Saturday, February 28, 2015

Why the Bourbon Shortage Is a Good Thing

(Photo by John Bramel)
Yesterday, Steve Beam (above) started his first barrel of Yellowstone Bourbon at Limestone Branch Distillery in Lebanon, Kentucky. I submit this as evidence that what some people are calling a 'bourbon shortage' is both real and good for bourbon lovers.

I'm not taking back anything I wrote here. For 99 percent of bourbon drinkers, there is no bourbon shortage. Nor am I yielding to Fred Minnick's argument. I do, however, agree with a simple comment posted yesterday on Facebook by Heaven Hill Master Distiller Craig Beam: "There is a shortage of aged bourbon!" I also appreciate David Montgomery's resort to basic economic theory here.

Today, there is no lack of good bourbon available for sale to you and me, but that's not true for folks who buy and resell bourbon, who cannot buy what they want and have to take what they can get.

Which brings us back to Yellowstone. The story of how this picture came to be is here. It was a feel-good story so I didn't want to mention there that Luxco's version of Yellowstone has been largely undrinkable. That's not Luxco's fault since they don't make it. It is made by one of the usual suspects and it doesn't matter which one. It stands for the proposition that distillers don't sell their best whiskey to non-distiller producers (NDPs). Bottom shelf whiskey, whether NDP or distiller-owned, is almost always too young but it's often whiskey that more age won't improve much. Even if you can bring a uniformly perfect distillate off the still, it never all ages the same way.

Saying products like Yellowstone, Old Crow, and Ancient Age -- to cite a few other examples -- are undrinkable is, of course, subjective. The products are cheap and, clearly, there are consumers who find them palatable enough for their needs. Probably, most of those drinkers drown them in cola, or something. They have a market.

What has changed is that even bad whiskey is now in short supply. With every major American whiskey distillery operating at or near capacity, NDPs have trouble buying anything for any price. Even NDPs operating with long-term production contracts are suddenly unable to buy more, which they need to take advantage of the boom. Their producer partners have to tell them there's no capacity to spare.

The solution, of course, is to add capacity. The companies that already have a lot of capacity can add more, and are, but we're now seeing something we haven't seen in half a century or more -- new capacity! The major NDPs are either finding new production partners (Luxco) or becoming producers themselves (Michters, Willett).

That's what the picture above represents. Although the whiskey going into the barrel was made on Limestone's current pot still set-up, a small column still has been installed and should be producing soon. Limestone Branch isn't alone, and some of the other new stills are bigger than Limestone's, like the one at Michter's in Louisville. New Riff in Cincinnati has been producing on its column for a while now. Willett now has house-made whiskey from its column still that is three years old. Few Spirits and Finger Lakes have had columns for about a year. Smooth Ambler put one in last week.

What do column stills have to do with it? Basically, you can produce a lot more distillate with a column still than you can with pot stills. Plenty of small distilleries are using pot stills, but even all put together they don't have much impact on industry-wide volume. A few new column stills will.

Time passes quickly. If Templeton had been a real distillery, they would have 8-year-old whiskey by now. Steve Beam's new barrel of Yellowstone will be 4-years-old in 2019. That day will be here before we know it.

Distilleries that make whiskey live and die on their long term projections. Since no one saw the current boom coming, no one really knows anything about how much will be sold in 2019, let alone 2025, when Steve will bottle his first 10-year-old. Will supply catch up with demand? Will price increases achieve balance by suppressing some of that demand?

What does it all mean? More bourbon. A lot more bourbon. Who will dare say that's not a good thing?


Justin said...

Mo bourbon = mo bettah!

It's hard for me to have much sympathy for the NDP's and their supply issues. Most of the ndp offerings of late are quite UNimpressive. Yet they are priced as though they represent the best Kentucky has to offer. The ndp bottlings that impress me the most are the producers who are blending new creations not available from the big boys. High west and Proximo with its Tincup are blending good stuff and putting fair price tags on them.

Here's hoping such blenders continue to find the stocks they need to keep on trucking!

Sam Komlenic said...

On a recent visit to Finger Lakes, they were using their column's excess capacity to produce distillate for a client in Kentucky!

Anonymous said...

I don't know about no one predicted. Brown-Forman added massive warehousing capacity to Jack Daniels back in...2004? be in that range, date wise. maybe 2002. I remember them announcing spending 92 million or so on an upgrade to the visitor center in Sonoma, and warehouses in Tennessee. I did the math, I mean, this is not manhattan island, 78 million in rickhouses is noticeable. When I visited in 2005, sure enough, there were warehouses everywhere.


Josh Feldman said...

In the cycle of boom and bust we're definitely in boom time. Luxco's move to have Limestone Branch distill Yellowstone is a sign, for sure, of growth. But the growth is in the future pool. The current pool of whiskey is in short supply of well aged premium expressions, even while the total supply of available whiskey grows.

Gary Gillman said...

Good news for the Yellowstone revival, however I hope the "recipe" involves everything which made the original Yellowstone so good, including not just the mash bill, but the yeast, the nature of the mashing and fermenting tubs, and the kind of rickhouse it was aged in.

The still, in particular had a definite influence:

Failing this, a fine bourbon may emerge but I doubt it will taste like Yellowstone did. I remember it quite well, it had a strawberry-like fruity quality with light caramel notes. On verra.


Quintilian B. Nasty said...

I wish someone would revive the Old Taylor brand but offer it at a higher proof (at least 90). I've read some folks reminiscing about how Old Taylor had a butterscotch quality to it. Never had it.

ezweave said...

It should probably be explained that the key problem with pot stills is that the distillate needs double distillation to taste okay. The whole low wines process. That's really why columns are more efficient.

Tom said...

Double distilled ... you mean like a single malt scotch whiskey, calvados, or cognac? Seems like a good way to make a quality product. The key problem with pot stills is that they are slower (and therefore require more labor and more capital). And, after prohibition, every whiskey manufacturer in the USA wanted to make a lot of whiskey fast and cheap.
And, congrats to Steve Beam.