True Crime Among the Bourbon Barons

 

After Prohibition, Old Crow advertising emphasized the brand's history.

The tale of the 1895 Brown-Gordon murders may seem like a stretch for a publication devoted to American whiskey, but the involvement of a principal in America’s most successful whiskey company makes bourbon part of the story. 

W. A. Gaines & Co., makers of Old Crow Bourbon, revolutionized how whiskey was made and distributed in the United States. They took corn whiskey, a product disdained by most sophisticated drinkers, rebranded it as bourbon, and crushed the old-style rye and malt whiskeys from back east. 

The scandalous 1895 murder of a governor’s son and bourbon baron’s sister-in-law shocked the state and scandalized the nation. It was so consequential it inspired “Careless Love,” a popular song still performed 130 years later. 

We started this story in the previous issue of The Bourbon Country Reader and conclude it in the new one, out now. (Volume 22, Number 6)

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Brown-Forman No Longer Makes Barrels. A Historical Perspective

 

Made in Louisville, but on their way to Tennessee.

Brown-Forman started its press release today by reminding us that the company is 155 years old. That’s one way to say they take a long view. In part, that’s their business. They are one of the four companies that produce about 70 percent of America’s whiskey, a beverage that takes years to make. 

The press release describes several changes at the company, including to executive leadership, although Lawson Whiting remains as CEO.

Leadership changes are routine. The bombshell is the announcement of a 12 percent reduction in the company’s global workforce. That’s about 650 people. About 200 of them currently work at the company’s Louisville cooperage, which will close permanently.

Brown-Forman began as a whiskey company and, ironically, a non-distiller producer of whiskey. As the industry changed and making whiskey from scratch, rather than buying it, made more sense, they became distillers.

From the beginning, where Brown-Forman really excelled was in marketing, especially branding. Old Forester was named for a prominent Louisville physician and marketed as medicine. Brown-Forman was a leader in developing western markets for whiskey at a time when most of the nation’s population lived east of Louisville. The company stayed in business during Prohibition as a medicinal whiskey supplier.

Brown-Forman is still controlled by its founding family, the Browns and their branches, but it is a public company. As you would expect for a 155-year-old firm, it has gone through many changes.

In the 1950s, the Browns teamed up with the Motlows to make Jack Daniel’s Tennessee Whiskey the leading American whiskey in America and the world, and Jack now challenges Diageo’s Johnnie Walker for supremacy among whiskeys of all kinds. When the #1 bourbon doesn’t have the word ‘bourbon’ on its label, you know you are dealing with branding geniuses.

After WWII, Brown-Forman decided to make its own barrels, and founded a cooperage not far from its Louisville headquarters. At the time, bourbon was booming. Historically, many distilleries made their own barrels, in some cases on site. When Brown-Forman started its cooperage, not far from its distillery and headquarters, several other distillers were doing the same thing, including Schenley, then the largest U.S. distilled spirits company. Its cooperage was also in Louisville.

Fast forward to the late 20th century. The American whiskey industry contracted dramatically in the 70s and 80s, and every distiller except Brown-Forman sold or closed its cooperage. Brown-Forman, and likewise Jim Beam, had most of their marbles in the American whiskey basket, so the first thing they had to do was broaden their portfolios. They did that but in the 1980s, that was no longer diversification enough, so Brown-Forman bought some other companies, all luxury goods, positioning themselves as a mini LVMH. 

Then fashions changed again. Wall Street no longer liked diversification. Investors wanted ‘pure plays,’ so Brown-Forman went back to concentrating on its distilled spirits portfolio and, most of all, its brands. The company has a massive revenue stream just from licensing the Jack Daniel’s logo. 

Brown-Forman always had a policy that its brands had to either be #1 in their market segment, or #2 with a strong shot at #1. Brands that didn’t meet those standards were sold or discontinued. The only exception was Old Forester, for sentimental reasons. 

By the 1990s there were just two cooperages supplying new barrels to the entire whiskey industry, as well as some percentage of the wine industry. The biggest, then and now, is Independent Stave (ISC), founded by the Boswell family in 1912 and still owned and run by them. The other was Bluegrass Cooperage, owned by Brown-Forman.

As the 21st century began, and with it the bourbon boom, Brown-Forman decided to stop selling barrels outside the company. It needed all it could make for its own hot whiskey brands, which in addition to Jack Daniel’s were Early Times, Woodford Reserve, and a resurgent Old Forester. Since they no longer needed to hide behind the independent-sounding Bluegrass Cooperage name, they rechristened it Brown-Forman Cooperage. 

The plant they’re closing now is in an industrial area just east of the Louisville airport. It includes some open space for letting wood season outdoors, usually for six months to a year. The property’s footprint is about the same as it was in 1945, and there is no room to expand. Over the years they crammed as much as they could into that facility, ultimately doubling its output. For probably half of the cooperage’s existence most of that output has been put onto trucks and shipped to Lynchburg, Tennessee. Even as the Kentucky-based brands grew, Jack grew more. In 2014, Brown-Forman opened a new, modern cooperage in Alabama, 80 miles from Lynchburg instead of 250.

That probably spelled the end for the Louisville facility, but when Brown-Forman decided to sell the Alabama place last year, that signaled the company probably would exit the cooperage business altogether, which it is doing now.

Back at the end of the 20th century, when ISC and Bluegrass were the only cooperages supplying whiskey-makers, Brown-Forman didn’t necessarily want to be in the cooperage business, but neither did it want to be at the mercy of a monopoly for such an essential input. So, they made and sold barrels. And the other Kentucky distillers bought them for the same reason, even though it meant doing business with a direct competitor. Now, although ISC is the largest and clearly dominant, they don’t have a monopoly. There are alternatives. No longer must Brown-Forman be one of them.

The way the cooperage business works is this. Although ISC owns some forests, most growers of oak for barrels are independent property owners. They hire independent logging crews to harvest the oak and haul it to the nearest stave mill. There are many stave mills, and they are located near the forests. Although the cooperages don’t own the forests or the logging companies, they do own the stave mills. As the name suggests, stave mills cut logs into barrel staves and head pieces, which are sent to the parent cooperages for seasoning and manufacture. Most barrels for American whiskey are charred, and the cooperage does that too. ISC is based in Missouri but has cooperages in Kentucky. As long as so much whiskey is made in Kentucky, it will only make sense to make barrels there too.

So, while it sucks for the 200 people who will lose their jobs, and it’s sad to see an 80-year-old business close its doors, Brown-Forman is just sticking to its knitting. Brown-Forman is a brand builder. They tried to make “we make our own barrels” a brand attribute, but it didn’t resonate. In truth, barrels are a commodity, much like corn and rye. Perhaps in the future they won’t even make all the whiskey themselves. For Brown-Forman, shareholder value is in the brands. Everything else is incidental.

Witness to a Long, Slow Fade

 

A Lazarus newspaper ad from a little before my time (1928).

It was fifty years ago, yet I remember the moment. 1975. I had just joined an advertising agency in Columbus, Ohio, to work on the Lazarus account. I was with some Lazarus executive, and we were walking through their print advertising department, which was a room with maybe 50 artists, hunched over paste-up tables, working on newspaper ads. 

I don’t remember the exact context, but the executive knew I was new and was giving me an overview of the business. He commented that department stores had been in decline ever since World War II. Many stores had closed. Most others had consolidated. Columbus still had Lazarus, Cincinnati still had Shillito’s, and Dayton still had Rikes, but they were all part of Federated, along with many other stores across the country, all still nominally autonomous, but slowly becoming mere brand names. I came to the job from one of the few remaining independents, Dayton’s Elder-Beerman.

The fact that this conversation took place in the store’s print ad department was a coincidence, but symbolic of the changes underway. In the 70s, Lazarus had something like 20 pages of ads in every daily paper and probably three times that many on Sunday. The store did all their print advertising in house, a department of probably 100 people, but they farmed out their radio and TV commercials to the agency where I worked and there were, like, three of us on the account. The decline of newspapers paralleled the decline of department stores, their primary advertisers. I was there at the beginning of the shift from print to broadcast.

Most cities of any size had multiple department stores in their 19th century heyday, but by the 1970s most were down to one or two. Columbus had just one, Lazarus. Their executives joked that their primary competition was their own Budget Store. In fact, what was killing them were specialty stores. One of the first big successes was The Limited, whose first store was in Columbus, one block north of Lazarus on High Street, across the street from the state capital. The Limited was revolutionary because they only carried what were known as junior sizes. They had cherry-picked one of the department store’s most profitable departments. As time went on, every department was poached in this way.

My college girlfriend was, by then, an assistant glove buyer at Halle's, a department store in Cleveland. Department stores were in my blood. My grandfather ran the maintenance department at Sterlings, another Cleveland department store. His mother-in-law, my great-grandmother, worked there as a salesclerk. Coincidentally, I think she sold gloves.

But I was 22 years old when that conversation at Lazarus took place. What I took from it was that I probably should get out of the department store advertising business as soon as possible, which I did eventually. It took me a couple of years, and I never got completely out. When I moved to Chicago in 1987, it was in part to work on a project for Montgomery-Ward, then still a moderately important national department store. I never worked on the Sears business, also based in Chicago, but had a close relationship with a studio that did most of their ad photography. I worked with chain drug stores for most of my professional career.

Although only 22, I had already made one major change in my work trajectory. Many more would follow. Looking back, I think I tended to follow this wisdom from Issac Wolfe Bernheim, a 19th century bourbon baron. “Wealth, in my humble opinion, is not a thing of luck, or the result of a deliberate and carefully fought campaign of industry, but rather the good judgment to take advantage, at the right time, of opportunities when they present themselves.”

The Business of Creativity Can Be Tough

 

In this stock image, 'business' is represented by a guy in a white shirt and tie while 'creativity' is represented by a lightbulb bursting with color, which is some pretty lazy creative.

About ten years ago, I wrote about what happened when a very creative micro-distillery owner got into a conflict with his investors. The company survived and thrived, and so did he, separately, so there is no reason to rehash that incident, but back then it got me thinking about what sometimes happens to creative people in business. 

Creativity is a characteristic that is valuable in any pursuit, in business or just daily life. But for some people, being creative is the job. I spent most of my career in the world of advertising and marketing communication, where 'creative' is a job title, the name of a department, and the term used to describe the work product itself, as in, "have you finished the creative for the new campaign yet?"

The person in charge of all that stuff is called the creative director.

In organizations of all kinds, managers sometimes think of employees as mere cogs in a machine, each essentially the same, easily interchangeable and replaceable. That's always a mistake, because every person is unique. Managers who think that way often do so because they are convinced it is they who make all the difference, not the people who work for them. But mostly it's a problem that happens when managers who come from one discipline are charged with managing people from a different one.

I was raised to be sensitive to this. Dad was an engineer for an appliance manufacturer. He complained often about the 'bean counters' who cared too much about cost and not enough about product quality. 'Bean counters' to dad were pretty much everyone in the offices except the engineers, so that was management, accounting, sales, and marketing. 

For me as a freelance creative working in marketing, I had to be wary of prospective clients who shop for creatives like they're shopping for a new phone. Hiring the right creatives is more about the ability to connect and communicate with that person than it is about how much they cost or even whether or not you like their past work. When it was apparent that a prospective client had no real idea what I do, I backed away. You have to, because it's bound to become a problem eventually. A client, or boss, who fundamentally doesn't understand what you do can't direct you productively or evaluate you fairly.

Sometimes it's just an irritant but it can become a nightmare.

Creatives, therefore, have to develop the ability to spot bad bosses in advance and avoid them, but in a long career you inevitably miss a few. That can amount to a serious career setback or, at the least, a real solid period of unpleasantness, but you have to be true to yourself and pay the price to get back on track. You learn from it and move on. But, for God's sake, learn from it. Examine what blinded you to the warning signs. From my experience it's usually money, or fame, or prestige, or power, or something that looks like an easy score. Some or all of these seduce you and you don't recognize what you later realize was obvious from the beginning.

But if you learn from the experience, then it's worth it.

The “Best” Lie

 

Every year at this time, everyone publishes their “best of” lists for the year. Sure, nobody wants to work very hard over the holidays, that includes most writers and editors and many readers. We all know these lists are just lazy editorial filler for a slow news period. 

But they are also a lie.

An honest headline would be something more like, “Here are the (movies, whiskeys, songs, etc.) we liked the most this year,” but who would read that? Instead, list makers tell not one lie but two, (1) that it is possible to objectively determine “the best,” and (2) they have done the work and here is the result.

At law, "best" claims are considered "puffery," defined as "exaggeration reasonably to be expected of a seller as to the degree of quality of his product, the truth or falsity of which cannot be precisely determined."

Therefore, the Federal Trade Commission (FTC) has determined that puffery does not warrant enforcement action under "truth in advertising" laws. "The Commission generally will not pursue cases involving obviously exaggerated or puffing representations, i.e., those that ordinary consumers do not take seriously."

Sadly, too many people do take them seriously.

So, don't. Listen to the FTC and stop falling for it. There is no “best,” only what you like best.

NOTE: I got even more worked up about this subject back in 2020.

FTC Sues Southern Glazer's for Illegal Price Discrimination

 

Southern Glazer's Wine and Spirits, LLC is the largest wine and spirits distributor in the United States with operations in 44 states and Washington, D.C. Its portfolio is 45% wine and 55% spirits. It was the 10th largest private company in the United States in 2022, with sales of approximately $26 billion.

(From NBC News) The Federal Trade Commission announced today a new lawsuit that accuses the largest U.S. distributor of wine and spirits of illegal price discrimination that gave large chains — among them Costco, Kroger and Total Wine & More — much better prices than those offered to neighborhood grocery stores, convenience shops and independent liquor stores.

(The following is a statement from Margie A.S. Lehrman, CEO of the American Craft Spirits Association.) 

The American Craft Spirits Association (ACSA) welcomes FTC’s efforts to crackdown on anticompetitive pricing practices that hurt small independent retailers, who are invaluable partners for craft distillers.

Market access remains one of the biggest challenges facing America’s craft spirits industry. This action by the FTC is an important step to protect small businesses but also should serve as a clarion call to all legislators and regulators to enact policies that enable craft spirits manufacturers to compete in this complex and consolidated marketplace. 

Today, more than 3,000 craft distillers in the United States operate in all 50 states. Despite this number, craft spirits only account for less than 5% of all spirits volume.

At the same time the number of craft distillers continues to rise, the number of wholesalers and retailers continue to consolidate at an accelerated pace raising barriers to market access for small business manufacturers.

The current 3-tier regulatory structure of the beverage alcohol market is outdated and in need of reform. ACSA urges policymakers to develop additional routes-to-market including direct shipping to consumers and retailers. Enacting these measures would result in a rare win-win-win for distillers and consumers as well as our wholesale and retail partners.

Single Barrel, So What?

Everybody is getting into the single barrel act.

Blanton's was the first single barrel bourbon but it sure wasn't the last. These days, they're everywhere.

But so what? What's so great about "single barrel" whiskey?

You probably think single barrel is higher quality than something that is not single barrel, and that's usually true, but do you know why?

It has to do with how whiskey is made, not the front-end part of fermentation and distillation, but the back-end part, how most whiskey goes from barrel to bottle.

Major American whiskey distilleries each fill between 500 and 1,500 barrels a day. Those barrels go into aging warehouses where they will sit for the next several years. As they fill so shall they dump and the major American whiskey distilleries each empty between 500 and 1,500 barrels a day too.

Modern distilleries produce a very consistent product off the still. All of the whiskey going into the barrels is the same but immediately it starts to change and become different. No two barrels of whiskey age exactly the same way.

There are several reasons for this. First, no two trees are exactly the same. Whiskey barrels are very much a natural product and white oak is the wood of choice because of the favorable way it interacts with the aging spirit. Although most American-made whiskey is aged in Ozark Oak, some use wood from other parts of the country. Minnesota Oak is also popular.

To the extent there is terroir in whiskey, it's about growing conditions for the oak, not the grain.

Second, no two warehouse locations age exactly the same way. Aging conditions vary according to the location and orientation of the warehouse and the location of the barrel within the warehouse. A barrel near an outside wall, near the top and on the south side will be exposed to a lot more heat, for example, than one in the center on a low floor.

The differences between any two barrels can be great but more often they are small and subtle. Distillers used to mitigate those variations by moving barrels, a process called barrel rotation, but that takes a lot of labor and became too expensive. Still, producers want a consistent product, so they mix the contents of hundreds of barrels together in a big tank. This erases those subtle differences. The whiskey being prepared for bottling is then compared to previous batches and if it isn't exactly the same, it is corrected through the addition of whiskey selected for certain characteristics. This is how most whiskey is prepared for sale.

There is nothing wrong with any of that. People want consistency. They want the bottle of Jack Daniel's Old No. 7 they buy today to taste exactly like the bottle they bought last week or last year.

But back to the whiskey still in the barrel and those subtle differences. Does the existence of those differences mean some barrels taste better than others?

Yes, it does.

Old timers called them "honey barrels." They are exemplars of their type, perfectly balanced. They're rare, but not that rare. Theoretically, a single barrel product isn't necessarily a honey barrel. If single barrels are selected at random you will get the whole range of variation, from worst to best, but they aren't chosen that way. That's the key to "so what?"

With non-single barrel whiskeys, small flaws are erased and the whole batch can be adjusted to better match the brand profile. With single barrels, once a barrel is selected there is nothing else you can do with it. There is no place to hide. Because of this, there is very little point in doing a single barrel product if you are not going to seek out the very best barrels of a particular brand.

With a single barrel whiskey, you get to taste exactly what the distillery's tasters tasted when they selected that barrel, but unlike them you never have to taste the ones they rejected. Although the producers will never put it this way, they essentially cherry-pick the best of the best for single barrel and put the rest into the product's regular expression.

Another way to look at it is that this is whiskey in its natural state, as close to tapping a barrel as you can get.

The selection process is subjective, of course. You may prefer a brand's standard expression to its single barrel and there's nothing wrong with that, and some producers may not be as selective as others. The point is that single barrel really does mean something, and it means this.