Tuesday, October 26, 2021

ADM Sells Storied Peoria Distillery to BioUrja


Hiram Walker Peoria in the 1940s.

The Peoria JournalStar reported it like this: "After almost 40 years, Archer Daniels Midland Co. no longer will be the primary firm that produces ethanol in Peoria. Instead, a Houston-based company will take over the dry-mill ethanol plant ADM has operated since 1982 at the foot of Edmund Street along the Illinois River."

The new owner is BioUrja, an international supplier and trader of commodities such as biofuels, petroleum products, natural gas liquids, electric power, metal alloy tubing, grain, and animal feed products. 

ADM is reducing its ethanol capacity to redeploy that capital more profitably elsewhere while BioUrja is excited about diversifying its biofuels business into higher-value distilled ethanol products such as beverage and industrial alcohol, the Peoria plant's specialty. This comes on the heels of another major neutral spirits distiller, Kansas-based MGP, moving itself up the value chain by acquiring Luxco.

Peoria and the nearby town of Pekin were once whiskey producers on a scale that rivaled Kentucky. The infamous 19th century Whiskey Trust was based there. The distillery BioUrja is buying used to make whiskey, and a lot of it. ADM bought it and converted it to neutral spirit production in 1982. The seller then was Hiram Walker, a Canadian distiller best known for Canadian Club. 

Hiram Walker was a 19th century Detroit grocer who owned a distillery across the border in Canada. He always intended to sell his products primarily in the United States but located the distillery there because he anticipated Prohibition. In so doing, Walker introduced Americans to the lighter Canadian style of whiskey. Because of Detroit's proximity to the Canadian border, Walker's plant supplied a lot of whiskey to the U.S. market before, during and after Prohibition.

Canadian law officially did not permit the export of spirits into the U.S. market during Prohibition, but row boats would show up daily at the Walkerville docks, declare their destination as “Jamaica,” and be sent on their way loaded down with all the whiskey they could carry. 

The Walker family owned the distillery until 1926, when it was acquired by Harry Hatch, a Canadian entrepreneur who started out with a small liquor store in Whitby, Ontario. 

When Prohibition ended in 1933, Hatch's Hiram Walker and Sons, Inc. decided to reenter the newly-legal U.S. market in a big way. Their Peoria distillery was the largest in the world and made Walker’s DeLuxe and Ten High, both straight bourbons; Imperial Whiskey, a popular blend; and other Hiram Walker products.

That distillery's predecessor on the same riverfront site was Joseph Benedict Greenhut's Great Western Distillery, built in 1881. The production of whiskey and neutral spirits was booming in Peoria and each new distillery was bigger than the last and, therefore, the biggest distillery in the world.

Six years later, Great Western and 65 other distilleries merged to form the Distillers & Cattle Feeders' Trust, popularly known as the Whiskey Trust. Greenhut became its president.

The Trust used its resources to buy more distilleries, many of which it closed. The idea was to limit production industry-wide to reduce competition and protect profits. Although the Trust was technically legal (it would not be today), it engaged in many illegal practices such as intimidating any distillery owners who did not want to sell.

That was Peoria then. The Peoria Historical Society's "Roll out the Barrel" Tour focuses on Peoria’s years as “Whiskey Capital of the World.” Peoria's Bradley University has a collection of interviews and other records in its Cullom-Davis Library. That's appropriate since part of the Bradley family's wealth came from the alcohol business. 

As you come into Peoria from the north you see it, where once there were distilleries as far as the eye could see. There is still one, the big one. It's still converting corn and water into alcohol, as they have done on that site for more than 150 years. There's just a new name above the door.

Wednesday, October 13, 2021

A Piece of Bourbon History Is Leaving Chicago

This is the view Beam Suntory is giving up, of the Chicago River from the Merchandise Mart's rooftop deck.

Back in January, Beam Suntory announced it will move corporate headquarters from Chicago to New York sometime next year. At least 100 employees will relocate. The current office, in Chicago’s Merchandise Mart, will remain Beam Suntory’s largest global office and home to its North American business unit. Parent company Suntory Holdings already has offices in the same Madison Avenue building where Beam Suntory is going.

But this isn't about that. That is just an excuse to look back on the history of Jim Beam in Chicago, where I live.

The Beam story begins, of course, with Jacob Beam's arrival in Kentucky more than 200 years ago. His descendant, James Beauregard Beam, brought the family's whiskey business into the 20th century only to see it snuffed out by Prohibition. After Repeal, Jim Beam, his brother, and their sons restarted the distillery but soon ran out of money, not because they were failing but because they were succeeding too well. It would take a lot of new capital to keep the company growing. The Beams didn't have it and neither did most of their neighbors in Kentucky's whiskey heartland. It was a common problem.

Perhaps in part because Chicago had been so wide-open during Prohibition, the midwestern metropolis seemed a natural place to concentrate legal whiskey distribution after Repeal. More importantly, investors could be found there. The Beams hooked up with three Chicago-based money men: Harry Homel, Oliver Jacobson, and Phillip Blum. The heirs of Tom Moore found Oscar Getz and Lester Abelson, who started Barton. In both instances, the distilleries were in Kentucky but the businesses were run out of Chicago.

Phillip Blum's son, Harry, eventually bought out Jacobson and Homel, who reinvested their funds in Heaven Hill. The Homel family hung on there until about 2005.

Harry Blum and his wife, Maribel, must have lived in my neighborhood because one of the buildings on the campus of Anshe Emet Synagogue, just down the block, is the Harry and Maribel Blum Community Hall. Two of the largest charitable foundations in Illinois are those of the Blums and of their daughter and son-in-law, the Kovlers, who also made their money from Jim Beam. 

The Jim Beam Distillery, of course, remained in Kentucky, in Bullitt County, about 30 miles south of Louisville. They eventually bought a second distillery a few miles away. Until the early 1990s, brothers Baker and David Beam minded the stills at the Bullitt County place, a 24-hour operation. Their cousin Booker Noe ran the plant in Nelson County. All of the manufacturing was done in Kentucky. All of the sales, marketing, finance, and corporate management was done in Chicago.

In 1967, Blum sold Beam to American Tobacco, which was using its cigarette profits to become a diversified conglomerate; soon renamed American Brands, then Fortune Brands. In addition to Jim Beam, the company would come to own Titlist, Moen, Master Lock and many other companies/brands. It was based in Connecticut, but Beam's headquarters remained in Chicago; downtown until 1988, then in a new office complex in Deerfield, a Chicago suburb. It had just merged with National Distillers and become a much larger company. 

Chicago is in Cook County. The next county north is Lake. The border between them is a major thoroughfare called, conveniently, Lake Cook Road. Beam's offices were on the north side of the street, hence in Lake County. I did a lot of business there between 1988 and 1994. One of their near neighbors was the Berto Center, where the Chicago Bulls had their offices and practice facility until 2014. 

Diversified conglomerates were all the rage in the 1960s but fell out of favor by the end of the century. Wall Street wanted 'pure plays.' Fortune eventually divested all of its other businesses and in 2011 became Beam Inc. That didn't last long. In 2014 it sold itself to Suntory. In 2016, Beam Suntory moved back downtown, to the historic Merchandise Mart building.

Although the top management echelon is decamping, what remains is significant. There is a lot of history there. Beam folks started to travel regularly between Kentucky and Chicago 80+ years ago. Chicago is slightly more convenient to Kentucky than New York, so that may help keep Chicago in the mix. It remains to be seen if there will be more Beam folks traveling from Muhammad Ali International to LaGuardia and Kennedy than O'Hare and Midway in the years to come. 

Friday, October 8, 2021

Whatever Floats Your Boat


Navy foresters at NSA Crane assess a white oak tree set aside for future use in repairing the USS Constitution. (U.S. Navy/Bill Couch)

Whiskey has only four ingredients and one of them is white oak, but there is a certain 50,000 acre stand of white oak trees that will never be used to make whiskey barrels. It is in southern Indiana, about 25 miles southwest of Bloomington, near the village of Crane.

Crane, Indiana is very much a company town and that company is the United States of America, specifically our Navy. Southern Indiana may seem like an odd place for a naval base, since it can't be reached by water, but Naval Support Activity (NSA) Crane is there nonetheless. 

NSA Crane was established in 1941 under the Bureau of Ordnance as the Naval Ammunition Depot. Weapons are produced, tested and stored there. It is remote; there aren't many people. That is by design, since Crane is where the Navy makes things that go boom. 

As naval weaponry became more sophisticated, so did Crane. Today, Crane provides a variety of advanced technical products to the Navy, but one of its products is ancient: hardwood timber, white oak.

It is hard to overstate the historical importance of white oak. Because it is so hard, humans didn't make much use of it until we developed iron tools that were strong enough to work it. After that, we used white oak for everything: buildings, weapons, containers, furniture, vehicles. Sure, there are other hardwoods, but plentiful and strong white oak is the unglamorous workhorse of wood.

White oak is used for whiskey barrels for several reasons. Strength is one of them. Barrels made from it are very sturdy and durable. Even more important is that they don't leak. Occlusions in the wood's large pores, called tyloses, protect the tree's sap when it is alive and provide leak resistance thereafter. The tyloses also contain a water-soluble compound that tastes a lot like vanilla, but that's a bonus.

White oak was, for centuries, used to make containers for all kinds of liquids. Even well into the 20th century, beer was kegged in white oak barrels. So was crude oil and many of the products made from it, such as kerosene. Today, most things are better off in metal or plastic; it's mostly wine- and whiskey-makers that still need white oak barrels.

White oak trees harvested for whiskey barrels are usually 60-75 years old, but that's not old enough for the Navy. For shipbuilding--or, in this case, repair--trees in the 200-year range are preferred. Those, too, once were plentiful but today not so much. Providing a stock of old growth white oak is part of NSA Crane's mission too.

The base at Crane covers about 62,000 acres and most of that is white oak forest. The stand's informal name is Constitution Grove and its mission is to provide enough white oak timber to keep afloat the USS Constitution, the oldest ship in the world that still is afloat. The Constitution was made from the same type of wood used to make whiskey barrels, white oak.

Although white oak is very durable, it doesn't last forever. Wooden warships usually don't last 227 years, but the Constitution is special. From time to time, parts of it need to be replaced. It is a real world ship of Theseus.

The USS Constitution is the only still-commissioned ship in the U.S. Navy that has sunk another vessel. (Shown here, doing it.)

Begun in 1794 and launched in 1797, the USS Constitution was one of six three-masted heavy frigates authorized by the Naval Act of 1794 and the third one constructed. It saw action against Mediterranean pirates and against Great Britain during the War of 1812. It was used for training during the Civil War, an era that saw the introduction of iron-clad ships. Soon the age of wooden warships was over. Today, the Constitution is a museum ship permanently docked in Boston's Charlestown Navy Yard

If after keeping the Constitution shipshape the Navy finds itself with excess white oak timber, Independent Stave has a stave mill in Salem, over toward Louisville, about 60 miles SSE of Crane. (A little closer if you take it out the back door.) It will be well-used. Maybe Spirits of French Lick can work something out.