JOHNSON CITY, Tenn. (WJHL) — Tennessee Hills has shifted plans for a multimillion dollar distillery from Johnson City’s West Walnut Street to Bristol, but the company’s principals say their five acres near East Tennessee State University aren’t going to be left high and dry.

Instead, Scott Andrew and Tennessee Hills founder Stephen Callahan said, the West Walnut property is likely to be home to a much larger brewery than first envisioned a year ago — while the expected demand for spirits left the Johnson City site unable to handle all the capacity.

“When we opened the Tennessee Hills Brewstillery (two blocks from the 5-acre site) we knew the Tennessee Hills brand was good, but brewing is a much more well-developed business,” Andrew told News Channel 11 Monday.

So while he and Callahan expected rapid growth in demand for its spirits, the two thought a planned combined brewery and distillery on West Walnut would be able to meet demand. He said the craft beer industry includes about 11,000 microbreweries, compared to fewer than 2,500 microdistilleries.

ETSU brewing students work under the watchful eye of teacher and chemist Dave Lawrence, left. (Rugged Media)

“We didn’t project the demand for the Tennessee Hills beer brand to be so good,” Andrew said. “A lot of credit to our master brewer Danny Smith and to our brew chemist Dave Lawrence. They make really good beer, and Tennessee Hills, thanks to Stephen and Jessica (Callahan) was already an incredible lifestyle brand. The local and regional communities have just embraced the Tennessee Hills Brewstillery.”

That popularity combined with high interest in a brewing and distillation sciences program that East Tennessee State University (ETSU) launched last fall has caused a current and projected demand “far beyond what we predicted” for Tennessee Hills beer.

Andrew said the former Preston Woodworking and Accurate Machine Products building sites near West Walnut and Watauga Avenue will likely become home to the new, larger brewery within a few years.

“We’re actually in the design stages of a Tennessee Hills Brewery,” he said. “That site’s so close to ETSU, we want to have a site that’s active to be a real core part of the ETSU brewing/distillation sciences program.”

In the meantime, the business nearly tripled its capacity at its small current Brewstillery a couple blocks east at West Walnut and Sevier streets.

“We added two large fermentation tanks and a glycol chilling system that enables to chill water faster to where we can do three batches a day instead of one,” Andrew said.

Helping with that “micro-expansion” was the newest member of the Tennessee Hills management team, Vernon Spaulding.

An engineer with expertise in lean manufacturing, Spaulding worked in large-scale beverage operations in the dairy industry in his native Wisconsin before launching a consulting career that has taken him around the country to build close to two dozen craft breweries and canning operations.

Tennessee Hills chief operating officer Vernon Spaulding will design the new expanded brewery and the business’s new distillery. (WJHL photo)

“The success of breweries relies on a few things,” said Spaulding, who recently moved to Kingsport and has become Tennessee Hills’ full-time chief operating officer (and a part-owner).

“You have to have good beer and second is you have to have an authentic story. We’re trying to represent a lifestyle brand here, ‘True Taste of Tennessee,’ and ‘Responsibly Rowdy’ is our theme. You have to have something that people can relate to that’s authentic.”

Spaulding said the most important element is developing a space that is inviting, with “nooks and crannies where people can come and feel comfortable and relaxed and have get-togethers from two people up to parties of 20 and 30.”

Whether it’s on West Walnut or somewhere else in Johnson City, Spaulding will be charged with creating a design that marries those inviting elements with an efficient layout that allows Tennessee Hills to produce large quantities of beer with consistently high quality.

Spaulding said the craft beer industry probably reached its apex about four years ago, and breweries without a compelling story, or real good beer, or good management, are starting to fail. But he said Tennessee Hills has a great story in the Callahans, good management and backing with Andrew — and a brewmaster in Smith who is producing “some incredible beers.”

“I’ve had the honor of being involved with some of the best brewmasters in the country through the various plants I’ve built and I would put Danny’s beer against any one of those beers,” Spaulding said.

“He just keeps coming up with better beers. Very authentic in the style of the beer itself, and yet he has a little fun with it, maybe experimenting with some hops or some different yeast that gives some flavors that you wouldn’t normally expect in certain types of beers.”

Spaulding said the demand for Tennessee Hills beer has grown so much recently that even that tripling of capacity at the current location’s 10-barrel brewhouse isn’t keeping up.

“We’re looking somewhere around a 50-barrel, four-tank brewhouse-based system with appropriately sized fermentation tanks and filling lines.”

He said the current plans call for a rooftop patio, a gift shop, event spaces and a sound stage to attract visitors potentially within a couple of years.