Stick with me; this is going to be about whiskey, but first we need to make a detour. I’ve done some writing about vodka and FMBs — what’s an FMB? It’s like an RTD. RTD? Well, it’s an alcopop. You know: like Smirnoff Ice. An FMB is a “flavored malt beverage,” which is basically beer with all the beer flavor stripped out and replaced with a variety of fruit flavors. (“RTD” means “ready to drink,” which seems redundant to me, but then, I’m not a marketer.) Anyway, the vodka category is dominated by the talk and advertising of flavors (though unflavored vodka is still the dominant seller), and FMBs are, obviously, all about flavors.
To look at a backbar these days, you’d think that flavored vodkas were a brilliant move. They take up a lot of real estate, they’re available in a broad assortment of different flavors, from fruits to confections to spices to the simply bizarre, like tobacco, and meat, and “fresh cut grass.” The FMBs had a similar rush of flavors, and still maintain growth in the market with that strategy, albeit at a large cost of promotions.
But look back a bit to the beginning. There were flavored vodkas going back to the 1950s; often colored, and flavored with a heavy hand. They were cheap booze, usually for kids or novelty cocktails. (We’re overlooking the original flavored vodka — gin — deliberately, of course.) It was a similar situation with FMBs: beer with cherry flavor, a horrible citrus concoction called Hop’n’Gator, and again, the weird, like Cool Colt, a menthol-flavored malt liquor, and the gin-flavored StingRay.
Each category was changed by a singular product. Flavored vodka changed in the late 1980s when Absolut put out Peppar, followed quickly by Citron. Suddenly flavored vodka had solidity, it had subtlety, and it was supported by an ad campaign that won awards for its simplicity and artistic nature; people framed these ads. Other vodka brands quickly added similar flavors; some, like Three Olives, were focused on flavors.
FMBs had flash in the pan success with Two Dogs, Zima, and DNA (which was essentially an alcoholic club soda), but the breakout product was Smirnoff Ice, a citrus-flavored cloudy white beverage, followed by Mike’s Hard Lemonade. They were huge successes, and spawned imitators.
But a funny thing happened; people got bored. Whether it was the drinkers, or the marketers, or the squirrely guys down in the flavor labs driving it, the flavor introductions accelerated. Vodka brands became literal rainbows of flavors (and colored labels), and new ones popped out every month: cherry, raspberry, lime, pear, peach…and then whipped cream, Swedish fish, “Dude,” tobacco, and, no kidding, Electricity!! The FMBs went through the same frenzy, albeit mostly limited to fruit flavors; the latest from Seagram’s Escapes is “Grape Fizz.”
There was howling from the neo-prohibitionists that flavored booze was on the market only to attract underaged drinkers (I honestly believe that’s not true, but…Grape Fizz? You gotta wonder), there was a ton of money spent on advertising, and round and round things went. The categories are big, but they’re a churning mess, and there are only a few flavor brands that retain any consistent traction in the market.
So what, right? Let them do their foolishness, we drink whiskey!
Yeah. You know where I’m going now. Flavored whiskey. Or, thanks to Dewar’s jumping off the high board (followed by J&B Urban Honey), flavored whisky. Sorry, flavored “spirit drink,” though the front label of Dewar’s Highlander Honey says, “Dewar’s Scotch whisky infused with natural flavors; filtered through oak cask wood.” Which, I would argue, is actually a more honest description of what’s inside than “spirit drink.”
But I’m not here to make fun of the labeling hoops the SWA sets up for companies to jump through. I’m here to wring my hands about the possibility of whiskey/whisky sliding down that disgustingly slippery flavor slope that vodka is whooshing down now. Because it starts with honey, and cherry, and cinnamon, then it’s maple, and tea, and barbecue, and mango, and actual heather…and the next thing you know, we’re coating our young whiskeys in dipping sauces and sucking them down raw, still wriggling as they slide down our throats, and they’ll never get to be fully mature and beautifully naked.
Think I’m exaggerating? Does anyone else remember Vijay Mallya at the 2008 World Whiskies Conference (back when people still cared what he thought about whisky), suggesting that for Scotch whisky to attract more young drinkers it needed “a spectrum of flavors”? Yeah, well…turns out that not everyone was repulsed by that. The folks in the stillhouse, the warehouses, and the tasting rooms figured “that’s crazy talk,” made faces, and went back to making the real item, sure. But in the offices? The suits looked at the vodka market, and proceeded to think the unthinkable: Hey guys? That crazy stuff Vijay said? Why not?
They made it happen, and flavored the whiskey. Some of them sold like mad, to the point where almost half of last year’s whiskey category growth in the U.S. market was from flavored whiskey. Beam’s rolling out new flavors, Jack Daniel’s is rolling out new flavors, Canadian Mist is in on it, and who knows where it will stop? Or if it will?
I’ll admit my complicity: I didn’t hate Red Stag, I used a bottle of it to make faux Manhattans. I didn’t even hate the Highlander (maybe because I thought, there can be only one! Whoops, I was wrong). All I can say in my defense is that I had no idea how successful they’d be.
That’s the real issue. It’s not that they exist, it’s that they’ve picked up a sizable number of drinkers. We’ve all seen what that did to Irish whiskey: proliferation of brands, expansion of production facilities, more more more. Money chases success. Flavored whiskey is exploding; and so, money chases success.
There will be more flavored whiskeys. To make them, barrels will be emptied that would have otherwise stayed in the warehouses and become our 15 year old whiskeys and whiskies. Sure, the big distillers are expanding production capacity, but flavored whiskey was not part of the expansion equation, and I hear there’s maybe a barrel shortage. They’ll make the money while they can! It’s not that we’re drinking our young; someone else is drinking our young, and they don’t care about the consequences. Whee! Cinnamon shots! I’m drinking whiskey!
The worst thing? There’s not really anything you and I can do about it. Don’t drink it? Don’t be absurd, you’re already not drinking it! Do you think the people who are drinking it — by the bottle! — read reviews of it? Do you think the companies are going to be able to resist the profits? Do you think the brands will survive becoming a rainbow of flavors? I don’t think whiskey will become the punchline vodka is, but it’s going to have an effect. Paint and dress a Cabinet secretary like a clown for a year, and no one’s going to take them as seriously again.
What to do, what to do? I don’t know…like I said, I’m wringing my hands here. Appeals to decency aren’t going to work when we’re talking hundreds of thousands of cases of sales. But man…I hope they make enough for us. I’d like to be able to afford 18 year old whiskey in 2030. Unflavored 18 year old.
On March 31, Kentucky passed House Bill 445, which allowed distillers a corporate income tax credit for the ad valorem barrel taxes paid on aging whiskey. According to the Kentucky Distillers Association, distilleries pay $13 million a year in barrel taxes.
Although ad valorem taxes—“according to value,” usually a tax on real estate or property—on Kentucky distilled spirits have existed off and on since 1906, the current system has been in place since 1990, when the General Assembly raised the rate from $0.001 to the current rate of $0.005. This 24-year-old legislation also allowed county and cities to tax the aging spirits, creating significant taxation liability without the ability to write off these contributions on their corporate income taxes.
Thus, HB 445 is an historic piece of legislation for the bourbon industry. But the distillers will not receive the tax credit if they do not reinvest the money, says Eric Gregory, president of the Kentucky Distillers Association.
“There’s a list of capital improvements that can be utilized for the credit. All our members agreed to that,” Gregory says. “We wanted to show the legislature that we’re serious about using this money to strengthen our industry, create jobs, and compete on an international scale. I think that’s important. The state Revenue Cabinet also is required to report to the legislature’s Interim Joint Appropriations & Revenue Committee each year on who has taken the credit, how much and what capital improvements for which it was used.”
Since Kentucky distillers are the only alcohol manufacturer in the world required to pay aging barrel taxes, Gregory says, this new law will at least allow distillers to better compete in the global marketplace with non-tax-burdened brands. It will allow them to reinvest that money in their Kentucky operations, create jobs and spur production, Gregory says, and allow the Bluegrass State to better compete with other states for new craft distilleries.
“Distilleries will still pay these taxes, so both the local communities and state will receive their money,” he says. “It will simply allow a tax credit on the distillers’ corporate income tax. We strongly believe that the reinvestment credit will actually create more than it will cost. Bourbon is a great investment for the Commonwealth. We have one of the state’s highest job spinoff factors; surprisingly, higher than other signature industries like tobacco, coal, and horses. For every distilling job, three more are created down the line.”
But no matter how much the KDA, its distillery members, or non-KDA member Buffalo Trace Distillery’s lobbyists—who all actively pursued this legislation for seven years—campaigned for change, a Kentucky legislator needed to take action. That man was Kentucky Senate president Robert Stivers (R-Manchester, a dry district), and I spoke with the president the day after the bill passed.
Tell us about the ad valorem tax credit. Why was it important?
Years go, a particular legislator wanted to add more funding to his local school system, so he got the legislature to pass an ad valorem tax on barrels in the warehouses aging. It’s how they funded their school systems and has gotten to the point that the school systems have developed their budgets on this. You couldn’t repeal [the local tax] because the schools would lose their money. What we’ve done is create a credit at the state level. [Distillers] get a dollar for dollar credit on their state corporate tax liability and are supposed to reinvest part of that into their operations. It’s what they’ve been wanting for years.
For all these years, distillers have not been able to write these taxes off. Was that fair?
Their bourbon was sitting there unusable for six to eight years and they’re paying taxes on it. That’s the only product like that you have. It wasn’t fair.
I’ve been told you’ve been working on this bill behind the scenes for a while.
When I got into leadership five years ago, I started looking at it. I thought it was an unfair tax and saw an opportunity in this session, so I took advantage of it. People in the House have been saying for they’re for it; I just gave them an opportunity to prove they were for the tax credit.
In private meetings, Senators and House members indicated they wanted to give distillers a barrel tax credit?
They would say they were supporting this, but you never saw anybody doing anything about it. Actions speak louder than words.
Were there any organizations or distilleries that helped make this happen?
The KDA and the distilleries, but I saw this opportunity and I took it.
How did you put this in motion?
As an amendment to a House Bill that the House Leadership really wanted. They basically saw the amendment and said we’re willing to talk. It passed with large numbers in senate.
Would this have passed if bourbon were not so popular?
I think you’re onto something. The Kentucky Bourbon Trail has become so popular and accepted. Bourbon is a true signature industry in Kentucky. It creates employment, peripheral jobs, and there’s also the image of Kentucky bourbon.
What is next? Are there other bills for bourbon?
We’ve are working on an option for state parks to go wet. But right now, the bourbon industry is on solid footing from a legislative standpoint.
I can’t let you off the hook without asking: What’s your favorite bourbon?
I have a lot of Woodford Reserve, but I also like to drink a little Maker’s Mark every now and then.
I’ve been a fan of New York’s Finger Lakes region for years. The unique views afforded by these long lakes and the bluffs above their shores, the startling white deer in the woods of the Seneca Army Depot, the wineries that cling to the frost-free microclimate of the lakeside hills…it’s a great place to spend an afternoon, a weekend, a whole vacation.
Recently it’s become an area for whiskey distilling as well. As New York loosened regulations on distilling, including the creation of a “farm distillery” license, the agricultural bounty of the area and the hordes of tourists that travel the wine trails around the lakes proved to be a draw to people who saw an opportunity. I visited two of them recently—Myer Farm and Finger Lakes—and a micromaltings that is helping to supply locally-grown malts to sustain these new distillers.
Farmhouse Malt is in Newark Valley, N.Y., south of Ithaca. Natalie and Marty Mattrazzo got a farm brewing license, which the state first made available in spring of 2013. Most brewers using such a license just grow their own grain and hops; very few malt. Marty’s been malting since 2008, when he was getting serious about his homebrewing. He asked other homebrewers about it, and they were perplexed. “They said, ‘You can buy malt so cheap; why bother?’” Marty told me. He went ahead anyway, to learn more about how beer was made.
Fast-forward to 2012, when he and Natalie were getting serious about the brewery. They saw the farm brewery license coming, and decided they would malt grain as part of their operation. Once again, other brewers said, ‘Why bother?’ They were right, to some extent; malting doesn’t make sense for a brewery on the small scale the Mattrazzos were planning. But they realized that they could malt for other small brewers and distillers who were growing their own grain, and that did make sense.
They had to learn the difference between distillers malt and brewers malt (“Distillers malt is just converted and then dried, not roasted,” Marty said), and find customers, but once the word got out, customers found them. The size adds a personal touch that appeals to distillers (they were steeping a batch of malt for Five and 20 Spirits when I stopped by); “After a week of turning over a bed of malt by hand,” Marty said, “I know each grain by name!” They can also do custom malting of non-barley grains like rye, corn, wheat, and triticale in small batches. (They’re pretty good brewers too; I liked the samples they had, and they’ll have a tasting room open in nearby Owego soon…right on the route to the Finger Lakes.)
Myer Farm Distillers is located in Ovid, N.Y. (pronounced “Oh-vid”), where the Myer family have been farming the land since 1868. “We’re small grain and bean farmers,” said John Myer, who said he’d bought a book on distilling 30 years ago to look into the possibilities.
But it was just a thought until he and his brother Joe went to conferences on fermentation and distillation in 2010. “We saw the craft distilling wave and got going,” Joe said. When they started in June of 2012, there was only one other farm distillery in New York. John knew the land he farmed, knew where the different grains grew best, and said that he now saves the best grain for the distillery.
The Myers make spirits—whiskey, vodka and flavored vodka, gin—using corn, rye, wheat, and barley, all grown organically on their farm. They don’t malt on the farm, so they convert with enzymes, ferment, and then distill on grains in a Christian Karl hybrid pot still.
The distillery sits right on State Rt. 89, which runs along the west shore of Cayuga Lake, a road dotted with wineries (as is the east shore of Seneca Lake, across the neck to the west). “Being on the wine trail gives us a flow of visitors,” Joe said. “Visitors doubled in the fall of 2013 from the fall of 2012. The wine trail’s growing, and the locavore movement feeds into it.” They do about 85% of their sales right there in the distillery. (I didn’t taste the whiskeys on this trip, but there are reviews in this issue’s Buying Guide.)
I cut west across the neck and coasted down the eastern shore of Seneca to Burdett, where Finger Lakes Distilling sits above the road, an impressively tall building with a smaller barrelhouse below. I was met by Thomas McKenzie, the distiller, who took me in to show me what he knew I wanted to see: their 12-inch Vendome column still.
He was just starting a run, and getting it dialed in: by hand, there’s no automation on this one. Thomas controls the proof — he wants it coming off around 50%! —by hand-regulating the flow of the steam coming in at the bottom and the amount of cool wash coming in at the top. “I’m distilling,” he said. “You put those PLC [programmable logic controller] probes in there, and they’re doing the distilling. I think the only big distiller doing it this way anymore is Dickel.” I told him how Jimmy Russell had told me about distilling by sound and touch, with a foot against the column and a hand on each valve; Thomas said that gave more control.
He has a lot of ideas about distilling the old way; the column still, for instance. Finger Lakes got a pot still first, and still uses it for brandy, but Thomas wanted a column still, because that’s how bourbon’s been made for over a century. He had Vendome build it, then had them come out and fix it till it ran right (not Vendome’s fault; they’d never made a column this small, and some things just didn’t work the same). He’s very pleased with the spirit coming off it, much more so than the pot still, he said.
We sampled some spirit—clean, but still flavorful—and some 3 year old bourbon that was some of the best young whiskey I’ve had. “Low entry proof,” he said, and grinned. He’s constantly tinkering with his whiskey to find the old ways that he feels many of today’s distillers have abandoned; his office overflows with bottles of bourbon and rye from the 1950s, 60s, and 70s, his own collection that he uses to help find that character in his own whiskey.
As we walked down the hill to the barrelhouse (where we smelled some of his dark ‘funky’ rum he’s making for blending), he turned and grinned, and said something that crystallized what he’s doing here. Waving his arm around to indicate the lake and the hills behind him, he said, “It’s all Appalachians, don’t matter what state it’s in. You got guys making whiskey in the woods!”
I made a couple more stops along the lakes—had a few beers at a brewpub, bought some farmhouse cheese for the ride home—and reflected on how distilling (and malting, and brewing) with a farm license, which allows on-premise sales, sales at farm markets, and the on-premise sales of other farm license spirits, beers, and wines, is transforming and expanding this area, which is sadly marked by abandoned barns. The farm license gives these farms a chance to add value to their crops and get them to new markets, just like whiskey did 200 years ago. You can find a guide to many of them here; you’ll find interesting stops and beautiful scenery, just like I did.
For more than 150 years, Le Claire, Iowa had been known primarily for one reason. The picturesque Mississippi River town was the birthplace of Buffalo Bill Cody, and there’s a street named after him…a road, actually: Cody Road. More recently, Le Claire, located just north of Davenport, has become more widely known as the home base for the History Channel’s popular American Pickers series. In just the last couple of years though, another business has become a must-visit destination in this charming small town: Mississippi River Distilling (MRD).
Perched above the river at the eastern edge of town, MRD has made a pretty sizeable splash in the craft distilling scene of late. Their gin, vodka, and aged whiskeys have gained distribution across the Midwest and into the mid-Atlantic in the three short years they’ve been up and running. The founding Burchett brothers, Ryan and Garrett, are justifiably proud of what they’ve accomplished in that time. They consider their distillery a “grain to glass” operation, with every kernel of their corn, wheat, rye, and barley being sourced from family farms within 25 miles of Le Claire, in Iowa and across the river in Illinois.
The brothers come from pretty non-traditional backgrounds for a run at the whiskey business. Their family owns a long-standing road construction company headquartered in Iowa. Garrett had been a transportation planner in Dallas prior to moving back, and Ryan was a television meteorologist in Iowa’s Quad Cities and other markets. But they’re also a couple of guys who love whiskey, and they sensed a potentially profitable business opportunity. They were the first to enter the distilling business after the legalization of tastings and retail sales of spirits at Iowa distilleries in 2010, and now they mash, distill, greet customers, and hit the road as the sales team for MRD.
Along with a small staff, they run the mash through a beautiful 1,000 liter handmade Koethe pot still they’ve named Rose. The Burchetts and Rose produce two whiskeys, a bourbon and a rye, neither of which is sold as white dog. The brothers prefer to age the distillate in 30-gallon barrels for at least a year before bottling. The bourbon is 70 percent corn, 20 percent wheat, and 10 percent unmalted barley, while the rye is 100 percent rye grain. Because of their quest to use all local grains, and the lack of any locally kilned malts, enzymes are used to enable fermentation. The cuts off the still are very tight, allowing the grain to shine through. Both whiskeys carry the name Cody Road in honor of Le Claire’s favorite son and the street that passes in front of the distillery.
Aging takes place in a smallish room on the lower level of the building that holds about 300 tightly-packed barrels. The operation is already running out of space, and plans are underway to expand in partnership with a local craft brewer on the current site in 2014. Great River Brewing of Davenport uses MRD whiskey barrels in their barrel aging program, and the prospect of a joint venture in shared quarters presents a host of compelling possibilities. The new facilities will include an event room and a bigger barrel warehousing area for MRD, and a specialty brewery and pub for Great River.
In the mainstream distilling business, tradition is an accessible commodity and tends to be something most brands hang their hat on. Craft distillers have to rely on innovation and creativity to stand out, and the Mississippi River crew has been doing a fair amount of both recently. Last summer they brought in a half-ton of bananas and soaked them in their aged rye whiskey to produce the first batch of the “Still Crazy” series, an ongoing project that will eventually feature other variants. This “Mono Loco” (crazy monkey in Spanish) version produced just over 1,000 375 ml bottles; a pound of bananas for every bottle! Mono Loco debuted during VIP Hour at WhiskyFest Chicago to crowd acclaim, and I was fortunate to be able to taste it at the distillery even though it had been a quick sellout. Wonderful stuff, and more whiskey weirdness will follow.
Another direction they’re heading in is the intriguing “My Whiskey” program, where the customer has the ability to have the team distill a single 30-gallon barrel of a standard or custom mashbill fermented with their choice of three yeasts, then whatever entry proof, level of barrel char, aging regimen, and bottling proof they choose. Custom labeling is part of this personalized package, and you get to keep the barrel. They’re also offering a hands-on Whiskey School in early 2014 and have an ongoing Adopt-A-Barrel program available to keep their customers engaged.
If it sounds like they’re having fun, trust me, they are. The place was buzzing with tourists the day I was there, and the team was doing their best to keep them entertained and informed. The tasting room, which offers a great view of the Mississippi out one window and of the distillery (and Rose) through another, was filled with guests asking questions, sampling the wares, and enjoying the scenery, all while barrels were being filled and jokes tossed around on the other side of the wall.
Creativity is indeed the buzzword in the world of craft brewing and distilling, and the brothers Burchett seem more than ready to take it to the next level. I expect they’ll continue to mess around with grain and wood (and fruit!) to help shape the next generation of American whiskey.
When Robert Simonson alerted me recently that the makers of WhistlePig rye were finally ready to “come clean” and confirm that the whiskey* they bottle is from Canada, I was skeptical. However, in an article written for the upcoming summer 2014 issue of Whisky Advocate, Simonson quotes WhistlePig’s master distiller, Dave Pickerell, saying that the original WhistlePig came from Canada’s Alberta Distillers (ADL), and that some of it still does.
Here’s some of what that piece will say:
“It’s fairly common knowledge that that’s where we started,” Pickerell said of ADL. “What’s not common knowledge is that’s not where we are now. We are growing our own rye on site and contracting whiskey from three distilleries in the U.S. and two in Canada.” One of those Canadian distilleries, however, is still ADL.
Has several years of badgering from American whiskey bloggers softened the stance at WhistlePig? Finally, Pickerell has stated for the record that at least some of the whiskey is from Canada. He also went on record in 2010 that this is the very best rye whiskey in the world.
When WhistlePig was released in 2010, the firm’s publicist was blunt that they did not want people to know that the whiskey was Canadian. So I was surprised when WhistlePig brand owner Raj Bhakta contacted me last week wanting to talk. Speaking of his whiskey’s Canadian heritage he was quick to say, “That’s not something I’ve shied away from,” although he did later concede that might not have been his approach in the beginning. In any case, he is talking now, and is completely candid that the whiskey they are bottling today is still from the same single Canadian source, not five distilleries as Pickerell implies.
“Yes, we’ve been growing our own grain,” he continued, “and we have been contracting others to distill it for us. We wanted to see how it turned out. That whiskey is currently maturing on the farm in Vermont, but it is not yet ready for release.” And the whiskey in the bottles? It’s still all Canadian rye whiskey, and will be for years to come.
“We’re deeply in bed with Canada, it’s just not our lead,” he continues. “WhistlePig is a Canadian-U.S. collaboration to the core. The latest batch has spent four years on the farm in our own barrels, so much of the flavor is from wood we put it into in Vermont.”
Shortly after Bhakta bought WhistlePig farm in 2007, he began casting about for business ideas. A mutual friend introduced him to Pickerell. He had found what he called “the best rye whiskey in the world,” in Canada and wanted to bottle it. However, try as he might, Pickerell could not convince any of the big players to sell Canadian whiskey at a premium price. Bhakta, meanwhile, wanted to create “America’s first luxury rye.”
“Dave had the product and the pedigree, I had the entrepreneurial gusto,” he told me. But after so many rejections, Pickerell wasn’t sure how to tell people the whiskey was Canadian.
“I’ve never not wanted to disclose,” Bhakta told me, citing what he called “the Templeton debacle.” But, he added, “you don’t start out saying, ‘This is Canadian whiskey.’ It’s looked down on. It’s been an interesting navigation. It’s a tricky piece—the people who react are the geeks of whiskey—but we don’t want to confuse the general public.
“Look, I’m a salesman with a bit of P.T Barnum in me,” Bhakta continues, “and I like that.” According to Bhakta, rather than talking about the Canadian connection, they decided to focus on their long-term vision of making rye whiskey in Vermont. “We’re not trying to dance around the issue, but how do you navigate this?” he wondered.
“We have the opportunity to sell younger whiskey,” he noted, “but we are storing our stocks and doing barrel experimentation. Five years from now the critics will come to see there was a much greater vision here. I feel I am getting attacked for building the thing the right way.”
One thing is certain from my conversation with Bhakta. There are no stills at WhistlePig. Although they have applied for a permit to open a distillery, they are still awaiting approval. For now WhistlePig is a farm, pure and simple, and not a drop of the whiskey bottled under the WhistlePig label was actually distilled by Dave Pickerell: sourced, selected, and approved, but not distilled.
*Rather than switch back and forth between the American “whiskey” and Canadian “whisky,” this one time we decided to just use the American spelling. Davin, no shy Canadian, approved, for which we thank him.
Another in our occasional series of Tweet-style interviews. As always, it’s 140 characters or less (we don’t count the spaces) in the answers from the distillery manager of Lagavulin. Georgie Crawford left Islay at thirteen to live on the mainland. In her work life, among a few other places, she spent some time at the Scotch Malt Whisky Society before joining Diageo. She returned to Islay a few years ago to take over the management of Lagavulin.
What’s the view from your office window?
Today it is blue skies and green rolling fields full of sheep. I can also see my house, and now it’s sunny I can see I need to clean the windows!
Get a little man in for that! What’s happening at Lagavulin this week?
Really busy on distilling as usual, but focusing on pulling together final details of our Fèis Ìle program before the tickets go on sale.
What’s happening for Fèis Ìle [Islay Festival] at Lagavulin this year?
Can’t say yet, BUT the staff have outdone themselves with great ideas to entertain our loyal visitors. We are finalizing the Fèis bottling too; another cracker in 2014.
We have focused our efficiency and are making more Lagavulin than ever. With the growth in whisky it all counts so we are glad we will have more whisky for the future.
Sounds great. You were looking at re-use of waste energy, etc. Progress?
There’s a new project on this in the pipeline (no pun) and we have optimized the stillhouse energy. I’m happy with the results to date.
What do you mean by optimized here?
By managing distillation temps we can get better heat transfer in our pre-heat heat exchangers, which saves the steam usage at site.
I was going to say ‘cool,’ but not if it’s steam! Very efficient. I’ve met your new female colleague, also called Georgie. A new Diageo hiring policy?
Georgie Bell. We haven’t met yet as she had to call off her visit due to winter gales. She also worked at the Scotch Malt Whisky Society which is just spooky!
Some mainlanders who now live on Islay run back every couple of months for some R&R. You?
No! I love the islands so much that this year’s trips are Orkney & Iceland! It’s the year of the seafaring Vikings in our house!
I know you like to travel. Are those destinations for work or pleasure?
Both for pleasure; you need to leave the whisky behind sometimes. (Or maybe pack a little bottle in your luggage.)
Sounds reasonable. You traveled far this last year, I hear. Where and why?
China on holiday for the culture and heritage. I will remember the view on top of the Great Wall forever. The Terracotta Warriors were also amazing.
What else fills your non-work time?
Our new puppy Sidheag (means wolf) is taking up most of my free time of late. She is driving me and poor 8 y.o. Jock, the Westie, mad!
Fabulous. Another Westie? And I was going to ask how Jock was enjoying island life…
She is a lab cross wire-haired pointer who will hopefully be a gun dog down the line. Jock is standing his ground and loves the longer walks!
Jock not bossed around then. You like cooking; any signature dish? Are your Lagavulin chocolate truffles in the shop there?
I can’t poison the customers! I make a mean lasagna, its bacon that’s the secret ingredient. Can’t beat my homemade shortbread with a cup of tea.
You were going to be starting a vegetable garden…
We should all have aspirations in life and try to live our dreams but if you saw my cauliflowers you would say, “Stick to making whisky!”
Okay, we will. Are there any distillers you particularly admire (anywhere)?
Pre-Diageo, I was just a whisky anorak. I will always remember John MacLellan spending time with me. Billy Stitchell [at Caol Ila] was my in-house go-to.
What would be your desert island dram? Doesn’t have to be Lagavulin!
Only one – impossible! Lagavulin Jazz 2010 from home or Longmorn 15 yo, Talisker 18 yo or Balvenie 12 yo depending on my mood and the weather!
Great choices, if too many. And it’s all over! Hope that wasn’t too testing and thank you so much.
News today that Italy’s Campari Group has bought Canada’s Forty Creek Distillery, should come as no surprise. After decades of marginal decline, Canadian whisky sales have rebounded strongly in recent years. Much of the credit for this must go to Forty Creek’s whisky maker, John K. Hall.
It is more than a decade since Hall began taking his whisky from bar to bar in New Orleans and Texas. At the time Canadian retailers had shown little interest in the upstart Canadian whisky maker. As he pounded the pavement, selling a case here and a case there, Hall effectively became the face of Canadian whisky in the U.S. Happily, despite the sale of his distillery, this will continue.
From the firm base he began building in America, Hall returned to Canada to conquer his home market. Forty Creek is not the largest, but it is now the fastest-growing whisky brand in Canada. Today, Campari, which also owns Wild Turkey bourbon, confirmed Hall’s unshakable faith in Forty Creek by purchasing 100% of the distillery, its brands, and holdings for $185.6 million Canadian. Forty Creek, as the consultants say, was low-hanging fruit, ripe for the picking.
Campari was one of a number of firms that was interested in purchasing the distillery. Hall was looking for a buyer that would keep the Grimsby facility open and ensure that all the employees could keep their jobs. The deal was sealed when Campari committed to those objectives.
When I met Hall in Victoria this past January, he seemed tired. “I just can’t keep this up,” he said of the non-stop pace of appearances at whisky shows and liquor stores across Canada and the U.S. “I want to spend more time with my family. When I’m in my distillery now I spend half my time behind a computer.”
“You need to hire a CEO and get back to tending your stills,” I offered. And I guess, in a way, that is what he has done. Little will change in day-to-day operations at the distillery and Hall will remain as company chairman and whisky maker. With the full strength of Campari’s sales force supporting him, Hall will likely have more time to do what he loves best: make whisky.
“I am very excited about my 2014 Limited Release,” Hall told me recently. “It will be bottled in July, and then after two and a half months of bottle rest I’ll release it.” That’s typical John Hall. Ever the wine maker, he wants to be sure his whisky has time to recover from bottle shock.
Forty Creek is a small distillery. With two pots and one column still, it has yet to reach its annual production capacity of 555,000 cases of whisky, but with the Campari deal, that can’t be far off. Watch for expansion plans in the not-too-distant future as Campari uses its global resources to grow Forty Creek in Canada, and around the world.
Meanwhile, congratulations are due to Canada’s hardest-working and best-known whisky maker, John K. Hall, and the whole Forty Creek family. For that’s what it feels like when you visit the distillery.
President Obama delivered his annual budget proposal to Congress earlier this week, and while — as usual with presidential budgets — it’s given little to no chance to pass, it does contain one proposal that would directly affect American whiskey drinkers, and whiskey producers here and abroad…and drinkers of those drinks we love to hate: flavored vodkas, and yes, flavored whiskeys. The president proposes repealing the “excise tax credit for distilled spirits with flavor and wine additives.”
Ha! Bet you didn’t even know that existed! Why would you; excise taxes — tax policy in general — are convoluted and confusing, often involving arcane percentages and policy goals, and this one’s no exception. Here’s how the the Distilled Spirits Tax Revision Act of 1979 — the foundation for the credit we’re talking about –works, as explained in an Esquire piece by Nate Hopper from last year (when Obama also put this in his budget):
“The bill did two things: it taxed foreign distillers (from friendly trade partners) at the same rate as domestic ones, and it rewarded manufacturers that, instead of letting the flavors become infused naturally in their spirits like through fermentation, instead added wine and outside flavoring to their product, like blended whiskies, but also cordials, liqueurs, vodkas, and gins. According to a U.S. General Accounting Office report to Congress in 1990, that meant that some producers could lower their tax rate from $12.50 per proof-gallon to as low as $6.30.”
When the taxes on a bottle of liquor can be over half the price, you can see that cutting those taxes by half would make a big difference in profits. Why did this go through? Support from California vintners was one big reason; getting a tax break if you put wine in your spirits means a lot more producers putting wine in spirits (and remember, “wine” can mean something very different from what you sip with your steak). Another reason is that every industry loves a tax break, and they do what they can to score one. It also helped Canadian whisky makers, who could add unaged “wine” (very light in flavor and color, and blended to taste like the non-wine-added product) to whisky destined for the U.S. market and reap the tax advantage. Hopper blames the tax credit for kicking American whiskey when it was down and accelerating its decline; the category was in the midst of a monumental slide that wouldn’t turn around until the late 1990s. That seems to be overstating the case; there were more factors involved than just this tax, but it’s possible it did have an additional effect.
What effect would repealing it have (other than bringing in an estimated $1.09 billion in taxes over the next ten years)? A Huffington Post writer guessed that “…it’s possible that consumers would be hit with a price increase as distillers pass on the cost.” I say ‘Ha,’ again! Yes, if taxes on booze production go up, it’s pretty much assured that distillers will pass on the cost, with a markup. That’s how things work. So shelf prices of flavored booze would go up (and technically, most gins are flavored vodkas, so there goes the martini…). Will that kill the flavored whiskey boom? Doubtful, but it could take some of the wind out of its sales. Would it mean more whiskey sales? Doubtful, as we’re already buying almost all they can make. So mostly what it would mean is that things would stay pretty much the same, and flavored booze would cost more.
A weird little bit of booze tax law that we bring up to remind you that for the governments of the world…it’s not about how the whiskey tastes, it’s about how much they can tax it. Press on, have a good weekend.
After several years of very encouraging sales, managers at Canada’s largest distillery have decided to expand production capacity. In 2014, $8 million will be invested on new and upgraded facilities. The coldest winter in a century delayed construction, but the cement is now poured for a new tank house at Pernod-Ricard’s Hiram Walker and Sons distillery in Windsor, Ontario.
“The bottleneck here is the column stills,” master blender Don Livermore told me. “We can’t speed up the stills without affecting quality, so we are constructing a new building with four tanks to hold excess high wines. That will let us run the beer stills longer without getting backed up.”
Changes are coming in blending and bottling as well, where expansion will increase overall volumes while enabling smaller production runs. When your lines are geared to over 400 bottles a minute, it’s difficult to do small batches. New equipment in the bottling hall will permit a more leisurely pace, allowing it to process smaller runs. And good news for whisky lovers: capacity for short runs could lead to more new products making it into field-testing and onto your home bars.
“When you are set up for high production it’s difficult to attract business from small producers,” says Jason Leithead, who manages the bottling hall. “Right now a seemingly trivial change can be a monumental undertaking for us.”
Hiram Walker and Sons president Patrick O’Driscoll agrees: “The new production volume will smooth out the seasonal peaks to offer more stable employment and enhanced partnership opportunities for our customers.”
The expansion will boost overall bottling capacity by 230,000 cases. Hiram Walker currently employs about 400 people across Canada, 300 at the distillery.
“In my 18 years at Hiram Walker I’ve never seen it this busy,” Livermore tells me. “We were distilling about 20 million liters a year when I started. Last year we made the equivalent of 55 million liters of pure alcohol.” That translates into a lot of whisky. Key brands include Wiser’s, Canadian Club (made for Beam), and Gibson’s Finest (for Wm. Grant). Hiram Walker and Sons makes about 70% of all Canadian whisky, of which about 75% is sold to independent bottlers in Canada and abroad.
If Livermore has his way, this expansion is just the start of bigger things to come. “My long-term vision is to have an education center right here at the distillery. We make great products here and we need to tell people all about them.” That project is at least a decade down the road, says Livermore. For now, expanding capacity to keep up with demand and support growing consumer interest in small-batch high-end specialty whiskies is the top priority.
Diageo have announced further details and pricing for the forthcoming release of four new Mortlach expressions. First revealed here in early December, the new range – which sadly means the demise of the much-loved Flora & Fauna 16 Years Old expression – comprises Rare Old (43.4%, no age statement); Special Strength (49%, non-age, non-chill filtered, Travel Retail exclusive); 18 Year Old and 25 Year Old (both 43.4%).
Coming alongside a major expansion of the distillery, this is a big play for Diageo. Dr. Nick Morgan, the company’s head of whisky outreach, described the launch as “positioning Mortlach as the luxury malt to redefine the category. We didn’t just hang it with luxury trappings. It has great single malt credentials.” Quite what The Macallan will make of that remains to be seen but, as I warned last time, new Mortlach comes with a wealth warning; prices are very definitely going to rise sharply.
European consumers will get the new whiskies in smaller 500 ml bottles. Morgan stated that this was “to make a little go further, as supply is constricted” but also suggested the new pack designs worked better in this bottle size. Be prepared for some fiscal easing: currently the Flora & Fauna bottle runs to around £70 in the UK (savvy merchants having moved their prices up as soon as supplies of these bottles were withdrawn).
The new ‘entry-level’ Rare & Old (it’s a NAS expression, but let’s not open that particular bottle here and now) in 500 ml is priced around £55 (£77 for the equivalent of a Euro-standard 700 ml bottle). Special Strength will be £75 (£105); the 18 Years Old £180 (£252); and the 25 Years Old a thumping £600 (or £840 for a standard bottle). U.S. consumers will get a 750 ml bottle, as the half-liter size is illegal there, so expect a shock at the check-out (actual U.S. prices have not been set yet).
The launch will be a global one, with priority given to high-end bars and specialist retailers in “core metro markets.” That means London, New York, Paris, Chicago, Shanghai, Moscow, San Francisco, and so on.
The highly distinctive packaging, said to be two years in development, was created by New York-based Laurent Hainaut of the Raison Pure design house, who claim on their website to offer “a platform for design excellence and social progress.” Clearly design excellence comes at a price, and with retail stickers such as these they will hardly be mistaken for socialists or philanthropists! The packs pay homage to the distillery’s founding father Alexander Cowie, and are heavily influenced by the great engineering achievements of Victorian Scotland, including icons such as the Forth Bridge and the mighty foundries and steelworks of Glasgow and the west of Scotland. (Note the metal framing on the 18 and 25 year old bottles.)
As for the distillery expansion itself, ground works have started to ready the site and construction will begin as soon as the final planning permissions have been received from the local authorities. It’s hoped that building will start very soon as the planning process is stated to be in its final stage.
The new Mortlach expressions themselves will enter global markets in late June and July this year, beginning with the UK and Germany, followed by Asia, and the U.S. later in the year. I await the launch with some interest: I cannot remember Diageo ever taking this amount of time and care to brief the whisky press over any previous release. These are big, meaty whiskies and the company is evidently playing for big steaks (pun intended, please forgive me!).