Buoy Beer Co. is entering the craft liquor market, acquiring Pilot House Distilling in a bid to help the startup and find a new area for growth amid a tightening beer scene.
Pilot House and its co-founder, Larry Cary, are being brought under Buoy Beer’s parent company, River Barrel Brewing Inc., as partial owner and director in the distillery. His existing business parter, Todd Shelton, of Michigan, will be bought out.
Cary will still run distillery operations, while Buoy Beer will provide capital and administrative support to help him grow. His wife, Christina, helps operate Pilot House. The two still own a related but separate company, Grumpy Dog Shrub Co., making drinking vinegars and other mixers.
“We don’t see any changes to what Larry’s making now, or any changes to recipes or anything like that,” said David Kroening, president and general manager of Buoy Beer. “He’s the expert. He’s got a good following. He makes stuff that we like.”
While Buoy Beer has experienced a lot of growth, the craft beer scene is getting tighter, with more than 6,000 breweries nationwide, Kroening said.
“Craft breweries are starting to come up against it a little bit, just like the megabreweries have been for the last few years,” he said. “As that kind of settles out and we see where that goes, this is kind of a growing industry, and we have local people we can work with.
“Would we have gone out and just bought distilling equipment and found a distiller? Probably not. But it was just kind of knowing Larry and Christina, and being able to trust them and work with them, is kind of what the main spark was.”
Cary, a former billiards salesman, started Pilot House with Shelton in 2013 as North Coast Distilling in the Astoria Plumbing building on Duane Street. The distillery has grown, winning national awards and becoming one of the first to release cocktails in a can.
“My biggest obstacle the last couple of years has been keeping up with demand we’ve created,” Cary said.
Since opening, Cary has also run into legal hurdles, namely trademark disputes. North Coast Brewing Co., from California, threatened to sue over the similarity of the distillery’s original name, leading Cary to rename the company Pilot House Spirits. House Spirits Distillery in Portland soon made a similar threat, leading to another name change to Pilot House Distilling.
Cary said the craft distilling industry has also been challenged by a draconian state tax system. Distillers pay up to 40 percent of tasting room bottle sales to the state. Gov. Kate Brown’s budget proposal calls for a 5 percent tax hike to raise another $21 million in revenue.
“It makes it very hard for small distilleries to break out of that small mold and grow,” he said.
The high taxes and administrative requirements have made it difficult to add employees, Cary said. Buoy Beer recently provided help to bottle spirits, along with mash from its brewhouse, to enable Cary to turn out more whiskey.
Cary is excited about being able to keep up with demand and put out some new varieties of liquor and canned cocktails, which now include a bloody mary, Moscow Mule and a gin and tonic.
“The canned cocktails are crazy," he said. "That was something I never thought in all my wildest dreams would take off like they did. But I cannot keep up with that. We cannot do the bottled spirits at the same time.”
The process of transferring licenses has been delayed by the partial government shutdown, but the two sides hope to complete the changeover by the summer. In the meantime, the brewers at Buoy will focus on making good beer, while Cary will have the freedom to focus on making good spirits, Kroening said.
“Everybody’s focusing on what their passions are and what they’re great at,” he said.