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TheCraftDistilleryMarket2018
©MichaelKinstlickandCopperseaDistilling,LLC
MichaelKinstlickCEO,CopperseaDistillingADIResearchEconomist
DistilleryNamesWordCloud
Data:MichaelKinstlick ©MichaelKinstlickandCopperseaDistilling,LLC
DistilleryNamesGame:RealorImaginary?
Data:MichaelKinstlick ©MichaelKinstlickandCopperseaDistilling,LLC
1. SevenBearsSpirits2. WesternLibertySpirits3. GoldenEagleCraftDistillery4. SouthHollowDistilling5. HorseOakDistilling6. TwoBirdsArtisanSpirits7. GoldenHillDistillery8. Ironfish Distilling9. RedCedarSpirits10. BearCreekDistillery
A. SilverOwlDistillingB. CopperRidgeDistilleryC. IronBaySpiritsD. NorthernRanchCraftWhiskyE. BigWhiteCreekDistilleryF. BlackBearDistilleryG. HighRockDistillingH. BlackRockDistillingI. PineBluffsDistillingJ. FireOakDistillery
Thetopfivenamesinbothcolumnsareimaginary
CraftDistilleryMarketSnapshot2019• Databaseof3600UniqueSpiritsProducers2006-2018• 2900ListingsinTTBDSPpermitholdersfile(Dec2018).
• Plus370DroppedDSPs• And300No-DSPADIListings
• Approximately1700CraftProducersatyear-end2017.
• 1250Identified OperatingCraftDistilleriesasofyear-end2018• 250Estimated CraftDistillers(“HiddenEntrants”)• 200KnownandestimatedNon-distillerProducers
• Infusers,Rectifiers,Blenders
©MichaelKinstlickandCopperseaDistilling,LLC
Industriesfollow“Density-DependentProcess”
Data:TTB,MichaelKinstlick ©MichaelKinstlickandCopperseaDistilling,LLC
• Density=NumberofIndustryParticipants
• Legitimation– Processofsocialacceptance– Obscurityto“taken-for-grantedness.”– Legalchanges– State/locallicensing,FET– Increaseswithmoreentrants
• Competition– Accesstoresources(inputs,labor,customers)– Alsoincreaseswithmoreentrants
“Density-DependentProcesses”
Data:TTB,MichaelKinstlick ©MichaelKinstlickandCopperseaDistilling,LLC
• FoundingRateofNewEntrants– RiseswithincreasingLegitimation– FallswithIncreasingCompetition
• Death/ExitRateofExistingEntrants– FallswithincreasingLegitimation– RiseswithIncreasingCompetition
VitalRatesvsPopulationDensityFoundings Deaths
Density
Rate
Notbasedonactualdata
TotalActiveDSPs(2945on3/12/19)
Data:TTB,MichaelKinstlick ©MichaelKinstlickandCopperseaDistilling,LLC
0
500
1000
1500
2000
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3000
Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Jun-19
DSPTotal 2884
NewAddRatestillRobust.DropRateSteady.
Data:TTB,MichaelKinstlick ©MichaelKinstlickandCopperseaDistilling,LLC
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Sep-17 Mar-18 Sep-18 Mar-19
DSPMonthlyAdd/DropRate
adds drops
Add/DropRateas%ofExistingBase
Data:TTB,MichaelKinstlick ©MichaelKinstlickandCopperseaDistilling,LLC
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
9/1/11 3/1/12 9/1/12 3/1/13 9/1/13 3/1/14 9/1/14 3/1/15 9/1/15 3/1/16 9/1/16 3/1/17 9/1/17 3/1/18 9/1/18 3/1/19
MonthlyAdd/DropRateas%
AddRate DropRate
SupplyUp!
0.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
2010 2011 2012 2013 2014 2015 2016 2017
VolumeWithdrawn(PGs,millions)
0-10k 10k-100k 100k-750k 750k+
Growthinreleasevolumes750k+=TOTALreleasesof<750k
U.S.DistilleriesReleasesbySize(2017)
Data:TTB,ADI,MichaelKinstlick ©MichaelKinstlickandCopperseaDistilling,LLC
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Count WithdrawnSpirit
<10kPGs 10k-100kPGs 100k-750kPGs 750k+PGs
42
96%
SupplyComing…
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Count WithdrawnSpirit
AdditionalDiageo/BulleitVolume
<10kPGs 10k-100kPGs 100k-750kPGs 750k+PGs Diageo
Supply…andDemand• USProducersrevenue5.2%5-yearCAGR– Per-CaseRevenue2.8%CAGR– CaseVolumes2.3%CAGR
• SpiritsAdultBevSharenow37% (33%06-10)
• FromDISCUS2018EconomicReport…– “GrowthofCraftDistillersacrosscountryhelptomodernizelaws,buildexcitement,andincreasespiritsconsumerbase”
Source:DISCUS
U.S.ProductionCraftDistilleries,1982-2018
Data:TTB,ADI,MichaelKinstlick ©MichaelKinstlickandCopperseaDistilling,LLC
0
200
400
600
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1000
1200
1400
1600
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2000
1982
1983
1984
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1986
1987
1988
1989
1990 1991
1992
1993
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2001
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2006
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2010
2011
2012
2013
2014
2015
2016
2017
2018
In-Production Craft Distilleries
CraftDistilleriesvs.CraftBreweries
©MichaelKinstlickandCopperseaDistilling,LLC
Data:TTB,ADI,MichaelKinstlick,GlennCarroll,AnandSwaminathan,BartWatson/Brewer’sAssociation
0
1000
2000
3000
4000
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7000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57
Craft Distilleries vs Microbrews by Industry Age (Microbrew start = 1961, Craft Distilleries = 1982)
MicroBreweries Craft Distilleries
Conclusion• AsCraftDistillersfollowtheBrewpubmodel,the
numberofpotentialentrantsbecomesverylarge.
• CraftDistillerieshavepassedthroughthelegitimationprocessandrevitalizedoneoftheoriginalAmericanindustries.
• CraftDistillersaretheleadingedgeofinnovation…buttheBigBoysstilldominatethelandscape.
©MichaelKinstlickandCopperseaDistilling,LLC
Data&Methods• WhatisaCraft-Distillery?
1. IndependentFirm• Belowacertainproductionvolume.(40-50k9Lcases,generally)
2. Distillingspiritsthemselves3. Bottling&Marketingthemdirectly
• OtherCraftProducersinclude…• Barrelers &Bottlers• Importers• Rectifiers• Infusers• ContractDistillers
• Data• ADIDirectories,2006-2019• TTBDSPpermitholdersfoia file(online,2010-2018)• StateGuildwebsites• DISCUSreports
©MichaelKinstlickandCopperseaDistilling,LLC
AbouttheAuthorMichaelKinstlick comestothespiritsindustryfroma20yearcareerinfinance,technology,andinsurance.Heco-foundedCoppersea Distillingin2011.Coppersea iscurrentlyproducingdistinctivewhiskiesusingitsheritage-methodsdistillingpractices.MichaelhasaBAinEconomicsfromColumbiaUniversity,aMSinIndustrialEngineeringfromNorthwestern,andaMBAfromtheHaasSchoolofBusinessatU.C.Berkeley.
©MichaelKinstlickandCopperseaDistilling,LLC