Bourbon

One
thing’s for sure: this ain’t your daddy’s
bourbon.

But some of it
is Pappy’s bourbon – Pappy Van Winkle, that is. And the
bourbon that still bears his name is a good example of
what’s going on in the bourbon business today. Pappy’s
grandson, Julian Van Winkle III, has been in the business
since 1977, and now he’s in a joint venture with Buffalo
Trace distillery, producing a line of aged, wheated bourbons
(and an aged rye; see sidebar) at premium prices. Let other
distillers argue over who started the “small batch” bourbon
category, Julian Van Winkle’s on his board and riding the
wave.

“From our side,
we’re selling every drop we’ve got,” said Van Winkle, who
spent the last 2O years tracking down barrels and tanks of
bulk whiskey for sale, much of it from his grandfather’s
now-closed Stitzel-Weller distillery. “It’s all allocated,
we know where every case is going. Price increases don’t
seem to slow it down at all. It’s a little scary, because it
might be like the housing industry: it’s gonna blow up one
of these days.”

Given the long
decline American straight whiskeys (and we’ll use that term
and ‘bourbon’ interchangeably for the sake of brevity) have
been on, it looks like things are blowing up now. Jack
Daniel’s long streak of solid growth against the category
has finally turned into a category leader, as other brands
show positive action as well. The major sales in the
category continue to come from Jack Daniel’s Old No.7 and
Jim Beam White Label, with over 5O% of the market between
them. Evan Williams and Early Times contribute another 13%
or so, and the other brands together account for the other
third.

To say that
overall growth of the category is “blowing up” is an
exaggeration – there have been very modest gains the past
two years. But there’s a lot to be said for holding steady,
and the growth in the premium and super-premium brands has
been nothing short of remarkable. “We’ve seen incredible
growth in the super premiums,” said Larry Kass, with Heaven
Hill distillers. “We’re doing very, very well in
Massachusetts.”

“There are three
dynamics at work there,” he explained. “First, the economy
has been rolling. Second, super premium spirits have been
doing well because they taste great: if you buy better, the
experience is better. I also think that we’re atoning for
sins of the past by educating people about what makes
special bourbons special, and so why it’s right to expect to
pay more for them. It certainly worked for Scotch and
tequila. Our super-premium Bourbons are really great, but on
the low end there’s no such thing as a “mixto” bourbon. Even
the standard brands are pretty good stuff. That’s a good
thing in our favor.”

Wayne Rose,
Brown-Forman’s Woodford Reserve man, believes that there’s
plenty of headroom to this rush to super-premium bourbon.
“We don’t believe it’s going to slow down any time soon,” he
said. “For example, about 9% of the Scotch business is at
the super premium level, tequila is about 13% super premium,
but super premium bourbon is only about 2.7% (of the
category). There’s a lot of consumer interest in
super-premium products, and bourbon is just starting to
capitalize on that.”

Rose gives a lot
of credit for this to overall better whiskeys. “Why are
people willing to pay more for a bourbon?” he asked. “We’ve
finally given them a reason to: it’s better product. The
whiskey is better than it was even 1O years ago. Everyone’s
making better bourbon than they did. They’re actively
competing for awards. There’s real pride, and it’s fun. The
barrels that are selected for the premium whiskeys are truly
premium barrels. We’ve hit on something consumers are
looking for – a higher end – and now there are a number of
products that are filling that niche. Some whiskeys that I
don’t care for personally, I still realize that they are
made that way for a reason, they’re not just what they had
in the warehouse.”

Julian Van
Winkle sometimes feels like he’s paying for some of those
ten-years-ago bourbons. “We are always seeing people who’ve
tried something they didn’t like a long time ago and think
they don’t like bourbon,” he said, “and then they try ours,
or something else nice, and they say ‘Wow, that’s totally
different from what I expected!’ We get a lot of new
customers that way.”

People still
aren’t paying – and distilleries aren’t charging – the kind
of lofty prices single malt scotch and exceptional 1OO%
agave tequilas can command. What’s the deal? Are bourbons
just not worth the money?

That’s not
really it; it’s a self-inflicted injury that dates back
decades, when bourbon distillers slashed prices in a
desperate attempt to stay open. “The bourbon industry dug
itself into a hole back in the ‘5Os and ‘6Os,” said Kris
Comstock, who’s with Buffalo Trace distillery, “and we’re
just digging out now. You walk in a store and the premium
bourbon section is mostly $2O to $3O. If I didn’t work for a
distillery and walked into a liquor store and saw Eagle Rare
Single Barrel for $25 and some real expensive bourbon next
to it for $1OO? I’m not even going to think about it, I’m
going to buy four bottles of Eagle Rare!” Getting the
consumer to consider that there might be $1OO worth of value
in that $1OO bourbon is a process that’s going to take some
time.

Maybe it’s a
facing issue: will more brands of a type mean more sales for
a category? Put another way, do future advances for
super-premium bourbon sales depend on line extensions, or
deeper marketing for existing brands? “We’ll see activity in
both,” answered Wayne Rose. “Selling a brand experience is
so important; what a brand stands for, looks like, tastes
like. Line extensions may add value to that, add to the
bottom line, add consumers, but the core brand, the parent
brand, is the one that drives the image of the brand. Vodkas
may be an extreme example. It’s hard to line extend without
a powerful parent brand.”

(That sounds
like a possible line extension in Woodford’s future; how
about it, Wayne? “We’re not ready to announce anything, but
there is work in that area,” he admitted. “That’s all I can
say.”)

Kass, as a
distiller, had some wake-up call words for the high-end
bourbon negociants, selling their picked labels: “As bourbon
heats up,” he said, “there’s less bulk bourbon on the
market. People who were willing to sell off barrels, that
market’s the tightest it’s ever been. As a distiller, you
want to sell what you make. If you can take your barrels and
put them in branded bottles, you make more money and you
build your brands . . . and then you make even more money.”
If bourbon’s hot, no one’s going to be dumping what they
could be making good money on.

There’s still
one factor lurking in the background: the Allied Domecq
purchase. Some brands are going to wind up in new stables;
Maker’s Mark will almost certainly wind up sharing a stall
with Jim Beam. Fallout? Minimal. This is something industry
geeks love to talk about, but no one is going to take a
successful brand and mess with it. Don’t expect anything to
change on your shelf because of this. You may talk to a
different rep and give a check to someone different, but
that’s going to be the only real effect.

What about the
guys in the trenches, what do they see? Is there really
something going on? Gary Park, of Gary’s Liquors in Chestnut
Hill, MA, sees it. “We have had a tremendous uptick in
bourbon sales over the past few years,” he said, “it’s quite
strong, from Jim Beam to the high-end bourbons – the Beam
Small Batch, Blanton’s, Eagle Rare, Wild Turkey Russell’s
Reserve, Elijah Craig 18-Year-Old – it’s all up. Well, some
of the lower-end, bar grade stuff is still just puttering
along. But from Jim Beam, Jack Daniel on up, it just sells
more and more, and it’s to younger people, which I am not
seeing in Canadian whiskeys. I don’t see young people going
there. Bourbon is where people often start before going to
Scotch whisky.”

Neal Zagarella
is the bourbon guy at Vinnin Liquors, Swampscott, and he
sees the growth more focused on the high end. “The high end
is going up,” he said, “the low end is going down, and the
middle brands like Jim Beam are still pretty strong. There’s
more of a single malt kind of clientele, especially on the
high end.”

Sometimes a
whiskey does so well, it grows itself out of the ‘special
purchase’ category. “Maker’s Mark has grown in the last few
years,” said Zagarella, “and now it’s less of a specialty
purchase; it’s a regular thing. If someone came in 5 years
ago and wanted something special for a father’s birthday,
that would have been Maker’s. Nowadays it’s something like
Knob Creek or Booker’s.”

The bourbon
market is finally catching up, and bourbon buyers are
starting to sound like every other connoisseur: “Got
anything new?”

The bourbon
industry is ready. “People will keep coming out with
specialty whiskeys,” predicted Julian Van Winkle. I can’t do
that right now, our supply’s too tight. I do know that
Buffalo Trace is coming out with a couple new things – new
finishes, experimental formulas, unfiltered whiskeys. You
can’t just sell the same old thing all the time. People want
new stuff.”

New stuff from
an old American business, new ideas and profits from an old
reliable category. It ain’t your daddy’s bourbon, and that’s
good news – even for your daddy. He might like a bottle for
his birthday.