Carla Daunton, head distiller at Young Henrys

Collaborations between brewers and distillers to produce hand sanitiser during COVID-19 have put the spotlight on the growth of craft spirits.

Brewers have long dabbled in other beverages, from the new explosion of hard seltzers to wine, and, as the craft distilling sector grows, into spirits.

Recently a major win at the 2020 San Francisco World Spirit Awards put Young Henrys on the world stage when it comes to spirits. Head distiller Carla Daunton said she was “stoked” with the win for Noble Cut gin.

Daunton said that to her, brewing and distilling go hand in hand and she was lucky to be able to experience both sides of the business.

“It’s exactly what I wanted, originally I was looking at brewing or distilling and craft is where it’s at, it’s hands-on and now I get to do both and it’s awesome,” she told Brews News.

“I say that brewing is my home and distilling is my heart – they both tickle parts of my creativity and my need to get my hands dirty and experiment. They’re two sides of the same coin.”

Craft distilling is still in its infancy in comparison to the adolescence of craft beer, but it is growing fast as Australian appetites for spirits increase.

Analysts at IBIS World said there had been an explosion in the number of craft distilleries in Australia, which it identifies as SME spirit manufacturers with less than $10 million in annual revenues. The numbers have grown from 75 in 2014-15 to well over 200 last year.

The Australian Distillers Association, the equivalent of beer’s IBA, is itself an indicator of this growth. It launched in 2004 with four members, which is how it remained until 2012. Since then it has increased its membership to 242 – approximately 75 per cent of all Australian distillers, the ADA said.

Stuart Gregor, co-founder of Victoria’s Four Pillars Gin and President of the ADA, said the growth of craft distilling is nothing less than “phenomenal”.

“Some of our distilleries do whiskey and gin, some just do one spirit, some are aligned to breweries and some to wineries, some are super tiny and others massive – it’s gone from being a true cottage industry to being a significant contributor to the drinks industry and the economy,” he said.

“Spirits are growing faster than every other category and locally-produced spirits are growing at twice the pace of imported.

“Before COVID-19 it was a perfect storm for distillers. Now we’ve been hamstrung by Coronavirus, with export markets closed to us, retail businesses shut down – it’s been a very difficult time in the industry for everyone, but hopefully we’ll come out of it stronger.”

Distilling and brewing collaborations

During COVID-19 brewers across the world made the news by teaming up with distillers to develop hand sanitisers, and Young Henrys was no different.

“I helped to get the brew team trained on how to make basic spirit on the still from beer, using warehouse beer that we couldn’t sell, and that’s why the sanitiser has a lovely hoppy aroma,” said Daunton.

“We were utilising stock that was sitting here in a way it wasn’t helping the community.

“We did two runs through the still, and pulled out as much spirit as possible, then do a stripping run and make it as neutral as possible, before including additives glycerine and peroxide, which are moisturising and sterilisation chemicals.”

But even at a regulatory level the two industries are working together, and the ADA’s Stuart Gregor said that there is similar red tape in both beer and spirits with everything from planning and licensing to excise.

With such aligned interests, the ADA and the Independent Brewers Association teamed up in March to write to the government to jointly propose remedies to the effects of COVID-19 on the industries.

“We’ve got a great relationship with craft beer, and the fact of the matter is if you’re interested enough in the drinks industry you have mates in winemaking, cider making, brewing and increasingly those making spirits,” he said.

No doubt we will see more of this advocacy collaboration in future, but for now breweries and distilleries are finding ways to work together, sharing barrels for aged beers and whiskeys, creating distilling washes and making hand sanitiser.

At Young Henrys, Carla Daunton said that distilling within a brewery has given her a lot of opportunity to experiment and work with the brewers.

“[Product development] is not done in a vacuum. I collaborate with everyone up to the directors. I get a lot of autonomy but they are guiding hands.”

As a technical discipline brewing and distilling are in a symbiotic relationship. For Young Henrys’ whiskeys, Daunton uses their in-house wash, but for the gin, she brings in neutral grain spirit.

“The barley itself is a bit variable for the gin, so we might bring in some neutral grain spirit but it doesn’t take away from the Australian botanicals we showcase.”

The future of craft distilling

Analysts at IBIS World said that pre-COVID-19, the spirits industry was expected to grow at an average annual rate of 15% over the five years through 2019-20, reaching $287.4 million in value.

This has largely been driven by growth in demand for craft gin, they said. But this was before COVID-19, with sales now predicted to have fallen by as much as 80 per cent during the lockdown period.

However as the economy recovers and government restrictions ease, demand is expected to recover, with the industry projected to grow at an average rate of 9.6 per cent a year over the five years through 2024-25.

Clearly Australia’s appetite for spirits is on the up, posing an opportunity for brewers and distillers to take advantage of the trend.

Stu Gregor said that maintaining quality is key.

“There are so many Australian distilleries making world-class spirits, and if we get the distribution, taste and marketing right we’ll create a great market for ourselves.

“Aussies like trying Australian spirits, so that’s great, but I don’t think they will always keep drinking them if they’re not up to scratch.

“It’s the same with beer, you’ll try a local craft but if it’s not at the highest standard you will go back to what you had before.

“We’re on the cusp of this, maybe where craft beer was 10 years ago.

“And there’s room for everyone who does a good job,” he said.

Young Henrys’ Carla Daunton said that more distillers joining the market and breweries getting in on the action can only be a good thing.

“There are some fantastic whiskeys and gin coming out of even the younger distilleries but in the future we’ll see more growth,” she predicted.

“Australia is maturing in its tastes. If you see how craft beer increased its market share and developed, I think we’ll experience the same in spirits.

“We’re a small industry and it would be nice to see everyone lifting it up, with a bit of healthy competition.

“I’m biased but it’s so good to see Australian whiskey for example showing the world that Australia is a force to be reckoned with.

“We’re producing as a whole some amazing, top quality spirits and proving that we can play just as heavy as the hundreds of established distilleries elsewhere.

“We produce good shit basically,” she said.