Much Ado About Nothing: Cane Neutral Spirits.

There is much weeping and gnashing of teeth in some quarters about something Beam Global recently did. You see, all labels for alcoholic beverages have to be approved by the U.S. Treasury Department's Alcohol and Tobacco Tax and Trade Bureau (TTB). Companies typically get labels approved way in advance and sometimes on the if-come.

That's what Beam did with labels for three of its blended whiskeys. The United States has this crazy rule, rejected by the rest of the world, that says a mixture of 80 percent vodka and 20 percent whiskey may be sold as blended whiskey. It's crazy but it's the rule, a political compromise made more than 100 years ago.

By vodka I mean neutral spirits. Another equally silly part of the compromise says that if neutral spirits are used, the label must say what kind of neutral spirits they are, i.e., from what raw material they were made. If made from grain it has to say grain neutral spirits. If made from fruit it has to say fruit neutral spirits. If made from potatoes it has to say potato neutral spirits. And if made from sugar cane it has to say cane neutral spirits.

This is true for any beverage that contains neutral spirits, not just blended whiskey. The same rule applies to vodka, gin and most liqueurs. That's all Beam was doing, getting labels approved that say 'cane neutral spirits' instead of 'grain neutral spirits.'

Why might they want to use cane spirits instead of grain spirits? Beam, like most beverage companies, doesn't make its own neutral spirits. Neutral spirits are a commodity, sold strictly on price. Becauses of this, neutral spirits distilleries tend to be where the raw materials are, so the companies that make grain neutral spirits tend to be in Indiana, Illinois, and Iowa; and the companies that make cane neutral spirits tend to be in tropical areas where sugar cane is grown.

Years ago the U.S. government came up with an idea to help fund development in Puerto Rico. Instead of distilleries there paying federal excise tax like all U.S. distilleries do, they pay a special federal tax that goes directly into the budget of the island's government. Eventually the U.S. Virgin Islands (USVI) got the same deal for its distilleries. Everyone was getting along fine until USVI decided to lure Diageo, the world's largest drinks company, to USVI by rebating half of the tax back to the company.

Since neutral spirits are a commodity this tax advantage gives neutral spirits produced in the islands a significant price advantage over neutral spirits produced in the Midwest, probably more than enough to offset the shipping cost. Since blended whiskeys are themselves extremely price-sensitive, blended whiskey producers such as Beam Global may have no choice but to switch to cane neutral spirits. Vodka, gin and liqueur makers will too.

To those doing the weeping and gnashing, this is a bad thing because "whiskey is supposed to be made from grain." I would argue that whiskey is not supposed to be made by flavoring neutral spirits, but that horse is not just out of the barn, it has died of old age as have all its offspring to seven generations. Since whiskey-flavored vodka can be called blended whiskey, how much can it really matter what kind of neutral spirit it is?

Some weepers and gnashers have compared this to India, which would like the rest of the world to recognize its cane-based imitation scotch as whiskey. Europe and much of the rest of the world is holding fast to the rule that not only must whiskey be made entirely from grain, and not be neutral, it must be aged in wood for at least three years. Morally, the U.S. has less of a leg to stand on but it too refuses India's appeals. Although if the Indians want to sell us very cheap cane neutral spirits we'll be glad to use it in our blended whiskeys, because there is nothing in the rules about U.S. origin either.

I'm all for calling out any producer, big or small, who does something bad for whiskey and whiskey lovers, but this just isn't worthy of our outrage.