Sonoma County distillers display high spirits as whiskey drives growth of spirits sector

The moves Adam Spiegel has made with his whiskey and bourbon business along a patch of State Farm Drive in Rohnert Park depicts the growth of the spirits industry in Sonoma County.

A quick synopsis over a decade: Spiegel and a local partner started nano-distillery 1512 Spirits in 2010. Three years later, Spiegel bought out his partner in an attempt to treat it more like a business than a hobby. He moved a few blocks to a 6,000-square-foot space and launched Sonoma County Distilling Co.

That space - big enough for four 250-gallon pot stills - served its purpose until last year when Spiegel went on the move again to a tract next door. The new 12,000-square-foot structure houses a vast array of malting and distilling equipment, including a 3,000-gallon pot still imported from Scotland. And he plans to add a 9,000-square-foot barrel room. The enlarged operation also comes with a new name, Sonoma Distilling Co. It's slated to open in May.

Spiegel, 34, of San Rafael, said he now has enough space to grow for years and still be considered a craft spirits producer. He is constantly thinking about the future since whiskeys and bourbons take at least two years of aging until they're ready to go into the marketplace - and even longer for special batches.

“Whiskey is the absolute long game,” Spiegel said.

That long game also is being played by other distillers around Sonoma County, mirroring the growth nationally in the U.S. spirits industry that posted record sales of $27.5 billion in 2018, according to the Distilled Spirits Council, the industry's main trade group.

Much like wine and beer, Sonoma County has emerged as a hotbed in the craft distilling space in California along with San Diego, said Cris Steller, executive director of the California Artisanal Distillers Guild who also owns his own spirits business, Dry Diggings and Amador Distillery in El Dorado Hills.

In one sense, that shouldn't be surprising given that Northern California has been at the forefront of the movement it started in the early 1980s with pioneers such as Hubert Germain-Robin in Ukiah - whose luxury brandy brand was bought by E. & J. Gallo Winery in 2017 - Miles Karakasevic's brandy at Charbay in St. Helena and Jorg Rupf of St. George Spirits in Alameda.

Spirit industry boom

There are 1,550 licensed distilleries nationwide, a sharp increase from about 200 a decade ago, said Eric Owens, vice president of the American Distilling Institute. The growth has been driven by upstarts that have carved a niche in making and bottling artisanal booze on their own premises.

The crafts spirits market still is a small segment, representing 3.3 percent of the overall spirits sector, according to London-based market researcher IWSR. Yet craft products contributed 31 percent of the overall growth in spirits from 2017 to 2018.

Under California law, any distiller that produces less than 150,000 gallons a year, which equals 70,000 9-liter cases, is considered a craft spirits maker. Those that fall under that rubric receive special breaks such as having the ability to sell directly to their customers via tasting rooms, having their own restaurants and holding additional retail licenses.

Growth in the county

There are about 20 spirits companies around the region, which include veterans such as Spiegel and Timo and Ashby Marshall at Spirit Works Distillery in Sebastopol, and younger distillers like Tara Jasper and her Sipsong Spirits in Windsor, which features her modern-style botanical gin.

The optimism is translating into expansions beyond Spiegel's Sonoma Distilling. Hanson Organic Vodka of Sonoma, for example, has opened a tasting room in Sausalito.

“The craft distilling movement is becoming more recognized among society as a whole,” said Timo Marshall, who has established a distiller apprentice program for Spirits Works. The sector has greatly lagged in training locally compared with the wine and beer industries.

The county, however, is a hospitable place for distillers because it pairs well with the food-and-wine culture along with the number of tourists who visit each year, Spiegel said. He said the term “Sonoma” conjures up premium products in the marketplace. That made it easier to ditch “county” last year in a rebranding of his spirits business.

“From my perspective, it was just one more word longer than it needed to be,” he said.

The growth in the spirits sector has been especially pronounced in brown spirits. The Distilled Spirits Council said annual sales of American whiskey last year increased 7 percent, or $224 million, to $3.6 billion; cognac rose 14 percent, or $250 million, to $1.8 billion; and Irish whiskey grew 12 percent, or $108 million, to $1 billion.

That's evident locally with the products on the market, especially since distillers typically can charge more for whiskey and bourbon than gin and vodka. For example, Jason Jorgenson has found success with his Alley 6 Craft Distillery in Healdsburg with its rye whiskey and single malt whiskey. He described his products as not being overly oaked or peaty that carry slight aromatics such as caramel.

“Ours is like the gateway drug into the whiskey world,” Jorgenson said in jest.

Getting in the mix

Alley 6 has benefited from its location in a town with more than 30 wine tasting rooms. Many visitors want to try something else, he said. Bartenders at establishments such as Duke's Spirited Cocktails and Spoonbar in Healdsburg, as well as Stark's Steak & Seafood in Santa Rosa have helped his business by using Alley 6 in their drinks and through promotion.

“There are great craft mixologists,” said Jorgenson, who worked 14 years as a bartender before going into the whiskey business in 2012. “They are amazing.”

But getting into restaurants and retail outlets is increasingly difficult given consolidation in the wine-and-spirits distribution business where most small players are neglected, distillers say. In California, three major wholesale firms dominate, with Southern Glazer's Wine & Spirits $4.1 billion in annual revenues, followed next by Young's Market Co. at $1.9 billion and Wine Warehouse between $500 million and $600 million, according to Shaken News Daily.

Spirits Works last year signed a deal with The Winebow Group to help it distribute its gins and whiskeys statewide. But Marshall said opening a distillery when he did in 2012 was easier.

“The market is much, much harder to break into,” he said.

Spiegel said he still thinks there could be room for another 20 more distillers in Sonoma County if growth continues despite distribution barriers and a higher tax rate than for beer or wine. The tax rate was reduced by a 2017 law, but that break is set to disappear at the end of the year if no legislative action is taken.

Meanwhile, as part of the move, Sonoma Distilling has not produced any spirits for about six months. Since Spiegel has a large stockpile of whiskey and bourbon ready to sell, that has not been problematic. The distillery produced less than 20,000 gallons last year, he said.

Room for creativity

Beyond the new building and renaming, Speigel wants to keep improving his whiskey, which is noted for a more rounded taste.

“I can get really creative with this,” he said during a recent tour of the new distillery.

The creativity has been with him since he started in the spirits business after being laid off from a Bay Area financial firm at the height of the economic downturn in 2008. His immediate thought as he walked to the parking lot carrying a moving box: “I want to be my own boss. I want to learn to make something.”

He's extremely passionate in trying to dial in the right amount of oak flavor, and goes to such lengths as double barreling his whiskey and bourbon to get it right. He also has a special selection, where the grains for his bourbon and whiskey are smoked over cherrywood for four to five days.

Spiegel, who has a business partner as well as a company board, said he is more focused on expanding his brand, which is in five states and 15 countries. He was in London recently promoting it. He also wants to make sure he prices his products right to ensure that they aren't too expensive. The flagship bourbon and whiskey are $40 per bottle while the cherrywood selections are $50 per bottle.

“I want this to be something you can share with your friends,” he said. “I don't want this to be a mausoleum whiskey.”

You can reach Staff Writer Bill Swindell at 707-521-5223 or bill.swindell@pressdemocrat.com. On Twitter @BillSwindell.