Lessons from the Pandemic:  Surviving & Thriving

Two distilleries get creative and grow business even as the pandemic rages

Note: A version of this article first appeared in Artisan Spirits Magazine Winter 20-21 issue.

 

When the World Health Organization declared COVID-19 a global pandemic on Mar. 11, 2020 distillers and brewers around the world were caught in a generational transformation of their industry. Tasting rooms, inns, caterers and restaurants closed. Employees were laid off. Sales evaporated. Some distilleries shuttered their doors for good, while others turned to making hand sanitizer and searched for creative ways to keep an income stream alive.

But two small, nimble businesses in this hard-hit space did the almost unthinkable. As the pandemic raged and the economic slowdown crippled the industry they found creative ways to reinvest into equipment and help their businesses grow.

 

VALUE SPIRITS ADDED   

Dented Brick Distillery in Salt Lake City saw sales and demand skyrocket so much early in the pandemic that owner Marc Christensen had to figure out ways to increase production. Christensen said Dented Brick hit almost $2.2 million in sales in 2020, up from about $1 million in 2019.

“Part of it was pure luck on our part,” said Christensen. “We were growing pretty rapidly before COVID hit because we’d taken the strategic track of a value brand. Other distillers were going premium or super-premium, but we purposefully decided to put our value products front and center.”

The average American liver worked overtime hyperdrive during the pandemic. According to a CNN report, the overall frequency of alcohol consumption in 2020 increased by about 14 percent from 2019, researchers reported in the journal JAMA Network Open. That increase, said CNN, averages out to about one additional drinking day per month for 75 percent of American adults. Less expensive liquor has fueled many of those extra drinking days.

“People have been at home and drinking cheap,” said Christensen, “and that has helped us.” Dented Brick does offer a premium whisky, but its gin, rum and vodka retail for about $15 a liter.

Another contributing factor to their success is that Dented Brick never opened a tasting room nor relied on foot traffic at their location to boost their bottom line. Their facility is almost strictly production. But as the pandemic raged, Christensen took the bold move of investing even more into the business.

“Demand for our product was rising and we needed to clean up our processes in both production and shipping,” said Christensen. Customers in places as far-flung as Florida, Illinois, Kentucky and California were asking for Dented Brick. Realizing conventional banks were leery of lending money during a downturn in the craft spirit industry, Christensen turned to an equipment leasing company for financing.

“We needed a scale, a shrink wrapper and some other equipment, and we needed it fast,” said Christensen, who chose North Star Leasing for their financing. He had worked with North Star Leasing in the past and knew the financing would be quick in coming.

Despite the resurgence of COVID, Dented Brick shows no signs of slowing down. In fact, said Christensen, he’s strongly considering going back to North Star for the financing of an additional new tank.

“Sure, I’m worried about this industry as a whole right now,” said Christensen. “But we’ve positioned ourselves to boom during a pandemic.”

 

TAKING NOTHING FOR GRANTED

About an hour west of Nashville, Gutter Bound Distillery was just six months old when the COVID-19 pandemic started. While Dented Brick found room to grow in the value liquor market, Gutter Bound got by thanks, in part, to being unburdened with high overhead.

“We didn’t know what to expect in March of 2020,” said co-owner Jess Markham. “The only reason it didn’t close our doors was that we still have full-time jobs. We learned we could make hand sanitizer, and then realized we might make it through this.”

Demand for their hand sanitizer was strong, but the equipment Gutter Bound was using could only produce three gallons a day. The Markhams donated sanitizer to first responders and police officers, then began selling it to nursing homes and schools. Like Dented Brick, Gutter Bound realized they needed to invest in equipment in order to increase production.

Under the 2020 CARES, the state of Tennessee set up a grant program (Coronavirus Agricultural and Forestry Business Fund) that awarded money to food and value-add production businesses like Gutter Bound Distillery. The only issue was that the grant was a reimbursement program, meaning the 6-month old company needed to pay upfront around $200,000 in order to buy a mash tun, fermentation tanks, control boxes and other equipment.

“Here was this great opportunity to get what we needed, expand our business and help out the community – dangling like a carrot in front of us,” said Markham. “The problem was we couldn’t qualify for the money since we needed to pay it up front.”

Like Dented Brick, Gutter Bound went with North Star Leasing to provide the needed investment cash, allowing them to buy the equipment and repay North Star Leasing when the Tennessee government reimbursed them.

“The grant was life-changing for a mom-and-pop operation like ours,” Markham said. “The way the deal was structured, we paid about $37,000 for more than $200,000 worth of equipment. We just needed some short-term financing to get us the equipment and make us eligible for the grant.”

With the additional capacity for hand sanitizer (about 15 gallons a day) and liquor production, Gutter Bound now stands prepared to push higher as consumers settle into what is becoming a new but ever-changing normal.

“It was totally by accident, but the hand sanitizer is helping us build our brand,” Markham said. “I’m just grateful we figured out a way to give back to our community.”

 

UPDATE:  Dented Brick is in the process of further expansion and adding additional equipment as of this posting.  Stay Tuned for updates

 

 

Finding Opportunity in the Midst of Crisis