3/28/15

5.       Local.  If you have read all of this and have not given up yet, it is probably because you either do not believe me or did not understand what I was saying.  But anyway.  Local town councils and law enforcement have a great variety of possible input into your situation but many times they have little to say.  It is extremely variable.  In most cases, if you have secured a proper lease and permits including zoning and other rights then there is not much to be done.  I have seen distilleries start in shopping malls and basements.  It is not the size that matters, just how well you organize and establish your business.  But sometimes local authorities are involved in the process.  Maybe the site needs to be re-zoned or maybe there are town restrictions on who can build what and where.  I am in a small town and one of the first things I did was check in with the local authorities.  Who knows what might be required for insurance purposes or other licenses.  I actually have a 55 year old log cabin with an ancient shake (wood tile) roof, and that is not insurable.  So I have to go through a whole crazy system of getting bank approval and having them carry the insurance.  In my case the bank could insure the property since it was a federal requirement and that saved me about twenty grand.  I have seen distilleries in caves and old asylums and every other arrangement you can imagine.  Each and every one has a local authority.  My advice is to go to the nearest bar and ask who the local authority is that handles their licensing and then go to that body and ask them about the procedure.  In my case the town was involved in retail licensing but not in federal or state, so it became more of a double checking all of my approvals and zoning, that is, until the donkeys came up. 


6.       Special.  If we were to look at the thousand or so craft style distilleries in America we would discover some interesting things.  For starters, half of them are a simple fronts, money making operations that buy product and re-package it for sale, and most of that is vodka, rum, and gin.  From a craft standpoint there is a big difference between a group of big city lawyers who decide making their own liquor sounds fun and weird backwoods madmen with their own unique perspective on this whole idea.  Half, maybe more, are just business arrangements, some are even in malls.  The other half may contain some form of truly craft idea but most of those are relatively simple operations with perhaps one or two products and a direct marketing focus.  A smaller percentage, something in the 20 or 25 percent range, are really craft distilleries with some form of creative idea that makes a special and unique product.  I have seen several with farm connections that are doing some sort of farm to bottle concept.  I have seen others with special aging techniques or finishing with local woods.  I have seen a variety of aging and blending ideas.  There are even distilleries in caves or with very unusual stills.  In many cases there will need to be some form of special permission or process.  Take for instance the idea of firing a still with wood.  This seems simple because it was done for so long, but it is in fact very dangerous.  Live flames and high proof liquor do not mix.  If you wanted to run such an operation you would not only need some amazing knowledge and precautions, but you would need special fire suppression and insurance as well as fire department permissions and other possible inspections.  In all these cases a variety of special arrangements need to be made.  I would say, in a funny way, the more bizarre special arrangements the more craft.  In my case things were about to get CRAZY.  Before we were done there would be historical societies involved and donkey rescues and town planning commission and fencing volunteers, and archeological stone specialists.


7.       Taxes.  Well, what can I say about the single most annoying thing that has ever existed in the life of a distiller?  OK, prohibition was worse, but taxes last forever.  Here is the one thing I will say, don't miss anything.  I found out that even if you do not produce anything, if you are approved you need to file your forms.  Those forms.  My God those forms.  It is like doing your taxes every month.  Imagine that.  Just imagine doing your taxes every month.  Then there is the state and the excise and the main yearly corporate taxes....it goes on and on.  Either you are going to need a CPA specializing in distilleries or you are going to have to have a few degrees of your own and study for a few months.  It is out of control.  The craziest part of all is that all these last seven things, they are in addition to all the normal things that go into setting up and running a company, like structures, payroll, accounts, advertising, etc.  You still have to do all the things a normal person with a normal company would need to do.   But I have to say, after owning a half dozen companies of all kinds, this is definitely the most complex.  It is easy to see why my grandpa went the illegal route.  Without the government in my business I could have set up for less than a tenth the costs and I would make $20 more per gallon.  It is ridiculous.


       In conclusion.  I know it sounds cool...hey, let's open a distillery...yea!  Don't do it.  Just don't.  You can make a whole lot more money doing a whole lot less work.  Besides, if you are going to just make the same old crap, we already have hundreds of those, and if you are going to do something really special, well, it is going to be so hard it really isn't worth it.  It took me six months and six donkey meetings and long visits with a dozen neighbors just to get an initial recommendation for an initial approval...not a donkey approval mind you, just a recommendation that it should be approved.  And their requirement for the land meant spending more money up front and every month for ever, plus mending fences and making land lease deals.  All of that for one small detail.  The wooden rack to hold the stone mill has to be reverse engineered and created from scratch.  Sometimes we feel like Noah.  We are just building this crazy ancient thing with no knowledge of what might happen....just faith.  It is crazy.  that about sums up the last two years.   Feel free to contact me and ask me anything you like.

3/27/15

3.       Labels.  If you want a nice label you are going to need art and design.  I used Hart Label and they did me right.  Minimal charges, good staff, great artist (his name was Michael Hidrogo) and he is the one behind all of our branding.  He was just a guy in the beginning, but after all this time we are friend who know each other pretty well.  I should point out another mistake people make, they don't buy the necessary art or own what they need.  This is a problem because eventually you will need to own everything.  More on that below on trademarks...but you need to make sure you own the art and everything else.  I would show him my sketches or tell him my ideas and he would convert that into actual art and design.  Good guy.  We had shiny metallic foils and embossed lettering.  It was pretty professional.  It will take more money and more time, but trust me, protect your art and designs and make sure no one can take them.  Sure, you can just make your stuff and sell it, and if no one ever thought of your name or idea you will be ok, but just imagine if you had done everything and set everything up and suddenly it was not allowed.  A couple years ago Jose Cuervo, one of the biggest and most powerful brands in the world, produced a special release.  The bottle had a colorful dripped wax on top.  the made thousands of bottles, millions of dollars went into this promotion.  Even these guys, even as old, and strong, and knowledgeable as they were, even they did not check everything.  Turns out Makers Mark owns the concept of dripping wax, period, all wax....if you see wax on something (like Evan Williams Single Barrel or Knob Creek) the wax is straight, not dripping.  Anyway, Cuervo had to cancel everything and pay Makers for every bottles, they lost millions.  It is a big example, but you need to make sure you own and control your concepts.  Don't forget, you will have to also buy the bar codes and own those as well.  One for each product.  As for a final word on labels be aware that the labels must contain a recognized type of liquor with specific rules attached.  I tried to create a "white whiskey" for instance and they turned it down because it was not possible under regulations to have such a thing.  White means un-aged and whiskey has to spend some time in barrels, so this description did not work.  I also had an awesome branding name "Irish-ish" which was to describe our American Irish product.  They decided it was too confusing and turned it down.  All of this work has to be done before you can have the state's label approval and that is before you can actually bottle or sell anything.  If your label is not very simple, and your style and type of liquor very simple, then they are going to ask for a formula.  There are various sites that can tell you all about these types and rules and even one that lets you know ahead of time if you will need a formula or not.  Be sure to check this and be ready in case you need to submit a formula (it can be either a form or lab sample depending on what you are doing).  When you work on your COLA online, be sure to notice the Formulas online as well, you may need it.


4.       Trademarks.  If there was one thing the most neglected by business people this would be it.  I mean, if you set up a company with the state, they let you, and if you set up a  DBA (doing business as) they let you.  And if you do all the other paperwork for months on end they let you.  No one ever tells you that if you do not have the trademark that you are not protected and if someone else does you are going to have to waste all that money and re-start.  Just imagine if you had all the paperwork in and all the fees paid and then had to re-do everything with completely different names.  You need a lawyer and a research team and you need to find out for sure that your name is yours.  This takes time and money, usually around six months to own it outright....sometimes a year.  The stages are:  get a lawyer and file the name, wait for an analysis and name search, they tell you it is not being used (or it is and you can fight it), then you establish the name and file the paperwork, then the Feds research it and give you an initial acceptance, then you wait, then they post it and wait for appeals, then they give you an a more formal acceptance, then you prove usage on the market, then they grant your official Trademark Number.  Most of the time all of this takes close to a year.  If they find someone with a similar or confusing name in a similar area then you can either change names or fight for it.  If it is a formally established trade name it cannot normally be fought.  So you have to be on top of this way in advance.

BLOG


3/25/15


       People keep asking me to record all this.  I know why.  It is so long and so crazy and of course, anyone who conceives of some hair-brained scheme to start a distillery, well, they should think twice; but this could help.  I think that the reason it is so hard is that it so not streamlined.   There is no overall guide and so people just start somewhere random.  And then every single thing you do is delayed several months.  As of this week I have been working on this whole thing about two years.  We have several parts done, but there is still more to do, and our concept is more complex than most.  Right now we have still delivery scheduled for July and everything else lines up before then, so we should be open by summer of 2015.  But what has gone into this is really quite intense.  Most people miss a part and have to make up ground later.  We started with the trademark in order to be sure to nail it down before anyone could take the name.  That process takes about a year.  We have both the state and Federal address change to our main site in process and hopefully a month out.  We had originally started with a smaller operation so we could bottle if necessary to get up and running.  This week we finished our 6th Donkey Meeting with the Town and the Green Mountain Falls Planning Commission officially recommended approval.  We still have the main Board of Trustees meeting and the Public Posting and Hearing before we will get formal approval, and only after that we have to repair fences, build corals, etc.  Let me back up and start at the beginning.  For that we need to go back to March and April of 2013. 


3/26/15

       Today I was walking a fence line damaged from the last flood.  I felt like a hardcore rancher.  I wonder how many distillers mend fences?  LOL.  So, that is of course why we are all here...why this is so different.  So, let's go back and try to describe this, what do you need to do?  What did we do?  OK, first of all let me tell you that there are SEVEN different things you need to work on simultaneously.  Almost no one does this.  They get their product up and running and THEN worry about trademarking.  The problem of course is that if they discover they cannot get the trademark they have everything done in the wrong name with the wrong branding and have to start from scratch AFTER they are approved.  Obviously this is not a good idea.  SO, let's look at this:


1.  TTB

2.  State

3.  Labels

4.  Trademarks

5.  Local

6.  Special

7.  Taxes


1.       The TTB process, specifically the Federal Alcohol and Tobacco Tax and Trade Bureau, is not something to take lightly.  You are looking at a minimum of half a year and usually more like a year to get this all together.  The problem is that apps take over 40 days to process, so if there is a question you are already at 90 days before you blink.  Your first problem is the application, which takes hours and has a ton of very specific questions.  Many of those require you have much of the other stuff done...so this is never easy.  You know how when you go down to get a license you need car insurance, but when you want insurance you need a license?  It is like that, but ten times harder.  One of the things you are going to need is a solid location WITH proof that you can run a distillery there.  This is almost NEVER in a regular lease, so it usually takes extra time and effort to get this done.  For me it took two months just to get the lease in line.  And that is a PRE requirement for the application.  There is good news, believe it or not, and that is that there are no technical fees for this (don't worry, the state is going to hit you for 5 grand and make up for it!  LOL).  I must say, and this is very important, that these guys are helpful and although it is long and hard, I only encountered helpful cool folks that really wanted me to succeed.  That was refreshing and kept me going.  You are going to need a solid location, proof that you are allowed to operate and various maps and descriptions and graphics of everything.  Depending on how artistic and computer savvy you are, this could take more weeks or months.   Heads up:  the main thing they are concerned about is the BOND.  What is this and how does it work?  A bond is like an insurance policy that covers your activities if something goes wrong.  You are going to need a formal bond to cover your activities.  BUT, to get that you need to know your exact process and equipment and storage capacity.  This takes a while to organize.  You get bonded for your level of activities...both production and storage...so this is a complicated calculation and if you mess up it takes weeks to correct.  Typical timeframe is a couple months before you submit the app to get the lease and bond together (I have heard of folks searching for a site six months), then a couple months for them to ask you for random things that are missing or clarifications, then another few months for their full analysis, then a final approval when you get your DSP....total time a minimum of six months and usually a year.  You are going to be lucky to get all this done under a year, but this is only ONE PART. 


2.       The State.  OK.  It is not exactly that the state screwed me...the main lady is actually VERY cool....it was just the fact that all their departments are so separate. You have to remember that all these things are separate and none of them know anything about the other or you or anything.....it is really hard and really complex.  I called the local authorities and they gave me a number with the state.  I called them and they told me how to get a wholesale license.  I set up a sole proprietorship and got my wholesale license.  AND, the license said specifically the wholesale selling of liquor.  This took months.  I thought that was it, and then I discovered an entire other process for the state liquor license....TWO licenses, not counting setting up your company.  This takes months and is very expensive.  So, in my case I basically had to do everything twice.  The state also needs copies of things like floor plans and leases.  It is, in essence, a repeat of federal requirements, but each state is different and it always works a little different.  The state will be handling your immediate licensing and taxes (and don't forget they need approve your labels as well), so it is good to know who is who and have a good relationship with them.

BLACK BEAR DISTILLERY

NEW ENTRY SEPTEMBER 2016.  That's right...we are finally up and running.  It took this long.  2 years minimum...you better plan for three years just to be safe.  Just don't do it.  So exciting and fun...but SO HARD!