Heritage Distilling Company has announced it will close all five of its retail tasting rooms in Washington and Oregon by December 31.
The move is part of a strategic transition to reduce operating expenses and shift to a more asset-light business model, according to a spokesperson. The company cited rising state taxes, regulatory challenges, and changing consumer preferences as factors making tasting room operations unsustainable.
CEO Justin Stiefel noted that the restructuring will help the company focus on higher-margin areas like direct-to-consumer sales, wholesale expansion, and partnerships through its Tribal Beverage Network program, while reducing annual operating costs by over $5 million.
Employees affected by the closures will receive severance packages, accrued sick time payouts, and continued health coverage. Heritage Distilling emphasized its commitment to customers and communities, encouraging patrons to visit the tasting rooms before they close.
The five tasting room closures across Washington and Oregon represent Heritage Distilling’s complete exit from brick-and-mortar retail operations, eliminating customer touchpoints where spirits enthusiasts could sample products and purchase bottles directly from the distillery.
The December 31 closure deadline provides roughly two months for liquidating inventory, notifying regular customers, and winding down lease obligations while capturing holiday season sales before permanent shutdowns.
The “asset-light business model” terminology signals Heritage Distilling’s pivot from capital-intensive retail spaces requiring rent, utilities, staffing, and inventory to distribution partnerships where other entities bear operational costs and risks.
Rising state taxes likely reference Washington’s spirits taxes among the highest nationally at over $35 per gallon plus sales tax, creating price disadvantages compared to neighboring states and online retailers operating from lower-tax jurisdictions.
The regulatory challenges encompass Washington State Liquor and Cannabis Board requirements for distillery tasting rooms including server permits, compliance reporting, and operational restrictions that add administrative burden without corresponding revenue benefits.
Changing consumer preferences toward online purchasing and home delivery accelerated by pandemic lockdowns eroded tasting room foot traffic, as customers discovered convenience of ordering spirits through delivery apps rather than visiting physical locations.
CEO Justin Stiefel’s focus on “higher-margin areas” acknowledges that tasting rooms generate lower profit percentages than wholesale distribution where Heritage avoids retail overhead while selling bulk volumes to bars, restaurants, and liquor stores.
The Tribal Beverage Network program represents Heritage’s partnership strategy with Native American tribal governments operating casinos and resorts, providing exclusive spirits distribution that generates revenue without company-owned retail infrastructure.
The $5 million annual operating cost reduction demonstrates tasting rooms’ substantial expense burden including employee wages, lease payments, utilities, and inventory carrying costs that exceeded revenues generated through direct retail sales.
The severance packages and continued health coverage provide terminated employees financial cushion during job searches, though craft distillery workers may struggle finding comparable positions as the industry consolidates and automation reduces staffing needs.
