No End In Sight for American Whiskey Growth

“Anyone who says he can predict what’s going to happen in the whiskey industry 20 years from now is crazy,” says Wesley Henderson, co-founder/chief innovation officer of Angel’s Envy. Being able to guess how long the current boom for American whiskey will last and stocking up inventories, he says, is “like throwing a dart at a wall.” But Henderson adds, “I don’t think there is an end in sight right now.”

Indeed these are boom times for American whiskey makers, a golden age for brown spirits connoisseurs and an ideal opportunity for new customers to delve into the category. Producers have the enviable, yet mixed, blessing of demand outstripping supply. They are ramping up productionbuilding new rickhouses and otherwise aiming to satisfy customers  — old and new. Helping to further drive growth is a wave of experimentation with mash bills, batches and barrels.

Boom Times

“We’re seeing growth in this category like we haven’t experienced since the 1970s,” says Mark Bacon, global brand director for Woodford Reserve. Brown-Forman’s American whiskey portfolio also includes Old Forester, Jack Daniel’s and Early Times.

American whiskey — bourbon, Tennessee and rye — continues to captivate U.S. consumers, with volumes up 6.8% to 21.8 million cases and revenues up 7.7% to $3.1 billion in 2016 according to the Distilled Spirits Council (DISCUS). “The American whiskey trend has plenty of room for growth as the country trends back toward historic levels of whiskey consumption,” says DISCUS chief economist David Ozgo.

“How long will the boom last?” is the question on the minds of producers who have to plan to meet future demand. That’s a long-term project, given that whiskeys need time in barrel.

“The vodka boom lasted 30 years — that’s a long time to be in love with an odorless, colorless, tasteless spirit,” points out Tom Steffanci, president of Deutsch Family Wine & Spirits, whose portfolio includes Redemption Whiskey. “Now there is a desire for flavor among consumers,” he says; an appetite that has fueled the craft beer explosion as well as interest in American whiskey. “The whiskey trend could last as long as the vodka boom did.”

“We continue to see plenty of opportunities for the American whiskey category. Retail bourbon/whiskey shelf sets are continuing to grow and consumer acceptance is at an all-time high,” says Jon Holecz, vice president of marketing for Western Spirits, whose portfolio includes Lexington, Calumet and Bird Dog bourbons. “We do not see any signs of this slowing down for a number of years.”

“While some folks are predicting a slowdown in the category’s velocity in the coming years, American whiskey is working from such a large base that no one expects the category to stop growing anytime soon,” says Michael Price, category marketing director, Whiskies, Campari America. The company’s portfolio includes Wild Turkey, Russell’s Reserve and the new Whiskey Barons project (Old Ripy and Bond & Lillard).

Catching Up to Demand

Whiskey makers need patience to nurture stocks that rest in barrels for years and even decades. Long-term planning is needed to anticipate future demand. And some producers were caught short by consumers’ thirst for fine whiskey.

“Demand for the whiskey made at Buffalo Trace Distillery continues to exceed our supply,” says Kris Comstock, senior marketing director—premium whiskey, which includes brands such as Eagle Rare, W.L. Weller and Blanton’s Single Barrel. The company is spending more than $200 million to build new barrel warehouses, as well as relocate its bottling operation to make room for distillery expansion with new cookers and fermenters.

“The industry is still playing a little bit of catch up with supply, says Susan Wahl, group product director for Heaven Hill Distillery, whose portfolio includes a variety of whiskey brands such as Elijah Craig, Evan Williams, Old Fitzgerald, Henry McKenna and Larceny. “With many of our products, we are talking about planning six, eight, 10 years out,” she notes. The company expanded production from 900 barrels per day to 1,300 barrels and is adding barrel warehouse space, intended to meet supply needs over the next five-to-10 years. “It’s crystal balling, hoping that assumptions made today still hold true in the future.”

“There are definitely inventory issues; a number of brands are on allocation,” Henderson says. “Almost everyone in the industry is producing at 100% capacity and hedging bets for the future.” Angel’s Envy opened a visitor’s center and new distillery last fall. That has provided an opportunity to increase capacity and meet future demand. But, Henderson adds, “the industry is growing so fast, we already have more expansion plans.”

Gruppo Campari has invested nearly $100 million in its distillery since the whiskey brands were purchased to accommodate the demand both domestically and on a global scale, according to Price.

To plan for the future, Western Spirits has partnered with The Bardstown Bourbon Company to supply custom bourbon.  For its part, when Bardstown launched its collaborative distilling program in 2015, the 1.5 million proof gallon capacity sold out. This year, Bardstown doubled capacity to 3 million proof gallons, and is exploring further expansion.

“Demand for American whiskey continues to grow,” says Sophie Kelly, Diageo senior vice president of North American Whiskeys Portfolio. Diageo is currently the largest North American Whiskey company by value, with a portfolio that includes Bulleit, George Dickel, Seagram’s 7, The Hilhaven Lodge, Orphan Barrel, I.W. Harper and Blade and Bow. This year Diageo opened Bulleit Distilling Co., with a capacity of 1.8 million proof gallons annually, but it was built as a modular distillery and future expansion opportunities are being explored.

Who Are the New Customers?

Beyond the current crop of connoisseurs, collectors and whiskey geeks, who are the consumers just now contemplating the category? Where will the whiskeyphiles of tomorrow come from?

One answer is millennials and other newbies to the spirits market. “Younger consumers are expressing greater interest in the category—specifically trading up beyond Whiskey & Coke,” says Chris Fredrickson, co-founder of Traverse City Whiskey Co.

“American whiskey is appealing to a new generation of spirits enthusiasts in the millennial age group,” says Price at Campari. Specifically, those who are interested in whiskey’s craft and heritage. “More 21-30 year olds are discovering American whiskey,” echoes Comstock at Buffalo Trace.

“Millennials continue to discover our brands as they are drawn to authentic stories that are meaningful to them,” says Dennis Carr, president of Anchor Distilling Company. “We’re also seeing a big interest in home entertaining and amateur mixology, which further draws new customers to our brands as they look to discover spirits that are fun to work with and interesting to introduce to friends.”

“Part of the growth in whiskey comes from pulling people away from other types of spirits,” reports Wahl at Heaven Hill. But a bigger piece is drawing people away from beer, she says. Both liquids share common attributes of craft production and a sense of place and heritage, stories which play well with millennials.

“We are seeing a lot of new whiskey/bourbon drinkers; people who are looking to move on from other spirits and enter the brown spirits categories,” says Holecz at Western Spirits, who adds that more female consumers are drinking flavored whiskey products.

“Surprisingly, the female portion of whiskey’s consumer base is growing much faster than the male,” notes Steffanci at Deutsch. “Women want bold flavors, and are not looking for girly whiskey.”

Catching Up With Rye

Bourbon is big now, but spicy whiskeys made with a high percentage of rye in the mash bill are rapidly gaining enthusiasts. And producers are rushing to supply quality ryes to the market.

For example, Anchor Distilling recently introduced Hirsch Small Batch 8-Year-Old High Rye Straight Bourbon Whiskey, which marries together two mash bills – one with 21% rye and another with 36% rye, resulting in a high rye content that adds spiced character while balancing the sweet notes of corn sourced from Indiana and Ohio, according to Carr. (An historic note: Anchor’s iconic Old Potrero was the first pot-distilled rye whiskey released after Prohibition.)

Building on the success of Bulleit Bourbon, the company added a rye expression. “Bulleit Rye is the best-selling rye in the U.S.,” Kelly says.

“Rye has been hot for a while now; the growth rates have been staggering,” Wahl says. Heaven Hill’s Rittenhouse Rye brand has long been a favorite of bartenders. “That brand really caught fire and led some of the growth in rye whiskey,” notes Wahl. The company’s Pikesville Rye brand has been reformulated and repackaged and is now available nationally, albeit in limited amounts.

“This summer, we will offer three different expressions of rye whiskey through the Distillery Series and we look to expand our popular Double Double Oaked Distillery Series bottlings with the potential for wider distribution,” says Bacon at Woodford.

R&D Leads to New Products

The category seems to thrive on new and limited releases, showcasing experiments in mash bills and barrel finishes. Collectors and whiskey geeks alike seek out the new and novel.

“All that innovation is driving growth,” Wahl agrees. Heaven Hill recently announced the latest release of its Parker’s Heritage Collection Limited Edition Bottling, an 11-year-old single-barrel bourbon bottled at 122 proof and aged in the late master distiller Parker Beam’s favorite section of the rickhouse.

Buffalo Trace releases a few experimental whiskeys a year, along with special releases of E.H. Taylor. “We’ve been experimenting for more than 20 years and have lots of experiments in the works. In fact, we have over 16,000 barrels of experimental whiskey currently aging,” Comstock says.

Traverse City Whiskey runs a single-barrel program around the country, partnering with on- and off-premise retailers. This fall the company will distill a Scottish-style single-malt whisky. “We periodically release unique single-barrel editions,” Fredrickson says.

Western Spirits released a new line extension for Calumet Bourbon called Calumet Single Rack Black Bourbon Whiskey, which is hand selected from a batch of 19 barrels that have aged for over 10 years on a single, center-cut rack.

“We are currently experimenting with a wide variety of mash bills and finishes for our own brands and for our Collaborative Distilling Program customers,” says David Mandell, president and CEO of The Bardstown Bourbon Company. “We are also participating in Independent Stave’s Experimental Barrel Program, and we are working closely with the cooperage to test a number of innovation barrels.”

This year, Campari America released the first offerings from The Whiskey Barons Collection— Old Ripy and Bond & Lillard. “And we continued that thread of experimentation with Wild Turkey Master’s Keep Decades, a mingling of 10- and 20-year-old whiskeys, in honor of Master Distiller Eddie Russell’s 35th Anniversary with Wild Turkey,” Price says.

“Currently, Stillhouse B at the legendary Stitzel-Weller Distillery contains our craft still, providing our team a chance to experiment with new flavor profiles,” Kelly says. Another part of Diageo’s strategy is the Orphan Barrel Whiskey Distilling Company, which rescues long-forgotten barrels of rare whiskeys. The upcoming release will be Rhetoric 24-Year-Old, within the next year.

Additionally, The Archive Collection includes select Orphan Barrel releases packaged in a custom wood-finished whiskey crate. This year, Bulleit also re-released Bulleit Barrel Strength, which is an ongoing limited annual release.

Redemption Whiskey expanded its portfolio with its first Wheated Bourbon, with a mash bill of 45% winter wheat. Another project for the company is Redemption Ages, which will release a 36-year-old bourbon and a 17-year-old rye in limited quantities. Now in the rickhouse awaiting release next year is Tyler’s Mistake, which was born out of an accident by an employee under previous ownership. Steffanci liked the rye-bourbon “mistake” so much, the company is creating enough for a limited release.

Angel’s Envy is the first brand of the Louisville Distilling Co., but Henderson says the company could release other whiskey brands under that umbrella. “Times are good; we’re seeing unprecedented things happening in the category,” he says. “But we can’t take anything for granted because things change and you always have to bring your A-game.”

Thomas Henry Strenk is a Brooklyn-based freelance writer with over 20 years experience covering the beverage and restaurant industries. In his small apartment-turned-alchemist-den, he homebrews beer kombucha, and concocts his own bitters and infusions

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