On March 12, Timo Marshall held an event at his Spirit Works Distillery in Sebastopol to celebrate the release of his cask-strength rye whiskey.
While such release parties are common among local wineries and breweries, it was a big deal for Marshall because, thanks to a new state law that went into effect Jan. 1, it was the first time he could actually sell his product on site at an event. For him, there would be no more directing customers to the nearest supermarket that carries his spirits — and wondering if they actually bought it.
“It went really well,” said Marshall, who with his wife, Ashby, opened the business three years ago in the trendy Barlow center in Sebastopol. “I have bumped into lots of people who said they haven’t been here for a year and now they are planning to come.”
Other local and statewide craft distillers are also experiencing sales increases because of the new law. It was hammered out as a compromise last year with the politically powerful lobby representing wholesalers, who feared that on-site sales would cut into their business.
Distillers and analysts are now predicting a boom in the craft distilling category, in large part due to the new law. There are about a dozen distilleries in the area. The growth could mirror what occurred in the craft beer business a decade ago, where stalwarts such as Budweiser, Miller and Coors have lost market share to artisans.
“It’s like the Wild West for people getting involved,” said Jim Harrelson, co-founder of Do Good Distillery in Modesto and president of the California Distillers Guild, which represents about 40 of the 60 craft distillers in the state. He has seen customer traffic at his business increase 30 percent since the new law went into effect.
But the impact of the new law goes beyond the distilleries. The changes have also attracted the interest of suppliers and other professionals such as bottlemakers and cork producers, financial services firms and lawyers, who all stand to gain revenue as the craft spirits industry’s reach grows.
“This is just the start of what we expect,” said Tracy Sheppard, senior lender for Live Oak Bank’s wine and craft beverage group, which is located in Santa Rosa.
The new law for the first time defines a craft distiller operating in California, limiting it to those that produce up to 100,000 gallons of distilled spirits annually.
The law, authored by Assemblyman Marc Levine, D-San Rafael, allows distilleries to sell up to three 750-ml bottles per customer per day on site. It also allows license holders to open an on-site bar or restaurant and have tastings where they can make cocktails and mixed drinks, a growing business with mixologists performing at cocktail-themed events.
The craft distillery market is still a small sliver of the overall spirits marketplace. The Distilled Spirits Council estimated that the overall U.S. retail market reached nearly $72 billion in 2015.
Craft accounted for 0.53 percent of shipments within California in 2014, according to a data analysis by alcohol beverage industry consultant Jon Moramarco. But that figure was a 40 percent increase over 2013 shipments. He noted that the California craft beer segment was at 3.9 percent a decade ago and now stands at about 9 percent.