Between elevated alcohol consumption during COVID-19 lockdowns and new distilleries popping up across America, the spirits market is booming — and shows no signs of slowing down. Grand View Research foresees a compound annual growth rate of 30.9% for the U.S. craft spirits market between 2020 and 2030. A large part of this increase can be attributed to the widespread global adoption of micro-distilleries — often craft-style facilities far smaller than their commercial counterparts that produce alcohol in small quantities.

While many commercial distilleries are in rural areas, micro-distilleries (and their equipment, barrel warehouses and mash rooms) are often located in repurposed buildings in densely populated urban areas. Now that COVID-related restrictions have been lifted in most countries, tasting rooms — and micro distilleries in general — have renewed traffic. This is a market with much opportunity, and we’re bound to see more and more facilities sprouting up across the country and world. The production of distilled spirits, though, is problematic — and fraught with risk. Property carriers should pay attention.

The spirits production process

It’s important to first grasp the production process to understand the hazards that can arise from it. The first step is grain milling — the separation of grain from foreign objects, crushing it open, and grinding the grain into a suitable consistency — which can be highly combustible in large quantities. This step is followed by malting, then mashing (combining crushed grain with hot water), and fermentation. Once distillers reach the fifth phase of distillation (the process of vaporizing ethanol), ignition is a serious concern due to the flash point — the lowest temperature that ethanol evaporates at, mixes with air and could ignite if exposed to a spark. Spirits are then left to age in oak barrels for at least three years, and during this time some flammable liquids within the barrel evaporate into the air (known as the “Angel’s Share”) creating an explosive atmosphere.

Up until 2021, the distillery industry was largely self-regulated. Fires rarely spread at larger commercial distilleries, and if one started at their typical rural locations, rarely spread beyond. But due to the growing popularity of micro-distilleries and the risks associated with urban settings, the 2021 international fire code (IFC) was updated to include a new chapter (chapter 40) that specifies requirements for the storage of distilled spirits in barrels and casks. One section requires an exhaust ventilation rate, one prohibits combustible materials in bulk beverage storage areas, and another requires automatic sprinkler system protection.

Distillery loss scenarios

There have been several severe distillery loss incidents resulting from the distillation process. In Bardstown, Kentucky, one of a ground’s 42 warehouses (or rickhouses) used to house aging whiskey barrels caught fire. Barrel after barrel of high-proof ethanol exploded with some flames reaching 350 feet high, and six other rickhouses followed. The massive fire consumed 90,000 barrels of whiskey — which at the time, comprised 2% of the world’s whiskey. In another instance, the over-pressurization of a production apparatus at a moonshine distillery exploded, killing one worker and severely injuring another.

At a different Bardstown, KY premises, a decades-old rickhouse undergoing repair experienced a partial collapse involving 9,000 barrels, followed by the rest of the structure two weeks later. And in Frankfort, KY, a fire suspectedly caused by lighting destroyed a massive rickhouse with 45,000 barrels of bourbon, which flowed into a creek and the Kentucky river. Bourbon polluted the water and killed wildlife along a 62-mile stretch.

Risk control and property loss considerations

Much of the dangers could be avoided by mechanical risk control and preventive measures. According to Walker Mechanical, the heart of a distillery is its boiler, and a reliable one needs little maintenance beyond blowing down at the end of the day to clear sediment that may have collected at the bottom. Skipping this step causes facility issues like drain and plumbing damage. Similarly, pipes serve as the arteries of a distillery, and they need to be kept in working condition — age, corrosion and pressure strain can lead to leaks over time. When making grain-based beverage like whiskey or vodka, there needs to be pristine ventilation and air filtration (with a backup manual system) because large amounts of grain dust in the air can be highly explosive.

Losses in distilleries range from fires and explosions to leaks, spills and beyond — caused by perils such as adverse weather, improper equipment instillation or equipment failure. While recovery from these losses is not much different than other commercial facilities, retaining experts fully versed in distillery mitigation is critical to manage/minimize the business interruption.

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