Distilling under contract is a mysterious, but vital, part of the spirits industry. The Spirits Business lifts the lid on the operations and strategies of leading third-party producers, and explains why many so-called craft brands wouldn’t be without them.

MGP Ingredients runs ‘a significant operation’

The production stories behind hundreds – perhaps thousands – of small, independent spirit brands are often left untold. As the craft renaissance grips the industry, romantic narratives of heritage and provenance are positioned front and centre on spirit labels, while the large-­scale companies that actually distil or source the liquid in the bottle stay in the shadows.

Industry members and consumers are now becoming more aware of third-­party producers, but their emergence into the public consciousness hasn’t exactly been smooth. In recent years, some brands that use contract distillers have come under fire for what has been seen as a lack of transparency. The criticism has stretched from gin to American whiskey and beyond, but whiskey producers from the US have borne the brunt of the backlash.

“In a way it’s unfortunate that people didn’t really understand how widespread and invaluable sourced alcohol is to all categories, and that they really focused on the whiskey category,” says Gus Griffin, president and CEO of MGP Ingredients, a large third­-party distiller based in the US.

“But I think that as people have understood how universal and historic sourced alcohol is to the various categories, and as their knowledge has improved, negative perceptions have declined, and they now realise within the industry the different benefits that sourced alcohol provides. A lot of craft brands wouldn’t have been able to get to market, or get to market as fast as they did, without sourced alcohol.”

Undoubtedly, third­-party producers and suppliers enable fledgling spirits to hasten their launch date and dedicate valuable resources to their brand and market strategies. But it’s not only ‘craft’ brands that benefit from the service; international drinks groups will often purchase sourced spirits to increase and accelerate their production.

Third­-party production is even more pervasive when one considers that it also includes neutral grain spirit (NGS), which is used as the base for countless brand leaders in the white spirits world.

Vital they may be, but how exactly do third-­party producers operate, and what are their plans for the future?

Over the following pages we profile five leading third-party producers.

MGP Ingredients

One of the most prominent third­-party spirits manufacturers in the world is MGP Ingredients. The company was formed in 1941 as an industrial distiller for the war effort, before moving into beverage alcohol some years later. It now owns two distilleries: one that creates vodka, gin and industrial alcohol, which is based in Atchison, Kansas; and another that distils whiskey, based in Lawrenceburg, Indiana.

While the company does not disclose its capacity for competition reasons, CEO Gus Griffin admits that MGP is a significant operation. He says: “With the expertise in our personnel, our craftsmanship, and then our actual physical assets, we can create just about any innovation concept that our customers might come up with.”

MGP, which produces all the NGS it uses, counts small family companies and big multinationals among its clients. However, the distiller has strict confidentiality agreements with all the brands it works with, so consumers are unlikely to find its name on many spirits labels any time soon.

MGP offers a full and flexible service, according to Griffin. “We don’t bottle, but we will sit down with a customer to work on their specific flavour profile,” he says. “We have standard mashbills, but if there’s a specific grain they want, we would bring in those grains, we would grind them, cook them and distil them, and we offer an ageing service too.”

The group has seen “very robust” growth in recent years, which has been augmented by a “very extensive” capital investment programme, including the installation of a new drier for spent grains and a warehousing expansion to double its maturation capacity.

“All of this is to support the growth of our business, and, by extension, the growth of our customers’ businesses,” says Griffin. “We have customers who have been with us for a while and whose brands are doing very well, and then we have put a big focus on meeting the needs of the expanding craft industry.”

Sasma

Netherlands-­headquartered Sasma is a supplier of base spirits and ready-­to-­bottle products – such as Scotch, Bourbon, cachaça and Tequila – for the beverage-­alcohol industry. Representing a further aspect of third­-party spirits, Sasma does not distil, but instead acts solely as a supplier, sourcing liquid from distilleries, traders and agents.

“We can source and supply most types of alcohol and spirits from and to anywhere in the world,” says Guy van Everdingen, head of sales and marketing. The craft community uses different varieties of base spirits and raw material alcohols supplied by Sasma – such as NGS, barley, apple and rice alcohol – which they rectify and turn into spirits such as gin and vodka. The growth of both independent brands and high-­end brown spirits has provided an enormous boost to Sasma’s business. “We have managed to grow 50% every year in the last three years,” enthuses van Everdingen. “The craft spirits boom has been one of the accelerators but the increase in demand for aged spirits has been the biggest factor in the growth of Sasma.”

The firm currently works with more than 60 brands and aims to ensure it has access to a wide variety of products to grow its business in the future. “We see that the spirits market is growing rapidly, and our clients are asking for products that distinguish them from their competitors,” adds van Everdingen.

Now, Sasma hopes to offer its selection of whiskies to more spirits entrepreneurs in Asia and South America.

Thames Distillers

“I was born and bred in the booze business,” says Charles Maxwell, the director of Thames Distillers, whose mother’s family ran Finsbury Distillery. Thames Distillery is one of the best-known third­-party distillers in the UK, and predominantly produces gin. It was founded 21 years ago, when Maxwell “believed there was room in the marketplace for a small, independent distiller of gin and a processor of vodka”, and so bought parts of a distillery that had gone into administration.

“I was perhaps slightly ahead of the times, as it turned out,” he quips. “It was only 10 years ago that things started to perk up, and we began noticing that the inquiries for gin were starting to come through in some sort of noticeable fashion. Today, we are at the stage where inquiries for gin are close to flooding in.”

Since Thames uses NGS, it is “technically a rectifier, not a distiller”. Its client­-base is international, with brands hailing from Japan, US, Europe and now South America. While most of the products Thames creates are small­-scale, a number of well-­known brands use its services, including The London No.1, Fords Gin, Mombasa Gin, and Gin Lane.

In terms of capacity, Maxwell says: “I wouldn’t say it’s infinite, but it’s extraordinarily flexible.” Thames Distillers owns two 500­litre gin stills – relatively small pieces of equipment for a large­-scale operation, but this is because a lot of its production is concentrated distillate that is diluted during bottling.

Thames works with “two or three botanical suppliers – one of which has been supplying the gin industry for 200 years,” says Maxwell. “They know what we are looking for and they are careful with what they send us. If they have to make any changes in sourcing, they advise us before they do and send out samples for us to check.”

For Maxwell, the secret to his company’s success is its flexibility. “At the end of the day, Thames Distillers is a service company – we’re here to serve what our clients want.”

Creamy Creation

Established in 1979, Creamy Creation is the market leader in emulsified beverages, supplying mixable and ready­made dairy, soy and coconut­-based beverages to the international drinks industry. “Chances are, whenever you have a cream liqueur, it’s made with Creamy Creation ingredients,” says Floris Daamen, the group’s marketing manager.

“Our products are tailored to our customers’ needs – from brainstorming to bottling, we offer advice and strategic insight at every step of the way, including application, formulation, production, stability and more.”

Creamy Creation has two manufacturing facilities – one in Batavia, New York, and one in Rijkevoort, the Netherlands. In addition to liquid production, the company offers services relating to concept development, research and packaging, as well as legal advice.

The firm was established as a business unit of the world’s leading dairy cooperative, FrieslandCampina, and uses milk sourced from its dairy farms in the Netherlands, Germany and Belgium. For its facility in New York, Creamy Creation uses milk from neighbouring dairy cooperatives. In total, it has a production capacity of 30m litres of emulsified beverages.

“Cream liqueurs are no longer considered your grandmother’s drink; they are a popular and growing spirits category,” says Daamen.

As such, the company has identified three applications for cream liqueurs: cream as a cocktail ingredient; cream liqueur enjoyed from the bottle; and as a splash with sparkling wine. Creamy Creation has also developed a “steady mixable cream liqueur that won’t curdle”.

Alcohols Limited

Alcohols Limited is the owner of Langley Distillery, a prominent UK gin manufacturer that has more than 300 partners around the world. It produces about 70m bottles for the global gin market annually. The business was established in 1805, while the distillery itself dates back more than 200 years, and has been distilling gin since the early 1900s.

“It’s quite an old site so a lot of the processes are manual,” explains Natalie Wallis, who is a sixth-­generation member of the company’s founding family, and currently serves as group commercial manager. “It’s a very traditional process that we have here.”

She adds: “The business has grown year on year, and over the past six years, since the gin resurgence happened, the growth has been quite phenomenal.”

Indeed, Langley’s products “reach the four corners of the globe”, and its famous clients include Martin Miller’s Gin, as well as a number of supermarkets.

“We are very lucky with the distillery that our size means that we haven’t had to turn anyone away,” says Wallis. “We spend time fine­-tuning what people want so that they have a commercially marketable product.”

Langley Distillery has seven stills, ranging from 300 litres to 1,200 litres, and a bespoke laboratory for product trials.

“We really do have the flexibility to be able to meet the demand of international blue chip companies, but also consumers on the street who have seen the gin craze happening in their local town and want to be a part of that,” says Wallis. “We pride ourselves on being able to help everyone and being able to turn their dreams into a reality.”