Cask of Stars

‘€œThings are good in the world of North American whiskey,’€ exclaims Yvonne Briese, vice president of marketing for Diageo North American Whisky, whose portfolio includes the Bulleit and George Dickel brands. ‘€œThe category is exciting, very dynamic, a lot of great things are happening.’€

Indeed, American whiskey is a vibrant category these days. Consumer interest has never been higher. Growth is up, especially in the premium and superpremium segments, where there has been a proliferation of new products, often limited editions that are much sought after. The rising tide has also floated a few previously moribund subsegments, like rye whiskey and unaged potions ‘€” a.k.a. white dog. American whiskey is finally taking center stage.

‘€œThe product’€™s time has come in terms of critical appreciation and consumer acceptance,’€ posits Larry Kass, director of corporate communications for Heaven Hill Distilleries, whose wide-ranging whiskey portfolio includes flagship Evan Williams Black Label and Rittenhouse Rye as well as Elijah Craig and Parker’€™s Heritage. ‘€œFor years, bourbon was almost a second-class citizen to Scotch. Certainly that’€™s not the case anymore; bourbon has taken its place in the pantheon of great whiskeys.’€

In fact, in the superpremium category, bourbon kept pace with single-malt Scotch, growing in volume 16.2% in 2010, comparable to single-malt Scotch’€™s 16.8% growth, according to industry statistics from the Distilled Spirits Council (DISCUS).

Indeed, the American Straight Whiskey category gained 2.3% in volume in 2010, to just under 12.6 million 9-liter cases, according to the Beverage Information Group’€™s 2011 Liquor Handbook. Jack Daniel’€™s still leads the category, with sales of more than 4.6 million cases, followed by Jim Beam, with sales of more than 3 million cases. Other top sellers include Evan Williams (up 4.0%) at sales of slightly less than 3 million cases, and Maker’€™s Mark, which increased a whopping 13.9% to 915,000 cases. In fact, high-end bourbon had a stellar 2010, according to DISCUS (Distilled Spirits Council of the U.S.), growing volume by 16.2%. In terms of revenue, the entire American Straight Whiskey category gained 4.2% in 2010 (DISCUS).

‘€œWe’€™re seeing a tremendous amount of upside in the bourbon category, particularly in the last year or so. The overall category continues to grow from both a volume sales and a dollar perspective,’€ concurs Rob Mason, director of bourbons for Beam Global, whose extensive whiskey brands include Jim Beam, Maker’€™s Mark, Knob Creek and Basil Hayden’€™s.

Those positive numbers are making a definite impact on retail shelves.

‘€œMy whiskey section is rocking,’€ exclaims Patti Robinson, owner of Heritage Wine & Liquor in Centennial, CO. ‘€œI’€™ve been giving American whiskeys a lot more shelf space over the past year.’€

Growth is not just measured in dollars. The Wild Turkey brand just unveiled a $50 million distillery expansion. The new 134,000 sq. ft. facility is capable of producing up to 11 million proof gallons of liquid annually. ‘€œBourbon has been on a roll for several years and that continued in 2010. The category saw good momentum even in a rather shaky general economy,’€ points out Umberto Luchini, group brand director for American whiskies at Skyy Spirits, which purchased the Wild Turkey brand in 2009.

Roll Out The Barrel

The question is, what got the barrel rolling? Industry professionals point to a number of factors driving interest and growth in the category.

One positive factor is that American whiskey is a great value relative to other categories.

‘€œI consider superpremium bourbons to be a good value proposition,’€ declares Mason at Beam Global. The high end for some spirits categories can cost up to hundreds of dollars a bottle, whereas superpremium bourbons generally range $30-$50. ‘€œThat’€™s much more approachable.’€

‘€œThree factors have really helped the category and our brand,’€ explains Laura Petry brand manager for Woodford Reserve, a bourbon in Brown-Forman’€™s portfolio that also includes Jack Daniels Tennessee Whiskey, Old Forester and Early Times. One factor, says Petry, is the cocktail renaissance sweeping the country; many classics feature whiskey. Cocktail culture generally appeals to a younger demographic and to more female consumers, she concludes.

Generating a Buzz

Some would argue that much of the category’€™s newfound momentum comes from highly publicized educational seminars, like Tales of the Cocktail and the Manhattan Cocktail Classic, and the growing number of whiskey tastings and competitions, like the International Wine and Spirit Competition and WhiskyFest. That excitement is augmented by the plethora of blogs and online forums devoted to whiskey, reviewing new releases, detailing projects by master distillers and creating cache for limited editions.

‘€œThere’€™s a lot of buzz around the category,’€ says Kass at Heaven Hill. ‘€œIt’€™s an amazing time right now if you look at the kind of consumer we have, who’€™s very interested in American whiskeys, highly educated and really into the provenance of the brands.’€

That’€™s evident in the retail arena. ‘€œBeyond question there’€™s a greater appetite for product knowledge on behalf of our shoppers,’€ says Tom Tesauro, partner at the three-store Yankee Spirits retail chain in Massachusetts. ‘€œConsumers today have a better understanding of what makes a bourbon, what makes a rye, what makes a Tennessee whiskey.’€

‘€œThe thing to keep in mind when you see the huge growth rate in the really high-end tiers is that the volumes are pretty small,’€ cautions Briese at Diageo. The bulk of business is still done in the premium and above-premium space, she says. ‘€œBut the people who are really engaged with whiskey tend to have a desire to experience new things, try new products.’€

The Open Spigot

The list of new products and line extensions flowing from whiskey producers is considerable. Virtually every maker boasts an introduction or two or three.

‘€œWhile we put a lot of focus behind growing existing products, we see a huge role for innovation in terms of driving the category going forward,’€ says Mason at Beam Global. The company launched two major products this year. In February, Beam released its first ever Knob Creek Single Barrel Reserve, aged nine years and bottled at 120 proof. ‘€œWe’€™ve had tremendous results, halfway through the year we’€™ve doubled our forecast so far.’€ The second innovation is Jim Beam’€™s Devil’€™s Cut. Playing off the Angel’€™s Share evaporation loss, the Devil’€™s Cut is the liquid that’€™s absorbed by the barrel during aging, extracted by a proprietary process, resulting in a 90 proof bourbon with oaky vanilla notes. Recently released, it has a suggested retail of $23.99 for a 750 ml bottle.

On the other side of the coin is Angel’€™s Envy. This small-batch bourbon created by master distiller Lincoln Henderson at Louisville Distilling Company has been aged four to six years in new charred white oak barrels and finished in port barrels for an incremental five to seven months. Currently, Angel’€™s Envy is only available in select markets.

For its part, in 2009 Maker’€™s Mark launched its first new product in decades’€”Maker’€™s 46. This year, Maker’€™s Mark released a special bottling’€”with a gold wax dip’€”commemorating Keeneland Race Course’€™s 75 anniversary; proceeds benefit an arts endowment.

Under direction of master distiller Jim Rutledge, Four Roses has introduced its 2011 Limited Edition Single Barrel Bourbon this spring, which in keeping with its name has a floral aroma reminiscent of rose petals. That release was followed by the 2011 Limited Edition Small Batch Bourbon in September. After being only in international markets for some 40 years, Four Roses Bourbon is relatively new in the U.S. ‘€œOur number of markets/states continued to grow in 2010 as did our case sales in existing markets,’€ says Rutledge.

Sazerac’€™s Buffalo Trace Distillery always has a number of experiments on tap. To name just a few: The 2011 Experimental Collection is the first release of some ‘€œrediscovered’€ barrels from 1989, 1991 and 1993. The Millennium Barrel expression from the last barrel of the 20th century consists of only 174 bottles, all of which are to be donated to charities for fund-raising. The company’€™s Single Oak Tree Project is designed as a series of releases; 96 oak trees of various types were made into 192 unique barrels, given different char levels and filled with one of two recipes, a wheat and a rye, then stored in different warehouses. Consumers are urged to rate the expressions on line to create a database about the effects of wood on whiskey.

Over in Tennessee, Jack Daniel’€™s launched Jack Daniel’€™s Spirit-Based RTDs with three flavors: Jack and Cola, Jack and Diet Cola and Jack and Ginger. ‘€œWhether it’€™s served neat or on the rocks, paired with a single ingredient mixer or served in a classic cocktail, whiskey is a very versatile spirit suitable for many occasions,’€ points out Jennifer Powell, senior brand manager. The company also rolled out some minor refinements to the familiar Jack Daniel’€™s Old No. 7 bottle to accentuate the bottle’€™s square shoulders and also to simplify the front and side labels. Also under the brand’€™s flag are Gentleman Jack Rare Tennessee Whiskey and Jack Daniel’€™s Single Barrel Tennessee Whiskey.

Heaven Hill is set to release its Parker’€™s Heritage Fifth Edition, a 10-year-old Cognac-finished bourbon. The ultra-high-end whiskey was unveiled at Tales of the Cocktail this summer. ‘€œIt’€™s an interesting synthesis between American and French oak,’€ says Kass, who adds that the release is targeted at high-end consumers and top mixologists. Also new at Heaven Hill is the 17th edition of Evan Williams Single Barrel, vintage dated 2002.

This spring Wild Turkey 81 was introduced; the 81 proof product is a mingling of six-, seven-, and eight-year-old whiskies poured into American oak barrels with a deep ‘€œalligator char.’€ It also features the first package change to the Wild Turkey family in nearly 15 years with a label makeover. ‘€œWild Turkey 81 was developed with bartenders and consumers in mind, creating a truly mixable spirit that delivers Wild Turkey’€™s famous kick every time,’€ says Luchini.

At Woodford, master distiller Chris Morris created a Maple-Wood finished bourbon for the Master’€™s Collection. ‘€œEach year, we try to create a unique expression that furthers the craft and knowledge of whiskey making,’€ says Petry of the Master’€™s Collection. Another limited-edition from Woodford is the 2011 Kentucky Derby Commemorative bottle. This fall, an additional Master’€™s Collection was released; a limited edition rye whiskey. ‘€œThere is some popularity among rye products right now,’€ says Petry.

And Early Times also recently got in to the act, with the spring debut of Early Times 354 Bourbon (Early Times Kentucky Whiskey, the parent brand, was changed from Kentucky Bourbon to Kentucky Whiskey in 1983), returning to its bourbon roots. The 80 proof bourbon is made with pure water, select grains, proprietary yeast and is matured in select oak barrels. It retails for $15.99 for a 750 ml bottle.

Catcher in the Rye

Whiskey made with a mash bill of more than 51% rye was the prevalent style in early America; after Prohibition, the rye category was nearly moribund. Now, thanks to the cocktail renaissance and renewed interest in all styles of whiskey, American rye whiskey is experiencing a resurgence.

‘€œNot so many years ago, the number of rye whiskeys available in the average store could be counted on fewer than the fingers of one hand,’€ recalls retailer Tesauro. ‘€œNow, rye whiskeys are emerging in a big way.’€

‘€œFor years and years, there were only a few of us who made rye,’€ says Kass at Heaven Hill, referring to the company’€™s Rittenhouse Rye. ‘€œNow that category has really caught fire. Just keeping Rittenhouse Rye in stock is a challenge, but it’€™s a nice problem to have.’€

Segment veterans like Rittenhouse, Wild Turkey Rye, Jim Beam Rye, Old Overholt. Old Potrero, Sazerac and Van Winkle are being joined by a bevy of newcomers such as Templeton, Jefferson’€™s Reserve, Tuthilltown and more.

‘€œRye was the original ingredient in the Manhattan,’€ points out Diageo’€™s Briese. ‘€œIt’€™s part of the trend towards more full-bodied whiskeys.’€ The company’€™s bourbon brand launched a line extension last spring with Bulleit Rye. Bulleit Bourbon already boasts a high percentage of rye, and Bulleit Rye’€™s mash bill consists of 95% of that grain. ‘€œTom Bulleit was out among the trade, saying bartenders wanted to see a Bulleit Rye,’€ recalls Briese. ‘€œWe finally did it and can’€™t be more pleased with the results so far. Bulleit Rye has been blowing away our expectations.’€

‘€œWe’€™re seeing more rye whiskeys coming into the store,’€ says Robinson at Heritage Wine & Liquor. As an example she cites WhistlePig, a 100% Straight Rye Whiskey, currently imported from Canada and bottled in Vermont. ‘€œI never thought I would ever see anyone spend nearly $70 for a rye whiskey, but it’€™s moving.’€

‘€œAs for rye and other grain whiskeys that are coming out of the gate, certainly there are a lot of competitors that are bringing these out there,’€ notes Mason at Beam. ‘€œRye is still a relatively small section of the category.’€ Execs at Beam Global continue to monitor this and other trends, like the nascent interest in so-called white whiskeys. ‘€œMuch like what we’€™re seeing in rye, a number of competitors have chosen to release these unaged products, but the segment as yet continues to be very small,’€ adds Mason.

White Dog’€™s New Tricks. These unaged whiskeys, popularly known as white dog, are the darlings of trendy mixologists and consumers interested in all aspects of the whiskey-making process.

‘€œUnaged whiskey is an emerging trend that fits into the whiskey category with a unique interest to a select group of consumers as well as mixologists,’€ notes Powell at Jack Daniel’€™s. ‘€œThe spirit appeals because of its mixability, and many bartenders in boutique establishments are using unaged whiskey in classic cocktails such as Sidecars and Manhattans.’€

Cautions Luchini, ‘€œThere is no such thing as white whiskey; it is either white dog or moonshine. Aging is one of the key ingredients to great whiskey making, along with mash, yeast and water. Without it, one of the defining characteristics is lost and you are now veering into vodka territory.’€

‘€œI think ‘€˜white dog’€™ is interesting, but it’€™s too early to tell whether it may become a trend,’€ observes Rutledge at Four Roses. ‘€œThe advantage white whiskey has is economics. Distill it today and bottle it tomorrow,’€ he adds. ‘€œThe high pricing of the few brands of white whiskey I’€™ve seen on the market may minimize any dramatic rush of consumers to purchase this category. White whiskey (or white dog) could be more of a fad than a trend; only time will tell.’€

‘€œI don’€™t know if white whiskey is the next trend,’€ admits Petry at Woodford. ‘€œBut it’€™s new and exciting, and there’€™s room for it as a specialized offering.’€

Heaven Hill’€™s specialized white whiskey offering is the Try Box Series. Named for the device that allows distillers to sample raw whiskey as it comes from the still, the series will feature unaged versions of the company’€™s popular whiskeys. The first two ‘€œnew makes’€ are white versions of Evan Williams and Rittenhouse Rye. ‘€œWe saw interest in ‘€˜new make’€™ whiskey on the mixologist side for its unique taste profile,’€ says Kass. Try Box is also a good educational tool at retail, to show consumers how barrel aging changes the color, aroma and taste profile of whiskey, he adds. The series will eventually include wheat and corn whiskeys. ‘€œTry Box allows us to talk about all the products we offer, for example, our Bernheim Kentucky Straight Wheat Whiskey.’€

Buy the Barrel

One interesting phenomenon that shows the strength of the superpremium category as well as consumer interest in custom bottling is the practice of retailers buying their own barrel of mature whiskey right from the distilleries. Fact is, volumes are now high enough to make the concept viable for retailers who want to offer their customers a product exclusive to their stores.

‘€œThe biggest off-premise support among a wide range of the normal tactics is around the Single Barrel Barrel Program,’€ comments Mason. ‘€œAccounts try samples from several barrels then purchase an entire barrel for their customers. We’€™re finding that has been a tremendously effective way to drive interest and distribution.’€

‘€œVolume-wise, we are now at the point where we are ordering whiskey by the barrel,’€ says Tesauro at Yankee Spirits. The three stores have featured exclusive barrels of Buffalo Trace, Eagle Rare and Knob Creek, and actively promoted the fact. ‘€œThat’€™s significant volume for us.’€

Off-Premise Push

To keep the momentum going, producers support their brands with a variety of merchandising and promotional programs both on-premise and off.

Evan Williams Black Label continues to benefit from an extensive media campaign that revolves around the theme Some Secrets are Worth Sharing, says Kass. The company will also be on ESPN2 and Great American Country networks, in conjunction with sponsorship promotions with Bassmaster, the elite fishing series. In addition, the brand now has a championship bull-riding component to its marketing for Evan Williams; not only sponsorship signage on the gates but outfitting the bull wranglers with logoed gear. The Best Kept Secret Band campaign is being reprised, with a free music download on the bottle, where legal, and a sweepstakes for the chance to catch the band live. ‘€œIt’€™s aimed at driving awareness particularly among the younger demographic,’€ says Kass. American whiskey brand ambassador Rob Hutchins will also be busy with tastings and seminar for trade and consumers.

Yankee Spirits holds regular customer education sessions, often inviting brand ambassadors and distillers to speak. This fall the retailer is hosting its own American whiskey fest, with 50 to 75 different offerings for its customers to taste.

Key promotions for Jack Daniel’€™s include seasonal programs around summer grilling, tailgate parties in the fall and Jack Daniel’€™s birthday during September. A new holiday program will include advertising, on and off premise components and digital and PR activation, says Powell.

A well-received Jim Beam commercial starring Willem Dafoe is the beginning of a campaign launched around a Bold Choice theme. ‘€œWhich we hope will build and grow for many years to come,’€ says Mason.

Wild Turkey’€™s extensive marketing campaign, called ‘€œGive ‘€˜Em The Bird’€ (a tongue-in-cheek way to order), features print, outdoor and digital advertising, as well as an in-your-face social media component intended to raise eyebrows and glasses. ‘€œThey are a lot of fun; kind of a wink and a nod from Kentucky,’€ says Luchini.

Heritage Wine & Liquor holds regular tastings on Friday afternoons. In a three-hour period, the retailer will sell as many as three cases of spirits, depending upon what is being featured. In partnership with a local restaurant, the retailer has also hosted bourbon dinners pairing three or four appetizer portions with different whiskeys. ‘€œThey sell out,’€ says Robinson.

Tom Bulleit is the ambassador for his own brand, evangelizing to the trade, notes Briese. In addition, there’€™s an internal resource, 20 Masters of Whiskey fanning out across the country educating the trade and consumers. ‘€œWe see social media as an amplification of our other growth drivers; facebook is becoming a more important part of our social marketing,’€ says the VP.

Four Roses has mounted a billboard campaign in its home state of Kentucky. It also participates in as many tasting events as feasible, while relying heavily on media and PR to promote and grow its brands on a grassroots basis, says Rutledge.

Once again this fall, Woodford Reserve will reprise its Manhattan Experience. Working in partnership with Esquire Magazine, the event will include a bartender competition, and be supported with off-premise merchandising. The brand will also amp up its social media component, including facebook, and is updating its website.

Flowing into the Future

All signs point to a bright future for America whiskey, with continued growth, burgeoning new products and increasing consumer interest.

‘€œAs the world economy improves, the potential growth of Bourbon whiskeys around the world is exciting and real,’€ believes master distiller Rutledge at Four Roses.

Concurs Kass at Heaven Hill, ‘€œWe see no reason that whiskey is going to slow down.’€

‘€œWe are incredibly bullish about where the whiskey category is headed for the remainder of 2011 and beyond,’€ concludes Mason at Beam Global. ‘€œWe think there’€™s a huge amount of upside and opportunity.’€

A Taste of Honey, Cherry and ‘€¦

Though some purists may scoff, flavored whiskeys are connecting with new consumers as approachable and mixable. The category is playing a card that vodka and to some extent rum have found so successful. The whiskey variants however follow the brown spirit’€™s natural taste profiles with compatible flavors like honey, cherry and vanilla. Early entrants like Red Stag, Jeremiah Weed and Phillips Union are joined by new contenders like Jack Daniel’€™s Tennessee Honey.

‘€œThe number of introductions of flavored whiskeys over the past two years has been staggering given that bourbon is a category that historically has been steeped in tradition,’€ notes Rob Mason, director of bourbons for Beam Global. The company seized upon the flavor opportunity a few years ago with its Red Stag by Jim Beam, bourbon infused with black cherry. ‘€œOne of the benefits of these flavored whiskeys,’€ continues Mason, ‘€œis that a lot of the volume is incremental to the bourbon category. They are not just pulling people who are already drinking bourbon, but a wide range of individuals who’€™d never considered whiskey before, but because the flavor profile is more approachable, sweeter, they are coming into the franchise.’€ Company research indicates that half of all Red Stag consumers are women; a skew much different from the largely male bourbon drinker.

Significantly, Jack Daniel’€™s entered the flavor arena this year with the launch of Jack Daniel’€™s Tennessee Honey.

Wild Turkey, too, has its entrant in the world of flavor with Wild Turkey’€™s American Honey. ‘€œI think the success of American Honey demonstrates that the whiskey category is ripe for innovations, as long as they are true to the character of the base whiskey product,’€ exclaims Umberto Luchini, group brand director of American whiskies for Skyy Spirits.

‘€œWe have been deluged with so many honey and cherry flavored whiskeys recently,’€ exclaims Tom Tesauro, a partner in Yankee Spirits retail stores. ‘€œIt’€™s not tremendous, but it’€™s a consistent volume. And the buyer is a different customer than the bourbon drinker.’€

‘€œWe’€™ve been having a lot of success with Sazerac’€™s Fireball Cinnamon Whiskey,’€ says Patti Robinson, owner of Heritage Wine & Liquors. The store carries a number of infused whiskeys in cherry, honey and vanilla flavors. ‘€œThey are popular with younger consumers,’€ she notes.

‘€œFlavored whiskeys have been a strong subsegment, with a number of entries over the past three or four years,’€ points out Larry Kass, director of corporate communications for Heaven Hill Distilleries. The company launched Evan Williams Honey Reserve about two years ago, followed by Evan Williams Cherry Reserve. ‘€œFlavored

spirits’€”vodka and rum’€”are so popular. There is an appeal to those who are not dyed-in-the-wool whiskey drinkers and to the female demographic. They broaden the entryway into the whiskey category,’€ says Kass.

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