Thursday, June 12, 2014
Tennessee's Alcoholic Beverage Commission Won't Punish Diageo After All
Three months ago, Tennessee's Alcoholic Beverage Commission (TABC) cited Diageo for shipping whiskey made in Tennessee to Kentucky for aging, contrary to Tennessee law. One week later, Diageo sued the TABC, challenging the law as unconstitutional. A trial in federal court commenced.
The law, passed in 1937 when Tennessee finally ended prohibition in the state, says all whiskey made in Tennessee must be aged in the county where it was made. Last year the law was amended to permit storage in adjacent counties. When cited, Diageo admitted that it made whiskey at George Dickel and shipped it to Stitzel-Weller in Louisville for aging, but none of it was whiskey intended for George Dickel Tennessee Whisky. That whiskey was being aged according to the law, in Tennessee. (There's more here.)
On Tuesday night the trial came to an abrupt halt after Dickel master distiller John Lunn testified that the liquor stored in Kentucky would be blended with other Diageo spirits, and that George Dickel Tennessee Whisky had been made and stored at the distillery all along. 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.
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.
A new warehouse at Tullahoma was completed in April, and another one is planned, so the cited activity has ended for now. Diageo attorney Bobby Burchfield said he will seek an agreement with the state to not seek penalties against Diageo if it has to send whiskey out of state again.
Diageo continues to be secretive about exactly how it is using the bourbon and wheat whiskey it made in Tennessee, some of which has reached its fifth birthday. It cannot be used in any product that says 'Kentucky' on the label. One candidate is Barrell Bourbon, which has been spotted in the New York City area. Barrell claims in its advertising that it is five years old, distilled in Tennessee, and aged in Kentucky. (None of that, however, is on the label.) That is pretty strong evidence. If Barrell is Diageo, it is hiding behind a Potemkin craft distillery called Barrell Craft Spirits.
Can the biggest whiskey makers also be craft? That's a proposition all of them are testing right now in one way or another.