Liquor titan Phillips Distilling aims top shelf with organic vodka

Spirits from the past: Dean Phillips
Darin Back

If you recognize the name Phillips Distilling, it's probably because you've seen its dusty bottles of schnapps lining the lower shelves of local liquor stores, or its workhorse gins and bourbons that typically rest somewhere below eye level. And if you've ever burned your throat on a basic Phillips 80-proof vodka—a substance that smells like rubbing alcohol and comes in a plastic bottle—you'll probably be as surprised as I was to find the company's newest offering, Prairie Organic Vodka, perched on the top shelf, next to the Grey Goose and Ketel One.

Minnesota-based Phillips has long been a utilitarian brand, more likely to be found in grandpa's tackle box than in any trendy nightclub. The family-owned company has been around for nearly 100 years, first as a wholesaler of magazines, newspapers, and candy, and after Prohibition as a distributor of spirits. In 1935, when a Phillips salesman got the idea to make peppermint schnapps (he had noticed saloon customers dropping peppermint candies into their glasses to soothe harsh-tasting whiskey), founder Ed Phillips got into the business of distilling, and created what's thought to be the first American schnapps brand. Since then, Phillips has produced all sorts of spirits, importing everything from Mexican tequila to Caribbean rum, then blending, aging, and bottling the spirits in Princeton, Minnesota, without attracting too much notice. But with Ed's 39-year-old great-great-grandson, Dean, at the company's helm since 2001, Phillips products are starting to gather a larger national presence, showing up on the pages of glossy magazines and at the Cannes Film Festival—being glugged straight from the bottle by bad-boy Kid Rock.

Dean Phillips has a more casual demeanor than a typical CEO: His hair is long enough to cover his ears and, today, he's wearing his dress shirt untucked. He repeatedly emphasizes fun and philanthropy when talking about the spirits business, and he says he personally responds to every email inquiry sent to the Prairie Organic website, sometimes while lounging in bed with a laptop. With his affable yet thoughtful personality, he seems like the sort of person who is frequently solicited for advice. (In fact, when he was younger, Dean's grandmother, Pauline Phillips, original author of the Dear Abby column [and better known by her pen-name, Abigail Van Buren], used to ask for his thoughts on how to respond to letters from other teenagers.)

Sitting in his Minneapolis office, Dean opens up a 60-some-year-old price book and scans the typed list of spirits in Phillips's portfolio—gin, rum, schnapps—and notes that there's no vodka. A spirit that's now the world's best-selling, which accounts for nearly a third of the industry's sales volume, was virtually unheard of in the U.S. back then. Dean says the book reminds him how the liquor business can be as fickle as fashion, and that, for a small company like Phillips, innovation is everything.

Dean walks me through a little room that looks like a work station in a high school chemistry lab, except for its archive of Phillips liquor bottles. There's everything from Sno Shoe Grog, a mix of brandy and peppermint schnapps, to Rock and Rye, which is made with rye whiskey and rock candy. Absolut and Stoli may take credit for the flavored vodka craze that launched in the 1980s, but judging from the aging bottle of Minty Vodka, Phillips was there decades before. Dean pulls down a bottle of Ginka, which is decorated with Jetsons-era futuristic graphics. It's described on the label as "a happy mix of gin and vodka," and Dean explains it as "vodka with training wheels" from the days when gin was more popular than vodka. Dean jokes that perhaps they should reintroduce it—maybe this time as Vodin?—to reacquaint vodka drinkers with gin.

The lab's counters are stacked with canisters of beet and cane sugar and bottles of natural flavoring, including acai, lychee, and clementine. Dean says the company doesn't conduct full-blown consumer research for new products, and assesses samples mostly within the office. He lets me taste the finalists for a new butterscotch schnapps, and I sip each glass like Goldilocks—the first is too harsh, the next too floral, the third too flat, but the fourth is as creamy and sweet as a liquid Werther's. While Phillips's annual retail sales are dwarfed by the tens of billions raked in by the industry leader, Diageo, which owns brands like Smirnoff, Johnnie Walker, and Guinness, Dean says his company's nimble size allows his team to jump on new ideas quickly. They can take an idea to market in as little as 13 weeks.

Today, Phillips makes about 70 products, and in recent years the company has launched several innovative brands with the help of the hip local ad shop Olson & Company. One of those products is Union Whiskey, a bourbon-whiskey blend available with hints of cherry or vanilla, which is intended to expand the market beyond the stereotypical whiskey drinker, or, as Dean says, "old white bald guys." Phillips's most successful new launch has been its line of UV flavored vodkas, candy-colored spirits marketed toward a group Dean calls "the Facebook generation." (In fact, he notes, UV fans created a MySpace page for the brand.) With liter-size bottles priced just over $10, UV has the same cheap chic image as Target or Ikea, which has helped make its probably-too-drinkable blue raspberry version (which is commonly mixed with lemonade or lemon-lime soda) the best-selling flavored vodka in seven states.

Prairie Organic may not be as flashy a concept as the other new brands, but its production values make it truly revolutionary. To understand why, you have to realize that almost all American-made vodka comes from the same place: neutral spirits distilled by large Midwestern grain processors such as Archer Daniels Midland. Those neutral sprits, which are nearly pure alcohol, are shipped by tanker truck to producers that filter them, dilute them with water and other ingredients, and bottle them.

By contrast, Prairie's neutral spirit base comes from the nearly 1,000-member farmer cooperative that owns the Chippewa Valley Ethanol Company in Benson, Minnesota, the one that also makes Shakers vodka. Dean says that when Shakers debuted in 2003 he thought the idea of Minnesota-made vodka was so good he was a little jealous: "That should have been us," he says. While Shakers launched with a bang, local liquor retailers say the brand has struggled somewhat in recent years, so when Dean approached Chippewa about producing Prairie, they were eager to form a partnership.

As far as its managers know, the Chippewa distillery is the only beverage alcohol co-op distillery of its type, and one of just two plants in the country certified for organic alcohol production. Most of the farmers live within 50 miles of the plant, so organic grain makes a short hop to the distillery, then to Phillips's bottling facilities in Princeton, then to a Twin Cities liquor store. Doing a little back-of-the-napkin math, I'd estimate that a bottle of, say, Skyy vodka, which is distilled in the Midwest and bottled in San Jose, California, travels about 20 times farther than a bottle of Prairie to get to a customer in Minneapolis. Adding to its environmental ethos, the Benson plant is replacing its natural gas inputs with biomass fuel from corncobs and other agricultural leftovers, and hopes those materials will supply 90 percent of its energy by 2009.

While using organic grain has less of an effect on a distilled spirit's flavor profile or nutritional content than it would in, say, wine or beer, there are other reasons Prairie's organic and kosher certifications are important. For one thing, liquor manufacturers aren't obligated to list their products' ingredients. Think about that: Bottled water requires nutritional labeling, while alcoholic beverages do not. And then you find out that some bottlers of spirits add things like glycerin, and you wonder what else they're not telling you. Also, distilling organic grain into a high-margin product like vodka creates a bigger, more profitable market for chemical-free farming.

But for all its progressive processing and pretty packaging, most Prairie consumers will probably choose it for its taste. I found it just as smooth as other high-end vodkas—including Belvedere, a brand Phillips imported from Poland when ultra-premium vodka was an emerging market—but with a lighter mouthfeel and a slightly sweet flavor. To my mind, it's a spirit that showcases our state's pure water and great grains, capable of converting even a non-vodka drinker to one who sips it neat.

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