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Sunday, January 13, 2008 - Page updated at 11:51 PM

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Wash. entrepreneurs getting into the distillery business

Associated Press Writer

In the land where hops and grapes grow, Northwest brewpubs have poured a variety of pale ales and dark beers. Wineries have uncorked pungent cabernets, spicy syrahs and fruity rieslings.

It stands to reason that distillers could enjoy the same success with local ingredients for grain gin or potato vodka, but entrepreneurs in Washington state have been slow to catch on.

Until now.

Dry Fly Distilling, believed to be the state's first production grain distillery since Prohibition, opened its doors last fall. Others are lining up to follow suit, putting Washington in a position to compete with its southern neighbors on another alcohol front.

California and Oregon, already known for fine wines and microbrews, also lay claim to the largest number of craft distillers nationally in a beverage market that is exploding.

"Whiskey is the future. The brands that are out there are old and tired. They've been around for 150 years," said Bill Owens of the American Distilling Institute, based in Hayward, Calif. "These new distilleries are creating new and interesting products. That's the plan _ you've got to come out the door and do something different."

More than 31,000 acres of wine grapes are grown in Washington state. Its inland fruit bowl, the agricultural Yakima Valley, also produces 70 percent of the world's hops, which provide much of the flavor and aroma for beer.

In the early 1980s, the late beer pioneer Bert Grant laid claim to what was believed to be the first American brewpub since Prohibition in central Washington. Dozens of microbreweries and hundreds of wineries have set up shop in the state since, and their products are becoming known around the world.

Like the breweries and wineries before it, Dry Fly Distilling is capitalizing on local ingredients and local talent.

"I first looked at doing a brewery, but that's just too tough of a market right now. There's too many," said Don Poffenroth, Dry Fly's co-owner. "Then my friends in the brewer business told me to look at distilling. They said, 'That's the next great thing,' and I think they're right."

The 142 craft distilleries in the U.S. are a pittance compared to the booming number of wineries and breweries _ some 7,000 wineries and 1,500 breweries nationwide. But 38 of those distilleries are in California and Oregon.

In Oregon alone, the number of distilleries doubled to more than 12 in the past two years, said Jim Dodge, purchasing manager for the Oregon Liquor Control Board. Craft liquor sales by state liquor stores topped 14,000 cases in the 12-month period ending November 2007, compared to 9,331 cases in the previous 12 months.


Last year, Oregon lawmakers approved a law allowing distillers to open tasting rooms and sell directly to the public.

"Some of these distilleries have been connected directly to the wine industry, but only a few," Dodge said. "I think it's an outgrowth of the earlier success of the microbrews, and the other element is more of a societal change.

"There's been a recent shift from beer, and to some degree wine, to distilled spirits as the alcohol of choice," he said.

Craft spirits remain a small niche in the U.S. spirits industry, which rings up $58 million in annual sales. Entrepreneurs in Washington aren't dissuaded.

Berle "Rusty" Figgins, an esteemed winemaker in the region, also is applying for a license to distill wine under a new business, Dynamic Alambic Artisan Distillers. By midsummer, he expects to have on the market three Italian-style spirits from his Mattawa facility: grappa, sambuca and lemoncello. The price: in the $30 range for a 750-millileter bottle.

"I really admire people who grow grapes, distill wine and produce brandy in the same operation," Figgins said. "It's vertical integration at its best."

Figgins and Poffenroth also are supporting legislation proposed in Washington state to create a new class of alcohol license for craft distillers _ those who produce only about 10,000 cases annually and derive more than 50 percent of their raw product in state.

The license fee would be just $100, compared to $2,000 for large grain distilleries and $200 for fruit spirits. Distillers also could allow visitors to sample on site and conduct limited retail sales.

Other states have taken similar steps. In 2002, New York introduced a new class of distilling license for small producers that carries a fee of $1,450, compared to $50,800 for the old license.

In the meantime, local farmers already are excited about the opportunities for new markets, Poffenroth said, adding, "For wheat farmers, for instance, it puts a retail face to a crop that doesn't usually get one."

Dry Fly buys most of its bulk ingredients from Washington growers _ a 20-family cooperative provides the raw, soft winter wheat for vodka and gin, and the malted barley for whiskey and flaked corn for bourbon are local.

So, too, are the ingredients that make up Dry Fly's 80-proof vodka recipe: juniper, coriander, organic dried apple, hops, lavender, mint.

Dry Fly produces one batch of whiskey a month _ about 900 cases _ where each barrel ages for at least two years. But they're distilling as much vodka and gin as they can make in a still with a capacity of 3,000 cases per year.

Eighteen months of planning went into the business, and 45 days in, Poffenroth and partner Kent Fleischmann were already making plans to expand. That despite liquor laws that in many states date back decades.

"Craft distillers are going to bring new flavors, and they're going to find ways around old ways of spelling out how things are done," Poffenroth said. "In our case, you build a small business and you hope it's going to work out. We knew eventually we would, we just thought it would be three years instead of three months."


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