Why American Whiskey Continues To Boom

Growing And Growing

A number of new distilleries have been in one stage of construction or another in Kentucky in the last few years, some built by brand owners who once bought their whiskeys from large distilleries but can no longer get enough of what they want. And nearly all the medium-to-large distillers have undergone frequent expansions recently.

For example, construction on the Bulleit Distilling Co. in Shelbyville, Kentucky. is on-track to be operational in late 2016, with the still only recently installed (The brand released Bulleit Barrel Strength this spring as a Kentucky-only offering. Similarly, brand owner Diageo also launched George Dickel 17-Year-Old Tennessee Whisky, a limited-time, Tennessee-only offering).

Over at Heaven Hill, capacity has been repeatedly tweaked – eight additional fermenters were brought on line over the past few years, bringing daily production from 600 to 900 and shortly 1,300 barrels a day, says Josh Hafer, communications manager at Heaven Hill. Additional warehouses with about 50,000 barrel capacities each also have sprung up, with two new ones about to be dedicated, bringing their aging capacity to about two million barrels.

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Evan Williams’ line of flavors – Honey, Cherry, and Fire – were earlier this year joined by Peach.

“It shows how much we’re really growing, and we’re getting to the point that we’re looking at new land,” says Susan Wahl, group product manager, whiskey portfolio at Heaven Hill.

For Heaven Hill, the current arc aims to satisfy demand and manage growth. Producing a number of different whiskey styles – in addition to Bourbon, rye and flavored whiskeys, the company produces wheated Bourbon and wheat whiskey – has added to the challenges of fulfilling supply and getting some brands out of allocation. The wheated Bourbon Larceny, the wheated whiskey Bernheim, and the two ryes, Pikesville and Rittenhouse, are all allocated.

“We need to be able to produce all those styles,” Wahl says. “If we were only doing Bourbon maybe we wouldn’t need that capacity, but having them made it much more important to expand and have that capacity to do different things.”

Heaven Hill’s Evan Williams brand has been selling well in recent years, leading the company’s growth, outpacing the category and exceeding expectations. In addition, Evan Williams’ line of flavors – Honey, Cherry, and Fire – were earlier this year joined by Peach, and although Wahl admits the category is seeing some softening, Evan Williams Honey and Peach are both growing robustly.

In addition to being at the forefront of the return of rye with Rittenhouse, and more recently a reformulation and reintroduction of Pikesville, Heaven Hill has benefited from the resurgence in interest in bottled in bond whiskey (By law, bottled in bond must be the product of one distillation season, one distiller and one distillery, aged in a federally bonded warehouse for at least four years and bottled at 100 proof).

“Bottled in bond has been huge for us,” Hafer says, noting that even their Mellow Corn bears a bonded statement, along with Rittenhouse, an Evan Williams iteration and Henry McKenna 10 year old. “We’ve seen a lot of competitors return to the space and that’s great and has lifted all boats, harkening back to the background of what these whiskeys were at one time. You know that when brands that you don’t focus on are seeing robust organic growth, there is something going on.”

At Campari America’s Wild Turkey, expansion over the last few years still hasn’t caught up to demand, especially among the super-premium Russell’s Reserve line. (Pictured atop: Wild Turkey Master Distiller Jimmy Russell (left) and his son, Wild Turkey Master Distiller Eddie Russell.)

“We’re seeing some explosive growth at the super-premium end last year – we added 50 percent to the amount of Russell’s and don’t see any signs of that brand slowing,” says Maggie McDonnell, who manages Campari’s American whiskey portfolio.

A major expansion was completed at the Wild Turkey facility a few years ago, but it may not be enough. “Every year we’re at the point with the numbers we are posting that we have to think about how many warehouses we might have to build. Our new visitor’s center head counts are up 20 percent this year already and we’ve sort of outgrown the facility,” McDonnell says.

New things are coming as well; following a package redesign for the Russell’s line last year, super-premium Kentucky Spirit single barrel and cask strength Rare Breed will be spruced up early next year, which she anticipates might push them into allocation as well.

Other brands are almost designed to be allocated – The eighth Orphan Barrel release from Diageo is Rhetoric 22-Year-Old Kentucky Straight Bourbon Whiskey. The third iteration in the progressively aged whiskey series, it is slightly more mature and carries a high proof but is available in quite limited quantities.

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Heaven Hill’s new warehouse in Coxs Creek, KY.

The Moonshine Corridor

Moonshine’s growth seems to have stabilized. Leading brand Midnight Moon has nearly 40 percent of the category’s share, according to Nielsen 52-week figures through June of this year.

Joe Michalek, founder of Piedmont Distilling, says the retail and wholesale consumer flurry around un-aged white whiskey that took off in about 2012 had a couple of good years, bolstered by enormous media coverage.  But that spike has come down in the last 18 months, after 70 or more brands came into the space, leaving retailers with the task of figuring out which have legs.

“It took a while for them to find out that some products are selling better than others and now we’re seeing a shaking out going on, with areas of growth again.”

He expects his brand, Midnight Moon and its numerous fruit flavored iterations, to keep entering new markets and expand its more than 35 percent share of the market  (according to Nielsen data).

“More moonshine companies are making their way into the market, which tells us that there is a big interest in the category,” says Ole Smoky president of wholesale Michael Bender.  “We have also seen that some of the established moonshine brands are increasing their marketing spend. This tells us that the category is growing, not only with the increased number of competitors, but the increase in everyone’s marketing efforts.“

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Moonshine’s growth seems to have stabilized.

With 14 flavors, the brand targets mostly males between the ages of 21-34 living in the Midwest and southern states, focusing its business strategically on top-performing markets, which they call the “Moonshine Corridor” in the South, Mid-Atlantic and Midwest regions of the country.

All sorts of whiskey seem to be seeing their markets and options expanding, part of what makes this the golden era of American whiskey, according to many producers. How far it can go will only be tested as supply continues to grow. bd

Jack Robertiello is the former editor of Cheers magazine and writes about beer, wine, spirits and all things liquid for numerous publications. More of his work can be found at jackrobertiello.com.

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