Fifteen years ago, a mere 50 or so small-batch craft distilleries were operating in the U.S. Today they exceed 1,800. But liquor stores, which don't expand easily, can't hope to stock most of the new products coming from these upstarts.
This is the opening Michael Weiss sees for his e-commerce company, Spirit Hub. Operating since January from a warehouse in suburban Lincolnwood, Spirit Hub, which has the help of some heavy-hitter e-commerce players, is taking on orphaned whiskey, gin and vodka labels from small producers who can't get shelf space at retail and introducing them to a mass audience online.
"We're addressing consumers who want access to things they've never had," says the 29-year-old Weiss, founder and CEO. "And we're partnering with distilleries that have not been able to get distribution for their products."
Weiss faces plenty of roadblocks. The U.S. liquor industry is regulated separately by all 50 states, each with its own maze of regulations. The greatest hurdle of all is that most states require that each bottle of booze pass through both a wholesaler and a retailer on the way to any consumer.
Weiss intends to meet the law by enlisting wholesale partners in each state and then taking out local retail licenses allowing Spirit Hub to operate, albeit without a brick-and-mortar storefront. So far, the company is selling in just Illinois and Nebraska, but Weiss is negotiating to get licensed in Washington, D.C., Florida and Michigan. So far he's struck deals to distribute products made by 250 distilleries around the U.S. and Canada, up from 150 in January.
Spirit Hub has 25 employees and in July hired the former president and CEO of Peapod, Jennifer Carr-Smith, as a nonexecutive adviser.
"We expect to be in six states by the first quarter of 2021," says Weiss, who originally started Spirit Hub under the name BigFish Spirits before changing it in February. "By 2025 we anticipate being in all U.S. markets as well as selling internationally. And we want to represent a lot more distilleries in the process."
So far, Weiss, who is on his fifth business (he had a real estate brokerage in New York and factored receivables for small businesses there), is funding Spirit Hub himself along with a few investors including his co-founder, London-based John Osborne. Big investment is not welcome so far. "We need to be able to pivot rapidly as the market develops and changes, and we can best do that with a small management team," says Osborne, 49, who has helped develop mobile phone products for Motorola and a sports wagering project for the Nevada Gaming Board. He notes that there are plenty of online sources for ordering wine, and even beer, but Spirit Hub has little competition so far in hard liquor, which is typically more tightly controlled from one state to the next.
Carr-Smith pegs the craft spirits market at about $8 billion in the U.S. "Independent spirits are the fastest growing segment of the spirits industry," she says in a statement. "But they also face the most legal roadblocks to sell their products."
Before signing on with Spirit Hub, Will Drucker, founder and president of Split Spirits in Vermont, had persuaded wholesalers only in New York and California to sell his unusual whiskeys—each bottle aged in wood and sold with a shard of leftover wood inserted into the liquid. He was drawn to the firm's robust website, which describes each distillery and its owners in great detail to online customers.
"We needed a platform to tell our story," Drucker says. "Distributors are limited in what they can do for you."
Koval Distillery, founded in Chicago 12 years ago, is also partnering with Spirit Hub. Koval already sells across the U.S. and overseas, but the COVID pandemic got Sonat Birnecker Hart, the president, worrying about an uncertain future. "People are changing the way they shop," she says. "Spirit Hub is innovating a new way to reach consumers. We think e-commerce will become more and more important."
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October 03, 2020 at 03:02AM
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Spirit Hub aims to get craft liquor to all corners of the US - Crain's Chicago Business
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