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No signs of slowing: American Whiskey is ounce again the fastest-growing spirits category.

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Whatever the reasons--and they are as varied as the styles, proofs and types of whiskeys emanating from this country's distilleries--American whiskey continues to boom.

Last year the entire broad category grew more than five percent, according to figures from the Beverage Information and Insights Group, but those figures also include the flailing blended whiskey brands. Recent Nielsen scan data suggests the numbers for straight whiskey this year so far are closer to eight percent.

Significantly, it's the high-end premium and super-premium Bourbons and Tennessee whiskeys that are growing faster, although off a smaller base. Super-premium volumes rose 25.2 percent in 2015 and revenues were up 26.5 percent for the sub-category that includes such brands as Woodford Reserve, Knob Creek and Jack Daniel's Single Barrel, according to industry trade group, Distilled Spirits Council. One notch down, premium brands including Jack Daniel's, Maker's Mark, Wild Turkey and Jim Beam Black rose 6.8 percent and revenues were up 7.7 percent.

And the international boom has become increasingly important, with Bourbon and Tennessee whiskey exports topping $1 billion for the third straight year.

MARKET PRESSURES

The relatively sudden change in fortunes has shifted the conversation from, 'how do American distillers sell more whiskey?' to 'how can they keep up with the demand?' The ultimate question, of course, is how far and long can this go on, given the steady expansion of American whiskey both here and abroad.

Still aware of the long, slow decline of Bourbon and the near-disappearance of rye in the late 20th century, many distillers looked overseas for new markets at the same time as the resurgence here, and have found that international growth in some cases has forced allocation of brands in the U.S. Most of the major distillers have in the past five years expanded their production and aging facilities, but whiskey-making is a long-term project--spirits barrelled in 2016 won't be ready until four years at the earliest to make the legal age limit to be called "Bourbon," for example--and so making reliable projections is like shooting arrows from a moving train.

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Mostly, distillers are optimistic that the luxury problem provided by simply keeping up with filling orders will be around for some time. Flavored whiskeys have offered different drinking options for established whiskey consumers and attracted more women, Hispanics and African-Americans--groups not traditionally a significant part of the American whiskey consumer base. With the return of classic cocktails--a major driver for rye as well as Bourbon, the growth of whiskey bars, and the growing interest in authenticity and heritage when it comes to spirits--American straight whiskey is poised for continued growth. Lately, even bonded whiskeys have returned to numerous portfolios, a style that had been reduced to only a handful of brands. A recent twist is one-offs based on pre-Prohibition whiskey styles--Old Forester's latest expression in its Whiskey Row Series is the 115-proof 1920 Prohibition Style. The third release in the series, it marks the brand's continued distillation during Prohibition.

Meanwhile, major brands keep growing: Jack Daniel's, the longtime category leader now offering numerous flavored and higher end iterations, broke the five million case barrier for the first time last year, up 2.9 percent. Almost every other tracked major straight American whiskey surged as well, led in volume by Heaven Hill's Evan Williams (up 15.3 percent to reach two million cases) and Bulleit Bourbon (up more than 39 percent).

And while moonshine and com liquor may not have the allure that they did a few years ago, when the novelty and array of new flavors made a big splash, some regional strength has kept a couple of brands, notably Midnight Moon and Ole Smoky, chugging along, though the chum of suppliers and brands has continued.

"Interest in the whiskey category has never been greater, led by the flavored and craft whiskey segments," says John Higgins, VP, Jack Daniel's brand director North America. "Based on that interest, there is a desire for more new offerings from their favorite whiskey brands. As the world's global whiskey leader, Jack Daniel's will always listen to what our friends want and will continue to deliver them product of the highest quality."

NEW TO THE SHELF

Meanwhile, something new is always on the launching pad, it seems.

For example, Brown-Forman is extending Jack Daniel's Single Barrel with a new Personal Collection program, under which consumers can purchase their own customized barrel of whiskey. Buyers can have the barrel selected for them by the master distiller, receive samples based on flavor profiles or travel to the distillery in Lynchburg, Tennessee and select their barrel. Barrels destined for the Personal Collection have been exposed to the most extreme temperatures, which creates bolder flavor and variance from barrel to barrel, Brown-Forman says. Prices start at around $10,000 a barrel.

And with this year the 150th anniversary of the Jack Daniel Distillery, the company has released a limited edition commemorative whiskey to mark the occasion with a suggested retail price of $99.99 for a 1L bottle.

"We continue to see consumers looking towards authenticity and heritage in American whiskey," Higgins says. "Just looking at the amount of new entrants to the category and proliferation of whiskey bars and whiskey blogs are examples of the thirst for American whiskey. The trends continue to show American whiskey growing over the coming years and we're hopeful that Jack Daniel's will be at the forefront of that growth. We're seeing growth across the Jack Daniel's family of brands, in particular in our craft and premium expressions, along with our Jack Daniel's Tennessee Honey and Tennessee Fire."

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To meet the demand, production capabilities in Lynchburg have been expanded over the past several years and so far, none of the brand offerings are on allocation.

Nor has the boom caught Beam Suntory's Jim Beam short, after many expansions of both facilities and brands, says Dan Cohen, public relations director at Beam Suntory.

"Only the limited editions and some smaller batches are on allocation, and they are that way by design," he says. "We've seen an explosion across all types and styles and find the whiskey consumer is very promiscuous these days. They love to discover and try new products. We know that with this much action and growth there is the risk of saturation, but we don't see that yet--consumers are still looking for new flavor profiles and processes, which allows for a wide range of offerings."

The Beam line was recently given a full packaging redesign to align the look of the various iterations, and the distillery launched in the U.S. in August yet another whiskey, Jim Beam Double Oak, finished in a new charred oak barrel after the standard four-year aging process. The second barreling allows the liquid to develop a deeper level of spiced oakiness and caramel, the company says, with a price point of $22.99 (the same as Jim Beam Black, Rye and Devil's Cut).

"Innovations like that one have played an extremely important role in our growth in the last few years, across price point and within sub-categories, and that has driven a lot of our growth," Cohen says. Beam had its most successful product launch last year with Jim Beam Apple, and limited editions like Knob Creek 2001 and Booker's Rye disappeared swiftly.

Cohen points out Nielsen data that says Beam brands are slightly outpacing the Bourbon category with some dramatic expansion over a recent 52-week period--small batch Basil Hayden skyrocketed more than 30 percent, as did the range of flavors Kentucky Fire, Honey, Red Stag, Maple and Apple.

For some distillers, being able to meet demand is still a goal, however. Numerous brands, especially those from smaller distillers such as Buffalo Trace, have been allocated for some time.

"We didn't get the memo eight or ten years ago that there was going to be such a surge," says Kris Comstock, Bourbon marketing director at Buffalo Trace. "Our premium brands like Buffalo Trace, Eagle Rare and Blanton's are and have been on allocation, so I don't know what the true demand is. We carefully allocate them out monthly to established customers around the country, but based on the phone calls and emails we get, it's not enough. But we don't know how much would be enough. We are making quite a bit more each year, but when we make a barrel of Eagle Rare today, it won't be ready till 2026, so we just keep filling barrels and we'll see."

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Buffalo Trace brands like Sazerac rye and others are also in limited supply compared to the upsurge in demand, and there's no point in even discussing Pappy Van Winkle, as the cult surrounding the brand means bottles frequently don't even make it onto store shelves.

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 recendy 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).

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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.

"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.

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"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 Com 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.

"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.

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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.

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."

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 www.jackrobertiello.com.
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Title Annotation:AMERICAN MADE
Author:Robertiello, Jack
Publication:Beverage Dynamics
Geographic Code:100NA
Date:Sep 1, 2016
Words:2579
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