Saturday, June 4, 2016

A Comment About Yesterday's Post

I did not intend yesterday's post to launch a micro vs macro war. (Read the comments.) You don't have to produce more than 500,000 proof gallons of whiskey per year to be significant or successful. Every business defines its mission its own way. Small isn't automatically good or bad, nor is big. Thinking that way misses the point. My purpose yesterday was just to identify, factually, where and by whom all but a very small percentage of America's whiskey is distilled. Opinion has nothing to do with it. All I am interested in is the volume of liquid coming off the stills.

Part of that post's message is that, despite the proliferation of new products at retail, and the constant drumbeat of new this and new that in the media, the list of actual distillers hasn't changed very much. The big have all gotten bigger.

My baseline of 500,000 proof gallons per year is arbitrary. As I learned today, of the two new distilleries on the list, only Michter's has actually achieved that level. New Riff is very close at 450,000. I left them in place, with an update, because I don't believe anyone else is bigger. If I missed someone who is, please let me know. (Update 6/6/16: After crunching the numbers a bit more, New Riff says it is right about at 500,000.)

If we're being picky, I'm not entirely sure the Woodford Reserve Distillery belongs on this list. I'm checking to see if, in fact, it produces more than 500,000 proof gallons per year. It might not. Brown-Forman's other two distilleries produce many millions, with Jack Daniel's being the biggest whiskey-maker in the country. (Update 6/5/16: It's confirmed. Woodford produces more than 500,000 proof gallons per year.)

In Scotland's biggest malt distilleries, you see row after row of huge copper pot stills. That's what it takes to produce a large volume of spirit using pot stills, which is what Woodford uses. If anyone can come close to Woodford using only pots it is Popcorn Sutton in Tennessee, but they currently are using only a small fraction of their capacity. No one in the USA, not even Woodford, approaches the size of Scotland's biggest malt distillers.

In recent years, micro-distilleries have become an important part of the American whiskey mix, just not in terms of volume. They bring excitement, new ideas, and new customers to the whiskey category. God bless them. Many never will approach 500,000 proof gallons and do not aspire to. That's not their business. Some small distilleries make good whiskey, some do not. That is not a function of size.

The actual output of America's small distilleries is all over the map, but most are very small, producing maybe 10,000 proof gallons per year if that. Many make a variety of products, not just whiskey, using the same equipment. If a 10,000 gallon distillery upgrades to 100,000 that is a huge deal for them and their fans, and for the overall industry in other ways, but it still doesn't make them very significant in terms of total industry volume.

All of this is very new and changing rapidly. The most exciting recent development has been the emergence of the 'mid-majors,' of which Michter's and New Riff are the vanguard. This segment is on track to explode in the next two years. You can read all about it in the new issue of Whisky Advocate.

As for the term 'craft distillery,' I don't mind people using it, but recognize that it is a marketing term. Whatever 'craft' actually means, it too is not a function of size. 'Craft Distillery' has a more appealing sound than the more accurate 'Micro-Distillery,' and 'Micro-Distillery' isn't perfect either. There is nothing 'micro' about the new Michter's. Perhaps in time we will have better terminology for all of these classifications.

One place where the large and small distilleries are on more equal footing is tourism. Sure, Jack Daniel's logs 250,000 visitors a year, but even the rest of the majors don't come close to that. Many visitors enjoy their small distillery visits more than the large ones because often their 'tour guide' is the owner and distiller. That very intimate contact is something the big guys can't match and it does inspire brand loyalty. Economically, the importance of tourism is based on how much money each tourist spends. The small distillery visitor spends the same amount on lodging, meals, and entertainment as the large distillery visitor. Distilleries are economic boons to the communities in which they are located regardless of size.

In Kentucky, which obviously has the most highly developed whiskey tourism economy, small distilleries have been a huge contributor. Kentucky's mix of small and large distilleries is an appealing combination for visitors. The same effect is being felt in Tennessee.

So take yesterday's list for what it is, nothing more, nothing less. The new players are hugely important in many different ways, but any suggestion they will supplant the entrenched behemoths is beyond laughable. That is not even important. What is? That American whiskey has never been stronger. Quality is high, there are many options, and always something new. American whiskey has become more than a beverage, it is a phenomenon. Lots of people are having fun with it and lots of people are making money from it. It's all good.


MadMex said...

Lots of "craft" or "start up" whiskies suck, especially when asking $60 plus a pop. I know. I've been trying. Sure, they all have a new distilleries to pay for and payroll to make, but they're out of their bleeping minds.

Gary Gillman said...

Most of the craft whiskey I've seen is young whiskey, non- or little-aged. And a lot of what is made is vodka or gin. That is a different or non-brown goods market. So that part doesn't count in this discussion.

Despite some crafts being in business almost 20 years, I am surprised there isn't more 4 year plus aged straight whiskey. Either for philosophic or financial reasons, there is only a little of this. What there is is good, but there would need to be a lot more to start seriously to challenge big distilling. Big distilling always made a quality product so there is no analogy to big brewing which let standards slide from the historical norm.

Personally, I think flavoured young spirits or vodka can make a good living for some crafts but they need to get into methodically aged straight whiskey to really make a difference. There is plenty of scope in that field to do so: using interesting yeasts, heirloom grains, variations on mashbills, even backset to ferment. Hey James Crow and E.H. Taylor, Jr. did it.

Gary Gillman, Toronto.

Mike from Ohio said...


I am glad you added this follow up to yesterday's blog. Living close to Kentucky, I have toured many of the macro, or "heritage", distilleries and have also visited many micro, or "craft", distilleries in the nation. I have developed a mindset that they are clearly two different monsters. Let me compare it to food and soda pop.

A Coca Cola is the same anywhere in the country. A stabilizing factor one could say. There are many different regional flares of food. Near my home, Cincinnati has a unique style of chili and goetta is popular. Travel to New Orleans and local fare as much different. Follow that with a trip to Maine. Just food styles vary from region to region yet Coca Cola is a constant, I apply the same consideration when looking at craft vs. heritage distilleries.

I purchase something from every craft distillery I visit. Some are good, some are not. For every craft item I purchase, I also purchase a Four Roses or Buffalo Trace product. It is a process of enjoying local flare and stability. To consider them in competition is unjust. Each is in it's own league.

Thank you for steering this away from a micro vs. macro competition. As the market continues to grow, both micro and macro, we are all winners.

Gary Gillman said...

Well, (to Mike) there is no rule that big distillery bourbon or rye is national and constant. Any craft distillery can make a valid version, in fact one that may be superior. They just have chosen not to, or can't (in general).

I don't see a valid comparison, even local vs. national, that is, between craft and established Kentucky distilling. Crafts are making different products, not ones that can be compared even for uniformity vs. diversity.

Anyway, big distilleries can and do sell white dog. Heaven Hill did for decades before any craft brewery did - Georgia Moon. And numerous large distillers sold corn whiskey which can be quite similar to what crafts typically sell.

It's the other way where I don't see the evidence.

Gary Gillman, Toronto.

Yagami said...

Can't agree with you more about the smaller distillery's tour being more intimate - I've toured all of the big distilleries (that does tours) and been to small ones as well but the small ones have always been more intimate and just because of the reason you mentioned - the person giving the tour is often the founder or someone close to the founder.

They can literally tell you everything about the whiskey they are making - their goal, the reason why they got into the business, and their dream. This isn't something your average tour at the big distilleries can match. Not to mention that in most cases their founders tend to be, well, dead.

Erik Fish said...

I've visited quite a few small craft distilleries, because that's all we've got in my area. I finally got a chance to tour Kentucky recently, and after crawling around the facilities at several "real" distilleries for the first time (especially Sazerac's tours at 1792 Barton and Buffalo Trace are beyond awesome for someone who knows whiskey), the craft distilleries lose a lot of their charm. There are some good small craft distilleries, but personally, I'd rather contemplate the big blackened rickhouses around Bardstown which I know are maturing very good whiskey, rather than listen to yet another guy babbling about passion and hand-made when describing his overpriced white dog.

Anonymous said...

A lot of digital ink is spilled attempting to look at craft whiskey through the lens of the craft beer success.

The elephant in the room is the aging problem. Craft beer doesn't have to age 6-12 years to be good. Bourbon whiskey does.

Craft whiskey business plan:

1. Spend a lot of money and do a lot of work
2. Wait 6-12 years
3. Start reaping profits

That's a tough sell.

Ralph said...

Hello Chuck,
Great post. It's sure easy to raise a rukus around here when 'craft' comes into the conversation. Fortunately, most of the folks who visit our distillery here in rural Missouri are more interested in tasting whiskey than arguing about it. Bottom line; we are having more fun than it should be legal to have, and we broke $1M in annual sales this quarter. Like you said. it's all good!
Ralph Haynes
New Haven, MO

Crown Point Marc said...

Why can't these smaller distilleries follow High West's example? Purchase whiskey from MGP while being completely forthright about it, have your genius master distiller do an outstanding job of finishing/blending said whiskey, release these products under your label, all while you continue to distill and age your whiskies for future release. Mr Perkins and High guys rock!

Chuck Cowdery said...

Many other people are doing what High West does but they don't spin it as successfully. That's not a criticism of High West. You need to be good at telling your story.

Simon Marshall said...

This whole discussion is so pointless. We are talking about alcohol, yet this discussion sometimes has an almost religious fervor. The only thing that is relevant is my individual preference that is dictated by the flavor of the liquid. Either I like it or I don't. It doesn't make me a better person or morally superior if the product is made by a so-called craft distiller. This religious battle almost makes me want to go out and buy tequila instead of whiskey. If only I didn't like it so much...