How to Win in the Brave New Whiskey World

 

As seen on the TTB website.

When approved labels appear on the website of the Treasury Department's Alcohol Tax and Trade Bureau (TTB), that doesn't necessarily mean those products will be released. This one, however, with the bottling date right on the label, seems like a pretty good bet.*

If it seems like only a few years ago that everybody was dropping age statements, it was. Although Wild Turkey 101 lost its 8-year age statement in the 1990s, and Evan Williams lost is 7-year statement in 2005, Knob Creek's decision in 2016 to drop its 9-year statement was one that really hurt, since its age was always a key part of its brand positioning. Reaction was such that, less than three years later, they restored it.

But an age statement like this, appearing as a new expression of an existing and very mainstream product, seems to auger something else. I mention Wild Turkey because they have 'restored' the 8-year age statement on Wild Turkey 101 for special editions, such as the current one celebrating Jimmy Russell's 70th anniversary, at special edition prices. This, I believe, is not that.

We don't know yet what the pricing will be on 7-year Grand-Dad, but if Suntory plans a high price, they are badly misreading the room. I suspect the suggested retail will be a modest upcharge over the standard BIB and will come out of the box heavily discounted. I predict this, in part, because they chose to do this with Old Grand-Dad and not Basil Hayden, which uses the same liquid but has more premium positioning.

This, I believe, is the beginning of a trend, the purpose of which is to blow out excess inventory.

I've been thinking about how regular, everyday whiskey drinkers here in the USA can take advantage of the current situation. Watching for this sort of thing is one of the ways.

First, where we are. I said "in the USA" because most of the recent noise has been about tariffs, if and when they go into effect. The more immediate and predictable situation has nothing to do with tariffs. It is the decline in sales that seems to mark the end of the bourbon boom.

Let's not overstate it. American whiskey sales declined in 2023 for the first time in more than 20 years, and 2024 was even worse. The 'boom' was a period of growth that was not sustainable. The recent talk from industry leaders touting illusory export opportunities is a good indicator that growth has slowed, and the industry has overproduced. Other factors affecting whiskey sales include ongoing post-COVID supply chain distortions, the effects of cannabis legalization and of weight loss drugs that seem to also suppress the appetite for alcohol, and what appears to be a younger generation with less interest in alcohol than previous cohorts. 

So, is there a whiskey glut? 'Glut' is an ugly word. 'Surplus' sounds better. Because of the aging cycle, producers know one thing for certain. They never get production planning exactly right. They always make either too little or too much. We just went through a long period of too little and are entering a period of too much.

But that doesn't mean the sky is falling. Don't bet against alcohol. It has survived worse, like being entirely illegal for 13 years. More specifically, American whiskey's gains over the last two decades are not disappearing. Growth may be slowing or even flattening, but double-digit sales declines like the industry saw in the 1970s and 80s are not on the horizon.

Probably.

On the positive side, the United States has gone from having about 50 active distilleries in 2005 to more than 3,000 today. Most of those 3,000 are small, but several hundred are not.

Ten years ago, eight companies distilled virtually all of America’s whiskey at thirteen distilleries. Three years later, there were ten companies operating fifteen distilleries. The additions were at the low end of the scale. Today, 16 companies operating 26 distilleries control about 94 percent of America’s whiskey production capacity. 

Again, the newest companies have come in at the low end. Meanwhile, the Big Four (BF, Suntory, HH, & Saz) have only gotten bigger and still have about 65 percent of industry capacity. They can deal with this downturn. I worry about the folks who are just getting started, whose plans did not anticipate tapping the brakes this soon.

But about tariffs, the European Union is and has been the largest American whiskey export market. When tariffs were on between 2018 and 2021, exports plunged 20 percent, from $552 million to $440 million. The EU suspended its tariffs in 2021, enabling exports to surge back even higher — to $699 million last year. 

Tomorrow? Who knows? Just as disruptive as tariffs themselves is uncertainty about tariffs.  

If exports decline that will mean more whiskey for us in the U.S., but that means we won't have help reducing the surplus. The industry needs to correct by reducing production and blowing out some inventory. I'm confident if we drinkers do our jobs and drink like I know we can, the surplus will be absorbed in no time. 

If your drinks portfolio includes other types of spirits, your scotch, tequila, and brandy budgets will probably go further buying American whiskey instead.

Yes, data shows that America's pantries are already overloaded with spirits, but I know people who have built room additions so they could buy more whiskey.

Don't think this means unicorns like Van Winkle will suddenly be plentiful and cheap. If that's your jam, though, be on the lookout for liquidations from folks like Penelope and Barrell. Just don't buy them intending to flip them for a profit on the secondary. While that probably won't go away, I expect it won't be as robust as it has been in the past. If you see something you want to drink, however, the price might be right. 

We probably won't see bargains on anything genuinely collectible or flippable, but expect good deals on drinking whiskey. Some of it will be on brands you know, like Old Grand-Dad, but some will be on brands you've never heard of because they were created for this purpose. Read the labels, especially age and proof statements. As usual, avoid products whose labels are obtuse or misleading. They are a poor bargain at any price.

All we know about this Old Grand-Dad expression comes from the TTB. Suntory hasn't said anything. But we'll keep our eyes open.

* According to custom, and TTB rules, 'spring' runs from January 1 to June 30.

Predicting Bourbon's Future, 13 Years Ago

 

The digital version.

On Christmas morning of 2011, the front page of Section BU of the New York Times featured a 2,500-word article about a phenomenon it called "the bourbon boom."  

"...today’s bourbon boom represents a triumph of salesmanship," wrote reporter Mickey Meece. "At a time when many American industries are struggling, distillers here are thriving, hiring and expanding. They are cashing in on an American renaissance in whiskey-based cocktails, as well as a growing thirst for bourbon around the world."

The lengthy article quotes Larry Kass of Heaven Hill, Mike Keyes of Brown-Forman, Fred Noe of Jim Beam, and many others, but it gives me the last word.

"...many distillers in Kentucky have been expanding. In five to 10 years, will their products be in such high demand? The industry is banking on big growth in India and China, said Charles K. Cowdery, author of Bourbon, Straight: The Uncut and Unfiltered Story of American Whiskey. 'If those markets develop as has been anticipated, no one will have made enough,' he said. 'If they don’t, everyone will have made too much.'”

I have remembered that quote often over the years, each time some industry analyst or executive waxes earnestly about the potential for export sales. Inevitably, their optimistic predictions feature India, China, or both.

"There’s still a big world out there for us to grow the industry in,” said Greg Hughes, president of Suntory Global Spirits, maker of Jim Beam and Maker’s Mark, at Monday's James B. Beam Institute industry conference at the University of Kentucky, as reported in today's Lexington Herald-Leader. 

“India’s a huge opportunity market for the spirits industry," said Hughes. "... there’s a bunch of beer markets out there ... that we can source volume from. ... If we can get 5 (percent) of the Scotch market in India, we’ll have all the distilleries in Kentucky full.”

On the Leadership Panel with Hughes was Kate Latts, co-president of Heaven Hill Brands. “We’ve all increased production to catch up with demand and now we’ve caught up," said Latts. "So now we’re ready. We’re ready. And when these tariffs go away we’re ready to experience ... the unknown demand that exists across the entire world. If we could just get, as Greg said, a little bit of that Scotch and beer consumption, we’re going to be in a place where we don’t have enough. So first we need to get rid of the tariffs and then we can make that all happen.”

The point of this walk down memory lane? Massive international sales to India, China, and other undeveloped bourbon markets have been predicted and touted for at least the last 13 years. While exports have increased, the top five export markets for American whiskey today are the European Union, Australia, Japan, the United Kingdom, and Canada, in that order. That's about how it looked in 2011 too. Then as now, India is essentially closed to distilled spirits imports. Why? Because of tariffs, up to 200 percent, but those tariffs have nothing to do with the current government in Washington. They have been in place forever. China is even more restricted. 

Those markets can't develop if they don't open up and there is nothing to suggest that will happen anytime soon. As the Herald-Leader article's always astute reporter, Janet Patton, put it, industry leaders, "may not agree on everything but they agree on this: There is no whiskey glut. Or at least there wouldn’t be if they could sell more bourbon overseas."

So, in other words, there's a whiskey glut.

The First Commercial Whiskey Distillery in America (Maybe)

 

The colony of New Amsterdam (1664 map).

The earliest report of a commercial whiskey distillery in what is now the United States places it on Staten Island, in the colony of New Netherland, in 1640. It says they distilled using “Indian corn” and rye. 

The event is not documented beyond a single reference, but the claim is plausible. The Dutch colony’s largest town, New Amsterdam (today’s New York City), was nearly 20 years old by that time and had a population of about 4,000 people. 

Although he authorized the distillery, the colonial governor complained about the town’s dependence on businesses that sold brandy, beer, and tobacco. He claimed fully 25 percent of New Amsterdam’s commercial enterprises were so engaged.

Some liquor was imported from Europe, as New Amsterdam was primarily a port, but most was locally made. There were European immigrants all over the area by 1640, in what is now New Jersey as well as New York. The Dutch colony shared Long Island with a British colony of several thousand additional people. 

Most colonists in the surrounding countryside were farmers who grew as much grain as they could. Their surplus was traded in New Amsterdam in either solid or liquid form. Indigenous people living in the area grew grain too and traded it alongside the newcomers, but mostly they were in the more profitable fur business.

Whether or not the product of that Staten Island distillery was whiskey as we know it is not important. If it was spirit distilled from a fermented mash of grain, as reported, it was whiskey for our purposes. If they distilled Indian corn (maize), it was proto-bourbon. 

The population of New Netherland was diverse. The first settlers were French-speaking Walloons. The first enslaved Black African workers arrived two years later. A significant number of the inhabitants were Germans, Swedes, and Finns. Local Indians were also diverse, representing many different tribes. Everyone tried to get along, more or less, but there were always conflicts between and among the various communities. 

Everyone had a reason to drink.

Willem Kieft was the governor who commissioned that Staten Island distillery and complained about the proliferation of vice shops. 

Calling Kieft ‘governor,’ as all histories do, gives a misleading impression. He was primarily a businessman, a merchant, not a politician or soldier. The colony was a business of which he had a piece. He ran it for the financial gain of himself and other shareholders, directed by a headquarters thousands of miles away. 

Kieft’s skills were not political, nor was his mission. He was there to move product and make a profit. His status vis a vis the colonists was vague. He certainly was not their leader; they didn’t choose him. He was more like their landlord. His limited legitimate authority was fortified by the small army he employed.

The business that was New Netherland began as a series of trading posts seeking beaver pelts. Rodent fur was the first American product Europeans went crazy for. Rodent fur, then tobacco. Further south, coffee and sugar. 

Europeans have only recently grown fond of American whiskey.

Technically, New Netherland began in 1615 when a Dutch company set up shop where Albany, New York, is today. Its purpose was to barter with local Indians for pelts. The site was selected because Indians already went there to trade with each other. By Kieft’s time the business had diversified, but animal fur was still its most profitable part. What Europeans most often exchanged for furs was alcohol, typically rum.

After Albany, additional posts were established up and down the Hudson River, but New Netherland wasn’t a true colony until those Walloons arrived a decade later. 

Then the trouble started. 

The first crisis was a skirmish between some Mohawks and Mohicans that didn’t involve the Walloons, but scared them and sent them running back to the coast. Peter Minuit, the ‘governor’ then and a Walloon himself, made a deal with some of the local Indian leaders that allowed construction and settlement of New Amsterdam, a town for Europeans at the foot of Manhattan Island. 

Much has been made of Minuit’s ‘purchase’ of the site for $25 worth of trinkets, but what he really did was establish terms for an extensive and generally equitable trading relationship between Indians and Europeans that led to a period of peace. Both sides understood the value of the goods exchanged was in their symbolic sealing of that mutually-beneficial agreement. That was how Indians did business and Minuit was smart enough to do it the Indian way. Only in later years was their transaction portrayed as superior Europeans fleecing gullible savages. 

For the Indians, it wasn’t so much that the Europeans got Manhattan, but that they agreed to stay there. In a pattern repeated for the next two centuries, Indians welcomed trade with the newcomers but did not want them moving in next door. 

Peace was good for business, but didn’t last. When Kieft’s tenure began a decade later, everyone was fighting with everyone else. The colonial administration was trying to run an increasingly complex political entity like a private business, and it wasn’t working. The colony was ceded to Great Britain in 1664.

Although the New World and its lucrative fur trade was abandoned by the Netherlands, French and British traders quickly filled the gap. Most Dutch traders already on the ground simply signed up with the new administration. The trade was still mostly furs for alcohol.

Most colonists stayed too. Day-to-day life changed little but the ancient, now global competition between France and Great Britain meant crucial decisions affecting North Americans, immigrant and native, were now being made on the other side of the ocean.

The Evolution of Frontier Distilling

 

"Moonshine Still 1" by Daniel Eskridge

When the livelihood of most people is subsistence farming, as it is on the frontier, communities are important, but households must be self-sufficient in food production and other basic needs. Survival is often precarious. The better you are at using what you have, and what you can find around you, the better your chances.

Because the new continent was so vast, America had a frontier from the beginning of the 17th century until the end of the 19th, nearly 300 years.

On that frontier, a typical homestead grew one or more cereals, an assortment of fruits and vegetables, and kept animals for work, transportation, food, textiles, hunting, and companionship. They foraged and hunted too. 

One of the first specialists to emerge in a community of grain farmers is a miller and since frontier millers usually are paid in grain, many became distillers. A farmer might take grain to a miller-distiller and instead of taking it back as milled grain, take it back as whiskey (less the miller-distiller’s cut). Whether by farmers themselves or by miller-distillers, most of a frontier community’s surplus grain was distilled into whiskey eventually.

Another early specialist in a typical frontier community was the metalsmith. Blacksmiths made, sold, and repaired iron tools and implements. Coppersmiths made, sold, and repaired copper items, mostly cookware, including stills. An alembic still is, after all, just a pot with a tight-fitting lid, like a pressure cooker. A trickier piece of equipment is the worm, a coiled copper pipe which, submerged in cold water, is used to condense alcohol vapor back into liquid.

Blacksmiths were usually rooted in the community, but coppersmiths often became itinerant peddlers.

A still that held ten or fifteen gallons of mash was big enough for a household supply and maybe a little to trade, depending on how big your family was and how much they drank. A bigger still was usually on the wish list. 

Although copper has always been preferred, stills can be made from other materials. J. W. Dant allegedly made a still from a hollow log. If true, his log still was likely an expedient, quickly replaced with something more suitable. 

How does that even work? The log is hollowed out, as you would a canoe. That’s your fermenter and your still. When fermentation finishes, you place it over hot coals, hot enough to vaporize the alcohol but not so hot as to burn a hole through the log. Then you cover the opening with a heavy wool blanket. When the blanket becomes saturated you wring it out into another vessel. If your still holds out, you can try raising the proof with a second distillation. 

If the whole thing sounds crazy that’s because it is. Don’t try this at home.

A practical still can be made from wood and many were. Commercial-scale wooden stills were common before Prohibition but didn’t come back after repeal.

In time, some farmer-distillers and miller-distillers evolved into full-time distillers. The Beam family claims Jacob Beam made the transition in 1795. The presence of two or more stills in a household’s inventory usually indicates a commercial-scale operation.

There are no good records as to who did any of these things first, just legends and oral histories passed mostly through families. 

We know the first people into a place, as soon as they got their hands on something fermentable, they fermented it. European colonists brought beer and wine with them on their voyages to the New World and tried to make beer from the indigenous grain they called ‘Indian corn’ almost immediately. 

Corn beer didn’t catch on, so they imported barley then grew it.

Once they had fermented more of something than they could drink right away, they distilled it. 

Individuals with the necessary skills were not rare. Almost everyone raised on a farm, which was almost everyone, knew the basics of fermentation and distillation. Some city folks did too. Before refrigeration, fermentation was a kitchen skill for preserving fruits and vegetables, and for making cheese, as well as for alcoholic beverage production. 

Some people, of course, were better at it than others. 

A note about the image: Although its title is "Moonshine Still," the setup depicted is a fair representation of a distillery on the American frontier in just about any period, though probably nicer than most.

The Beginning of Bourbon

 

John Barleycorn headed for the still.

Whiskey plays an outsize role in American history, especially during the late colonial period. Not that alcohol wasn’t part of American life from the beginning. Beer, cider, and wine were as ubiquitous as bread in the diets of the 17th century Europeans who colonized North America. Alcohol production, including distilling, was a common pioneer activity as the American frontier advanced westward through the 17th, 18th, and 19th centuries.

Among settlers on those frontiers, whiskey making was an adjunct to grain farming. Almost everyone who grew grain distilled some of it into whiskey, one way or another, and almost everyone grew grain. 

Wherever fruit was cultivated it was fermented into cider or wine and distilled into applejack or brandy. Fruit that was damaged or otherwise no good for the table was ideal for the still.

Honey was another source of fermentable sugar from which a distillate might be made. In the South, there was sorghum. Further south, sugarcane. Anything that could be used to make alcohol was used to make alcohol.

Alcohol-making was ubiquitous. If you never were taught that, you are entitled to wonder why. 

Neither makers nor consumers were too particular about types or styles. Liquor was liquor. Alcohol and its effects, that was the point. Alcohol that tasted good was a bonus but neither expected nor required. It all tasted about the same, bad by modern standards. Nostalgia for spirits of olden times is generally misplaced. Distillate rarely spent time in wood, and was often below proof, that is, less than 50 percent alcohol. Liquor today is better in every way.

In the frontier economy, distilled spirits were not just another consumable. They were more valuable and easier to store, package, transport, and sell than either the agricultural products from which they were made or the intermediate, fermented products (e.g., beer, cider, and wine). 

Hard cider is great, but whiskey never unintentionally turns into vinegar.

Where currency is scarce, as it typically was in pioneer communities, distilled spirits were a handy substitute. Everyone had a general idea how much a barrel of whiskey or applejack was worth. As a liquid it was easy to divide, and liquor is always in demand. Businesspeople today talk about ‘liquidity’ and ‘liquid assets.’ On the frontier, liquidity was literal. Whiskey was money.

You probably weren’t taught any of this in school. Alcohol and other intoxicants are among the subjects people prefer to gloss over, like war, slavery, and genocide. But just like war, slavery, and genocide, alcohol played a significant role in the story of European colonization of the Americas and the eventual formation and history of the United States. Leave them out and you don’t know what happened, not really. 

If portrayed at all, frontier distillers usually are pictured as drunks, clothed in rags, clutching a jug labeled “XXXX,” with two more X’s where their eyes should be, the stereotypical comic hillbilly wasted on mountain dew.

It wasn’t like that at all.

This Meme Is Both Wrong and Right (Sort of)

 

The meme is wrong but raises an interesting point.

Earlier this week, I posted the following on Facebook.

"There is a meme making the rounds that says Canada is the largest purchaser of Kentucky bourbon. That is false. The largest purchaser of Kentucky Bourbon is the United States, but among export markets Canada is only fifth, after the EU, Australia, Japan, and the UK. Export is about 20% of total sales and Canada is about 5% of the export market. So, yes, Canada is an important market and tariffs are bad, but those are the actual facts."

The meme in question is reproduced above. It's still wrong and my statement above is still correct, but in conversations about the meme and my response, I learned something interesting. Canada is, in fact, Kentucky's largest export market for distilled spirits products of all types. That means whiskey but also other things, such as vodka, gin, liqueurs, brandy and tequila.

Wait a minute! Brandy and tequila? I know Kentucky has a small grape crop and a few wineries, some of which also make brandy, but that's very small volume. Tequila! That has to be made in Mexico, so that can't be right.

Some Tequila can be shipped in bulk, bottled in the U.S., and still called Tequila. If that happens in Kentucky, as it does at several producers, then it counts as a Kentucky export. Brandy is an even bigger part of the equation. Of the five best selling California brandies, three are distilled in California from California grapes, but the distillate is shipped to Kentucky where it is aged in used bourbon barrels, then bottled. That, too, becomes a Kentucky product and a Kentucky export. 

The source for this statistic is the Kentucky Distillers Association (KDA), specifically KDA's annual report on "The Economic and Fiscal Impacts of the Distilling Industry in Kentucky," Prepared for the Kentucky Distillers’ Association by Paul Coomes, Ph.D., Economic Consultant and Emeritus Professor of Economics, University of Louisville, and Barry Kornstein, Economic Consultant. This is from the 2023 report. The 2024 report hasn't been released yet. 

The page you want is #68 in the printed version, #70 in the PDF. Although it mentions "liqueurs and cordials," it's also those other things. If it gets bottled in and distributed from Kentucky, it's a Kentucky product. If it's then shipped out of the country, it's a Kentucky export.

Heaven Hill and Sazerac, especially, produce full lines of value brands in virtually every distilled spirits category. If you're the LCBO (the liquor distributor for the Canadian province of Ontario) and you're buying a few pallets of bourbon and rye, why not throw in a few pallets of triple sec, coffee liqueur, or peppermint schnapps? Canada produces some of that stuff too, but Kentucky's big producers make so much of it they can compete favorably with Canada's smaller producers. 

If you look at the graph, you will see that only in exports to Canada are the two segments, whiskey and "all other spirits" roughly equal. And that makes Canada #1 for spirits exports from Kentucky. 

Although some Canadian whisky is bottled in Kentucky, I believe that is only for the U.S. market. It's not exported back to Canada. Likewise, U.S.-bottled Tequila isn't exported back to Mexico, but some of it goes to Canada. All that will, of course, change if there's a trade war. 

So, if the meme had said "the largest export market for Kentucky distilled spirits is Canada," it would be correct.

Kentucky is a small state, and because it produces so much whiskey, distilled spirits are one of its largest industries. Except for its Democratic governor and the representative from Louisville, all of its major elected officials are Republican. The legislature has a veto-proof Republican majority and Trump won Kentucky by 26 points.

Fred Rosen, Creator of the Modern Booze Superstore, Has Died

 

Fred Rosen, former CEO of Sam's Wine and Spirits, the first booze superstore.

Forty years ago, when I was contemplating a move to Chicago, a friend from my Louisville days, a Chicago native, advised me on many matters. He helped me get a lawyer, told me where to buy my suits, and because his father-in-law had been a liquor distributor in Chicago, he told me about Sam's.

Sam's was named for its founder, Sam Rosen, who started it in 1942, but it was his son, Fred, who put Sam's Wine and Spirits on the map, building it into a local institution, described by some in the industry as the first liquor superstore. Fred Rosen died on February 4 at age 88.

The original Sam's was on Halsted Street at North Avenue, then a much more marginal neighborhood than it is now. The legend, according to my Louisville friend, was that there was no glass in the windows, but the store was never robbed because it was guarded by ferocious German shepherds.

As Ashok Selvam wrote in his appreciation of Rosen on Eater, "He transformed a cut-rate liquor store into a destination where out-of-towners would visit and fill up their trunks with booze they couldn’t find anywhere else."

Fred Rosen moved the store from Halsted into a much larger space in a new shopping center further west on North Avenue, then into an even larger space in the same complex. A few branch locations followed. Binny's bought Sam's in 2009. The Marcey Street Binny's is the former Sam's.

Chicago has a long tradition of colorful booze merchants, beginning in the 19th century with Gardner Chapin and Jim Gore, whose Chapin & Gore store and saloon dominated the Chicago market until Prohibition.

In the post-WWII era, three names stand out. In addition to the Rosens at Sam's, you had Harold Binstein, founder of Binny's, and "Max the Hat" Zimmerman.

Binstein opened his first Gold Standard Liquors store in 1948, one block south of Wrigley Field. Binny's house brand is Clark & Sheffield, a reference to that first store's location. Harold died in 1995. His son, Michael, runs Binny's today. 

"Max the Hat" Zimmerman had the biggest store in downtown. It's now the Binny's on Grand Avenue. Zimmerman opened his first liquor store in Chicago in 1933, as soon as he could after Prohibition’s demise. It was in the old Cambridge Building on North Wells. He mostly sold whiskey and other spirits at first. The only wine in the store was in pints. “Sweet wines were big, stuff like Mogen David,” Zimmerman told a Chicago Tribune reporter in 1992. Known as “Max the Hat” for his trademark Stetson, Zimmerman died in 1998. 

Fred Rosen's youngest son, Brian, is the founder of InvestBev, the nation’s largest beverage alcohol private equity fund.