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The most regulated industry in the United States

Whoever said the economy ran like a well-oiled machine never studied the spirits industry

The seaplane-styled tasting room of California Spirit Company, ready to take off in June 2016, having overcome a host of harsh government restrictions.
The seaplane-styled tasting room of California Spirit Company, ready to take off in June 2016, having overcome a host of harsh government restrictions.

Thanks to recent changes in state law, the California Spirits Company will officially open its San Marcos tasting room to the public on June 9. While owner and distiller Casey Miles embraces the opportunity to sell bottles via his tasting room, he suggests it's just the latest example of how strict government controls have impacted small spirit producers' ability to do business.

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Miles, who holds an MBA from UC Irvine, experienced an 18-month delay before launching his company at the end of 2014. "In business school they teach you that the economy runs like a well-oiled machine," he says. "Apparently they never studied the spirits industry."

Ironically, the former IT professional used to manage the sort of big data valued by the national intelligence community, but now considers liquor production "the most regulated industry in the United States." He points out, "The city alone delayed us three months and about 15,000 dollars," adding that the difficulties only continue when his bottles reach the consumer. "Distilled spirits are taxed at ten times the rate per ethanol as beer and wine," he states, "The same molecule in the same quantity is taxed ten times more."

Miles rails against this double standard. "If you have 8 ounces of alcohol, you're drunk," he argues, "whether you have it in a couple martinis or a lot of beers, you still had 8 ounces of ethanol." He contends issues attributed to distilled spirits in the public imagination — DUIs and fights for example — are more common among people drinking beer than cocktails. "You don't actually drink a martini and then get into a fight unless you are James Bond," he says.

"I have nothing against beer," he continues, "What I do take issue with is the sin campaign against distilled spirits." Miles insists small-batch spirit manufacturers actually produce a cleaner product than brewers or winemakers, which produce alcoholic solutions. "We refine it," he says, "we remove the impurities. We remove the acetone, the methanol, propyl alcohol, butyl alcohol, amyl alcohol. Those are all poisons." He claims that ethanol's dehydrating properties aside, such byproducts are the chemicals guilty of causing hangovers. And they're not found in his spirits. "You get a nice craft distilled product," he pledges, "you'll be right as rain in the morning."

To succeed within the confines of existing rules, Miles initially focused his business plan on "one product, massive distribution." He built his distillery around developing a white rum, experimenting with dozens of different sugars and yeast combinations until he settled on a blend of sucanat, premium-grade molasses, and a French blush wine yeast. It's subsequently earned silver medals at both the American Distilling Institute and San Francisco World Spirits competitions.

However, now that California Spirits can directly sell up to three bottles per customer on site, a single product would limit his brand's success. So, Miles has had to work quickly to expand his product line and will begin by introducing a line of flavored rums with his tasting room opening. "If they can buy three bottles," he figures, "we need at least five products!"

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The seaplane-styled tasting room of California Spirit Company, ready to take off in June 2016, having overcome a host of harsh government restrictions.
The seaplane-styled tasting room of California Spirit Company, ready to take off in June 2016, having overcome a host of harsh government restrictions.

Thanks to recent changes in state law, the California Spirits Company will officially open its San Marcos tasting room to the public on June 9. While owner and distiller Casey Miles embraces the opportunity to sell bottles via his tasting room, he suggests it's just the latest example of how strict government controls have impacted small spirit producers' ability to do business.

Sponsored
Sponsored

Miles, who holds an MBA from UC Irvine, experienced an 18-month delay before launching his company at the end of 2014. "In business school they teach you that the economy runs like a well-oiled machine," he says. "Apparently they never studied the spirits industry."

Ironically, the former IT professional used to manage the sort of big data valued by the national intelligence community, but now considers liquor production "the most regulated industry in the United States." He points out, "The city alone delayed us three months and about 15,000 dollars," adding that the difficulties only continue when his bottles reach the consumer. "Distilled spirits are taxed at ten times the rate per ethanol as beer and wine," he states, "The same molecule in the same quantity is taxed ten times more."

Miles rails against this double standard. "If you have 8 ounces of alcohol, you're drunk," he argues, "whether you have it in a couple martinis or a lot of beers, you still had 8 ounces of ethanol." He contends issues attributed to distilled spirits in the public imagination — DUIs and fights for example — are more common among people drinking beer than cocktails. "You don't actually drink a martini and then get into a fight unless you are James Bond," he says.

"I have nothing against beer," he continues, "What I do take issue with is the sin campaign against distilled spirits." Miles insists small-batch spirit manufacturers actually produce a cleaner product than brewers or winemakers, which produce alcoholic solutions. "We refine it," he says, "we remove the impurities. We remove the acetone, the methanol, propyl alcohol, butyl alcohol, amyl alcohol. Those are all poisons." He claims that ethanol's dehydrating properties aside, such byproducts are the chemicals guilty of causing hangovers. And they're not found in his spirits. "You get a nice craft distilled product," he pledges, "you'll be right as rain in the morning."

To succeed within the confines of existing rules, Miles initially focused his business plan on "one product, massive distribution." He built his distillery around developing a white rum, experimenting with dozens of different sugars and yeast combinations until he settled on a blend of sucanat, premium-grade molasses, and a French blush wine yeast. It's subsequently earned silver medals at both the American Distilling Institute and San Francisco World Spirits competitions.

However, now that California Spirits can directly sell up to three bottles per customer on site, a single product would limit his brand's success. So, Miles has had to work quickly to expand his product line and will begin by introducing a line of flavored rums with his tasting room opening. "If they can buy three bottles," he figures, "we need at least five products!"

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