Distiller will only be allowed to use a Pot Still (Batch Operated Still), no larger than 9 000 lt in terms of Boiler Size, and with a total Distilling Capacity of no more than 9 000 lt at a time, where the total recovered alcohol does not exceed 100 lt of Absolute Alcohol per batch.
2. A Craft Distiller has to Ferment, Distill and Enhance his product at the Licensed Premises – such activities to be defined as per the Annexure.
3. A Craft Distiller needs to maintain ownership equal to a minimum of 50% of the value of the Distillery and its profits.
4. A Craft Distiller has limited Automation within the Distillery. This is limited to Temperature Control of Starch Conversions and Fermentations, and all Bottling and Bottling related activities are to be accomplished by manual or semi-automated means only.

(Obviously this can be reworded as needed, but the basic principles remain)

But now, to build on two of the definitions quoted earlier (both from Diageo employees):

“Not all small distilleries are craft, and not all craft distilleries are small.” - Ewan Morgan, Orphan Barrel Distilling Company

“I kind of reject the notion craft needs to be small because every single batch that’s produced of our brands is what I would consider as crafted.” - Charlie Downing, Head of Gin at Diageo

The fear that all Craft Distillers have with a legal definition of Craft Distilleries and Craft Spirits is that their growth and development would be limited. This fear can be mitigated by allowing for a separate legal definition for Craft Distilleries, and a Craft Spirit. Ideally these two definitions should be as similar as possible, and only differ in terms of total distillation capacity, and ownership.

The Craft Spirit Definition would therefore be:

1. A Craft Spirit will only be a Spirit produced in a Pot Still (Batch Operated Still), where the total recovered alcohol does not exceed 100 lt of Absolute Alcohol per batch.
2. A Craft Spirit has to be Fermented, Distilled and Enhanced at the Licensed Premises – such activities to be defined as per the Annexure.
3. A Craft Spirit is produced with limited Automation within the Distillery. This is limited to Temperature Control of Starch Conversions and Fermentations, and all Bottling and Bottling related activities are to be accomplished by manual or semi-automated means only.

This means that yes, even a Mega Distiller could produce a Craft Spirit, but in terms of that specific spirit, the playing field will now be level.

The Role of Distilling Guilds or Representative Organizations

It is an unfortunate fact that the Craft Spirit Industry will have to regulate and police itself.

Talking purely from a South African viewpoint, we just do not have enough Liquor Inspectors to ensure compliance of all participants to all requirements, and many of them lack the training and knowledge to do so in any case. I am relatively sure however, that we are not the only country with this problem.

To do this effectively and consistently, Distilling Guilds and Representative Organizations (like SACDI) will need to start playing a more active role in ensuring that a Craft Distillery and Craft Spirit remains complaint to the approved regulations after initial License and Product approvals.

But this can go even further …

One of the participants in our recent C10 Comprehensive Distilling Course (Master Class) was a Winemaker from Stellenbosch. His input on this issue raised a question of different levels of Craft Distilleries, based on 4 basic principles.

1. Using some or only locally sourced raw materials (i.e. within 25km). This could be locally produced fruit, molasses, botanicals, etc.
2. Fully owner operated (with all shareholders actively participating in the distilleries’ activities)
3. Farm to Bottle (meaning some or all raw materials is grown by the distillery itself – and yes a small greenhouse section for your own ginning herbs will be accepted for the City Distilleries)
4. Green Operations, indicating measures to conserve water and electricity during operations, i.e. recirculating cooling systems and alternative power sources

 Other possible criteria we could add to this is a Tourism contribution, i.e. having a Tasting Room, as well as (for South African Distilleries) their BEE (Black Economic Empowerment) Status.

The last point will be a contentious issue for some, but the fact of the matter is that one of South Africa’s Department of Trade and Industry’s set goals is to increase access to the Liquor and Spirits Production Industry to the broader population, and helping them achieve this goal will help us in paving the way through government to benefit the Craft Spirit Industry.

In Conclusion

Craft Spirits and its legal definition and status will always be a contentious issue, fraught with different opinions and special interests, but for the protection of the Craft Spirit Industry, Customers and Consumers, it is necessary and vital that we have a clear definition and understanding of exactly what Craft Spirits is – sooner rather than later.

I am but one person playing a small role in the industry, and this article should be taken as that, one person’s opinion and ideas. My only hope is that you will take something from this article that might be of use to you in the formation of your own ideas.