Some in Whiskey Country Don't Want More Whiskey in the Country

 

A maturation warehouse at Barton 1792 Distillery, Nelson County, Kentucky.

"Bitter bourbon battle pits Buffalo Trace against Franklin County residents over new warehouse," screams the headline in today's Herald-Leader, which typically has the state's best bourbon industry coverage.

The news business is brutal right now so I won't fault the sensationalized headline. These 'bitter bourbon battles' have become commonplace in the last 20 years. Kentucky's signature industry is doing quite well right now, in case you haven't noticed. More people buying more Kentucky whiskey means Kentucky whiskey-makers must make more whiskey, in Kentucky. Because of American whiskey's marvelous, unavoidable aging process, increasing sales means more maturation warehouses must be built and filled. 

I apologize if this seems too elementary.

Because a maturation warehouse, being mostly wood and high-proof alcohol, is kind of flammable, you don't want them too close to people. The industry's safety record is very good, but still.

In addition to fire risk, neighbors worry about Baudoinia compniacensis, the 'whiskey fungus' that is a harmless nuisance but easy to scare people with. The scare-mongers will call it 'little studied' or 'mysterious' even though it was identified and described about 150 years ago. It was first analyzed by a pharmacist in Cognac named Baudoin, hence the name. It has been observed everywhere distilled spirits are aged in wood all over the world.

Baudoinia is, admittedly, weird. But people who live near proposed whiskey maturation facilities deserve facts, not trumped-up fear. Baudoinia appears and grows only where there is a sufficient concentration of ethanol vapor in the atmosphere. It can't spread very far from the vapor source. It's ugly, but it washes off. It can grow back. 

Many, many people--millions--have lived their whole lives around Baudoinia and never gotten sick. There is literally zero evidence, after 150 years, that it poses any kind of health risk to anyone or anything. It grows on trees and other plants, also with no detectable effect. 

Since Baudoin, interest in studying it comes and goes. Every so often there is a new look, which benefits from the latest technology. There isn't more research because Baudoinia isn't very interesting. It doesn't do anything except make surfaces where it grows look dirty. 

Believe it or not, whiskey companies want to be good neighbors. They don't want any trouble if they can avoid it. The only practical way to contain the fungus, so it doesn't dirty-up people's garage doors, is to build new maturation facilities on large parcels of land, typically 300 acres or more. Provide that kind of buffer around the warehouses and little if any of the fungus will make it past the perimeter. Building these facilities on large tracts in rural areas is the solution, not the problem, at least so far as Baudoinia is concerned.

Sited this way, a maturation facility takes only a tiny fraction of the parcel out of agricultural production. It can continue to be cropland or pasturage or even woodland. Woodlands are particularly good because trees also keep the fungus from spreading. Since the fungus consumes ethanol vapor, more fungus growing on the distillery's property will mean less, if any, will be growing on adjacent properties. 

Traffic is the other typical concern expressed by members of the affected community. Bear in mind, the whole idea of a maturation facility is that once a barrel is in the racks, it doesn't budge until it is time to put it in a bottle, four to ten years later. That simple fact means the number of barrels going in or coming out of the facility on any given day will be very small. A distillery, especially a distillery with a visitor center, then you're talking traffic. A maturation facility? Very little impact on traffic. 

Most of these objections are the normal 'not-in-my-backyard' (NIMBY) reaction businesses and governments face with just about every development or re-development proposal, and that is not entirely a bad thing. People should see how the sausage is made. That should encourage them to learn more about sausage-making and maybe even make some sausage themselves. In a healthy democracy, the more the merrier.

You would think that with as long as Kentucky has been aging whiskey, about 150 years, they would have worked out some of these land use issues, ideally with a statewide standard. As recently as 2016 the next county over, Woodford, was arguing about whether or not whiskey maturation warehouses are an 'agricultural use.'

The Herald-Leader story is well-reported. It shows that the opponents are mostly using procedural and legalistic tactics to delay approval, or perhaps to encourage the developer to go elsewhere where there will be less trouble, except there is no such place.

What Can this Picture Tell Us About Greendale Distillery?

 

Greendale Distillery; Greendale, Indiana; circa 1920.

Whiskey-making in America wasn’t fully industrialized until the final quarter of 19th century, but then it became very big very fast. This is clear from what we know, but hard data to quantify it is elusive. It is even harder to find detailed information about individual distilleries, especially those that disappeared without a surviving physical plant or brand. 

Prohibition is the reason for the paucity of public records, that and the stigma that attached to whiskey-making as a result. Many families covered up their involvement rather than preserve it.

But we can glean some facts from the limited information we have. This image is of the Greendale Distillery in Greendale, Indiana. (Most ‘Lawrenceburg’ distilleries were actually in the adjacent town of Greendale.) We know that after the Whiskey Ring scandal of 1871-76, whiskey production for the greater Cincinnati area became concentrated in Lawrenceburg-Greendale.

This image is taken from a 1920 warehouse receipt. Many distilleries of that era had similar detailed line drawings of their facilities on their letterhead, stock certificates, warehouse receipts, and other documents. After Prohibition, picture postcards of similar images became common. Many of both have survived. By comparing these pre-Prohibition drawings to Sanborn Maps, post-Prohibition postcards, and surviving structures, we see the 19th century drawings were generally accurate, not fanciful nor aspirational. 

The purpose of these images was, perhaps, to assure customers that they were doing business with an actual distillery and not a broker or other intermediary. For us, they can tell us things about the distillery we don’t get from the existing meager record.

Stitzel-Weller Distillery, post-Prohibition picture postcard. 

For example, although Greendale was a small community compared to Cincinnati, this is the configuration of an urban distillery, reflective of the ‘reformed’ industry post-scandal. Everything is close together on a large city block. Although not shown, it is likely there were similar facilities on either side. We know the Squibb Brothers distillery was adjacent to Greendale, as they were combined into a single plant after Prohibition.

Greendale wants us to know it is a modern and substantial distillery. The artist made it a point to show paved roads with automobile traffic on the block’s two visible sides, with sidewalks and curbs. The locomotive visible middle-left tells us a railroad runs through it. (Notice that a train is also depicted on the much later Stitzel-Weller postcard.) 

The large building left-front is clearly the main one. It may be offices, at least a sales room, with the distillery behind. One of the towers is probably an elevator, the other the column still. The stacks indicate boilers.

The two buildings in the center are maturation warehouses, likely holding 18-20,000 barrels each. The long, low buildings at the upper left are probably bottling and finished-goods storage. 

The building on the right is harder to figure. It appears to be two-story with no windows downstairs, which suggests some sort of storage or processing as opposed to offices. Cistern room? New barrel staging? Many distilleries of this era had large machine shops for fabrication and repairs. They were, in some ways, more self-sufficient that the mega-distilleries of today.

We can't tell much about the low buildings on the right, except that the plant is using every inch of its real estate.

What have we learned from this picture? That Lawrenceburg-Greendale was very much like Louisville or Peoria in its urban concentration of large, industrial whiskey manufacturers. How large? We have a record that says Squibb Brothers Distillery, next door, was mashing 330 bushels per day in 1885. That comes out to about 10,000 barrels per year. If the two obvious maturation warehouses are it, and hold about 40,000 barrels, and they’re selling 4-year-old whiskey, those numbers work.

It's a lot of speculation and a shame we have to guess at these things, but at least every picture tells a story, don’t it?

Who Gets the Best Whiskey?

Barrels of maturing whiskey.

Consider this a thought experiment. 

Let’s say you have a whiskey distillery. You make a lot of whiskey. Most of it you sell through brands you own and distribute. Those are your most profitable sales, the ones that earn you the most money. 

But sometimes you make too much whiskey, more than you need. That’s a good strategy because when you distill whiskey you don't know exactly how much you will be able to sell all those years down the road when it matures. You make too much or risk making too little. 

No problem. You can sell that surplus to a non-distiller producer (NDP) for one of their brands. You won’t make as much money selling it that way, but you will make a profit. It won’t be hard to sell. With new whiskeys appearing all the time, the NDP market is always hungry for good liquid.

Maybe selling whiskey in bulk is more than just something you do to dispose of excess stock. Maybe it is part or even most of your business. Maybe you have standing contracts with customers for regular deliveries of mature whiskey. Maybe you sell new make. Maybe you lay down whiskey at your own expense for sale on the spot market when it matures. Maybe you sell most of your output in bulk. 

Nevertheless, brand sales are more profitable than bulk sales so even if branded products are a small part of your portfolio, they will inevitably contribute a disproportionate share of your profits. That's why every commodity producer aspires to be a brand producer. It's natural. In business, one proven way to improve profits is to move up the value chain. It’s the nature of the beast.

So that's the business you're in, now a little about you. You are an experienced whiskey-maker. You make the best whiskey you know how. Nothing goes out the door that does not meet your high standards. Your whiskey is excellent. You don’t make bad whiskey. You don’t sell junk. It's all good.

However, you know each barrel is unique. The barrel itself, the tree it came from, its location in the warehouse, the season it went into the warehouse, all those things make each barrel unique. When each barrel is unique, some barrels will be better than others.

In practice, distillers regard all barrels laid down on the same day and stored in the same part of the warehouse as the same, but even within those sets of 50-60 barrels, there are differences if you care to find them. 

As a distiller, you and your tasting panel make subjective judgments about your whiskey every day. All things being equal, the whiskey from some barrels is better than others. It could not be otherwise.

Here comes the thought experiment.

It is time to select which barrels you will use for your most profitable channel of distribution, where the labels have your name on them; and which barrels you will sell in bulk, where you make less money and the labels do not have your name on them.

Which channel gets your best barrels?

Remember this the next time you get all excited about some bottle you’ve never seen before, from some producer you don’t know, that some retailer or buddy has just shoved in your face. The label is obtuse about where the whiskey was made. Maybe you pooh-pooh people who care about that sort of thing. “I don’t care about that stuff, as long as the whiskey is good.”

Exactly the point of this exercise, finding the best whiskey.

Not to say NDP whiskey is bad, or that whiskey from a known producer will always be better than whiskey from an unknown one. In fact, NDPs often get their hands on very good whiskey, or they are very good at combining whiskey from different sources into something greater than the sum of its parts. That's where the best NDPs shine.

But way too often, that cool label that caught your eye is just a marketing idea and the whiskey inside, while perfectly okay, is nothing special and not worth what they are asking. 

NDPs have unique challenges because they are at the mercy of the market. Distillers are better off because they make everything they sell.

Right now it's a seller's market for mature bulk whiskey and most contract producers are booked up. NDPs have to take what they can get and can't always get what they want from the distillers they want to get it from. That causes inconsistency. Both types of producer strive for consistency in their brands from batch to batch, bottle to bottle. Who do you think has better control of that, the distiller producer or the NDP?

As a whiskey consumer, if you like to spin the wheel and take your chances, more power to you, but as with any risk-reward scenario, there are ways to tip the balance in your favor. 

The first is to be aware if the bottle you are looking at is from a known distiller producer or a NDP. With a known distiller producer you know what you have, no further inquiry is necessary. With a NDP, you might want to dig a little more, gather more data before you make a monetary commitment. If you can find out who the NDP is, maybe you can find out what else they make, and start to move them closer to known producer status.

A known NDP is a better bet than an unknown NDP. 

Some NDPs make this easy by selling a wide range of products from many different sources under a common umbrella. Find one or several NDPs whose stuff you like and let them do the hunting for you. Barrell Craft Spirits and Proof and Wood Ventures are two good examples. With Barrell, Barrell is the brand. Proof and Wood has a variety of brand concepts but the company name is on the label. Good NDPs have web sites. Good NDPs tell you as much as they can about the whiskey they sell. Good NDPs are into whiskey, not celebrity endorsements, fancy packages, or phony backstories. This is a growing niche. 

On the other hand, if the producer makes it difficult for you to find out who they are and what they had to do with the whiskey in the bottle, that should tell you all you need to know. Sure, happy accidents happen, but they are never a good bet. Give the cagey NDPs a pass.

There are no guarantees, but these are ways to improve the odds that you will get something new that you will like for a reasonable price. There is a fundamental difference between a known distiller producer and a known NDP, but a known unknown is better than an unknown unknown, as Don Rumsfeld might say.