Wednesday, April 23, 2014
Jim Beam Bourbon made history today as the first bourbon-maker to fill 13 million barrels since the repeal of Prohibition in 1933. The barrel was personally filled and sealed by Fred Noe, Jim Beam’s great-grandson and seventh generation master distiller, at the company’s flagship distillery in Clermont, Ky. Also on hand to celebrate the milestone was Fred’s son Freddie Noe, an eighth generation Beam who also works at the distillery.
“I guess, in this case, 13 is a lucky number,” said Fred Noe. “As a family, we’re proud of this milestone. It speaks loudly and proudly to our longevity and history, and bolsters our position as the world’s largest producer of bourbon. We’ve been making bourbon a long time and we’ve made a lot of it.”
The historic milestone, achieved less than three years after filling the 12 millionth barrel, underscores bourbon’s soaring popularity the world over. Domestic sales of bourbon have increased by 40 percent in the past five years and exports have topped the $1 billion mark. Demand for Jim Beam Bourbon is on the rise, as well – not just Jim Beam’s flagship white label bourbon, but its entire bourbon portfolio that includes Jim Beam Black, Jim Beam Devil’s Cut, Jim Beam Honey, Jim Beam Maple, Jim Beam Signature Craft, Red Stag by Jim Beam, and Jim Beam Single Barrel.
“This recent success is a testament to the craft and heritage of ‘America’s Native Spirit,’” said Noe, who has been on hand for a number of barreling milestones in his 30 plus years at the Beam distillery. “Globally, bourbon is in huge demand, and we’re producing it at a faster rate than ever before. We expect even less time to pass between now and the 14 millionth barrel fill than the three short years it took us to hit 13 million after 12 million.”
The 13 millionth barrel will be aged inside the distillery’s historic rackhouse D, a nine-story rackhouse re-built after Prohibition by Jim Beam, his brother, Park, and their sons T. Jeremiah, Carl, and Earl. It is on the distillery grounds and open to Beam’s bourbon fans who come to tour the Jim Beam American Stillhouse.
To rain on Beam’s parade a little, Jack Daniel’s decision to call its Tennessee-made bourbon-style whiskey ‘Tennessee whiskey’ often gives Beam, and Heaven Hill’s Evan Williams, bragging rights they don’t exactly deserve. Historically close in sales, Daniel’s has in recent years opened up a very large lead on Beam, especially internationally. Although privately-owned Heaven Hill doesn’t release sales figures, it is widely believed that Evan Williams is a fairly distant #3.
Therefore, this milestone is only ‘historic’ if you lean on the word ‘bourbon,’ as Jack Daniel’s passed it some time ago, even though they got a later start due to the 1938 repeal of Tennessee state prohibition. Beam calls itself the world’s #1 bourbon, which it is, but it’s the #2 bourbon-style American whiskey. Similarly, Evan Williams likes to call itself, truthfully, the #2 bourbon, but it’s actually the #3 bourbon-style American whiskey.
Tuesday, April 22, 2014
The U.S. Treasury Department's Alcohol Tax and Trade Bureau (TTB), which regulates all alcoholic beverages sold in the United States, announced today that it has not approved for sale a new powdered alcohol product called Palcohol, reversing previous announcements by the bureau and producer that approval had been obtained.
It's hard to believe that such a thing as powdered alcohol can actually work and there is plenty of reason to be skeptical. The website, for instance, says you reconstitute Palcohol by adding it to five ounces of water, but it never says how much powder to use in that formula. A teaspoon? A tablespoon? A cup? Very suspicious.
It is probably good that TTB has put the brakes on this. The operator of a beverage law web site told USA Today that it looks like Congressional intervention. Powerful people are asking questions TTB can't answer.
They should not stop there.
The vehicle through which TTB regulates alcoholic beverages (usually in liquid form) is the Certificate of Label Approval (COLA) process. Producers submit proposed labels and other required information, which TTB reviews and either approves or rejects. Rejections usually include some guidance as to how the label can be corrected.
Many producers, large and small, complain about the process. They say COLA rulings often seem arbitrary and inconsistent, and TTB's guidance is often vague or contradictory.
One big problem is that the COLA process is largely run on the honor system. They expect producers to know and obey the rules. They usually only question something on a COLA application if it is wrong on its face, and sometimes not even then.
A few years ago, TTB approved a label for a 'potato whiskey,' despite that most basic of rules that whiskey is a product made from grain. Even though the rules clearly state that whiskey must be "bottled at not less than 80° proof," TTB has approved whiskey bottled at lower proof on several occasions.
Although the system seems to be breaking down now, it worked okay when virtually all producers were big companies, with lots of lawyers, all making the same products. Now the big companies are innovating like never before and there are hundreds of new micro-producers, some of whom don't understand the rules, and some of whom deliberately circumvent them when they think it's to their advantage.
As TTB becomes less and less effective, the crafty dodgers become more brazen.
The problem has gotten nothing but worse. Clearly, TTB is overwhelmed, and their 'honor system' is crumbling. When it comes to consumers being able to trust that the alcoholic beverage products they buy and consume are labeled correctly, we simply cannot. TTB fails way too often, to the point where the consumer protection part of their operation has become just about worthless.
However, they still seem to do their main job, tax collection, quite well.
Here is a great example. There is a TTB rule that says every distilled spirit label has to have on it the name of the producer (name can be a DBA) and a location (city and state) where that producer does business. The listed state does not have to be the state where the product was distilled but if it's not, then the state in which the product was distilled must be disclosed too.
A diligent whiskey enthusiast has compiled a list of 29 products, all whiskeys from small producers, that fail to list the state of distillation, even though it is known that the state of distillation is not the same as the state shown on the label. He has provided his list to TTB.
In more than a few cases, the producer has listed the location with which it wants to be associated when their product is in fact distilled in Lawrenceburg, Indiana, a fact they would just as soon obscure. These are not, in other words, honest mistakes. They are deliberate actions intended to mislead consumers, in clear violation of Federal law.
This is not about whether or not alcohol is over-regulated. This is about rules of long standing that some producers follow and others flout to give themselves a competitive advantage, so honest producers are hurt and public confidence in the regulatory system is seriously eroded.
Let's hope the legislators who are questioning the Palcohol decision will also address the much larger mess that TTB has become.
Sunday, April 20, 2014
You know those TV news teasers that go like this: "Something you could be eating right now might kill you. Details at Eleven." Don't you hate those?
Well, this is like that. During the recent fight about Tennessee whiskey standards, the barrel shortage was frequently mentioned. Is it real? If it is, how bad is it, what’s causing it, and how long will it last? If you want to know the truth about America's whiskey barrel crisis, you'll just have to subscribe to The Bourbon Country Reader. It's all in the new issue (Volume 16, Number 1) which is in the mail right now.
The truth is, I'm doing you a favor. Because if you're a fan of American whiskey, macro or micro (and why else would you be reading this blog?), you should have subscribed to The Bourbon Country Reader a long time ago. It's your best source for original reporting and informed commentary you won't find anyplace else. Also in this issue, we look at the weird, new world of whiskey advertising on TV.
Happily, a subscription to The Bourbon Country Reader is still just $20 per year (six issues) for addresses in the USA, $25 for everyone else. The Bourbon Country Reader is always independent and idiosyncratic and has no distillery affiliation. It is published six times a year, or thereabouts.
Click here to subscribe with PayPal or any major credit card, or for more information. Click here for a free sample issue (in PDF format). Click here to open or download the free PDF document, "The Bourbon Country Reader Issue Contents in Chronological Order." (It's like an index.)
If you prefer to pay by check, make it payable to Made and Bottled in Kentucky, and mail it to Made and Bottled in Kentucky, 3712 N. Broadway, PMB 298, Chicago, IL 60613-4198. Checks drawn on U.S. banks only, please.
Saturday, April 19, 2014
As you may recall, we launched the Fountainhead School of Spirits in February. Classes resume on April 29. The spring session runs through June 3. Classes are held on Tuesday nights in the Barrel Room at Fountainhead, 1970 W. Montrose, on the North Side of Chicago. For more information, call Fountainhead at (773) 697-8204, or visit their web site.
It goes like this. We taste four or five whiskeys. We taste and talk. It lasts about 90 minutes. It is very informal and probably a bit geeky, but also fun. For the spring session, Sean Ludford is teaching the scotch and Irish classes, I'm teaching the American whiskey classes. The links below take you to Brown Paper Tickets, where you can register and pay for your classes.
The room holds about 20 people so classes often sell out. To avoid disappointment, sign up now.
Tuesday, April 29th, Presenter: Sean Ludford, $40
TITLE: Scotch 150: Intro to Islay
TASTING: 1. Black Bottle 2. Bowmore 12yr 3. Kilchoman Machir Bay 4. Laphroaig 10yr 5. Lagavulin 16yr
DESCRIPTION: We welcome The Beverage Expert, Sean Ludford (BevX.com), to the Barrel Room to discuss an extraordinary anomaly; a small Atlantic Island that produces whiskies passionately sought after all over the globe. But be advised, it’s not just peat and smoke. Experience a tour around Islay and learn the tasty variations in these beautiful whiskies
Tuesday, May 6th, Presenter: Sean Ludford, $40
TITLE: Irish 150: Irish Single Malts Explored
TASTING: 1. Bushmills 10yr 2. Tullamore Dew 12yr 3. Knappogue Castle 12yr 4. Tyrconnel Port Finish 5. Connemara Peated 12yr
DESCRIPTION: Sean’s back to tout the single malt wares of his home country. Let’s get past the bar shots and talk about some serious Irish Malts. The range of these selections is formidable and Sean has mentioned he might have a surprise on hand to enhance the experience. If you haven’t met Sean…that’s a very good thing!
Tuesday, May 13th Presenter: Chuck Cowdery $30
TITLE: American Whiskey 102: The Whiskeys of Four Roses
TASTING: 1. Four Roses Yellow Label Bourbon 2. Four Roses Small Batch Bourbon 3. Four Roses Single Barrel Bourbon 4. Four Roses Single Barrel Fountainhead Selection
DESCRIPTION: Although it is a very old brand, Four Roses Bourbon was not sold in the United States until a decade ago. The Four Roses Distillery is unique because it makes ten different bourbon recipes, all rye-based. The yellow label combines all of them. Small Batch is a mixture of four. Single Barrel is just one. In this session we will taste a variety of these mashbills and yeast strains.
Tuesday, May 20th Presenter: Chuck Cowdery $25
TITLE: North American Whiskey 102: The American Whiskeys of Diageo
TASTING: 1. George Dickel No. 12 Tennessee Whiskey 2. Bulleit Bourbon 3. Bulleit Rye 4. Crown Royal Black Canadian Whiskey
DESCRIPTION: Diageo, the world’s largest drinks company, has a limited presence in American whiskey. It owns the George Dickel Distillery in Tennessee but its Bulleit whiskeys are contract- produced. Its biggest American whiskey is from north of the border, but has bourbon as an ingredient. This course offers a rich taste of American whiskey geography, moving from Tennessee whiskey to Kentucky bourbon and Indiana rye, and ending in Gimli, Manitoba, with the best-selling Canadian blended whisky.
Tuesday, May 27th Presenter: Chuck Cowdery $30
TITLE: American Whisky 150: The Whiskeys of Jim Beam-Advanced
TASTING: 1. Jim Beam Black Label Bourbon 2. Old Grand-Dad 3. Basil Hayden Bourbon 4. Maker’s 46 Bourbon 5. Knob Creek Rye
DESCRIPTION: In this session, we taste the step-up versions of the Beam whiskeys from the basic course. The black label is aged twice as long as white, as is Basil Hayden compared to Grand-Dad. Maker’s 46 undergoes a unique wood treatment after aging. Knob Creek Rye shows how the Beam rye recipe changes as the whiskey matures.
Tuesday, June 3rd Presenter: Chuck Cowdery $25
TITLE: American Whiskey 102: The Whiskeys of Brown Forman
TASTING: 1. Jack Daniel’s Old Number 7 Tennessee Whiskey 2. Early Times 354 Bourbon 3. Old Forester Bourbon 4. Woodford Reserve Bourbon
DESCRIPTION: Brown-Forman is America’s largest whiskey producer and is the only one that makes its own barrels. Most of that whiskey is Tennessee’s Jack Daniel’s Old Number 7, which is second only to Johnnie Walker among all whiskeys in the world. Brown-Forman, a Kentucky company, makes bourbon at its two Kentucky distilleries. Its Woodford Reserve distillery is the only major distillery in the U.S. that exclusively uses pot stills. Among other things, this course will explain the real difference between bourbon whiskey and Tennessee whiskey.
Thursday, April 17, 2014
The gathering at Wild Turkey on Tuesday had two main purposes: to honor Master Distiller Jimmy Russell for his 60 years at the distillery, and to officially open the distillery's new visitors center (pictured above).
Russell's distillery has had many different owners in the past 60 years. For the last five, Gruppo Campari has signed his checks. Tuesday was also the debut of Jean Jacques Dubau ("call me JJ."), the new CEO and President of Campari America. ('JJ' being an attempt to head off the inevitable 'Johnny Jack.')
Campari has invested heavily in Wild Turkey, hundreds of millions of dollars worth, and the place has been transformed probably more than any other distillery in Kentucky over the same five years. Campari has built Wild Turkey a new distillery, bottling house, and now a new visitor's center. It has built several new rackhouses. It has updated the packaging for the entire Wild Turkey line and ramped up production of its bourbon and rye.
In 1954, when Jimmy Russell started at what was then the J. T. S. Brown Distillery, they filled 60 barrels a day and had about 60,000 in storage. These days, Wild Turkey fills 550 barrels a day and has about 500,000 in storage. Those are numbers usually associated with much bigger brands.
Rye production alone has increased by 500 percent since 2009, to 187,000 proof gallons per year.
Dubau said they will have their 20-year plan meeting soon, but mostly they hope to get the next five years right.
At Jimmy Russell’s insistence, the processes haven’t changed with all this growth, they've just been scaled up. For example, Wild Turkey is one of the last bourbon distilleries to make its own yeast. (Most have switched to dry yeast.) Yet even their yeast strain hasn’t been there as long as Russell. It’s just 59 years old.
The sparkling new bottling house will bottle Wild Turkey, of course, but also Campari's Skyy Vodka, a much bigger brand. Skyy is distilled in California but will be shipped to Kentucky for bottling. (Some of it was already being bottled in Kentucky, by Brown-Forman.) Campari has spent money in other places too, such as buying Forty Creek Canadian Whisky. But the investment in physical plant in Kentucky is impressive. The company is gambling big on Wild Turkey’s growth in the U.S. and everywhere else. Should they stumble, they will have a lot of excess whiskey.
But no one is looking at it that way. Both the distillery and bottling house have room to grow inside their respective buildings and there is plenty of empty space on the 800-acre site. Wild Turkey also has rackhouses near the Four Roses Distillery and at Camp Nelson in Jessamine County.
Wild Turkey sells a little bit of two-year-old whiskey for its Australian Ready-to-Drink products, but everything else is five-and-a-half years old and older, according to Jimmy and Eddie Russell. (Most Wild Turkey products do not bear age statements.) That means none of the whiskey Campari has made has been sold yet. Whiskey is a cruel business that way, most of the cost is front-end while all of the revenue is back-end, and several years down the road at that. Crazy.
That makes it very expensive to grow, although it just got a little easier. Kentucky Governor Steve Beshear came to the festivities at Wild Turkey straight from a signing ceremony for $14 million in tax relief for Kentucky whiskey.
A note on the new limited edition Diamond Anniversary bourbon, created by Eddie Russell. It is a mixture of 13- and 16-year-old bourbons (and that is on the label). Eddie joked that Jimmy rather famously doesn't like anything older than 12-years-old. "I figured I could get away with 13," said Eddie. He used the 16-year-old to give the whiskey extra spice notes. The result tastes like a 13-year-old but with a little something extra.
The Diamond Anniversary Bourbon goes on sale next month, but only at the distillery. Suggested retail is $124.99. It will be released nationally in September.
If there's any left.
Friday, April 11, 2014
Just about a month ago, we wrapped up the first Chuck Cowdery Bourbon Tour Experience. It was a great success. The feedback from our guests was very enthusiastic. Several said they would like to do it again. The great folks at Mint Julep Tours and I reviewed all the comments and our own notes, made a few tweeks, and are now accepting reservations for the sequel, June 11-13.
The first tour sold out quickly. This one probably will too, as there are only 20 places, so don't wait. To reserve your spot, contact Josh Dugan at 502-583-1433, ext 107, or email him at firstname.lastname@example.org.
I'll be heartbroken if you aren't there.
Here's how it works. Each morning, we board the bus in Louisville. I'm there the whole time, to tell stories and answer questions. With just 20 people, we all get to know each other. We already have a lot in common, since we're all crazy about bourbon and love to learn about its history and culture.
Since you don't need me to tour distilleries, we mix it up. We hit a few distilleries but some other places as well. We'll visit some authentic Kentucky place each day for lunch, and I'll even take you shopping -- for bourbon, of course. Then it's back to Louisville each day by early evening.
Day one we stay in the Louisville area. Day two we head east, to Frankfort and Versailles (pronounced Ver-SALES, y'all). Day three we head south to Bardstown and Loretto. We pack a lot in but we do it at a comfortable pace. The super-professional folks at Mint Julep Tours make sure we're safe and sound, amply fed and watered, and exactly where we're supposed to be at all times. They're terrific!
One thing that came out of the first tour is that every distillery wants to be included. This allows us to squeeze them a little to do something special for our group. Some, but not all of this, is explained on the itinerary, but we've kept a few surprises.
Whether this will be your first trip to Kentucky or you've been many times, you've never done anything like this. I had a blast doing it and I'm sure you will love it too. So don't wait. Reserve your spot by calling Josh Dugan at 502-583-1433, ext 107, or email him at email@example.com.
Come on, we'll have fun. I promise.
Thursday, April 10, 2014
What maple syrup is to Vermont, wine is to California, orange juice is to Florida, and cheese is to Wisconsin, bourbon whiskey is to Kentucky. That makes 'Kentucky Straight Bourbon Whiskey' a valuable brand. Last week, Kentucky lawmakers wisely invested $13 million in that brand. The details aren't important, but you can find some of them here.
A few days ago, Fruit of the Loom announced that it is closing its last factory in Kentucky. Fruit of the Loom, which makes underwear, was once one of Kentucky's largest employers. Using that news as a bridge to talk about why the whiskey business is different may have been ill-considered. It's devastating for families and communities when any employer closes.
The comparison was in no sense meant to suggest that whiskey jobs are in any way more valuable than any other jobs. You can't make a jobs-to-jobs comparison between textiles or any conventional manufacturing and whiskey. Fruit of the Loom at its apogee employed more people than the entire whiskey industry. That was never the point.
Kentucky has no unique claim to its textiles plants, its auto plants, its appliance plants, nor to most of its other manufacturers. Those industries can and do locate anywhere. Kentucky is glad Toyota is in Kentucky but Toyota could just as easily be in Ohio or Tennessee. Once Kentucky has made its case (taxes, cost-of-living, quality-of-life, location, resources, quality of its workforce, etc.), it becomes a bidding war with other potential locations.
The whiskey business is different. Why? Because 'Kentucky Straight Bourbon Whiskey' is a powerful brand to millions of consumers around the world. Is it well established? Yes. Is it valuable? Absolutely. Can its value be enhanced? Of course.
Louisville Slugger is the world's best known baseball bat brand. Not many years ago, the Louisville Slugger factory was across the river in Indiana. Today it is on Main Street in downtown Louisville. It is open to the public and attracts thousands of visitors a year. You can make baseball bats anywhere. Louisville Slugger proved you can even make Louisville Slugger baseball bats anywhere, but having the Louisville Slugger factory and museum in downtown Louisville has been good for Louisville, good for Kentucky, and good for Louisville Slugger.
Once upon a time, whiskey was made in many states. In some years, Illinois was the biggest producer, not Kentucky. Pennsylvania made a lot of whiskey, so did Ohio and Indiana. Tennessee, of course, still does.
When the American whiskey industry contracted sharply about 40 years ago, it essentially collapsed into Kentucky and Tennessee. The reasons for this are many, and it took Kentucky about 30 years to figure out how to take advantage of it. Now American whiskey is booming and American whiskey tourism is booming too.
Because American whiskey has become so geographically focused on those two states, it makes sense for diversified distilled spirits companies that have a major American whiskey business to locate other facilities there as well, such as bottling plants and distribution centers, research and development, and even headquarters. Recent examples include Jim Beam and Wild Turkey.
It also makes sense for related businesses to locate there, such as cooperages, bottle makers, label printers, etc. Kentucky corn farmers have a robust local customer for their grain and Kentucky dairy farmers have a cheap source of feed for their cows. A robust bourbon tourism industry means jobs in hotels, restaurants, bars, liquor stores, transportation companies, etc.
Whiskey is the gift that keeps on giving.
Micro-distilleries are the latest thing. They tend to be local in nature, but if a new whiskey producer has ambitions to be a national or international contender, isn't it smart to locate where you can make Kentucky bourbon or Tennessee whiskey? And where thousands of people are already coming to visit distilleries?
New producers aren't necessarily micro either. Angel's Envy and Michter's are both building distilleries with capacity of more than one million proof gallons per year. That's maybe one-quarter of what the smallest big guys produce, but it's still a lot of new production. They've both located in Kentucky.
What are the forecasts? That's the most exciting part. If Kentucky and Tennessee can keep this thing going, they can make major inroads into international markets, especially emerging markets in Asia and Africa. The $13 million, like any economic development spending, makes more money available for the producers to invest in new and expanded facilities in Kentucky. No one can say how big Kentucky bourbon can become, but it looks like the potential is huge. Arguably, Kentucky has an even better head start than Tennessee, but they're both way ahead of any other venue.
That advantage isn't a reason to lay back. It's a reason to double down.
Are investments in the whiskey industry a sure thing? Of course not. Are there threats? Of course. That's why industry leaders and state and local lawmakers need to be smart and realistic but also ambitious.
If they are, it's right there for them.
Saturday, April 5, 2014
This is from the web site of a new micro-distillery in Indiana: "Did you know that a significant portion of the whiskey in the world, both in Kentucky and Scotland, is matured in barrels made from oak trees grown right here in Indiana?"
The accuracy of that statement depends on your definition of the word "significant." Other Indiana distilleries have claimed it as well. Basically, the statement is false. They all seem to be getting their information from someone they believe is a good source, who told one of them that the world's largest barrel maker gets 60 percent of its white oak from Indiana forests, but the source's boss says that isn't so.
"At our mill in Southern Indiana," says Brad Boswell, President of Independent Stave Company (ISC), "we process white oak logs from Indiana, all the bordering states and a few other states. I’m sure the person you talked with assumed Indiana forests were the primary if not the only source of logs for an Indiana mill."
The Indiana mill is Blue River Wood Products in Salem, Indiana. Salem is about 40 miles northwest of Louisville. The mill is owned by American Stave Company, a subsidiary of ISC.
For the most part, cooperages neither own white oak timber stands nor log them. The property owners hire loggers to cut the trees and transport them to the nearest stave mill. The stave mill accepts the logs that meet its standards and roughly cuts them into barrel staves and head pieces. The wood is then shipped to one of the company's cooperages. "Unfortunately, we do not publicly disclose details as to which of our mills provide what percentage of raw material to each of our five cooperages," says Boswell. At the cooperage, the oak is air-seasoned for up to two years before being made into barrels.
ISC is based in Missouri, where it has two stave mills and a cooperage. The company has always said that most of the wood for its whiskey barrels is Ozark oak from Missouri and Arkansas. The company's other main cooperage for whiskey barrels is Kentucky Cooperage in Lebanon, Kentucky. The other three cooperages primarily make wine barrels.
The company's fourth stave mill is in Zanesville, Ohio, which is close to Ohio's borders with Pennsylvania and West Virginia. ISC's Log Procurement Division is staffed with 15 buyers who cover more than ten states to supply the four mills with high quality white oak stave logs.
Thursday, April 3, 2014
Underwear maker Fruit of the Loom announced today that it is closing its last factory in Kentucky, in Jamestown, at the cost of 600 jobs. The company, which still has its headquarters and a distribution center in Kentucky, is moving the Jamestown operations to Honduras.
In Janet Patton's story about the announcement, the town's state representative is quoted as saying there was no warning, but there kind of was. Twenty-five years ago, Fruit of the Loom was one of the commonwealth's largest employers. Only General Electric was bigger. At the time there were many textile plants in Kentucky. OshKosh B'gosh also had several. Many were located in rural areas in the south-central region.
Fruit of the Loom started to close its plants in 1998. Every couple of years, another one would close. Jamestown went from 3,200 workers in 1990 to 600 today.
The Fruit of the Loom factory at Jamestown was built in 1981, so it lasted 33 years. That's the textile industry. Cutting plants, sewing plants, textiles move all over the world. They're always looking for the optimal balance of skills and wages. They know what skill level each type of plant needs and they go wherever the wages for people with that skill level are lowest. That's why Kentucky got a bunch of those plants 30-40 years ago and why it is losing them today.
This isn't a secret and shouldn't be a surprise.
This story is appearing in this space because of the story we reported on Tuesday. Many people reflexively condemn government 'handouts' to big business, but the purpose of those investments is to preserve existing jobs and tax revenue streams and create new ones. The new tax break for whiskey-makers was one small part of an overall budget bill that passed 91 to 9 in the House and 35 to 3 in the Senate. The Kentucky Senate, it should be noted, is ruled by Republicans while the House is ruled by Democrats, so passing a budget with those kinds of majorities is no small feat.
But let's look at the advantages of Kentucky investing in bourbon versus investing in boxer shorts.
'Made in Kentucky' never did a thing for underwear sales, but millions of consumers all over the world look for the word 'Kentucky' on whiskey labels. Every year, thousands of those millions personally bring their money to Kentucky because they want to experience the place where their whiskey is made. Just like underwear, you can make whiskey anywhere. You can make bourbon anywhere in the United States. But you can only make Kentucky bourbon in Kentucky.
(Pay attention, Tennessee.)
It is hard for many Kentucky legislators to support the whiskey industry because there are so many conservative, anti-alcohol voters in the state. They are to be commended for recognizing that an investment in the whiskey industry is a smart one. This particular change will be very good for the industry, but it merely eliminates a competitive impediment from which the state's whiskey-makers had long suffered, as Kentucky is the only state that taxes the value of aging whiskey. Producers are forced to balance the value of 'Kentucky' on the label against millions in taxes they can avoid just by moving to the next state. The value of that name on the label is proven by how few producers have (well, none), but you can't safely remain higher cost forever.
Just ask the soon-to-be unemployed workers in Jamestown.
Wednesday, April 2, 2014
The American Distilling Institute (ADI) today announced the winners of its 8th Annual Judging of Craft American Spirits. The announcement was made last night at the dinner concluding ADI's annual convention, held this year in Seattle. The American Craft Distillers Association (ACDA) announced its awards last week.
Like ACDA's list, ADI's is never-ending. The concept of 'less is more' apparently does not appeal to America's craft distillers. These would appear to be the key awards, based on being listed first in the press release.
Best of Class - Certified Craft Distilled Spirits™
WHISKEY Triple Eight Distillery - The Notch, Nantucket Single Malt Whiskey
GIN Oregon Spirit Distillers - Merrylegs Genever
RUM Cannon Beach Distillery - Donlon Shanks
MOONSHINE Flat Rock Spirits - Stillwrights Key Lime Pie Moonshine
BRANDY Merridale Artisan Distillery - Stair's Pear Brandy
LIQUEUR & OTHER broVo Spirits - broVo Amaro No 1 - John Ueding
VODKA Candella Micro-Distillery - Ytown Vodka
VODKA (Most Neutral) Hendricks Family Distillery - Pür Class Vodka
ADI is eleven years old, ACDA is brand new, but craft distilling itself is still a very young movement. It is growing so fast and changing so fast it must be very hard for distillers and distillery owners to make time to guide their respective trade associations, but some deep thinking may be in order. What do you want your awards program to accomplish? Is your current awards program serving your needs and what you perceive to be the needs of the movement as a whole? Do the people running your association care what you think? And what about consumers? What are they to make of all this?
And what does the trademarked phrase 'Certified Craft Distilled Spirits' mean? Why is it trademarked? Here is what ADI says it means. You might also want to read this. Go here for the complete list of winners.
Congratulations to all the winners and good luck next year.
Tuesday, April 1, 2014
The Kentucky Distillers’ Association (KDA) announced yesterday that Kentucky lawmakers have passed a state revenue bill that gives relief to ad valorem taxes levied every year on aging bourbon.
House Bill 445 offers distilleries a corporate income tax credit against the amount of barrel taxes paid, and requires distilleries to reinvest that money into their Kentucky operations, said KDA President Eric Gregory. Kentucky is the only place in the world that taxes aging barrels of spirits.
“We are appreciative that the General Assembly recognizes our signature Bourbon industry as a major economic development engine of the Commonwealth,” Gregory said. “This reinvestment tax credit will allow our distilleries to create more jobs and increase investment in the state.
“Plus, it will help us attract more craft distilleries and strengthen Kentucky’s rightful place as the one, true and authentic home for Bourbon and the Kentucky Bourbon Trail experience. We thank the legislature for its hard work and partnership.”
Joe Fraser, Chairman of the KDA’s Board of Directors, said the industry has struggled for decades to find a solution without jeopardizing the local communities that distilleries call home. The KDA first filed this measure in 2010 and has been advocating its passage every year since. Local barrel taxes help support critical needs in education, health care, libraries and public safety, Fraser said. The bill does not impact that key funding; it simply allows a tax credit against barrel taxes paid by the distilleries, which total about $13 million a year.
“Thanks to this new law, distilleries will increase bourbon production to meet the growing global demand, which translates into new jobs, increased revenue for education, additional grain markets for our farm families and more tax revenue for local and state coffers.
“This is a win-win strategy that’s good for business and our local communities and keeps the Commonwealth competitive in the global marketplace,” said Fraser, who is Vice President of Operations at Heaven Hill Distilleries, Inc.
Beginning in tax year 2015, the bill will phase in the ad valorem credit over five years. Leveling the playing field on taxes will allow Kentucky to attract more craft distilleries that are locating elsewhere. Kentucky’s spirits tax rate is third-highest in the country while the state ranks eighth in the number of operating distilleries, according to the KDA.
“Right now, Kentucky produces 95 percent of the world’s Bourbon,” Gregory said. “But as these start-up distilleries grow, that number might slide to 90 percent or lower. Imagine the impact on Kentucky’s economy if we begin to lose our historic monopoly.
“That’s why this bill is one of the most historic and monumental achievements for our legendary industry and it will provide benefits to generations of Kentuckians for years to come.” Gregory thanked the General Assembly for passing two of the group’s other legislative priorities – a new craft distiller’s license with reduced fees and a bill allowing communities to approve the sale of alcohol at state parks. “It’s been a highly successful session,” he said. “We are truly thankful.”
The KDA, a non-profit trade association founded in 1880, is the state’s leading voice on spirits issues. Its 18 members have invested more than $350 million in new facilities, equipment and tourism centers in the last three years alone.
KDA 'heritage' members include Beam Inc. (Jim Beam and Maker’s Mark), Brown-Forman Corp., Diageo North America, Four Roses Distillery, Heaven Hill Distilleries, Inc., and Wild Turkey Distillery. 'Proof' members include Michter’s Distillery. 'Craft distillery' members include Alltech’s Town Branch Distillery, Barrel House Distilling Co., Corsair Artisan Distillery, Kentucky Artisan Distillery, Limestone Branch Distillery, MB Roland Distillery, The Old Pogue Distillery, Silver Trail Distillery, Wilderness Trace Distillery, and The Willett Distillery. 'Educational' members include the Distilled Spirits Epicenter.