WHAT CAUSED THE BOURBON BOOM
AND WHEN WILL THIS MADNESS STOP?
Sales of bourbon are growing at a dizzying rate. Domestic sales of Kentucky-made bourbon have increased 36% in the last five years to $1.5 billion. Exports rose 56% to $300 million from 2010, according to the Distilled Spirits Council of the U.S.
This explosion has us bourbonites worried – and for good reason. Beloved labels are disappearing or skyrocketing in price. Age statements are dropping like flies. Pieces of American heritage are being snapped up by European and Asian countries, and brands are watering down their product (remember Makers?).
If you are wondering where this whiskey rampage began and where it will end, read on.
WHERE DID THE BOURBON BOOM COME FROM?
Back in 1999, annual bourbon production was at an all time low. How did we go from a mere 455,000 barrels in production back then to more than 5 million barrels in production today?
The increase in bourbon consumption came from a few different events and factors combined, but the main culprit was export growth.
In February 2002, the Kirin Brewery Company, Ltd. purchased the Four Roses brand trademark and named the new acquisition Four Roses Distillery LLC. Kirin used its global reach to spark demand for Kentucky bourbon in far away European and Asian markets. It worked. In 2011, Jim Rutledge master distiller at Four Roses noted that “We’re seeing tremendous (sales) growth, especially outside the U.S.”
Production at Wild Turkey had slowed down when its previous owner Pernod made the
rather foolish decision to close Wild Turkey’s bottling operation in 2006, and move it 700 miles away to Arkansas. That decision was reversed Wild Turkey was acquired by Italian company Gruppo Campari in 2009 and made official in 2012.This made production and distribution more efficient, and no doubt drove sales and consumption.
Then, according to Kentucky.com whiskey sales increased faster than those of vodka, gin, tequila and other spirits in 2012, for the first time in recent memory.The bourbon boom was officially on.
Other foreign companies that wanted to get in on the boom started snapping up all-American bourbon companies left and right.
Japanese company Suntory bought out Jim Beam in 2014 for a ridiculous $16 Billion, throwing fuel on the fire of global bourbon demand. That same year, Diaego took charge of producing and distributing Bulleit Bourbon, hoping to increase sales from its 2007 rate of 35,000 cases per year to ‘several million cases,’ according to Larry Schwartz, president of Diageo’s North American operations.
Today, thanks to the intervention of foreign companies, almost half of all Kentucky bourbon is shipped overseas, with the largest markets being Australia, Germany, and Japan. Combine that with domestic demand and we have a much larger market for a very limited commodity. Hence, bourbon boom.
AND THEN THERE’S PAPPY
“If one more person asks me where they can find pappy, I’m going to prison for assault” – Anon. Louisville Bartender
People want what they can’t have. Such is the case with Pappy.
In 1999, the Van Winkle brand was established as being the best bourbon at the exact moment America was waking up to Kentucky bourbon. When people as influential as Anthony Bourdain and David Chang started evangelizing it in public, it officially went bananas. Normally this is a great thing, but for a product that takes anywhere from 13 to 2 years to make demand was threatening to wipe out the entire supply.
The Van Winkle family raised prices to control demand, but mass hysteria had already set in for ‘the best bourbon on the planet.’ Pappy Van Winkle became a Veblen good: a product whose demand is proportional to its price. In other words, the more expensive Pappy became, the more bars, restaurants, collectors, and Pappyphiles purchased it.
A rising tide lifts all ships, so those who weren’t able to get a sip of Pappy set their sights lower on the bourbon shelves. New bourbonites sought out and bought out labels that were perceived to be as hard to get or as high a quality as Pappy. Soon, a number of favorites started disappearing or increasing in price.
WHAT BOURBONS HAVE GONE ‘EXTINCT?’
- Sazerac has confirmed that 2015’s Buffalo Trace Antique Collection Sazerac 18 Year will be the last bottling of their tanked stock.
- Four Roses announced that it will not releases it’s Single Barrel Limited Edition (SBLE). In a release Four Roses refers to shortages as their reason for cancelling.
- Heaven Hill temporarily suspended bottling of the 18-year-old Elijah Craig Single Barrel back in 2012. They have yet to bring it back, but 20- and 23-year-olds are available in select retail centers (including at the Evan Williams Experience in Downtown Louisville.)
- Buffalo Trace quietly terminated its Ancient Ancient Age 10 year, Old Charter 8 year, and Old Charter 10 Year. Weller Antique has been downgraded to NAS (no age statement).
- Eagle Rare 101-proof 10-year-old bourbon is no longer available.
(***If you have any information that is contrary and can be substantiated, leave a comment or get in touch)
WHEN WILL THIS MADNESS END?
With so many foreign companies pushing bourbon demand through the roof, some people believe we are in a ‘bourbon bubble’.
Fortune Magazine writes ‘Anyone who was in the Texas oil business in the 1970s knows how easy it is to mistake a temporary boom for a permanent state of expansion. And while those in the whiskey industry are uniformly optimistic, many on the retail side are skeptical. “I’m very worried about it,” says Michael Dolega, who oversees whiskey for BQE Liquors in Brooklyn. Distillers are running out of quality, well-aged bourbon, he says, and eventually consumers are going to grow tired of the hype and move on. “I don’t know when, but the bust is coming.”’
I pray that he is right. But still, work on stocking up that home bar just in case!