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Feature

Mo' Whiskey, Mo' Problems: The Saga of Balcones

 

Now that Chip Tate’s gag order has been lifted, Balcones fans have a little reassurance that the distillery founder is not the gun-toting trespasser he was made out to be when the conflict began. Tate and others have already said much about the lessons learned for expanding craft distillers through Balcones’ struggles, but the discrepancies between Tate’s story and his accusers’ point to a much larger — and more ubiquitous - problem: Why does a talented and admired whiskey producer sell control of his distillery, and why should we be bothered by his resulting loss of decision-making autonomy and eventual departure from the company?

Tate, along with co-founder Jared Himstedt, transitioned from brewing beer to distilling whiskey in a modest warehouse in Waco, Texas. In five years of operations, Balcones Distilling has received over 40 awards for their line-up of spirits, with their most notable product, the Texas Single Malt, claiming 36 of those recognitions.

With a growing international demand that would challenge even the capacity of a major distillery, Tate and Himstedt began working on plans to expand their facilities. In 2013, a private firm (PE Investors II) bought a stake of the company allowing imminent plans to break ground on the expansion to move forward. However, internal conflict followed almost immediately, culminating in Tate’s restraining order, various gun-related accusations and his eventual buy-out by the company's board leaving an uncertain future for the world’s best new single malt.

Tate is quick to clarify that he did not sell a controlling share of Balcones. The structure of the LLC stipulates terms and operating procedures that, according to Tate, board chairman Greg Allen cleverly found ways to work around. Although much of the story remains obscured, it’s clear that Tate’s role in the company was systematically marginalized in the months leading to his restraining and gag orders: he was buried in busy-work, his shares were deviously diluted by the board of directors, the frequency of board meetings increased to an impossible level, and plenty more, according to him, that will come to light as the situation develops.

Tate claims it started the moment he showed Allen a budget. Balcones is known for its careful attention to detail, especially in their time-inefficient commitment to fermenting the wash (whiskey in its pre-distilled form) at a low temperature, and in their relatively unique micro-barreling process. There’s a reason these practices aren’t common at major distilleries: they’re not cost-efficient. So “expansion,” to Tate, meant selling more of the whiskey he was already making. But to Allen, it just meant selling more whiskey.

So how does that escalate to Tate allegedly threatening to shoot Allen? Tate claims he was taken out of context. So the next question must be this: what possible motivation could Allen have for lying about it?

In the whiskey world, Tate’s influence on Balcones is crucial. If Tate speaks out against Balcones, the distillery potentially loses the very name recognition that was responsible for making its expansion a viable investment. However, if Balcones loses its recognition for quality as it grows, could it even sell enough product to justify the expansion?

This isn’t an unfamiliar circumstance, and it’s not a problem exclusive to the craft spirits industry. When demand surges and a specific market expands, well-performing products become profitable investments. But the quality of these products — and the products themselves - are only incidental next to their sales potential as the prevailing attitude is that any loss in popularity due to a decline in quality can be offset by strategic marketing.

The thing is, that approach isn’t inherently wrong. As appreciators of great whiskey, we’re inclined to side with Tate’s point of view, but it’s truly not the most profitable approach to growing a business. And in a high-risk industry, it makes undeniable sense to maximize the likelihood of success. Plenty of mass-produced whiskies are delicious, after all, and growth often demands sacrifice. But when profit is the bottom line, the rationalizations snowball past that reasonable point towards a situation when one might, say, falsely accuse their business partner of something like assault with a deadly weapon.

It’s no less of a shame that people like Chip Tate get locked out of their own distillery, than that musicians make next to nothing from services like Spotify, or that corporations like Monsanto can bully smaller, independent farmers by recognizing their point of departure. But, this does make it easier to be grateful for the nearly miraculous fact that great new American whiskey keeps finding its way into barrels. The struggle of a small venture against big money is quintessentially American, so maybe it’s better to look at the Balcones saga as an initiation or turning point in the perceived legitimacy of craft distilleries in the global market.

Tate’s right to emphasize the lesson in his experience for aspiring distillers, but there’s another point here. A commitment to genuine practice and outstanding craftsmanship is always, in every industry and occurrence, a sacrifice of potential profit, which often comes with conflict between those willing and unwilling to make that sacrifice.

As in all economic contexts, there will always be many competing factors at play. However, the unwavering devotion to quality found in people like Chip Tate is beyond admirable.

Ethan Bennett

Ethan likes whiskey and football, usually together.


Photos by The Beer Haul