In the ever-evolving landscape of the spirits industry, with new craft and premium brands entering the market every year, one term has been gaining significant attention recently: contract distilling.

This business model, which involves one company producing spirits on behalf of another, is reshaping the way distilleries operate and offers a range of benefits for established brands, newcomers and investors.

Seeking a manufacturing partner to produce spirits for someone else isn’t something new: whiskey distilleries across southern USA have been trailing this business model since the 19th century.

However, with the advent of premiumisation of the global alcohol market and the increasing purchasing power across Asian markets in the 21st century, aspiring brands and well-established ones have found a route to market with less paperwork, shorter lead times and less financial investment.

KEY STEPS

The process of contract distilling typically follows these key steps. In the initial consultation and planning stage, the client approaches the distillery with their concept. This could range from replicating an existing brand or creating something entirely bespoke.

It is at this stage where that discussions take place on production capacities, timelines and costs. This stage can be an eye opener to potential clients: the East Side Distillery (ESD) works with a minimum order of 4,000 litres for the gin category.

We usually recommend clients to keep an investment of ?10 lakh available for the entire process of developing a spirit, blending, bottling and dispatch as a finished product in bottles.

Of course, this will vary depending on whether the spirit is a vodka, which is produced considerably faster than a whiskey, which needs to be rested in wood barrels – or whether the client simply wants the spirit to be supplied in bulk, and they will bottle it at their own facilities. All these factors determine the final price.

PRODUCTION RECIPE

If the client doesn’t already have a recipe, the team at ESD works closely with the client to develop one. This stage involves using existing brands as benchmarks, selecting ingredients, trial distillation and test blends, to ensure the product meets client’s expectations.

During the recipe development process, ESD helps the client with all necessary licenses to manufacture and dispatch the product.

In terms of lead times, ESD commits to create a commercial recipe from scratch within 6 weeks. However, the process length depends on the client’s feedback. In my previous company in the United Kingdom there were clients who needed several months to approve a recipe.

Once the recipe is approved the distillery begins commercial production, distilling in our Holstein copper still, blending, bottling, or supplying in bulk, according to the client’s specifications.

Not all clients come from an alcobev background, so ESD also offers guidance on label design and compliance with excise department and food safety norms.

During distillation, blending and bottling the spirit undergoes quality checks in line with international standards, to ensure consistency. The finished product is then shipped to the client directly or to their appointed distributors.

WIN-WIN

Contract distilling can be a win-win for both distillery and client. Some main benefits of this relationship can be:

• Low capital investment. Building and operating a distillery requires significant capital, from purchasing equipment and hiring staff to maintaining facilities and navigating licenses. Contract distilling effectively reduces these costs, allowing brands to allocate more resources toward branding and marketing.
• Expertise, compliance and regulation: The ESD team brings a combined experience of 20 years to the table. From experimenting with unique flavours to sourcing raw materials and managing the complexities of distillation ESD ensures the timely production of liquids of a consistent quality. We also take care of permits, safety protocols and quality assurance, ensuring alignment with state-wise and international regulations.
• Speed to market: A contract distiller will normally be flexible with amounts, either producing small batches (1,000 litres) and up to 1,00,000 litres. As the facilities are already operating and manned, producing stock through contract distilling can greatly reduce time to market. ESD can help clients develop a new recipe from scratch and release to market in a matter of 12 weeks.

EXPERTS ON HAND

ESD already has its own recipes and products – the Indo-Japanese Doja gin, Portal London dry gin and Nomad Oscuro dark rum – that have won competition medals and praise the world over.

The ESD team has over the years curated and developed hundreds of gins, rums and other spirits for clients worldwide. It is also available to work with the client at his/her facility on a project basis.

There is also the option of using ESD’s facility for product development, leveraging its world-class equipment and team expertise.

From diversification and innovation to access to expertise and resources, contract distilling offers a cost-effective and scalable solution for producing all categories of spirits without the need of a large upfront financial investment.

Keeping a clear brand story and the right distilling partner closely aligned, the option of contract distilling can turn ambitious ideas into liquids that will captivate consumers in a competitive market.