SMYRNA — Although small, Delaware’s distilled spirits industry is relying on a creative and collaborative recipe to grow. With the newest addition of easySpeak Distilling in Milford last December, there are about four in the state. Several of them are making large investments in their future, and with the signing of House Bill 373 last month — a law that permits licensed Delaware craft distilleries, breweries and wineries to sell one another’s products for on-site consumption — sustained revenue growth in the sector may be possible.

Expanding industry

Appealing to trend to transform distilleries into “destinations,” Painted Stave Distilling in Smyrna is in the midst of adding a 6,000 square-foot patio to their location. Also, they just completed an over $200,000 pole-barn style barrel house on the rear end of their property.

Painted Stave became a favorite new business success story in Smyrna when it moved into the building on West Commerce Street originally built as a first-run movie theater in 1948. From 1975 to 2007, it was run as a plumbing supply store.

After a significant renovation, co-owners Ron Gomes and Mike Rasmussen located their distillery in the old building almost four and a half years ago. With some time under their belt, they’ve grown their staff to five full-time employees and about 12 part-timers. Their production has increased every year as well — now reaching about 2,000 crates of sold product and about double that held in cooperage, according to Mr. Gomes. Their signature liquors include vodka, gin and whiskey.

The outdoor patio will include a large seating space and pads for both food trucks to park and live bands to perform. They also plan to have a large audio-visual set-up to screen movies on the side of the new barrel house.

The barrel house itself will allow the distillery to make room by transferring over 100 stored barrels and raise its maximum storage capacity to about 2,500 barrels. But, Mr. Gomes said it would take a long time before they filled that capacity.

Beach Time Distilling co-founders Greg and Mary Ann Christmas will ring in the anniversary of their third year in business in August. The husband and wife duo operated their Lewes-based distillery out of about 2,000 square-feet of retail and office space, producing vodka, gin, rum and whiskey. Mr. Christmas says the distillery produces just under 1,000 cases of product annually, but with plans to upgrade to a larger still in the coming years, he’s hoping to boost output.

The newcomer, easySpeak, opened its 3,500-square-foot restaurant and distillery in Milford last December. Marissa Cordell, one of the owners, noted that business has been booming since they opened their doors.

“We just opened the patio and we’re working on perfecting our offerings now,” she said. “We really love Milford and we feel like we’ve been welcomed with open arms. Both local businesses and customers have embraced us.”

The distillery/restaurant has a full menu and produces its own vodka, rum, gin and bourbon.

Recent legislation

Though the benefits may not be obvious at a cursory glance, the signing of HB 373 last month may help the growing distillers in the state further cultivate their locations into tourist destinations and squeeze some extra revenue out of them. Before, distilleries were only allowed to sell their own products for consumption at their location, but now they can sell the products of fellow craft beverage producers in the state. At nearly 70 percent of all Painted Stave’s revenue, Mr. Gomes says selling other producer’s beers and wines at his location will help him appeal to a wider customer base. In fact, he estimates that the distillery missed out on between $15,000-$20,000 of event space rentals last year because of his inability to serve beer and wine at his location.

“It’s going to be a nice additive for what we can offer,” said Mr. Gomes. “It’ll make its biggest impact on private events. Last fall, we missed out on a number of rentals because not being able to serve beer or wine was a deal breaker for a lot of people.”

The bill also appears to be having an interesting affect on the craft beverage industry’s natural tendency to collaborate as well. Well known for working with breweries like Blue Earl Brewing Company in Smyrna and Fordham & Dominion Brewing Company in Dover, the Painted Stave frequently gives brewery access to its old rye whiskey barrels for brewing. They’ve also distilled whiskeys from certain craft beers. Mr. Gomes says these interesting collaborative projects can begin to take on a new “cross-promotional” life under the new law.

“For our fifth year anniversary, Blue Earl is ‘stouting’ one of our whiskeys — finishing a stout in one of our rye barrels,” he said. “Without this law, we couldn’t have had that product here in our distillery for sale once it was bottled. Now we can. It’s a great opportunity for all the small craft beverage makers to work together to cross-promote and support one another.”

More to be done?

Though the new law was given a warm reception among distilleries, most feel there are legislative tweaks still needed to help foster industry growth.

Mr. Christmas says the state’s “three-tier system” of alcohol distribution — placing restrictions on producers, distributors and retailer — can often shrink his margins and cause inefficiencies.

“In Maryland, I could sell directly to a bar, restaurant or liquor store, but in Delaware, I can’t do that,” he said. “If a liquor store up the block from me is getting a shipment of my product, it first has to ride all the way up to a distributor in Wilmington in a truck, the turn around and come right back down here. That comes at a heavy shipping cost too. It’s a barrier to growth in terms of market accessibility.”

Although he admits he’s not entirely sure how to address the issue legislatively, Mr. Gomes agrees. Though the Painted Stave employs their own small sales staff, Mr. Gomes feels the system is not conducive to helping smaller businesses.

“We’re a small producer so our expectations and sales goals are almost more of a nuisance to our distributor than anything,” he said. “We have a hard time because they essentially don’t try to push sales of our product. We aren’t really capitalized well enough to incentivize them to actually sell for us. By law we have to first sell to the distributor before our product is sold retail. My sales people will go out and sell to stores, but their breakthrough sales team that aren’t even selling those bottles still get paid. It’s a bit of a backwards system.”

Though most of the small distilleries have no interest in becoming distributors themselves on account of logistical concerns, they maintain hope that alterations can be made to the state’s system that would make it more mutually beneficial to producers.

“We’ve heard expressed at a few meetings with the governor that there is some interest in assembling a task force that would evaluate the legislative needs of the industry, so we’re hoping that might come together,” said Mr. Gomes.

Delaware distillery guide

Delaware’s young, small distilled spirits industry is relying on a creativity and collaboration to grow. With the newest addition of easySpeak Distilling in Milford last December, there are about four in the state.

The listing below is a directory of known distilleries in the state.

• Painted Stave Distilling — 106 W Commerce Street in Smyrna, (302) 653-6834

Owners Ron Gomes and Mike Rasmussen opened the distillery about four and a half years ago. Their offerings include vodka, gin and whiskey.

• easySpeak Spirits — 586 Milford Harrington Highway in Milford, (302) 503-3313

The distillery/restaurant opened last December. It has a full menu and produces its own vodka, rum, gin and bourbon.

• Beach Time Distilling — 32191 Nassau Road, Unit 5, in Lewes, (302) 644-2850

Owners Greg and Mary Ann Christmas opened the distillery about three years ago. Its products include vodka, gin, rum and whiskey.

•Dogfish Head — 6 Village Center Blvd. in Milton, (302) 684-1000

Although most well-known as Delaware’s largest brewery, Dogfish Head also produces gin, vodka, whiskey and several different liqueurs.