State deals a bitter blow to Chandler couple’s business - SanTan Sun News SanTan Sun News

State deals a bitter blow to Chandler couple’s business

May 10th, 2021 development
State deals a bitter blow to Chandler couple’s business

Executive Editor

The Ducey administration has long touted its “regulation rollback” strategy “to make Arizona the best state in the nation to open a new business or to expand an existing one.”

But the Arizona Department of Liquor Licenses and Control apparently never got the memo.

It clobbered a Chandler couple’s unique business last fall – seven years after it gave them permission to launch their flavor-extract operation.

The department’s change of heart forced Bill and Lillian Buitenhuys to shut down their thriving business, AZ Bitters Lab.

They had turned what started as kitchen experimentation into the only business of its kind in Arizona – one that found a market across the country and as far away as Australia.

Despite the business’ name, the Buitenhuys’ business license states they had been making flavor extracts that have a bitter taste.

Though the beverage community euphemistically call such products cocktail bitters – which are spirits – their product labels stress they are extracts.

The federal Alcohol and Tobacco Tax and Trade Bureau agrees that unlike true bitters, the Buitenhuys had been making flavor extracts rather than spirits.

And for seven years, the Arizona liquor department felt that way too.
     But last October, the department without warning told the couple it changed its mind from a ruling it had made in 2013.

It told the Buitenhuys their product actually was a spirit and that they would have to meet stringent requirements for becoming a spirits producer – including constructing a production facility that would pass state inspection as a distillery.

It was a bitter blow – no pun intended – for Lillian, a Gilbert native who has a fulltime job as a business manager, and Bill, a native Bostonian who works in the defense industry.

Chandler residents since 2007, they built a business that started simply from their epicurean appreciation of a good cocktail.

“We started out as a hobby back in 2011” Bill explained.

Though they both like wine-and-food pairings, Bill’s East Coast upbringing had him more inclined toward European rather than California wines.

Hence, he said, “There weren’t a lot of wines here that we wanted to go with our food.”

On the other hand, Bill was impressed with Valley bartenders’ inventive cocktails.

“So, we would sit in a bar and watch these bartenders pull out little bottles of infusions or extracts to tweak the cocktails to go with our food and we found that fascinating,” he said.

“These bartenders were just so creative that it gave us this thought to say, ‘You know, why can’t we try this at home and then we can tweak our cocktails to be what we would want them to be on our own?’” he continued. “So, we started making these little infusions and bitter flavor extracts for ourselves.”

The Buitenhuys worked in their kitchen, mixing a high-proof spirit with various dried fruits and herbs, depending on the flavor they wanted to create.

All the flavors were bitter, which Bill said basically make a cocktail tastier – much like what salt does to food.

“Bitterness does the same thing in that it balances out the sour and the sweet and acid, and kind of balances everything to make everything taste more harmonically,” Bill said.

As time went by, they became so pleased with their concoctions that they took them to some bartenders and asked if they’d be interested in trying them.

Soon, word caught on and bartenders started calling the Buitenhuys because they were impressed with the couple’s creations.

“There were enough people that talked to us that we said, ‘OK, maybe we can look at turning this into a small business,’” Bill said.

Though neither has a background in mixology, Bill’s science background and Lillian’s business background blended perfectly with the couple’s love of kitchen experimentation.

They soon realized they couldn’t meet the growing demand just working in their kitchen.

They had to find commercial kitchen space, get special equipment – and then get the approval of county food inspectors to set up their production facility.

They met with state liquor department officials to explain what they were doing and also cleared their products with the federal Alcohol and Tobacco Tax and Trade Bureau.

The state liquor department, Bill said, “told us, ‘you guys are exempt from liquor licensing because you’re producing flavor extracts.’”

With Lillian’s mother helping out, they were off and running.

When they weren’t working at their full-time jobs, toying around with new extract ideas or making larger batches for sale, they were traveling to bars across the Valley and, eventually, Arizona, offering samples of their creations to bartenders.

More than 600 bartenders in Arizona became customers as others in other states picked up on their product through their web store.

Word of mouth from friends and bartenders even reached Down Under. Bartenders in New Zealand and Australia also started buying their extracts.

“It kind of floored us every time that happened because here we were, this little company in Chandler that’s got this global reach,” Bill said.

And the kicker: “We never advertised. We never spent a penny on advertising. We post on social media and we had a bunch of friends who have a lot of followers who posted on social media. But we never bought an ad.”

Over the last eight years, the Buitenhuys have spent “tens of thousands of dollars” between all the trademark, licensing and other legal fees and the equipment they kept on upgrading.

But that investment was paying off. “We were growing at about 20 percent a year,” he said.

Then came the phone call from a state liquor department detective.

“We went seven years without hearing from them at all and then this past fall we got a phone call from a detective and she said, ‘We have an issue with your product.’

I said, ‘We have written approval … that were exempt’ and she said, ‘Not anymore.’”

Did she explain the change of heart?

“Nope,” Bill replied. “We asked and we got crickets. They just said, ‘The attorney general’s office supports this and this is what it is. You guys have 30 days to wrap up business or we’re sending a cease-and-desist.’”

Though the couple shut down the operation, Bill asked the state liquor department how it was going to regulate their product even if they did apply for approval as a distillery.

They wanted to know if the state would issue, as federal regulators do, a “certificate of label approval” – something that follows after a manufacturer submits their recipe and labeling for approval.

The problem is that because federal regulators consider what the Buitenhuys make to be only a flavor extract, they don’t issue certificates of label approval, usually called COLAs.

“We’ve asked the state if will they require a COLA on bitter flavor extracts and we haven’t gotten an answer,” Bill said. “So, there was no sense in us applying to be a distiller when they can’t tell us the rules.”

Bill said state regulators indicated at one point that they were concerned “about underaged people buying our product and they just want to control that.

“But we asked them how are they going to regulate the hundreds of producers from outside Arizona that sell the same product direct to Arizona residents by mail without any age verification and they have not answered that question.”

The SanTan Sun News asked the liquor department for comment but its chief spokesman did not return the call.

Lillian is discouraged by the state’s attitude.

She recalled all the trial and error involved in mixing ingredients, testing them in drinks and doing that many times to come up with the perfect flavor extract.

“There’s a lot of thought, a lot of process that goes into this,” she said. “It’s really a labor of love and the effort that the two of us and my mom put into any bottle … we do that because we really support the community and want people to have good experiences.

“People also use our products for cooking and baking and other applications like with any flavor extract,” Lillian said. “So, we want people using it, to really enjoy it.”

So far, the couple has been reluctant to hire a lawyer.

“We respect that Arizona can make their own liquor laws,” Bill said. “They have a right to do that. What they don’t have a right to do is target a business and they don’t have the right to not explain how they are going to regulate an entire industry and that’s what we’re pushing for.”

He said the Arizona Craft Distilleries League has reached out to them to point out how legislation could be changed.

But at the end of the day, Bill said, “We work full-time jobs and there’s only so much energy we can put into trying to fight the system.”