Wheat Ridge, Colorado
Industry: Brewing & Distilling
Products: Distilling equipment and supplies
Founder Mike Warn is bridging the gap between grandpa's basement and craft distilleries.
"When I first started this company I was the only company in the United States selling these types of products as far as I know," says Warn of his moonshine stills, which are made from milk cans.
Warn, a welder by trade, was interested in distilling. Not, originally, he says, to make hooch. "I was buying a lot of E85 for my vehicles and I wanted to learn how to make alcohol fuel. So I decided to build a still and I realized how simple it was to make decent stuff to drink, you know, moonshine," Warn says. "I built a few more stills and they sold really fast on eBay. Every time I sold one, their friends wanted to buy them. It took off."
But the devil is in the details, he adds. "If it goes in your fuel tank, you're not breaking the law. If you make a martini with it, you're breaking the law. It's all about taxes. Alcohol is taxed tremendously. But it doesn't seem like the government cares too much if grandpa's in the basement making a gallon of hooch for himself."
Before he launched the company, Warn claims, "It was all underground, if you wanted a still you had to build it. You had to buy copper tubing, an old beer keg, and build the still. I looked at the logistics and found it wasn't illegal to have a still in almost all states. It's illegal to make alcohol to drink but you can make fuel." He says all that's required to make up to 10,000 gallons of alcohol-based fuel a year is a permit.
The company has grown into a distilling superstore selling across the U.S. -- Warn says he has a lot of business in the South and Alaska -- as well as Europe and other markets. Over the first 10 years, he estimates that the company grew at an annual rate of 30 percent.
"We have the largest selection that sells these kind of products, stills, essences, yeast. We've got over 650 products," Warn asserts. "The stills we build are still about 60 percent of our sales." For everything else, the company serves as a supplier. "We're selling bigger stills, like 50- to 150-gallon stills, but for nine years, we stuck with the 8-gallon and 16-gallon stills that are geared towards the home user," Warn says.
Warn's also seen that a home distiller can turn into a micro-distiller. "My buddy Joe von Feldt, I sold him his first still," he says. "Then he started working for a company in Lakewood, a distillery, and he branched out on his own. He's now the owner of Mile High Spirits." The bustling distillery and bar makes Fireside whiskeys and Elevate Vodka, among other spirits.
Most of Mile Hi Distilling's sales are direct to consumer. With a welding background, Warn says he was shocked when launched the business to learn how companies priced their products. "It goes from a manufacturer to a warehouse, to a wholesaler to the retailer to the customers, so usually the customer is paying for it to go through four different hands," he observes. "It cost the manufacturer a dollar. By the time it gets to the customer, it's $5. I've always tried to make it as much direct as possible. The stuff we build is manufactured for the customer. We don't really have resellers." A few companies offer Mile Hi Distilling's products in their beer and wine stores though.
Warn says there was only one other competitor in the U.S. when he launched. Now, he says, "There are about a dozen companies that sell distilling products. There are only a few that manufacture, about half of them."
"I'm not your typical businessman that wants to build at the lowest price and maximize profit. That's not the way we do things," Warn asserts. "We want to sell high-quality stuff and have people coming back for years. A lot of these companies selling crap at a high price, they're going to get that one sale and aren't going to get the return customers."
Warn explains that much of the competition has emulated his design and are selling knock offs from Asia. "Just like all my ideas, people take them. There's not much you can do about it. Getting a patent on it would be difficult because stills have been around for thousands of years. People can just change it a little bit and they're not infringing on the patent."
Challenges: Protecting IP. "Biggest problem right now is these companies stealing our ideas and design and selling copies of our stuff," says Warn. "That's what's hurting us. People are selling Chinese knockoffs."
Opportunities: I definitely think microdistilleries. But also the home distillers. A lot of people are realizing the government doesn't care too much. . . . If you're making a gallon of hooch for yourself, I don't think they give a shit," Warn says. "People are doing essential oils, lavender and rose, and in Colorado marijuana, making tinctures and oils in stills."
Needs: Space. "We have basically outgrown our building. Looking for a warehouse and looking to build more stuff in our place because we're out of room," Warn says.