Scaling Up from Nano: How and When to Grow

For nano- and microdistilleries, starting small comes with certain benefits, such as lower costs, a safer distilling setup, a proving ground for the business, and a well-paced route to market.

When those distilleries are successful, however, some changes and growth spurts are inevitable—and it’s a balancing act to expand at a pace that both fits with customer demand and keeps costs manageable.

With that in mind, here are some insights from pro distillers and operators on how to find your optimal size and efficiencies without losing sight of quality or price.

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Growing a Boutique Brand

“I’m fairly certain that when we began, we were the smallest distillery ever licensed in the United States,” says Colin Spoelman, cofounder of Kings County Distillery in Brooklyn, New York.

Initially, the Kentucky native was producing moonshine-inspired spirits on hobby equipment, based in a 325-square-foot room in Brookyln’s East Williamsburg neighborhood. With several eight-gallon stills, the team was running two eight-hour shifts daily, producing one case of unaged whiskey or moonshine per day. It was an approach that allowed Kings County to prove its spirits in the marketplace.

“Starting small is very advantageous,” Spoelman says. It’s also faster and easier to get a product to market that way. “After a couple of years of working at that scale, we had the confidence to move to a bigger building.”

Thanks to the small equipment, they had an interim solution while building a more substantial distillery. “It’s very time-consuming to get elaborate equipment set up,” Spoelman says. But having the hobby-scale stills meant that they could keep running as they built, avoiding large gaps in production.

Now, Kings County is in the Brooklyn Navy Yard using stills of 5,000 liters, 1,000 liters, and 650 liters. And the driving reason behind scaling up was to be able to produce more aged whiskey. “It can be difficult to assemble a whiskey if you don’t have a lot to pick from,” Spoelman says. The endeavor has paid off: At Tales of the Cocktail in 2023, the New Orleans Spirits Competition awarded Kings County’s Barrel Strength Empire Rye a double gold as best rye whiskey, while the Barrel Strength Bourbon won gold as the best cask-strength bourbon.

In Spoelman’s view, there isn’t a huge difference in the quality of what came from the hobby stills versus the current ones. However, while the sampling and sensory aspects haven’t changed much for the larger scale, the physical labor is worlds apart.

“We had, certainly, a much more intimate relationship to the mash when we were straining it with laundry bags,” he says. “The distiller’s job is now switching valves and operating pumps.”

On the other hand, Spoelman says the distillery has grown into the business they want it to be, at a size appropriate for a boutique brand. “I think we’ve found our scale.”

Photo credit: Aaron Parsons

Safe Home Distilling and Measured Expansion

Sacred Spirits, founded in 2008 in London, started out as a passion project from home.

Ian Hart was experimenting with gin recipes—and enlisting regulars from his local pub to sample them—before he landed on the version that would become the brand’s flagship. Initially, he was using one rotary evaporator with a two-liter capacity. “It gave us the ability to experiment,” says Hilary Whitney, cofounder of Sacred Spirits and Hart’s wife.

Vacuum distillation is known for its delicate treatment of botanicals, leading to a softer and more aromatic spirit. Whitney describes botanicals as “fresher and lusher” using this method. There are sustainability benefits, too: Distilling under vacuum versus with a traditional pot still means the team is distilling at a much lower temperature, using 90 percent less energy, she says. “And it’s much safer, so when we started off, we had no qualms about setting up the distillery in our house.”

From these humble beginnings, the distillery has moved to a dedicated site, “but our process hasn’t changed, and the footprint is more or less the same,” Whitney says. These days, Sacred Spirits uses four 10-liter vacuum stills, designed by Hart and handmade by a glass manufacturer in Yorkshire. A closed-loop condensation water circulator reduces the amount of water the distillery uses by 120,000 liters a year.

Sacred Spirits macerates each botanical in English wheat spirit for four to six weeks and then distills them separately. “Every single distillate is tested and tasted before going into any end-product,” Whitney says.

Having more space isn’t only helpful in increasing production volume, but also in allowing the Sacred Spirits team to store more botanicals and bottles. “Having a separate space also means that we can host events, such as distillery visits and Make Your Own Evenings, which increase consumer awareness of our products,” Whitney says.

While there’s space for another vacuum still if it’s ever needed, scaling up dramatically isn’t the current plan. “We still have plenty of capacity with our current setup … and we will never compromise in the exacting standards and quality of our spirits,” Whitney says.

Courtesy Patent 5 Distillery, Winnipeg, Manitoba

Cost Efficiency and Price Pressure

In Winnipeg, Manitoba, Patent 5 Distillery is getting ready to make the move over to their new, larger kit.

Until now, they’ve been using a 125-gallon still, a 400-gallon mash tun that doubles as a stripping still, and four 400-gallon fermentors. “The advice that we got from other distillers was [to] buy the biggest equipment that you can afford,” says cofounder Brock Coutts.

At first, he was the only employee. “I could either mash, strip, or run the spirit still,” he says. To keep up with demand, he went from working five days a week to all seven. Four years ago, he hired a distiller and added multiple shifts on weekdays as the distillery scaled.

After seven years with their initial setup, the team acquired a new, larger set of equipment earlier this year. With a 500-gallon still and a 1,500-gallon vessel that can be used as a mash tun, stripping still, and fermentor, it’s a big step up. Recalling that same advice that he received years ago on going big as possible, Coutts says that the financial benefits of doing so remain undeniable.

“The difference between buying a 250-gallon still and a 500-gallon still is not double,” he says. Being able to mash, ferment, and strip all in one vessel without moving the mash around will be a huge plus. “The whole design of it was for labor efficiency.”

For now, there’s one distributor in Manitoba selling more than half of Patent 5’s bottles; the distillery uses or sells smaller quantities in its own cocktail room or at farmer’s markets. Patent 5 currently ships only a tiny fraction of its bottles outside the province, but Coutts says that should increase once the new equipment enables larger volumes.

However, one of the challenges that comes with expansion is more connected to marketing than to the growing pains of capacity. As a distillery that focuses on local ingredients—nearly 100 percent of their grain and many of their botanicals grow in Manitoba—Coutts says he’s not sure how well their brand will resonate as it expands into neighboring provinces.

“As you move beyond your local market, the message about being local doesn’t translate as well,” he says. When shipping from Manitoba to Saskatchewan, the value proposition might need tweaking. “And it’s a little bit tricky.”

While Coutts says he’s mostly optimistic about the future, he also says the timing of the distillery’s growth feels a little strange. “The future is not as clear today as it was a year and a half ago when we embarked on the expansion,” he says, citing issues such as tariffs and uncertainty in the spirits world.

Fortunately, thanks to that larger equipment, the labor costs per unit produced will be much lower. Going forward, Coutts says the distillery will be able to produce four times as much while holding labor costs steady—critical for their mission to not raise the price of the product on the shelf.

“What we’re hoping is we can hold the line on our prices,” which he says are likely around the maximum that their customers would be willing to pay. “[We] aren’t really comfortable passing on a bunch of inflationary costs to them because I think maybe we just might push things a bit too far.”