Craft Distillers, Facing Lower Taxes, Invest in Themselves

Craft Distillers, Facing Lower Taxes, Invest in Themselves


But the tax cut is having its biggest impact with small craft distillers, most of which turn out less than 100,000 gallons a year and struggle to compete with larger companies. And it is evidence of their growing political clout as distilling becomes a significant source of jobs and tax revenue in every state.

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Since the federal tax bill passed, New York Distilling Company has lowered the wholesale price for Perry’s Tot, its “Navy strength” gin.

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Cole Wilson for The New York Times

The backing for the move attested to that geographical and political reach. By the time the amendment — introduced by a bipartisan group of lawmakers from Minnesota, Missouri, Oregon and Wisconsin — was adopted in a final version by Senator Rob Portman, Republican of Ohio, it had collected 304 co-sponsors in the House and 56 in the Senate.

“This is a tremendous change from where we were in the past, fighting tax increases,” said Frank Coleman, a senior vice president of the Distilled Spirits Council, a trade association representing American producers and marketers. “Up until recently, the efforts on taxes at the federal level were entirely defensive.”

The victory was not achieved without a great deal of legwork. Dozens of distillers joined in a multiyear effort to win over Congress members to the idea. The Distilled Spirits Council estimated it organized thousands of visits to the Hill.

“We encouraged our members small and large to invite their local officials at all levels of government to take a tour,” Mr. Coleman said. “Many have done so, in the process learning about how spirits are made, how they fit into the agricultural economy.”

In two visits to Washington, Christian Krogstad, the founder of House Spirits, spoke with several lawmakers during appointments and what he called “drop-ins.”

“I was surprised by how accessible senators and congressmen are,” he said.

The bill brings federal taxes on spirits into line with those for the wine and beer businesses, which won similar reductions. To achieve that, the three industries — normally rivals — combined their lobbying forces.

“This was an unprecedented collaboration by spirits, wine and beer producers,” said Mark Gorman, a senior vice president of the Distilled Spirits Council.

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Barrels in which New York Distilling ages rye and other spirits. The company has hired its first full-time salesman.

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Cole Wilson for The New York Times

In response, New York Distilling Company, in Brooklyn, has done something just as unusual: lowering prices.

Allen Katz, a founder, wanted to get Perry’s Tot, its “Navy strength” gin, into more bars and consumers’ homes. The tax cut allowed him to reduce the wholesale price, per bottle, to $18 from $29. With by-the-case discounts, the wholesale price drops further, to $14, and some merchants have cut retail prices to as low as $23.

“I would say the reaction from our industry peers has been jaw-dropping,” Mr. Katz said. “ ‘You’re offering it at what price?’ ” In March, sales of Perry’s Tot doubled. (The company has also hired its first full-time salesman.)

The excise-tax break for spirits is set to expire after two years. Because it may not be renewed, few distillers have gone so far as to lower prices. “I think that’s reckless,” Mr. Winters said. “If the tax break goes away, than the price break goes away.”

Mr. Katz doesn’t see it that way. “The driving force will be increased sales,” he said, “and from that revenue, we will further invest in equipment and other aspects in our business.”

There is a chance, however, that the break will be made permanent. In May, the lobbying campaign will begin anew, with distillers flooding Capitol Hill once more.

“We’re going to go to D.C. to show them all the good stuff we’re doing,” said Paul Hletko, the founder of Few Spirits.

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