Wednesday, July 23, 2014

Bourbon Inventory Tops 7.5 Million Barrels for First Time in 40 Years


According to a press release yesterday from the Kentucky Distillers' Association (KDA), more than 5 million barrels of bourbon are aging in Kentucky warehouses. It's the first time bourbon stocks have reached that level since 1977.

Kentucky’s bourbon distilleries filled 1.2 million barrels last year, the most since 1970. Production has skyrocketed more than 150 percent in the last 15 years, resulting in 5,294,988 aging barrels at the end of 2013. Add to that 2.2 million barrels aging at Jack Daniel's in Tennessee, for a total of 7.5 million barrels.

Other key facts from KDA:
  • Bourbon isn't the only spirit aging in barrels in Kentucky. When you include brandy and other whiskies (e.g., rye, wheat), the state’s total barrel inventory was 5.9 million at the end of 2013, the highest total since 1975.
  • The tax-assessed value of barrels aging in Kentucky is $1.9 billion this year, an increase of $81 million from 2013. Since 2006, the value of barrels has nearly doubled ($1 billion to $1.9 billion). 
  • Kentucky distilleries paid $15.2 million in ad valorem tax last year to the state and local communities. Ad valorem tax receipts (a tax on the value of whiskey in storage) have increased 52 percent since 2006. A new law enacted earlier this year gives distilleries a corporate income tax credit against the amount of ad valorem taxes paid, if they invest that money in their Kentucky operations. (Tennessee doesn't have an ad valorem tax.)
  • The KDA’s Kentucky Bourbon Trail and Kentucky Bourbon Trail Craft Tour experiences logged more than 630,000 visits in 2013, a new record for the tours that showcase KDA-member distilleries. 
Hidden in the 1970, 1975, and 1977 dates is a cautionary tale. American whiskey sales began to trend down in the late 1960s after growing steadily since Prohibition's end. Although production began to decline after 1970, it didn't decline as much as sales, so inventories kept growing until 1977. This created a whiskey glut that lasted for approximately 20 years.

That was a painful experience producers would like to avoid this time around, so don't be surprised if the current ebullience is tempered with caution. Still, it's a great time to be a bourbon fan.

Monday, July 21, 2014

There Is a Difference Between 'Craft' and 'Crafty'


As reported by Amy Hopkins in The Spirits Business last week, Diageo North America president Larry Schwartz recently declared to investors at a conference: “We’re going to be the number one craft distiller in North American whiskey in the US. Why? Because we have the whiskies.”

Schwartz was talking about the Orphan Barrels program, which so far consists of three bourbons called Old Blowhard, Barterhouse, and Rhetoric. Diageo calls them 'craft.' Others have called them "an insult to American whiskeys and the people who drink them."

The person Hopkins calls "Ewan Moran" is probably Ewan Morgan, who takes the ball from Schwartz. "Craft is about artisanship, passion, experience, great liquid, great products," he says. Okay, except 'artisan' is just a synonym for 'craft,' while 'passion' and 'experience' sound nice but they're just vague platitudes. Even absent an agreed definition, 'craft' has to be more than a vague label you can stick on just about anything.

Or does it? For marketing purposes, words such as 'craft' are best left to the consumer's imagination, because like 'small batch' and 'produced by,' the consumer is likely to believe they mean more than they really do.

Morgan is absolutely right about one thing when he says, "not all small distilleries are craft."

The American Distilling Institute (ADI) begs to differ. It defines 'craft spirits' as "the products of an independently-owned distillery with maximum annual sales of 52,000 cases, where the product is physically distilled and bottled on site."

In other words, "not you, Diageo."

But 'craft' has to mean more than just 'small,' doesn't it? ADI's problem, of course, is that so many of its members are fakes. Take a look at its pathetic joke of a craft self-certification system. Diageo probably loves it since it's based on the principle of "It's craft because I say it is."

To muddy the waters further, a California company called Craft Distillers Inc. (CD), has trademarked the term 'Craft Distillers.' Earlier this year they filed a trademark infringement lawsuit against the young movement's other trade association, the American Craft Distillers Association (ACDA). ACDA put on its tough guy face at first, then became the ACSA (American Craft Spirits Association).

Can a large distiller be craft? Probably, but Orphan Barrels isn't because there is nothing even remotely craft about the offering.

Craft is about things made, not necessarily from scratch, but where an artisan affects some kind of transformation. For something to be 'craft,' an artisan must conceive and execute an idea, and it must be a production idea, not a marketing one. The 'craft' performed must directly impact the product, not merely the packaging and promotion of it. Orphan Barrels is a marketing idea, not a product idea. The product itself consists of nothing more than several large batches of leftovers.

Too harsh? Consider the facts. No one has claimed that United Distillers, the Diageo predecessor company that made all the whiskey, intended 26 or 20 years ago to make these products, nor that it did anything special then or along the way to the specific whiskey that became these products. It was standard production of the Bernheim Distillery, from before and after it closed and was rebuilt. It is simply whiskey they couldn't find any other use for until now.

There's a name for that -- 'Closeout' maybe? 'Bargain Bin'? 'Final Liquidation'? -- but it's definitely not 'craft.' Saying the Orphan Barrels aren't craft doesn't mean they're bad whiskey. They may be great whiskey, they're just not 'craft' if 'craft' is to be anything other than a meaningless marketing term du jour.

The producers most recognized for their craft whiskeys -- Balcones, Koval, Corsair, Few, Dry Fly -- do it with innovation, originality, and creativity. They do things that haven't been done before and create products unlike anything you've ever tasted before. That's what the consumer wants from 'craft,' but perhaps Lance Winters (St. George) is right when he says, "putting a binding definition on what craft is, would be like putting a binding legal definition on what art is." Consumers have to stay skeptical and always ask producers who call their products 'craft,' "where's the craft?" It's a question we've been asking here since 2008.

Friday, July 18, 2014

Curious About an Old Bottle? Try Whiskey ID


Hardly a day goes by that I don't receive an email from someone who has discovered an old bottle in an elderly relative's liquor cabinet, or some other scenario like that. Finding them inside walls while remodeling is my favorite.

They want to know how old it is, who made it, the story behind it, if any, and how much it's worth.

Now there's an app for that.

Well, not the last one (yet) but all the rest, at least the beginning of something that will do all of those things. It's called Whiskey ID. It includes tips on how to age bottles, photographs you can compare your bottle to, producer timelines, a glossary of abbreviations commonly used by whiskey enthusiasts, and other stuff.

Some of it is clearly lifted from straightbourbon.com and bourbonenthusiast.com, which is perfectly okay. That information was put up there for everybody to use and this format just makes it easier to access and thus a little more useful.

Most of all, it's easy to use. If researching your bottle on Whiskey ID is too much work for you then forget about it, because you don't really care.

It's also free.

Whiskey ID is not perfect by a long shot. It's clearly a work in progress but it's already a great resource for any American whiskey enthusiast.

Thursday, July 17, 2014

Join Me for an Exclusive 3-Day Tour of Bourbon Country, October 15-17, 2014



Mid-October is a beautiful time to be in Kentucky. The heat and humidity of summer are gone, autumn’s leaves are in full flame, and Kentucky’s iconic distilleries are busy transforming fall’s grain harvest into new bourbon whiskey.

How would you like to share a few October days with me on an exclusive 3-day tour of Kentucky’s bourbon country? I promise you will love it. We’ll visit distilleries, and do a whole lot more. At the distilleries, we’ll have special behind-the-scenes access. We’ll also see bourbon barrels being made, and bourbon candy. It’s a memorable experience and a lot of fun.

We’ll leave every morning from Louisville. A terrific lunch each day is included. Where you stay and what you do in the evening is up to you, but our days will be jam-packed and I’ll be there the whole time, to share my knowledge and experience, and answer all of your questions as we explore some of my favorite places in the heartland of bourbon whiskey.

The dates are October 15-17, 2014. All of the details, including a complete itinerary, are here. The cost is $599 per person, which includes transportation, admissions, appetizers, lunches, a bourbon tasting with me, and an autographed book. For more information or to reserve your seat, call Mint Julep Tours at 502-583-1433 or email chasta@mintjuleptours.com.

We did a tour in March of this year and everyone loved it. The photograph above was taken during our visit to the grave of Dr. James C. Crow in Versailles. Everyone made new friends on the trip and got to know the real Kentucky. We were warmly received everywhere we went.

Mint Julep Tours does an outstanding job with the arrangements. They make sure we’re fed, watered, and on-schedule. Mint Julep is bourbon country’s premier tour company and I'm proud they're my partner in this endeavor.

There are only 20 spots available. It’s a little tricky, because we have to book all 20 to be able to do the tour, but people hesitate to sign up for something they know might be cancelled. That’s why we set a deadline of September 1, so you’ll know if the tour is on or not with plenty of time left to make your travel and lodging arrangements. (Mint Julep can get you deals on the lodging.)

Whether you’ve never been or can’t get enough, I promise you this will be a one-of-a-kind experience. I’m looking forward to meeting you and showing you around the Kentucky I love.

Tuesday, July 15, 2014

The Movement to Enforce 5.36(d) Is Growing


The Treasury Department's Alcohol Tax and Trade Bureau (TTB) puts out a series of informational brochures directed at the general public. This one, for instance, is entitled "What You Should Know About Distilled Spirits Labels."

On the back is a column of text that starts out, "How TTB Protects the Public." It says things like this: "TTB takes tremendous pride in its strategic mission to 'protect the public' which is designed to ensure the integrity of alcohol beverages in the marketplace, verify and substantiate industry member compliance with law and regulations, and to provide information to the public as a means of preventing consumer deception."

Recent examples of how TTB is failing at its mission can be read here and here. There are many others. The reality is so far from the brochure's claims, you have to laugh to keep from crying.

As citizens in a democracy, we can do something when our government fails us. We can complain to the agency in question, of course. We can also complain to our Congressional representatives. With so many fails we have to pick our fights and TTB Rule 5.36(d) is a good place to start. That was the subject of a post here two weeks ago.

One of the people who started this movement is Wade Woodard, who lives in Houston. His rep is Gene Green, who proudly represents the Texas 29th. Rep. Green responded quickly to Mr. Woodard's letter.

Although there are 5.36(d) violators all over the country, Texas is significant because there are several non-distiller producers (NDPs) there who try to create the illusion that their sourced whiskeys are made in Texas when they're not. Naturally, they don't comply with rule 5.36(d) which requires them to put "distilled in Indiana" or "distilled in Kentucky" on the label, which would destroy that illusion.

This doesn't sit well with Texans like Mr. Woodard. Rep. Green doesn't care for it either. He wrote, "As a proud Texan, I firmly oppose businesses importing goods and falsely labeling them as being made in our state." He has promised to write a letter to the Commissioner of the TTB about our allegations, and asking how they are enforcing the labeling requirements and investigating potential violations.

Good for Rep. Green. We need more like him.

To that end, here's what you need to do, all of you committed bourbon lovers out there. Do what Mr. Woodard did and write to your representative about 5.36(d). There's a sample letter here. By all means, personalize it. Tell your representative why this is important to you. Then send copies to the following.

Rep. John Yarmuth
Co-Chair Congressional Bourbon Caucus
403 Cannon House Office Building
U. S. House of Representatives
Washington, DC 20515

Rep. Brett Guthrie
Co-Chair Congressional Bourbon Caucus
308 Cannon House Office Building
U. S. House of Representatives
Washington, DC 20515

Frank Coleman
SVP Distilled Spirits Council
1250 Eye Street, NW, Suite 400
Washington, D.C. 20005

Eric Gregory
President, Kentucky Distillers’ Association
614 Shelby Street
Frankfort KY 40601

Victoria I. McDowell
Executive Director
The Presidents' Forum of the Distilled Spirits Industry
4601 N. Park Ave., Suite 1721
Chevy Chase, Maryland 20815

Monday, July 14, 2014

And Then There Was a Van Winkle Bourbon Barrel Box and It Was the Best Box Ever Made




The video above is mostly just a well-made video you can enjoy for what it is. Heritage Handcrafted does interesting things with used bourbon barrels, including this project with the Van Winkles. Pappy & Company is an outfit run by Pappy Van Winkle's great-granddaughters, who happen to be triplets. It sells everything Van Winkle except the whiskey, which is still the province of their father and brother.

The distillery shown in the video is Buffalo Trace, of course. There is no Old Rip Van Winkle Distillery. The Van Winkle whiskeys are a collaboration between the Van Winkles and Buffalo Trace.

The phenomenon that is the Great American Whiskey Revival of the Early 21st Century has spawned many sub-phenomena, of which Van Winkle mania may be both the silliest and most profound. The Van Winkle whiskeys are very good but their supposed exceptionalism is exaggerated to an extreme. Still, with retailers and illegal resellers doubling and tripling (and more) the suggested retail price of the Van Winkle whiskeys, and acting like they're doing you a favor, at least this is the family trying to feed the beast in a tasteful way.

Credit where credit is due.

The other day, on a bourbon web site, a self-identified bourbon beginner was using a smart phone app that prompted him to ask a vague question about Pappy 23, like "is it really all that great?" How to answer? Bourbon should be enjoyed and people may enjoy it however they choose, but even if you can afford a Ferrari, you probably shouldn't take your driving lessons in one. "Why not start with the best?" is the usual counterargument, but if what you've learned so far about bourbon is that Pappy is the best, then what you've learned is not useful.

It's not that something else is the best, it is that the early lesson you should have received is that 'best' is a false and destructive standard. The essence of the bourbon hobby is experience. When you buy a new video game, do you also buy a cheat book so you can rush to the end? Maybe you do. In both cases, you've only cheated yourself.

The unintentional humor in the video is how everybody throws back Pappy 23 like it's an everyday thing, and I suppose if your name is Van Winkle it can be. Mazel tov. Just like how it's on offer at every dive bar in "Justified." It's an inside joke, but a bitter one for the average bourbon drinker who would just like to try the stuff. Here, though, the human brain is very accommodating. If you move heaven and earth to get a taste of Van Winkle, expecting it to be nectar of the gods, it probably will oblige.

To that end, every Wednesday at Twisted Spoke here in Chicago is Whiskey Wednesday, and all whiskey is half-price, including Van Winkle. (Note: at the moment, the Spoke's website is being renovated, so you might want to call first.)

Wednesday, July 9, 2014

The On-Again, Off-Again Battle Between Tennessee and Diageo Is On-Again


Alcoholic beverages are heavily regulated at the federal and state levels. At the state level, it's each state's Alcoholic Beverage Commission (ABC). Some have slightly different names, but every state has one. ABCs have enforcement authority. They have their own investigators and inspectors. Only in serious criminal cases will the state police also become involved.

We think of the feds as regulating production and the ABCs as regulating sales, but ABCs also license and regulate production when alcoholic beverages are made within their state's borders, such as in Kentucky and Tennessee.

Tennessee, for instance, has a law that says whiskey distilled in Tennessee must be aged in Tennessee, in the same county where it was made, or a county adjacent to that county. That's the law. The reason for it may be obscure but what it requires is clear.

Then why doesn't Keith Bell, the director of Tennessee's ABC, understand it? Why does he think it makes a difference how whiskey removed from Tennessee is going to be used? Sure, if the whiskey is being removed for immediate bottling out-of-state, then there is no violation. But if the whiskey is being removed for aging in another state, such as Kentucky, as 850,000 gallons were, then that company (Diageo-George Dickel) is in violation.

After five years of Diageo sending whiskey made at George Dickel in Tennessee to Stitzel-Weller in Louisville for aging, Tennessee's ABC finally decided to cite Diageo for a violation. Diageo sued in Federal court, saying essentially that it is a dumb law because it serves no purpose.

At a hearing in that case on June 10, George Dickel Master Distiller John Lunn testified that the whiskey stored in Kentucky would be blended with other Diageo spirits, and that no George Dickel Tennessee Whisky had left the state. He further testified that in 2009, Dickel's warehouses were effectively full, so they started to ship newly-made bourbon and wheat whiskey to Louisville, in the meantime making plans to build new warehouses in Tennessee. The alternative would have been to shutter the distillery until new warehouses could be built. Sixteen-thousand barrels of whiskey (about 850,000 gallons) were sent to Kentucky.

That seemed to satisfy ABC Director Bell because when Lunn finished testifying, Assistant Attorney General Kyle Hixson announced that the state would not pursue penalties against Diageo, though he declined to say why. "Then that's it," said Senior District Judge John T. Nixon, and adjourned the hearing.

By the way, the new warehouse at Dickel is open and the removals have stopped.

As is routine, Judge Nixon ordered the parties to write up an agreement for the court to bless, but they couldn't do it. Since the violations have stopped, Tennessee wanted Diageo to pledge never to sin again. Diageo refused. A hearing was ordered for yesterday, at which the judge told the ABC to provide its interpretation of the storage statute in ten days. The ABC objected. It doesn't think the Court has the authority to order that.

The ABC keeps talking about Tennessee whiskey and making sure George Dickel Tennessee Whiskey isn't being aged in Kentucky. Diageo says nothing in Kentucky is intended to be sold as George Dickel Tennessee Whiskey, but that's not the point. Whiskey made in Tennessee is being aged in Kentucky. That's what the law says you cannot do. Diageo is doing it. If the ABC isn't going to enforce the law, it needs to explain why.

So that is where we are. Diageo has 850,000 gallons of Tennessee-made whiskey slumbering in Kentucky, Tennessee ABC Director Bell is deeply confused, and there is nothing a smart company like Diageo likes better than a confused adversary. Surely there is more amusement to come.