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Associated Press photos
A bottle of Maker’s Mark bourbon is dipped in red wax during a tour of the distillery in Loretto, Ky. Kentucky bourbon makers have stashed away their largest stockpiles due to resurgent demand.

Makers braced for bourbon boom

Stocking up a gamble due to aging process

Bourbon supplies age in barrels at the Jim Beam distillery in Clermont, Ky. Kentucky bourbon has to be aged at least two years.

– Kentucky bourbon makers are making a big bet by stashing away their largest stockpiles in more than a generation.

To put it in bartenders’ lingo: Distillers are putting up the tab for millions of rounds of bourbon years before they are even ordered. The production poses an inherent risk, but hitting the moment right – a big supply meshing with big demand – could mean a serious payday for companies big and small.

Missing the target would leave bourbon makers awash with supply and leave future production in question, particularly for craft distilleries that have seen a surge in popularity.

“People keep asking us, ‘When will the bubble burst?’ ” said Eric Gregory, president of the Kentucky Distillers’ Association.

For most in the business, the answer is: not anytime soon.

Large companies are banking on continued international demand from places such as China and a culture in the U.S. that currently has a taste for bourbon, which has to be aged at least two years in new charred oak barrels.

“We are busier than I ever could have imagined,” said Chris Morris, master distiller at Brown-Forman Corp., producer of Woodford Reserve and Old Forester bourbons.

Last year, Kentucky distilleries filled 1.2 million barrels of bourbon – the most since 1970, according to the Kentucky Distillers’ Association. Inventory has topped 5 million barrels for the first time since 1977.

Production has surged by more than 150 percent in the past 15 years in Kentucky – home to 95 percent of the world’s bourbon production.

“For many, many years, bourbon was considered a Southern gentleman’s drink,” said Jimmy Russell, longtime master distiller at Wild Turkey. “Now bourbon’s become a worldwide drink.”

The last time industry production spiked, distillers ended up with a glut when demand went in a tailspin.

That was in the ’70s. Back then, the industry had grown stale, and many consumers switched allegiance to vodka, Scotch and other spirits.

“You had the same old brands, you were pretty much on autopilot,” Morris said.

Now, distillers are constantly dabbling with premium small-batch offerings or putting new twists on recipes and flavors.

Companies are also looking at real-time data from the digital world.

Sales trends and developments are tracked in markets worldwide. The numbers are crunched to make the best educated estimate of future consumer demand for a product that takes years to mature.

Straight bourbon whiskey ages a minimum of two years, though the average maturity is four years or older. Many popular super-premium brands age six years or longer, and those are the toughest to stock in bars, restaurants and liquor stores.

“Bourbon as a category is on fire,” said Bill Thomas, a Washington, D.C. “Every week, there’s stuff that’s out of stock.”

Expansions have occurred at Jim Beam, Evan Williams, Wild Turkey, Maker’s Mark, Buffalo Trace and Woodford Reserve. Global liquor giant Diageo PLC recently announced plans to build a distillery in Kentucky. Micro-distilleries are getting a foothold in the state.

Every drop of bourbon is precious for producers trying to keep up with demand.

“If they had more, they could sell it right now,” said Fred Noe, Jim Beam’s master distiller and descendant of Jacob Beam, who set up his first Kentucky still in 1795.

In the U.S., total revenues for bourbon and Tennessee whiskey reached $2.4 billion last year, a 10.2 percent increase, according to the Distilled Spirits Council.

The two spirits claimed 34 percent of the U.S. whiskey market in 2013, putting it ahead of the Canadian, Scotch, blended and Irish whiskey categories.

The industry lumps bourbon and Tennessee whiskey into one category. Both are produced in the same way with similar ingredients, but Tennessee whiskeys are charcoal-mellowed before going into the barrel to age, while bourbon isn’t.

Exports of bourbon and Tennessee whiskey exceeded a record $1 billion in 2013, the council said.

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