The "95% of the World's Bourbon Is Made in Kentucky" Fallacy

 

A couple weeks back, we talked about whether or not Jack Daniel's is, as the brand claims, "the #1 selling whiskey in the world." The answer hinged on what the claim actually means. Pressed, Jack Daniel's people will tell you that the claim refers to sales of the Jack Daniel's flagship expression, black label "Old No. 7." By that standard, Jack Daniel's is #1, beating Johnnie Walker Red Label, that brand's leading expression. But if you look at all of the whiskeys sold under those two brand names, Johnnie Walker beats Jack Daniel's by several million cases (although Jack is catching up fast).

Which is it? When you know all the facts, you see it's actually both. In all fairness to both brands, the claim simply means less than it seems. It tells you something, but not everything. It's true only as far as it goes. The full answer is nuanced and qualified. That's how reality is most of the time, but advertising doesn't play well with nuance. It needs claims that are clear, direct, and persuasive. 

It is the same with this oft-repeated claim: 

"Kentucky is the birthplace of Bourbon, crafting 95 percent of the world’s supply."

Is that, indeed, a fact? Not necessarily. You can be excused for believing it's a fact because it appears under the words "Bourbon Facts" on the Kentucky Distillers' Association (KDA) web site.  

Eric Gregory is long-time president of the KDA. He has freely admitted that the claim originated with him and was, to put the best possible face on it, a seat-of-the-pants estimate or, if you prefer, a guess. He has expressed amazement and amusement that it has been accepted and widely repeated as fact. 

Was it a good guess? Is he right?

As the saying goes, it depends.

The claim has persisted and is promoted by the KDA because it serves that organization's purposes and in the precise way they frame it, the claim is probably close to being true. Its accuracy depends on what you mean by "bourbon." If by "bourbon" you mean products that say "bourbon whiskey" on the label, then 95% may be too low. When Gregory first said it, there were only two distilleries outside of Kentucky making a whiskey that was labeled and sold as bourbon. They were A. Smith Bowman in Virginia, which made Virginia Gentleman, and Seagram's in Indiana (now MGP), which made bourbon that was mostly sold outside the U.S. There may even then have been a couple of craft distilleries making bourbon outside of Kentucky, but they didn't make enough of it to matter. Bowman and Seagram's made so little that it probably didn't amount to even the 5% allocated to them by Gregory. 

Which brings us back to Jack Daniel's, always the elephant in the room when we talk about bourbon and Kentucky. Jack Daniel's is bourbon in all but name. So is George Dickel. Their use of the term "Tennessee whiskey" instead of bourbon is a choice, adopted long ago in part because bourbon is so closely associated with Kentucky. Between them, their volume (approximately 90% of which is Daniel's) is about one-fourth of the bourbon-style whiskey category. That makes Kentucky, at best, the producer of about 75% of the "world's bourbon supply."

In the business, the term "bourbon" is shorthand for American whiskey. Nobody breaks out bourbon, much less Kentucky bourbon, as a category. The numbers are for American whiskey, distinguishing straight whiskey from blends in most cases but that's about it. The straight whiskey segment was almost all bourbon and Tennessee whiskey until recently, with the resurgence of rye. 

Today bourbon is made all over the country. Most American whiskey is still made in Kentucky and Tennessee, and most of the growth in whiskey distilling capacity in the last decade or two has been there as well. Again it would be a guess, but if you said 95% of American whiskey is produced in that region, you'd be close to right. That region, which includes MGP's distillery on the Kentucky-Indiana border, is America's whiskey heartland.

With the resurgence of rye, American distillers are now making a lot of whiskey that is not in the bourbon/Tennessee whiskey style. In Scotland, they make many different whiskies, but they are all scotch. Not all American whiskey is bourbon, even with Jack and George included. In addition to bourbon and Tennessee whiskey, America's whiskey-makers make rye whiskey, wheat whiskey, malt whiskey, corn whiskey, and blended whiskey, just to name the major types. Increasingly, these other whiskey styles are made in other places. Some craft producers have eschewed bourbon because of its strong association with Kentucky. Pennsylvania, New York, Virginia, and Maryland all have historical associations with rye whiskey, as does Canada.

Remember, the only thing that distinguishes bourbon from, say, rye is the mash bill. Both types use new, charred oak barrels and taste very similar. The parallel to scotch isn't bourbon, it's American whiskey writ large.

Back to the Kentucky question. The problem, of course, is with the KDA itself. They claim, also on their web site, that they are "Responsible for Promoting and Protecting All Things Bourbon," but that's not true. They actually only care about "promoting and protecting" the bourbon made in Kentucky by their member companies. 

About 70% of the whiskey made in the U.S. is made by four outfits. One of the four, Sazerac, is not a KDA member. Sazerac makes bourbon in Kentucky at Barton 1792 in Bardstown and Buffalo Trace in Frankfort. They are one of the largest producers of Kentucky bourbon but the KDA acts like they don't exist.

Do Brown-Forman and Diageo, which owns George Dickel, support the KDA's Kentucky-centricity? Apparently they do. Since both companies also make Kentucky bourbon, and Brown-Forman is Kentucky-based, they happily support the hegemony of Kentucky's large, legacy whiskey-makers. It's a not-too-subtle barrier to entry for producers of Texas bourbon or anyone else who would like to expand out of a successful regional market. 

In general, false and misleading statements invariably lead to false beliefs. Decisions based on bad information are themselves usually flawed. False and misleading statements erode our trust in the institutions that make them and in institutions generally. It shouldn't surprise anyone that most trade organizations are really private clubs intended to promote and protect the interests of their members, certainly not the interests of the public or even, necessarily, their industry at large. In this case, people repeat the 95% claim like it's gospel. It contributes to the hard-to-kill myth that bourbon can only be made in Kentucky. 

They could fix this one, little problem easily. When you say "95%," it sounds like you actually know it's 95% because you've used a number and numbers imply precision. Maybe it would be better to just say "most" and leave it at that.

Bigger picture, this is part of a larger problem in which too many people feel free to pick and choose the "facts" that most appeal to them. There are still ways to find out what is true and what is not. You're using the most powerful of them right now (by which I mean the internet, not this blog). But you have to be smart about it, you might have to do a little more work than you'd like. Most of all you have to care about basing your judgments upon accurate information. The truth, like Tinkerbell, will die if you stop believing in it. Care about the truth, both in what you take in, and what you put out. It's the best way to live.

That's true in whiskey, in politics, in life. 

Jim Murray Does It Again (I Wish I Knew How)

Do not look directly into his eyes.

One thing you rarely read about in the whiskey press is the whiskey press. That's just as well. Excessive navel-gazing is a risk in any enterprise. Look at the movie industry. But Jim Murray's annual World Whisky of the Year awards are a cultural phenomenon that deserves a comment or two.

Although it is the work of one man, it is widely reported as if it represents an industry consensus. Every year there are dozens of different competitions for distilled spirits products; with panels of judges, prestigious announcement events, and fancy trophies. Murray does a press release, yet he gets better coverage than all of them. Murray's annual announcement is always front page news in the trade press and garners remarkably heavy coverage in the general press as well. 

How does he do it? No one explains Murray better than Murray. Here is his description of himself, from his website:

"Jim Murray is a legend and leading player on the world’s whisky stage. It is now over 25 years since he became the world’s first-ever full time whisky writer. And this 2020 edition of his Whisky Bible marks the 17th year of annual publication."

You can't argue with results.

What is his secret? Here is part of the answer. Murray does his business in a way that generally pleases whisky producers, although he has pissed off more than a few of them too. His annual pronouncement gives most of them something to crow about, often in irresistibly evocative prose, so they promote his glowing descriptions of their products and burnish his credibility in the process. He keeps a low profile most of the time and doesn't go on Facebook to argue about politics and other wastes of time. He maintains an air of mystery, the hermit aesthetic who speaks to his votaries only through The Book. ($19.95 on Amazon) 

About that evocative prose, here in part (from his press release) is his description of his latest World Whiskey of the Year:

“A succulence to the oils, balanced perfectly by ulmo and manuka honeys ensure for the most chewable Canadian mouthful possibly ever and yet this is constantly salivating, from the very first nanosecond."

Murray also is very good at creating controversy, i.e., buzz. He loves to tweak the whiskey establishment by giving his highest honors to outliers such as this year's winner, Beam Suntory’s Canadian bottling of Alberta Premium Cask Strength Rye.

Whatever his secret, he's been getting it done for 25 years now, and I can testify to how easy that isn't.

NOTE (9/21/20): Murray's hegemony faces a new threat. Finally, he is being called out for the sexism in his writing.  

O. Z. Tyler Is Now Green River Distilling Co. (Again)

The distillery on the west side of Owensboro has had many names. One of the first was Green River, a name originally given to a distillery on the nearby Green River, a tributary of the Ohio. That distillery, established in 1885, was owned by John W. McCulloch, who had worked there as the 'government man' (i.e., internal revenue agent) before buying it. In about 1900, he moved the distillery to its current location for access to the Louisville, Henderson & St. Louis Railroad line, but he kept the Green River name.

The Green River brand became famous for its advertising slogan, “The Whiskey Without a Headache.” With new rules post-Prohibition, that slogan was barred. Its replacement, “The Whiskey Without Regrets,” though arguably more evocative, never had the same zing and the brand declined. 

But now the slogan is back, in huge letters on the side of one of the distillery's brick maturation warehouses.

The name change is being unveiled today.

Green River Distilling Co. is owned by Terressentia, which bought it from CL Financial in 2014. They renovated the distillery, which had been dark since 1992, and named it O. Z. Tyler after the company's founder. Distilling resumed there in 2016. The master distiller, then and now, is Jacob Call, whose family has deep roots in bourbon-making. Both his father and grandfather worked at Jim Beam.

“Green River was known for making some of the finest whiskey in Kentucky," said Call. "We’re excited to be crafting bourbon and rye under the Green River flag again. As a third-generation distiller and seventh-generation Kentuckian, playing a role in reviving this historic distillery has been a once-in-a-lifetime experience.”

Terressentia is best known as developer of the TerraPURE rapid aging process. However, the bourbon and rye that will be sold under the Green River name will not use TerraPURE, according to distillery sources. Both whiskeys will be traditionally aged for a minimum of four years. A limited release of Green River Kentucky Straight Bourbon will be available in 2021. For more information, visit the distillery's web site.

Rob McCulloch, great-grandson of Green River's founder, worked closely with Terressentia CEO Simon Burch to rename the distillery. “I’ve always wanted the distillery’s name back at its original location in Owensboro," said McCulloch. "It completes the story my great-grandfather started in 1885.”

“We’re so grateful to Rob for sharing his family’s legacy with us and it’s a privilege to continue to build on the legacy that John McCulloch created," said Burch.  

Green River Distilling Co. is the westernmost point on the Kentucky Bourbon Trail. 

Is Jack Daniel’s the #1 selling whiskey in the world?

 

As I read the press release from Jack Daniel's about the resignation of Jeff Arnett, I thought they had buried the lede. There, at the end of the second paragraph, I saw it: "Jack Daniel’s is the #1 selling whiskey in the world."

I don't recall seeing this statement in any previous press releases from Jack Daniel's, but I have to confess I don't read them all. Notice the exact words: "#1 selling whiskey in the world." Not "#1 selling American whiskey in the world."

This is a big deal because the #1 spot has long been held, proudly, by Johnnie Walker. As any whiskey drinker knows, Jack Daniel's and Johnnie Walker are completely different products, connected only by the fact that both are classified as whiskey (or whisky). They are, however, as segment leaders, avatars of each nation's whiskey industry. As Jack and Johnnie go, so goes the business. World wide, scotch still outsells American whiskey about four to one, but that ratio has been narrowing steadily for decades.

In 2014, when the Tennessee legislature was considering amending or repealing its new Tennessee Whiskey law, I testified before the committee looking into the matter. I was there at the invitation of the newly-formed Tennessee Distillers Guild, most of whose members supported the existing law, which for the first time formally defined Tennessee whiskey as (in effect) straight bourbon that has been filtered through maple charcoal before aging.

Those wanting to dilute or discard the law were led by Diageo, owner of Tennessee's George Dickel Distillery, and not coincidentally also the owner of Johnnie Walker. Diageo and its supporters offered a variety of reasons for opposing the law. They said it was unfair to small distillers, too narrow, and stifled creativity. I told lawmakers the real reason. "Right now, Diageo's Johnnie Walker and Brown-Forman's Jack Daniel's are battling for the title of world's number one whiskey, a title long held by Johnnie Walker," I told them. "Most industry analysts believe it is only a matter of time before Jack overtakes Johnnie. In emerging markets, where no one knows either, that title is worth millions, so anything Diageo can do to slow Jack down, they will do it, and that is why they are doing this."

That sent the Diageo folks in the hearing room scrambling, but no one has ever denied my claim.

Earlier that year, the drinks research firm IWSR reported that the principal expression of the Jack Daniel's line, black label "Old No. 7," had passed Johnnie Walker Red as the best-selling single expression of a whiskey product. Although the Arnett resignation is the first time I've noticed it in a press release, my Jack Daniel's contact says they've been using it for "some time," relying on the IWSR research. Wasn't there a big announcement, I asked? Apparently not, my contact said. "We typically don't tout something like that directly, so I'm not surprised that there wasn't a big announcement." 

Is Jack Daniel’s the #1 selling whiskey in the world? By that single-expression standard, yes. If you consider the brand as a whole, no. According to industry publication The Spirits Business, Jack Daniel's sold 13.4 million cases in 2019, Johnnie Walker sold 18.4 million.

The Spirits Business does a cute trick. Jack Daniel's is #1 on their "World Whisky" list, which excludes the products of Scotland. Johnnie Walker is #1 on their "Scotch Whisky" list. But they also show the numbers. Neither brand has moved very much since 2014, with each growing by about a million cases.

If you merge the two lists it goes like this. Johnnie is first, Jack is second, Jim Beam is third, Ballantine’s Scotch is fourth and other blended scotches round out the top ten. An American whiskey, Maker's Mark, slips back in at number 12. 

But nobody cares about #12. Everybody wants to be #1. 

No, the Booze Business Is Not 'Thriving,' Part Two

 

Historically in the US, approximately 80 percent of alcohol sales were conducted at off-premise retail establishments such as alcohol, convenience, and grocery stores; with the remaining 20 percent coming from on-premise (bars, restaurants, etc.). As Covid-19 impacts the on-premise beverage alcohol landscape, the balance between on- and off- premise occasions has shifted, with consumers being forced into even more at-home consumption.

This is from IWSR, one of the leading research companies serving the alcoholic beverage business. 

As much as it is Covid killing on-premise today, the on/off-premise ratio has been shifting toward off-premise since the turn of the century.

One reason is price. Drinking in always has been cheaper than drinking out, but the gap has grown as on-premise prices have increased more than off-premise prices over the last 20 years. Other factors driving more at-home drinking include stricter DUI laws, a societal/generational shift towards online experiences, the growth of online shopping and delivery services, and better at-home entertainment options. 

Today, there are 20% fewer places that serve alcohol than there were 20 years ago. 

According to IWSR's analysis, total beverage alcohol volume sales for off-premise increased by 9.3% over the 52-week period ending August 16th. It would need to increase at twice that rate to compensate for the estimated 75 percent loss of on-premise business. 

IWSR estimates that, when all is said and done, the industry will have grown 0.06 percent in 2020. Growth? Yes. Thriving? No. 

No, the Booze Business Is Not 'Thriving'

On Tuesday, Vinepair published an article by Tim McKirdy entitled, "What's Fueling the Billion-Dollar Bourbon Boom?" In it he writes, "It's no secret that liquor sales have thrived during the coronavirus pandemic." 

Not only is it not a secret, it's not true. What has thrived has been at-home drinking and hence liquor stores sales, what the industry calls "off-premise." Yes, off-premise is thriving but on-premise, meaning bars and restaurants, is dying. The one has not offset the other so overall liquor sales are down or, at best, flat.

How bad is it?

IWSR is one of the leading research companies serving the alcoholic beverage business. Back in May, they put out a press release with this headline and subhead: "Beverage Alcohol Not Expected to Rebound Until 2024. Global Alcohol Consumption Grew Last Year, However, New IWSR Research Forecasts That Covid-19 Will Push 2019 Volume Gains Back By 5 Years."

That's the real story.

They elaborate: "Total global alcohol consumption, led by increases in beer and ready-to-drink products, grew by +0.1% in volume and +3.6% in value in 2019, but losses in the months-long near complete shutdown of bars and restaurants across the world this year has not been offset by upticks in liquor retail and ecommerce. IWSR expects this to lead to double-digit declines in 2020, which IWSR estimates will take until 2024 to reach 2019 pre-Covid-19 levels (though in the UK and US, IWSR forecasts that pre-Covid-19 beverage alcohol volume levels likely won’t return until after 2024.) Global travel retail, severely affected by widespread travel restrictions, will see a particularly harsh decline in 2020 but is expected to reach pre-crisis levels by 2024."

Did you catch the caveat about the US and UK? They predict recovery some time after 2024, and they aren't prepared to say how much after. Yes, this release is from May, but has anything happened since then that would make the outlook rosier?

I got into the beverage alcohol business at about the time the American whiskey industry collapsed. For years after that, industry observers predicted a rebound was "just around the corner." It wasn't. It took about 40 years. Only now, as in 2019, has whiskey production (as in new distillate going into barrels) exceeded the previous high-water mark. As McKirdy notes, in 2019 "Kentucky distillers filled more than 1.7 million barrels of bourbon — nearly four times greater than 1999’s total. Production in the Bluegrass State ... is the highest it’s been since 1972, according to data from the Kentucky Distillers Association (KDA)."

Production in the other big production state, Tennessee, is similarly at record levels.

It's bad all over. Last month, a study prepared by the Distilled Spirits Council (DISCUS) and the American Distilling Institute showed that craft distillers have lost 41 percent of their sales, worth more than $700 million, since the shutdowns started earlier this year. Thirty-one percent of their employees have been furloughed. 

Craft distillers have been hit so hard because sales at the distillery are such a big percentage of their total sales. About 40 percent of craft distillers make most of their sales at the distillery. Most craft distilleries have seen those at-the-distillery sales decline and 15 percent say their distillery store is completely shut down. 

But the worst hits are happening with on-premise retail; bars and restaurants. Those who haven't thrown in the towel are struggling to survive. Millions are out of work. No one is thriving.

There is a lot of denial around this crisis, driven by partisan politics. But if you're willing to look at the facts in a clear-eyed way, it's possible to get a picture of what's really going on and what happens next. I'm lucky because I'm mostly retired. Like everyone I've lost some income streams, but most people have it much worse than I do. If I have any advice it's just this. 

Be realistic.