A visit to the American Whiskey Trail – Part 3

June 10, 2015

Where does the American whiskey industry go from here? The market is massive, the whiskey is (largely) great, and the continued growth is staggering. Yet, there are issues and obstacles to move past, problems to solve and challenges arising.

Growth, Shortages & Hedging

Production and investment are increasing all across the board, and certain distillers are dealing with current or potential upcoming shortages. This has led to product allocations, the removal of age statements from certain brands and the discontinuation of others.

It’s a problem, which has to some degree been overstated and is already in the midst of being solved. Yet, the solution could also create a risky environment. Investments needs to be repaid; increased capacity must continue being warranted to be financially worthwhile.

As all things American whiskey soar and soar, it’s hard to envision a potential crash. Yet, it has happened before, in the 1970s, as Americans began shifting towards vodka and other lighter spirits. Therefore, the massive forward thrust of the industry today still must be hedged against in some ways.

Dealing with demand

“Brown-Forman is very fiscally responsible,” explains Woodford Reserve master distiller Chris Morris. “Every six months we recalibrate. Are things going the way we thought? Is a brand slowing or a market not going well?”

Nobody is projecting anything dire to happen, but those in the industry, particularly those who were around then, are aware that everything cannot always be so rosy. Wild Turkey’s master distiller Eddie Russell, for instance, acknowledges that demand will have to level off in the years ahead, although “it’s not likely to be like it was in the ‘70s.”

It’s not just a supply of the brown stuff which is having difficulty satisfying demand, it’s all of the logistical cogs along the way. There are myriad industries within the whiskey industry.

For instance, Vendome Copper & Brass Works puts new customers on a nine to 10 month waiting list before they can start building their new stills. Demand has maxed out barrel availability, with craft distillers getting pinched and going on even lengthier waiting lists. Even at Brown-Forman, the only company which makes its barrels, they can hardly keep up with their own internal demand, churning out 3,200 barrels a day across two facilities for Jack Daniel’s, Woodford Reserve and their other brands.

The Educated Whiskey Consumer

While the college crowd may still be happy with a Jack & Coke, or whatever the cheap whiskey shot of the night is, elsewhere, tastes are far more advanced and specific, and consumers are far more educated than they had been previously.

“A lot of consumers are getting smarter and learning how to read labels,” says Jim Beam master distiller Fred Noe. “They’re learning a lot more.”

The positives of that are clear, of course – there are more educated whiskey drinkers. They want better whiskey, and a wider range of choices. It’s something which in part can explain the huge resurgence of rye whiskey, along with the (smaller) renewed interest in bottled-in-bond whiskey.

Rye: The big surprise

Such category revivals came as revelations, even to those in the industry. “Rye was the biggest surprise of my career,” says Russell, attributing much of the interest to mixologists. Now everyone wants to be a major player in the rye game, with production ramping up and new labels being launched.

Noe agrees with the power of cocktail culture and mixologists, for both rye and for bonded whiskey as well. “The mixology folks have seized it and want it,” he says. “They like having stuff from the past.” Then whiskey drinkers see it at the bars, give it a try, and want to bring it home, too.

Smarter drinkers though also means more questions are asked – Who’s actually distilling this whiskey, and where? What’s in it? Is the back story behind it true? Why has the age statement been removed?

The way the industry responds to these types of questions and issues will in large part shape what unfolds over the coming years and decades.

The Next Generation

While the big boys forge ahead with hundreds of millions in new investments, the craft distillers which have opened by the hundreds need to carve out their own place. The quick success of some has hidden the difficulties which exist in that field. “There’s a learning curve,” explains Noe.

“That’s what I tell people… Jacob Beam in 1795, he was a craft distiller. These guys who are starting now, if they stick with it, their families stick with it for 200 years, they might be as big as Jim Beam down the road. It’s not like going out and buying a car and putting your key in… I think a lot of them are learning fast, but it’s not an automatic thing.”

Generational family figures, such as Noe, Jim Beam’s grandson and 7th in a line of family distillers, are found all over the American whiskey realm. Eddie Russell was just named master distiller at Wild Turkey, alongside his father, 80-year-old Jimmy Russell, who’s still working every day. Bill Samuels Jr. is also carrying on the tradition of his father, Bill Samuels Sr., at Maker’s Mark.

The new and the old

Each of those names has paid homage to those who came before, while also introducing new concepts. At Maker’s Mark, Samuels Jr. came up with Maker’s 46, which is made by finishing regular Maker’s for between eight to 11 more weeks in barrels loaded with seared French oak staves.

At Wild Turkey, Eddie Russell’s first expression is due out this fall, Master’s Keep. At 17 years old, it’s a bourbon his father Jimmy never would have personally produced. “This is the oldest bourbon we’ve ever put out in the United States. If you’ve ever been around Jimmy, he’ll tell you he doesn’t like bourbon much older than 12 or 13 years,“ he explains. “So if you don’t like it, you can blame it on me.”

Who’s next up at these brands? What other new figures will emerge, and how will they walk the same fine line of honoring the past while moving in a new direction? How will they deal with the aforementioned issues and questions?

Challenges and unknowns aside, with unprecedented growth, it’s certainly a good time to be in the whiskey business. Even better, it’s a great time to be a whiskey drinker.

Ready to go hunting for some new American Whiskey?

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