Photo: Ralph Erenzo
Mike Groll  /  AP
Ralph Erenzo poses in front of the still Tuthilltown Spirits in Gardiner, N.Y. Erenzo claims he and business partner Brian Lee run the first legal whiskey distillery in New York since Prohibition.
updated 7/15/2007 3:59:18 PM ET 2007-07-15T19:59:18

Ralph Erenzo and Brian Lee keep a still in the barn to make whiskey.

No, the two are not backwoods bootleggers filling jugs with “XXX” on the side. Their shiny copper kettle cooks up whiskey that can run $40 for a half-sized bottle and vodka distilled from local Hudson Valley apples, all under the high-end Tuthilltown Spirits label.

Erenzo claims they make the first (legal) whiskey in New York since Prohibition. But they already face competition from dozens of “craft” distilleries around the country catering to consumers’ appetite for artisan and local products.

People who pay more for hand-crafted cheese, bread, beer and wine are showing a willingness to do likewise for the hard stuff. Tiny Tuthilltown — which makes bourbon, rye, corn whiskey and vodka — is selling faster than it can bottle.

“Whiskey is what people are screaming about,” Erenzo said midway through distilling a batch of rye. A clear stream of spirits flowed from the still on the barn’s spacious second floor as he talked.

Erenzo and Lee seem to be unlikely spirit makers. Erenzo ran a climbing gym in Manhattan. Lee was a broadcast engineer. Neither business partner drinks except to taste their products. Lee jokes that his previous experience with fermenting was confined to making cinnamon buns with his kids.

But the pair display entrepreneurship typical of the new breed.

Erenzo and his wife bought the land on the Wallkill River, about 70 miles north of New York City, with plans to open a ranch for climbers visiting the famous Shawangunk Ridge nearby. After opposition foiled the ranch plan, he met Lee, who initially came to Gardiner to look at Erenzo’s 18th century grist mill (since sold). With Lee as a partner, Erenzo decided instead to satisfy his “innate curiosity about spirits.”

They saw their chance in 2002, when New York introduced a new class of distilling license for small producers that carries a fee of $1,450, as opposed to $50,800 for the old license.

They created a wholesale liquor business from scratch. Until they landed a distributor this year, Erenzo loaded up his trunk and made the rounds to retailers from New York City to Albany.

Lee, meanwhile, learned the nuances of fermenting — things like how to retain notes of vanilla in the final product. And he relied heavily on his mechanical aptitude to install the 125-gallon still in the barn’s second floor. The unit — with its bell-shaped kettle, gauges, vapor columns, valves and pipes — looks like a science experiment, which it was.

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“It took us about 2½ years from a dead stop knowing nothing about it until ’We can turn this thing on and make alcohol,”’ Erenzo said.

Lee said they mostly break even, with profits going back into the business. Each man has a wife with a steady job.

While vodka is essentially ready to go right out of the still, whiskey is aged in charred oak barrels stored in the barn. After bottling, Erenzo applies labels, dips the bottle tops in wax (heated in a crock pot) and boxes them up.

Small-scale distilleries like this were common in America before Prohibition wiped the slate clean. New York, for instance, now has only 16 licensed distillers, including some larger operations in New York City and wineries that specialize in fruit-based spirits like brandy and grappa.

Problems can be legion for startup distillers, ranging from Byzantine state laws to high state licensing fees. And as Erenzo and Lee can attest, there are no rule books.

“It’s hard as heck to open a distillery,” said Guy Rehorst, owner of Great Lakes Distillery in Milwaukee. “Frankly, it’s kind of a headache.”

Still, Rehorst has had enough success selling craft vodka in Wisconsin that he’s branching out to gin. From Virginia, Rick Wasmund crafts and sends out his Wasmund’s Single Malt Whiskey to nine states. They are among some 90 craft distillers active nationwide, according to Bill Owens of the American Distilling Institute.

Craft spirits remain a tiny niche in the U.S. spirits industry, which rings up $58 billion a year in sales. Owens estimates that an average craft distiller might produce 6,000 cases a year.

But the little distillers have the wind at their backs. Not only are artisan products popular, but the spirit industry is growing with the help of high-end products. Sales of so-called super-premium products, like Grey Goose vodka and Johnnie Walker Blue, grew 72 percent from 2002 to 2006, according to the Distilled Spirits Council of the United States.

Drinkers used to spending $30 for a bottle of Absolut Vodka or Jack Daniel’s Old No. 7 are less likely to be fazed by craft prices.

Rehorst’s vodka and gin runs about $30 a bottle, Wasmund’s Single Malt Whiskey ranges from $35-$40. A wine and spirit store nearby advertises Tuthilltown Manhattan Rye Whiskey for $39.99 for a 375 milliliter bottle and same-sized bottle of Tuthilltown’s Heart of the Hudson vodka for $31.99.

Erenzo said Tuthilltown has sold 6,000 bottles since going on sale in April 2006. They are awaiting delivery of a second, 250-gallon still that will allow them to speed up production. And they’ve already distilled some rum, which is aging in barrels, made with molasses from Louisiana.

Tuthilltown also rides the wave of the “buy local” movement. Their vodkas are made from local apples — Erenzo stresses that it's not apple-flavored vodka, but rather vodka made from apples. Heart of the Hudson vodka retains a ghost of apple flavor going down. That’s less true for Spirit of the Hudson vodka, which is distilled three times.

It’s harder to buy local ingredients for grain-based whiskeys (the Hudson Valley is not big on wheat production), although Lee said they have a line on local heirloom corn.

“That’s my Holy Grail,” Lee said, “to get a whiskey that is wonderful and unique based entirely on New York products.”

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