A Spirited Startup Story

In March 2015, after a successful career spanning 35 years in the food and beverage industry, I was starting to formulate plans for early retirement. I knew that I did not want to fully retire, and I thought the model of thirds would work well for me: a third of my time doing paid consulting work, a third doing unpaid volunteer work, and a third being “retired.” That model had worked well for friends of mine, and I liked the way it sounded, so I started to explore how that might look for me in retirement.

I developed an interest in single malt Scotch whisky early in my career when I worked for three years on the flavor characteristics of Laphroaig—a unique and very peaty whisky from the island of Islay off the west coast of Scotland. This was an interesting start to my career, where I was able to learn about the “art of distilling” while leveraging my academic knowledge of chemistry, mass spectrometry, and gas chromatography (GC). I learned how to extract and concentrate the flavor compounds and how to create “fingerprints” of the chemicals in various whiskies using GC, but the breakthrough came when I developed a “GC-sniffogram” and used professional whisky distillers from our Scottish distilleries to sit at the end of the machine and identify the aromas that made Laphroaig unique. Later in my career, I attended the Bruichladdich Whisky Academy (also on Islay), conducted whisky tasting events for my friends, and taught a class at the University of Tennessee titled “Whisky: History, Making, Types & Tasting,” so doing something associated with whisky seemed like a good fit.

Tennessee is home for some major players in the whiskey world, with Jack Daniel’s, George Dickel, and Benjamin Prichard’s all being based there, but there were no micro distilleries in Tennessee until a 2009 law loosened the state’s tight controls on producing distilled spirits. A year later, Ole Smoky Distillery opened in Gatlinburg with a range of moonshine products, but there were no distilleries in Knoxville. I suppose it would be more accurate to say no “legal” distilleries. Clearly, there was an opportunity for a small boutique distillery to leverage Knoxville’s history, and so it was that Knox Whiskey Works came to be. I was happy to join the team both as an owner and as an advocate, and thus my venture into the world of distilled spirits began.

Location, Location, Location

One of our first challenges was to find a location. Buildings in downtown Knoxville were both expensive and not suitable for a distillery, but the “old city” offered some promise. Although it was a little off the main pedestrian area of downtown Knoxville, it did have potential as a location due to the bars, restaurants, and clubs in the area. Fortunately, a 1,400-square-foot workshop became available for purchase, and two of us bought the building with the goal of renting it to the distillery at a rent that was low enough to make the distillery business model work, but high enough to cover the mortgage payments. With the building secured, we started a major remodel to get the building up to distillery standards with drainage, fire suppression, water supply, and power. When we had the building remodel well underway and the permits in place, we were ready to focus our energies on our brand and product offerings.

Building a Brand

Although we were a very small and entrepreneurial operation, we believed in the benefit of a mission statement. We had no budget to engage an expensive consultancy firm and, frankly, we didn’t feel we needed to. The owners sat around a table with some adult beverages and crafted our own: Our mission is to harness the collective skill, passion, and expertise of East Tennessee to create authentic, distinct, and delicious handcrafted spirits.

Next, we had to decide on our flagship product and our initial product lineup. Whiskey is in our name, and we had no doubt that a unique bourbon whiskey would be our flagship product. In order to call a whiskey “bourbon,” there are several things you need to comply with. (See sidebar on this page.) Contrary to popular belief, one of them is not that it needs to be made in Bourbon County, Ky. Bourbon needs to be made with a mash-bill (recipe) of at least 51% corn, with the rest being made up of other grains such as rye, spelt, barley, wheat, and oats. We agreed that if the minimum is 51% corn, we would make ours with 100% corn. And, for it to be very much an East Tennessee recipe, we would use locally grown, organic, heirloom corn that was not genetically modified.

These were all good decisions from a branding and a uniqueness standpoint, but poor decisions if we wanted to minimize our raw material costs. Heirloom corn is expensive and each stalk produces only one ear of corn. The corn is not high yielding for starch (which enzymes turn into sugar and then yeast ferments into alcohol). But it does make very, very good whiskey. So the decision was made to make it the best we could and to price it accordingly (something I learned in the food industry), knowing that we could never compete on price with the likes of Jack Daniel’s and George Dickel.

We made one other decision early on: to give all our products a connection to Knoxville. The area code for Knoxville is 865, VOL on the alpha-numeric keypad, chosen because of the name Volunteers, which is used for the University of Tennessee’s athletic programs. Most whiskies and spirits are sold at 43% alcohol by volume or 86 degrees proof. (See sidebar for information on how the concept of degrees proof came about.) So we decided to sell all our products at 86.5 degrees proof (GO VOLS). And so it was that Knox Whiskey Works’ Silver Release Bourbon Whiskey came to be. Why Silver Release? We were new to this business and we felt that no matter how good the Silver Release was, at some point we would improve upon it and launch a Gold Release.

Our next challenge was to decide what else to produce because bourbon needs to be aged in new oak barrels and will not be ready for months after it is distilled and placed in the barrels. In the same way that the food industry needs to balance investment in short-term line extensions along with longer-term new product development, we needed some products that we could develop rapidly and sell without the need for barrel aging. Our options included vodka, gin, white whiskey, and liqueurs. So on this multiple-choice question, the ownership team checked “all the above.”

The white whiskey was the same spirit as our Silver Release Bourbon—just not aged in an oak barrel. Some people would call it moonshine, but there is no legal definition of moonshine (shiners can literally make it from anything, including sugar), and although it might resemble moonshine due to its clarity and taste, it is really an un-aged whiskey. Consequently, we offer our customers the rare opportunity to taste a whiskey before and after barrel aging, and it is amazing just how much of the flavor, color, and sweetness comes from the barrel.

There are three things that happen during barrel aging: extraction, reaction, and interaction. During aging, the clear spirit extracts color and flavor from the toasted oak barrel. Fundamental food science principles tell us that this is directly impacted by the ratio of surface area to volume, so by putting some of our fresh-make spirits into smaller barrels, we were able to age it much more rapidly. Vodka was a no-brainer, easy to make and within tight control specification; nonetheless, we have won awards for our vodka: 86.5 degrees proof, simple, and clean tasting. I am particularly proud of our gin. It is made with eight botanicals, including juniper, cardamom, and cubeb (very traditional gin botanicals), but to give it that Tennessee twist and make it a little unique, we also use the root of the iris, the Tennessee state flower.

Our coffee liqueur is made with locally roasted 100% single-sourced beans from Counter Culture Coffee, a sustainable coffee producer. We use a cold-brew process, which is less efficient for flavor extraction but gives us a rich, smooth product appreciated by our customers. I applied some of my R&D knowledge to this product and worked with a supplier of coffee extract and was successful in coming up with a good product that could be made more inexpensively and in less time. The reformulated product was good, but we wanted it to be “as good or better” than our original product. I was able to utilize some pretty fundamental sensory techniques used in the food industry (triangle testing and preference testing), and we used the data to drive a decision not to change the process and the product. It was our best-selling product (by number of bottles), and we wanted to keep it that way. We could have saved costs, but we chose not to.

New Product Development

Our small enterprise was off to a good start, and we opened our doors with some rave reviews about our products, but the lineup was limited, and it soon became apparent that we needed a few more product offerings. Once again, I was able to use my food industry experience because I had worked for two companies with world-class records for new product success. We did not have the scale, scope, or budget for a full-blown Stage-Gate approach to product development, but the fundamentals were still very applicable: identify the opportunity, develop prototypes, run costing, test with consumers, and launch.

Being based in East Tennessee, we are very much in Big Orange Country, where the University of Tennessee’s football team manages to pack a stadium with over 100,000 fans at almost every home game. On football Saturday in Knoxville, there is a lot of orange worn around town, and those of you who follow college football may know that it has to be the right shade of orange (PMS 151, to be precise). We decided that we needed an orange vodka to add to our line of product offerings, but it had to have the right taste, the right name, and—of course—the right color. We prided ourselves on the fact that we used only natural ingredients, so I worked with a flavor house that I knew produced high-quality, all-natural ingredients and asked them to supply colors and flavors suitable for an orange vodka. They came through with a really good color match with Sunflower Cloud, a proprietary blend of sunflower oil and gum arabic, providing the opaqueness we wanted.

I made several prototypes with the natural flavor extracts provided, and we tested them among the owners and our friends, particularly those who were both vodka drinkers and University of Tennessee football fans. This was very much a scaled-down version of the consumer testing I had done in the past, but it gave us enough feedback regarding the recipes for us to feel good about a product that had approximately a 2:1 ratio of blood orange to orange with enough citric acid and sugar to provide the same tartness and sweetness that you would get from biting into a fresh orange. We wanted to call the product Big Orange Vodka, but our lawyer advised us that the University of Tennessee might have an issue with that, so after several iterations, we settled on Tennessee Tailgate Orange Flavored Vodka. By law, the word “flavored” needs to be on the label in the same font and size as the word vodka, so we decided to put the emphasis on the words Tennessee Tailgate Orange. It works, and our customers love it.

Next, we turned our attention to gin, which is a category of distilled spirits that is growing rapidly. When making whiskey, there are three “cuts” of the final spirit run. The first cut (the heads), which contains low molecular weight (MW) aromatics, is discarded because it also contains acetone and methanol. The second cut (the hearts) is used to make the final spirit, and the third cut (the tails) is kept and added back to the next batch so that the alcohol can be recovered from the higher MW aromatics, which can have some unpleasant characteristics. There is no doubt that the hearts provides the cleanest, best-tasting, highest-quality part of the run, and it is the skill of the distiller that determines when to switch between cuts.

The same is true when making gin, and we choose only the hearts of the distillation to bottle. But why not barrel age the hearts? The flavor characteristics of gin, along with the popularity of pink gin as a cocktail, led us to experiment with aging our gin in red wine barrels. After a few experimental batches, we concluded that cabernet barrels produced the best product—a gin with a pink hue that kept its classic gin characteristics with additional underlying notes of dark berries, oak, and a hint of pepper. Every batch is different due to the variation in the barrels and the storage time, and the pink color is reminiscent of the pink marble that made East Tennessee famous. For those reasons, Marble City Pink Gin seemed like the perfect name.

One of the many lessons I learned in the food industry is not to waste anything that can be reused, reworked, or repurposed. The same applied to our small distillery venture. The tails from the gin run had dry earthy notes and some robustness that were worth exploring. By law, bourbon barrels can be used only once, so the used barrels that still have bourbon characteristics soaked into their pores are shipped to Scotland to be used for aging Scotch. We had, at this point, started bottling our Silver Release Bourbon Whiskey, so we had some used bourbon barrels at our disposal, and the tails from the gin run found a new home—aging in used bourbon barrels instead of sitting in stainless steel drums. The result was a London-style gin christened Dry Gap Barrel Aged Gin.

Like many distillers, we were surprised by the popularity of Fireball, and I was asked if I could develop a product that would appeal to the same consumer base but “please, not another cinnamon whiskey!” The key to Fireball is “sweet heat,” which is a combination prevalent in the food industry, too. The owners felt that an all-natural product with less sweetness but more heat than Fireball would be a good fit in our portfolio, and I was delighted with the challenge. I had several options to provide the sweetness, but we felt that honey was the best complement to our Silver Release Bourbon Whiskey, which was used as a base. Once again, working with a natural flavor supplier, we collaborated on options for delivering the heat. Several test batches and small-scale consumer testing weighted toward a younger demographic and those who like Fireball yielded the winner—habanero chili extract with a hint of ghost chili. The combination worked beautifully. The first sensation is sweet honey, followed by a buildup of habanero heat; by the time the ghost chili bites, your mouth forgives you because it is embraced by the warmth of honey and whiskey.

We had fun exploring potential names with a tie-in to our location. Deals Gap Dragon Tail Honey Habanero Flavored Whiskey was a perfect fit: The Tail of the Dragon is an 11-mile stretch of highway that begins in Deals Gap, which is located on the Tennessee/North Carolina state line. It has 318 curves and is considered “the destination” for thousands of motorcycle and sports car fans. And a shot of this whiskey makes you feel like you’ve been kissed by a dragon.

At this stage of our growth, we thought we had a pretty good range of product offerings, but we were getting several inquiries about rum. A rum would make a good addition to our product portfolio, but our stills were fully deployed making our other products, and the aging requirements meant that if we were making rum, we were not making whiskey. Nonetheless, consumer interest led us to explore options for rum, and we discovered that we could buy aged Caribbean rum in barrels for less than it would cost us to make it if we used activity-based costing.

We purchased a sample barrel of aged rum, and I got to work on how we could make it uniquely ours. Again, I chose to work with a flavor company, and I gave them a very broad brief asking for a supply of “brown flavors” that would go well with rum. They came through with caramel, toffee apple, maple, salted caramel, English toffee, brown sugar, and apple pie. I made several prototypes and tested them with consumers. Having stayed abreast of consumer trends, I thought that salted caramel would be the winner. Interestingly, while salted caramel was ranked first by many, it was also rated in the bottom one or two by a significant group of people. The overall liking appeared to be very bimodal. Maple was liked by everyone and, if it was not their No. 1 choice, it was No. 2. I tweaked the recipe, sweetened it with brown sugar, added a little oak essence, and we had a winner: Three Rivers Maple Flavored Rum. It was aptly named because the confluence of the three flavors matched well with the confluence of three rivers in Knoxville.

At a Tennessee Distillers Guild meeting, I met a gentleman who supplies Jack Daniel’s with the sugar maple charcoal they use for mellowing their whiskey. He had a supply surplus and wanted to know if any other distillers were interested in buying from him. I spoke with our head distiller, and she loved the idea of finding a way to utilize it. The Jack Daniel’s distillery makes Gentleman Jack by “double mellowing” their whiskey through sugar maple charcoal, so we decided to experiment with our Silver Release Bourbon Whiskey. We felt that if Jack Daniel’s double mellowed theirs, then we should triple mellow ours. We tried it, and the product was excellent—smooth, slightly sweeter, reminiscent of a much older bourbon, and worthy of the name Gold Release Triple Mellowed Tennessee Whiskey.

Finally, our newest Knox Whiskey Works product is not unique. Many Tennessee distillers are producing it, and we are sharing recipes, know-how, and raw material suppliers. The product is hand sanitizer; it is 80% alcohol by volume and definitely not for human consumption. It makes me proud to know that all the distilleries in Tennessee are putting time, resources, and money to the manufacture of hand sanitizer—not all to the same scale as Jack Daniel’s but all making a difference in their communities during the COVID-19 pandemic.