Twelve years ago, Ralph Erenzo moved two hours up the Hudson River from New York City to Gardiner, N.Y., to open a rock-climbing resort along the scenic Shawnagunk Ridge. In 2004 he started turning out Baby Bourbon, the first whiskey distilled in the Empire State — legally — since Prohibition. After bourbon, his Tuthilltown Distillery started turning out a uniquely American single-malt whiskey: Hudson Whiskey Single Malt is a woody aqua vitae with an intense earthy flavor that comes from its time spent in new oak barrels, rather than Scotland’s traditional sherry or bourbon casks. How Erenzo went from the business of bouldering to barreling is a story of equal parts private American entrepreneurship and public American obstinacy.
Start with the land: In 2001, Erenzo bought 36 acres of land in the Hudson River Valley. His plan was to open a rock-climbing resort near the Shawnagunk Ridge rock-climbing area he’d been coming to with his son for years. He’d made a successful career in Manhattan building rock-climbing gyms and related businesses, and was intent on opening a hospitality business in the valley’s world-class rock-climbing area. His land included a stretch of the Shawnagunk Kill, a stream on which lay Tuthilltown Gristmill, a National Historical Site that had been producing flour for 220 years.
But Erenzo’s dream was slowly strangled by the strictures of local government. His land was zoned for agriculture, and required a range of zoning exemptions before it could be used for the commercial purpose he envisioned. A few uncooperative neighbors were able to bottle up his ambition by preventing the town government from providing the variances he needed.
Yet his entrepreneurial ebullience was undimmed, so he asked a friend from the local zoning board what other businesses he could run on the property. The zoning officer said, “You have to have an agricultural use — how about a farm winery?” But Erenzo, “not much of a wine guy,” found a better idea, his son Gable says. In the process of researching farm-winery licenses, he found out that New York State was creating a license for “farm distilleries,” which can produce small amounts of spirits from local agricultural products.
As Erenzo was deciding what to do with the land he’d purchased, Brian Lee, an audio and broadcast engineer, had his own idea for retirement: running the Tuthilltown Gristmill on Erenzo’s property. But after one season of milling, Lee found that labor, especially in a historic grist mill, grinds down all, and decided that running a two-century-old gristmill was no way to enjoy his golden years. As Gable explains, Lee agreed to be a partner in the distillery, and two weeks later, “took out a second mortgage on his house to buy our first still.”
Since Prohibition, federal and state regulations and corporate lobbying had kept the costs of the relatively simple spirits business extremely high, protecting the largest producers and drowning the competition. Before the Volstead Act, there were more than a thousand distilleries in New York State; in 2001, there were none. A New York license to produce high-proof alcohol would ordinarily cost tens of thousands of dollars. But in 2002, Albany recognized the economic-development opportunities that boozy small businesses could produce, and passed a law allowing distilleries to purchase a license for just $1,450 that would permit them to produce up to 35,000 gallons of liquor per year.
In 2004, the first barrels of booze rolled out of Tuthilltown — a vodka made with scraps of apple from a local apple-slicing plant. Meanwhile, Erenzo and Lee kept lobbying for the further liberalization of New York’s distilling laws. Albany loosened the laws in 2003 and 2004 to allow smaller distillers to share equipment and premises with existing, larger farmer distillers. (Indeed, when I visited Tuthilltown’s bottling room, workers were rolling labels onto bottles of vodka by hand for another brand, Renegade Vodka, which was then using the facilities.) Result: There are now 28 distilleries in New York.
In 2007, the legislature passed a law that allowed distilleries with the proper licenses to make direct sales to customers and offer tasting on the premises (Tuthilltown now can do both). The profit margins are so much higher on such activities, Erenzo explains, that for Tuthilltown or another distillery, they can account for as little as 5 percent of sales, but up to half the business’s profit. A 2012 amendment to the law now also allows farmer distillers to sell their products at farmers’ markets and fairs.
There was one catch (or so it seemed) in these licenses: Distilleries operating under them have to buy most of their agricultural supplies from within New York State. While some free-market conservatives may grumble at this idea, at least it’s a noble effort to help the Northeast’s struggling farms, one could argue. But for Tuthilltown and others, it’s actually unnecessary. Tuthilltown buys as much as 90 percent of its supplies not just from within the state, but from within ten miles of the mill.