Micro-distillery marks a successful friendship

John Cooper, with business partner Herman Mihalich , pours a shot of whiskey. They produce their own Dad's Hat rye at Grundy Mill Distillery in Bristol, reviving a proud Pennsylvania tradition.
John Cooper, with business partner Herman Mihalich , pours a shot of whiskey. They produce their own Dad's Hat rye at Grundy Mill Distillery in Bristol, reviving a proud Pennsylvania tradition. (DAVID SWANSON / Staff Photographer)
Posted: August 12, 2013

Their bond was formed 35 years ago in a fraternity house on the University of Pennsylvania campus, where the Phi Sigma Kappa creed pledges a brotherhood committed to "faith and purpose."

Today, Herman Mihalich and John Cooper's purpose is to deliver a quality stiff drink.

As novice craft distillers of Dad's Hat rye whiskey, they are also reviving a lost art in Pennsylvania, a state heralded on their company's keystone-shaped bottle label as the birthplace of the brown liquid that lost a devoted following during Prohibition.

"The good news is there's a huge resurgence in classic cocktails and whiskey drinking," Cooper said.

Following that trend, or perhaps feeding it, is another burgeoning movement - the start-up of artisan distilleries such as Mihalich and Cooper's, which does business as Grundy Mill Distillery in Bristol.

In New Jersey last week, Gov. Christie signed legislation that creates a craft-distillery license, which allows the production of up to 20,000 gallons of distilled liquor annually. In Pennsylvania, there are nine such "limited distilleries," with annual production caps of 100,000 gallons.

Nationwide, the American Distilling Institute counts 565 craft distillers, up from 69 when the trade association was founded in Hayward, Calif., in 2003 by former brew pub operator Bill Owens. Of the total, 303 are making whiskey, 154 gin, 138 rum, 129 brandy, and 90 bourbon, Owens said.

"Rye is super hot," Owens said, before attributing the reasons for the overall craft distilling boom: "[The] general renaissance in American culture. We're going back to basics. It started with wine, beer, coffee. The same thing is happening with spirits. People want to buy local.

"Think of the carbon footprint of importing scotch. It's time for this to come back home."

Operating a sustainable business was indeed part of Mihalich and Cooper's objective - in addition to producing a whiskey for which consumers would pay $38.99 for a 750-milliliter bottle. (They also offer a white rye for $28.99 and a just-released whiskey finished in vermouth barrels for $43.99.)

Their rye is grown in Lancaster and Bucks Counties, the labels come from within the same renovated mill complex where Dad's Hat is produced, and the bottles are custom made by Anchor Hocking in Monaca, Beaver County.

"We wanted American-made," Mihalich said. "Pennsylvania-made was just a home run."

Cooper, 57, of Berwyn, was an economics major at Penn and has held several executive positions in sales and information technology. Mihalich, 55, of Solebury, is a chemical engineer whose resume includes high-level jobs in pharmaceuticals and flavor and fragrance in the United States and abroad.

How their friendship, brewed in a frat house where beer was the drink of choice, led to a later-in-life whiskey-distilling business venture began with a 2006 New York Times article, they said. The gist of it was that rye whiskey was going to make a comeback, Mihalich said.

That got them thinking that "maybe we can bring the rye whiskey business back to Pennsylvania," where, for instance, Old Overholt started in 1810 - and is now produced in Kentucky.

Mihalich and Cooper wrote a business plan and tested recipes, different barrel sizes, and aging strategies at Michigan State University, which has a small distillery as part of its engineering department. Then they raised $1 million from 18 investors - most of them friends, family, former business associates, and fraternity brothers.

They settled on using 15-gallon charred American white oak barrels rather than large versions in order to achieve finished product faster. Their batches are typically a blend of barrels aged from six to nine months. Cooper and Mihalich are currently testing whiskey in 53-gallon barrels, where minimum aging will be 24 months, they said.

Their first consumer-ready batch of 90-proof whiskey was bottled in September 2011, and Dad's Hat made its debut in Pennsylvania State Stores in July 2012. It is now sold in 12 states, including New Jersey and Delaware. The company, now selling 2,000 bottles a month, reached profitability in the second quarter of this year, its founders said.

While Grundy Mill consists of just the two of them - with enthusiastic assists from investors, friends, and family on bottling days - Mihalich and Cooper said they hope to add employees by the end of the year.

Owens, of the American Distilling Institute, said a typical craft distillery creates seven jobs - three employees and the rest working for outside companies and farmers.

Among those toasting Dad's Hat's progress is Nevada Mease. His Meadow Brook Farms in Riegelsville, which mainly grows hay and straw for horse farms, is now providing rye grain for Dad's Hat.

"It's really nice to have a local market and someone you can work face-to-face with," said Mease, 34, who has farmed for 14 years. "Any type of new market kind of excites me."

For Anchor Hocking, craft spirits "is the niche product that we are going after," said Patrick Groves, director of marketing for its special markets division. "The liquor market, especially the craft market, is growing leaps and bounds."

What thrills Cooper - besides having a name so apropos to a business reliant on barrels - is "when you walk into a bar or restaurant and see your bottle."

For Mihalich, he gets to carry on the family business in a way. He grew up above Mihalich's bar in Monessen, just outside Pittsburgh, which closed in the 1970s and where Mihalich's father and grandfather were rye whiskey drinkers.

He often wears his dad's hats.

Contact Diane Mastrull at 215-854-2466, dmastrull@phillynews.com or @dmastrull on Twitter.

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