Being the first at anything comes with inherent challenges. Opening the first distillery in Orange County proved even more challenging than entrepreneurs Robin and Brian Christenson imagined.
The opening of Blinking Owl Distillery in Santa Ana last month was a triumph for the trailblazers, who said they overcame a steep learning curve and several bureaucratic hurdles. They took on the roles of student and teacher as they learned precisely what it took to launch a distillery and educated others in the process, including members of the Orange County Fire Authority.
They and their team are now sharing their newfound knowledge on the subject of distillery permits and protocols with aspiring distillers who have the perseverance to follow in their footsteps.
“Keep plenty of good spirits on hand and patience, patience, patience,” Brian Christenson said.
A distillery, a separate classification from a winery or craft brewery, makes hard alcohol, such as whiskey, gin and vodka. Two laws approved in the past few years smoothed the path for distilleries, including Blinking Owl.
In 2013, Gov. Jerry Brown signed AB 933, which permitted craft distillers to sell tastings to consumers—individual servings of up to 1.5 ounces—at retail.
Brown signed the Craft Distillers Act last year, allowing craft distillers to sell up to three bottles of spirits to a customer per day, opening the door to a separate revenue stream.
The two laws helped level the playing field with wineries and breweries, said Tom Zeigler, an attorney and shareholder at the Santa Ana office of AlvaradoSmith who helped guide the Christensons through the process.
Change of Plans
The effect of the laws can be seen in two different versions of the Christensons’ business plan. In 2013, they anticipated that tours and events—which tend to include lots of tastings—along with carryout would represent less than 5% of their gross revenue, Robin Christenson said. Wholesale shipments to bars and stores would make up the bulk of sales.
By 2016—with both of the new laws passed—they adjusted the plan, expecting that their tasting room would generate upwards of 30% of their gross for the first few years, until they reached larger-scale distribution on the wholesale side.
The results proved even rosier in terms of tastings, which have exceeded initial expectations on revenue in the first few weeks of operations. Robin Christenson said Blinking Owl already has racked up more than double the annual total projected in the original business plan.
Aficionado
Pending laws weren’t top of mind for Robin and Brian when they first hatched the plan for a distillery. They were more attuned to the growing trend of distilleries themselves. They had a background in making wine, and Brian was a whiskey aficionado.
“We saw that the craft distillery business trend was similar to the craft brewery boom in the 1990s,” Robin said. “We thought it was kind of a brilliant time to start a distillery in the heart of Orange County because there were none.”
They both had day jobs at the time. Robin, a physical therapist, was the owner of Womanology, a physical therapy practice catering to females, which has since been acquired by Hoag Memorial Hospital. Brian was art director at AkinsParker, an advertising agency in Santa Ana. Neither gave up their job right away.
Their friend, actress Kirsten Vangsness, who’s in the CBS series “Criminal Minds,” and her mother, Barbara Vangsness, invested as co-owners.
Location
The Christensons have lived in Santa Ana for a decade, and they set their sights on a 1940s Quonset hut that used to house metal fabrication and the manufacturing of staircases, in an industrial area.
“We saw its untapped potential,” Brian said.
The city was very helpful in facilitating the Christensons in getting their permits, especially since it required a whole new category of licensing, Brian said.
They also got unexpected help from Jose Solario, a former Santa Ana city council member, he said. Solario worked for the law firm that was lobbying with the California Artisanal Distillers Guild to get the Craft Distillers Act approved.
He supported the Christensons’ project because of the loyalty and affinity they have for Santa Ana, Robin said. The Christensons also belong to the guild.
They named their distillery Blinking Owl after the former bar by the same name in downtown Santa Ana, legendary for its large circular sign with an owl eye that blinked, Robin Christenson said.
Roadblocks
The Christensons were setting a precedent with many agencies, so the agencies were understandably cautious in proceeding, Ziegler said. The Orange County Fire Authority, for example, was concerned about the fire hazard posed by high-proof alcohol.
The Christensons eventually hired a fire consultant, who helped get final approval for the site from the fire authority.
They had to obtain two different licenses from the California Alcohol Beverage Control Board: one giving them the right to operate a still and the other conferring the right to be a distilled spirits manufacturer.
They also had to obtain the necessary permits and approvals from the Alcohol and Tobacco Tax and Trade Bureau, a division of the U.S. Department of Treasury responsible for regulating the import, production and sale of alcohol in the United States.
Exacerbating the challenge was that every part of the project was significantly delayed or had major roadblocks, Brian said. Their head distiller, Ryan Friesen, thought they’d be up and running two years ago. Construction was supposed to be completed in 16 weeks, but it took about 10 months due to “major” problems with the plans, which took three architects and over a year and a half to complete, Brian Christenson said. The still was supposed to be delivered within 30 weeks but took a year and a half just to manufacture. The Christensons were on the list for “very coveted” charred and toasted whiskey barrels for two years. That’s two years they lost out to making their first batches of whiskey, as that’s how long the process takes. The barrels finally arrived recently.
The entire process was a tremendous learning experience, Brian Christenson said.
“On the business side, I think we’ve all grown a lot by navigating multiple countless issues, as well as a few very expensive mistakes,” he said. “The past three years has felt like we were getting our MBAs in the school of hard knocks, learning how to deal with architects, contractors, subcontractors and government agencies. Learning how to navigate all the regulations is an ongoing process.”
Teaching
The Christensons and their team are now sharing their expertise with others who are trying to open distilleries. Robin Christenson has the following advice: “Take time with your business planning. I would suggest ‘failing’ your business on paper first. Also, consider the scalability of your project. Craft distilling can turn into a very expensive hobby if you cannot produce and sell enough to cover your expenses.”
Christenson said that after writing her first “overly optimistic” business plan, she took a hard look at multiple scenarios that could cause the business to fail. She then spent a few more months on the plan, calculating unexpected financial and contractual burdens and then reverse engineered the plan accordingly.
“This gave me a more realistic view of what we needed to become financially sustainable and scalable versus having a very expensive hobby,” she said. “The difference in this plan was substantial and added more than $1 million to our startup costs. It completely saved us from early financial burdens, as we had a tremendous amount of unanticipated delays and expenses.”
The Christensons originally thought it would take less than $1 million to open but have spent more than $2.2 million to date.
The owners of Bottle Logic, a craft brewery in Anaheim, may want to take their advice to heart. They are in the early stages of planning a distillery in a building they acquired next door, said Steve Napolitano, president of Bottle Logic, which opened about two and a half years ago.
Napolitano and his business partner, Wes Parker, are already pros at barrel-aging their beer, so they decided to try their hand at spirits, he said.
“We think it’s a really fascinating process, and we’ll have the barrels already,” Napolitano said.
They’re planning on incorporating a kitchen into the distillery so they can provide a cocktail bar with food and mixed drinks, he said.
Napolitano and his business partner have gotten some helpful advice from Friesen, Napolitano said. Friesen recommended that Napolitano take a class on distilling, so he travelled to Washington state for one, he said.
Napolitano and Parker happened to be at Blinking Owl the day the Christensons finally received the whiskey barrels from Germany, Napolitano said.
“We shared a drink and shared some stories,” he said. “I really enjoyed talking with Robin and Brian about what they had put into the business. There’s always a learning curve. I’m sure we’ll be competitors, but at the end of day, it’s a much more collegial atmosphere than people might think.”
The real competition is the well-established conglomerates like Jack Daniels, he added.
Napolitano and Parker hope to open their distillery in about a year, he said.
