A decade ago, there were five licensed distilleries in Colorado. That number is now closer to 100.

That's a lot of new bottles fighting for shelf space, says Andrew Burton, spirits buyer at Argonaut Wine & Liquor in Denver.

Burton says Argonaut carries about 200 different products from Colorado distilleries. "It's grown quite a bit the last five years," says Burton. "We would estimate total spirit sales to be about 10 percent Colorado craft."

But it's not black and white. "Putting anything on paper for 'craft' is very difficult as the word craft in and of itself is ill-defined with no legal definition," explains Burton. Stranahan's Colorado Whiskey is owned by Proximo, a multinational corporation, but distills all of its whiskey in Denver. Others blend Colorado-distilled spirits or Colorado water with product that's made elsewhere. "It's a pretty blurry line anymore and the definition is different depending on who you talk to."

P.T. Wood, co-founder of Wood's High Mountain Distillery and president of the Colorado Distillers Guild, calls the precise number of craft distilleries in Colorado "a bit of a moving target" and notes that about 70 are currently active. "The big jump has been in the last few years," he says. "In the last four years, it's quadrupled."

He's embarking on a second year-long term at the helm of the guild to finish some work in progress as well as legislative "wrangling." The guild represents a little more than half of the active distilleries. "I'd like to set it closer to 90 percent," says Wood.

The growth in the number of distilleries far outpaces the increase in overall volume. "The overall category of spirits is growing, although at a slow rate," says Wood. "Higher-end spirits is growing really fast." According to the Distilled Spirits Council of the United States (DISCUS), growth in "super-premium" bottles priced over $30 retail is outpacing less expensive categories. "A lot of that is driven by small distilleries," notes Wood.

The American Craft Spirits Association's October 2016 Craft Spirits Data Project found 1,315 craft distilleries sold $2.4 billion worth of product in 2015. In 2015, craft spirits made up 2.2 percent of volume and 3 percent of value in the U.S., more than doubling since 2010 with an annual growth rate north of 25 percent.

The study pegged Colorado as home to 72 distilleries, fourth-most in the U.S. after California (118), New York (104), and Washington (103), and just ahead of Texas (71). That puts Colorado at or near the top of all states in terms of craft distilleries per capita.

"I suspect it will continue to grow," says Wood. "The industry can reach 10 to 11 percent market share nationally within the next five or six years. The upside is significant, but the challenges are also significant."

He says Colorado laws allowing for on-site tasting rooms has been key to growth. "That does drive cash flow and distilling is a cash-flow-intensive business."

But like many Colorado industries, we might see a bust after the boom. "It's becoming a crowded space," says Wood. "There are a lot of opportunities for distillery pubs, which is a new license category. . . . In a crowded space, that's a fairly attractive business model, particularly in denser urban areas and tourist towns."

Comparisons to craft brewing "is an analogy that gets made, and there are some similarities growth-wise, but it's actually a different beast." Wood highlights less shelf space available to spirits and a higher entry-level price point as the major differences.

Age matters

Are craft spirits sales growing at Argonaut? "For now, yeah," says Burton, estimating an annual uptick of a percentage point or two for Colorado craft spirits in 2016.

But it varies from category to category, he adds. Whiskey is booming in general, spurred in part by craft distillers. "Whiskey is an odd one. When it's popular, aged inventories go down. Even the big guys are struggling. Keeping certain labels on the shelf is difficult."

Because upstart craft distilleries haven't been around for long, most of their whiskeys "are fairly young," he adds. "They have to turn them around and pay off investors."

Denver's Laws Whiskey House is an outlier. "They don't hurry anything," says Burton.

Patience pays off. When Laws delivered Argonaut's first order of a couple cases in 2014, "I had that sold within an hour," says Burton. "What do we need to do to stay in stock?" Now Argonaut buys entire barrels of Laws' whiskeys. "They bring us some samples and we pick a barrel."

Alan Laws, Laws Whiskey House's namesake founder and owner, started distilling in 2011, but he didn't bottle his first whiskey until 2014. "For us, it just takes a lot of time," he says. Laws firmly believes 34 months is the minimum amount of time whiskey should spend in a barrel.

Not only does aging take time, but moving the barrels into a new racking facility in order to expand production has been a slow process as well. Laws bought a nearby building in mid-2015 and is still waiting final approval from city officials to move his ever-growing stock of barrels.

Regardless, sales grew at about a 20 percent clip in 2016. "We're closing in on 700 accounts," says Laws. The staff has grown to 19 employees, including an internal sales force of five.

Production hit 1,600 barrels in 2016. "We'd like to get to 10,000 barrels over the next 10 years," says Laws. He's hoping to ride the wave of dynamic growth in premium spirits: A 750-milliliter bottle of bourbon or rye is about $65; specialty releases are usually $75 or more. "It's not an inexpensive bottle," he notes.

Currently, Laws sells about 90 percent of his bottles to accounts in Colorado. He hopes to grow out-of-state business to about 25 percent of total sales and anticipates distribution in 15 states, plus Canada and New Zealand, by the end of 2017.

The Colorado market is the distillery's "heart," says Laws. "Our home state isn't going to go without." But there's a catch: "There's a limit to how much of this we can sell in state. If you want to grow, you need to go out of state. With a one-year whiskey, good fucking luck."

"It all comes back to what's in the bottle. People are going to figure it out. Especially in this state, people are going to figure it out. If it's not extraordinary, it's going to be challenging."

To this end, the distillery released a pair of four-year whiskeys in 2016, Bottled in Bond Bourbon and Bottled in Bond Rye. Five-year whiskeys will come out in 2017, as well as a corn whiskey. "It's over four years old already," Laws says of the latter. Don't expect a one- or two-year whiskey from Laws -- ever. "We're not going to do that," Laws says adamantly. "We're not just putting it out. We're raising our quality. We're going to raise the bar every year."

And that's a huge point of distinction. "Age matters," Laws says "There's a material step up with the quality, the richness of the whiskey.

Another differentiator: All of the distillery's grain is now sourced from Colorado farms. "We're buying local because it tastes better and it's distinctive. It's local terroir."

Outside state lines, however, being local is not part of the equation. "We gotta be a lot better to make a splash," says Laws. "If we get the shelf space, we want to keep the shelf space."

There's an increasingly fierce battle for it. New distilleries continue to launch in 2017, and many established distilleries are moving from aging whiskey to bottling it.

Ambitious launches

While distilling is capital-intensive, Old Elk Distilleries in Fort Collins has deeper pockets than most of its startup peers.

The distillery from OtterBox founder Curt Richardson released its first bottles of Dry Town gin and vodka, named for Fort Collins booze ban from the 1890s to the 1960s, in late 2016. "We're aging our bourbons now," says GM Bill Lovell. "We should launch them in the spring."

Lovell's background managing global supply chains for StorageTek and Otterbox translate nicely into craft distilling. "Spirits are really fun," he says. "A lot to learn."

Is there still space in the market for new distillers? Lovell is bullish. "There is increasing demand. The craft market is growing 7 to 10 percent a year.

Craft beer helped pave the way, he adds. "It's not just a Colorado phenomenon, but Colorado is really benefiting from the craft beer industry," says Lovell. "I think it's going to follow the craft beer industry fairly closely. I don't see a bust in the future. It's going to be competitive."

What's the Dry Town differentiator? "We spent a lot of time and money to make sure our spirits are high-quality," says Lovell. "We invested significantly into our product. It takes money to do it well." He says the goal was "martini-worthy" vodka and gin. The four-grain vodka is notably smooth, says Lovell, noting that his crew made 75 batches of gin before settling on a recipe with fresh Colorado sage.

Moving forward, Old Elk's business plan includes a big investment in a tasting room. After passing on renovating the historic mill in Windsor, Lovell and Richardson are eying a location in Fort Collins. "It's really about how fast our brands are accepted by consumers and how fast we grow," says Lovell, describing a vision for multi-state distribution after an initial focus on Colorado.

Marble Distilling Company in Carbondale is another recent launch. Co-founder and Head Distiller Connie Baker had a pharmaceutical marketing business before starting Marble Distilling in 2010. "We always joke we went from drugs to booze," she laughs.

After studying distilling at Spokane, Washington-based Dry Fly Distilling's in-house school, she spent about five years researching the industry and developing recipes before launching the brand. Baker and her co-founders built a distillery with a five-room boutique lodging in Carbondale that opened in May 2015.

"It's been a crazy ride since then," says Baker. "We joke that we have a toddler -- a toddler that requires a lot of attention."

After launching with vodka, gingercello, and coffee liqueur, Marble Distilling will release its first whiskeys by spring 2017.

Sustainability is an emphasis: Many ingredients are grown at farms located within a mile of the distillery and the water system is cutting-edge. "We recycle 100 percent of out water to heat the building," says Baker. "We save more than 4 million gallons annually and capture more than 1.8 million BTUs."

"My husband's a big green guy, so we couldn't go into the business without doing something green,” says Baker. "We coined the term, 'Drink sustainably.'"

Along with the lodging, it's proven to be a differentiator, she adds, and that's increasingly key to success. "When I first started looking at it in 2010, there weren't as many craft distilleries as there are today," says Baker. "Now you have to be craft and you have to be quality."

Baker says she still sees "a lot of room for growth," but remaining true to the key tenets of craft are important. "Sourcing locally is a big movement in that direction. Some of the less concerned distilleries may fall out of the marketplace."

After signing with Breakthru Beverage Group in mid-2016, Marble Distilling's forecast for 2017 is 4,000 cases, double its 2016 production. Distribution is exclusively in Colorado, but Baker is aiming to move into other "craft-conscious markets” like Marin County, California, and Philadelphia next.

She says craft spirits are paralleling the growth curve of craft beer 20 years ago, but there are a few notable differences. "Budweiser and Coors were caught off guard by the craft brewing market," says Baker. "They didn't see it coming. In the craft distilling world, it's completely different."

Case in point: The major distilleries are buying craft producers and mounting savvy marketing campaigns to buffer any losses. "They're buying a lot of little distilleries to stock their portfolios with something that looks crafty," says Baker, noting that almost all of the spirits on a given liquor store's shelves are brands owned by the big players. "The true craft is on a tiny little 'Made in Colorado’ shelf on the left."

A saturation point

Amidst the steady growth, Al Laws is plotting his next move. "We're going to get some equity in this year," he says. Once he moves his barrels into the new facility, he's in the market for about $2 million in outside investment to boost production.

Laws says he's not interested in an exit, just smart money. "I can get money, but money doesn't help me without some sort of other expertise," says Laws. "I don't have any partners. I don't have any investors right now. I didn't do this to turn around and sell it."

"We're running at 55 to 65 percent of capacity because we have no place to put the barrels," he says. He says he'll have the space to quadruple distilling output once the barrels are out of the way.

He likens it to the battlefield: "War is done through logistics and you have to put things in place."

"We can take on Kentucky," touts Laws. "Colorado led beer, and I think Colorado can lead spirits. . . . Your customer is educated, and, if they're not, they're open to being educated, and they're discerning. It's a great place to cut your teeth."

Craft distilling is also a political winner, he adds. "We create more jobs and we create more community revenue. That's the message of that study [the American Craft Spirits Association's Craft Spirits Data Project]. We create jobs and, if you give us tax breaks, it's going to create even more jobs."

He notes that South Acoma Street in Denver and Englewood might well be the distillery-densest drag in the state: Laws is a half-mile north of Bear Creek Distillery and about three miles north of Devil's Head Distillery. "There are three distilleries on a three-mile stretch," he says.

But how many distilleries is too many? Notes Argonaut's Burton: "We're not far from a saturation point. How many vodkas do you need? The herd will probably thin itself out."

Craft distilleries need some sort of differentiator. Burton points to Marble's gingercello as an example. "It's easier to find yourself on a shelf," he says, and notes that he always asks new distilleries what makes them stand out from the crowd.

"A lot of them are offended by the question. They say, 'This is good. This is better.' That doesn't really count anymore." In 2017, says Burton, distilleries have to bring more to the table. "Good products disappear all the time."