Good Economic News, Thanks to Bourbon and Rye

Do you like business stories where American manufacturers enlarge their factories and add workers so they can increase production? Especially when a lot of that increased production is destined for export? Or when companies put new offices into a revitalizing downtown? That's what whiskey is doing for Kentucky and, in this case, her largest city, Louisville.

Heaven Hill has announced that it will increase capacity at Bernheim, its Louisville distillery, by 50%; increasing annual output to about 5.3 million gallons. This is Heaven Hill's second major expansion since it acquired the distillery in 1999. It is expected to be completed next year.

All of Heaven Hill's whiskey is distilled at Bernheim and transported by tanker to Bardstown, where it is barreled and aged.

Heaven Hill is also building a new visitors center, "The Evan Williams Experience," on Main Street downtown. It too will open in 2014.

A few blocks away, Beam is building its Global Business Services Center, expected to open in the next few months. Beam's headquarters are in Deerfield, Illinois, a suburb of Chicago, but the company's principal U.S. production facilities are in Kentucky.

The Global Business Services Center will combine select financial and human resources transactional activities into one centralized hub. The center will act as the primary point of contact for Beam’s North America business in the areas of benefits, compensation, accounts payable, payroll and other key business processes. It will employ about 60 professionals.

This is on top of recent production expansions at its Clermont, Boston, and Frankfort facilities, and a huge investment in a new visitors center at Clermont.

These are only the latest announcements. American whiskey is also helping the economies of Tennessee and Alabama.

Every community likes to see local businesses expand. What's unique about American whiskey is that there is so much mystique around Kentucky and Tennessee that the distilleries can't leave. At the very least, they need their distillation, aging, and tourism facilities there. But since those have to be there, and the state and local governments have continued to be supportive, it makes sense to consolidate other parts of the business there too.

Although air quality is sometimes a problem, Louisville has a high quality of life coupled with a low cost of living and a mild climate. There are certainly opportunities to attract more business from other companies that are in the whiskey business, directly or indirectly.

Much of the industry's current growth is driven by predictions of explosive sales increases in Asia, particularly in India and China. If all of that goes according to plan, the future for Kentucky is bright.

CSI For Whiskey Enthusiasts

So you're down in the basement at Grandpa's house, a few days after the funeral. Mom says you can keep anything you find.

After wading through box after box of carefully washed tomato cans, you find a weathered wooden crate. Inside it are several clear bottles of dark liquid, and the label says "1895." Then you wake up.

Finding a cache of old whiskey is a popular fantasy, but when it actually happens it can be hard to figure out exactly what you have.

About a year ago, Adam Herz heard about an intriguing stash of bottles that has been making the rounds. He was able to examine them in person and even taste the contents. Then he donned his CSI sunglasses and went to work.

The result is "Adventures in Whiskey, the Case of the Strange Fitzgerald." It's on the web site of the L. A. Whiskey Society, where Herz is the most prolific contributor.

With old whiskey, labels can be monkeyed-with but bottles don't lie. Herz's article is one of the most authoritative you'll find on how to use bottle markings--intentional and unintentional--to accurately identify what's inside. In his Fitzgerald case study, Herz can't answer every question, but what he does discover is remarkable. Both his science and reasoning are unassailable and he tells the story in a zippy way.

These days, a lot of people write about whiskey. Most of it is earnest but ill-informed opinion. In contrast, what Herz delivers is fact-based information that will expand your knowledge of whiskey, whiskey hunting, and whiskey history.

New Barrel Proof Elijah Craig 12-Year-Old

Heaven Hill announced yesterday a special bottling of Elijah Craig 12-Year-Old Barrel Proof Small Batch Kentucky Straight Bourbon Whiskey. This limited edition bourbon will be allocated to all markets that currently offer Elijah Craig.

According to the company, this release takes advantage of both the surging popularity of high end bourbon and American whiskey, and the trend toward high proof or barrel strength bottlings. It also leverages the critical acclaim for Elijah Craig Bourbon and the high regard with which critics and aficionados hold the brand.

The new Elijah Craig Barrel Proof Small Batch release will begin shipping next week. Quantities are limited. The suggested retail price is $39.99. Proof of the initial release will be 134.2° ( 67.1% alcohol/volume). The 12-year-old age statement has moved to the back label to make room for 'Barrel Proof' on the front.

In addition, the release will forgo traditional chill-filtering, meaning all the natural esters and taste components from the barrel are preserved, giving the bourbon a particularly rich flavor and mouthfeel.

The new release will be offered in the traditional, distinctive Elijah Craig flask-style 750ml bottle, with the familiar oversize cork stopper and Elijah Craig signature blown into the front of the glass.  It will carry a dark brown version of the cartouche-style Elijah Craig label, with 'Barrel Proof' highlighted in red and hand written proof/alcohol by volume information, which will vary from one dump to the next.

“With the current unprecedented popularity of American whiskeys in general, and high end bourbon releases in particular, we feel that this release of Elijah Craig Barrel Proof is poised for great critical acclaim and sales success,” noted Heaven Hill Senior Brand Manager Susan Wahl. “It hits all the right sweet spots for today’s ultra-premium Bourbon consumer—barrel proof, 12 years of aging in open rick warehouses, non-chill filtered, and very small dumps of barrels. This barrel proof bottling, and the recent 20 year old Single Barrel bottling, have taken the Elijah Craig range to unprecedented levels of demand and stature.”

In Praise of Straight (It's Not What You Think)

The advent of products such as Kansas Clean has revealed a shocking truth. Distilled spirits that contain as little as five percent whiskey are allowed to call themselves whiskey. They can whiskey-this and whiskey-that all over the place, but is their product really whiskey? By law, yes. By common sense, no.

But law will trump common sense every time.

For you as a consumer, it shouldn't be necessary to memorize the Federal Standards of Identity for Distilled Spirits just to buy a good bottle of hooch, and it's not.

There is a simple, one-word solution, but the word to remember and look for is not 'whiskey,' it's 'straight.'

'Straight' is a modifier that applies primarily to American whiskey and not to most other types of distilled spirit. It means that certain specifications have been met, including aging in new, charred oak barrels for at least two years. It doesn't guarantee that the product will be good but it does guarantee that it will be what most people understand to be whiskey.

We're talking about American whiskey here, like bourbon or rye, not scotch, Canadian, or Irish. They have their own rules and peculiarities.

Straight whiskey (or straight bourbon, straight rye) is what most people mean when they just say whiskey. If asked to elaborate, they might call it 'real whiskey' or even 'pure whiskey,' but those terms are forbidden, at least on whiskey labels. That's okay as long as you know that the alternative is 'straight.'

If you want to blame someone for the semantic awkwardness of all this, the person you want is William Howard Taft, the 27th president, whose Taft Decision in 1909 allowed products that contain liquids other than whiskey to call themselves whiskey. It created different types of whiskey, the most whiskeyish of which is straight whiskey.

Unfortunately, there are a few straight whiskeys that don't have 'straight' on their label. Jack Daniel's doesn't and possibly can't, even though it meets all the key requirements. Even so, remembering to look for 'straight' is a good tip for anyone who wants guidance but doesn't want to get bogged down with details. 'Straight Bourbon,' 'Straight Rye,' and 'Straight Whiskey' are the terms you want to see. 'Straight Wheat' too, but there's not a lot of that around.

If you don't see 'straight' on the label, either find out why, or simply move on.

Quincy Street Distillery Is On Its Way to Somewhere

If you're going to start a micro-distillery, try to put it in an attractive older building in an attractive older part of an attractive older suburb of a major city. Visitors can be crucial to a distillery's success. Jack Daniel's and Jim Beam know this and so does Quincy Street Distillery, a new micro located in historic Riverside, Illinois.

When you think about your visitor experience, remember that it begins long before the guest crosses your threshold. That industrial park may have practical advantages for you and your employees, but it probably wasn't designed by Frederic Law Olmstead. Downtown Riverside was. Your customers will be much more likely to enjoy your place and your products if they've already begun to enjoy themselves before they get there.

Quincy Street is very new and very small but they have some interesting ideas about using old recipes and using their town and its history for inspiration. They sell a white whiskey, a lightly-aged bourbon and rye, a gin, and some unique spirits. Every product has a rich back story. At this point you can mostly get them at the distillery, but last month they got a distributor.

Sure, Daniel's has Lynchburg, but one thing the giants can't do is provide an intimate and idiosyncratic experience tied closely to a particular place. That's where micros such as Quincy Street have an advantage.

(Pictured: Owner Derrick Mancini and distiller Daniel Maguire.)

Kansas Clean. What Is This Stuff?

"Kansas is a new whiskey for new whiskey drinkers," says the ad, replete with pictures of attractive 20-somethings and at least one unattractive geezer. Kansas, aka 'Kansas Clean,' aka 'Kansas Clean Distilled,' is a distilled spirit product that has been around for about a year. It is the first product from a company in Rochester, New York (not Kansas), called Fabulous American Beverages.

They want $30 a bottle for it.

The bottle is clear and the product inside is clear too, so how can it be whiskey? Doesn't whiskey always have to be aged? Haven't dozens of micro-distilleries, and at least one giant (Jack Daniel's), gotten into trouble with federal regulators for trying to call an unaged grain spirit whiskey? Then what's this stuff?

Spirit whiskey.

What's that? Well, under U.S. rules, 'spirit whiskey' is a distilled spirit that contains at least 5 percent whiskey, with the remaining 95 percent neutral spirit, aka vodka. The whiskey component can be anything that meets the legal definition of whisky, so it can be very nearly neutral and very lightly aged itself.

The very hip/now/with-it Kansas web site tells you none of this.

The spirit whiskey classification exists because right after Prohibition there was so little fully-aged whiskey available, and whiskey was what people wanted, that the feds accommodated producers by creating categories of 'whiskey' that were mostly vodka.

That way, producers could stretch what little whiskey they had and still give people something with a little bit of whiskey character.

In the intervening years, and especially after the 'light whiskey' fiasco of the late 1960s, it became conventional wisdom that no one wants a whiskey that is barely there. Drinkers who want a neutral spirit buy vodka, which is the largest distilled spirit category. There is very little demand, seemingly, for a slightly non-neutral spirit with a modicum of whiskey character. At least there is very little demand for a spirit with less whiskey character than Canadian Mist or Seagram's 7 (the Bud Lights of whiskey).

That is, until now. Whiskey is now hip. There are, or so the makers of Kansas believe, many people who want to drink vodka but say they're drinking whiskey. They don't so much want the very slight whiskey flavor that (at least in theory) differentiates the product from vodka, as they are willing to tolerate it for the privilege of calling it whiskey.

In the rest of the world this isn't an issue, because following the guidance of the Scotch Whisky Association and the lead of the European Union, their rules say whiskey must be aged for at least three years. In the U.S., whiskey has to be aged, but no minimum duration is stated and products that contain as little as five percent whiskey are able to call themselves whiskey.

The rules are written to protect consumers but also to accommodate producers. In this case, both probably would be better served if the 'spirit whiskey' classification was abolished. Sorry, Kansas. (Not really.)

Diageo Loses Cuervo to Proximo

This has little to do with whiskey directly, but it's a big news day for people who follow the distilled spirits business, and anything that shakes up the industry this much is bound to affect whiskey at some point.

Today The Big Galoot (my pet name for Diageo) got a little smaller, as the other shoe dropped in the ongoing saga of Diageo and Jose Cuervo Tequila in the U.S. market.

Here's the synopsis of our story thus far. Jose Cuervo is far and away the best selling tequila in the U.S., fluctuating in recent years between 3.5 and 3.9 million cases, and trending down. Diageo doesn't own Cuervo, it's merely the distributor, and that contract ends June 30. Diageo tried to buy Cuervo from its owners, the Beckmann family, but that fell apart in December.

So the question has been, what's next for Cuervo? A new distribution deal with Diageo? Someone else? A sale to someone else? Or self-distribution?

Five years ago, the Beckmanns established a distribution company in the U.S. called Proximo Spirits, which sells 1800 Tequila, 3 Olives Vodka, and other small brands. Taking on Cuervo will more than double Proximo's size, so that was by no means a sure thing. It is, however, the choice announced today.

Proximo's only whiskey property is Stranahan's Colorado Whiskey, which is tiny compared to Cuervo but probably the biggest micro-distillery whiskey in the country.

Diageo, meanwhile, will fight back by promoting its other tequilas, principally Don Julio. The other challenge for Cuervo is the current glut of inexpensive, 100%-agave tequilas on the market. The other story this may impact is the ongoing speculation that Diageo will make a play for Beam Inc. Jim Beam itself is the prize, but does the fact that Beam owns Sauza, the #2 tequila, make such a move more or less likely? Only time will tell.