Bourbon Marches On

Bourbon Marches On

Liza gives us a roundup of the bourbon scene in USA today

Production | 30 Jan 2015 | Issue 125 | By Liza Weisstuch

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Thus spoke Bob Newhart, the legendary comedian and Dean of the Deadpan. Sure enough, on 28 November, an article appeared on the front page of the paper of record with the headline: 'Budget Problems? Kentucky and Elsewhere Find Answer in a Bottle.' It explained how the bourbon industry is pumping revenue into the state's economy and quoted Governor Steve Beshear as saying: "The bourbon industry is such a boon for us. The effect that it has on other sectors in creating jobs is very important to us."

Those jobs are also very important to bourbon drinkers around the world, a contingent whose numbers - and dedication - are growing by the day. Things that would have been considered outlandish a decade ago are commonplace today. Consider, for instance, the abundance of limited edition bottlings that are released annually. The speed with which enthusiasts scoop them up is astonishing. In December 2013, Michter's released 273 bottles of Celebration Sour Mash Whiskey, made from 20 and 30 Years Old barrels. Each bottle fetched $4,000. They were all spoken for before they arrived in stores.

But perhaps what's most exciting, for better or for worse, is how American whiskey has become an egalitarian product. Brands have wiped their products clean of the 'red neck' image. Today, bourbon is presented as a drink that's classy, yet hardly elite.

Numbers don't lie

According to the Distilled Spirits Council of the United States, a trade organisation, 18 million 9 litre cases of bourbon and Tennessee whiskey were sold in the USA in 2013, generating over $2.4 billion in revenue for distillers. That huge sum is largely due to people opting for premium whiskies. From 2003 to 2013, revenues on super-premium products grew 104 per cent while increasing only 26 per cent on value products. Over that same time, sales of super-premium brands grew 87 per cent by volume, but increased only 14 per cent for value brands.

"Demand is as crazy as ever. Every whiskey we make is on allocation," said Kris Comstock, Bourbon Brand Director at Buffalo Trace Distillery, the facility in Frankfort, Kentucky that produces Blanton's, E.H. Taylor, Buffalo Trace, the annually released Antique Collection and the coveted Pappy Van Winkle, among others. "We're making more bourbon than we have in 30 years, but it's for Buffalo Trace long-term, Blanton's long-term and the rest. We need to put whiskey away so that barrels are matured and ready years down the road. And we're still experimenting. The general demand is separate from that."

While all the major bourbon producers are located in Kentucky, in 1964, American Congress passed a law defining bourbon as a distinctive product of the United States. The act specified that to be a bourbon, a whiskey must be made with at least 51 per cent corn, aged in new charred American oak barrels and bottled at no less than 80 proof. Adding colouring or flavouring agents is illegal.

Many see the bourbon boom as part of a broader lifestyle shift.

"It's part of the retro movement we're seeing all around. People are still referencing 'Mad Men' and the classic cocktails they drank in that show," says Mike Keyes, President of North America Region of Brown-Forman, which produces Woodford Reserve, Old Forester and the iconic Jack Daniel's Tennessee Whiskey. "But more than that: Americans are returning to full-flavoured products that are authentic, unique and have a story."

The mania for all things retro - from clothing to drink - stems from a nostalgic craving for something personal and genuine.

"People are flocking to American whiskey because these are brands with real figure prints, real stories of heritage, people, production and a sense of place. It's just so inherent in American whiskey brands," said Andrew Floor, Senior Marketing Director of Brown Spirits for Campari America, which markets Wild Turkey. He noted that after the recession, perceptions of value changed. "It was less about bling than good old-fashioned American values. When you tap into these deep human cultural movements, it fans the flames."

Indeed, one of the upshots of bourbon's boom is that whiskey makers have become public personalities, appearing at festivals, restaurants and stores around the world. Parker and son Craig Beam of Heaven Hill are well known on the circuit, as is Wild Turkey's Jimmy Russell. In October, Wild Turkey launched Diamond Anniversary, a limited edition bourbon commemorating his 60th anniversary with the distillery. The brand's new advertising campaign, which includes commercials on late-night television and sports channels, features Russell, an avuncular octogenarian, touting the brand's tagline, 'Never Tamed'.

"Jimmy was the inspiration for the 'Never Tamed' campaign," said Floor. "He refers to himself as resistant to change. Despite Wild Turkey being owned by a number of companies throughout his tenure, and a number of executives and finance people trying to force Jimmy to make changes, he never would."

TV ads are a bold move in today's internet-centric media world, to be sure, but it's a bold move that's caught on. Woodford Reserve broadcast television ads for the first time in 2014 and Jim Beam abandoned its macho-themed TV ads, like its 2010 campaign 'Guys Never Change, Neither Do We,' for a spot featuring actress Mila Kunis looking glamorous as Fred Noe offers her a bourbon tutorial in a barrel warehouse.

Bring on the crowds!

Distillers can't fill barrels fast enough in the Bluegrass State. According to an economic impact report put out by the Kentucky Distiller's Association in October, over the past two years, the bourbon industry workforce nearly doubled in size, from 8,000 to 15,000 employees, bringing the total payroll up to $700 million from $400 million. In those same two years, the number of distilleries in the state tripled.

"The numbers. It's mind-blowing. In the past five years, from 2008 to 2013, companies have invested more than $400 million, much of which goes to new tourism facilities," said Eric Gregory, president of the KDA, which claims 27 members and counting. "In the next five years, we're gonna see another $630 million for new bottling lines, warehouses and the $15 million new distillery from Wild Turkey.

That's a billion dollars in ten years. And I actually think that's conservative. I think it'll come closer to $2 billion." After all, craft distilleries are popping up around the state and companies of all sizes are building facilities and refurbishing old buildings throughout downtown Louisville.

And then there's the flourishing tourism industry that taps right into the nostalgia and hunt for authenticity on which brands are capitalising.

"People want to see authenticity in the place where a product is made. I think the American whiskey experience is like visiting wine country," said Keyes of Brown-Forman, which invested $35 million to expand the Woodford Reserve Distillery in 2013 and $100 million on its Jack Daniel's Tennessee facility. "We've had so many visitors to Woodford, we had to expand to take care of the amount of people."

But that's only the start for Brown-Forman, which is ponying up $30 million on a new fully-functioning Old Forester distillery in a refurbished historic building on a strip of Main Street in downtown Louisville. The strip, home to many production facilities in the mid-1870s, was called Whiskey Row. That name has been reinstated today.

The trailblazing Heaven Hill was among the first on the scene when it opened its Evan Williams Bourbon Experience on Whiskey Row in November 2013. Angel's Envy, a brand that the late Lincoln Henderson, former Brown-Forman kingpin, helped get off the ground, is opening a $12 million facility near the city's baseball field. Craft operation Kentucky Peerless is jumping into the downtown game, too, with a facility slated to open next year. And in December, Beam Suntory announced it would commence construction on the Jim Beam Urban Stillhouse, a tourist mecca, in the vibrant 4th Street entertainment district.

Michter's, which long produced its whiskies in another Kentucky facility, is opening a showpiece distillery in a refurbished landmark on Whiskey Row. It's designed for tourism and education, but the company's development extends beyond downtown. In October, they received 5.5 tons of distillation equipment, including a 46 feet high custom still, at Shively Distillery, its facility south of Louisville, which became a licensed distillery in 2012 and carries a $10.9 million price tag.

Also beyond downtown, Four Roses opened a stunning visitor center at the distillery in 2012 and another at the warehouse and bottling facility in September 2014. Wild Turkey's sleek visitor center with a tasting room opened in April 2014, capping off parent company Campari's $100 million investment in the distillery.

Craft in the spotlight

In the past two years, controversy around the meaning of 'craft' reached a fever pitch. Industry insiders had increasingly protested use of the word 'craft' by small distilleries that purchase product from an industrial facility, like the former Seagram's plant in Lawrenceburg, Indiana, and call it their own. The TTB, the US government agency that oversees the liquor industry, has a loophole in its regulations that allows anyone who manipulates a product in its facility to claim that it's 'made' there.

It all came to a boil in July, when Eric Felten, longtime Wall Street Journal writer, published an expose in the Daily Beast, a news website, with the headline "Your 'Craft' Rye Whiskey Is Probably From a Factory Distillery in Indiana." He explained how brands package bulk spirit and sell it as their own. And with that, the public entered the ring.

Having believed that buying craft spirits meant supporting local distillers, they felt betrayed. And hell hath no fury like a locavore betrayed. Truths started emerging. The model case has become Templeton Rye, the Iowa distillery that claims it's using a generations' old recipe favored by Al Capone. It turned out that the product was coming from Indiana. A class action suit ensued.

"People are asking poignant questions that companies can't market their way out of. It's getting more dramatic and persistent. People aren't just accepting a pretty picture of a river as proof that that's the source of water," said Nicole Austin, president of New York State Distillers' Guild, engineer and distiller at Oak View Spirits, a craft spirits consulting company, and Master Blender for Kings County Distillery in Brooklyn. She also sits on board of directors of the American Craft Spirit Association. "I'm confident that we have quality to be recognised. We're just looking for honesty and transparency across the market."

Despite the contentiousness, she sees the future of craft shaping up nicely.

"People are seeing the craft trend take hold, so they're willing to take great risks from the get-go. It's not that they can't make a product taste like it's out of Kentucky or Indiana, it's that they don't want to. There's such a narrow grip on what it means to make spirits. We're hoping to loosen that grip on the narrative. We want craft spirits to have a voice in what it means to make

great whiskey."

The shortage: True or false?

Each time an article comes out in the media, the chattering masses set in on blogs and chat rooms. There is no shortage, they assert! It's all yellow journalism, they maintain. The high-profile episode when Maker's Mark announced that its bourbon would be offered at a lower proof, soon after rescinded, was suspected to be a marketing ploy by some. Still, bars and stores can't get inventory.

"By definition, having a large volume growth brand like Evan Williams requires a path to growth, and that means more barrels. And having more niche brands based on product attributes, like Elijah Craig or Larceny, requires planning to accommodate ongoing requirements and, hopefully, some volume gain," he said.

"It's true that we don't have as much Buffalo Trace as there seems to be demand for, but it doesn't mean that you walk into bar and there's no bourbon to be had," said Comstock. "There's more this year than last year, but feels like less because people are swiping barrels and pouring drinks faster than before. People will get it, eventually. It's not like everyone's gonna have to drink gin."
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