GNAW BONE — Susan Spagnuolo thought her idea of opening an artisan distillery in the tourist haven of Brown County was a pipe dream after touring a whiskey-making operation in North Carolina a few years ago.
Since the end of Prohibition, Indiana’s restrictive alcohol laws made it illegal to distill spirits for retail sale. Some craft brewers and vintners were pushing to relax the rules, but conservative lawmakers weren’t exactly intoxicated with the idea.
“They told us, ‘We don’t want a still on every hill,” said Spagnuolo.
Those fears were to put to rest when Indiana opened a narrow window for entrepreneurs like Spagnuolo a year ago. Only a handful of artisan-distilleries have opened in the state.
For Spagnuolo and her husband, Mike, it was enough to open shop in a 4,000-square-foot building that once housed an automobile repair shop, where they now serve samples of Hidden Holler Moonshine, an unaged whiskey made from corn grown right down the road.
Distilled in a 250-gallon copper pot, then bottled on site, their Hoosier take on white lightning is among the first homegrown craft spirits to be made and sold retail in Indiana. While the state previously allowed distilleries, their products could only be sold wholesale.
By year’s end the Spagnuolos hope to serve the rye whiskeys and bourbons now aging in small barrels at their Bear Wallow Distillery, named after the hiding place of a long-ago bootlegger and just three miles from the much-visited Brown County State Park.
“We’ve invested a lot of time and a lot of money and had some real frustrations,” said Susan Spagnuolo. “But in the long run, it’ll be good for us and this new industry. If you’re going to call yourself an artisan distillery, you should be selling what you make.”
Attracting tourists with moonshine was anathema in the mid-1930s, when Indiana passed “blue” laws to curb alcohol sales. While some of those laws have since fallen away, there’s still a flavor of temperance in the state.
Retail stores can’t sell package alcohol on Sundays. No cold beer can be sold — any day of the week — in grocery or convenience stores. Only recently could the state’s burgeoning craft breweries and wineries sell products on Sundays.
Indiana’s vintners and brewers have convinced legislators that loosening some of those old laws helps tourism by attracting visitors interested in seeing their facilities and sampling their wares.
That thinking drove arguments for the artisan distillery bill last year, when prominent makers of craft-alcohol persuaded key members of the General Assembly that lifting a ban on craft spirits would goose a new wave of economic development.
They pointed to states such as Michigan, where 32 small distillers sell local spirits and generate tourism dollars and tax revenue. Kentucky’s “Bourbon Trail” attracts 400,000 visitors to distilleries, which buy more than 2 million bushels of Indiana corn, each year.
“It couldn’t be just about alcohol. It had to be about tourism and agriculture and small business development,” said state Rep. Ed Clere, R-New Albany, who carried the legislation.
The law that went into effect in July 2013 allows an artisan distiller to produce no more than 10,000 gallons of liquor for retail sale a year. The distiller cannot sell spirits to a retailer or a dealer, but must sell by the drink, bottle or case on the premises.
Unlike big craft-spirit operations that buy liquor from wholesalers then flavor, bottle and label it as their own, the products of Indiana’s artisan distilleries must be homegrown. At least 60 percent of the final product must be fermented and distilled from raw materials on-site.
STARLIGHT, STAR BRIGHT
Ted Huber, who opened one of state’s first artisan distilleries near his popular farm winery in Starlight, advocated for the rules.
“If we’re going to tell tourists that we’re an artisan distiller, they need to know there’s a still in that distillery,” he said.
The rules designed to strengthen ties between Indiana agriculture and distilleries are welcomed by Trevor and Brett Glick, fifth-generation farmers in Columbus, who grow and mill corn for craft distilleries in Indiana and Kentucky.
The brothers specialize in corn that’s not genetically modified, which is more attractive to craft distillers, and sell more than a half-dozen corn varieties, allowing distillers to experiment.
“The small distillers can do some things that the big distillers never would,” said Brett Glick. “And with the artisan spirits made here, you get a real taste of Indiana.”
SLOW IN THE STILL
Even with the rules loosened, there hasn’t been a rush to make liquor. The Alcohol and Tobacco Commission has granted five artisan-distillery permits and is vetting seven more.
Getting into the business isn’t easy. Start-up costs for a distillery can run from $50,000 to $500,000. Applicants for a state permit must first have a brewery, winery or conventional federal distilling license for three years, though the law grandfathered in some folks, including the Spagnuolos, who obtained a federal permit in 2013.
Also, it takes longer to produce most spirits than it does to make wine or beer.
Huber started planning a distillery in March 2013, which included an expansion of his farm by 60 acres to grow his own corn, ordering custom-built copper stills and designing a 13,000-square-foot building that includes a tasting room and an explosion-proof boiler room.
He served his first batch of artisan vodka this May and thinks the gin will be ready by October. Whiskey and bourbon, still aging, may not be ready for another year or two.
“We knew it would be a slow process,” he said. “But we weren’t interested in putting up a shack out back. We’re building a showcase for the artisan distillery industry.”
Next year’s legislative session may bring further changes to the law.
Huber and other distillers hope lawmakers will lift restrictions on selling carry-out bottles on Sundays — giving distillers the same liberty as wineries and breweries.
Spagnuolo would like to see relief from a ban on off-site tasting rooms so that she could offer Bear Wallow spirits in nearby Nashville, where outdoor activities and an artists’ colony attract more than 1 million visitors a year.
Clere — who spent three years persuading his colleagues of the economic virtues of craft spirits and built in restrictions to get the distillery bill passed — doubts any dramatic changes will occur.
“I want to see the industry develop in a responsible and sustainable fashion,” he said. “And that doesn’t mean it will develop overnight.”
— Maureen Hayden covers the Statehouse for the CNHI newspapers in Indiana. She can be reached at firstname.lastname@example.org