Artisan Distilling: Selling Luxury Spirits Amidst A Recession

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Artisan Distilling: Selling Luxury Spirits Amidst A Recession

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Artisan Distilling: Selling Luxury Spirits Amidst A Recession

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BNET TalkbackShare your ideas and expertise on this topic

Renowned distillers Ansley Coale and Jorg Rupf started making Hangar One Vodka in 2002 with a goal to make their spirits with the freshest ingredients. To do this, they use old-fashioned pot stills. The technique is less efficient and more expensive than conventional methods, but they believe their approach makes their beverages taste better. Correspondent Sumi Das takes a tour of their distilling factory and finds out how their hands-on production process and unique marketing approach help them compete with larger spirits makers.

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Speaker: Hey, Dave, what time did you fire up the boilers?

Speaker: 20 minutes ago.

Speaker: Okay, thanks.

>> Sumi Das: The team at Hanger One is moving full steam ahead.

Speaker: That's got a real nice sweetness to it.

>> Sumi Das: Today, they're working on a batch of their popular mandarin blossom orange vodka.

Speaker: Right now, I'm topping up the still with water. We've got -- we've got orange pills in there, a couple hundred pounds of orange peels. They've been macerating over the weekend in high-proof alcohol.

>> Sumi Das: This batch is for global distribution.

Speaker: This is gonna finish distilling by the end of the day today. And then it's going to end up going into cases that are destined for around-the-world travel, Singapore and little bit into Malaysia.

>> Sumi Das: These are the day-to-day challenges of a small business.

Speaker: Let her rip.

Music

Speaker: Step right up here and run it.

>> Sumi Das: Ansley Coale is the co-founder of Hanger One Vodka, a small spirits maker based in the San Francisco Bay area. In 2002, he started selling his vodka, partnering with renowned distiller, Yorg Rupf. They set up shop in this old military hanger, thus the name, Hanger One. Coale leads the design and marketing effort, while Rupf oversees the production.

Speaker: We're in 49 states, and then a little bit of it goes to Europe, a little bit to Canada.

>> Sumi Das: The two had a unique mission.

Speaker: It's brandy-quality vodka.

>> Sumi Das: Stay small, but compete with the giants by producing a more flavorful vodka. What's unique about Hanger One Vodka because it's not made the way other vodkas are made, really.

Speaker: Yeah, but there's really two things about it. One is it's made from absolutely fresh ingredients, and there's nothing else in it. It's just vodka and fruit. There's no glycerin, there's no sugar syrup. And the other is the people who make it care deeply about hands-on production.

Music

>> Sumi Das: Hanger One uses good, old-fashioned pot stills to make their vodka. The technique is more time consuming and more expensive, but the makers believe it makes their vodka taste better. Lance Winters runs production at Hanger One.

>> Lance Winters: We know our way around a piece of fruit. And the secret of our success lies within that philosophy.

Music In distillation, most of the technological advances are geared towards increasing efficiencies. And we don't like to be efficient here. We like to be tasty. And efficiency doesn't necessarily taste good. But when you're looking for something that's got a touch of artistry, a pot still is the only way to go.

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>> Sumi Das: But because Hanger One is made in pot stills, the business costs more to run, so Coale needs to charge more per bottle to earn a profit. Currently, Coale sells his vodka for $35.00 a bottle. That's higher than the $30.00 average his competitors charge. The larger companies also spend millions of dollars each year to market their spirits. Coale admits he can't compete with those marketing expenditures. His approach? Get the barkeepers and restaurant owners to fall in love with the brand.

Speaker: Our sense is if we can just let people know what we're doing, and just encourage people to sort of, like, be thinking a little more deeply about what they drink, the same way as they think about their coffee or their water or whatever, it's gonna happen. This method of distillation is gonna become a significant part of the market in the next 10 years. We know it.

>> Sumi Das: However, the recession has hit this small business hard, with sales down 18 percent in 2009. And how has the economy affected you.

Speaker: Oh, it's been horrible.

>> Sumi Das: Yeah?

Speaker: No, our market is really high-end, you know, triple A restaurants and bars.

>> Sumi Das: Sure.

Speaker: And those guys, nationwide, are off something like 35 percent.

>> Sumi Das: So how have you adjusted then, because of what's happening with the economy right now?

Speaker: We just -- we laid some people off and we spend less money. I mean, it's just -- it's real life. It's like there was an earthquake. You know, now you have to go around and fix everything, you know?

>> Sumi Das: Still, the downturn hasn't changed their message, and they are starting to penetrate national chains like Safeway and Beverages and More. And it's not from pricing tricks, but rather word of mouth advertising.

Speaker: We never discount a bottle. We sell to Safeway the same price we sell to a corner grocery store.

>> Sumi Das: Um-hum.

Speaker: Some of these products that you see in the supermarket, the distributor's making $1.50 a bottle on, and he's making $8.00 a bottle every time he sells a bottle of Hanger One, no matter how he does it or how many he does.

Music

>> Sumi Das: Healthy margins in a tough economy. And Coale is confident that with a loyal and growing following, people will cozy up to the bar with his blend of vodka. For BNET, I'm Sumi Das.

Music

==== Transcribed by Automatic Sync Technologies ====

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