Thursday, June 12, 2014

Tennessee's Alcoholic Beverage Commission Won't Punish Diageo After All

Three months ago, Tennessee's Alcoholic Beverage Commission (TABC) cited Diageo for shipping whiskey made in Tennessee to Kentucky for aging, contrary to Tennessee law. One week later, Diageo sued the TABC, challenging the law as unconstitutional. A trial in federal court commenced.

The law, passed in 1937 when Tennessee finally ended prohibition in the state, says all whiskey made in Tennessee must be aged in the county where it was made. Last year the law was amended to permit storage in adjacent counties. When cited, Diageo admitted that it made whiskey at George Dickel and shipped it to Stitzel-Weller in Louisville for aging, but none of it was whiskey intended for George Dickel Tennessee Whisky. That whiskey was being aged according to the law, in Tennessee. (There's more here.)

On Tuesday night the trial came to an abrupt halt after Dickel master distiller John Lunn testified that the liquor stored in Kentucky would be blended with other Diageo spirits, and that George Dickel Tennessee Whisky had been made and stored at the distillery all along. He further testified that in 2009, Dickel's warehouses were effectively full, so they started to ship newly-made bourbon and wheat whiskey to Louisville, in the meantime making plans to build new warehouses in Tennessee. The alternative would have been to shutter the distillery until new warehouses could be built. Sixteen-thousand barrels of whiskey (about 850,000 gallons) were sent to Kentucky.

When Lunn finished testifying, Assistant Attorney General Kyle Hixson announced that the state would not pursue penalties against Diageo, though he declined to say why. "Then that's it," said Senior District Judge John T. Nixon, and adjourned the hearing.

A new warehouse at Tullahoma was completed in April, and another one is planned, so the cited activity has ended for now. Diageo attorney Bobby Burchfield said he will seek an agreement with the state to not seek penalties against Diageo if it has to send whiskey out of state again.

Diageo continues to be secretive about exactly how it is using the bourbon and wheat whiskey it made in Tennessee, some of which has reached its fifth birthday. It cannot be used in any product that says 'Kentucky' on the label. One candidate is Barrell Bourbon, which has been spotted in the New York City area. Barrell claims in its advertising that it is five years old, distilled in Tennessee, and aged in Kentucky. (None of that, however, is on the label.) That is pretty strong evidence. If Barrell is Diageo, it is hiding behind a Potemkin craft distillery called Barrell Craft Spirits.

Can the biggest whiskey makers also be craft? That's a proposition all of them are testing right now in one way or another.


EllenJ said...

1. I love American whiskey.
2. I know you love American whiskey.
3. I can only assume (and I most certainly do) that readers of your blog love American whiskey.
4. The average American whiskey drinker (a) doesn't read this blog; (b) drinks whiskey because s/he enjoys the taste... in general; and (c) decides what whiskey to drink based on what's available and affordable, without regard for the sordid details of where it came from.

That said,

5. Diageo is obviously either (a) making whiskey at their distillery near Tullahoma that they do not intend to bottle as George Dickel; (b) buying up the output of multiple small cottage-distilleries (which I've long held to be the future of "craft" distilling); or (c) a combination of the two.

The point is, what DIFFERENCE does it make where the whiskey ages (other than the earth-shaking importance of who gets the taxes, of course)?

Diageo is secretive. Yup! I sure can't argue that. So's the NSA. And most of my whiskey friends don't think of Ed Snowden as an American patriot for letting us in on their secrets. And that's even though we're supposed to be the owners of America. We're not the owners of Diageo; that's a privately-owned (well, sort of; I own stock in it so I guess in that way it's publicly owned) company. What they want to keep secret is, IMHO, their business. And their business has made a ton of money for me (percentage-wise, at least) in the past five years. My point is that just because it's a big company (oh, and one not headquartered here in the U.S. of A. like say, Brown Forman) why must every writer's credibility be "earned" by dissing them? Diageo markets distilled spirits. It markets (and develops) some of the finest spirits available (to those of us who are not personal friends of kings and dictators, as well as some who are) and also some of the easiest-to-obtain middle-quality spirits (unacceptable as they may be to those whose acceptance of others is influenced by the cost of the whiskey they drink).

So, here's the switch, and the challenge...

Is Diageo mix/'n'/matching whiskey distilled at their Dickel facility with other Diageo spirits produced elsewhere to make products that might not even be marketed as "whiskey"? Does Diageo have (non-disclosure protected) "arrangements" with small distillers throughout Tennessee... or Kentucky... or Idaho... or Mexico, Ireland, Pakistan, Australia, wherever, as sources of truly small-batch distillates with which to produce anything from overpriced "heritage" or "neo-modern mixologist" brands to just "rum" or "whisky". Remember, the real reason that the big U.K. Scotch blenders sourced from so many little single-malt distilleries wasn't because of the "nuances" obtainable, it was because those distillery's dependence gave them control over the villages that, in turn, depended on those distilleries for their very survival. That was pretty much the case all over Scotland until the early '70s, and some of those old blenders still understand that power.

Chuck, I'm no longer as driven as I may once have been. And I'm not blessed with buddies who are fellow lawyers that could help me avoid litigenous multi-national conglomerates. But you are. See what you can do with this.

Chuck Cowdery said...

Barrell Craft Spirits appears to be run by a serial entrepreneur named Joe Beatrice, who is using bourbon he acquired from Diageo. That doesn't mean he isn't a stalking horse for Diageo but there is no evidence that he is. The product was reportedly bottled at Bardstown Barrel Selections in Bardstown.

Unknown said...

Wonder if they charcoal filtered the product before shipping it off to Kentucky?