An entrepreneur seeking to start up a craft whiskey distillery recently had his eye on two Cobb County sites: one near the Square in Marietta and another in downtown Kennesaw.
After a couple of weeks of back-and-forth negotiations on the two sites, it looks like Kennesaw may be lifting its glass with a celebratory "cheers," while Marietta could be left crying in its beer. Mark Allen of Acworth spoke with both cities about opening Lazy Guy Distillery, a startup venture that eventually would churn out up to 400 cases of craft whiskey a month.
The manufacture of distilled spirits is a tough business to crack in Georgia. Startup costs are high, as are the amount of government regulations and taxes, said Allen. Both cities were interested in his business plan. In the end, it came down to one city, Kennesaw, stepping up to the table with an offer he couldn't refuse.
"Kennesaw rolled out the red carpet for us," Allen said. "They gave us a lot of incentives that were real important to a small business. And we did not have to go through a zoning process." Kennesaw waived or partially waived its business license fees, signage fees and permit fees. It kicked in a remodeling grant and agreed to partially fund rent payments to Allen's landlord. The incentives added up to about $15,000 toward Lazy Guy's bottom line, Allen said. Then there was the issue of the sprinkler system.
"We were going to have to spend $20,000 for a sprinkler system, which ultimately killed the deal; now they (Marietta) are saying it may not be required, but we don't know for sure until we meet with the fire chief and show him our proposal," Allen said.
"Kennesaw put it in writing. No sprinklers." Marietta Mayor Steve Tumlin sounded sorry that the whiskey venture slipped away.
"We were very interested in a whiskey distillery," said Tumlin. "We brushed our teeth, combed our hair and gave it our best."
Allen had locations picked out in both cities. He said both would have provided the old-time feel of a saloon atmosphere he wanted. Tumlin is hopeful that Allen will open a Marietta branch and said the city remains interested.
"He's on the cutting edge in Georgia," Tumlin said. The whiskey distillery would have added to the brewing scene in Marietta, which is already home to Red Hare Brewery, maker of a full line of craft beers. Tumlin said Red Hare has been successful, and he believes whiskey would be, too. Lazy Guy Distillery will be near downtown Kennesaw at 2950 Moon Station Road. The building dates to the late 1800s, but was last used as a pet crematory.
Allen said. Lazy Guy will be the first craft whiskey distillery in metro Atlanta and the fourth in the state, according to www.distillery.com. The shop will start off with two or three employees, but has potential to grow, Allen said. Startup funding is coming entirely from Allen's own company, Level Net Consulting, and he plans to split his time between Level Net and Lazy Guy, leaning more toward the distillery as business picks up. Level Net is a consultancy specializing in information technology.
Showcasing Cobb County The distillery will focus on showcasing Cobb County, Allen said. He'll employ local people and use local grains in his spirits. He's looking to start with something similar to moonshine, a high-proof clear whiskey. The more involved, and more coveted, aged spirits will take at least six months to develop. "It's a small-batch product, so the taste isn't like anything else out there," Allen said. "My recipes will vary based on grain availability, but I'll have something that tastes like a bourbon."
Allen plans to include tours and a tasting room at Lazy Guy, but he won't be able to sell his products on site. Because of state laws, distilleries can only sell to liquor distributors. Start-up costs for a small-batch distillery can be close to $250,000, Allen said. He hopes to recoup those costs and break even within a year after getting his permit from the federal government, which could take up to six months to obtain. In the first year of operation, Allen said he hopes to produce 200 to 400 six-pack cases per month. "It depends on the relationship with the distributor and how much people want to drink," Allen said. Allen has already ordered his equipment, which should arrive in late May or early June, he said. The still itself is $82,000, and the steam boilers are another $40,000.
Then he'll install piping and control valves that cost another $10,000 to $15,000. "It adds up," he said. "Now you can see why the incentives matter, why $20,000 is a big deal. We have to pretty much be a turnkey operation before we can get our state and federal permits." Grassroots marketing He said he will focus on grassroots marketing for the first few months, meeting with liquor store owners and distributors to find out what they're looking for in a new product. "Then I will ask people who are whiskey drinkers, 'What do you like? What do you not like about whiskeys that are on the shelf?'" he said. Allen said the barriers to entry into the liquor manufacturing business are more daunting than a straight shot of moonshine. "Number one is capital - not many have $250,000 in cash. Number two, regulation," he said. "The permit process is rigorous, and you have to submit yourself to background checks, your family has to submit to them. If there's any history of DUIs, alcoholism, bar fights, on anyone in your immediate family, they are not going to issue you a permit."
Whiskey is also taxed upfront, as soon as it is produced, instead of after it is sold like most products. "We have to keep a bond on the value of unsold whiskey that sits in our warehouse," he said. "So, as soon as we make it, we have a tax liability, which again shows why it's not a business chosen by your average entrepreneur." But Allen says he is up to the challenge. "I've always tried to do something different in business, and there's a little mystique about running a distillery. The romance of it," he said. "And the artisan craft industries have exploded, not so much in the Southeast because of our antiquated laws, but in the Northwest, they've exploded. But times change. It was only last year we (in Georgia) were able to start having tastings in our distilleries and breweries." Lobbying the Legislature Legislation to further loosen the restrictions on craft distilleries was tabled in the Legislature this year.
The Georgia Distillers Association recently formed to lobby for changes in the laws, Allen said. "We want to sell a limited amount to the public. If you're coming through a tour of our distillery, I would like the ability to sell you one bottle in a 24-hour period," Allen said. "I'd rather sell to distributors. But it's just a marketing approach. If I can put one bottle in your hands, how many people are you going to tell about it? That's what we're lobbying for."
Allen feels that time is on the side of the craft distilleries and breweries. "It's good for the economy, it's good for local government," he said. "People are always going to drink. Even in Prohibition, people sold more liquor than ever. We're taxed more than any other business.
Why not tax that in a way that lets us help ourselves and help the local economy?" In the end, Kennesaw landed the project with just that in mind - hoping for a spark to its economy. "They had the outlook of, 'come grow with us. We know we're not Marietta, we're not as big as Marietta,' but if we can get in on the ground floor maybe it's the best for us. As a small business, we don't have investors out the ying-yang."