Friday, December 9, 2016

Get Ready to Pay More for Booker's -- a LOT More



It started as a rumor. Beam was going to double the price of Booker's Bourbon as of the first of the year and start allocating it.

It seemed too crazy to be true. Sure, producers hike prices all the time, especially these days, but doubling it? With the increase the retail price will be about $100 per 750 ml bottle. Today, although the suggested retail is about $50, it is commonly found on deal in the low 40s. Such a huge price hike for any brand is a huge risk. It felt like brand suicide. It couldn't possibly be true.

But it is.

Here are the facts, from an official Beam Suntory spokesperson. Suggested retail will be $99.99 and the wholesale price is rising accordingly. At the same time, they will cut back from six or seven batches per year to four, with the batch size staying the same (about 350 barrels). Essentially, that means the number of bottles available will shrink by about one-third. They expect this will cause demand to exceed supply immediately, so they will began allocating the available bottles so every part of the country gets its fair share.

They have their own way of explaining why this is happening but it boils down to this. They are doing it because they can. The brand is strong. Other super-premium whiskeys are selling in that price range, so why shouldn't they enjoy some of the available profit? This keeps Booker's as the top of their line (except perhaps for their very limited 'craft' offerings), rather than creating something new in that high-price segment.

Seen in that context it doesn't seem so crazy after all. Perhaps the fact that Booker's Rye sold out quickly at $300 a bottle gave them the idea.

If you like Booker's and don't want to pay the higher price, or have trouble finding it, Jim Beam Black at about $22 is a good substitute. The biggest difference is the proof, 45% ABV for Jim Black versus more than 60% for Booker's. For about $40 a bottle you can get Knob Creek Single Barrel, which is nearly the same ABV as Booker's. On paper they are virtually identical, but no two products are ever exactly the same due to flavor profiles. Still, $40 versus $100 is worth considering.

This may have been part of the equation. Knob has been creeping up into Booker's price segment. In fact, all four of Beam Suntory's 'small batch' bourbons are bunched up at about the same price. It makes sense to put some distance between them. (The other two are Baker's and Basil Hayden's.)

No doubt there will be much weeping and gnashing of teeth about this, with accusations of greed and probably some xenophobia aimed at the parent company. If you swing that way, knock yourself out.

Realistically, no one in the whiskey business is organized as a not-for-profit. Beam has a huge American whiskey portfolio, with something for everyone. The whole industry right now has more demand than supply and the aging cycle means there is a several year lag between production increases at the distillery and supply increases on the street. The smart business play is to increase profits and tamp down demand a little bit with price increases, hopefully without hurting overall demand growth and customer loyalty.

Wednesday, December 7, 2016

My Dad's Pearl Harbor Story


Seventy-five years ago today my father, J. K. 'Ken' Cowdery, was in the Army stationed at Schofield Barracks in Hawaii. This is his account of that morning. He wrote it in 1991, for the 50th anniversary, for our local newspaper the Mansfield News Journal (Mansfield, Ohio). It was later published in the AARP magazine. Dad died in September, 2010, age 90.

This is just one of his stories from that fateful day. I heard them all about 100 times but it never got old. He had an amazing memory. How he got to Hawaii is quite a story too, as is what happened next, but I'll leave it at this for now.
_______________

Sunday, December 7, 1941, dawned bright and clear at Schofield Barracks, Territory of Hawaii. At least I assume that it did because it was bright and clear when I got up at about 7:45.

To get breakfast I had to be in the chow line out behind the barracks before 8:00. I made it.

Someone noticed a column of smoke coming from the vicinity of Wheeler Field, the fighter field, south of our location. There were comments and conjecture that the fly boys must be having some kind of exercise and that one of them had cracked up.

At about the same time we noticed a line of planes coming over Kole Kole Pass, which was about three miles northwest of us and in full view because there was nothing in the way. Our barracks was the furthest northwest barracks on the post. As the first plane in the line passed overhead I could not only see the red circle markings on the plane but could see the pilot's face, he came in so low that he cleared the two story barracks by about 5 or 6 feet.

At that point he also started his guns. We never did figure out why he didn't start strafing a few seconds sooner and try to get some of the 30 or 40 guys in the chow line. I have no idea what the second plane in the line did, by the time he got there I was long gone.

We all made for cover, I went into the building via the back door to the kitchen. The kitchen was about 20 feet wide by about 30 feet long. Just inside the back door, to the right, was the walk-in cooler. I hit the floor at the far end of the cooler, putting the cooler between me and the line of fire.

There must have been several planes in the line as the firing kept up for quite a long time--at least it seemed like a long time. After the firing stopped everything was completely silent, there was not a sound. I wondered if I was the only one still alive.

There was a line of preparation tables down the center of the room, with equipment and utensil storage drawers below, and ranges along the far wall at the other end of the room. Looking around I could not see another human being, everyone was obviously hugging the floor. Then I saw a hand rise up, pick up a spatula, turn over two eggs frying on the range, then replace the spatula and again disappear.

Regardless of the circumstances, duty comes first.

I might add at this point that this was the 90th Field Artillery Battalion of the 25th Infantry Division, a Regular Army outfit.

When it seemed that the attack was over and people started stirring again I grabbed a plate, claimed the eggs, and sat down to eat my breakfast.

Sunday, December 4, 2016

Indy's Big Red Liquors May Be on to Something


The line to get in.
Big Red is a chain wine, beer, and spirits retailer in Indiana. On Saturday they held their third annual Pappy Van Winkle Rare Bourbon Lottery and Sale in the Champions Pavilion at the Indiana State Fairgrounds on the north side of Indianapolis. Everybody calls the event 'bourbonfest,' but there is also scotch and even some wine and beer. Even Ale-8-One, an iconic Kentucky ginger ale, was there giving out samples.

In some ways it was just like the whiskey festivals held in other major cities. There were tables, with people giving sample pours of various whiskeys and other products (e.g. Louisville's Copper & Kings Brandy). Wild Turkey's Jimmy Russell was there.

In other ways it was completely different. One was the price. General admission tickets were just $15. For that you got all the samples you cared to taste, and one ticket for the Van Winkle lottery, which also included the Buffalo Trace Antique Collection. All proceeds from ticket sales were donated to the Tony Stewart Foundation.

Inside the pavilion.
It was pretty spartan. The facility usually hosts prize livestock. There were not many amenities, a few snacks and plenty of bottled water. The lines for the small bathrooms were as long as the tasting lines. It was also in the afternoon, from 1:00 to 4:00 PM. Most people left when the lottery wrapped up, about 3:30 PM.

They won't say if it's their entire Van Winkle and BTAC allocation, but that is how it looked. It came to about 43 bottles. Lottery winners win the right to buy their bottle at the regular retail price. The bottle you get is also the luck of the draw. The last ticket drawn was for the lone Pappy 23.

The result? A huge, enthusiastic crowd of about 2,400 people, the biggest crowd I've ever seen at this type of event. All of the tables were doing a big business, but the longest lines were at the tables for Buffalo Trace and Four Roses. All of the majors were there but also many craft distilleries.

They planned well for it. Every whiskey vendor had two tables, at opposite ends of the hall. The 'sale' part of the event is the order form every attendee receives upon entering, along with a tasting glass. The form lists each table and the products available there for tasting, with the item's regular and sale price, and a space for how many bottles you want to buy. No money changes hands at the event. You indicate on the order form the Big Red store where you will receive your order. You pay when you pick it up.

People took the buying opportunity seriously. One guest brought his own set of Glencairn glasses so he could comparison-taste.

Speaking of comparisons, Big Red Bourbonfest's $15 ticket compares to $139 for WhiskyLive and $245 for WhiskyFest.

Big Red may be on to something.

Wednesday, November 30, 2016

Buffalo Trace Distillery Completes First Warehouse X Experiment and Releases Findings, 3.5 Million Data Points Captured


Warehouse X at Buffalo Trace Distillery
Buffalo Trace Distillery has completed phase one of its bourbon barrel aging experiment inside Warehouse X, the experimental warehouse built in 2013 that allows for specific atmospheric variables to be tested in four individual chambers, plus one open air breezeway.

The first experiment focused on natural light, keeping barrels in various stages of light for two years.

Chamber One of Warehouse X held barrels at 50% natural light, while matching the temperature of the barrels inside the chamber to the temperature of the barrels in the outdoor breezeway.

Barrels in Chamber Two experienced 100% darkness, while keeping the barrel temperature at a constant 72 degrees Fahrenheit.

Chamber Three also had 100% darkness, but those barrel temperatures were kept the same temperature as the barrels in the outdoor breezeway.

Chamber Four barrels saw 100% natural light as the temperature was kept the same as the barrels in the outdoor breezeway.

In the two years this experiment was conducted, the barrels in the open air breezeway (which was not climate controlled) saw a fluctuation of temperatures ranging from -10 F to 105 F, likely some of the greatest temperature variance any bourbon barrels have ever experienced. The pressure inside these barrels varied from -2.5 psi to 2.5 psi.

Workers removing barrels following
the experiment's conclusion.
The team at Buffalo Trace collected and analyzed an astonishing 3.5 million data points. Among those learnings, an interesting correlation between light and psi was realized, and a long held distiller’s theory of more heat equaling higher proof was scientifically proven (at least for now).

However, another popular theory was disproved in part – as it turns out, the amount of light does not really affect the color or the proof of the bourbon inside the barrels. So much for the theory of honey barrels! But Master Distiller Harlen Wheatley has this to add about honey barrels, “Even though we proved light doesn’t affect the color or the proof of the whiskey, that doesn’t mean that honey barrels (those next to windows in standard warehouses that are typically distiller’s favorites) don’t taste a little bit better. Perhaps because of other factors than natural light.  We did prove factors like temperature, pressure, humidity and air flow all play a role in the end result.”  

Now that the light experiment is complete, Buffalo Trace is moving on to the next planned experiment, which focuses on temperature. In this experiment, the various chambers will experience different temperature variations, with Chamber One remaining the same temperature as the outdoor breezeway, plus 10 F.  Chamber Two will be 80 F, Chamber Three will be at 55 F and Chamber Four will be kept at the breezeway temperature minus 10 F.  The temperature experiment is expected to last at least two years.

For information about Warehouse X including a blog updated since the inception, visit http://www.experimentalwarehouse.com/  

Monday, November 14, 2016

New Barrel Research Center in Lebanon, Kentucky, Will Focus on Innovation



Independent Stave Company (ISC) has begun construction of a research center dedicated to oak innovation and experimentation for the spirits industry. It is being built in Lebanon, Kentucky, as an addition to the company’s Kentucky Cooperage campus. Once complete, the new research center will serve as a cutting edge resource on oak maturation for ISC’s distilling customers in Kentucky and around the world.

“We are passionate about spirits, including working closely with distillers to foster innovation and develop new products,” said Andrew Wiehebrink, ISC director of spirit research and innovation.

The research center will include a laboratory, a library of experiments, a tasting room, and offices for ISC’s Kentucky-based research and customer service team.

“We don’t want to just talk about what is possible,” said Jeff LaHue, ISC’s director of strategic partnerships. “Instead, we can demonstrate through blind tastings, sensory science and chemical analysis.”

Since the 1990s, ISC has conducted hundreds of barrel experiments and the company, working with its distillery partners, continues to lay down barrels every year. The company’s innovation team has increased the number of experiments in play for the past three years and many of these projects will come of age for evaluation as the research center becomes fully operational. 

"Independent Stave Company is committed to continuously improving the quality, consistency and variety of the barrels we offer,” said Brad Boswell, ISC president. “This research center is further evidence of how we translate that vision into action to the benefit of our customers."

As part of its mission, the research center will also explore how to enhance structural integrity and recovery yields.

“We are looking at all the elements to build a barrel–oak species, wood age, barrel shape and size, how we engineer the barrels, all the materials used–to optimize the barrels we craft,” said Wiehebrink, who works directly with ISC’s key spirits customers on innovation projects. “We encourage distillers to bring us their ideas and challenges. We know how to transform ideas into reality, with sensory and science-backed results.” 

ISC supplies whiskey barrels to most of the whiskey distilleries in Kentucky and Tennessee. The major exceptions are Jack Daniel's and the other distilleries owned by Brown-Forman, which owns its own cooperages.

Monday, October 31, 2016

Is There a Bubble Brewing in Bourbon?



"A bubble might be brewing in bourbon," headlined the Business Insider story this morning, reporting on an analysis by RBC Capital Markets. (The last time Business Insider predicted an impending 'bourbon bubble' was in February of 2014.)

The picture above shows good bourbon bubbles, not the kind Business Insider means. Economists define a 'bubble' as "a market phenomenon characterized by surges in asset prices to levels significantly above the fundamental value of that asset. Bubbles are often hard to detect in real time because there is disagreement over the fundamental value of the asset."

The concern in this case is that the bourbon industry may be growing too rapidly. The story cites as evidence recently released data from an American Craft Spirits Association (ACSA) study that shows a 42 percent annual growth rate since 2010 in the number of U.S. distilleries.

There are several problems with the conclusions RBC uses this data to support. First, not all of those new distilleries make bourbon or even whiskey. Most do not. Second, the conclusions are based on the number of distilleries and not on their distilling capacity. 

This is important because most of the new distilleries started in the last ten years are tiny, with an annual production capacity of 15,000 proof gallons or less. A handful of new distilleries have annual capacities between 500,000 and 1,000,000 proof gallons, but even added together they don't equal the capacity of America's largest whiskey distillery, Jack Daniel's in Lynchburg, Tennessee.

Jack Daniel's owner Brown-Forman won't disclose the distillery's production capacity, but they confirm it is north of 10 million proof gallons a year.

As we reported in June, in 2014 there were 13 U.S. whiskey distilleries that produced more than 500,000 proof gallons each per year. Today there are 15. By this time next year, or early in 2018, there could be 20. That is in addition to capacity growth by almost all of the existing distilleries. It represents a big increase but is it too much capacity? Most of that new capacity won't impact the marketplace before 2020. By then, we should know if China and India are going to develop the way everyone has predicted. If they do, no one will have made enough. If they don't, everyone will have made too much.

The analysts also warned that "it is important to keep in mind that to be classified as a straight bourbon, the product must be aged for a minimum of four years,"

Business Insider checked with Ralph Erenzo, founder of Tuthilltown Spirits, who corrected RBC's mistake. The 'straight' designation requires only two years of aging, not four.

All that is preliminary to RBC's money shot: "This has led new entrants looking to take advantage of the category's growth to take two approaches: 1) enter the market with an un-aged product; or 2) wait a few years and launch bourbon (once it hits the 4-year mark).

"The former approach is immediately price dilutive on the broader category, and the latter approach could lead to an influx of supply over the next few years, forcing overall category prices lower (the exact opposite of the scarcity value driving overall bourbon prices today)."

Price dilutive? Not when un-aged or lightly-aged craft whiskeys routinely sell for $50 and more per bottle. And, again, the volume of un-aged and lightly-aged products is minimal. As for the fear that a 'glut' of cheap bourbon is looming, that all depends on demand. If demand growth continues to exceed supply growth, especially the demand for older whiskey, bourbon will remain scarce and prices will continue to rise. As mentioned above, export growth is key, but there is no evidence that either it or the more modest domestic growth is slowing.

Speaking of volume, The ACSA study reports that the U.S. craft spirits market reached 4.9 million cases in 2015. Jack Daniel's alone sold about 12 million cases over the same period.

RBC is a premier global investment bank. It says so right on their web site. But they are way off the mark this time.

Monday, October 24, 2016

What Started It All. "Made and Bottled in Kentucky"



In his new book Bourbon, the Rise and Fall, and Rebirth of an American Whiskey, Fred Minnick generously credits some of my early bourbon work for ushering in the new era. For me, it all began with my independent production of the documentary, "Made and Bottled in Kentucky." The 25th anniversary of its premiere on Kentucky Educational Television arrives in June. What a long, strange trip it's been.

The one-hour documentary is still available on DVD, either directly from me or from Amazon.

"Made and Bottled in Kentucky" began in 1991 as a book idea. I had yet to write my first book at that point and I didn't know where to start. Most of my experience was in writing and producing videos. When the Kentucky Educational Television Network announced that it had money to fund independent productions on Kentucky subjects, in advance of the bicentennial of Kentucky statehood in 1992, I applied and received one of the first grants awarded. Additional support came from the Kentucky Distillers Association, from a grant it had received from the U. S. Department of Commerce for export promotion.

I began the project with visits to most of the working distilleries in Kentucky, strictly as a research phase. Principal photography took place in the second half of 1991 and first half of 1992. The deadline was June 20 and we were shooting until practically the last minute because we wanted to capture the exteriors in mid to late spring. The first exteriors at Maker's Mark in mid-April had to be carefully framed. The dogwoods were in bloom and the grass was green but the rest of the trees still looked pretty bare.

Our last shot was at the grave of Dr. James C. Crow in Versailles Cemetery. Earlier in the day we had picked up some Elijah Craig 12-year-old, which we passed around and drank straight from the bottle.

Obviously, the documentary looks dated after 25 years, but now that is part of its charm. A lot has happened since. With "Made and Bottled in Kentucky," you can see what bourbon-making looked and felt like in 1991-92, when we had no idea what was to come.

Many of the interview subjects are no longer with us: Booker Noe, Owsley Brown, Ova Haney, Elmer T. Lee, Walter Doerting, and Sam Cecil. Also featured (and still living): Bill Samuels Jr., Max Shapira, Jerry Dalton, Jimmy Russell, Flaget Nally, Dixie Hibbs, Ed Foote and others. All of the interview segments are longer than what you usually see in documentaries today. I was strongly influenced in my style by Donna Lawrence, a Louisville-based producer who didn't like narrators and wanted interview subjects to tell the story in their own words. For that reason, I didn't write the script until after everything was shot. I built the story from the interviews and augmented it with narration.

Making "Made and Bottled in Kentucky" was a great experience and it inspired me to keep studying Kentucky's bourbon culture. The rest, as they say, is history.