The Spirit of Industry

By: Robert Ordway Last Updated: March 2, 2016

robert-ordwayWhile Indiana may have been the first state in the Midwest to capitalize on riverboat gaming, it will be the last to the party when it comes to micro-distilling, one of the fastest growing industries in the US. In 2010 there were 92 craft distillers in the U.S. and today there are over 750. Unfortunately, none have that growth has come from Indiana.

Over the past few years, the Indiana Brewers Guild has successfully chiseled away several regulations for craft brewers. Ironically, in 2013, they worked to add requirements for micro-distillers. To apply for an artisan distilling permit, one must already possess an artisan beer or wine permit for three years with no violations. This poses a large barrier to entry for new-comers and protects the established order.

Michigan, the only state to lose population during the 2010 census, quickly removed laws for beer, wine and spirits in order to diversify away from the auto-industry. Because of Indiana's laws, Bill Welter, a Valparaiso native, started Journeyman Distillery in the sleepy town of Three Oaks, MI. Since, it has become a mecca for high dollar tourists from Chicago while generating big tax revenues for the state. In addition, his commitment to source local organic ingredients has supported many other small business owners.

Barry Kornstein, a research manager in Urban Studies at the University of Louisville, assembled a 60+ page report titled 'The Economic and Fiscal Impacts of the Distilling Industry in Kentucky' in 2012. While manufacturing jobs are at their lowest percentage of overall jobs in the US history, this study provides a path to (partially) rebuilding the sector. Studies on the link between prohibition and the Great Depression confirm it. Similar to real estate, distilling is one of the best economic multipliers as one job creates several more. These are quality positions for all levels of skill and a smooth cyclical nature, not to mention the industry has a strong commitment to social responsibly and philanthropic engagement. Like steel mills, distilleries are capital intensive and significantly increase the assessed value of land and improvements. Given Indiana's tax caps and supplemental homestead exemptions, this is a big winner for local government coffers as well.

While alcohol consumption is a frequent concern from conversation in legislatures, Kentuckians consume no more Bourbon than any other state in the union. 95%+ of production is exported, not only to other states, but to the world. Demand in both China and Japan continues to climb at an exponential rate. Russia is not far behind. Suntory, a Japanese company, purchased Jim Beam at the beginning of 2014 for $13.6B. To add, there are even select whiskeys produced in the US, but only available overseas. While Indiana will never be the home of Bourbon, the only federal requirements to label a spirit 'Bourbon' are 1) it must be made in the US and 2) the mash bill must be a minimum of 51% corn. Given our position as one of the leading corn producing states, this seems like a natural fit. Although not a craft distiller, Midwest Grain Products (MGP) in Lawrenceburg, IN is a large distiller for major brands in the US and evidence of the opportunities ahead.

As gaming competition from other states continues, Indiana's tax revenue will decline and something must replace it. While vital to The Region, the steel industry has a 100+ year history of boom and bust, therefore, it cannot be relied upon for future job growth. Today, 'Sunday Sales' remains in the minds of many each session but empowering craft distillers is where the real economic opportunity lies. It doesn't take much more than a google search as 'proof'.