Saturday, Nov. 17, 2012 | 2 a.m.
Since opening the state of Nevada’s first craft distillery in the summer of 2011, George Racz jokes that his business has nearly gone bankrupt 72 1/2 times.
Exaggerations aside, Racz isn’t kidding when he says his entry into the liquor business has been challenging.
Bottles of the Las Vegas Distillery’s vodka and rumskey — a blend of whiskey and rum dreamed up by Racz — made it to the shelves of less than two dozen stores around the valley.
Slow sales have made it difficult for Racz to pay back the $600,000 loan he used to outfit his distillery with stills, fermenters and barrels. He relied on extensions from the bank and his landlord to keep his business afloat.
Hemmed in by state laws that separate manufacturers, wholesalers and retailers in a three-tiered system, Racz was prohibited from selling his product on-site at the distillery and was forced to distribute his liquors through Wirtz Beverage Group, a company that represents dozens of high-profile brands, including Smirnoff, Seagrams and Coors.
“The structure of their business is different and really serves bigger brands,” Racz said. “We were too small for them. For us, if we sell 100 cases, it’s fantastic. For them, 100 cases was a drop in the ocean.”
As the distillery teetered on the edge of bankruptcy in May, Racz’s friend Justin Wallin approached him with a novel idea to save the business — form a new company specifically to distribute Las Vegas Distillery products.
The plan was risky — state law prohibits any company from owning more than one part of the three-tiered system. When Wallin, who also owns Wallin Construction, approached the Nevada Department of Taxation to register the new distribution company, “they tried talking me out of it,” he said.
The two forged ahead, though, and recruited Christian Escobedo to open a retail store next door to the distillery, at 7330 Eastgate Road in Henderson, to sell its liquors.
On Saturday, the three partners will celebrate the grand opening of Half Full, the retail store, and Booze Brothers Beverage, the distributor, with a celebratory event coinciding with the launch of several new distillery spirits, including a whiskey, a rum and a gin.
“We built our own three-tier system. We are not alone anymore,” Racz said of the distillery. “Before, we were a chair with only one leg. Now, we have three legs and a chair you can sit in.”
Wallin said since the distillery is Booze Brothers’ only client, he will be able to focus 100 percent on marketing the brand and increasing its presence on liquor store shelves throughout the valley.
The opening of Half Full means the thousands of visitors who visit the distillery each year will also be able to finally purchase its spirits without having to drive several miles to a liquor store.
“Six thousand people came through here last year,” Wallin said of the distillery, which offers daily tours to the public. “Everybody comes through here and loves it. If the store had been next door, 6,000 people would have gone over and bought something.”
To abide by the three-tiered system, each of the three companies is owned separately and has its own office spaces, even though Booze Brothers makes its home in a 200-square-foot, fenced area in the back of the distillery warehouse.
Visitors to the distillery will be able to bottle their own liquors, which are then walked into the fenced area owned by Booze Brothers. Booze Brothers then takes the liquor and walks it next door to Half Full, where it can be purchased legally.
Racz admits the set-up is a bit convoluted, and he’s working with state legislators to pass a bill allowing craft distilleries to host tastings and sell their products on-site, without going through a distributor.
Even if the bill passes, Racz said he’s committed to making his new partnership with Booze Brothers and Half Full last.
“These people around me saved me. We will stick together now, whatever happens,” Racz said. “We have good products. We’re local and there are a lot of passionate people around it. Maybe we won’t succeed. We will see. But we believe.”