Brandy And The Holidays.

This is the time of year when people who never buy brandy buy brandy.

Although bourbon whiskey is great in egg nog, many people prefer the more traditional brandy. It also figures in other holiday and winter season recipes, not just for drinks but also desserts and other dishes.

So this is when a lot of people who aren't normally brandy drinkers buy and drink brandy, and a lot of that brandy is American-made.

Most American brandy comes from California, or so most people think. Two of the five largest brands are entirely made in California while the other three are distilled in California from California-grown grapes, but aged and bottled in Kentucky. And as I told you Sunday, four of the top five American brandies are aged in used bourbon or Tennessee whiskey barrels.

The United States doesn't have the fine brandy tradition of France, Spain, and Greece. Except for a few boutiques like Germain-Robin, American brandy producers go for a utilitarian spirit, typically aged for two to three years. Most of it is perfectly acceptable for egg nog, punches, and other holiday uses, and it's much less expensive than the imports.

There are four major grape brandy producers in the United States. I specified 'grape' there because Laird's, in New Jersey, is technically a brandy producer but their fruit of choice is apples.

There are countless small brandy producers, in California and elsewhere, mostly associated with vineyards and wineries.

The Big Four are all in California. They are:

1.  E&J Gallo, in Modesto. They make E&J Brandy, the most popular brand. At about three million cases a year, E&J outsells all other brandies, domestic and imported.

2.  F. Korbel and Brothers/Heck Cellars, in Arvin. Korbel Brandy is #4 in sales at about 350-thousand cases. Although Brown-Forman markets and distributes the better-known Korbel Sparkling Wines line, its sole involvement with the brandy is in supplying Jack Daniel's barrels for its aging. Korbel's sales are concentrated in Wisconsin.

3.  O'Neill Vintners & Distillers, in Parlier. O'Neill is one of the two big independents. It provides all of the distillate for Heaven Hill's Christian Brothers (#3) and Coronet (#5) brands, and possibly some of #2 Paul Masson for Constellation. It produces more than five million gallons of brandy and neutral spirit a year. Some customers, like Heaven Hill, just buy their distillate. For others they do the aging, blending, and bottling too.

4.  Vie-Del Company, in Fresno. Vie-Del is the other big independent. It's a former Seagram's plant, now owned by the Nury family. Together Vie-Del and O'Neill supply distillate for just about every brand except Gallo and Korbel. Like O'Neill, Vie-Del is strictly a producer, selling grape juice, wine, and brandy to customers who handle the branding, marketing and distribution of it.

Constellation Exits American Whiskey, Sells to Sazerac.

The gist of the deal, announced today by Constellation in a press release here, is that it is selling its portfolio of 'value brands' to Sazerac, along with production facilities in Bardstown and Owensboro, Kentucky.

Significantly, one brand in the sale is not considered a value brand but, rather, a super-premium. It is Ridgement Reserve 1792, a bourbon that competes in the segment with Beam's Knob Creek and Maker's Mark, and Brown-Forman's Woodford Reserve.

The company's other American whiskey products, such as Very Old Barton bourbon, Ten High bourbon, and Imperial American blended whiskey, which are considered value brands, were also sold. This means Constellation has completely exited the American whiskey segment. It has, however, retained entries in the single malt scotch (Balblair, Speyburn) and Canadian whiskey (Black Velvet) segments.

The Bardstown production facility, the recently-renamed Tom Moore Distillery (formerly the Barton Distillery), is a whiskey distillery with rackhouses and a bottling house. The Owensboro facility has rackhouses and bottling, but no distillery.

The net result of this transaction is that American whiskey production has become more consolidated. There is now one less producer of American whiskey.

Constellation is a public company, bound by disclosure requirements, and its press release is admirably detailed and complete. Sazerac, which also owns the Buffalo Trace Distillery, is a private company and isn't required to tell us anything. So far they haven't, which is not to say they won't. Buffalo Trace, under the direction of President Mark Brown (who is now Sazerac's President and CEO as well) has long been very open and transparent about its activities.

We have many questions that we hope Brown will be quick to answer, most significant being whether or not they will continue to operate the Tom Moore Distillery.

As this news is just literally breaking today, one should also consider that there may be other shoes not yet dropped. It is not unusual in these situations for there to be a subsequent swift resale of some of the assets, typically to one of the other usual suspects such as Bardstown's Heaven Hill or St. Louis's Luxco. Even some much smaller players, such as Bardstown's Kentucky Bourbon Distillers Limited, may be in the mix.

Considering that Buffalo Trace is one of the few distilleries in Kentucky and Tennessee that still has excess production capacity, why do they need another distillery and two more bottling houses?

We'll keep you posted.

Delete the "& Wine" Part

In 2005, when Jim Beam Brands Company partnered with Pernod Ricard to acquire and divide between them the assets of Allied Domecq, Beam became a major international player in spirits, but also in wine. A new corporate name followed in 2006 that reflected the change: Beam Global Spirits & Wine, Inc. Now, new facts have made the new name obsolete, as Beam has divested itself of its wine portfolio.

I blogged about this in November, when an $885 million sale of wine business to Constellation Brands was announced. I just received a press release announcing that sale closed today, but it noted an earlier sale I had missed, to E. & J. Gallo Winery. At any event, Beam is now out of the wine business and has close to a billion dollars to spend on other things.

Constellation got Clos du Bois, Geyser Peak, Wild Horse, Buena Vista Carneros and Gary Farrell. Gallo got William Hill and Canyon Road. Constellation is the parent company of Barton, a full-line spirits company with a whiskey distillery in Bardstown, Kentucky.

This exit from the wine business is a little surprising, mainly because such a big deal was made of the new corporate name barely a year ago. If at the time they had intended to get out of the wine business, they could have come up with a less specific name. This suggests that the decision was opportunistic rather than part of a long-term plan. Press releases from Beam parent company Fortune Brands invariably point out how profitable the premium spirits business is, without saying what everybody knows, which is that the wine business isn't.

As a rule, investors hate surprises, so publicly-traded companies usually try to avoid them, but investors like profits even more than they hate surprises, so this surprise sale doesn't seem to be a problem for Fortune. It does, however, suggest that if Beam is thinking about using the proceeds of these sales to make a major acquisition in the spirits business, such as Absolut Vodka, it may not publicize its intentions in advance.

Still, what are they going to do about that name and their new web site?

On a slightly different subject, corporate press releases like the one I got today from Fortune invariably end with a paragraph that describes the corporation's business. It was a big deal a few years ago when the phrase, "Major spirits brands include Jim Beam bourbon.." was changed to read, "Major spirits brands include Jim Beam and Knob Creek bourbons..." It was a way of saying that Knob Creek had arrived as a successful brand. Sadly, Knob Creek has been bumped and replaced by Maker's Mark, one of the key brands in the Allied deal.