State of Local Craft Spirits With Koval Co-Owner
Local Food Forum published an article on October 7 highlighting the new tasting room opened by Chicago craft spirits pioneer Koval Distillery after a long COVID-related delay. The article included Q-and-A specifically about the tasting room from an interview I conducted with Dr. Sonat Birnecker Hart, who co-founded and runs Koval with husband Robert Birnecker.
Today we present excerpts of the rest of the interview, which focus on the overall state of the local craft spirits industry coming out of the pandemic. Today is the Independent Spirits Expo in Chicago, which I will be attending, and will have more to say about this topic over the next few days.
Koval was founded in 2008 as the first distillery within Chicago since before the Prohibition era.
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Q: Where does the craft spirits industry in Chicago stand now, coming out of these strange last couple of years.
A: In Chicago it's doing very well. There are a lot of different distilleries and craft brands and a developed craft brewing scene, which is Is exciting.
But I would say that the industry as a whole, when it comes to craft, has really been changing a lot, particularly because of the pandemic. We've seen so many shifts in business practices, one in which a lot of things have gone online. It's not legal for craft spirits brands to ship anything online, but what we've seen is real interest among online retailers in craft. This has been great, because at this time we need retailers to be selling craft brands.
So many of the Illinois craft distilleries relied on their tasting rooms for a lot of their business. We didn't have a tasting room during the pandemic nor did we have one before. So it really wasn't a focus for our business at that point. But for a lot of other local brands it was. So that's definitely been difficult…
There's also the desire to deal with tariffs, which have been very detrimental to craft brands who might have been able to do a good bit of business shipping some product abroad. But if you're paying for a lot of tariffs, it becomes less attractive. It also it affects distributors’ decisions as to what to push in foreign markets, because if they see there are more tariffs, they start thinking, “Maybe if I push a local brand, it'll be a little more stable. I won't have to worry about paying more for it. I won’t have to worry about getting less support from the brand because they're trying to offset costs.”
Another thing that is affecting craft brands very specifically is you've seen a lot of consolidation… in which large companies are purchasing craft brands, either entirely or in part. We saw that in the brewing world too, so it's definitely happening in the craft industry to a very, very strong extent. Koval is still independent and we're happy with that.
It's also been interesting that the distilleries in Illinois have not been to do cocktails to go. Restaurants and bars have been able to do that. But my distillery has not been able to do that….
But at the end of the day, I do think that the pandemic has forced craft brands to streamline, to figure out ways to be tighter in their processes, so that they can compete. Because it has become a very, very competitive industry. The large brands were able to do some things financially during the pandemic, whereas craft brands, with our price point, didn't have the same sort of surge in sales as a lot of large brands that were selling at different price points. Also they have a lot of money to spend. And with that comes even greater competition.
So we, the smaller brands and the craft brands, need to really be more nimble and more creative and think outside the box in order to succeed.
Q: The Good Food movement and the local food movement are really pushed by younger consumers, their concerns about wellness, health, better quality food. Not Big Food. Do you see that happening in this industry as well?
A: Absolutely, there's a general interest and push for knowledge about how products are made, what are they made of… With Koval, we don't add anything, there are no artificial colors or flavorings or anything in our products. And we also tell the consumer what's in our bottle. So we say what grains they are. When we say it's rye, it's 100 percent rye and we declare that on the bottle. And so I do think that there is interest in more transparency when it comes to the spirits industry, just as with every other industry right now.
Q: People in the craft beer world always told me, first the big producers didn't want to believe it was a factor. Then when they realized it was becoming a factor, they tried to crush it. And it was only after they realized that the market was changing that they started buying everything. What I heard about the relationship between craft and big distillers was there wasn't that kind of animosity. And in fact, the big distillers were using the craft distillers as almost like their R&D unit to tell them where the market was going.
A: Right. Absolutely from the very beginning.
Q: Has that changed at all?
A: I still think that the craft spirits industry brings a lot to the table by way of new ideas and trends, and being small means you're more nimble, you can try things out and see if they work, and you can have regional flavors. That being said, when it comes to the big brands, I think that a lot of them just feel like buying up small brands and just having them be part of their own conglomerate.
Q: Early on, when the Good Food movement really started rolling, there were some big mistakes made by big companies. They bought a brand and they tinkered with the recipe. They got burned, and they got smarter. They bought those companies for a reason, so they're just leaving well enough alone. So for concerned consumers, the issue is more, “Is it greenwashing?” Are they buying these companies to put them in as window dressing and still doing all the bad things?
A: It's up to the consumer to get educated. At the end of the day, there's a bottom line with a lot of these companies. If they buy a company and they spend a lot of money on it, they need to make that money back. It's hard to say what's going on because every case is individual. You have to hope that the quality is maintained, but that would be an individual inquiry for every single brand to get to the bottom of whether things stay the same or change over time, especially after an acquisition. So we hope people continue to do things for the best.