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Burlington Free Press: Vermont's distilleries are growing by leaps and bounds

March 3, 2016
In The News

WINDSOR - Sales are booming for Vermont-made vodka, gin and whiskey, up more than 600 percent in state liquor stores over the past five years, and more than 1,000 percent at farmers markets, special events and retail outlets.

Jeremy Elliott, owner with his father, Ron, of Smugglers' Notch Distillery in Jeffersonville, and president of the Distilled Spirits Council of Vermont, testified at the Vermont Legislature last week in support of a more forgiving tax structure for the state's 18 distilleries. Elliott told lawmakers sales of Vermont-made liquor in state liquor stores have gone from $533,488 in 2010 to $3.3 million in 2015. Sales at farmers markets and other retail venues have gone from $110,045 in 2010 to $1.7 million in 2015.

"Our business has been growing at a rapid rate," Elliott said in an interview with the Burlington Free Press.

That growth reminds some people — Peter Jillson, co-owner of Silo Distillery in Windsor, for example — of another Vermont success story, craft beer.

"The people in this industry are very collaborative, we're all going after the same thing, to make great, local products," Jillson said. "Akin to where the microbrewers were 20 years ago."

Jillson built his red, barn-like distillery on Artisans Way in Windsor in 2012, and began selling vodka in 2013, following a 30-year career in sales and marketing for large pharmaceutical companies like Abbott Laboratories in Chicago

"My routine was I would be up here on weekends," Jillson said, standing at the bar in his distillery. "On Sunday night I'd go as far as Boston. I had a condo outside the city. On Monday morning I'd get on a plane and be gone domestically or internationally all week."

Five years ago, Jillson deplaned in Boston and found his right knee had swelled to three times its normal size. He had a revelation.

"You know what? Too many planes, too much running through airports," he said. "I don't want to do this any more."

Jillson broke the news to his "life partner," Anne Marie Delaney when he got home. Her response: OK, what are you going to do instead?

"Living here you have to create your own destiny," Jillson said.

Craft distilling was going "like that," he said, holding his hand at a 45-degree angle up, and all the raw materials he needed for vodka, his favorite drink, were in his back yard. In other words, corn, which Jillson buys by the ton from Grembowicz Farm, fewer than 50 miles away in North Clarendon.

"In writing the business plan, I wanted first of all to source locally," Jillson said. "That's near and dear to my heart, not only to provide opportunity for farmers, but also because we knew where the grain was coming from. I wanted to create jobs. That was part of the master plan."

Grembowicz Farm began as a dairy operation in 1946, lasting nearly 60 years until October 2005 when the dairy operation was sold off. Today, Jeff Grembowicz, a fourth generation farmer, is running a nearly 900-acre grain farm, most of the land rented rather than owned.

Silo Distillery bought 70 tons of corn from Grembowicz last year, and expects to double that amount this year. There's plenty of corn available.

"I store almost 1,200 tons of corn after the season," Grembowicz said. "The rest goes out the door."

It's who you know

Once he made the decision to open a distillery, Peter Jillson set about educating himself and lining up investors. He visited Catskill Distilling Co. in Bethel, New York, where owner Monte Sachs introduced him to his artisan distillery, made by Germany's oldest distillery fabricator, Carl, dating back to 1869. As it turns out, Carl is very picky about who can buy its copper and stainless steel "fine instruments." Sachs smoothed the way for Jillson.

"You almost have to know someone," Jillson said. "If I had not had that connection I never would have gotten a return phone call from Carl."

The Carl distillery system at Silo is magnificent to behold. It sits behind large glass windows just off the lobby and bar, its burnished copper columns, lined with small round viewing windows, rising toward the open ceiling. The large copper pot, where the corn mash is boiled, releasing alcohol in the form of vapors, is surrounded by dimpled stainless steel fermenting tanks, and the mash tun, where the process of converting the starches in the ground corn into sugars for fermentation begins.

Other stainless steel tanks are covered in swirling tooling marks, a "German-design style," said Chris Maggiolo, production manager and head distiller. Connecting it all to a custom-built boiler in back is an immaculate, orderly matrix of stainless steel pipes that Jillson brought expert welders in from New Jersey to install.

"Those kind of steam guys are not right around the corner," Jillson said. "The steam boiler is the heart of the system."

"We looked for people who knew what they were doing," added General Manager Erin Bell. "If you're going to do it, do it well once."

Maggiolo begins his work with Grembowicz's non-GMO corn, delivered in 50-pound plastic bags, stacked in the shed added this year to the back of the distillery. Climbing a ladder, Assistant Distiller Jack Besse dumps the corn into a hopper feeding the grinder, which pipes the corn flour into the mash tun for fermenting.

"Vodka by definition is a neutral spirit, not really tasting like much," Maggiolo said. "Ours, because we use corn, is a little sweeter, and because we distill it once through the column it has more flavor and texture, which makes it a very nice sipping vodka."

The vodka Maggiolo makes is the base ingredient for all of Silo's flavored vodkas, which this year includes cucumber vodka. It's also the base ingredient for Silo's gin, and reserve gin, aged in used whiskey barrels.

Erin Bell said Silo's cucumber vodka is one of only several made in the United States. Across the country, there are 600 to 700 craft distillers, according to Peter Jillson.

"About the same time we released our cucumber vodka, Svedka released a cucumber lime product," Bell said. "I'm not sure what it's made of, but in ours, we peel, cut and steep the cucumbers in-house. There are no chemical flavorings."

As soon as they're in season again, Silo will use locally grown cucumbers, Bell said.

Short column, tall column

The Carl distillery system has a short column and a tall column, plus a column on top of the copper still, called a "helmet." In addition to vodka and gin, Silo also makes whiskey. The vodka goes through the tall column; the whiskey goes through the short column.

"You don't want a lot of flavor in vodka, and the tall column is very efficient, it strips out a lot of the congeners and flavor profiles," Maggiolo said. "It comes out 95 percent alcohol as opposed to the short column, the whiskey column, which keeps those flavors, because you want a flavorful whiskey."

For the gin, Maggiolo uses the column on top of the copper still, the helmet, where crushed juniper berries and/or apples are placed on a plate inside the column, the alcohol vapor passing through and picking up the flavors.

"Gin is pretty much a flavored vodka, primarily with juniper berries," Maggiolo said.

Bringing the FDA around

At the end of the distilling process, Silo is left with spent corn, rye, and other grains, stripped of sugar content. The town of Windsor could only handle a limited amount of the grains flushed down the drain.

"They were OK bearing the burden, but if we had increased production we would have had to start shipping to landfills instead of flushing it down the drain," Erin Bell said. 

As it turns out, spent grain from distilleries is excellent animal feed, and Hambsch Family Farm in nearby Barnard was more than willing to take Silo's grain off its hands. The only problem: the U.S. Food and Drug Administration almost got in the way.

In May 2014, the FDA was considering requiring distillers to dry, sanitize and package their spent grain before giving it to farmers. Rep. Peter Welch, D-Vt., got involved after being alerted to the issue by John and Jan Kimmich of the Alchemist, the Waterbury brewery that makes Heady Topper beer. The Kimmiches were giving their spent grain to a local pig farmer, free of charge. The pigs were loving it.

"And who can blame them?" Welch said. "John and Jen explained the FDA's proposed rule was going to require them to package their spent feed and take it to a landfill, an immense expense imposed on the brewery, and an immense expense on the farmer, who would have to buy grain instead of getting it free."

The spent grain would also impose an environmental burden on the landfill.

"This was a disaster in the making," Welch said.

Welch and several other representatives wrote a letter to the FDA, essentially telling the agency to back off, asking them to exempt brewers and distillers from the proposed rule. The legislators also proposed legislation that would hit the FDA budget, taking away money for enforcing the rule — a sure attention-getter.

The FDA listened, suspending the proposed rule. Last year, the agency came out with a rule that reflects its conversations with brewers and distillers, allowing the practice of providing spent grain as feed for farm animals to continue.

"What we emphasized (to the FDA) is we're OK with food safety, we want that, brewers and distillers are committed to it," Welch said. "But make regulations that are common sense and practical. Don't sit in a quiet office, writing them up. Get in the field and talk to people."

Steady growth

Peter Jillson is projecting Silo's sales to be "well north" of $500,000 this year, with steady growth into the future of about 20 percent annually. General Manager Erin Bell said the company has opened up four new territories with distributors outside of Vermont since last September, and she expects retail sales at the distillery this summer to double over last year.

Jillson is also focusing on contract manufacturing, having just completed a deal with Hotel Vermont in Burlington to provide the upscale hotel with its own private label vodka and gin.

"We were really looking to find a way to replace the import products and present something made in Vermont, and it's a great product, top of the line," said Hans van Wees, general manager of Hotel Vermont.