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The Economics of Distilling Your Own Liquor

It is interesting to me to note that, in all the distilling books I have recently seen, only one brings up the subject of economics. That one is specifically aimed at the commercial distilling industry, not hobby distillers. To me, though, it is critical to examine the numbers involved, since this relates directly to why the government says it doesn’t want to allow home distillation of spirits.

When the state liquor stores closed in Washington, in June 2012, many residents believed that the cost of liquor would go down. This perception was understandable. The major sponsors of the bill led voters to believe that getting rid of the “monopoly” of state-run liquor stores would not only result in lower prices (presumably by increasing competition), but would also enhance selection and availability, by increasing the number of retail locations where consumers could buy liquor. It’s true that there are now roughly 1,400 stores statewide that sell liquor (compared with the previous 139 state-run liquor stores). However, we have had an increasingly hard time finding some of our favorite brands in stores near us. I suspect that many of these stores — for example, our local Walgreen’s Pharmacy — have relatively little shelf space to devote to liquor, so they have to limit their selection to a few of the more popular types. It makes sense, but it’s still frustrating.

So why have Washington State’s liquor prices gone up so much? As I mentioned before, Washington has the highest liquor taxes in the country; at this writing, the excise tax is 20.5%. There is also the “liter tax” of US$3.77 per liter, so that adds close to $3.00 for every 750-ml bottle purchased. (If these numbers seem outrageous, please note that Washington, at this writing, has no state income tax, although it has been recently proposed.) And although there are new annual fees collected at both the distribution and retail levels, the single biggest difference in the new pricing structure is the retail markup. There is more than one kind of liquor that we have simply stopped buying, due to the dramatic price increase.

I have certainly wondered if the boom in Craft Distillery license applications since June 2012 is, in part, due to a reaction to this increase in prices. Which brings us to the question of whether it is actually less expensive to make your own distilled liquor. It’s an important question, not just for the obvious reason of how it will affect your personal finances. Part of the reason the government doesn’t want people making their own liquor without a license is they believe that if consumers make their own, they’ll stop buying liquor and the state will lose a lot of liquor-related tax revenues.

In chapter 25, I will show, using numbers from my own experience, how the worries about lost tax revenues simply don’t apply when there is a reasonable limit on the amount of liquor a home distiller can make. First, let’s look at what it takes, in time as well as money, to produce even a relatively small amount of ready-to-drink liquor. I promise I’m not trying to discourage you. But just in case your motivation is saving money by making your own, I don’t want to deceive you. Remember, I am focusing in this book on making good-quality spirits, not just cheap spirits.

A Blinders-off Look at the Economics of Home Distillation

I’ll bet you a Gin & Tonic that most people who take up liquor distillation do so mainly because they imagine they will save money on booze. Ring a bell? I’ll further bet that, aside from cost, a certain percentage of these distillers will soon give up the hobby, once they discover how much time is involved.

For example: Say you are making a 5-gallon batch of malt whiskey. You buy 15 pounds or so of malt (it’s a lot cheaper to buy a 50-pound bag, but you’re not ready to commit yourself that far) and a package of premeasured whiskey yeast. So far you’ve spent about $25; add tax and shipping cost if you mail-ordered. Oh and add a couple bucks if you had the homebrew shop crush the grain for you.

Now you mash the grain, which takes two to three hours. You strain the mash, let the wort cool, then add the yeast. Fermentation begins, and takes anywhere from a few days to two weeks, depending on conditions. You fire up your still, do a stripping run (another two to three hours) and let the still cool down overnight. You now have about two liters of low wines. You spend half an hour or so emptying and flushing out the still before the spirit run. You fire up the still again, and spend nearly two hours slowly and carefully doing the spirit run. You now have (if you’ve done a good job of separating the hearts) about 450 to 600 ml hearts at 65% ABV. You’re tempted to drink the stuff then and there, but it smells a bit harsh and raw. You decide to age it a bit. You dilute it to 55% ABV, toast some oak chips and toss them into the jar.

Now you wait. At least a month. Maybe three or four months. You strain out the oak chips, measure the alcohol content and dilute it to 40% ABV. Now you have about 800 ml of whiskey ready to drink, a little more than a bottle’s worth. And you’ve spent weeks doing it!

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I’m so glad I kept good records right from the beginning. One thing I discovered is that as I gained experience with distilling, my yields of potable spirits increased noticeably. Presumably this is because I was getting better at making the cuts, and possibly I am also doing a better job of mashing the grains. So keep at it, take notes and remember that practice makes perfect.

True, if you’re fairly experienced, detail-oriented, have good equipment and are aiming for high-quality spirits, all that time and effort will be rewarded. If you’re like me and up for the challenge, you will be raring to go after reading this summary of the process. Or you may decide that it’s not worth all that much trouble. Depending on the kind and quantity of liquor you plan to make, and whether you are able to buy some of your ingredients in bulk or from local suppliers, you may save money.

What’s Your Time Worth?

Don’t ignore or discount the time factor. Although the actual hands-on time is not an awful lot on any given day, some parts of the process are time-sensitive, so you will need to plan your schedule to be available for the next step. I often find myself thinking ahead about when to start something fermenting, just to be sure I will be at home and ready to distill once fermentation is done.

Did I scare you off from even trying? I hope not! I do think it’s better to have some idea up front, though, of what you’re getting into. Remember this is a hobby, not a full-time occupation. Ask yourself why you want to make your own spirits. Are you a beer brewer looking for a new challenge? Maybe you’re daydreaming about having your own commercial distillery someday; in this case, I strongly encourage you to start small. My still, although much smaller than a commercial model, operates on exactly the same principles and is capable of producing excellent spirits. Many brewpubs and microbreweries began life as a hobby in someone’s basement or garage; why shouldn’t the same be true of craft distilleries?

It reminds me of what I tell people about raising turkeys. I heard that snicker! If you think you’re going to save money raising your own turkey for Thanksgiving, well, you won’t. You’ll be feeding that thing for months, using the most expensive high-protein feed, before you’re ready for turkey sandwiches. Plus, commercially grown turkeys are so cheap these days! On the other hand, you will have a fresh, homegrown turkey, and you can be justly proud of the investment of time and effort that went into putting it on your table.

Likewise, when you make your own premium spirits, you may not save money, and yes, you will invest a lot of time before you have a bottle of something ready to drink. I’ll bet you another Gin & Tonic that you’re smiling right now, anticipating the moment; go on, admit it. Sure, you could run out to the store and buy something, but where’s the fun in that?

If People Distill Their Own Liquor, Won’t They Quit Buying It?

An important point here is that we still buy some of our liquor. In the course of researching this book, I daresay I have spent a lot more time, in an average month, distilling liquor than most hobbyists will realistically do. I don’t have a job outside the homestead, so I have a lot more “spare” time than most people. Even so, I’m not running the still more than a couple of times a week at the most. I would have to be fermenting at least three batches of something at any given time to have something ready to distill more often than that! You’d be surprised how quickly your kitchen floor can get crowded with fermenting buckets, and while it gives you a good excuse to put off mopping the floor, it does tend to induce muffled swearing when someone (OK, me) trips over a bucket on a late-night foraging excursion.

I have also been experimenting with a lot of different kinds of spirits. I have yet to come up with a reasonable facsimile of 18-year-old Glenlivet, and while we don’t drink Scotch all that often, we do still buy it. I like my homemade genever-style gin for G & Ts, but David prefers a gin with less botanical character to it, so he buys Bellringer or some other brand. With all the kinds of whiskey I’ve tried making, I haven’t yet made something akin to blended Canadian whiskey, so we still buy that.

I could go on, but you get the point. It’s also important to realize that the size of your still (that is, its boiling pot capacity) automatically limits the amount of liquor you can make. I promise this is true. You might think that you can just turn up the heat and run everything faster, but this is actually counter-productive, and can even be dangerous. Running it faster just puts more strain on your condenser (see the discussion on this in chapter 10), which can decrease yields. It’s also much harder, with small quantities like this, to accurately make the “cuts” that separate the poisonous and undesirable elements from the potable ethanol in your still. Once again, I’m encouraging you to pursue this hobby with the goal of producing high-quality spirits, not cheap, quick rotgut.

Keep in mind that, depending on your location, you may or may not have a nearby source of equipment, ingredients and supplies. Do try to buy your stuff locally when you can. I know it’s easy to just order everything online now, but consider the additional cost of shipping, all that extra packaging and those horrible peanut things to get rid of somehow. By the way, because home distilling is currently illegal, no one at the homebrew shop is allowed to answer questions or give you advice about distilling. No matter that they sell distilling yeast and even small counter-top stills (labeled carefully as being for water or essential oil distillation). Trust me, they are required to report sales of stills, even Internet sales, so proceed with caution if you haven’t already applied for your license.