Intro. [Recording date: September 6, 2022.]
Russ Roberts: Today is September 6th, 2022, and my guest is Sonat Birnecker Hart, the co-founder of the Koval Distillery in Chicago. This is one in a very occasional series where I interview someone from the world of business about what their job is like to give us a glimpse of a world we may not otherwise get a glimpse of. I’ve interviewed the guy who sold me my car, the woman who cuts my wife’s hair, the CEO [Chief Executive Officer] of Legal Seafood, and so on to give you a window into that hidden world. Sonat, welcome to EconTalk.
Sonat Birnecker Hart: Thank you so much. It’s great to be here.
Russ Roberts: You started your career as an academic, a professor.
Sonat Birnecker Hart: Yes.
Russ Roberts: What was your field and where did you teach?
Sonat Birnecker Hart: Sure. My field was cultural history. I focused on German and Austrian, in particular, Jewish cultural history from 1890 to 1938, and then from 1945 on, and I taught at Humboldt University in Berlin. I was the Walter Benjamin Chair of German Jewish cultural history for a number of years. And, I also taught at Baltimore Hebrew University as a Jewish studies professor. But, I taught at a number of other universities–German lit classes, Kafka, you name it–anything related to German culture in that period.
Russ Roberts: So, I looked at your bio and I saw the University of Berlin. Could you say the name of it again?
Sonat Birnecker Hart: Humboldt University.
Russ Roberts: I call it Humboldt, but what do I know? I’ve never heard of it. I wonder what it’s about. And, I found that the following people who taught there, Albert Einstein, Karl Marx, Frederick Engles, Otto Van Bismark, W.B. Dubois, Arthur Schopenhauer, Hegel, Walter Benjamin–who your chair was named after–Max Weber, Max Planck. And, my favorite: the Brothers Grimm. So, it’s got a pretty good heritage. Right?
Sonat Birnecker Hart: It was a wonderful place to teach. I really enjoyed my time there.
Russ Roberts: But, you stopped doing it. You stopped teaching. I understand something of that appeal, but most people, they’ve invested a huge amount in their academic bonafides. They love research. You probably were interested in German/Austrian cultural history with the Jewish flavor from 18-whatever to 1938 and 1945 onward. What happened?
Sonat Birnecker Hart: I feel that life has many chapters and that’s okay. And, I am still interested in all of those things. But, now I’m interested in the world of business and whiskey and gin and vodka and liqueurs and brandies and doing that with my family in the city that I love. And, I feel that there are a lot of things that draw us to do what we do. And, some of it isn’t just what we’ve spent our lives preparing to do. You know that–you go to school and you spend all of this time and you become a good researcher and that leads you down a path.
But, there are other things that can lead you down a path, which is your parents at some point start getting older. Maybe you want to be close to them. Maybe there’s a city that you love that you just can’t get a position teaching in that city. Or you can, but it’s only as an adjunct professor and you’d been a tenured professor for years and you’re not really into that.
Or, maybe you just see a moment in time where you can break away and do something completely different and maybe it will be wonderful.
And, all of those things sort of converged. My husband and I felt as if we were at a crossroads. I was pregnant with our first child. We were living in DC [Washington, D.C.] at the time, but I wanted to live in Chicago. I wanted to be close to family as my parents were getting older. I enjoyed working with my husband, but we didn’t have the opportunity to do that much in our other careers. And so, we thought, well, maybe we could work together. We could start a family business; we could live where we want. We could be close to family. Maybe all those things are worth changing our path. And, they were.
Russ Roberts: So, we’re going to talk about that new path in a second, but one more question about this change. Do you still read in your academic field–do you still read any of that literature? Do you still read for pleasure in turn-of-the-century Austrian, German, Jewish circles?
Sonat Birnecker Hart: Absolutely. I mean, it never gets old for me. I was just in Vienna a few weeks ago, and I was taking my children to Freud’s house and explaining everything to them and making cross-references. And, it’s funny–my son is taking a history class and the teacher asked him if he has any previous experience taking history classes. And, he says, ‘My mom was a history professor, so wherever we go, she stops me on the corner and gives me a lecture.’ So, I mean, that’s sort of what happens when I go to Vienna or Berlin or any of these places; and, you know, it’s wonderful.
Russ Roberts: So, I understand this urge to go to a particular city, maybe where your parents are; and the idea of starting with a business with your husband or spouse could be deeply appealing. To others less so: that’s person-specific, obviously.
Sonat Birnecker Hart: True.
Russ Roberts: But, why did you decide to do something that, when I contemplate it–starting a distillery–strikes me as something that would be impossible? I could imagine opening a grocery store or a bookstore, a factory of certain kind that made some craft work. A distillery is a really specialized kind of thing. Wasn’t that a big leap? Was it–or am I wrong?
Sonat Birnecker Hart: You know, it definitely at the time seemed like it could be a big leap. But, then came the research. So, we were trying to think of what we wanted to do. And, as you said, our default was to think about things that made a little bit more sense, maybe a Vini’s[?] Coffeehouse. But, there actually was a Vini’s-type coffee house in Chicago at the time. [?] had started one around the same time that we started KOVAL in 2008. And so, we said, ‘Okay, well that’s out.’ So, we started–were home for the holidays and we brought some of Robert’s grandfather’s brandy back from Austria for the whole family to enjoy. And, we were sitting around the fireplace and my sister was there and my brother was there and my sister’s kid, everyone, the whole family was together and we were drinking this brandy. And, my sister said, ‘This is fabulous. I haven’t had anything like this. This tastes like pears just jumping out of the glass.’
And, my husband went into a whole discussion of the merits of small-batch distilling in Austria and all of the farm-to-glass and how his grandparents make the brandy and how they don’t really have that same sort of tradition in America as they do in Europe for brandy. And so, we happened–my father at the time, he used to order all of the publisher’s clearinghouse magazines. So, we had maybe 30 magazines on the coffee table. And, one of them was a Time Magazine. We were leafing through some of these magazines and it was an article about a distillery in upstate New York that was a craft distillery. And, this was sort of a new concept there. I’d heard of craft brewing, but craft distilling hadn’t really entered into what people thought of when one thought of alcohol, hard alcohol.
And so, we were reading it and my sister said, ‘Well, these guys are doing it. Maybe this is what you guys are looking for to do. Maybe you should do this.’ And, it sounded sort of wild. But, the idea of started working its way into our minds and we started researching it and looking into all the government requirements for starting a distillery, looking into all of the requirements for the state, for the federal government. We started–really just, it became a research project; and then it became a, ‘Yeah, why don’t we do this?’
Russ Roberts: Well, I can think of a lot of reasons. Let me raise one of them. And, I’m sure that research part was fun because you like research: it’s in your wheelhouse. So, a coffee house, I can kind of understand, because a coffee house is an experience where if it’s done well in terms of atmosphere and the way the ambiance that’s created there, it’s very nice. A distillery, in theory, competes, even though it’s a local distillery, it competes with national brands. So, there’s a lot–I lot happen to bourbon. I particularly like scotch. I like Irish whiskey; I like regular whiskey. It’s going to be hard for you to create something that’s better than those national brands, I might think.
And, then the next question would be, were you thinking you’d be able to exploit the localness of it? More specifically, is the distillery itself a destination for people as a place to hang out, the way a coffee shop is? Because it doesn’t have to be. Sometimes it is. So, what were your ideas in the beginning, and did they change?
Sonat Birnecker Hart: Well, our distillery today is a place where people can come and enjoy a fabulous cocktail. We have a patio, a beautiful bar. But, when we started, it certainly was not, We were not a destination. In fact, it was illegal for us to have a bar at our distillery. And, I had to, soon after we started our business, I had to start lobbying and trying to figure out a way to change the laws in Illinois so that we could retail on site.
In fact, early on, we were not thinking of having a bar. We were thinking of just the opportunity to invite people into our distillery, let them taste what we make, show them around, and then have them leave through the gift shop, so to speak. But, that wasn’t allowed. We were not allowed to do that.
And so, we’re starting this business–I’ve got small children, and I’m driving to Springfield, Illinois trying to get a new law on the books that allows us to retail on site, do tours and tastings, which I managed to get passed. Which really, I think, changed the nature, not just of our business, but all of the distilling industry in Illinois.
So, in the very beginning, to answer your original question, we weren’t thinking about our competition. In fact, we didn’t care at all about our competition. We weren’t thinking about creating a destination. We were only thinking about how can we afford the best still possible? How are we going to mash, since we cannot yet afford the super-special mash tanks with the glycol chillers and all of the things that–now, we have everything.
And so, what we were thinking about was really all just getting things going. And then to answer your question about: did we think we could make something as well as everybody else? Yes, we definitely did. Because, there are different advantages to being small and there are different advantages to being very large. And, we’d seen already the advantages of being a small craft distiller from a European standpoint–Robert’s grandfather has a functioning distillery and cidery in Austria. We’d visited many small-scale distilleries that were doing beautiful work, creating wonderful products that we enjoyed. And, we felt that there was something about the ability of movement of a small–not just a distillery–but a small company. You’re more nimble, you can do things differently that would not be financially viable or interesting for a very, very large company. And, when we started Koval in 2008, there were less than 50 distilleries in the entire United States, and many of them were under the umbrella of maybe about eight distilleries. So, we felt that there was ample room for us to make our mark–
Russ Roberts: To do something distinctive. And so, originally when you first were dreaming about it, did you have a product list in mind that was different than what you’ve now ended up with? Or did you plan to expand to what you are now at? Or did you say: We’re just going to make the best bourbon in the United States and that’s what we’re going to do?
Sonat Birnecker Hart: No, actually we wanted to make a number of different products. We actually treated it sort of very academically in the beginning, which was a strategy that we realized later on was probably not the best one, because we just were so excited about the industry and about being able to make so many different things that just were not on the market. So, we were able to start out and we made a 100% rye whiskey, 100% wheat whiskey, 100% oat whiskey, 100% millet whiskey, 100% spelt whiskey. And then, we made them all, and we aged them in a toasted barrel. So, then we had two versions of all of those different whiskeys, and then we said, ‘Well, what would they taste like in a charred barrel?’
So, then we had three versions of all those, and pretty soon we had more whiskeys in different versions than Starbucks has coffees. And, it was really a lot of fun. But, from a business standpoint, completely ridiculous because when you start selling to different retail stores and you present them with 20 options, everyone’s going to have their favorite. And, then how is anyone going to find what they’re looking for, what they want?
So, obviously in the very beginning we had a huge menu of products, which works very well in a small, middle-of-nowhere, Austrian farm distillery, but in the middle-of-the-city, Chicago distillery, it was not the best strategy. So, we’ve reduced it down.
Russ Roberts: Interesting.
Russ Roberts: Was there a division of labor between you and your husband initially and has that persisted? And, what’s dinner like at the Birnecker Hart home? Is it all whiskey all the time?
Sonat Birnecker Hart: Well, in the very beginning it was just a lot of labor and there was no division. We just had to get it done. And so, it was really just Robert and me. We were in the distillery sometimes until three in the morning. I remember trying to get our first shipment out, and I was nursing. We had a pack-and-play in the distillery. We had a couch. It was not big enough for two people to lie on it. We worked through the night. We even had to solicit friends to come and help us because we did not realize how long it was going to take to get all of these things done. We came from academic careers. My husband was the Deputy Press Secretary for the Austrian Embassy. I’d spent a lot of time in libraries, but not a lot of time bottling, labeling, packaging, all of those types of things and figuring out how long that would take–you know, just shrink capping.
We didn’t have a system where you just put it in and it does it all for you. I mean, we certainly do today, but in the very beginning, each portion of the packaging was done by hand, literally. So, put the labels on by hand, we had to then shrink cap it by hand, cork it by hand, everything. And just shrink capping alone–I mean, I’d recommend anyone to give that a try. We had this machine that looked like a industrial hair dryer and it would melt the shrink cap onto the bottle, but it wouldn’t always do it beautifully. And so, then you had to rip those off and do it again.
So, it was a huge amount of work. My parents came and helped, and it was really a big, big effort. Friends and family, everybody. And, it was five in the morning and we were about to get a shipment out. We slept for maybe 15 minutes and then had to continue working again. So, in the beginning it was a lot of work and a lot of, just, physical labor doing everything.
We had to do so much by hand that today we have incredibly modern equipment and it’s all fit with sensors and we can monitor it on iPads and it’s really night and day. But, in the beginning it was really–there was that.
But then, you also had the fact that I was a mother and I had a baby at the time. I was nursing. So, I would be nursing, I’d be answering the phones, I’d be helping mash, I’d be shrink capping, I would strap the baby on top of me. I gave interviews on television with a baby attached to me. I mean, it was quite an amazing time.
And, it was really interesting because, when somebody called the distillery, as we started gaining a little bit of interest in the press–the Tribune wrote an article about us and other magazines and started writing about us–we would get a lot of phone calls of people wanting to do what we did. And so, when they called, they got my cell phone. And so, I’d be like answering the call. I’d have the phone on my shoulder, I’d have a baby next to me. We’d be doing the work; I’d be emailing and people would ask me to go through the whole process of setting up a distillery on the phone. And, being an educator, of course, I love helping people, teaching them.
But, it got to the point where we would field maybe 20 of these calls every few days. And, we started saying, ‘Come to our workshop.’ And so, this became also–in the very beginning, an element of our time was devoted to teaching other people. We set up a vertical business model, Kothe Distilling Technologies. It became our consulting arm. We worked with the TTB [Alcohol and Tobacco Tax and Trade Bureau], which is our regulating organization in the government. The TTB officer would come to the distillery and tell people how to do things: Don’t keep just a spiral notebook with squiggles in it, and a few notes about how much you distilled. And, they would really show people all the forms that needed to be filled out, how to do things the right way. And, we would teach people how to actually make different products.
And, we set up lots of people. This first wave of craft distilling, many of them came through Chicago. So, in some ways we never left teaching behind. It just sort of shifted and we started teaching people how to set up craft distilleries all over the United States, Europe, Canada, Africa–people came from all over the world to Chicago to learn how to distill from us. And, that was really a wonderfully fun part of the business in the beginning.
And so then, as we had all these vertical business models, and as we were growing all the time, we did need to split up the business a little bit. Wherein I took over most of the business side of it, the marketing, the distribution, the distribution relations. And, Robert took over more of the production and managing the production and also setting up distilleries all over the world. He would go to Uganda and set up distilleries, or Sweden–everywhere.
Russ Roberts: You have one in Jerusalem that you set up?
Sonat Birnecker Hart: Yes. One in [inaudible 00:22:08] as well–
Russ Roberts: Thinkers Distillery, which is on Agripas. And, I’m ashamed to say I haven’t been there yet, which is hard to believe since I like whiskey and I’m on Agripas all the time. So, we’re going to–we’ll remedy that soon.
Russ Roberts: You charged for the workshop, right?
Sonat Birnecker Hart: Yes.
Russ Roberts: Did–
Sonat Birnecker Hart: They helped us, we helped them. It was a wonderful situation. I mean, this was how we were able to grow our business without bringing in investors or without bringing in huge, huge debt. Because, this industry is incredibly expensive. And, that becomes a big barrier to entry for many people because it’s not just the startup costs of getting the initial equipment. It’s also the fact that you are playing futures with your growth. You are trying to imagine how much you’re going to grow in about four or five years. And, then you need to buy all those raw materials. You need to produce all of that product, put it away, and pay taxes on it, by the way, also in advance of selling it. And, then hope for the best. So, you reach a point where that becomes prohibitively expensive for a lot of startups. And then they need capital.
And, what we did, instead, is we were very lucky, we created these vertical business models and in helping people all over the world–I mean, we’ve had over 3,500 people come to our workshops. We’ve set up over 200 distilleries, turnkey from start to finish for others. We’ve done consulting, we’ve done white labeling for brands, many you’ve heard of. And, we’ve done all of these things on the side so that we could then continue to build Koval.
Russ Roberts: What’s white labeling?
Sonat Birnecker Hart: White labeling is where you make products for other brands. So, we’ve done some manufacturing of products for brands in–all across the United States and other places. We don’t do it as much anymore; but for example, we did some white labeling for WhistlePig.
Russ Roberts: To their specifications? Or to your–
Sonat Birnecker Hart: Yes–
Russ Roberts: Whatever they asked for?
Sonat Birnecker Hart: No, theirs.
Russ Roberts: And, I think maybe you said this before: There are now 3,000 distilleries in the United States. Is that correct?
Sonat Birnecker Hart: Yes. Well, craft distilleries. There are even more than that. When we started, as I said, there were under 50 and now we’ve gotten close to about 4,000. But you have to understand ‘distillery’: it can also mean a rectifier. So, they may not do the mashing themselves: they may just bring in product and distill it with botanicals and make a gin.
So, there are different designations for different kinds of distilleries. But, craft distilleries have gone from literally a handful when we started. There might have been an actual craft distillery. There might have been maybe 10 or 15 when we started. And now you have about 3,000, I would say. So, it’s pretty exciting times.
Russ Roberts: Let’s talk about quality control. My wife makes really good sourdough bread; and, you know, we’re in Jerusalem. She had a certain way to do that with a Dutch oven and to make it come out a certain way and get that thick, their artisanal crust. And, she’s really good at it.
And, we come to Jerusalem and she brought her starter with her–because she’s serious, and which is something you need to make bread: you need a starter that’s alive. It’s a crazy thing. And, it comes out different every time now, or at least for a while. At some point it might stabilize, but it turns out–we had a cold winter here, we didn’t have much heat, so the bread over the winter was really different. It came out really differently.
The idea that she could sell–I think there were people who would pay for it, but in general, when people pay for something, they want to get the same thing the next time. Not always. Sometimes they like the variety. But, usually in a whiskey, what you’re making–gin, whatever it is–people, if they liked it, they want to have the same thing again. How is that possible?
At Anheuser-Busch, the people who sell Budweiser, they’re really good. One of the things they do really well–which is not straightforward–is that every can of Budweiser tastes the same. And, you might think that’s because they have somebody taste it each time and if it doesn’t taste the same, they don’t use that one. That isn’t the way they do it.
So, how do you in your business keep quality control? It’s not just quality, it’s essential control. It’s whatever’s the essence of what you’re selling is the same every time. How is that possible?
Sonat Birnecker Hart: Absolutely. And it’s very, very difficult in whiskey, because there are so many factors that you cannot control. For example, barrels, temperature. So, for example–especially for a craft distiller–we have a lot of modern technology that we use that might not be possible for some much smaller craft distilleries.
But, having an aging place where the temperature is always the same is going to be very difficult. And, the barrels, they get charred. And, there are different levels of charring for barrels, but that doesn’t mean there aren’t different sort of slight variations in the barrels themselves.
So, and as you say, crops are different. We’ve distilled grain. We get pretty much all of our grain from a local farmer and also a farmer co-op. So, that if for example, there’s some sort of issue, with one of the farmer’s grains, we get grain close by from another farmer. They work together; it’s an organic co-op[?crop?]. All of our grains are organic.
Russ Roberts: The idea there being that the soil and the acidity and other aspects of the soil at least be very similar, if not the same. Right?
Sonat Birnecker Hart: Exactly. Because we’ve also seen, in distilling–you know, also for others: we’ve distilled grain from various parts of the United States and that, the grain, also is a little bit different. So, we’ve noticed these differences. So, we try and stick with the Midwest. We’ve got our grain, our corn all comes from Illinois. Our other grains all come from the Midwest, very close to where we are in Chicago, actually.
And so, with that, there’s some things that you can control. But, you cannot always control how the crops are in a particular year or the minutiae of every single barrel. Or what necessarily happens all the time in a distillation. Sometimes there are things that can happen. And that’s where technology comes in, to help you make sure that things are going to be as consistent as possible.
xAnd so, we have–we employ a lot of technology. We believe that this is an art and a science. So, we love the tasting aspect and trying things, but we also love the science aspect of making sure that there are sensors everywhere, that we’re never flying blind, that we can monitor what’s happening in our still, so that if there’s a slight temperature variation that we can correct it immediately. We get an alert. If the flow rate changes, we get an alert. Immediately we can change it.
So, all of these things that we can control, are controlled.
Now, there come the things, as we’ve talked about already, that you can’t always control. And so, what we do is that we make sure that we’re tasting before we’re bottling. And, that’s where you can sort of notice, ‘Oh, this actually tastes a little bit more in a caramel direction than our traditional products.’
It doesn’t mean it’s bad. It’s just slightly different. And, that can be because of maybe the temperatures that year, maybe the grain. There are possibilities.
And so, if something tastes noticeably different, it does get pulled off. And, here’s one of those advantages that I say of sort being a small brand, is that we can do that; and then have some unique and interesting special barrels for people. And, people love those, because they are a little bit different, or they are fun. The quality is the same: it’s just the character might be slightly different. And so, then that becomes a unique and special program.
Russ Roberts: That’s very cool.
Russ Roberts: When you did the first set of batches, and you tasted it, and maybe you’ll tell me, but I could imagine that you didn’t like it so much, you say, ‘Well this isn’t quite what we were aiming for.’ Sometimes when I taste a craft beer, it might be extremely hoppy. And some people like that: that’s fine. But sometimes it’s just not that good. And, you wonder could they not make it better? Could they not afford to make it better?
So, when you think about the product that you’re creating, how much control do you have over what we might call the quality, which of course is inherently subjective? But, if you’re aiming for a quality that you enjoy drinking–which would be my, sort of, starting place, ideally other people, too–how do you change that if you’re not happy with it? Were you happy with it when it first came out that the first few batches? Or did you go back to the drawing board? And what is that–what’s on that drawing board?
Sonat Birnecker Hart: Sure. I mean we had very strict rules for ourselves. And, keep in mind, my husband grew up distilling, so this was not new to him. He wasn’t just troubleshooting this. This was his chores growing up as a kid on his grandparents’ farm.
And so, he had done a lot of the troubleshooting. He’d seen a lot of things that can happen. And they were distilling something that was very difficult, actuall,y to distill–a lot more difficult than grain on some levels, which is fruit. And, they also worked with berries, which is very difficult, because you know how quickly berries can have problems even in your refrigerator. So, just imagine trying to ferment those.
So, he had a lot of experience. But, what we wanted to do, which was unique in America at the time, is take a European approach–a brandy approach to distilling–and apply it to grain.
So, already from the very beginning, our approach was going to be unique and very different from what was the playbook for American whiskey at the time.
And, what I mean by taking a brandy approach, is: When you are distilling and–or mashing and distilling–an apricot, you are very conscious of each and every apricot. You cannot put one bad apricot in, because it literally will wreck everything.
If you are distilling pears, in Austria, there are different schools. But, if you really want to do it, in our opinion, the cleanest, the brightest, the right way, you will take the stems off. You know, you will make sure that–for example, with apricots you will take out the pits. So, some people do, some people don’t. But, we sort of felt that we wanted to do everything as best as possible. Which always tends to mean a lot more work.
Russ Roberts: But how does that–how does apricots and pears get you to grain? What was the analogy?
Sonat Birnecker Hart: Okay. That’s a good question.
It’s: So, already there are a lot of things that you have to sort think about when you’re working on the mashing process. But what also brandy distillers need to think about very carefully is the paying attention to the mash. Making sure that they’re doing that, that they’re adding the yeast properly. And, that’s something that you have to do no matter what you’re distilling.
But, then with the fermentation process, making sure that all the starches convert over those sugars. That you’re then distilling it at the right time. And, then, the distilling process is, for brandy, is very particular. In that, when you were to distilling really anything, it comes off in three parts: Heads, they will make you go blind and crazy. You do not drink them. They’re full of all sorts of chemical compounds that you might find in nail polish remover, very bad for you.
Then you have the Hearts: that’s what people drink or that’s the good stuff. That’s pure ethanol.
And, then you have the Tails, which are a number of different compounds. They’re often called the long ends. There are many names for the tails. But they have similar chemical compounds to what you might find in vinegar, for example. Not necessarily bad, just kind of interesting, sort of off flavors.
And, for a brandy distiller who’s looking to let that pear shine, that pear that we were drinking on that holiday evening that my sister said, ‘This is amazing,’ they would never add the tails. And the reason being, it’s not that the tails are bad for you, like the heads. They’re not. They might also add some interesting flavors. They’re also oily and they’re a little bit oilier in their composition. But, if you are going for a brandy that is not aged, that needs to stand on its own and be bright and clean, you would never add the tails.
Now, in America it is very traditional when you’re making whiskey and also if you think about making millions and millions and millions of gallons of whiskey, it’s likely–very likely–that much of the tails will also end up in the product. Because, when you take the hearts–the pure ethanol–and you mix it with some of the tails, and then you put it in a barrel–it’s heavily charred–and you age it for an extended period of time, the barrel acts as a filter. And the barrel will pull out some of those off-putting flavor notes and some of those off-putting smells–because tails by themselves sort of taste and smell like a wet dog.
Now, when you release that whiskey after four or five years, it’s going to be rounded. It’s going to be nice. It’s going to have a flavor that I would say is very easily recognizable as an American whiskey. And, it’s great; and it’s loved by millions of people all over the world. It is, however, different than a whiskey that did not have any tails in it, that is aged with only the heart cut, that is then put in a barrel, where the barrel really doesn’t need to filter anything. Because, you are not adding anything into the barrel that, in its own essence before the barrel is a little bit, like, off; then you’re getting a very different product.
And, that’s what we were going for. We wanted to create a product that was going to be unique, that was going to make good on Robert’s heritage of his grandparents and their brandy tradition and apply that to grain, because we wanted the rye to shine just itself, its purest form, just as the oat, just as the millet. And, that’s sort of the identity that we wanted for our distillery.
Russ Roberts: Now I could imagine–when you say classic, standard, mainstream American whiskeys, what do you have in mind? Can you mention those names? Are talking about Jack Daniels?
Sonat Birnecker Hart: I don’t know their specifics, but I can imagine that large-scale distilleries are–if I were running one, I probably would not want to not use alcohol that is completely usable, and that there’s nothing wrong with it. It just has very different chemical components to it than the heart cut and the pure ethanol.
Russ Roberts: So, did some of your customers initially find your flavor off-putting because it wasn’t what they were used to?
Sonat Birnecker Hart: They said it was different; and it is different. Our products are very clean, they’re very bright.
But, then again, what was really interesting is that a number of years into our business you started having this love and interest in Japanese whiskey. And, a lot of Japanese whiskey also uses similar approach. It’s very good. Some of them are, very sort–I would imagine just having tasted them, I can tell–a lot of them use, if not mostly the heart cut, at least a tighter cut than I might imagine some American brands use. And, it creates just a different flavor profile. And so, our products, our whiskeys do very well in Japan and I can see why. We have a very clean, bright flavor profile to all of our grain whiskeys.
Russ Roberts: So, going back to my earlier question–that was fantastically interesting–I want to come back and go into a few more details. But, did your first batch taste good? Were you happy with it?
Sonat Birnecker Hart: I mean, we were happy with it, because we did not use any tails. For us, we had a different metric. We were going for very clean whiskeys. So, from a scientific standpoint, we wanted just the pure ethanol in our whiskeys; and we achieved that, and that’s what we wanted. And so, we were very, very happy with it.
There were different whiskeys that we tried that–in adding things. We were purists in the beginning, so we only would use just rye. And, even today our rye is 100% rye. Whereas, many ryes on the market are only 51% rye, because that’s what the U.S. government says a rye has to be–51% rye, but you still might be getting a lot of wheat or corn or something else. But, we were purists.
But, I think we started having a little bit of fun, even more fun, when we started mixing grains, as well. And, when we made our bourbon, when we made our four-grain whiskey, those were a lot of fun for us, because we realized the complexity of flavor then that would come out in these sort of mixed-grain whiskeys that we did not necessarily have in our 100% grain whiskeys. Which we also loved, but they were just very specific.
And then, making our bourbon was a lot of fun, because we were trying to create a bourbon that was also sort of unique and different than what you have on the market. And so, we did not want to use the usual suspects. We did not want to make a bourbon with rye, or wheat, or malted barley. So we said, ‘Let’s make our bourbon with millet.’ Which is a fabulous grain. It’s incredibly unique. One of the few grains that’s basic as opposed to acidic. It is used in a lot of gluten-free breads. It has a completely different habit in the way that it grows. It’s a fun grain. It’s very popular in other parts of the world, just not in the United States.
And so, we achieved this notion of trying to create a bourbon that is very uniquely ours. And, that’s part of the fun. That’s what we want to do. We really wanted to have fun and make really high quality products that were unique and different.
Russ Roberts: I thought bourbon was made out of corn. It’s not?
Sonat Birnecker Hart: It has to be 51% corn.
Russ Roberts: So, when you say millet, what do you mean?
Sonat Birnecker Hart: Well, our mash bill–sort of the recipe–is corn and millet. Whereas the typical bourbon mash bill is corn and malted barley, corn and rye, corn and wheat and malted barley, corn and malted barley and wheat. So, it’s different combinations of those secondary grains, whereas the primary grain needs to be corn. So, 51% corn.
Russ Roberts: Let’s talk about the mash, a phrase you’ve used a number of times. What is that?
Sonat Birnecker Hart: The mash is the–when you are making a whiskey–in fact, when you’re making beer, when you’re making sort of any beer or whiskey, the beginning is very similar. Brewers call it their wort or distiller’s beer. We call it our mash. It’s basically where you take–you’re making a soup almost of grain, water, and yeast. And, that’s very similar for brewers for making beer. But, for a distiller, that’s what we use.
There are different approaches that one can take to the mash. Some just use the yeast and some will use malted barley in their mash. Not necessarily only for flavor, but also to help crack the starches, which is something that has been very, very traditional in America. In fact, it’s so traditional there’s a funny anecdote about this, if you’ll indulge in me.
Russ Roberts: Please.
Sonat Birnecker Hart: So, yeah,so there was a gentleman in–a scientist in Japan–who came to America during one of the World’s Fairs, I think that was in New Orleans. And, he had this science of fermentation that he’d been studying; and he came across it in looking at sake [saki] and how sake ferments. And, he was looking at the rice and I think koji was what he was focusing on.
And, he came across this realization, because the science around distilling is still full–and alcohol, for that matter–is still full of mystery and questions. There’s a great book called Proof and it looks into the science behind all of the different stages of making alcohol–and including intoxication, around which there are a lot of questions. Sometimes there’s so many factors that come to play in it, both environmental, as well as what you’ve actually ingested that it’s fascinating science.
Either way, this gentleman, he came to this conclusion that there was a much better, more efficient, and cleaner way to mash whiskey than was very common in the United States at the time, and wanted to bring this new technology–in fact, it was the first biotech patent in the United States; it was actually for enzymes for distilling, from him.
So, basically, what he said is that he then brought this technology to Illinois–so this has a very Chicago and Illinois side of this story. He brought this technology to Illinois when we had the World’s Fair here and had a meeting in Peoria, Illinois, which was the main distilling hub in the United States at the turn of the century [c. 1900–Econlib Ed.]. Everyone thinks it’s Kentucky or Tennessee–no, no, no, no, no. It was Peoria. Unfortunately, it lost its luster and it then moved down to Kentucky. But, Peoria was producing most of the alcohol in the United States, I believe, at the time.
So, he went there to meet with all of these distillers and said, ‘Look, you don’t need malted barley anymore.’ Which was very also time consuming. It was a big process to malt the barley. It took a lot of space. And he said, ‘Look, you don’t need that. You need enzymes and that will do the job and it’s all natural. And, this is exactly what will make your production more efficient and better and cleaner and easier.’ And so, some of the distilleries in Peoria said, ‘This sounds like a great idea,’ and started using it.
And then they burned down. And, then the firemen who came to put out the fires, surprisingly, had no water. They couldn’t get water. And, after this happened a few times, I think they got the message.
Russ Roberts: The distilleries were burning down because the enzymes created–what?
Sonat Birnecker Hart: No, no, because of the barley mafia.
Russ Roberts: Oh. What happened?
Sonat Birnecker Hart: They didn’t want the distilleries using the new technology because it would put them out of business.
Russ Roberts: Oh, this is awesome.
Sonat Birnecker Hart: See, I just assumed that was clear because I come from the Chicago, Illinois. It’s like, of course there was somebody that was just sending them a message.
Russ Roberts: And, that’s why there was–
Sonat Birnecker Hart: Yeah. It had nothing to do with the enzymes being dangerous.
Russ Roberts: That was why there was no water, because they switched it off and made sure they couldn’t put out the fire.
Sonat Birnecker Hart: Yeah.
Russ Roberts: So, for the listeners who’ve been long time listeners, I haven’t talked about this in a long time, but this is a great example of Bootleggers and Baptists, for those listening–in a certain sense, not exactly the Baptist part. But, bootleggers don’t like competition and barley makers don’t like competition, and so this is a fabulous example of how, when property rights are insecure, sometimes you don’t get the best outcomes. Not really Bootlegger and Baptist, but I had to get that in somehow. Okay.
Sonat Birnecker Hart: Of course.
Russ Roberts: Let’s talk about single malt, which–I think about it as a scotch thing. So, I think it’s a bit of a form of snobbery. I think there are non-single-malt scotches that are quite drinkable. Johnny Walker being the most well-known by most people. Johnny Walker just makes the same kind of whiskey each time. They have different colors. They have green, black, blue, red.
But, it’s not just in whiskey, right? It’s–single malt is general thing? Tell me what it is; and is it a thing, and should it be?
Sonat Birnecker Hart: Well, single malt–there are a lot of things in whiskey. And if I could just quickly back up, because I hate not giving somebody credit, but the gentleman that came up with that was Jokichi Takamine, was the name of the scientist that came up with enzyme.
Russ Roberts: And, do you use enzymes now, you’re saying? It is now?
Sonat Birnecker Hart: We use enzymes.
Russ Roberts: Okay.
Sonat Birnecker Hart: Yeah. Others might use malted barley, but the whole point, and of course as I digress, but the whole point was that we use enzymatic conversions of starches to sugars, so that we can have a very clean whiskey that is 100% rye without ever having seen other grains.
Russ Roberts: So, go to single malt.
Sonat Birnecker Hart: Exactly. So, with regard to single malt, there are many things in whiskey. I would say there’s a lot of marketing in whiskey, too.
But, single malt is a designation, just like bourbon is a designation. And, if we’re going to jump to another alcohol category, champagne is also another designation. These are all designations that are geographical in their nature. So, single malt whiskeys are primarily–although this is very topical because America is creating an American single malt right now as a category. We didn’t have it before. It was primarily–it would come out of Scotland. And, really it’s just using malt, a malted barley for this–
Russ Roberts: I’ve got to ask an embarrassing question. What is malt, exactly?
Sonat Birnecker Hart: Sure. It’s where you have–you know, there are many things that can be malted. You can malt all sorts of kinds of grains. It’s a process in which it’s sort of smoked and it’s dried and there are many different processes for malting different things. But, it’s a way to change the character and flavor of a grain. But also, it changes–it breaks it down and it helps start the process. So, in a way that’s why it’s great to use malted barley to help crack the starch and the sugars because it gets it started: it gets it really moving, and that’s why it’s used.
But, I would say it’s also a flavor; it’s a delicious flavor. I love the malted barley. And, there are different levels that it can be malted. So, it can have more smokey-type flavors, it can have more caramel-type flavors, it can have more chocolatey-type flavors. It really just depends on the malter. And, while I’m not a malter myself, so I mean that could be an interesting thing to ask. Because one can get lots of different flavor profiles out of malt, malting different grains and also barley for that matter. But, that’s what it is.
Russ Roberts: Yeah. I was going to say neither a malter or a mender be, but I’ll let that go. Sorry about that. Really bad dad joke for Shakespeare fans. So, what’s single malt?
Sonat Birnecker Hart: A single malt is just, you’re only using the malted barley. You’re just using that one malted barley. There might be different things where it’s just of one harvest. There might be different marketing techniques of different things.
In America there’re trying to figure out what our designation is going to be. Is it going to be distilled at a certain level? I think that they’re fleshing out the details right now as to what is going to constitute an American single malt.
But it’s really–has been primarily a Scottish type of whiskey. And, then you can add different things. Then there’s peated whiskeys, which is also something that happens a lot in Scottish whiskeys that they’re starting to do. Some distilleries in the United States are starting to use peat as well. But, it’s just–
Russ Roberts: So, what does that mean?
Sonat Birnecker Hart: It’s just really what the chef wants to make.
Russ Roberts: Well, what’s that mean, though? Like, I’m a big fan of peated whiskies, of scotch, especially–those are my favorites. Lagavulin, Laphroaig. I’m blanking on–Ardbeg. What does that mean, ‘peated’? It tastes smokey. I’ve mentioned this before–my favorite marketing slogan of all time, a drinker of Laphroaig, I think, won a contest. He said that, ‘Drinking Laphroaig is like kissing a mermaid who has been eating barbecue.’ There is, I don’t think, any better expression to capture Laphroaig, although there’s some less attractive ones. How is the peat–peat is something from the ground? Like dirt? How is that integrated into the process?
Sonat Birnecker Hart: Yes. Yeah. Well they use the peat, sort of similar to the fact that malted barley, first you’re sprouting the grain, whether you’re using barley or whether you’re using some other grain and you’re malting it. You’re sprouting it, getting it started. And then you’re using fire and different amounts to dry it or to smoke it or to make it have one sort of flavor versus another.
Peat, it’s natural. It comes from the ground. It’s organic substances that, I think, are pressed into certain–I guess it’s like a bog. To be perfectly honest, we don’t use any peat, so I’m not an expert in peat. But, I know that there are peat fields in England. I’ve been to them in Scotland. And, what they do is they harvest it out of the ground and then they’ll smoke it or they will use either a heavy smoke or a light smoke onto it and that obviously affects the flavor and aroma of the grain. But, how they use it exactly in different minutiae, is beyond me because I do not use peat at all.
Russ Roberts: It’s okay. You’re spared.
Russ Roberts: But, I have to go back to inquire on something you said earlier when we were talking about the heart. And, you said it’s pure ethanol.
Sonat Birnecker Hart: Yes.
Russ Roberts: Right?
Sonat Birnecker Hart: Yes.
Russ Roberts: So, ethanol is something you might use in a science experiment. It doesn’t–
Sonat Birnecker Hart: Yes, you would.
Russ Roberts: In theory, it has no flavor, I would say: I’m guessing.
Sonat Birnecker Hart: Right. In theory, but that really depends.
Russ Roberts: So, my question is–
Sonat Birnecker Hart: Because–
Russ Roberts: why would you want to make something that’s 100% ethanol? Is it going to have any flavor? [More to come, 57:04]