I’d say he made a monumental move. Jump for his story.

After reading state regulations, he went to the Texas Alcoholic Beverage Administration (TABC) and told them he wanted to get a permit to operate a commercial vodka distillery. They told him it was illegal. He asked them if they had read the regulations. They told him they couldn’t cite the exact clause, but nobody had ever asked for a license for a distillery so it must be illegal. After several appeals, Beveridge’s application was kicked up to someone in the organization that was more familiar with the regulations. The TABC was willing to approve the distillery only if the Federal Bureau of Alcohol, Tobacco and Firearms was willing to do the same. Two years after filing his application his distillery was approved. In 1997 Tito’s Handmade Vodka shipped its first vodka.

Licensing wasn’t his only problem. State law governing the sale of liquor requires sales to go through the three-tier system: the producer sells to a distributor, who sells to a retailer, who can sell to final consumers. Unlike wineries, which are governed by different laws, a liquor producer cannot develop a thriving direct trade by creating a tasting room and attracting tourists or shipping products directly to consumers’ homes. State law limits on-site tastings to 1/2 of a fluid ounce and no sales.

Tito Beveridge

Beveridge approached distributors who all told him the same thing. Retailers could not order his vodka if the distributor didn’t carry it. So how did he expect to compete with the global  companies that dominated vodka sales? He was forced to go to retailers directly and encourage, plead, and extol them to order his vodka from distributors. He traveled to all corners of the state, often sleeping in his car or on the couch of the distributor’s local sales representative to save costs. In the first year he sold 1,000 cases.

Beveridge made his product by fermenting American corn into the ‘beer’ (as fermented grain is called in the liquor business). Then he distilled the liquid six times in a pot still. He built the still himself using pictures he found in library books. (This was the pre-internet age!). Once distilled, he would filter, bottle, label, and pack the vodka, often sleeping by the still during distillations. Then he’d load his truck and rush out to sell it. Thirty days later, the money would flow in and he could pay his suppliers and credit card companies (he had 19 credit cards at one point with a combined balance over $80,000).  At one point his hunting buddies sat him down and said, “Tito, isn’t it time to end this insanity?” Somewhere along the way his first wife left him.

Growth was slow but steady. Two thousand cases sold in the second year. Three thousand sold in the third. In his sixth year he sold 17,000 cases, largely on the strength of the double-gold medal he won at the prestigious San Francisco International Wine and Spirits Competition. Ironically, he missed the show because he had to fix a boiler. He ended up sending a few bottles to the competition. He wouldn’t have done it unless Tony Abou-Ganim, then the beverage director of the Bellagio Hotel in Las Vegas and a personal fan of Tito’s vodka, had encouraged Beveridge to enter.

Now Tito’s Handmade Vodka sells several hundred thousand cases a year. Beveridge has 11 production stills and two prototypes. Seventy percent of his production is sold outside Texas. He is no longer the only liquor producer in the state. Currently 31 distilleries have been bonded and the micro distillation buisiness is on fire. However, these ambitious people starting to make bourbon, gin, vodka and tequila should remember that the state permitting process is now easier in large part because of Tito’s efforts. And consumers are willing to look at local spirits rather than global brands in large part because of the credibility he has given Texas spirits.

TABC officers and Michael Costa (light blue shirt to right) outside The Office Grill in Dallas. (Photo by Nancy Nichols)

This evening, around 6:40PM, officers from the TABC entered The Office Grill in far North Dallas (Frankford and Tollway) and arrested co-owner Michael Costa. I’m awaiting information on the specific charges of the arrest but his business (Lucky 7 Private Club) has appeared consistently on the TABC credit law delinquent list which is released every two weeks.  The most recent was published yesterday. (A detailed explanation of why a business is included on the list is below the jump.)

Costa was handcuffed inside the restaurant and taken to Collin County Jail.

The Office Grill co-owner Michael Costa once again behind bars. (Photo by Nancy Nichols)

Jump for TABC rules.

UPDATE: I have turned the comments off until I have more details about the situation. Sorry, but thanks.

UPDATE: Comments on.

UPDATE: I’ve been on deadline all day. According to an officer of the Collin County Jail, Michael Costa was arrested for two charges. Both were “an act prohibited during permit suspension.” Since the TABC arrested Costa it looks like Costa’s liquor license was suspended and he continued to sell alcohol. Both charges are misdemeanors and bond for each charge was set at $1,500. Costa bonded out earlier this afternoon. Mug shot below.

Mug shot from last night's arrest.

The current TABC credit law delinquent list is now available and has an effective date of September 19, 2011 at 12:01 am.

The Delinquent List is published/effective at 12:01 a.m. on the 3rd and
18th of each month. All payments must have been received by the
wholesaler prior to 12:01 a.m. on the 3rd and/or 18th as applicable to
avoid regulatory action. Any orders received for delivery, will call,
salesperson pick-up or hot shot prior to the publication date may be
delivered by the Wholesaler and/or Local Distributor on the day of the
publication. Such orders must be invoiced and billed prior to the
publication time of 12:01 a.m. and must be delivered by 1:00 p.m. on the
publication date.

If the publication date falls on a Saturday, Sunday, or a state or
federal holiday, the publication date shall be the next regular business
day.

Being on this list does not always indicate the restaurant is going out of business. Sometimes many restaurants make an accounting oversight or the payment gets delayed in the mail. Either way, if you miss the strict deadline you go on the list.

The list is here.

Jump for the legalities.

The Delinquent List is published/effective at 12:01 a.m. on the 3rd and
18th of each month. All payments must have been received by the
wholesaler prior to 12:01 a.m. on the 3rd and/or 18th as applicable to
avoid regulatory action. Any orders received for delivery, will call,
salesperson pick-up or hot shot prior to the publication date may be
delivered by the Wholesaler and/or Local Distributor on the day of the
publication. Such orders must be invoiced and billed prior to the
publication time of 12:01 a.m. and must be delivered by 1:00 p.m. on the
publication date.

If the publication date falls on a Saturday, Sunday, or a state or
federal holiday, the publication date shall be the next regular business
day.

Two forms of the delinquent list are available.  The first is an HTML
browser compatible list.  It can be viewed and printed from your normal
Internet browser.  The second list is in a comma delimited ASCII text
format that you may wish to use to import the data into your favorite
database, spreadsheet, statistics or word processing package.

NOTICE REGARDING BANKRUPTCY

Violations under Code section 102.32 (d) and 16 TAC 45.121 (f) and (g)
regarding sales to and purchases by a retailer who appears on the
delinquent list will not be enforced so long as the retailer is
protected under the United States Bankruptcy Code.  This policy does not
require a seller to sell to any particular retailer, but allows that a
seller may sell to retailers on the delinquent list who are protected.
The terms of sale must otherwise comply with the Code and all applicable
rules of the Commission.  All reporting requirements of Code section 102
and 16 TAC 45.121 are still in effect.  Retailers must inform the TABC
Compliance Division immediately upon filing for bankruptcy and
immediately upon release from bankruptcy protection. All communications
with the Compliance Division should clearly indicate the entity’s permit
or license number(s). Please contact the TABC Compliance Division at
512-206-3300