Moonshine, the outlaw hooch made famous in backwoods Appalachia, is now regulated by the government and is sold at Walmart. The spirit has grown so popular that even the industry's biggest distilleries are getting in the game

Ole Smoky Moonshine Distillery Eastern Tennessee is now home to several moonshine distilleries, including Ole Smoky. Several big-name whiskey distillers began releasing their own white whiskeys this year

For decades, most people had never even seen a jar of moonshine, let alone tasted it. These days, you can find it at stores and restaurants around the country thanks to loosened liquor laws and changing consumer preferences. Even the industry’s biggest distilleries are experimenting with moonshine.

Moonshine has been distilled in backwoods Appalachia since the 1800s. By its most traditional definition, the term means “illegal spirit,” and many families in that historically independent-minded, libertarian-leaning area of the U.S. made a living off making it — partly because the liquor could be produced and sold quickly, as it didn’t require years of aging in barrels. (That, by the way, is also what gives the hooch its oftentimes harsh character.) Today, moonshine is generally used as a catchall term for unaged white whiskeys, many of which are made in Tennessee and North Carolina.

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Another difference with modern-day moonshine is that the people distilling it aren’t operating outside the law. Making moonshine is now legal in Tennessee and is quickly gaining popularity around the country.

When the recession hit in 2008 and 2009, a number of states looked for ways to generate employment and keep tax revenue rolling in. One way to accomplish both goals was to loosen laws regulating distilleries. For years, the production of distilled spirits was legal only in a handful of Tennessee counties. But in 2009, the state legislature opened dozens of other counties to the business, including several in eastern Tennessee that had been home to unlawful moonshine production for decades. One of the biggest operations is Ole Smoky Moonshine Distillery, which opened in 2010 in Gatlinburg, Tenn. Roughly 250,000 to 280,000 cases of moonshine were sold in 2012, a jump from 50,000 in 2010 and 80,000 in 2011, according to food-and-beverage-analysis firm Technomic. (A case holds 12 750-ml jars.) Ole Smoky accounted for 100,000 of the cases sold in 2012.

Ole Smoky founder Joe Baker expects the company to sell 250,000 cases (3 million jars) this year. Baker attributes Ole Smoky’s growth to a number of big-box stores, including Walmart and Sam’s Club, deciding to carry the spirit “because it’s an American-made product from a small family business and because it was a well-known product that had been previously unavailable.” Ole Smoky is now available in 49 states.

While the very existence of distilleries like Ole Smoky can be credited to loosened liquor laws, the popularity of the product can be attributed to increasing consumer demand for products that are distinctive, novel and perceived as local. “Consumers are looking for a unique drink, that unique flavor you can’t get anywhere else, not something people are drinking all the time,” says David Henkes of Technomic.

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Ole Smoky, for example, comes in Ball mason jars, the way moonshine did (and still does in some places) when it was sold illegally. It’s distilled right in the moonshine heartland, and the product’s outlaw backstory alone piques consumer interest. “When I went off to college, one of the first questions I was asked by anyone who found out I was from east Tennessee was, ‘Well, can you get us some moonshine?’” Baker says. “That interest in the culture of the area where I was raised kind of pushed me along to embrace it.”

Ole Smoky’s unique flavors also play into another reason for the product’s popularity: 65% of its moonshine sales are flavored, and the distillery has even advertised flavored moonshines as Mother’s Day gifts. The company’s lineup includes apple pie, blackberry, peach and cherry flavors — all of which, Baker says, are authentic to the spirit’s heritage. “We tried to embrace the rich knowledge and expertise of this area instead of just basing it on my granddad’s recipe,” Baker says. “We took the best of a lot of different recipes and came up with a product that we think best represents the area.”

Frank Coleman, senior vice president of the Distilled Spirits Council trade group, says the recent distillery legalization in states like Tennessee, coupled with the popularity of small-batch distilleries elsewhere in the U.S., has led to the recent explosion of moonshine distilleries. Ole Smoky is just one of a number of distilleries to have popped up in the Appalachian region in recent years, including East Tennessee Distillery, Short Mountain Distillery and Asheville Distilling Company in neighboring North Carolina. “You’ve had a lot of people come into the business,” Coleman says. “There’s a little bit of a gold-rush mentality.”

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The growth of those distilleries has even gotten the attention of Big Whiskey, despite the fact that moonshine represents just 1% of the American whiskey sales. Earlier this year, Jack Daniels released its own white whiskey, Unaged Tennessee Rye, and Jim Beam released Jacob’s Ghost, a white whiskey that has been aged for only a year. (True straight moonshine is unaged. Regular Jim Beam bourbon, by contrast, is aged for four years in charred white-oak barrels, according to the company, which is what gives Beam and other aged whiskeys their golden brown color.)

Bill Newlands, the North America president of Beam Global, admits that the company’s new white whiskey is a direct response to the popularity of distilleries like Ole Smoky. “We certainly saw that moonshine had quite a pickup,” he says. “The question that we had around it is, ‘How broad-based would the interest be?’”

Newlands says his company isn’t quite convinced that white whiskey is the next big thing, but sales are being closely watched.

The growth in moonshine is somewhat akin to what’s happened in the beer industry over the past decade, during which big-brewery sales of beers like Bud Light and Miller Lite have been flat or declining while craft breweries like Deschutes, Brooklyn Brewery and Dogfish Head continue growing at a fast clip. That’s leading the big breweries to introduce their own “crafty” beers, like MillerCoors’ Blue Moon.

As moonshine creeps into the mainstream, however, there are some in Appalachia who question whether a spirit that’s aboveboard — and regulated and taxed by the government – can truly be considered moonshine. It may be unaged whiskey. But is it really good ol’ ’shine?

“I think there are people out there who feel that if you’re paying taxes on it, it’s not moonshine,” says Ole Smoky’s Baker. “And sure, if you pay taxes, you lose a little bit of credibility. But I think most folks — certainly people who are familiar with how we make our products and people who have been to our distillery — they see that we do it the same way that it’s been done around here forever.”

Updated, July 26: A previous version of the story stated that 130,000 cases of moonshine were sold in 2012. According to updated numbers by Technomic, between 250,000 and 285,000 cases were sold last year. Piedmont Distillers, which makes Junior Johnson’s Midnight Moon, sold roughly 130,000 cases alone in 2012.