When Bill and Johanna Welter decided to add a small brewery to their Journeyman Distillery in Three Oaks, Michigan, it was 2016—five years after they had opened. Craft beer was booming at the time, and the Welters saw a chance to entice beer lovers to their destination facility.
However, they ran into a series of obstacles along the way, and by the time they released their first beer—in July 2024—the Welters had an appropriate name for the fledgling brewery: Sea of Monsters.
For most brewery-distillery hybrids, the expansion goes in the other direction: A craft brewery decides to add a still and produce spirits. In either case, the idea is to attract new customers and, ideally, keep their spending in-house on higher-margin products, rather than buying wholesale from other producers.
As today’s drinkers increasingly demonstrate beverage promiscuity, focusing on flavor rather than segment loyalty, producers stand to benefit from being more things to more people. If customers want product lines you don’t or can’t currently produce, why not figure out how to make them yourself and keep the margin?
Breweries and distilleries can benefit by reaching across segments, hyphenating their business descriptions, and getting more out of their facilities and equipment. In the process, they’re unlocking new and creative ideas, blurring the lines between segments, and helping drinkers—and makers—reimagine what’s possible.
“It Opens the Aperture”
Dogfish Head has been known for offbeat experimentation since opening in Rehoboth Beach, Delaware, in 1995. They first expanded into spirits in 2001.
“Even though our brand wasn’t big-scale,” says founder Sam Calagione, “we had this super-interested niche audience that were clamoring for any extensions of the exotic fermented recipes that were coming from Dogfish Head.”
He’s quick to mention one of the more exciting aspects of having a brewery and distillery run out of the same building: a constant exchange of ideas that keeps the production teams curious and the whole company energized. “It opens the aperture for ingredient and technical-process considerations, and the influence goes in both directions equally,” he says.
One example is found in a product that actually falls into a third category: ready-to-drink cocktails (RTDs). Dogfish Head makes its Strawberry Lime Tequila Margarita with its own triple sec, which it makes with the same oranges it uses in the brewery’s popular Namaste witbier. They were able to keep the DNA of both the brewery and the distillery in a product that might otherwise have been nondescript.
Making Spirits from Beer
When we think about the creative opportunities of brewery-distilleries, one of the first ideas to come to mind is distilling beer itself. That spirit may even carry the same brand as the beer, if it’s popular and familiar to customers.
While not a craft brewery in its own right, Berkshire Mountain Distillers in Sheffield, Massachusetts, has had success making branded whiskeys from Samuel Adams Boston Lager, Harpoon UFO White, Spencer Trappist Ale, and Jack’s Abby Smoke & Dagger, among others.
However, there are several challenges inherent in this idea. For example, Calagione says, distillation can concentrate beer’s bitterness, leading to a spirit that’s out of balance or unrecognizable from the original beer.
Explaining it to customers can be another challenge. For a while, New Holland Brewing in Holland, Michigan, was producing a line of beer schnapps made from their more popular beers. Marketing director Adam Dickerson says the biggest hurdle wasn’t the product itself—it was getting people interested in it. While the schnapps offered fun opportunities for creative cocktails at their bar, they were otherwise hard to sell.
“There’s something cool and unique to be said there,” Dickerson says, “but for the general consumer in the market, it proved to be kind of a difficult educational hill to convince people it was worth their time.” He adds that they ran into a similar issue with hopped whiskey.
At Journeyman, head brewer Greg Winget has taken a different approach. He looks at the grain bills for Journeyman’s whiskeys, and he emulates them in unique beers.
“We make a whiskey here called Silver Cross,” he says. “It’s 25 percent each corn, wheat, rye, and malted barley. I think I could make a beer that has that same grist and express that same concept in a beer format.”
Barrels as the Fulcrum
Perhaps the biggest creative opportunity when a brewery and distillery share space is found in barrels.
It’s long been common for craft breweries to rest beers in former spirits barrels—and, in turn, some distilleries have produced interesting spirits by aging them in barrels in which beer previously matured. The hybrid approach means that could all happen under one roof, streamlining the sourcing of used barrels and opening up new creative possibilities.
Dogfish Head, for example, has aged whiskeys in barrels that formerly held some of their most coveted beer brands, such as World Wide Stout, 120-Minute IPA, and Palo Santo Marron.
At Journeyman, Winget has access to a wide variety of wooden vessels for aging his beers. These go beyond the basic bourbon or rum barrels to include maple syrup or honey barrels that subsequently held spirits. He currently has a barleywine resting in a barrel that held peated single-malt, and he has hefeweizen in a rum cask. Because he has his pick of barrels—and his company has already paid for them—he doesn’t need to limit the wood-aging to high-ABV rarities. Nor does he need to charge a premium.
“We don’t necessarily have to say, ‘Hey, I have to charge $10 a pour for anything that comes out of this wood barrel,’ because it’s all internal,” he says. “We’ve already gotten what we paid for out of that barrel, in terms of delivering flavor to the spirit.”
New Holland’s biggest brand, the bourbon barrel–aged imperial stout Dragon’s Milk, helped to popularize the now-ubiquitous style. The beer was foundational to New Holland launching a distillery in the first place—and it all started when the brewery put a stout into a used bourbon barrel.
“The lifeblood of our brewery was born from a single barrel,” Dickerson says. “Then we thought, ‘How do we grow Dragon’s Milk outside of just craft-beer lovers when the brand itself—its core promise—is bourbon barrel–related?’”
Besides beers, the Dragon’s Milk brand now encompasses a series of bourbons and other whiskeys aged in barrels that previously housed the beers. The ready availability of good barrels is one of the biggest perks of running a brewery and distillery together, Dickerson says. They can hand-pick their best-performing barrels instead of being at the mercy of whatever a barrel broker sends them.
At Journeyman, Winget says he also benefits from a variety of barrel sizes as small as 15 gallons. That reduces risk if a barrel-aged beer doesn’t turn out as expected, but it also decreases cost and turnaround time because the increased surface area-to-liquid ratio imparts flavor more quickly.
Production and Planning Synergies
While the details differ, all alcoholic beverages are based on the same basic process of fermentation: Yeast turns sugar into ethanol.
In the case of brewing beer and distilling spirits, a lot of the space and equipment needed for both can be shared. While there are differences between a typical beer mash and a typical whiskey wash—ratios of malted versus unmalted grains, the use of exogenous enzymes, degree of milling, lautering, and so on—the fundamental principles of the process are the same, and it can be done on the same equipment.
At both Dogfish Head and New Holland, the brewers make the whiskey washes and pump them into a bonded distillery area, passing the baton to the distillery crew. Dogfish Head has a QA/QC lab that oversees both operations. At the much smaller Journeyman, the brewery and distillery share a boiler and a glycol system.
One of the most important synergies, however, is in the realm of product planning. Whether the brewer and distiller are the same person or there are separate teams, there are more options to make the target product efficiently and with flavor in mind. Legal restrictions and excise taxes may also play a role.
“Let’s say we want to offer the customer something that’s grapefruit-forward and refreshing and bubbly,” says Dickerson at New Holland. “Is that going to make more sense and be more productive as a brewed product or a spirits-based product?”
For example, he cites a gin-based grapefruit drink that started as a distilled product. There are legal limitations on the package sizes of distilled products, so New Holland is making a malt-based version that can go into the type of package they want to sell.
The flexibility to work across segments also helps New Holland overcome an uncomfortable truth: Some people just don’t like the idea of craft beer, regardless of flavor.
“Some people have a barrier with craft beer, but they’ll happily have a canned cocktail,” Dickinson says. He notes that despite craft beer’s growth, it’s never reached even 20 percent of market share by volume, suggesting that many drinkers just don’t want to have to think too hard about what they’re drinking.
“We’ve been able to bring in a whole demographic of consumers who aren’t craft-beer drinkers by bringing them premium [spirits],” he says.
Don’t Overcomplicate It
The flexibility to choose whether you brew or distill your products offers options for creative expression, but that doesn’t mean you need to burden your consumers with those details. In fact, it might be in your best interests not to.
“That’s probably been one of our Achilles heels, to be frank, where we’ve just had too much creativity,” says Welter at Journeyman. “One of our aims and focuses going forward is trying to narrow our focus a little bit more.”
One of New Holland’s main motivations in launching the distillery was to draw casual vacationers to their brewery near Lake Michigan. The area has a strong tourist economy, and a lot of folks visiting their taproom weren’t necessary committed craft-beer drinkers on a pilgrimage to the brewery. Many were asking for cocktails.
“If you’re looking for interesting, weird, innovative ideas, go crazy,” Dickerson says. “But remember that the majority of consumers want something that’s kind of familiar.”
Having too many products—and too much information or storytelling around them—can lead to consumer confusion. Calagione says younger consumers want clean, easy-to-understand propositions. Too many SKUs can clog up brand messaging and limit a sales team’s ability to get priority products to retailers. Brands need to tell a coherent, simple story, and choose their times and places for going more in-depth.
“The distillers put their heart into the nuances of that recipe,” Calagione says. “But today’s consumer doesn’t want to hear so much about that creative journey of the maker as much as they just want to be like, ‘It better taste awesome, and if it does, I’ll buy it again.’”