Startup Distills a Partnership Down to Success
Tuthilltown's Ralph Erenzo (left) and Brian Lee.
Ralph Erenzo and Brian Lee say they're so different it’s not likely you’d find them at the same cocktail party. And even if they were there, you probably wouldn’t find them hovering around the bar: They're not big drinkers. But it was alcohol that brought this unlikely duo together in what they describe as an arranged entrepreneurial marriage that has blossomed into an enduring family affair.
Their company, Tuthilltown Spirits, produces a line of hand-crafted, award-winning vodkas and whiskeys at a small batch whiskey distillery in New York’s scenic Hudson Valley. One of their products, Hudson Baby Bourbon, is the first bourbon distilled in New York.
Their story began in 2001 when Erenzo, a self-described serial entrepreneur who had run his own production company in Manhattan for 35 years, bought a parcel of land two hours north of New York City that included the 227-year-old Tuthilltown Gristmill. He met Lee shortly after when he put part of the property up for sale, including the mill, and Lee, an electrical engineer who had just completed an M.B.A. at Columbia University and was looking for a new challenge, took a look at Erenzo's property with the notion of trying his hand at flour milling.
Erenzo countered with the suggestion that they take advantage of their location in the heart of New York's corn and apple country and set up a distillery.
No manual for this
There was a meeting of the minds. Erenzo kicked in the property. Lee took out a second mortgage to finance the enterprise and the two set out to learn how to make whiskey. Serendipity played a key role in getting their project off the ground. The state had recently created a new distilling license for small-batch operations that cost only a fraction of the $50,000 license that large operations need.
Erenzo was attracted by the intellectual challenge and Lee was attracted by the ancient technology that is still at the core of the distilling process. They were on the way. But there were rough patches to come.
At first, Erenzo told BusinessNewsDaily, it was a real struggle. "We're very different people," he said. "Yin and Yang." Erenzo likens it to being married at the end of a shotgun that's being held by mortgages, liquor licenses and the State of New York.
"It was like an arranged marriage," Lee said. "It's taken us a long time to work it out. Part of it is trying to divide the world. It's a push-me, pull-me relationship," he said.
It was a learning process. "There was no manual," Erenzo said. "There's not much research on whiskey."The only people who knew much about distilling were the large producers. They'd offer to teach you, he said, "but they would be teaching us how to make their whiskey. We wanted to make our own whiskey."
Starting from scratch
Erenzo and Lee cobbled together the equipment to make a functioning distillery, salvaging and repurposing old equipment. And they learned by trial and error how to make high-quality whiskey and other spirits. There were batches that didn't pan out and had to be thrown away.
"We started from scratch and taught ourselves from scratch," Erenzo said. "The only thing we didn't do was drill the well."
In the process, they also developed an effective modus operandi. "We've come to know each other," Erenzo said. And they developed an overarching rule of thumb. "If we can't convince each other of an idea, we don't do it," Erenzo said. "That has served us very well. You follow what you think is the right thing to do. It's a checks and balance kind of thing."
Early on, they staked out their roles. Lee heads production; Erenzo peddles product.
“Ralph’s a natural marketer,” said Lee. “He’s cut out of that cloth.” The Tuthilltown staff now numbers 10, including Ralph’s son, Gable, and Gable’s wife, Cathy.
Their first products reached market in 2006, a corn whiskey made from local corn and a vodka made from local apples. Where possible, all products are made from local ingredients. It's a business decision as much as a philosophical one. "It saves us a pile of money to source close to the distillery," said Erenzo.
Their timing was good. In addition to the lowered cost of entry into the distillery market with the new license, Tuthilltown also benefited from being close to the trend-conscious New York market and the rising interest in the foodie and locavore movements.
Maturing to acquisition
This year, their company was acquired by William Grant & Sons, a large family-owned company whose brands include Glennfiddich Scotch. The cash infusion was welcome. The process of building TuthillTown Sprits into a successful company put a financial strain and the Erenzo and Lea families. "It's only since June that we've been collecting real salaries," Erenzo said.
Both Erenzo and Lee feel a great sense of pride in what they've accomplished.
"We stuck to our guns and did it ourselves and built a world-class brand in six years," Erenzo said. "It was a proof-of-concept that for two smart guys nothing is impossible."
And how's that shotgun marriage working out? As in any healthy marriages, Erenzo said, there can be conflict and differences of opinion. But when disputes do rise up, he tells Lee: "We're married. And it's a Catholic marriage. You can't leave."
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