More News About that Distillery in Indiana.

About a year ago, after MGP bought the former Seagram's Distillery in Lawrenceburg, Indiana, whispering began that they were going to exit the bulk whiskey business and concentrate on contract distilling exclusively.

The distinction is that with bulk sales, the customer purchases aged whiskey that is ready to sell. With contract, you pay the distillery to distill and make whiskey on your behalf, which won't be ready to sell for several years. They're two very different business models.

"There is no foundation whatsoever to any rumors or speculation that MGP is withdrawing from the bulk whiskey market," says David Dykstra, MGP's Vice President of Alcohol Sales & Marketing. "We are investing heavily in rebuilding the whiskey stocks that were depleted under prior ownership of the facility. MGP intends to be in the bulk whiskey market for both the near term and longer term."

If anything, they're going in deeper. "MGP is developing new mash bill formulations of rye, wheat and other grains that we expect to introduce to the marketplace in the coming years, as product innovation is a key component of our efforts to help customers continue to grow their distinctive brands."

Bulk whiskey from that distillery has been responsible for such brands as Templeton Rye, Smooth Ambler Very Old Scout Bourbon and Rye, High West Rendezvous Rye, Redemption Bourbon and Rye, Wm. H. Harrison bourbon, Chattanooga whiskey, and a host of others.

No doubt those micro-producers are relieved to hear what MGP intends, but bulk whiskey pickings will be slim for the next few years, especially for well-aged whiskey because the previous owner laid down very little near the end.

Many bourbon enthusiasts have wondered if MGP plans to develop and market its own whiskey brands, or continue exclusively as a commodity producer. Lawrenceburg is the only pure commodity whiskey producer in the U.S.

"We have no plans at this time to develop or purchase any branded whiskeys or other products," says Dykstra. "However, we remain open to evaluating market opportunities if any such possibilities should warrant our interest."

And what about tours? There have been distilleries on that site since about 1860, though most of what is there now was built by Seagram's in the 1930s. "MGP plans to begin tours at some point over the next 18 months," says Dykstra. "We currently are working on details to ensure the tours provide a highly enjoyable, as well as educational, experience for those who visit our Lawrenceburg facility."

One huge change has already taken effect, the new owners answer questions.

News From Templeton Rye.

Here is some news from Templeton Rye President Scott Bush that came by way of their email newsletter. I thought it interesting enough to pass along.

Templeton has taken a lot of heat for not being able to keep up with demand in its home market of Iowa while it tries to expand into other areas. To rectify this, they announced they will greatly increase their monthly allocation to the State of Iowa in October, November and December, "so you should have an easier time finding a bottle of The Good Stuff for the holidays."

They say they are on pace to sell 22,000 cases in Iowa in 2011, up from 7,100 in 2010. This is one of the first tangible numbers I've seen for Templeton's sales. Twenty-two thousand cases of a premium whiskey in a smallish market like Iowa is pretty impressive. Whatever else Templeton might be, they are effective marketers.

Bush also points out that Templeton is only sold in four states: Iowa, Illinois, New York, and California. They are a pretty big deal here in Chicago, so they are in my face more than they are for most people. They've been in New York and California for less than a year and their distribution there is pretty much limited to high-end bars in New York City and San Francisco.

The news about that is that they don't intend to add any more markets until at least 2014.

Since this is Templeton, I can't resist a small dig.

Their email newsletter is called "Straight From The Still." That's a laugh since the still in which every drop of Templeton Rye is made is not even in Iowa and is not owned by them. Every drop of Templeton Rye is and always has been made at LDI in Lawrenceburg, Indiana. That's why Templeton has supply problems, they are limited by how much whiskey LDI has to sell.

Templeton is bottled in Templeton, Iowa, and at least some of it is partially aged there as well. They also claim, in one of their videos, that they throw some rye grain grown on Templeton-area farms into the hoppers at LDI.

Micro-Distillers And The "Just Till We Get Going" Trap.

One of the recurring themes among new micro-distillers is: "We're going to make vodka just to get going, but what we really want to make is whiskey," or its variation, "We're going to buy and bottle bulk whiskey just to get going, until we can make and age our own."

So simple, so reasonable and, therefore, so alluring. But is it realistic?

After observing this pattern for the past half-dozen years or so, I have concluded that when new micro-distillers say that is their plan, they are in most cases either lying or naive.

Why is the "Just Till We Get Going" strategy a trap? Two reasons.

(1) People seem to think it's easy to build up a profitable business making and selling vodka, or buying and bottling bulk whiskey, as if you can work on that for a few minutes, just until the cash starts to roll in, and then go do what you really want to do. Not only will the business practically run itself, it will bring in enough revenue to fund the whiskey program.

Well, it's not easy. What's more, you can work very hard for a long time, become successful, and discover you're in a completely different business than the one you wanted to be in, no closer to realizing your dream than you were when you started.

(2) If you want to make whiskey but intend to start with a bulk product, you'll never be able to transition to whiskey you made yourself because it will never be the same or even similar enough to make such a transition. If you try to do both you risk diluting your brand and confusing your customers.

Great Lakes is a micro-distillery but they recently released a product that combines bourbon made by a major Kentucky distillery with malt whiskey made at Great Lakes. St. George has announced a similar project. This can work for them because they are established, have distribution channels, and have loyal customers. They have a receptive audience for anything they choose to produce, whether it's made by them or not. They can be perfectly honest about what they're doing and the vast majority of consumers, who don't pay very close attention, will still assume they made it because they have a reputation as micro-distillers.

But what about examples of startups that began that way? Templeton Rye has been around for six years and when they finally admitted the product isn't theirs, they said they were going to use bulk whiskey just until their own whiskey was old enough to bottle. In reality, they have made no effort to replace their LDI-made whiskey, though they have stopped pretending that they ever will. They have even admitted that, if they wanted to make it themselves, they would need a completely different distillery than the one they have in Iowa now.

High West's highly acclaimed Rendezvous Rye is a similar story. High West is now selling products it made, but they will never replace the current Rendezvous Rye, a bulk whiskey product, with whiskey made by them in Utah.

Last month I told you that Michter's plans to build a micro-distillery in Louisville. Even if, after aging, they mix their house-made whiskey with their sourced whiskey, the ratio will  be 10 to 1 or more, a drop in the bucket. The Louisville project is a way to give a company that doesn't have a distillery a symbolic one.

Another example is the Pogue family. Old Pogue has been on the market for seven years and just this year the Pogues are beginning the process of obtaining necessary permissions to start a very small (25-50 gallons a week) distillery in Maysville, Kentucky. Old Pogue has, by all evidence, been a successful product and, as such, sells a lot more than you can produce at a rate of 25 to 50 gallons a week. In fairness, they don't claim they are starting the distillery to produce the current Old Pogue Bourbon. They just want to bring whiskey making back to Maysville, where the family's historic distillery was located.

Aspiring micro-distillers, take note. The Pogues have come nearest to realizing some version of the "Just Till We Get Going" dream and it will, if all goes according to plan, have been a decade-long project the day their first drop comes off the still.

What Is Killing LDI?

My recent posts about Diageo’s Bulleit Bourbon, new Bulleit Rye, and the Indiana distillery where Bulleit Rye is produced, got a lot of attention. There are a few things to wrap up on the various subjects those posts covered. If you want to catch up first, the posts were on March 3rd, March 9th, and March 10th.

This post will be about Lawrenceburg Distillers Indiana (LDI). The next one will be about Bulleit, including some tasting notes on the new rye.

Although no one official at LDI talked to me, plenty of other people with knowledge about the place did. The main thing they told me is that LDI is for sale, with a deal likely to be concluded in eight months to a year.

Many of the people who contacted me, including some who commented publicly on the blog, asked what specifically do I want to know? I’d like to know everything, starting with facility specifications: How many bottling lines? How many and what types of stills? How many rectification plates in the whiskey still? How much copper? How much still capacity? How much fermenter capacity? How much maturation warehouse capacity? What type of maturation warehouse construction?

That sort of thing. Standard whiskey geek stuff.

Some of it is on the website but most isn’t and I doubt the website has been updated recently.

Most of all I want to know what they’re doing today? What’s their business model? What do they offer to customers? What do they offer to a prospective buyer? The website tells us what they make -- or at any event what they have made and can make -- but it says nothing about what they have to sell now. That’s what bulk whiskey customers want to know. How much 2-year-old 40% bourbon do you have for sale? How much 3-year-old? How much 2-year-old 95% rye? How much 4-year-old? Or did Diageo get it all? How much is in the pipeline for next year and the year after that?

Prospective buyers of the whole facility don’t just want to know its physical specifications. They want to know what kind of business it can be. They want to know if they’re buying a viable business or just a factory. There is a difference.

The General Manager at LDI is Rick Brock. Although he won’t talk to me, he gave an interview to Cincy Magazine just about a year ago. At that point things were looking bright. Now they’re on the sales block. What happened? Isn’t the economy in recovery? Hasn’t alcohol been strong lately? The Distilled Spirits Council says it has. Shouldn’t a company that was doing well in the spring of 2010 be doing even better today?

Either way, that’s an interesting business story.

According to my sources, LDI has seven bottling lines but runs only four on a typical day, and only on one shift. Lately they have been bottling a lot of Three Olives Vodka, which is a product of Proximo Spirts, a small New Jersey-based producer and importer of various vodka, tequila and rum brands as well as, just recently, Stranahan’s Whiskey. LDI bottles several other Proximo brands and some for Castle Brands too, a similar small producer and importer whose products include Jefferson’s Reserve Bourbon and Boru Vodka.

For drinks giant Diageo they bottle Moon Mountain Vodka, Godiva Chocolate-Infused Vodka, Bulleit Straight Rye Whiskey, and Seagram’s Seven Blended Whiskey.

Absent from these mentions is Seagram’s Gin, which used to be a mainstay of LDI. At 2.8 million cases sold per year, Seagram's is America’s #1 gin.

The Seagram’s Gin and Vodka lines are owned by Pernod Ricard, which owned LDI until 2007. Before it sold LDI, Pernod moved most of its bottling to Fort Smith, Arkansas, where it also manufactures its Hiram Walker cordials line. But LDI still made the gin and shipped it by tanker to Fort Smith. Did LDI lose that contract?

Presumably, all or most of the products they bottle at LDI are made there as well. The distillery and maturation warehouses are about a mile from the bottling hall and finished goods warehouse.

Last year at this time, Brock said they had about 185 employees. They have fewer than half that many now, according to my sources, and many are temps.

Is LDI’s secrecy what’s killing it? There’s seems to be no problem with their products, which are doing well for companies such as Diageo, Proximo Spirits, Castle Brands, Tipton Spirits (Harrison Bourbon), High West Distillery, Templeton Rye Spirits, Dynamic Beverages (Redemption Bourbon and Rye), Big Bottom Whiskey, and no doubt others. Their fully-aged whiskey, in its various guises, is the darling of international whiskey enthusiasts and their young bourbons and ryes, again in various guises, are hot properties with today’s most creative and celebrated mixologists.

Shouldn't somebody be able to make a profitable business out of that? I suppose they would have to know about it first.

Yes, Another Templeton Rye Post.

I write about Templeton Rye frequently. Whenever I do, someone asks me why I pick on them. I don't, but I write about them frequently because their president, Scott Bush, does such a good job of working his brand. Every time I see a promotion he's done or a story he's placed I'm prompted to write something.

Today it's a travel story, of all things, about the tiny Western Iowa town that Templeton Rye has claimed as its Lynchburg. I saw it in the Tribune.

The hook for Templeton is a local legend that the town was a major producer of illegal spirit during Prohibition. Writer Josh Noel went looking for Templeton's whiskey, legal and illegal, past and present. Here is what he found.

In recent years, Bush has talked more openly about who makes the only Templeton Rye you can buy in stores, as he did with me last Friday at WhiskeyFest. As Noel reports, "The stuff in bottles is contracted out to Lawrenceburg Distillers in southeast Indiana, which at 28 million gallons of spirits produced per year is anything but the quaint Iowa image the Templeton brand is meant to evoke. The whiskey is trucked to Templeton, offloaded at the plant and bottled there. A staff of gray-haired locals does the rest: hand-writing the labels, affixing them to bottles and sealing the bottles shut. At least in that way the operation is very quaint, very small town and very Iowa."

I asked Bush if he has been able to do business with Lawrenceburg recently. Its parent company, CL Financial of Trinidad and Tobago, was hit hard by the financial industry meltdown and its U.S. operations, like Lawrenceburg, have been reeling. Bush admitted it has been hard to get their attention lately and he is having some supply problems. Some of that is attributable to the brand's success, but Bush knows no businessperson can afford to disappoint customers who are ready to buy.
 
Templeton is only available in Iowa and Illinois, which is another reason I write about it. In Chicago, I see it everywhere.
 
Bush is a busy guy. In addition to running Templeton he is on the new Distilled Spirits Council of the United States Craft Distiller Advisory Council, which has its first big round of Washington meetings starting tomorrow.

Templeton Rye. Hoist On Its Own Petard?

There are some subjects that keep recurring, so often I get tired of writing about them. One is the great spelling controversy--to "e" or not to "e"--another is Jack Daniel's; bourbon or not?

Today it's whiskey producers who call themselves distilleries but whose products are made by somebody else. I wrote about it here and many, many other places, but when I saw this picture I just couldn't resist.

It's a picture, supplied by them, of Templeton Rye barrels. See, it says "Templeton Rye" right there on the head. But look at what else it says, "distilled 10/03."

Leaving open the possibility that "10/03" does not mean October, 2003, one can compare that date with the fact that Templeton Rye was formed and received its alcoholic beverage producers license in 2005. You can figure out the rest.

Who Made That Whiskey?

Every time some new whiskey appears that isn't being made by one of the "usual suspects" (the handful of known distillers of American whiskey) my first question is always, who made it?

Often, when I query the marketers of said product, they admit they did not make it but claim they can't tell me who did, because that producer won't let them.

I believe this claim of "source secrecy" by bulk whiskey buyers is more obfuscation than fact. When Willie Nelson, for example, wanted to disclose Heaven Hill as the source of his Whiskey River Bourbon, Heaven Hill was happy to oblige, and had him in for pictures. Likewise Luxco identifies Heaven Hill as the source for its Rebel Yell Bourbon. The Pogue family also was very forthcoming when they introduced their bourbon, which was Heaven Hill whiskey sourced through Kentucky Bourbon Distillers Ltd (KBD).

In Scotland, where there are a lot more distilleries and where distillery names and brand names, for single malts at least, are one in the same, and where bulk sales to blenders are common, the distilleries tried without success to prevent independent bottlers from identifying the sources of their whiskey. Logo designs, package designs and things like that are protected, but the courts ruled that if saying, "this whiskey was made at Glen Whatchamacallit" is a true statement, then the bottlers are allowed to make it, whether the distillers like it or not.

Of course, a sale of bulk whiskey could well be made on the condition that the source not be revealed, which would give the distiller a civil cause of action if the bottler did reveal it, and the contract could be written in such a way that the mere breach would entitle the distiller to some kind of award, without having to prove damages, but I've never seen such a contract or heard from a distiller that they insist on such a contract when they make bulk sales.

No, who I hear it from are the bottlers, who frequently have also created a mythology intended to lead consumers to believe they made the product they bottled. Then when somebody like me asks them who really did make it, they come up with this "source secrecy" thing.

In fairness to KBD, a major independent bottler of American whiskey, they have never used the "source secrecy" excuse with me. They either tell me where it came from, give me enough information to figure it out, or just tell me they're not going to tell me, all of which are fine with me. I'm definitely not pointing a finger at them about this, but I've certainly heard it from others, most recently Templeton and High West.

Tell me to go f*** myself, tell me it's none of my g** d*** business, but don't lie to me and treat me like a chump.

While I don't think Heaven Hill or Barton, who are the sources for most bulk whiskey, really care, I can imagine somebody like Jim Beam, who only sells bulk occasionally, when they find they have overproduced for their needs, demanding non-disclosure. Brown-Forman, on the other hand, can't wait to tell me who they're making whiskey for, so I can't believe they swear the customers to secrecy.

If someone refuses to tell me I still don't know, but that's not the same as falsely claiming that you are required by the distiller to keep the source secret. If they say, "I don't want to tell you," they are at least taking responsibility for the secrecy, not pretending that they'd like to tell me but their hands are tied.

As I said, don't treat me like a chump. I'd like to know the source and I don't think much of them for refusing to tell me, but I give them points for owning their silence. I think even less of them if they pretend that they can't tell me when the truth is that they choose not to.

Many people have come back at me with the argument that "who cares if it's good whiskey?" There is some validity to that. However, part of my reason for arguing for transperancy is that the most highly regarded single malts all come from known distilleries and that type of obfuscation is not well tolerated by single malt enthusiasts. I think that for American whiskey to take its rightful place among the world's great spirits, its producers need to be similarly transparent. Independent bottlers should identify themselves as such and be proud enough of their products to tell the truth about them.

We're not children and we don't need to be told that our whiskeys are made by elves in a hollow tree.

In other not-getting-answers-to-my-questions news, it is two weeks and counting since I asked Diageo my George Dickel questions.

What Is This Stuff, Really?

It may sound sometimes like I'm on a crusade against micro-distilleries. I'm really not. Quite the opposite. I have great hopes that small distilleries will revitalize the American distilled spirits industry. Problem is, most micro-distillery operations seem to be pushing out bullshit faster than any other product, which is perhaps not surprising since it is the easiest thing to make.

(Followed by their next-most-popular product, vodka.)

Now comes an outfit in Park City, Utah, called High West Distillery. Their premier product is a rye whiskey called Rendezvous Rye. It is 92 proof and selling for $40 per 750 ml bottle. The back label specifies a blend of 6-year-old 95% rye and 17-year-old 80% rye.

It also uses the category designation "a blend of straight rye whiskeys." This, by itself, raises some alarms. That classification is for a mixture of straight rye whiskeys which, for some reason, does not conform to the standards for being called straight rye whiskey. Since any mixture of straight rye whiskeys made in the same state should qualify for the better classification of "straight rye whiskey," one wonders why this mixture was non-conforming. The frustration, of course, is that the makers aren't talking because they want to preserve the illusion that they made the product, which is impossible since they've only just gotten both their license and still.

But let's look at the rest of their claim: "a blend of 6-year-old 95% rye and 17-year-old 80% rye." Although not crystal clear, the reference to a percentage would seem to refer to a mash bill. The problem is, nobody makes rye whiskey that way.

So here is a reality check and I encourage Scott Bush (Templeton) and David Perkins (High West) to address this issue. Get around these facts if you can:

Over the last 20 years, only five American distilleries have made rye whiskey. One of them, Anchor, can be set aside because they make very small quantities of a very idiosyncratic spirit that has very little to do with the tradition of American straight rye whiskey. The other four are Heaven Hill (using, at the moment, Brown-Forman's distillery), Wild Turkey, Buffalo Trace (Sazerac) and Jim Beam.

That's it. Those are the usual suspects. The Templeton Rye had to have been made by one of those four. Most likely the High West was too.

All of them make a mash bill that is about 51 percent rye, the balance being corn and barley malt.

Some of the very old ryes on the market today were made more than 20 years ago at the Medley Distillery in Owensboro and at the old Bernheim Distillery in Louisville, so there are two more suspects, but that's it. We can't be sure what their mash bills were, but they probably weren't more than about 60 percent rye.

What is left of that whiskey resides at Kentucky Bourbon Distillers LTD (KBD) in Bardstown, Kentucky, which has bottled it under a number of different labels, and sold it to others wishing to do the same. Setting aside the mash bill claims, KBD may have acquired some 6-year-old rye from, most likely, Heaven Hill and mixed in a little of its elderly whiskey (maybe, in fact, a 17-year-old) to make the High West product. That, based on the known facts, is the most likely scenario.

Personally, I hope it is that, because that would be an interesting product that might actually justify the price. I find most of KBD's very, very old bourbons and ryes too old, too woody, but take a little of that and add it to some good 6-year-old rye? That could be just the thing. I would be interested to try that product.

But back to the original issue. The bottom line is that any fully-aged rye whiskey on the market today has to come from one of the sources named above. That unavoidable fact is the reason why people like High West and Templeton aren't saying who made their whiskey. It's not only because they want you to think they made it. It's also because then it becomes easy to say, "Oh, that's Heaven Hill's rye? Well, you can pay $35 for it in a bottle that says 'Templeton,' or $40 in a bottle that says 'Rendezvous Rye,' or $12 in a bottle that says 'Rittenhouse,' which would you prefer?"

More than a decade ago, when Brown-Forman reopened what is now the Woodford Reserve Distillery, they wanted a Woodford Reserve product on the market right away, so they used whiskey made at their other Kentucky distillery. While they didn't print banner headlines about the whiskey's real source, the information was always there, and if you asked they always told you the truth.

I'm all for this micro-distiller thing, but when it seems like all of these characters are coming out of the box lying to the consumer, I'm already less than enthusiastic about their next act.

But that's just me, the grumpy old man. You kids, knock yourselves out.