Craze – The Bourbon Boom

Ah, bourbon. America's spirit. In recent years, the bourbon industry has seen exponential growth. Distilleries never expected such growth, which led to the shortage in bourbon to satisfy the demand of customers. Popular bourbons that once filled liquor store shelves are getting harder and harder to find. Bourbon drinkers will wait for hours outside distilleries and stores, hoping to get their hands on popular allocated bourbons. Popular bourbons sell for hundreds, even thousands of dollars in secondary markets. To keep up with the demand, distilleries have been expanding rapidly, and many new distilleries are just getting started. This new era of bourbon is called the bourbon boom. The bourbon industry has seen its history of ups and downs. From the 13 years of prohibition to the decline of sales that began in the 60s. In the late 70s, early 80s, bourbon took a nosedive, you might say, and consumers got to going to white products, you know, vodka, gin, so on and so forth. And the industry itself kind of thought that, you know, we were going to be a dying industry. And we kind of sat there for a while, and in the mid to late 80s, it took a turnaround and started to incline, and people started to enjoy the product more. And I think they got to enjoying the quality of the product. Distilleries began to close or be sold, causing several brands to disappear from store shelves. The last bourbon boom was 60s or so, died off in the 70s. By the 80s, it was almost completely gone. The 90s were not a good time either. When I got in the business then, looking back now, that's probably, it may not have been dead nuts bottom. They were starting to come back up slightly. But, you know, the factors that influenced or that caused the decline, we are aware of what those were. And, you know, we're actively insuring or hoping, planning that that doesn't happen again. Many distillers sat on millions of barrels of inventory. As a result, distillers began to introduce small batch and single barrel bourbons in the early 90s, which caused an upward trend back to bourbon. Bourbon is a craft spirit unlike any other in the world. To be called bourbon, whiskey must meet strict guidelines. For starters, it must be made in America. The mash bill must contain at least 51% corn. It must be distilled at no higher than 160 proof. And it must age in nude, charred oak barrels. No additional coloring or flavoring is allowed. And only water can be added. The process of making bourbon consists of the mash bill, beer mash, fermentation, distilling, and aging. The longest part of this process is aging. Time and patience. Bourbon needs to age, which allows the whiskey to slowly interact with oxygen and the oak. Barrels expand and contract in the hot summers and cold winters of Kentucky, allowing the bourbon to move in and out of the wood. The sugars in the charred oak give the bourbon its color and much of its flavor. The longer it sits, the more flavor it picks up from the barrel. There is no substitute for time. So boom or no boom, the bourbon's got to age until it's ready. Bourbon typically matures at around 4 years. But the demand by bourbon lovers is usually in the range of 7 to 12 years. This contributes to the high demand and low supply that is aged 10 years or longer. That means bourbon supplies are wholly dependent on distillery managers, accurately predicting the demand. You know, if we had a time machine, we'd go back 10 years and make a lot more of it and have a lot more to sell, but there really is no substitute for time. So wouldn't it be great if 10 years ago we had a much bigger distillery and it could have, you know, overproduced by enough to support the current demand? But, of course, we don't have a time machine. Now, I guess we have a time machine for the future in that we're building a new distillery. So we have this distillery operating, you know, 1,500 barrels a day, as I said, and we're building a new one at Bardstown that will be three phases. Phase one will be 500 barrels a day. So if you give us another third production and a third and a third, so ultimately we'll have the capacity to produce over 900,000 barrels a year. So that's how we're managing demand. Kentucky is the birthplace of bourbon. 95% of the world's bourbon is made in Kentucky. Kentucky's water flows through limestone reserves, which acts as a natural filter and is ideal for bourbon making. Along with the water, Kentucky's climate provides the perfect conditions for bourbon making. Bourbon has left a huge impact on the society, culture, and economy of Kentucky. Over 70% of Kentucky bourbon trail visitors travel from other states. The historic Old Talbot Tavern in Bardstown, Kentucky, is one of the oldest bourbon bars in America. It has provided drinks and overnight stays to travelers like Daniel Boone, Jesse James, and even General Patton. In recent years, the bourbon boom has led to an increase in tourism. It's completely bourbon. Everybody that comes in wants to have a taste of bourbon. We now went from just a few bourbon bottles on our shelf to almost 300 bourbons so people can have a wide variety of saplings. We also expanded about seven or eight years ago where we bought an adjacent property and added 15 overnight rooms to our eight that we have here now. And without the bourbon boom, we would not have done that. As the sun rises, bourbon drinkers will line up at Buffalo Trace in Frankfort, Kentucky to see what the day's allocated release will be. Websites and Facebook groups are dedicated to posting updates of the day's release and even notifying everyone for when they sell out. On average a day, we're going to have two to three to five, six hundred folks that are waiting to come in before we even open the door. And it's just gotten very popular. We have to allocate. At Buffalo Trace, you can get a gift shop feature. But that makes it available to everybody. Many distilleries are investing in the visitor experience, providing memorable experiences, and even allowing visitors to interact with products. Distillery tours allow bourbon lovers to go behind the scenes and see their favorite bourbons being produced. Distilleries are expanding both production and warehouse capacity to ensure for the future that popular brands will be available. We're building a new warehouse about every four to five months. We're overproducing because we don't believe it's a boom at this point. We believe it's a long, continued growth, and we're actively planning on that. The bourbon boom brought some older distilleries back, such as Kentucky Peerless. The first Peerless whiskey went into barrel in 1889. Due to World War I and Prohibition, the distillery was forced to close and ceased the production of its famous whiskey. In 2014, the Kentucky Peerless brand was revived. So the bourbon boom definitely created the opportunity for us to revive this historic giant of a distillery. Its impact was amazing back in the day, and now that we have such large demand, it was able to justify in the marketplace bringing it back. The bourbon boom couldn't have been a better time to revive the Peerless brand. Peerless hit the market at a really good time. Bourbon is at an all-time high. And as we were reviving this historic brand, being able to draw on this new population of people who are a combination of these aficionados as well as people who are just getting their feet wet with bourbon is really rewarding for us. When you're talking about Peerless, it's a historic brand. There's an amazing heritage to uphold. But functionally, it's a new product. And when we were creating it, we wanted to make sure that it was complex enough to satisfy the curiosities of the aficionado but also be approachable enough for people who are just getting into the whiskey to kind of see what a premium spirit is. Being a new distillery during the bourbon boom brings its challenges. It's not something that can happen overnight. Because we're a distillery that prides ourselves on making everything within these four walls, that means that we cannot just go out and buy a 12-year-old product if we want a 12-year-old product. We have to make it 12 years in advance. And given that we currently have spirits that were made in 2015 as their oldest because that's when we started production, we can't snap our fingers and have a large population of that old age. In 2018, Peerless named Caleb Kilburn Master Distiller at the age of 27, making him the youngest Master Distiller in Kentucky. So I actually got very lucky. I entered the industry at this time of intense demand, not just for the spirits but for the people who make it. And I think it definitely created some additional opportunities here in this industry for persons like myself who may not be the traditional Master Distiller, in my case from an age standpoint, to really find an opportunity to showcase what we can do. It was an amazing opportunity that was generated, but it wasn't the reason I got into this. When I got into whiskey, it was because I didn't necessarily care about drinking it. I grew up in an alcohol-free culture, largely. I fell in love with the science. I fell in love with how it was made during college. It was every distillery cure I could take. Everybody who let me shadow, every book, every article, anything I could get my hands on. It was just an intense scientific fascination. And it was just serendipity that I came into the world in a time when bourbon created more opportunities for me. The increase in bourbon demand was a direct result of the opening of New Rift Distillery in 2014. Opened by liquor retailer Ken Lewis, he saw the bourbon boom happening firsthand. So Ken really had a firsthand view of what the bourbon boom was becoming as a retailer. I think in about 2010, 2011, they really started to take notice of a lot of the whiskeys that were moving off the shelf, that they normally just kind of sat there. They called them dusties, collecting dust. I think at the time they had three bottles of rye that they sold over there. I think it's now expanded to a couple hundred brands. A lot of people are distilling rye now, as well. But really he saw kind of what was happening in the bourbon industry. And we kind of call him one of the great entrepreneurs of America, in our humble opinion. But he wanted to sell to a party source. He actually made it in ESOP. And then he came over and we founded New Rift Distilling. New Rift has been expanding ever since their opening as the bourbon boom's demand increases. We started putting barrels away August of 2014. And we've just been grinding ever since. We started with four fermenters. We've since added five. We initially were planning to do about 3,000 barrels of whiskey per year. And as the bourbon boom just kept expanding, we just kept expanding along with it, hoping that by the time we finished all of our expansions, we were going to have enough product out there to kind of cover what our distribution footprint has become now. New Rift prides themselves as a New Rift on the old tradition of bourbon making. It's been a steady expansion throughout the entire bourbon boom. We know there's a bunch of other distilleries out there making a whole bunch of whiskey. So we're very, very, very laser focused on quality. About 75% of each year's production is bourbon. Another 25% is rye. And we also do a lot of specialty whiskeys and stuff like that. What's nice now that this will be going into 10 years of whiskey making here at New Rift, we're starting to release some stuff with some older age statements, which is really nice. And it's really encouraging how the whiskey's turning out as well. Bourbon drinkers' demographics show a wide range of ages drinking bourbon. And the bourbon boom has brought in many new bourbon drinkers. Collecting bourbon has grown in the last decade, with bourbon drinkers looking to increase their collection and find the rare unicorns. Many bourbon travelers go on a hunt for these unicorns, either to have for their collection or to drink. A little bottle hunting is also kind of like on the agenda, but I'm not one of those guys who will overpay like crazy. You know, once in a while I will. But, you know, just trying to see what I can get at these distilleries and just even your local liquor stores, you know, kind of like the fun part of it as well. Those who have been drinking bourbon for years have seen the bourbon boom progress over the last decade and the change it has made. Today, and it's tough to find certain bourbons, as everybody knows, it's crazy to me to think that six, seven years ago I could walk into a drugstore in Lexington, Kentucky and buy a bottle of Blanton's for 40, 45 bucks, sit on the shelf. I mean, it's set on the shelves. But the bourbon craze hit in the last few years and everybody thinks, you know, I have to have Blanton's and I'll pay 200 bucks for it or whatever. And it's created demand. Bourbon is tough to find, tough to buy, certain ones. Growing up in central Kentucky, you know, I still am back there a lot. I visit there frequently. And I buy more bourbon in Wisconsin and New York when I'm traveling on business than I do anywhere else. For whatever reason, you know, I think the reason is the bourbon craze. Kentucky is, you know, the Disney world of bourbon. And when people come to Kentucky, they think, oh, I'm going to find Pappy Van Winkle, I'm going to find E.H. Taylor, I'm going to find this. And the stores are able to charge whatever the market will bear, so to speak. So, two, three times retail price and some of the tourists pay it. And I'm a native, I've been drinking the bourbon forever and I'm not paying triple for it. So, I find the things that I like, I'll pay retail for it, and that's just the principle that I kind of abide by. The Chalet Premier, located in North Lima, Ohio, began Bourbon Tuesdays a few years ago to manage the bourbon craze. Tuesday mornings start off early. We get here at 4 or 4.30 in the morning for our beer and wine orders. That's when we start handing out our tickets. We can't sell liquor until 9 a.m., so we hand out tickets so our parking lot doesn't get super filled and people here are waiting for it in the middle of the night. So, they sleep in our parking lot and we hand them a ticket, they come back at 9, we start yelling out numbers, and depending on what kind of bourbons we get in, that depends what kind of people show up. Like you saw today, this is like Christmas, basically. There was at least 70-plus people here. And this is the same thing as last year. Customers will even come in and try to order hard-to-find bourbons on a daily basis. So, yeah, we have customers coming in all the time looking for bourbons. They're always requesting the Blanton's and the Eagle Rares of the world. They're saying, oh, can you set aside me a bottle or two? Can you order me this? Can you order me that? And the answer has to be no. We're at the mercy of the state. That's what they want to send us, basically. So, I've got to tell them, you've got to come to our early morning thing if you want. If you're not dedicated and you want to show up, you've got to be early for those kind of bourbons. Jay Novak, owner of the Whiskey Bar in Cleveland, Ohio, says the bourbon boom caused him to change his business model. We opened this Whiskey Bar 2016 as a side project underneath the Bon Appetit. We wanted to have a whiskey bar and represent whiskeys from around the world. We started with 50 different types of whiskeys. And then we ended up with 500 different whiskeys and probably the majority will be bourbon at the moment. Why? Because when we started, we didn't know at the moment how bourbon is having a renaissance and our customers are curious and they were exploring bourbon more and more and then we had to adjust, of course, and then we were going in that direction. In particular, rare bourbons, then we were trying everything to find them through the whiskey representatives and have as many as we can. Bourbon makes up most of the Whiskey Bar's business. Bourbon in particular will be probably 70% from the wholesale. That means it is very popular. It is bourbon renaissance. I don't know how long it's going to be like that, but for a couple of years, we are seeing that interests are actually growing. Of course, the rare ones are most popular and since we are called the Whiskey Bar, a lot of our clientele will come, even from Akron. We have people from Pittsburgh driving or calling us for whatever rare bottles, let's say in particular Pepe Van Winkle, 20-year-old, do you have it? We said yes. How much a shot? 150. They said we'll be there in two hours. With the increase in competition, demand, and customer thirst for new bourbon, many distilleries are experimenting to come out with new innovative techniques and products. Maker's Mark has been experimenting since 2019 with their wood finishing series where they add different barrel staves into the barrel for several weeks to create unique flavors. Angel's Envy began in 2006 creating a unique bourbon product by finishing their bourbon in different spirit barrels like port wine, rum, and sherry barrels to give their bourbon a unique flavor. Bardstown Bourbon Company, who opened in 2014, began with pushing boundaries through innovation. Bardstown produces high-quality Kentucky bourbon, but also blends newer and older bourbons to create something truly unique. Years and years ago, blending was done to hide an inferior product. Blending has been done with scotch and whiskeys overseas for years. And in the bourbon industry, it was kind of done as a way of hiding stuff. Well, now it's done as a way of making good products better. So it's taken on a whole new turn of products. And everything that we release here at Bardstown, we take good products and try to make a better product out of it. So blending has taken on a new concept and the customer is appreciating a good blended bourbon. And they're not looking at it as a way of covering up anything. So I see it, you know, everything that we want to try, we're trying, and the customer's wide open to accepting it. Kentucky Peerless saw interest in both new and old bourbon drinkers growing. To showcase their bourbon's journey from the very beginning through the aging process, Kentucky Peerless developed a limited-edition bottle collection called the Series 1. This gave customers a unique first-hand look and taste through a bourbon's aging process. We wanted to come up with a way for us to allow the people who were supportive of us from the very beginning to follow our journey and our whiskey's journey to maturity. So what we started off with is a seven-bottle series where we start with a new-make whiskey in the first bottle. We waited six months and bottled a six-month, waited another six months, did a one-year, a two-year, a three-year, a four-year, and five. So these seven bottles represent our journey from very, very early on new-make to mature bourbon. Now, what's really cool about this is because it's all from the same distillation, the same lot of barrels, they're stored in the same rigs, it gives you a really good transfer of view into how that whiskey also matures. The future looks prosperous for bourbon lovers and distillers as the bourbon boom is far from slowing down. Data shows it is forecasted that this trend will continue over the next five years. I think it's just gonna keep accelerating. I mean, I think we have not seen the growth of it peak out yet. As long as we keep producing good quality bourbon, the demand's gonna stay there. I mean, we are ourselves only in 24 states right now. We have not even saturated the United States. We're already getting demands from foreign countries to supply overseas. So, you know, we have not reached our peak by any means. I hear the same thing from other major producers that, you know, they could supply 50% plus what they're producing. What will people be drinking 5, 10, 15, 30 years from now? Well, we're planning on them and betting on them drinking bourbon. I think if we're able to get in and create our name and our reputation right now when the bourbon movement is at its best, I think the best that we can do is position ourselves, you know, for further growth and to continue to get those age statements on our whiskey. You know, bourbon has gotten so much exposure in the last 10 years that I think there will be hopefully steady growth. But, you know, we can only do what we're capable of doing, and that's just quality whiskey. And, you know, hopefully during these times we've built enough of a reputation that it's sustainable for the future, which we believe we've really positioned ourselves well. So hopefully, but not sure. Many distillers are looking toward the future, and so are the bourbon drinkers.