Monday, June 15, 2015

Make No Little Plans, Kentucky, Even If That Goes Against Every Instinct You Have

I don't know Stephen Thomson but David Mann's article about him in Louisville Business First today has me steamed. In it Thomson, a former Brown-Forman executive and current investor in Kentucky Artisan Distillery in Crestwood, Kentucky (a posh Louisville suburb) wonders "whether there's a big enough market of tourists to support this many attractions."

He's talking about Louisville's current and planned bourbon-themed attractions such as the Evan Williams Experience.

And that's the sum of his argument. He wonders. He frets. He probably purses his lips and furrows his brow. He offers no statistics, no projections, he just wonders. "Most local people will go to these attractions once and rarely go back," he speculates. "It's like a one-time experience, then you go to the next one."

"A visitor to Louisville who is in town for a convention or other purpose likely will go to one or two distilleries — not all of them, and the one or two they visit probably will be the most promoted ones."

He goes on in that vein for a few more paragraphs. "Some will fail," the genius prognosticator predicts. Yes, businesses fail, so don't ever try to start one. Is this the kind of advice 'industry consultant' Thomson gives to his clients?

The truth, or at least my version of it, is exactly the opposite of what Thomson believes. As I said in 2009, when I was inducted into the Kentucky Bourbon Hall of Fame, I believe the potential for American whiskey is unlimited.

"Don’t think in terms of twenty percent increases or forty percent increases. Think about growing two times, three times, five times, ten times bigger. There is no reason you can’t do it," I said.

Since then, the industry has been growing at about a 40 percent annual rate, yet Thomson wants to slam on the brakes.

What's his problem?

I think I know the answer.

I lived in Kentucky for nine years, from 1978 to 1987, and have spent a lot of time there since. I love Kentucky. It's a unique place with many wonderful qualities but one particularly bad one. I call it 'small timer syndrome.' It rears its ugly head in the efforts of the Kentucky Distillers Association to crush anyone who dares to promote bourbon without their permission. It is why the University of Kentucky refused to play the University of Louisville in major sports for 60 years. There are many other examples. Small timers are zero-summers. They believe you can have too much of a good thing. In fact, they believe that every new good thing diminishes the existing ones. Better not to aim too high. You might be disappointed.

At the end of Mann's article, Janet Kelly offers this retort: "Isn't that rather like Napa (Valley) saying we have too many wineries?" Kelly is the executive director of the University of Louisville's Urban Studies Institute, which actually uses data to reach its conclusions about bourbon's huge economic impact on Kentucky.

Instead of Thomson's pessimism, I prefer what Mark Twain wrote: "Too much of anything is bad, but too much good whiskey is barely enough."


JDL said...

I agree with you 100%. This is a new golden age of Bourbon. The future is bright.Keep up the great work that you do explaining all that is going on.

Oscar said...

Yeah, as if someone in Napa Valley back in the early '70's said, "who's going to come and look at some grapevines".

Keith W said...

Apropos of nothing...I grew up around Crestwood, and your reference to it as "posh" reminded of a time back in the late 1970s/early 1980s when the local grocery store shelved cans of Chef Boyardee in the small "International Food" section.

Anonymous said...

It used to be the Hatfield's and McCoy's, now it's the Japanese and the British, fighting over who's the most American ! Kentucky and Tennessee have essentially sold their souls. The new distilleries in the other 48 will set the tone for the future of American bourbon innovation. Everything else will just be the same old product, with more and more absurd fiction.

Anonymous said...

Going to have to disagree with you Chuck and your analysis of Steve Thompson. From a business and economic perspective, Steve is right on the money.

All businesses have to evaluate their geographical location for where they place their facility (IE. downtown), opportunity for longevity, and where their competitors are located in proximity to them. The "Big Boys;" Brown Forman, Sazerac, Suntory, Diageo, Heaven Hill, etc. do not have their "experience/tour centers" as a money making entity on their books, if anything, it is a marketing write off to promote their brands. These "experience/tour centers" do not make enough money to be a self sustainable entity under their parent company. The parent company funds them and anticipates losing money. In short, they have the money to keep them operational and the "smaller guys" can't sustain nor do they have enough money, at least not Brown Forman money. In turn, some will go out of business, usually the "smaller guys."

When dealing with figures, the KY Distillers Association (KDA) presented to the Kentucky Tourism Bureau, 800,000 +/- visitors visited distilleries in calendar year 2014. Now, take that number and multiply it by $10, the average customer tour cost. Now, divide that by the amount of distilleries, experiences, and every other bourbon engagement facilities in the area represented by the KDA. In the end, you are left with "peanuts" or in business terms, "a loss." KDA is not the enemy nor do they crush any outliner distilleries. Sazerac has no affiliation with them, and they are doing just fine.

In just a short time, downtown will be so saturated with these bourbon places (bourbon bars, experiences, micro distilleries, large distilleries, etc.) people won't want to visit more then 2-3 places, max. People and tourists in particular want variety.

Imagine if every restaurant in downtown Louisville served the same entrees and provided the same experience? If this was the case, Louisville would not get the press/attention it currently does in the culinary world, people would find it boring, and lack ingenuity. The bourbon business is no different. They all make the same thing, some just have better stories then others or more money. The Bourbon business is about brand value and selling cases of product, nothing more, nothing less.

Someone should build a "distilled experience" or "tourist trap" that does everything but bourbon, ie. rum, gin, liqueurs, etc. that focuses on production, blending, and crafted cocktails. People would want to go there, as this would be different. So now, tourists can hit 1-2 bourbon places, get bored, and then visit the only "other" facility in downtown.

You mention growing about 40% annual rate, let's compare that to other industries that have grown that fast or are at least comparable in the market place; the housing market; crashed, the tech boom; crashed, dot com; crash, corn/ethanol; crash, vodka in the late 80s and early 90s; crash, wine coolers, crash, the moonshine market five years ago; crash, next up to crash; Fireball and flavored moonshines.

One thing that was left off the debate is parking or lack thereof downtown. Good luck getting people downtown Monday through Friday 8-6 and having enough parking for the droves of tourists that are apparently going to engulf these places.

In closing, there are too many wineries in Napa Valley.

Someone whom works in the Spirits Industry

Chuck Cowdery said...

And New York has too many theaters, Miami has too many beaches, and Colorado has too many mountains.

Anonymous said...

PS...Vodka has only grown immensely since the late 80's/90's So no crash there...there has been a slow down in the last year-but that was due to the flavors. And "Moonshine" has only grown by 10 fold in the last 5 years-no crash there either.

Erik Fish said...

And Vegas has too many casinos. Actually, it has had too many for about half a century. But that hasn't hurt its attractiveness, and at least until it runs out of water, it's going to keep building and tearing down and re-inventing and coming up with new stuff and fascinating not just Americans, but people from all over the world.

There is no reason why the Louisville bourbon experience can't do the same on a smaller scale. Of course there'll be failures, consolidations, ideas will work great, ideas will flop; so what? That's how it works. Of course people will only visit two or three of the bourbon attractions on a visit; but not all will visit the same two or three. When we go to Vegas, we have had enough after visiting about three casinos. Yet the other (currently) 72 licensed casinos appear to also be doing fine.

And the Vegas example offers another parallel: People who think that immature "craft" bourbon from elsewhere will ever supplant Kentucky bourbon and Tennessee whiskey are deluding themselves; the growth of Indian casinos all over the nation didn't reduce the attraction, but actually accompanied strong revenue growth for Vegas, as it just whetted people's appetite for the real thing.

Anonymous said...

Anon..... Good points. However, the crashes are coming, it is inevitable. I should have clarified past and future crashes. Future being flavored vodkas and moonshines entirely. The 80s and 90s are gone, the liquor business is way overdue for a new category. The bourbon/whiskey base formula is just the beginning of where it needs to go. Wait about two to three more years when all the big boys have lots of bourbon and they are wondering what to do with it, because no one is selling aged stuff now, I can assure you. As a whole, America can't consume it all, that's why whiskey sales are hotter in India and Asian countries. This makes the brand profitable, but will do nothing for the store fronts in downtown Louisville.

Erik you make a good point. Consider this. Vegas money is way different the Louisville money. Vegas does not have a consistent stable economy right now, look at their housing market. However, like Vegas, people visit the hippest casinos and maybe some of the others. Also, people visit Vegas multiple more times then they will Louisville. Although offering entertainment on different scales, Louisville does not offer shows, gambling, and billion dollar casinos. Ask the general public that head out to Vegas, they visit Caesars, bollagio, Venetian, and a few others leaving about 60 others that kind of hang in there to maintain a small profit or wait to get bought out. Again, going back to brand profitability. People will come to Louisville for beam, old forester and maybe angels envy. The rest, unless your a purest bourbon guy, no one knows the others. The general public thinks every bourbon on the shelf has their own distilleries too. Yes, Indian casinos helped Vegas because many of the Indian casinos don't offer over the top entertainment like Vegas and several don't even sell booze, unlike Vegas. To your strong point, as mentioned above to Anon....offer it to the world. Take away the Derby, will the world embark on Louisville, we will see. Living here, from the tourist dollar, I hope u are right.

Great debate and conversation gentlemen. I am enjoying it and learning a lot

Chuck Cowdery said...

It's not Vegas but Louisville has quite a bit of gambling. Horseshoe Casino Southern Indiana is 23 minutes from downtown Louisville, i.e., closer than Bardstown. The spring meet at Churchill Downs is April 25 – June 27. The fall meet is September 11 - 27. Louisville has many attractions. How can it possibly have too many? More attractions = more attractive.