Rooted in Tradition: A Spirited Conversation with Arthur Hartunian, Founder of Napa Valley Distillery

Most people will tell you that craft this or artisanal that is overplayed in the world of spirit making. Many producers attempt to claim craft but are simply changing the labeling of a few products to give the appearance of being craft. If you are Arthur Hartunian, Founder of Napa Valley Distillery, you know exactly what craft distilling is all about. Together with his wife Lusine, the couple built a business from their passion for small-batch craft spirits and old-world cocktails.

Q: So Arthur, where does the story begin? How did you get into the distilling business? 

A: I’ve been a cocktail geek & spirit lover for years. Years ago, I worked at a law firm in Hollywood.  The guys would grab drinks after work & would order drinks from the past like Negornis & Old-Fashioneds.  Back then those drinks were not as popular as they are today. I just became fascinated with the cocktail process & how it brought people together. So I researched the history of cocktails & spirits in general. I always knew I wanted my own brand. Eventually I started experimenting & even made my own moonshine that I gave to friends.    

Q: Did you start planning a business after your research & experimentation?

A: Not exactly. Fast forward, I moved into the insurance business. It worked out ok, I was still able to make spirits in my spare time, raised a family, but then 2008 happened. Not sure if you remember what happened with a little company called AIG but when they went down, so did many of the independent satellite offices. It was an overnight collapse. I was turning 40 & I was forced to make a change. I knew this was a sign for me. I was more creative & wanted to do something more. So at the worst possible time, I decided to pursue my passion.

Q: How did you get started?

A: I think I did about eight minutes of research & started down the path of starting my distilling business. In 2009 on a shoestring budget, & almost no money left after the crash, Ileased a humble 1200 sq ft space & got licenses. We became the first distillery in Napa since Prohibition.

Q: What was your first product?

A:   We started with a liqueur (limoncello) made with Meyer Lemons but it was obvious we wouldn’t last long with prohibition style lawsstill in effect. In 2010 we had to decided to reinvent ourselves and expand our portfolio. . In 2011 I became the founding President of the California Artisanal Guild. This collective gave me the voice I needed & was able to raise the money to get a lobbyist to introduce a bill that would change the laws. Fortunately, it was passed unanimously in the California assembly in  2013. This decision allowed me to do tastings & have more direct sales and was the baseline in  2014 to really take the business off the ground.  

Q: With so many challenges in the way how did you stay focused?

A. Certainly my wife & I had many sleepless nights, we were not sure how we would keep the lights on, but the passion drove us. The beverage alcohol business is so regulated you need that passion to push through. After all that, we now have 12 employees, are building a kitchen in the distillery, & thinking about the future. All that seemed far off just a few years ago.  

Q: Those challenges extended to your expansion as well

A: Yes. With a few products & direct sales we had built a following. The time had come to expand to get a tasting room & more equipment. We thought we had what we needed money wise. Just before we were going to start on the construction, we got a visit from the fire dept. Although they had seen the plans before, they decided they wanted to see additional sprinklers & valves. The cost put us over what we had. We were devastated.

Once again, a regulatory type of hurdle got in the way. We gave Indiegogo a try to get the funds. We didn’t reach our goal but got close enough andwere able to raise the final funds through a private investor.  The lesson is, never assume you won’t hit a roadblock even if everything looks good. We had planned everything, but did not anticipate this. 

Q: Talk more about your products

A: Our Limoncello was the first to be made with Meyer lemons. This fits our founding goal to make spirits differently. And that is the soul of artisanal or craft anything. Willingness to take risks, experiment and bring a unique conversation to it. It is your interpretation and that’s what creates the category. To maintain this style and uniqueness we remain inspired by the old. Old world techniques and ingredients are behind our products.

Our gin was inspired from a book from the 1800’s. The recipes inside had processes that I used by using a straight infusion of the botanicals. With modern style gins, you don’t get the layers of flavors and to get that you must be more tedious to get the right result.   

For whiskeys, we source alcohol from other distilleries. As a start-up, you have no choice but to do this if you want to get whiskey out quickly. But you must be honest about what you are doing. If you are a craft spirits maker – if you are sourcing a spirit, you should put your own twist on it to give your fingerprint. That is craft. There has to be some art involved not just moving from a tank to a bottle.  

When we launched the brandy, there were California brandy distillers we sourced from.  From that source material we modified the taste, color & character. Cordial is a three-year-old brandy that we did not distill but we modified for up to one year before bottling. We age the brandy in used bourbon barrels from distillers all over the country. When we get the barrels, we fill them with the brandy so it takes on the bourbon attitude.

Q: What is your business model?

A: Our business is primarily direct to consumer. We don’t have to mass produce anything. This gives us flexibility and luxury of experimentation. Take a typical start-up philosophy - we want to try something and fail fast. It is ok if a product doesn’t work. We can take a calculated risk and try something in small batches like the pastis or ancho chile-infused brandy. If we like it and it works, we can monetize it and go straight to the website, bar club or tasting rooms. 

Q: You have some specific views on the role hierarchy of distilling. What is that?

A: The distiller is not the most important person in the room. First in line is the Blender. The reason for that - it takes years of practice and knowledge to keep product consistent batch to batch. That is the real talent. Next comes the Cellar Master who makes sure the barrels are right, the temperature is right, etc.   Third is the Sales & Marketing team, and only after that is the Distiller. You need all these roles working together as a team to make a fantastic product.

Q: You are passionate about people’s experience. What drives that?

A: Our founding principles for business and how we interact with customers is similar. First, we ask why and why not? This explains why we experiment with products, how we sell and how we get people excited about what we are doing. Next, why do the same as others? We put our unique signature on everything we do, so do we want a boring tasting experience? No, we want to be different than a traditional wine bar. Our staff is knowledgeable, funny, and engaging. Finally, why not - as in why not make it different? Why not have cocktail mixes in bottles, small batches, etc? Why not give people a memorable time with us so that they become customers for life?

Most important in all of this is that we want to teach people what we know. People don’t get a chance to learn how a spirit is made which you can’t get from a big brand. You don’t have a connection to the brand. But we go through the entire process – we show them how we manufacture, why it matters in the taste of choice & product line, and the social aspect. These elements come together so that people can come together.  

Q: And those experiences comes with unique bottle size & those old-timey label designs.

A: I always loved half bottles. I did a 375ml bottle on purpose. They are easier to consume versus  full bottles. It’s a sweet spot – you can consume it without having to store it for too long like traditional spirits and it gives people the opportunity to try more than one spirit. This helps us price accordingly because of the complexities we use to make the product. It is not cheap to make spirits in California. This is one way to help with that and for tourists, you can travel with it easier. 

As far as the label design, that is thanks to my wife. In remaining in the style of tradition and old world craft techniques, we found great inspiration in the bottling and labeling from the past which made total sense for our brand.

Q: If you could have a drink with anyone who would it be with & why?

A: My dad. He passed away in 2006 before we started the company. He would be proud and happy to be part of what we are doing. He was social, brought people together, talked, made and ate great food, and above all, had fun. It would be a dream come true for him to see what we accomplished.

For more information on tours, tastings & the range of products, visit the Napa Valley Distilling company at www.napadistillery.com 

The Journey to Excellence: A Spirited Conversation with Dennis Carr, President and CEO, Anchor Distilling Company

The burgeoning spirit business has seen a host of small and large labels eagerly seeking new ways to reach consumers. The Anchor Distilling Company has secured a unique place in the category by offering a broad collection in a variety of spirit categories (and you thought they just had great beer!), with an emphasis on consumer education. The more people know, the better they can assess their choices. I was very excited to get a chance to speak with Anchor Distilling Company President and CEO Dennis Carr to learn more about his thoughts on the vision and direction for the market.

Q: How did you get your start?

A: I grew up in the Northern California wine country. After I got my degree in business I started looking for a job. Gallo Wines had a sales training program so I joined them. The experience gave me a deeper appreciation for wine and was the foundation for why I value the education piece of this business so strongly. Eventually, I expanded from wine to beer and then spirits.

Q: Why did you join the Anchor Distilling Company?

A: In 2011, craft spirits were starting to move but were not yet well understood. I was seeing it develop and I felt it was a good trend. I have seen my share of trends in the beverage industry and, often, it’s a generational thing. Typically, it doesn’t happen with mass produced brands. Take craft beer – the focus is on smaller production brands and the business model continues to be incredibly successful. I saw the same opportunity with spirits and wanted to get involved.  Anchor already had a rich history with a strong brand, and they wanted to create a platform that would sit somewhere between the small producer and large producer; serving the market in a way nobody else was doing. That was very exciting and a key factor in my decision.

Q: What challenges did you face in building the platform?

A: Many small and/or independents don’t have the resources to build a national brand. They move slowly...one state at a time. On the other side of the spectrum, huge suppliers often can’t or won't focus on small brands. We occupy the space in between to build the platform to meet that need showcasing small/niche markets from all over the world.

The first major challenge was that nobody (wholesalers and retailers) knew what to make of the emerging craft spirits category. We decided to come up with a one-stop shopping concept and go to wholesalers and explain to them how they could manage both inventory and operations effectively.  Building the portfolio was one thing but, to get traction, we had to bring in experts to work with sales teams, re-think traditional distribution channels, and educate the producers themselves to create a price program and build a brand within an existing infrastructure about a category they were not necessarily comfortable with.    

We got the support and attention of larger wholesalers early on and have helped them develop their craft spirits divisions. There wasn’t much money in the beginning; nice margins but not enough volume to put lots of resources against.   The education piece came up again in a big way and eventually the model made more sense to people and is now the default go-to-market strategy.

Q: Education continues to be a theme – why is it so critical for spirits?
 
Alcohol and beverages go back centuries and come from cultures all over the world. With whisky there is a lot of narrative that you can share with others.  Drinking is about learning stories of communities, cultures, and how families have made their product for years. Consumers want to know what goes into the bottle – not just the alcohol but who made it, where, why, etc.. They want to connect the passion to the product and marry that with quality.

Education is an important aspect of our industry, and we need to learn more about other people in the industry who want to protect this business and have something to give. The keys are responsibility and authenticity.   Bartenders too – they take it seriously and they are all about education and teaching people about the spirits that make them passionate. Today it’s OK to ask your bartender questions and get to know brands and tastes. I can walk into any bar and ask about spirits in a much more relaxed way; but it is every bit the same kind of education as we associate with wine. You merge the environment with the ease of learning, you feel comfortable and you can explore much more and be much more excited about the cocktail or spirit you’re consuming. 

Q: Do you think the increase of small US craft distillers and the expansion of world whiskies is related?

A: Absolutely they are related. The common thread is that the consumers are looking for better quality and more information. Twenty years ago Anchor focused on that thinking – first with Old Potrero and with Juniper gin. It was not about mass appeal; it was about quality. And that attitude is what has driven and continues to drive the industry.

It’s a matter of people wanting the best whisky they can find. It doesn’t need to be from Kentucky where you get the best quality; you can get it from many other parts of the world. For example, we introduced Nikka from Japan.  That product, along with the information and education we put behind it, drove consumer interest in Japanese whiskies and opened our eyes to the capacity for quality outside of Scotland or the US. Another perfect example of this is Kavalan from Taiwan.

Taiwan is not Scotland – it’s the complete opposite: hot, humid and pretty terrible conditions for making whisky. But they figured it out.  Start with a great distillate that is ready to accept the wood and, once barreled, store it properly, extract the flavor more quickly and you have a flavorful single malt in 3-4 years; not 20.   

Q: Kavalan is an example of a non-age statement whisky. Many producers are addressing demand with non-age statement releases. Do you feel this is necessary or is it a marketing gimmick that could harm consumer understanding and receptivity to the spirit market?

A. We present a single malt scotch called The Glenrothes. It was ahead of its time with the non-age statement process. The producers felt a whisky matures in barrels differently and that bottling should occur at the optimum time for the whisky to be good not because it reached a specific year stamp like 12 or 15 years. So they took age statements off and use vintage dates instead.  

People are learning that an age statement is just that – a statement– versus a number. It has more to do with whisky itself and how long it should be aged. For instance, you can’t age Kavalan for 12 years because the climate would ruin the whisky. There is no 12-year-old Taiwanese whisky because they have to get it out of barrel quickly before the whisky passes its peak. Producers understand the practicality that removing the age statement provides flexibility and the option to blend different years.

The industry, in general, will go in this direction for two reasons: the rarity of aged whiskies and the desire to focus on quality and not get trapped by marketing.  Defining the age of whiskies is the real marketing. Consumers have been taught to look at age alone to determine quality; the myth is that the older the whisky, the more expensive product. But it's not always better. You might find a 15-year-old whisky is not as good as a 12 and that could be due to the whisky staying in the barrel too long because marketing wanted to have a 15-year age stamp on the bottle.   

Q: Knowing the current and forecasted supply and demand issues with the whisky market, would you be more prone to starting a distillery or a tech company?

A: The discovery period around whisky has not completed its journey. One thing driving innovation and creativity in this category is that it has challenged people to be more imaginative across the board - wine barrel finishes, wine barrels aging in different climates, etc. The key is not to sacrifice quality because consumers won’t allow or accept any compromise.  They are good at researching and communicating. You share the story of a great experience you had and the brand gets known and built. But, if you have a bad experience, you will share that experience and steer your friends away from the brand because of your quality expectations.

Quality is what governs the category. It challenges us to adapt and find ways to make great whisky. It keeps us real and very grounded. That being said, I know many small producers are popping up, and similar to start-up tech companies, they want to get to a point and position themselves for a big exit from a larger producer. I’m not sure that’s the best strategy and I imagine many tech companies don’t operate that way. Bottom line – either industry requires a ton of work, focus and passion.  But if I had to choose, and I’m biased, I’d place my bet on spirits.

Q: What other changes are you anticipating in the category?

A:  We will see an influx of new brands and more localization. We are, in many ways, already there with the craft movement. The idea that my local town whisky is my favorite, versus another country's product, is increasing. When we see such excitement about a category the product sensitivity rises. If producers try to cut corners and impact quality, the consumer will be turned off. Many players will try to get in quickly during this period but, ultimately, the consumer will shake things out and many new labels won’t last. Besides that, too many choices could lead to consumer fatigue.  If that happens, people will just go back to the brand they like. Even with new experimental products, the consumer will qualify which ones deliver the best value expectations for what they are willing to spend.

Q: Final question – if you could have a drink with anyone who would it be and why?

A: I would love to have a drink with George Washington. He was one of our country’s original whisky producers. I would like to know why he felt whisky was so important. I also want to know what was happening in his time that included the whisky. Did he, like many of us do today, enjoy a whisky at end of day? Has it really changed that much since his time or is it still the same basic enjoyment?

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Anchor continues to grow its portfolio and influence in the spirits category.  Education doesn't apply solely to the end-user; they continue to learn more about consumer choices and connect that to product improvements, and business requirements.  You don't get this kind of knowledge sitting behind a desk.  The Anchor team is out there speaking to the people, learning from competitors and implementing common sense.  It's what makes their curated portfolio stand out in the field.  The pioneering spirit of Fritz Maytag is deeply woven through Anchor Distilling Company. There is no doubt, with Dennis at the helm, Anchor will continue that spirit in defining new categories and markets.