Study shows gains, hurdles for area's distilling industry

Ray Scherer

A fresh state report is giving insight into the Hermann area's growing craft distilling industry.

The University of Missouri study this month reveals a vast increase -- along with untapped economic opportunity -- for craft distillers statewide. The companies, which include several in and around Hermann, helped bring $567 million in gross sales from the industry to Missouri for 2019.

"With many of the distilleries only a few years old, the growth in the industry is a welcomed surprise," the authors stated. Missouri distilling is widening a gap in numbers of crafters when compared to the national average, based on the study's findings. Resources that cover forestry, agriculture, and tourism in Missouri are being credited for the increase, and with Missouri bourbon touting its lineage to the state's corn crop and aging in Missouri wood barrels.

The report puts the state in 16th place in the U.S. for number of craft distillers, based on an analysis by the American Craft Spirits Association.

Don Gosen, co-owner of Copper Mule Distillery just east of Hermann, currently serves as president of the Missouri Craft Distillers Guild. Gosen told the Advertiser-Courier the guild worked in close cooperation with planners in commissioning the industry study that featured anonymous survey responses from distillers and contributions from such groups as the Missouri Corn Growers Association.

"I think it's critical that they were involved," he said, referring to fellow members of the guild from across the state. "We felt it was important….We've become a more important industry….It does a good job of telling where we are."

The document, he added, will be vital in helping companies plan their future investments. Just ahead of the advent of the COVID-19 pandemic, Missouri craft distillers were expected to embark on a doubling of their production this year, with Gosen stating the disease "kind of put a hitch in things." The distillers cite job creation and award-winning spirits as key assets for the state's economy.

"The closures of restaurants and bars, along with the cancellation of festivals and events, distillery tours, and tastings have hurt the hospitality industry overall, making it hard for new distilleries to connect with new customers," the report stated in its introductory findings.

Some of the state's distilleries took the unusual step of making the best of a bad situation by converting their normal operations to co-produce hand sanitizer, accenting their relevance and thereby assisting their host communities and the nation at large. The action, sanctioned by emergency government action, enabled a stopgap to a temporary shortage of sanitizer due to a dramatic rise in demand. Copper Mule does not possess the capabilities to make hand sanitizer due to government guidelines, with Gosen estimating a $60,000 pricetag for modifying the facility for such a purpose.

Yet despite that successful pivot in procuring use of the plants' alcohol, the distillers say they still find themselves in uncertain times. The report cites regulations the companies contend constrain them from operating on a level playing field with Missouri's wine and beer industries.

Gosen said one of the challenges is a disparity in excise tax for the distillers. The report said the firms must pay $2 per gallon in the tax, compared to $0.46 a gallon for wine and $0.06 a gallon for beer. Pending action would raise the federal excise tax on distillers to more than $13 per gallon, the report said, placing a financial strain on start-ups. 

"The squeaky wheel gets the grease," said Gosen, explaining that the two other industries were successful in receiving attention from state government in establishing excise taxes and other favorable measures, such as those that pertain to shipping.

According to Gosen, Missouri's beer and wine makers can ship their products directly to their in-state customers, while the manufacturers of spirits must comply with what they believe are unclear and unequal statutes on in-state shipments of their goods. Those rules, they maintain, hamper the ability to sell their wares online and deliver to out-of-state customers in the same manner as the wine industry. Annual permits also cost more for distillers than the other industries, with the report outlining a current cost of $1,350 per year compared to $200 for craft breweries or $300 for a domestic winery.

Such barriers to a more thriving distilling industry in Missouri can be addressed by revising regulations they say date back to Prohibition. Gosen is optimistic the university's report will shine light on the issues.

"It will allow us to go to the state and say, 'Here's what we're doing…," he said. "We're keeping a lot of people in Missouri."

All of the companies work well together, he said, with the guild itself being so diverse in the size of its members. Some rely on restaurants, grocery stores, and tourism for their viability.

"It's really up to each to gauge their markets," Gosen said.

The Guild has created a Missouri Spirits Expedition as a means of highlighting craft distillers and their tasting rooms, while simultaneously promoting the state's tourism industry.