In 2017, the Chehalis Tribe, comprised of around 900 members living on just over 11 square miles of reservation in southwest Washington, decided to construct a community-owned restaurant, brewery and distillery. There was just one problem: distilling on tribal lands was illegal.
After a successful fight to overturn the 184-year-old federal law, the tribe opened Talking Cedar in 2020, the country’s first distillery on tribal land. It’s also the charter distillery of the Tribal Beverage Network, an initiative led by Heritage Distilling Co that aims to provide tribes a quick runway into the spirits market. Through the network, the founders of Heritage Distilling are sharing the model for their distillery, and building out a web of tribal-owned facilities. Heritage Distilling has signed deals with tribes across the Pacific Northwest and Midwest, and is targeting at least 35 locations in operational or buildout phase by 2025.
The Repeal
For nearly 200 years tribes have been shut out of the spirits industry. Now, just as the industry is hitting a growth cycle, many are eager to catch up.
The right to distill liquor was controlled under a series of laws that guided how the federal government interacted with tribes and sovereign governments of indigenous peoples — an amendment in 1834 specifically limited or eliminated the production, sale and trade of spirits by tribal governments both on and off reservation lands. The law was signed by President Andrew Jackson not long after the passing of the Indian Removal Act of 1830, which forcibly displaced more than 60,000 Indigenous people from their ancestral lands.
In 1953 the law was amended to allow sales of alcohol on tribal land, but spirits production was still prohibited. All that changed in 2018 when Congress repealed the 1834 Indian Trade And Intercourse Act. Led by the Chehalis Tribe, a coalition of tribes across the country lobbied to gain the right for all 574 federally recognized Native American tribes to distill liquor on their lands.
Unlocking the commercial spirits industry represents a potentially bountiful revenue channel for tribes, somewhat similar to the impact of gambling legalization in the late 1980s. Because tribes already operate their own casinos, hotels, golf courses, arenas, resorts and retail spaces that sell adult beverages, this is the next logical extension of a tribe’s development, said Justin Stiefel, co-founder and chief executive officer of Heritage Distilling Co.
“Spirits production and sales is the next major source of financial growth and local tax capture in this newly legal industry for tribes,” he said.
At a very slow pace, Native-owned distilleries are now getting into the spirits business. Wisconsin-based Copper Crow, the first Native-owned distillery in the country, made headlines last year for taking advantage of its dairy-state home by producing one of the few whey-based gins and vodkas in addition to their rum and wheat-based vodka. Elsewhere, the Paskenta Brewery & Distillery became the first tribal-owned distillery in California last year.
But launching a distillery is a complicated process, which is where the founders of Heritage Distilling see an opportunity.
The Model
Founded a decade ago, Heritage Distilling is now one of the largest independent craft distilleries on the West Coast. The company has six tasting rooms in Washington and Oregon, offering whiskey, vodka, gin, rum aquavit, and a line of canned cocktails. The company announced plans in December 2022 to merge with Better World Acquisition, a special purpose acquisition company (SPAC), to go public in a transaction that has a pro forma enterprise value of over $122 million.
Justin and Jennifer Stiefel, Heritage’s husband and wife team of co-founders, lobbied in collaboration with the Chehalis tribe to overturn the distillation ban. Prior to launching Heritage Distilling, Justin Stiefel worked for 13 years in the U.S. Senate with two senators from Alaska (a state that has 274 tribes), through which he focused on several tax and economic development issues for tribes.
“I learned firsthand the needs and economic power that tribes have if they are willing to take risks and venture into new arenas of economic development,” he said.
The Tribal Beverage Network was developed out of the legal collaboration with the Chehalis tribe. The tribe provided startup capital for the distillery, which has access to the Heritage’s brand, intellectual property, and industry knowledge through a licensing agreement. In addition, that facility can also produce white-label products or nearly-finished products to other tribes on the West Coast. Heritage Distilling provides marketing support, as well as help with compliance, sourcing, quality control and a variety of other backend services. Starting from that basic model, the growing network creates custom agreements depending on each tribe’s needs.
The Tribal Beverage Network is also part of Heritage Distilling’s growth strategy, as the company plans to use the new distilleries as leverage for distribution in new regions. Typically tribes earn wholesale and retail margin as well as tax capture, and many have a product funnel on site at casinos, hotels, resorts, c-stores, golf courses and other entertainment venues.
“The first and most important thing is to listen,” Stiefel said. “We love to visit with the tribes at their invitation – see their properties, learn about their heritage and understand what is motivating them to want to explore distilling as a new economic opportunity.”
There are numerous visits, tours, and vetting sessions to develop mutual trust.
“We take this very seriously because they are sovereign nations, and they each operate on their own timelines,” Stiefel said.
Once a tribe chooses to engage, there’s a four-phase process to evaluate opportunities, build economic models, create drawings and renderings, and eventually get to construction and pre-opening activities, said Stiefel. Unlike distilleries on non-reservations, there are particular stakeholders: the process works to balance the needs of the Tribal government, the economic enterprise divisions, and their entertainment properties. There was very little pushback from the Chehalis tribe community, according to Greg Burnett, a member of the tribe and director of operations.
“People were pretty, eager to see the development happen,” Burnett said. “They know that it means jobs, they know that it means an economic driver in the region.”
A Hub and Spoke Network Begins
Heritage Distilling has now signed agreements in various phases of development for nine new tribal locations with tribes in Washington, Oregon, Idaho, and Oklahoma. Stiefel is fielding inquiries weekly, and in negotiations with tribes across the country, he said.
At the $25 million Talking Cedar craft brewery, distillery, and restaurant, the network is starting to fuel production. After enduring several supply chain delays at the start of the pandemic, the distillery turned out test batches of gin and vodka last year. It also started a couple hundred barrel contracts for whiskey, with the goal of producing 4,000 barrels by the end of this year for themselves, Heritage Distilling, and other tribal distilleries. By the time other distilleries in the network have set up their facilities, they’ll ideally have Talking Cedar’s whiskey aged, branded and bottled ready to sell. The distillery has been built out as the largest west of the Mississippi, according to the tribe, and has the capacity to produce 10,000 barrels of whiskey per year and nearly 1.5 million gallons of other spirits.
The brewery at the 35,000-square-foot complex is also home to Stillwater Brewing. Testing for Stillwater began last summer, and the brewery expects to produce 5,000 to 6,000 barrels of beer this year, with about 75% going to Stillwater. Talking Cedar’s own beers are distributed in Washington through Northwest Beverage Group and Odom, and can be found at major chains in the state.
Unlike spirit distillation, beer and wine production was not previously outlawed on tribal land. Other tribal-owned breweries have sprung up in recent years, but Talking Cedar is the largest in terms of volume, according to the tribe. Still, the Tribal Beverage Network will primarily focus on spirits, based on the industry’s growth over malt-based products and the relative ease transporting spirit products in bulk across state lines.
But with both spirits and beer, the new ventures present opportunities to buy grains and other source materials locally. Other tribes have also approached Stiefel about sourcing from tribal member’s farms for a potential distillery. The Chehalis valley was once a hotbed for hops production, and using some tribal land for hops cultivation may become an outgrowth of the alcohol operation.
“But I need to get good at what I set out to do before I start to do anything else,” Burnett said. “We won’t be doing that until we start hitting some production benchmarks.”
Working with local tribal farmers may also be a way to differentiate tribal-produced beers or spirits. Other Native-owned distilleries, like Paskenta Brewery & Distillery, are experimenting with traditional ingredients like acorns that were used by the tribe’s ancestors. But aside from sourcing, Burnett is hesitant to lean on other aspects of the tribe’s cultural or culinary traditions.
“I don’t believe it’s any one tribal member’s place to capitalize on the sacred nature of cultural heritage,” he said.