With the bourbon industry undergoing massive changes, how best could we summarize 2016? Is it a year to remember or a year we’ll soon forget? Are we experiencing a bourbon renaissance, or is this the beginning of the end of bourbon as we know it? As 2016 draws to a close, journey with us as we look back on the year in review.
The bourbon industry as a whole has been experiencing phenomenal growth in demand resulting in distillery expansions, new distillery startups, rising prices, loss of age statements, and a rapidly increasing number of new product labels. Bourbon continued to flood the mainstream; cocktails, food, art, marketing, pop culture, and more, arguably helping solidify the resurgence of the spirit itself.
Though the majority of bourbon consumption takes place within the United States, bourbon makes up approximately 2/3 of total U.S. spirits exports, topping $1 billion in 2015 and expected to increase for 2016. The largest import markets for the spirit include the United Kingdom, Japan, and Australia. Currently the largest market for whiskey worldwide, India imports a relatively small amount of bourbon, though this could quickly change as year over year growth has been significant.
While demand has grown as a whole, a younger generation of consumers with a taste for a “premium experience” and willingness to pay for it, has skewed the growth towards the more expensive “special” releases. Iconic brands such as Pappy Van Winkle might be credited with starting the trend, but the continued success of new and premium priced labels could be credited with keeping it going. In an effort to separate from the masses, producers continued to push boundaries in barrel finishing, experimentation, and marketing strategies.
Some industry critics have voiced their discontent with the rapid changes and arguably superficial marketing in some cases, suggesting demand has exceeded a reasonable level and consumers as a whole have gone too far. On the other hand, a comparison with Scotch suggests bourbon might simply be following a similar trend and there is still a good deal of room for growth.
While the future of bourbon is uncertain, the growth and popularity bourbon has experienced in 2016 has been undeniably tremendous.
Bourbon and American Whiskey Distilleries
Kentucky bourbon production is expected to break records in 2016. According to the Kentucky Distillers Association, Kentucky distillers filled 1,886,821 barrels of bourbon in 2015, up over 44% from 2014. While 2016 counts have yet to be released, an increase of only 2% in 2016 over 2015 would surpass the state’s previous 1967 record of 1,922,009 barrels filled in a single year.
Not surprisingly given the growing production numbers, large distillery expansions continued at an incredible rate. Buffalo Trace announced a $200 million expansion that would add 30 new warehouses over the next 10 years. Brown-Forman’s Jack Daniel’s unveiled a $140 million Lynchburg distillery expansion, following a $100 million expansion just three years ago. Four Roses continues with expansion projects, including breaking ground on a $55 million expansion at their Lawrenceburg distillery doubling distillation output and adding four new warehouses to their Coxs Creek warehouse and bottling facility by 2018. Heaven Hill, Wild Turkey, and other expansions continued as well.
But it wasn’t just the large distilleries that have been growing. In 2016 an estimated 125 new whiskey distilleries popped up in the United States according to whiskey blogger Sku. This brings the total number of United States distilleries making whiskey to approximately 787, an increase of nearly 20% over 2015.
Retired Four Roses master distiller Jim Rutledge returned from a very short retirement to announce plans for his own distillery that will bear his namesake, the J. W. Rutledge Distillery. Celebrating 50 years in the industry, Jim was also honored by a grassroots organization known as The Bourbon Crusaders who organized an event in his honor. Proceeds from the event went to support the Crohn’s & Colitis Foundation in his honor.
The historic Old Taylor Distillery in Woodford County Kentucky was renamed Castle & Key Distillery. The distillery has been undergoing massive renovations since Marianne Barnes announced her plans to leave Woodford and begin new distillation operations as master distiller at the historic site. Barnes began distillation of their flagship bottled in bond bourbon over the summer. The company also plans to release gin in the next few months, along with rye whiskey by 2018.
With respect to company ownership, big changes took place for Utah’s High West Distillery and West Virginia’s Smooth Ambler Distillery. High West was acquired by spirits giant Constellation Brands for $160 million, and Smooth Ambler sold a majority stake to Pernod Ricard. Both High West and Smooth Ambler followed a similar growth strategy, sourcing relatively large quantities of whiskey from other distilleries to bring to mass market while getting their own distillation operations up and running.
Notable Releases and Brand Updates
Four Roses new master distiller, Brent Elliott, surprised fans by bringing back their limited edition single barrel after a two year hiatus, and dubbed it “Elliott’s Select.” A 14 year old OESK recipe bottling, approximately 10,000 bottles were released. Later in 2016, Four Roses released their Limited Edition Small Batch, a blend of 12 year old OESO, 12 year old OBSV, and 16 year old OESK, with approximately 12,000-13,000 bottles released in total. Based on an interview we had with Elliott earlier this year, he’s as down to earth as they come, demonstrating promise for continuity of the respect from the community his predecessor had helped Four Roses earn.
Jim Beam released a limited edition rye under their Booker’s label, Booker’s Rye, which was received with critical acclaim. Awarded World Whiskey of the Year by Jim Murray, and American Whiskey of the Year by Whiskey Advocate , the whiskey also found a place on our own Favorite Whiskeys of 2016 list. Behind its $300 MSRP, this 13 year / 1 month / 12 days old rye was a tribute to the late Booker Noe, who served as longtime master distiller for Beam. Barreled in 2003, the whiskey in this release was among the last barrels laid down by Noe before his passing in 2004. It’s said he took the specific recipe to his grave, making this a truly unique and one of a kind whiskey.
The Beam family of whiskeys experienced sweeping changes to their more readily available brands culminating in the announcement of a significant price increase for their Booker’s brand of bourbon, from $60 (often found for less) to $100 beginning in 2017. This followed announcements of Knob Creek Small Batch losing its 9 year age statement, a packaging redesign for the Jim Beam line, and the quiet death of Old Grand-Dad 114, which we awarded a positive review and even named on our Best $20-$30 Bourbons list.
Brown-Forman released the third edition in their premium Old Forester Whiskey Row series, 1920 Prohibition Style. Following 1870 Original Batch and 1897 Bottled In Bond, 1920 is the highest proof, and highest priced, release in the series to date coming in at 115 proof and $60. Intended to pay homage to a significant event each year in the history of bourbon, 1920 pays homage to January 17, 1920, the day it became a federal crime to manufacture, transport, or sell intoxicating liquor in the United States. Old Forester was one of only six distilleries that was granted a permit for the purposes of supplying medicinal whiskey during Prohibition. According to Brown-Forman, this 115 proof whiskey is said to be similar to what would have been batched by company president Owsley Brown at the onset of Prohibition.
Sazerac’s Barton 1792 Distillery continued its line expansion with their Single Barrel, Full Proof, and High Rye releases. Noted as limited releases by the company, the general high quality combined with reasonable pricing for these special bottlings experienced consumer demand leaving little on the shelves at MSRP.
Buffalo Trace’s highly sought after Buffalo Trace Antique Collection, a collection of bourbons and ryes representing a cross-section of American whiskey, hit the market this year with estimated overall bottle counts up more than 30% over last year. Breaking it down by individual whiskey bottle counts, the only decrease was Sazerac 18 Year, down approximately 35% from 2015. Notably, this was the first year Sazerac 18 Year was comprised of new distillate, as Buffalo Trace had been drawing down from steel tanked stock in previous years for the brand. We reviewed all five whiskeys in the collection here.
Buffalo Trace released three unique vintage dated bourbons honoring the Old Fashioned Copper Distllery. Dating back to 1980, 1982, and 1983, only 200 bottles of O.F.C. were released in 2016. This first offering was only made available to nonprofit organizations at no charge to be used to raise money for their causes. A list of organizations who have received bottles can be found here.
Michter’s released the most expensive American whiskey ever, Celebration Sour Mash 2016 Whiskey, which hit the market at $5,000 per bottle. A non-specified type and non-age stated whiskey, the company says it’s a blend of 6 barrels ranging from over a decade to 33 years old. It’s bottled at 116.8 proof. With a total release of just 256 bottles, this whiskey that couldn’t fill the volume of a single barrel if all bottles making up the release were combined (a standard 53 gallon barrel can hold the volume of 267 750ml bottles of whiskey) will fetch a total of $1.28 million at retail.
Bourbon in Pop Culture
Wild Turkey surprised fans with an announcement naming Matthew McConaughey as their creative director, unveiling the first in a series of videos featuring McConaughey as storyteller. Though it may have appeared gimmicky on the surface, the first video very eloquently showcased the history and people behind the brand - a stark contrast to Beam’s Mila Kunis commercials . While Wild Turkey quietly delayed their Master’s Keep Decades release in the United States for 2016, McConaughey’s role suggests 2016 might be the calm before the storm as Wild Turkey’s popularity could see a greater surge in years to come.
A number of American whiskeys were released under celebrity names and labels, following a trend spread across numerous types of spirits. Notable releases include Brent Ratner’s The Hillhaven Lodge and Drake’s Virginia Black Whiskey, both blends of sourced whiskey.
Buffalo Trace completed phase one of their first Warehouse Xexperiment, investigating the effects of natural light on aging bourbon barrels. Dubbed “The most advanced whiskey warehouse ever built,” the vision for Warehouse X is to take whiskey aging experimentation, something Buffalo Trace has been doing for over 25 years, to the next level. Interestingly, we conducted our own experiment relative to bourbon storage, with storage in direct sunlight as one of the conditions. Our 24 month results along with our conclusion will be posted soon.
Jefferson’s CEO and Master Blender, Trey Zoeller, continued his experimentation with aging bourbon aboard a boat testing the results of motion on aging created by the boat’s movement. Known for Jefferson’s Ocean, first released in very limited quantity as an experimental voyage in 2012 and now an ongoing release, Zoeller has been experimenting with bourbon in motion ever since. This voyage is a little different, however, as it was just a few barrels aboard a 23 foot boat. The journey took the bourbon from Louisville, Kentucky down the Ohio and Mississippi rivers, to New Orleans, then Key West, and finally up to New York. According to Forbes, Zoeller purposely chose a small vessel to that the aging barrels would experience more motion. This differs from the Ocean bourbons (currently releasing the 9th voyage) which, with the exception of the first voyage, have all been aged aboard container ships.
While bourbon is and has been traditionally aged for a relatively long period of time, typically greater than four years and often longer, the recent increase in demand has inspired the concept of alternative aging methods. Referred to as “rapid aging,” innovators seek out methods to recreate the naturally occurring reactions bourbon undergoes within a barrel over time, but in a much shorter period with the assistance of technology. Methods include TerrePURE’s Terressentia, Lost Spirits THEA (Targeted Hyper-Esterification Aging) , and Cleveland Whiskey’s disruptive technology. This is not a new concept for 2016, but has continued to reach the masses as experimental rapid aged whiskeys grow in production and distribution, sometimes hiding in plain sight. Controversial within the bourbon community, 2016 saw continued growth in the area.
And there is so much more. From the growing number of whiskey bloggers, to the growing number of bourbon consumers, to the seemingly never ending list of new releases, 2016 will surely go down as a tremendous year for bourbon.
What will you remember most from 2016?
Breaking Bourbon: You guys are, from my experience, doing things a little bit differently in terms of the starting point selection of your tasting notes from a lot of different barrels, get it down to a smaller number, and then go from there. [Editor’s note: New Riff first has you choose from approximately 25 pre-selected single barrels via barrelling date and tasting notes to narrow down to 5 options to taste, then provides a very well thought out environment to conduct the tasting. For an in-depth explanation, read about our experience here.]
Jay: We did an awful lot of intimate work with Kentucky’s finest distilleries back when we were retailers with barrel picks and other products, things like that. We launched at The Party Source, for example, Four Roses private barrels for that distillery, among other things. And so we knew well how that all works at the retail level, at the experiential level. And when we go to offers that to people in our now distillery, we wanted to do it right. We hope we do everything right, but that’s kind of how we went about that. I hear from other groups and stores and our customers, things like, you know, you hear horror stories about where this wound up at other institutions or distilleries. Like, they go to a tasting and they’re all tasting out of a common glass. They pull it out of a barrel and pass a glass around.
I’m pretty sure you guys can afford getting some glassware, you know? It’s just uncivilized and things like that.
But the notes that we put out, these tasting notes...look, back when I was doing these, I never wanted notes. Don’t give me the note. Just give me the whiskey and get out of the way. In fact, honestly, at The Party Source, I almost never went to the distillery to do a pick for one thing. It was long enough ago that they were fold-over thrilled-happy at distilleries that someone wanted to do a pick, and they didn’t care if you came there or something. Today, many distilleries, including in a way, New Riff, although we’re not absolutely dogmatic about it, to constrain somewhat. I know Four Roses does this, again. Places require you to come to the distillery, they’re not just going to send out samples. And by the way, one reason they don’t like to do that so much anymore is it chives up a lot of the barrels. If you have 100 barrels, and you want people to pick 5 barrels out of them, and you start sending out 4 barrels at a time, what happens? Suddenly you’re waiting on people to get back to you, and they take a long time, or they blow you off, or whatever they do. So there is that. I never wanted a tasting note though.
And I have some sort of our…how do I put it…more evolved or more sophisticated bar- restaurant retailer clients who are extraordinarily experienced and bourbon-experts, they sometimes pick them at random, you know, give me that one and that one and that one. I had one retailer in Louisville say, “Ehhh, just give me four barrels, from, let’s say, even numbered dates.” Ok. 10, 12, 14, 16, like that. That’s a great way to randomize what you’re tasting.
Breaking Bourbon: And how do you get to those barrels that are going to end up in the single-barrel program, at this point?
Jay: We taste every lot of whiskey, by which we mean, at New Riff, fermenters...and this is an interesting point, really, it’s the more important point than other aspects of single-barrel or private-barrel programs...most larger distilleries have…so you distill a batch of whiskey. A fermenter full of whiskey. It goes through the still you get the white dog, etc. Most places, that goes to a ginormous tank, big as your house, and all the whiskey pours into that and they cut it and they start filling barrels. And by this, means the batch-to-batch, fermenter-to-fermenter difference...there’s a slight difference between each one. This one get that flavor or that one gets this flavor…is largely ameliorated and kind of blended away if you will, which is great for consistency, and that’s a very smart way to make whiskey.
We happen here to not really be able to do that. Well, we distill a fermenter whiskey, and it goes to a gage tank, and that gage tank is only big enough to hold the output of one fermentation. That’s not absolutely discreetly dogmatically true. We have...perhaps you saw on your tour...a beer well. So a fermenter goes with the beer well, and we distill it out of the beer well. It takes about 7 or 8 hours to go through a whole fermenter in the beer well. Well we top that beer well off from other fermenters through the day. So there is a small amount of combining or mixing together different fermentations, but there’s also...at least in a relative sense...there’s a more concrete, discrete line between each fermentation than at many distilleries.
The long and short of this is, Nick, that we see a difference not only barrel to barrel, but lot to lot. So we always give people advice when they’re picking...don’t pick stuff all from the same lot. I don’t care if you really like this note and that note and this flavor...be sure and pick some from different lots, because we get to see a flavor, not only a difference in flavor, not only barrel to barrel, but lot to lot. So we change each lot of whiskey, and based on that, we go into that lot or not and pull out some single barrels.
Nick: Is there anything on the horizon that you’re able to talk about at this point with upcoming releases or upcoming experiments or projects that you guys are working on?
Jay: Well we make three what we call “main” whiskeys, by which I mean we make them every month - bourbon, rye, and malted rye. 100% malted rye grain, right? And we only make three fermenters a month of malted rye. We made it very sporadically in the early years...in the early days. At any rate, we make those three. So the next sort of official, if you will, whiskey to come out will be malted rye. That probably won’t hit the market until fall of 2020.
Breaking Bourbon: Little ways off, yeah, I saw that one a little bit, we talked about that one a little bit [when visiting New Riff].
Jay: Yeah, we’re going to give it a little extra time to age and let it be a solid 5 years old, not 4, and kind of make a little exclamation point out of it. So that’s coming down the pipe.
And then as well as that, we make...perhaps you appreciated on the tour...how we have the ability to digest different grains.
We can dump any bag of grain we want to into the process. For one thing, that’s how we make 100% malted rye. We have the ability to go outside of our silos and dump in 2,000 lb. bags of whatever grain we want and then that takes its malted run. So we’ve made a whole bunch of different things. We’ve made wheated bourbon, we made heirloom-grain bourbon, we’ve made heirloom-grain rye, we’ve made chocolate oatmeal stout bourbon where we were inspired by our background as brewers, beer lovers, to make a bourbon so it’s mostly corn, but there’s oats in it and malted oats and things like that. So those things will come out, I don’t know when, but in the future, as special limited editions. And for what it’s worth...but just so you know, those are not accessible for private barrels. And in fact will not be bottled as single-barrels, probably, they will just be Bottled-in-Bond.
Breaking Bourbon: To go forward for New Riff, what’s on the more immediate horizon? What’s on the long-term horizon? What might we expect New Riff to look like in 10 or 20 years from now, all things going as you guys kind of envision them today?
Jay: Well, I don’t think I can say really with accuracy here. But I would say that we do hold that 20-30% of our output every year to become older. That still is not a lot. 20% or 30% of what we made 4 years ago, in 2015, years from now, still is not a lot of whiskey. I hear from folks a lot, I can’t wait until it gets older. And it will get older. I don’t know how old, 7, 10, 8, I don’t know. But there won’t be a lot of it. So I hope that by 10 or 20 years from now, we have simply more whiskey to share with the world.
Furthermore, maybe, more whiskeys to share with the world. Right now we have bourbon and rye. What does malted rye do? What do our specialty, as we call them, for want of a better term, the speciality whiskey do? What is the perception of our version of wheated bourbon? And I’m not necessarily saying it’s the cat’s meow but we have the opportunity to change perceptions in the future with other risks, if you will, that we will do.
Breaking Bourbon: And you don’t have any plans to become, or ideas to become, larger on a scale of say...let’s open another distillation location or something of that nature? I know there’s another warehouse that’s in the works, at least, as we toured the warehouses, and were speaking about that, from a distillation and production standpoint. Or would you grow into demand, do you think...or do you think you’d want to keep it in the tighter kind of way you have it right now?
Jay: One thing I can say with certainty is, we’re going to remain independent. As we’re in this business now and I start to work inside the bourbon industry in a totally different way than we did when we were retailers, you can start to see people’s business models. And these are all good...no criticism of anybody...they’re all viable ways to do your business, what have you...but I can see places making decisions for an eventful outcome. And sometimes that outcome is to remain independent and often that outcome is to someday be bought up. Sell it to someone.
I can look at someone now and see that they’re making decisions to do one or the other. Nothing wrong with that, but if Ken Lewis’s intention is to get bought up someday, he’s doing it wrong. We are not doing the kind of things...you know, putting the money where the mouth is...that would lead us to be bought up. We are making decisions that are for long-term independence and quality. So that I can say with a certainly is what you will see in 10 or 20 years. Will we be owned in 10 or 20 years by, take your pick of Diageo, Sazerac, William Grant, Brown-Foreman? No. We’re not going to be sold. I don’t know that we would ever expand with another distillery. It’s doubtful. We think that you are not wanting to get too big.
One thing that we are not really concerned about is the very thing that all these big companies are concerned about, which is two words - the words are market share. Market share. What’s our market share in San Francisco? How we doing in London? What’s our market share? We don’t really care about that. We don’t have stockholders. We don’t have shares out there. We have one brilliant owner who’s a fantastic guy to work with.
You know how you hear of such and so entrepreneur is just the most amazing boss to work for, but it’s never your boss.
Well, Nick, it is my boss.
Working with Ken Lewis is tremendous. And I think that’s not going to go away, so. We don’t need to get really big. Our goal here is not to get rich. We’ll have nice lives and we’ll make our money, and we’ll be successful, but the point is not to gain market share. The point is to be a great small distillery. Which if you think about it, is an amorphous goal. How do you know if you’ve made it? What do you do every day to get there? If your goal is market share, it’s simple. You need to make and sell more booze. But that’s not the case when your goal, your stated goal, that you remind yourselves in every meeting every week, is to become a great small distillery of the world and to do it in sour mash Kentucky whiskey. If that’s the goal, how do you go about it? How do you know that you do it?
You just have to keep putting one foot in front of the other with confidence and skill and commitment to quality. That’s what will go on. I’m sorry that sounds corny but its the truth.