BY TRAVIS PERSAUD

The article was originally published in the April 2015 print edition of Ottawa Magazine

The booming craft-distilling industry is ripe with creative, hard-working, patient people who take a hands-on approach to making top-shelf liquor. Travis Persaud explores the scene

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We’re experiencing a renaissance — at least Ian Smiley thinks so.
The Ottawa resident, who often consults with distilleries across the country, says Ontario is in the midst of a craft-distilling boom.
“While there hasn’t been much change in the way of legislation, the government has been quite co-operative,” says Smiley, whose 2000 book, Making Pure Corn Whiskey, is often referenced by people in the burgeoning small-batch liquor industry.

“The population in Ontario is becoming less tolerant of the alcohol monopoly, and because of that, the government is beginning to loosen the rules.”

But those wanting to start a distillery still have some significant hurdles to overcome, especially the requirements specifically created to keep out small distilleries. For example, in order to open an onsite retail store, a distillery must have either a 5,000-litre still (imagine a cauldron big enough to hold three grown men) or a continuous still capacity of 150 litres of alcohol per hour.

Made-in-Ontario liquor, created using craft distilling processes. Here, Toronto Distillery’s Organic Whisky. Photo: Jamie Kronick

Ottawa native Charles Benoit, co-founder of Toronto Distilling Co., says the first option simply does not work for craft distilleries. “We have a 500-litre still, and that’s a good size for us,” he says.

Benoit, a lawyer by training, found a way to achieve the second option by feeding the still with absolute alcohol to meet the hourly requirement. It’s a creative work-around that Ottawa’s North of 7 also used to get their business started.

Once up and running, taxes are the next big hurdle.

“We pay eight to 14 times the tax and duty that breweries or small wineries do in Ontario,” says Greg Lipin, co-owner of North of 7. “[But] we have the Ontario Craft Distillers Association that’s pushing for reforms from all levels of government.”

So exactly what do wineries and breweries pay in excise tax, compared with distilleries?

It’s based on alcohol percentage and the volume output of the winery, brewery, or distillery.

Made-in-Ontario liquor, created using craft distilling processes. Here, North of 7’s Leatherback Rum. Photo: Jamie Kronick

In general, wineries pay $0.620 per litre; breweries pay $0.312 per litre. Spirits, however, are taxed at a whopping $11.696 per litre.

“Then it’s the provincial markup,” Benoit says. “They don’t care about the alcohol content. They just mark up what you charge them. Our wholesale price is $12 a bottle — their markup is 140 percent.” By comparison, wine is marked up by only 70 percent.

Markup is something that every craft distillery has front of mind.

“Making a quality non-mass-produced spirit results in razor-thin margins,” says Sophia Pantazi, founder and owner of 66 Gilead Distillery in Prince Edward County. “But the spirits scene is definitely moving toward craft, as has happened for beer. People are now as concerned with the quality of what they drink as they are about what they eat.”

Indeed, that concern is one of the reasons more distilleries are popping up across the province. People are demanding the quality that makers such as North of 7 are able to produce.

Made-in-Ontario liquor, created using craft distilling processes. Here, Toronto Distillery’s JR’s Dry Organic Gin. Photo: Jamie Kronick.

“I oversee every aspect of product development,” Lipin says. “From the drying and grinding of the grain, yeast pitching, barrel selection, distillation cuts [what part of the spirit run is kept], bottling, and labeling.”

This type of hands-on work and transparency doesn’t happen at larger outfits. Many in the industry were concerned about the lack of regulation concerning the use of such words as “craft” and “small batch”; big producers were taking advantage of the booming industry by using these terms on labels and in marketing campaigns.

But those lax rules are changing. In 2014, the Ontario Craft Distillers Association began lobbying the LCBO to create criteria for craft-distillery status. The list includes mandating that more than 50 percent of raw materials be fermented on-site.

Lipin notes that these regulations will avoid the situation in the United States, where lawsuits are being filed against upstarts — so-called craft distilleries — who sold “rebottled” product from a larger distillery. But the rules don’t address mash-bill mysteries. (A mash bill is the proportion of different grains used to create a wort, the liquid extracted from the mashing process, which is then fermented into alcohol.)

“Grains determine the taste of whisky, yet a lot of the big producers won’t tell you what’s in their mash bill,” Benoit says. “We put everything we use on the internet. Customers want to know. I want to know. The traditional industry has not offered it. The craft industry is doing it.”

Smiley, who has been consulting with North of 7 since 2013, believes the distillery will take off in coming years. He also says that in the next decade, we will see more distilleries.

“Some will go belly up, and others will get absorbed by big conglomerates. But then we’ll be left with a nice industry of medium-sized distilleries.

“If you have more businesses, it will be good for everyone. It happened with craft breweries. Same thing with spirits: as more distilleries open, people will want the craft stuff.”