Still cooking: Distillery pioneers gear up for expansion

In early 2016, siblings Bill and Denise Mathias moved their company, Old Republic Distillery, into a former nightclub in North York.

They were planning to expand production but immediately hit a roadblock that hampered growth at one of the first small-scale distilleries in Pennsylvania.

They made a downpayment of $41,500 for a still that never arrived, according to Bill Mathias.

They had to eat the cost and put their expansion plans on hold.

Now, three years later, those plans are back in motion.

Mathias is about to fire up a new 300-gallon still, which is expected to speed up and expand production at Old Republic.

“The plan was to do this two-and-a-half years ago,” Mathias said.

But the delay may not be all bad.

The commonwealth has seen a surge of craft spirit companies over the last few years and consumers are taking notice. Excluding Jacquin’s, one of Pennsylvania’s largest distillers, Pennsylvania-made spirits sold in state-run liquor stores generated $13.1 million in sales last year, up from $10.4 million in 2017.

“Spirits have become the No. 1-purchased alcohol over beer and wine,” Mathias said. “There is a strong future for distilleries.”

Second round

When Pennsylvania created a licensing category in 2012 for small producers, dubbed the limited distillery, the Mathias siblings were among the first to apply.

The siblings opened Old Republic in Seven Valleys in 2013. It was the first new distillery in Central Pennsylvania since prohibition.

By 2016, with growth in mind, they decided to lease 6,000 square feet in a former nightclub on North Duke Street, near Route 30.

They had hoped to fill the space with larger distilling equipment from Idaho-based Corson Distilling Systems. They said they made a downpayment on a new still for about half of the $83,000 cost, but ended up with nothing.

Old Republic was not alone. The Idaho Statesman newspaper has reported that customers nationwide were stiffed by Corson after ordering equipment. The manufacturer has drawn a string of lawsuits from distilleries and vendors, according to the Statesman, and now appears to have closed. Efforts to reach Corson were not successful.

The owners of Old Republic continued to run their 50-gallon stills and began saving up again. They recently found a manufacturer in Missouri and spent $60,000 on a 300-gallon system.

Bill Mathias, Old Republic’s distiller, is wrapping up the installation and hopes to start using the larger system this spring.

For now, Old Republic is producing about 1,000 six-bottle cases per year. With the new still, Mathias expects production to reach 15,000 to 20,000 cases within the next two years. He said maximum capacity would be around 60,000 cases.

In addition to increasing output, the new steam system also will be faster: It can heat up in less than one hour compared to the two hours taken by his 50-gallon electric still system.

“We’ve been working these stills to death,” he said. “This will allow us to take the next step up in our production.”

The next step will include new varieties of rum, as well as whiskey and brandy, new offerings for Old Republic.

Bill and Denise believe the expansion, albeit delayed a few years, will help Old Republic stand out as the Pennsylvania spirits industry grows.

In the nearly seven years since the new licensing category was created, the state has licensed 104 distilleries. There are 18 in the midstate, with a 19th distillery on its way pending licensing, according to the Pennsylvania Liquor Control Board.

At the same time, sales of Pennsylvania-produced spirits — including vodka, whiskey, gin and rum — have been growing faster than sales of Pennsylvania wines.

In 2015, sales of Pennsylvania wines at state liquor stores totaled $6.1 million, while spirits sales clocked in at $6.7 million, according to the Pennsylvania Liquor Control Board.

By 2018, wine sales had flattened out at around $8.5 million, while spirits sales hit $13.1 million.

Some retail wine sales moved out of state stores following liquor law reforms in 2016, which allowed grocery and convenience stores to sell wine and beer.

Private retailers in Pennsylvania are not allowed to sell spirits, though they could be soon. State lawmakers continue to float bills to expand takeout liquor sales.

Mathias would like the opportunity to sell his products through grocery stores, though he said he is content to expand within the state-store system.

Old Republic currently has two vodka products in about 25 state stores. Mathias said he hopes the company’s white and dark rums will be picked up next.

He said increased production volumes of the distillery’s core products could get it into more state stores and boost out-of-state distribution.

The siblings also are optimistic that more bars and restaurants will buy their craft spirits in favor of products made by industry giants. They believe craft spirits can make inroads in bars and restaurants the same way that craft beers have.

Experience

Still, for small companies like Old Republic, the biggest sales opportunity may be in-house.

Bill Mathias said he can’t compete with the marketing done by bigger brands in order to stand out on retail shelves, so he has to get consumers into the distillery’s tasting room, which is open from Thursday to Saturday. It includes a bar that sells cocktails, along with some Pennsylvania wine and beer, as well as an area for tastings and bottle sales and a small private room – called the copper room – available for event rentals.

“My best marketing is to allow people to taste my products,” he said. “If I can get them to taste it, they will love it.”

That’s one of the reasons he has created an experimental series that starts this spring with a single-malt rye whiskey. He expects to offer a few new releases each year, starting with whiskey and branching out into brandy and other products.

“All of the experimental stuff will be aged at least a year,” he said.

The special releases will be limited to 100 or 200 bottles. Mathias said he plans to sell them through the North York tasting room, which often attracts people from out of the area and even from out of state, including from Maryland, New York and New Jersey.

“Since day one, about 60 percent of our sales have been coming from out-of-state customers,” said Denise Mathias.

Old Republic’s longevity has helped inspire other distilleries, in turn spurring the launch of the Keystone Craft Spirits Trail in 2017. The trail promotes regional distilleries and brings visitors to York County and surrounding areas, said Louise Heine, destination marketing director for the York County Convention & Visitors Bureau.

“I hope as visitors and locals continue to enjoy the things are made here, we’ll see more and more local establishments serving up local wine, beer and spirits,” she said.

Old Republic’s owners also see potential to continue adding production equipment.

As they grow and build a bigger menu of products, the Bill and Denise Mathias said their goal is to eventually buy a farm near their hometown of Spring Grove.

Not only do they want to make more rum, whisky and vodka, they would like to grow their own fruits to use in their spirits and be able to offer more rental space for private events.

“That is the big dream,” Bill Mathias said.