That’s the spirit

Great Lakes Distillery was founded in 2004, but it didn’t sell its first product until 2006. The distillery in Milwaukee’s Walker’s Point neighborhood has made a name for itself since then, and founder Guy Rehorst’s work to change Wisconsin’s antiquated distilling laws has paved the way for 13 other distillers to open in the state.

Last year, Great Lakes added a tasting room and patio to its manufacturing space, opening the door to hosting events that will boost its exposure.

In the last year and a half, Milwaukee’s only distiller has started distributing its vodka, rum, absinthe and other liquors – previously available just in Wisconsin, Illinois and Minnesota – to 22 other states.

Rehorst is expanding production to meet the growing national demand for distilled spirits. With additional production capacity, he also hopes to introduce new liquor.

A growing local food movement has coincided with the distillery’s growth, contributing to its booming popularity. And industry projections show spirits are following the same massive growth trend that craft brewing has experienced over the last several years.

Great Lakes master distiller Doug MacKenzie

Rehorst’s award-winning products have made him a leader in the craft distilling movement, both in Wisconsin and nationwide.

A new tradition

Rehorst sold his successful Mequon CD and DVD manufacturing company, Great Lakes Media Technology Inc., in 2002 and then took some time off while he was deciding what to do next.

As he considered his options, Rehorst took up his old homebrewing and winemaking hobby, and it got him thinking.

“You could go out to any restaurant and you could find local beers, even local wines being sold, but there were no local spirits,” Rehorst said. “That kind of got the wheels turning, and I decided to look into it.”

After some research, he decided to make the leap and invest his earnout by opening Wisconsin’s first post-Prohibition distillery.

At the time, there weren’t many small distilleries in the United States. While distillers had been as prevalent as brewers in Milwaukee during a wave of immigration ahead of the Civil War, Prohibition wiped out many of them, according to Martin Hintz, author of “A Spirited History of Milwaukee Brews & Booze.”

Some distillers closed and others turned their attention to other products. National Distilling, one of the largest, focused on its Red Star yeast production. The company is now part of Milwaukee-based ingredients manufacturer Sensient Technologies Corp.

About 70 years later, Rehorst started the distilling trade again and paved the way for its growth in the state.

The company followed in the footsteps of Rehorst’s great-grandfather, a tavern owner, and his grandfather, Alex Rehorst, who was a Milwaukee policeman during Prohibition and, as legend has it, never shut down any of the speakeasies he was invited into on his beat.

For a few years, Rehorst and master distiller Doug MacKenzie learned the trade and patiently researched the equipment and regulations surrounding the industry.

“Seven years ago, this industry was really in its infancy,” MacKenzie said.

MacKenzie had no distilling experience, so he had to be self-motivated and find an experienced mentor to learn the distilling process and the finer details of flavor and craftsmanship.

“I have a lucky palate because I make the product taste good to me, and it seems to translate to other people liking it, too,” he said.

Distilling in the Brew City

Opening a distillery in a city that’s partial to beer had its advantages and disadvantages.

“All the new craft breweries were doing so well…it’s almost natural that craft distilleries would be following as well down the road,” Hintz said. “I think (Great Lakes) did pave the way, and they kind of took the lumps.”

Rehorst was one of the pioneers of the resurgence in craft distilling, said Bill Owens, president of The American Distilling Institute.

“Guy, he’s a product of the new generation,” Owens said. “He’s a role model for others to follow.”

Distillers are the latest to join the renaissance that wine, beer, olives, chocolate and several other food groups have experienced, he said.

While craft distilleries still make up just one to two percent of the U.S. alcohol market, they are gaining traction in the marketplace as trade treaties increase the variety of spirits in the market and tasting laws are passed in more states, said Frank Coleman, senior vice president of the Distilling Council of the United States.

“Guy is absolutely one of the first, certainly in the region, and one of the great craft distillers in America, really,” he said.

In 2011, Wisconsin was fifth in the country for consumption of distilled spirits at 3.25 gallons per capita, and ranked second in the brandy category. Wisconsin residents spend about $2.4 billion per year on spirits.

Fits and starts

“Alcohol has the unique feature of being both a food product and a fire hazard,” Rehorst said.

It operates under a tight web of federal, state and local laws that might have discouraged a weaker businessman. But Rehorst was determined to make it work.

First, he needed to get approval from federal agencies including the Alcohol and Tobacco Tax and Trade Bureau, the U.S. Department of Agriculture, the U.S. Food and Drug Administration and the U.S. Environmental Protection Agency.

Then, he needed to break down the barriers to entry in Wisconsin. When he called the Wisconsin Department of Revenue, nobody there had even licensed a distillery before, and they had to research the regulations before they could help him with such a unique request.

Locally, the company’s original Riverwest location and the Walker’s Point building it has occupied since 2008 needed to be inspected to receive a hazardous occupancy permit.

Rehorst now regularly reports to the Wisconsin Department of Agriculture and Department of Revenue.

“It took basically a year and a half from the day I set up the company to selling product,” Rehorst said. “It can be very frustrating because at times it can move very slowly. I was at a point in my life where I was able to take the time and do it. I’d hate to have to do it on a tight schedule.”

After pouring between $300,000 and $400,000 into starting up the business, Great Lakes started distilling vodka first.

“It’s the most popular spirit to people in general,” Rehorst said. “It just made sense from the standpoint of needing to start generating cash.”

Rehorst always planned to offer several products to appeal to different palates. After the company started selling Rehorst Premium Milwaukee Vodka in 2006, Great Lakes introduced Rehorst Gin in 2007 and Rehorst Citrus & Honey Vodka in 2008.

The company also now manufactures Roaring Dan’s Rum, named after Dan Seavey, the only pirate ever captured on the Great Lakes, according to Hintz.

Great Lakes gradually started making artisan brandies, absinthes and a Pumpkin Seasonal Spirit that is made by distilling the Pumpkin Lager from Milwaukee’s Lakefront Brewery.

But some spirits can prove difficult for a young distiller. It only takes about seven working days to make vodka, but whiskey can take years.

“We love whiskey, everybody who works here loves whiskey,” Rehorst said. “It’s a difficult product to make because all the cost is upfront on it, so you’re basically investing the money to produce the product and then it sits in the barrel for, in many cases, years before you ever get a return on it, so it just ties up a lot of cash.”

However, consumer demand for whiskey, and bourbon, in particular, have been skyrocketing nationwide as more bourbon distilleries open and the supply of aged whiskeys dwindles.

Great Lakes reached a middle ground when it introduced its Kinnickinnic Whiskey in 2011. Rehorst sourced a well-aged straight bourbon from the South and blended it with the younger rye and malt whiskeys the company makes on-site. It produced a unique product that has proven very popular and garnered several national and international awards.

The distillery also releases small quantities of its aged rye and malt whiskeys when they’re ready. Two barrels of the rye whiskey will be sold this fall, after aging five years.

“A lot of people are developing more sophisticated tastes I think and they’re starting to enjoy whiskey to a greater level and they’re starting to look for different things in whiskey,” Rehorst said. “There’s a lot of things you can do with whiskey, and I think companies are just discovering that.”

Booze boom

As consumers have become more interested in where their food comes from, a movement toward local and sustainable production has provided a boost to Great Lakes and other small batch distillers.

“When I started…there weren’t very many small distilleries in the U.S.,” Rehorst said. “Almost all products came from the large producers, both in the U.S. and Europe. What’s changed since then is that in the country there’s now at least 500 small distilleries, and we’ll probably have more than 1,000 after two years.”

In 2006, Great Lakes made between 6,000 and 7,000 bottles of liquor. Last year, the distillery put out 60,000 bottles.

About 30,000 visitors come into Great Lakes annually to tour the distillery, learn how the products are made and sample its growing array of spirits. There are tours and tastings seven days a week.

“For us, it’s about getting people to try our product, and by having a tasting room here and by having a place to represent the brands, people get a much more involved connection to our products,” Rehorst said.

Without a formal advertising campaign, Great Lakes has grown in popularity mostly through word of mouth and social media.

In its first several years, state law forbade Great Lakes from providing on-site samples or sales of its products, so it had zero visitors. With a lot of effort and the help of then-state Rep. Pedro Colon and the Metropolitan Milwaukee Association of Commerce’s government liaison Steve Baas, Rehorst was able to get the law changed in 2010 to allow him to provide tastings.

“It’s been a tremendous boon for us,” Rehorst said. “I mean imagine making a product and being told that you can’t sell it, you can’t sample it to people, you can’t really do anything with it and then all of a sudden that barrier comes down.”

While the company can now sell bottles of its spirits in the tasting room, it can’t directly sell its products to bars and retailers. A distributor must make the sales.

Each bottle the company makes is subject to a $3.14 excise tax when it leaves the facility, a tax rate about four times higher than the taxes imposed on wine and beer makers.

“The single most costly ingredient in our product is excise tax,” Rehorst said. “We pay a tremendous amount of excise tax, and the distillery has to pay that before the distillery ever gets paid for the product, typically.”

With Rehorst blazing the trail, there are now 13 other distilleries in Wisconsin, helped in large part by his efforts to change laws related to distilling. They are: Aeppeltreow Inc. in Burlington; Yahara Bay Distillers Inc. in Madison; Death’s Door Distillery LLC in Middleton; 45th Parallel Spirits LLC in New Richmond; Door County Distillery in Sturgeon Bay; White Wolf Distillery in Shell Lake; Minhas Micro Distillery in Monroe; Van Drastic LLC in Cedar Grove; Hendricks Family Distillery LLC in Omro; IB Artisan Winery & Distillery in Eau Claire; Old Sugar Distillery LLC in Madison; Lo Artisan Distillery LLC in Sturgeon Bay; and The North Woods Distillery LLC in Coleman.

A unique flavor

It’s too soon to tell how Great Lakes products are being received in outside markets, Rehorst said.

The products have a Wisconsin-centric and natural theme. Great Lakes uses local grains, pure Wisconsin honey and real lemon zest in its citrus honey vodka, pure Wisconsin maple syrup in its Roaring Dan’s rum and Wisconsin ginseng and locally supplied botanicals in its gin.

“Even the things that we don’t necessarily produce in Wisconsin that we use, we still try to always purchase them from a local supplier,” he said, “Our biggest supporters are local, and they see us support other local companies, using local suppliers.”

Great Lakes considers its competitors to be the big liquor brands, not the smaller batch distillers.

“There’s about 10 small distilleries in the state right now, and I really don’t feel we’re competitors,” Rehorst said. “We’re all kind of fighting the same thing and that is large brands with very deep pockets who produce a very predictable product, whereas we’re trying to typically market with products that are a little unusual or have a different twist to them.”

Large distilleries like Absolut and Pinnacle have rapidly introduced a variety of flavored vodkas with artificial flavorings that seem to grow in number each week. But their flavors can only hold consumer interest for a short time, Rehorst said.

“We try to produce things that are going to be long-lasting, that people are going to like and have a use for over a very long period of time, and it’s not just a novelty,” he said.

The consumer who drinks Great Lakes products is typically more adventurous and isn’t necessarily married to one brand, he said.

It’s tough to identify the target customer, since it’s more about attitude than demographic group, Rehorst said. They usually range from 25 to 55, and all have a pointed interest in the liquor and its origins.

Small batch distilleries have become trendsetters in the alcohol industry, as they gain a larger share of the market from traditional beer and liquor brands.

“The larger distilleries are now creating brands that are picking up on the marketing that small distilleries have been using: Hand-crafted, small batch, organic, you name it,” Rehorst said. “Suddenly they’re realizing that, ‘Hey, maybe these little guys are on to something’ and so they’re coming out with those products as well.”

Aging plans

Great Lakes has grown to have six full-time and 10 part-time employees. Full-time employees are involved in production and sales, while part-time employees serve as tour guides and tasting room attendants.

Great Lakes is sold in about 800 bars and retail stores in southeastern Wisconsin. And the number of Great Lakes retailers outside the area is difficult to pinpoint because it’s growing so quickly.

“We began distributing outside the state with some seriousness last year, so we suddenly found ourselves in 25 states and we’re at the limit of what we can produce on the equipment we have. So, we need to add some additional equipment,” Rehorst said.

He plans to purchase a second still and three to four new fermenters in the near future. They’ll fit easily into the existing space, but a future expansion is also possible.

“There’s a neat little building in the parking lot here that would be great,” Rehorst said. “It was an old stable building for the brewery that was on site here in the late 1800s and would be a perfect barrel aging house for us as we get more aged spirits.”

Rehorst and his silent partner have reinvested heavily in Great Lakes over time. The addition of a tasting room and patio last year cost about $300,000, paid for in part by a deal Great Lakes arranged with the building owner.

“They weren’t interested in selling the building, so we basically struck a deal with them where they did a lot of the buildout, and we signed a long-term lease with them,” he said.

The distillery initially leased only the building’s lower level, but moved into the upper 3,500-square-foot space with the addition. It now has 14,000 square feet of space.

With the path to national distribution opening up, Rehorst aims to increase production to about four times what the distillery is currently putting out. The additional capacity would also allow the company to introduce new products, such as sweetened liqueurs and botanical spirits, as well as additional whiskey products.

“We’ve been growing between 15 and 20 percent per year over the last few years and expect to continue to see that,” Rehorst said.

Rehorst and Great Lakes were at the beginning of a burgeoning trend in 2004, and have served as a model for states like Indiana, which recently began allowing distilleries, according to Pennfield Jensen, executive director of the American Craft Distillers Association.

“What Guy has done in almost every regard, from legislation to product quality, and the nature of his establishment there and how they handle tasting and selling and the resonance that he’s created for craft distilling in Milwaukee there, it’s great,” Jensen said. “He’s a model for others. The kind of success we need more of.”

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Molly Dill, former BizTimes Milwaukee managing editor.

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