Thursday, January 21, 2016

A Healthy Bourbon Business Is Good for All of Us

This week, Heaven Hill's Elijah Craig dropped its 12-year old age statement. Both Fred Minnick and Bernie Lubbers wrote about it.

The loss of age statements is mourned by bourbon enthusiasts for good reasons. We like information and age statements on labels, because they are regulated by the government, are generally trustworthy. A label age statement tells you the age of the youngest whiskey in the bottle, which is almost surely most of the whiskey in the bottle, so it's useful information. Heaven Hills says that Elijah Craig going forward will be "a composite of 8- to 12-year-old barrels," and I'm sure that's a true statement, but if it's not on the label you can't hold them to it. And since the youngest whiskey in the bottle is no longer 12-years-old it's a downgrade no matter how you look at it, yet the price remains the same.

I'm cynical by nature but as I get older I try even harder to find silver linings. I think there is one here. As American whiskey consumers, we are met with higher prices, frequent out-of-stocks, degraded products, and other irritations. What could possibly be good about that?

Like those other afflictions, the need to stretch limited stocks of older whiskey indicates a robust market and a healthy business, in which demand is out-stripping supply in just about every category. If we like bourbon and like having a bourbon marketplace in which just about every variation on the theme is available, this is the price we have to pay.

At least for now. The aging cycle means you can't ramp up bourbon availability as quickly as you can vodka but you can ramp it up over time. Because of the huge investment required, bourbon makers are cautious, but they are investing. As this becomes the new normal, availability should get better.

Consider what the bourbon market was like 40 years ago. Sales were plummeting, brands were disappearing, producers were merging, and the product was blah, pretty much all the same. Producers considered it a commodity. They were making it as cheaply as they could so they could sell it as cheaply as possible. It was a race to the bottom and a good time to drink scotch.

Today, while your favorite brand may be in occasional short supply, you have plenty of choices. Bargains are rare but depending on what you like, you can still buy a lot of very good bourbon for less than $35 a bottle. And when it comes to 'what you like,' it's pretty much all out there for you. If it's in short supply now (like bourbons aged 12 years or more), wait a while. When the business is as healthy as it is now, producers feel good about producing a lot and letting more of it get very old.

Despite the problems, it's a great time to be a bourbon fan.

While I'm referring you to recent articles, Kevin Smith has a good op-ed piece in the Louisville Courier-Journal today about what Kentucky's government needs to do to keep bourbon booming. Smith now has the awkward title of vice president of Kentucky Beam Bourbon Affairs at Beam Suntory, but I remember him as the master distiller at Maker's Mark. He may be a corporate spokesperson now but he's not a bullshitter. He makes a strong case.

I assume the bourbon barons are a little nervous right now. When Smith writes, "we’re pleased that the recent growth of the bourbon industry has been built in a spirit of true partnership with the commonwealth," he is largely talking about the previous administration, of Steve Beshear (2007-2015), a Democrat. Kentucky's new governor is Matt Bevin, a far-right Republican. While you may think of Republicans as pro-business, and Bevin ostensibly is, his base includes many social and religious conservatives who are stridently anti-alcohol. Beshear cut a lot of ribbons and handed out a lot of plaques to bourbon folks. Bevin will be watched closely and nervously, both for his actual policies and for the optics.

And while we're at it, Steve Coomes and I share both a love for Kentucky country ham and admiration for Jay Denham, a master butcher, curer, and entrepreneur who experienced a recent setback with the USDA. As people like Kevin Smith work to elevate Kentucky's bourbon business, Jay Denham is similarly dedicated to elevating the region's production of artisanally cured meat. Those are both names to watch.


Christopher said...

I'm not a high-end bourbon drinker and have never experienced any shortages, but I think you make a lot of good points here! It is a good time to be a bourbon drinker, haha! Lots and lots of options out there.

Keep up the good work, Chuck!

Crown Point Marc said...

It's also a great time to be a firearms enthusiast. Supply is high, demand is high; especially with an upcoming presidential election. Many great choices out there. Sorry; I didn't mean to hijack this thread, but we are truly living in a golden age of whiskey and firearms....and motorcycles too. Ok, I'm out.

P.S. don't enjoy all three at one time

Rob K said...

Crown Point Marc, are you crazy? While the laws are getting better, have you seen the price and availability of ammo lately? I remember when you could buy a bucket of 1500 rounds of .22LR for something like $10. Now it's hard to even find a brick of 100 rounds.

And don't get me started about $12 bottles of 10yo Heavenhill BiB, a product I may never see again in my lifetime, let alone at that price. As golden ages go, I'd say the late `90s, when I was getting into whiskey, was it for American whiskey-- as it was reviving, but before it became too hip. Pappy Van Winkle Family Reserve Rye for under $30 and several on the shelf-- I think I still have the little packet of rye berries that came with it.

Now is a great time, and it's only gonna' get better, but then was amazing.

Anonymous said...

Oh well. I will no longer buy Elijah Craig. A real shame. I liked it. I am a fan of age statements. I assume that any NAS Bourbon has only been matured the minimum amount allowed by law (same for scotch). So if you charge 12 year prices for a 3 year product.....well you lose, I don't buy your product.

Mark said...

This may be better than the environment where demand has fallen off a cliff and distilleries respond by reducing production, discontinuing brands, etc., but bourbon demand is past the point where we, as consumers, should be happy.

Demand, especially for the aged stuff, has outstripped supply far enough that producers can now start doing almost whatever they want, because they know someone will buy it, even if it means taking steps (such as the removal of age statements) that reduce product quality.

Distillers will tell you it gives them "flexibility", but lets be real here: this is all about dollars, that's it. I've had age stated Weller Antique, Wild Turkey 101, and others side by side with the current NAS versions, and the age stated version is, without fail, an improvement, and I'm not alone in that sentiment.

Andy said...

Rob, Heaven Hill still bottles a 10yo bonded bourbon under the Henry McKenna label. Not $12, but that's to be expected, isn't it?

Rob K said...

That's good to know. I hadn't seen it available anywhere yet, but when I do I'll buy some.

Crown Point Marc said...

Rob, I remember when I could go to the movies for a buck fifty, and MTV used to play music videos. Welcome to the new normal. .22lr was rare as hen's teeth for awhile, but I see tons of it at gun stores around me now. I was speaking to the availability and diversity of firearms however; particularly CCW handguns. .380's, 9mm's, .38's/.357's, .40's, .45's. Single stack, double stack, polymer, aluminum, titanium. Pink, purple, plastic sights, night sights, fiber optic; I could go on and on. The same with the American Whiskey industry; the parallels are very similar. For every $30 bottle of Pappy you were drinking 10-15 years ago, there's ten whiskies available that are just as good across many different price points. The selection now is truly fantastic. Bourbon, rye, blends, single barrels, wine barrel finishes, American malt whiskey. If you can't find fantastic whiskey to drink in the U.S. then you're not looking. You couldn't even get Four Roses in the States in the 90's and look at them now; everything they bottle is liquid gold. Heaven Hill and Buffalo Trace can do no wrong either. Truly the golden age of American whiskey. You can have your overhyped Pappy. I'll take everything else. Slainte Rob K.

Chuck Cowdery said...

I never would have used firearms as an analogy, but it works. No situation is perfect but I'll take what we have now over anything I've experienced in my 40+ years of whiskey drinking and buying.

Anonymous said...

American whiskey is popular because of craft distillers. Craft whisky is up 40% in 2015. Mega producers are riding a wave that they are going to fall off of, due to their fake stories and increased capacity. Mega producers will be fighting their way to the bottom of the price chain 5 years from now, while actual craft distillers will experience growth for decades.

It happened with beer, it happened with wine and all that's left is for it to happen with spirits. A few short years from now the mega ethanol guys aren't gong to be able to use age as the defining characteristic, as hundreds of creative craft distillers will by them blanket the market with straight whiskeys that aren't the same old 4-5 recipes.

it will be a hoot to watch.

Anonymous said...

I'm going to miss the Elijah Craig 12. I hope they are able to maintain the flavor profile, but if past experience holds true, then I fear the worst. I'm a fan of age statements because it gives you some idea of why bottle "X" is $5 more than bottle "Y". It's a way to cut through the BS stories and Small Batch claims and make a more informed buying decision. One of the stated reasons for dropping the age statement is to ensure stock of EC 18 and EC 12 Barrel Proof. Alas, both of these are out of my budget. I do enjoy Heaven Hills revamped Henry McKenna 10year Old Single Barrel Bottled in Bond at around $30. Talk about a descriptive name, that one lays it all out there.

Anonymous said...

RE:Craft Distillers.

It certainly would be nice if a few years from now, a slew of properly aged, reasonably priced craft whiskies hit the market, but I'm not holding my breath.

On one hand, plenty of craft distilleries right now, seem to be comfortable charging 50+ dollars for sub 2 year or even totally unaged whiskey. Even Tuthilltown, which has been around since 2005, has pretty reliable distribution, and now has the financial backing of William Grant and Sons, is not offering straight bourbon or rye in their core lineup.

I think it's far more likely that some craft distilleries will begin offering older bourbons as special releases for 100+ dollars while keeping their core lineups young and overpriced. People are buying them now, why stop?

Others will continue to maintain that small barrels, "proprietary techniques" and aging in hotter conditions produce the same effect and not bother putting out older offerings at all.

I like that the new distilleries are using pot stills, non-chill filtering, sourcing heirloom grains, etc. but the reason craft beer was successful is that it offered much better beer than the majors for only a couple bucks more per six pack. In whiskey, a seven year old Evan Williams still sells for about 1/3rd the price of even the cheapest craft whiskies.

Something needs to change before I fully get on board.