Cleveland Whiskey has become known for its award-winning spirits that include varieties finished with woods like black cherry, maple and apple.
Those wood flavors and essences are imbued into its products through a proprietary pressure-aging method invented by Lix, which forces whiskey through wood pieces. This approach replicates the static barrel-aging method that gives whiskey its characteristic tastes and colors in a fraction of the time.
This is how Cleveland Whiskey can finish its products with woods other than oak, which is what barrels are most commonly made from. There are also other flavors in the product portfolio, like its Magic Rabbit peanut butter-flavored product.
Meanwhile, to tap into a new overseas market, Lix has formed a joint venture with a startup in Delhi, India, called Ella Spirits and Beverages, which will serve as Cleveland Whiskey’s “branch” there. Lix’s company owns 49% of Ella.
The goal of this partnership is to produce and ship Cleveland Whiskey flavor extracts overseas to Ella, which will, in turn, combine them with locally made neutral grain spirits to produce what is known as “foreign-made local liquor.”
This approach gives the distillery significant savings in shipping costs compared to sending over filled bottles.
It also minimizes the impact of Indian tariffs on American whiskey imports because the finished product is created in that market.
“Because we ship the extract and less alcohol, which is what is taxed, the buyer in India saves a considerable amount, and that makes for a competitive product,” Lix said.
This is a big development for the small business, which had to pull back from its initial foray into international sales due to reciprocal tariffs imposed in 2018 during President Donald Trump’s first term. Those taxes forced Lix to back out of the European market, destroying a small but budding international market for him at the time.
With this plan to sell into India, Lix said overseas sales could compose about 20% of his business by the end of next year. And in the “years that follow, I expect that will be a multimillion-dollar component of our business,” Lix said.
This is all the more important to Cleveland Whiskey as alcohol manufacturers grapple with declining sales, changing consumer habits — according to a recent Gallup poll, just 54% of U.S. adults say they consume alcohol, the lowest level in the 90 years it’s been tracking the stat — and tariffs.
Further complicating the landscape for producers of alcoholic beverages is the federal government shutdown.
As reported by Bloomberg, the U.S. Treasury’s Alcohol and Tobacco Tax and Trade Bureau is operating with a significantly diminished staff after furloughing more than 86% of its employees. That agency approves new products, recipes and labels.
Amid the shutdown, those approvals aren’t being made.
As a result, Cleveland Whiskey is delaying first runs of a new, creamy version of its Magic Rabbit product, which drinkers might use to perk up milkshakes and sundaes.
But that’s just one example. Overall, Lix said the release of nine new whiskeys is on hold, a delay that will likely cost the company hundreds of thousands of dollars in lost sales.
“That’s significant to our business, that’s the difference between hiring and not hiring people,” Lix told Bloomberg. “I can’t print labels, and I can’t bottle product until I have approvals.”
In SEC filings, Cleveland Whiskey reported a $2.19 million loss for its most recent fiscal year on sales of approximately $2.57 million.
In terms of the financials, Lix has noted that loss follows a year when the company relocated operations, which was a significant expense.
