Tuesday, November 18, 2014

The Failure of Diageo's Orphan Barrel Project


Diageo's 4th release of their Orphan Barrel Project is called Lost Prophet, a 22-year-old bourbon distilled in 1991 at what is now the Buffalo Trace Distillery in Frankfort, Kentucky. The retail price will reportedly be $125.

Whether or not Orphan Barrel is successful financially is unknown and while that's probably all that matters to Diageo, as a concept it's already a failure. Yes, there is a portion of the market that responds to anything very old, limited, and expensive, but that's all the Orphan Barrel bourbons are. People already feel burned by the 'limited' claim, but what the series really lacks is the transparency and authenticity true whiskey enthusiasts crave.

Although the whiskey is real, just about everything else about this 'project' is phony, starting with the designation 'orphan barrels.' All four releases were distilled by or, in this case, for United Distillers (UD), which was the distilled spirits arm of Guinness. In 1997, Guinness merged with Grand Metropolitan to form Diageo. Therefore, the 'parent' of these whiskeys didn't so much die as remarry and take a new name.

The first three 'orphans' were all made at UD's Bernheim Distillery in Louisville, which is now owned by Heaven Hill. That distillery was completely demolished and rebuilt in 1991-92, giving us 'Old Bernheim' and 'New Bernheim.' Old Blowhard was distilled at Old Bernheim. Barterhouse and Rhetoric were distilled at New Bernheim. Although UD sold the distillery and several brands in 1999, along with some whiskey stocks, it retained ownership of what it's now calling 'orphans.' The Bernheim whiskey was originally aged in the masonry warehouses at Bernheim, but  moved to the steel-clad warehouses at Stitzel-Weller (SW) after Bernheim was sold.

The whiskey now being bottled as Lost Prophet was distilled at what is now Buffalo Trace in Frankfort on behalf of UD while Bernheim was under construction. It was originally aged there, but also moved to SW at some point. There was also a stock of whiskey made at SW, some of which sojourned in Canada for a time, before returning to Kentucky for sale to the makers of Jefferson's Bourbon. Whether or not Diageo has any of that whiskey left is another unanswered question. A stock of rye whiskey made at Old Bernheim was sold to Julian Van Winkle, then by him to Kentucky Bourbon Distillers. It is unknown if Diageo retained any of that either. How many other orphans is it sheltering in Shively? No one outside the company knows.

Shortly after the whiskey for Lost Prophet was distilled, ownership of the Frankfort distillery passed to Sazerac, the current owner. Until 1983, both Buffalo Trace (then known as the George Stagg Distillery) and Bernheim were owned by Schenley, another Diageo predecessor company. After the mid-1970s, American whiskey was in the doldrums and many distilleries only operated for a few months each year. Schenley operated Bernheim and Stagg as if they were one distillery, taking turns meeting the company's limited needs for new whiskey. None of the company's Kentucky brands had a true home. If they needed to make some of a particular recipe, they did it at whichever distillery was operating at that moment.

In 1983, Schenley sold the Stagg Distillery and Ancient Age brand to Ferdie Falk and Robert Baranaskas. They called their new company Age International (AI). In 1987, the rest of Schenley was acquired by UD.

Falk and Baranaskas were longtime industry veterans. Falk was the CEO of Fleischmann’s, a division of Standard Brands, and Baranaskas was the company's president. Falk was also a former executive at Schenley. When Fleischmann’s was sold, Falk and Baranaskas wanted to stay in the business so they persuaded Schenley to sell them the Ancient Age brand and Stagg distillery.

Falk and Baranaskas made money however they could during what was a very hard period for American whiskey makers. They did a lot of contract distilling and sold bulk whiskey. As such, their relationship with Schenley and then UD continued more or less unchanged, as they could make all of Schenley/UD's products.

In the mid-1980s, international sales of American whiskey began to pick up, particularly in Japan. Falk and Baranaskas, and their former Master Distiller Elmer T. Lee, created Blanton's Single Barrel Bourbon, primarily for the Japanese market. It was a hit. Other single barrel, super premium brands followed, including one named for Mr. Lee.

In 1991, Falk and Baranaskas sold a 22.5 percent interest in AI to Japan’s Takara Shuzo, with right of first refusal to purchase the remaining shares. In 1992, Falk (35.1 percent) and Baranaskas (33.9 percent) sold their shares to Takara for $20 million. Takara immediately sold the distillery to Sazerac but retained the corporate entity and brand trademarks. All of the AI brands continued to be made at Buffalo Trace, as they are to this day.

The ultimate failure of Diageo's Orphan Barrel Project is that you didn't learn any of this from them. Instead you get silly names, cute but meaningless label designs, and other made-up stuff. All of these whiskeys have a real story behind them and, presumably, at the prices being charged, it's information consumers would like to know. For instance, all of the Bernheim whiskey was made during the tenure of Ed Foote as master distiller. Gary Gayhart was master distiller at Stagg when the Lost Prophet whiskey was made.

The above is history, public information. What isn't known is the mash bill, the barrel char level, and other specifications of each product. Diageo knows all of this, why aren't they saying? They also haven't explained why none of this whiskey was sold before now, even as Diageo was contracting with other distillers for millions of gallons of spirit to support Bulleit and its other brands. Despite Diageo's use of the term 'limited,' this is clearly a very large stock of whiskey. How much more is there? Wouldn't you like to know?

Diageo could have told us interesting, true stories about these products. Instead they give us fantasy and look like they have something to hide.

35 comments:

Anonymous said...

I mostly wish they had released these at higher proof. I think some could have been incredible at 110+ proof but Diageo decided to water them down for us.

Matt L said...

Great post Chuck, thanks so much for doing what you do! This is so much more interesting than all the bull$&@# on the bottles. But that's what a huge corporate entity will do isn't it? Hire a big marketing firm to sell whiskey instead of just telling the real story.

kaiserhog said...

Hope that Diageo just leaves George Dickel alone.

Anonymous said...

Excellent write-up Chuck. It follows nicely in expanded detail on your earlier opiniom regarding Barterhouse; ie. This whiskey has a fascinating history - so much so it is a real shame (and quote possibly a missed opportunity) that Diageo elected not to share it - marketing instead on a story which, with the sale of each bottle, has even the novices thinking twice 'um, if Barterhouse is so limited, why is there so much of it?'

Anonymous said...

You have to water down/filter overaged/overoaked juice to make it drinkable.

Anonymous said...

I'm not buying any of this stuff b/c

1. Proof is too low

2. Lack of transparency as detailed by Chuck

3. Fake marketing that they are "limited" b/c obviously, there are 10's of thousands of each expression

4. there is a lot of other stuff I'd rather buy with my $100 that doesn't have issues with 1, 2 & 3 above.

Mike said...

I think calling it a failure is sensationalistic, but the effort is certainly a missed opportunity. I think it illustrates the disconnect between traditions in whiskey selling and how consumers have changed in recent years.

Thanks for providing the info. It's very interesting.

Anonymous said...

Does anyone actually know how much actually sits in the S-W warehouses and where it all came from over the years since Norton Simon purchase?

risenc said...

Great write up, Chuck. However, I'm unclear how Diageo's decision not to play up Takara's right of first refusal over Falk and Baranaskas's remaining shares -- and other such details -- makes the Orphan Barrel program a "failure."

There's a very small group of people who find that interesting; for 99.9 percent of the market, such information is uninteresting at best. Mash bills, char levels, etc. are more interesting to a larger set of folks -- but again, it's not unreasonable to posit, as Diageo seems to do, that most people don't care, and might even find such details off-putting. (Let's leave aside the company's misdirection regarding the "limited" nature of the releases; that's certainly a knock.)

I guess my point is that the kids of folks who read your blog are perfectly right to argue that Diageo missed an opportunity to do something that we would regard as cool. But as we all know, we're not the core of the market for a company like Diageo. Saying that Diageo has failed because it didn't cater to our interests is, with all due respect, a bit myopic.

Mr Manhattan said...

Thanks for this great write up. I concur this level of detail would have been great to have from the horses' mouths. In their defense, a lot of this backstory would probably have gone over the heads of the average consumer. Patrons in my bar looking to spend some $ generally only care about the label (Pappy) and whether ordering it gives 'em bragging rights later. A label they've never seens? A few details are usually all they need to make a decision, specifically how it tastes, not a curriculum vitae of each barrel.

Anonymous said...

Of course it is possible that admitting to the progenesis would require admitting to an inferior production that was shunned for years out of fear it had created an inferior product.

The reason it is so low proof? Hiding the offensive compounds?

The reason they don't want you know know the true history? You would know you were paying over $100 too much for an inferior product.

Why admit to failure... when you can market it as "Limited" and sell it to unsuspecting people who think they are actually spending a premium to purchase a high limited edition... when in reality they are wasting money on a massively inferior product?

I'm not saying that's what is happening here.... but it sure seems plausible given how others have treated this batch, how much there is, and how little they are willing to let on.

Chuck Cowdery said...

The observation that many people don't care about provenance is certainly valid. Obviously, that's Diageo's target. My opinion is that they had a chance to do something cool and didn't. That, to me, is a fail.

Quintilian B. Nasty said...

At those prices and proof along with the silly marketing schemes, I'll save my money and spend it on very good and reasonably priced bourbons.

Chuck Cowdery said...

Fred Minnick's take on Lost Prophet.

Guy L. Smith said...

Oh Chuck! It’s so much fun to know that Diageo can elicit so much passion from you. Not sure why you hold such antipathy for a group that has been providing people with awesome liquids since the 1700s: whiskeys, whiskys, vodkas, beers, gins, even raki and baijiu (they’re not from here) and many other cool products. Every minute, around the world and at your corner bar, billions of people are enjoying the fruits of our master distillers, master blenders, brewmasters, vintners and the tens of thousands of people who support their craftsmanship. Dude, we kinda know what we’re doing. I’m distressed (actually I’m not distressed at all, but the lawyers made me say it that way) that you don’t like us. But here’s the deal: whiskies (no matter how silly you want to be on how to spell things…kinda like behavior and behaviour …no, not yours) are suddenly popular with hosts of folks who a few years back were drinking wine spritzers (gag!). Why? Because they like the taste. They like the romance (we’ll get someone over at Harlequin to explain romance for you!) Hey, they like it. Celebrate that. Kinda silly to always be taking a shot at the corporate suits just because they have a catchy name for some rare and awesome liquids (awesome by all accounts, even yours). Lastly, and this was the fun part: in your comment above you said we missed a “chance to do something cool.” Being the arbiter of “cool” is a heavy responsibility. We’ll all be watching for more cool. 

Cheers!

Your Obed. Servant,

guy

Guy L. Smith
EVP of Cool Diageo
and
Vice Chairman of the Jeremiah Weed (whiski) Company

Dan Z. said...

Is this the authentic Guy Smith, for real? If so, he has also popped in to Fred's place as VC of Piehole: Fred - Piehole

Shows a bit of a sense of humor anyway, I guess.

Chuck Cowdery said...

If your liquid is so great, Guy, why not tell us all about it? That's all I'm saying.

Anonymous said...

I believe Harlequin Romance is basically a producer of sensationalized fiction. I can see how Diageo personnel must be familiar with their work. It's probably required reading for this add clerks.

Funky Tape said...

I agree with Guy. Good for Diageo for milking the market. They're not idiots and they know the general populace is essentially braindead with loads if cash for this stuff. The avg consumer *should* be able to spot the slick marketing and gimmicky-ness, but then again they'd have to actually care enough. They do not, that's pretty clear.

If the market did not demand the 'Orphans' there would be none. They'll sell all of it and they'll make their dough. That's what they're supposed to do!!

Anonymous said...

Good lord Brown-Forman and Beam must have paid you well back in the day, Chuck. You just can't stop hating on Diageo. And that's cool, freedom of expression etc. But most flesh-and-blood whiskey folk I chat with at tasting events (in these dubious times) deeply suspect or wholly believe the vast majority of producers are completely full of sh*t... across the board.
So Diageo muckraking ain't gonna persuade us to view Diageo as an outlier. It just wont.
And as failed concepts go, Sinatra Select was as self-serving a d*ck move as whiskey marketing provided in 2014. I know Brown-Forman is an organization that has helped you in the past, but it's pretty damn self righteous of you to cite Dieageo for a lack of transparency and authenticity while you're using your platform to play favorites and give some bullsh*tters a complete pass.

Chuck Cowdery said...

For the record, 25-30 years ago I did some marketing work for Brown-Forman and Jim Beam. During that same period I also did the same kind of work for Diageo-predecessor United Distillers, and several other drinks companies. I'm also accustomed to the tactic of attacking the messenger when you can't argue with the message.

Anonymous said...

In opinion pieces the messenger is the message.

Charles_in_TN said...

I prefer to be an informed consumer. That seems to be contrary to the desire of most US whiskey distillers. I want to know what I am buying. I agree with your write up. They are using smoke and mirrors when the true story would be much preferred.

Tadas said...

Hmmm discussion here is gone and the whole subject and the article became tools of attacking the other side :(
1. I would want to see on each bottle (front label) that states distillery where the product was made and where it was aged. Most bourbons and American whiskeys do not mention that. Surprisingly with all the blah blah on "Orphan Barrels", they state where it was made and where it was aged.
2. I would love to see more honesty on the bottles, not elaborate made up "folk" stories on the labels like "Orphan Barrel". Just read couple bottle labels from micro-distilleries. Puts a bad taste in my mouth about the whole micro-distillery movement.
3. Price to value ratio. There are many offenders, but “Orphan Barrell” whiskeys are very reasonable priced. Who can find another 20+year old whiskey for less $100 that also tastes good? For comparison: Barterhouse 20yo cost $75 in a controlled state of Michigan - Balcones Texas Single Malt which was aged just for a few months cost $71.

Anonymous said...

Talk about beating a dead horse...
Bottom line should be, Mash Bill, Method of Distillation, Location of Distillation, Location of Aging, and the bottom of the bottom line after some integrity would be nose and taste! Everything about intregrity has left this country. As the result, some "good ole folk" making Whiskey in micro-distilleries seems to ring true. (I don't meen the foo foo yuppie micro-distilleries of the urban turf. Take a walk into the country, and it can be suburban country, and find someone making Whiskey like it was made in the late 1700's to mid 1800's and you will find Whiskey worth all your time and attention. Once again, american banter has lost focus on the target!

morlock said...

My opinions or product preferences aside, I purchased multiple Balcones TSM, regardless at 15% less than the price named. I haven't & won't purchase Orphan Barrel expressions. I can bloviate with the best, but my wallet speaks loudest. Obfuscation of product provenance pales in significance compared to Diageo corp. practices e,g, distilleries as fungible cf. http://www.belfasttelegraph.co.uk/news/local-national/northern-ireland/tequila-firm-buys-whiskey-brand-30713043.html, predatory investment capital http://www.just-drinks.com/comment/one-year-on_id114696.aspx and transnational assimilation of criminal operations http://www.thedrinksbusiness.com/2013/11/as-companies-expand-how-can-they-patrol-local-markets/ , none of which behaviors are unique to their enterprise.

seattle foodie said...

I may have missed the boat on this, but as a love of Bourbon, and particular Small Batch I'll say I've enjoyed the Lost Prophet. At the age and price point it is well worth it.

Randazzler said...

Chuck, thank you. I found your information fascinating but then again I am not the average Bourbon Snob (self professed). I have sought out and purchased all five releases and have back up bottles to savor down the road. My pallet absolutely discerned good to great bourbon than is accessible and not being sold for ridicuolus money like Pappy. The finish of all of these bourbons is long and lucious. I agree also with many who posted comments about wishing for a barrel proof or at least 110 proof. Likewise I agree with the post who declared that the watering down of such antique bourbons to calm the oak is a valid point. Let's face it, Old Blowhard is way to woody even at 90 proof. I use a few drops of this in some of the other Orphans to boost barrel flavor; does'nt take much. Alsway love to learn more about bourbon and rye. Love the flavor of the Orphan Barrel releases but also agree with you on the marketing and especially the names. Well, I am raising my snifter of Lost Prophet with a tablespoon of Old Blowhard and a shot of Barterhouse added- these bourbons mix incredibly well to create amazing flavors!

Anonymous said...

I tend to agree with a few of the dissenters. I don't think that the types of people buying an $80+ bottle of whiskey are necessarily uninformed. I happen to not really care for Barterhouse or Rhetoric, but Lost Prophet and Forged Oak are exceptional values. I think that Orphan Barrel/Diageo has been relatively open about all this information (to the fact that a simple Google search will give you the mash bill and distillery of origin of every label released so far.) I am an above-average bourbon consumer, and I am not sure I've ever seen a whiskey with the char level listed on the bottle- maybe with the exception of some Parker's Heritage Collection expressions, and many brands are so muddied that even finding a mashbill is impossible. I would have loved to see these (especially Forged Oak) bottled at barrel strength, but that is a far-fetched expectation and not concurrent with the bourbon market. What is also not concurrent with the bourbon market is a 20+ year aged whiskey widely available for under $150. I applaud Diageo/Orphan Barrel for that, and even if that were the only consideration, I'd call the brand a success.

Anonymous said...


The Whiskey is good.
Get over it.
I am new to Bourbons but this collection is awesome.

-Artie said...

All said and done - while I think the Orphan Barrel Story has some holes, hasn't it produced some decent whiskey, and a lot to talk about? And, sin't creating a stir what marketing is supposed to do?

Some of the OB offerings are good. Some are not. That is true for *all* distillers. Agree for those bourbon history buffs, the lineage of the OB stock would make for an interesting tale. I don't condone deceptive marketing, but, I don't ever recall seeing Diageo ever saying these barrels were anything other than found barrels of old whiskey. Other bourbon bloggers stated different legends of the possible lineage, but, the company stayed out of the fray. They didn't do anything to stop it, because, well, it fueled sales. This should teach us all a lesson: Where a market exists, someone will create a product to fill that market. Bourbon is in full swing, and if a bourbon person sees a new bottle with a high price tag, well, it drives them curiously nuts. I've learned to not always expect the best of an expensive bottle. Even the fabled Elijah Craig, a great bourbon, missed with it's last 23 yr old release. I spent the $200, bought the bottle, and was overwhelmed by oak.

The thing I would like to remind folks of is that Diageo owns lots of distilleries that make a tremendous amount of good whisky. They own the Classic Malts of Scotland (Dalwhinnie, Talisker, Craggamore, Oban, Lagavulin, Glenkinchie), as well as Cao Isla, Cardhu, Knockando, The Singleton, Clynelish, etc.

Ben from Florida said...

where can you get the lost prophet and old Blowhard?

Chuck Cowdery said...

Unless they've sold out they should be everywhere. Ask your whiskey monger.

Anonymous said...

Lost Prophet is my favorite of series; Old Blowhard, Barterhouse, Rhetoric & Forged Oak. Totally different whiskey as well. Mashbill would be nice to know, suspect low rye

Anonymous said...

I guess the whole concept of marketing is lost on you. Good graphic design and bottles along with a mysterious story appeals to many people. I am for all I intents and purposes a purist when it comes to many things but calling this line a failure because it doesn't allign with your whiskey ideology is pretty intellectually dishonest. The truth is, for as many people as there are that despise everything about this concept there are just as many that enjoy it. It's all about perceived value. Enough people were obviously willing to buy the stuff up and cause it to become rare in its own right so to call it a failure is kind of nonsensical. I do think respecting the true history of each barrel and those who made them by showing mash bill etc is also a very good idea as far as marketing and respecting the history of the craft. It is just not what they decided to do. This is a massive corporate entity we are talking about here and I'm quite sure some pretty precise marketing science was applied to the line and how it has been release. This is why America is great. If you don't like a product don't buy it and feel free to voice your opinion about it too, but at least be fair when labeling something a failure.