Whisky Advocate

The lines between established distillers and small craft distillers are becoming blurred

March 23rd, 2011

And they will continue becoming even more blurred in the future.

As the young, developing craft distilling movement matures and begins offering longer-aged whiskeys, they will compete with the established distillers’ products.

On the flip side, the established distillers are increasingly offering younger, and as is the case with Heaven Hill’s “TryBox Series” (shown in the picture), sometimes even unaged product for sale. In fact, distillers on both sides of the pond are selling unaged spirit.

Craft distillers comprise a rapidly growing, but still relatively low-production, market. I don’t think the large, established distillers have anything to worry about–yet. But they would be foolish to not pay attention.

Just take a look at the American craft beer market and you will see where craft distilling is heading. According to a recent Brewers Association press release, overall beer consumption is down, but the craft beer market continues to grow and capture market share.

The large brewers who made relatively bland pilsner-style beer are now making beer with more flavor–or forming alliances with craft brewers to compete with them.

You are witnessing the same happening within the whiskey industry. Small craft distillers like Stranahan’s and Anchor have been purchased by larger players in the drinks industry. And large distiller William Grant (owners of Glenfiddich and Balvenie) bought the Hudson whiskey brand from Tuthilltown Spirits, the Hudson Valley craft distiller.

Yes indeed, the lines between established distillers and small craft distillers will continue becoming more and more blurred in the future. For the most part, I think this is a good thing. It will be healthy for the whisky industry.

Will there be some downside? Sure! We will have to endure the “weeding out”  of the inferior brands and “fly by night” companies that will undoubtedly surface to make a fast buck in this growth market (as we witnessed in the early phases of craft brewing–and that cigar boom a while back).

But the upside is far greater–and well worth any temporary inconvenience.

28 Responses to “The lines between established distillers and small craft distillers are becoming blurred”

  1. Cayman says:

    I completely agree with that last point. I’d rather have more product to choose from and make an informed decision rather than a limited number. Plus, more product means there might be something out there for the friend who thinks they don’t like spirits and they’ll soon be on the slippery slope like the rest of us.

  2. Barry Jay says:

    I love the fact that this keeps everyone on their toes. Promotes innovation and hopefully reduces complacency. Every once in a while, whether a small distiller or brewer, they come out with something really nice that shakes up the big players….

  3. Ernest says:

    Good analogy to the craft beer movement. The shake out is an inevitable part of the process and will ultimately lead to a better product in the long run.

  4. More product, especially good product provide more options. Options are always good for the consumer, and I always welcome more innovation and creativity. Solid industry moves.

  5. Red_Arremer says:

    Reminds me of the music industry. The big labels are always trying to buy or start some sort of “independent” label so that they can have credibility with the cool kids. Same thing goes on with film– And in the world of fine art where this guy Shepard Farey (sp?) who started out as an oft-arrested street stencil artist has become a museum and fashion sensation and is making an industry out of reflecting on the change in status of his art and audience from independent to mainstream.

    The idea of independence certainly sells.

    The upside of all this is that at least a few of the hip edgy craft propositions whisky bigwigs put their money behind will be run by genuinely adventurous and talented people.

  6. The Bitter Fig says:

    Here’s my worry. By and large, it seems like the only distillers who really experiment with something like the mashbill are the small ones who are trying to come up with a differentiated product. A small, craft bourbon isn’t as likely to cause the same reaction as a more unusual set of grains. The larger distillers seem significantly more hidebound in things like that, content to keep distilling the same things they’ve distilled for decades. Maybe they’re doing more experiments, but even if they are, it isn’t like they’re out on the market.

    I’m highly skeptical at this could somehow lead to more innovation by the large distillers. They don’t have the same ‘innovate or die’ need as the micros do, simply because they can keep selling their basic product. They’ve got marketing and corporate forces to contend with which are going to resist change simply because it’s expensive.

    Maybe I’m just being cynical, but this almost seems like an effort from the distilling giants to kneecap the craft distillers before they take hold, before major changes in the industry are needed. It just seems like they don’t want what happened to beer to happen to them, and they’re trying to do so by preempting the microdistillers with minimal tweaks.

    • Vince says:

      Hey Bitter,

      I’m not sure I agree with your perception of the big distillers. I think they are really coming out with some innovative things, take Woodford Reserve’s limited release collection (Maple wood finish, four grain, chardonnay finish, etc). Also, Buffalo trace comes out with experimental bourbons every year and just released the EH Taylor, which is the original mashbill of the old brand. Parkers Heritage collection offered the Golden anniversary which was a batching of older and younger bourbons. Jim Beam is offering the “devils cut” and just released the knob creek single barrel. Now, the may not be changing the mashbill but there is an alot of experimentation going on in the industry today from the big players.

      • The Bitter Fig says:

        Yeah, a lot of it is how we characterize the stuff. I think finishes are basically the kind of tweaking with stuff to give the appearance of more inventiveness, and with single casks (Knob Creek, for example), it really doesn’t seem like anything new at all. I dunno. Most of it seems like marketing stunts to sell the few barrels worth of whisky they put some slight twist on, but some of it does show something original. Devil’s Cut does indeed show someone trying to improve the process and come up with a potentially better way of making something.

        Consider the hypothetical. Jack Daniel’s Rye. To me, that’s a head-exploding hypothetical, pouring a spicy rye whisky over charcoal before aging. I doubt they’ll do it, unless forced to compete in an expanded rye market by folks like High West or Whistlepig. Or how about Four Roses taking their blending of different yeasts and mashbills to the logical next step: distilling straight rye, corn, and barley whiskies and really putting together elegant blended American whisky. Of course, there’s the double-barrier there with marketing forces on one side, and anti-blend snobbery on the other (not from this blog, but still…).

        In the end, there are two ways to improve market share. [1] Make a better whisky than the competition. [2] Buy the competition before it forces you to make a better whisky. I’m probably being cynical, but it seems like the strategy is #2.

        • MrTH says:

          “Or how about Four Roses taking their blending of different yeasts and mashbills to the logical next step: distilling straight rye, corn, and barley whiskies and really putting together elegant blended American whisky.”

          It’s being done…but in Canada, by Forty Creek.

        • Vince says:

          Bitter

          All of your points are very fair, FYI- I know the next Woodford Reserve limited release is going to be a 100% Rye and in 2012 it is going to be 100% malted barley.

          • Red_Arremer says:

            That will be like a fully new oak aged scotch– I’m interested, Vince– Do you know any
            thing more about this?

  7. MrTH says:

    “The large brewers who made relatively bland pilsner-style beer are now making beer with more flavor….”

    …or trying to. They never seem to get it right.

    Anyway, there’s still plenty of Bud Light being sold, and craft brewing is still a small part of the market. I’m not sure how closely the distilling industry parallels brewing in this regard. In the Scotch world, I’d more compare single malts/blends to craft/mass market beers, and that’s an obviously imperfect comparison, since malts and blends are made by the same companies. It may be interesting to compare and contrast, but I really wouldn’t expect craft distilling to shake out the same way as craft brewing at all–the situations are too different.

  8. Mr Manhattan says:

    Are the so-called craft distillers really trying to make anything other that what they are already selling—i.e. young whiskeys? I’ve been asking this question to all the distillers I meet and it seems the great majority of them are not interested in re-creating the products offered by established distilleries. I’d hazard a guess they are in fact aiming at two things: 1- development of a market of people who prefer young whiskeys and 2- development of techniques in support of #1 which allow product to be brought to market as fast as possible.

    Thoughts on this?

    Michael

  9. thomas mckenzie says:

    I know of several small distilleries that while they are selling the whiskey from the small barrels, are also putting big barrels up for longer term aging. In an attempt to completly transition to the big barrels when it is aged.

    • Mr Manhattan says:

      Which distillers might those be?

      There is a very large market force in play here which is demand *now* for craft products. As long as the market absorbs very young whiskeys (and at premium prices), we will see new business ventures formed and new brands minted quickly to pursue those dollars. It’s a bit of a gold rush: there’s not much premium in putting aside product for aging when it can be sold for what amounts to top dollar today. It kind of makes sense.

      I am suddenly reminded of what happened in cigars, when people went crazy pumping money into boutique cigar brands and demand for them was equally astronomical. When demand fell away (guess people lost interest) most of those brands disappeared.

      Will the same things happen with “craft” whiskeys? We’ll know in a few years.

      Michael

      • thomas mckenzie says:

        Well, first off, we are putting up quite a bit into large barrels every month at Finger Lakes Distilling. Smooth ambler is putting some up if I am not mistaken, and a few others I have heard rumors about.And Wyoming Whiskey which I consider a micro distillery. I know for sure that in a few more years there will be some whiskey that has been aged in big barrels that have been truly double pot distilled, as well as column distilled, from very good ingredients that will surprise a lot of people.

        • Mr Manhattan says:

          Thanks… I will keep my eyes, ears, and most importantly, my mind open.

          Michael

          • thomas mckenzie says:

            Was just tasting through some bourbon and rye that is just turned 2, in regular sized barrels. In another 2 it should be really good. Due to using really good grain, lots of backset, double pot distilled, and low barrel proof. Just what the big boys do, only better. That I think is what a craft distillery will HAVE to do. Floow what the big boys do and improve on it. Then sell it for a comprable price. There is way more craft in Kentucky than in some of thes micros could even try to understand. There is a lot of misinformation out there on exactly how to make whiskey.

  10. PeteR says:

    It’s an exciting time for those of us who are passionate about our spirits. I remember in the early years of microbrews in the US (and I was more into beers then), every time I traveled to a new location I sought out the local brewpubs to be impressed. Remember when Pierre Celis brewed in Austin, TX? Likewise now I usually check the American Craft Spirits website before I go somewhere new to tour and taste from a new craft distillery. One can only hope that Anchor doesn’t suffer the same fate that Celis brewery did after Miller distribution took them over.

  11. Rick Duff says:

    Happy to see this release. Went down to KY today (south of Cincy) and didn’t find it.. a little disappointed. Guess I need a trip to Bardstown or Louisville.

  12. John Hansell says:

    Serge Valentin made a good point on Facebook about this. He said:

    I’m wondering… I understand that craft beer is better than ‘regular’ beer and I guess that’s why it worked. Is craft whiskey better than ‘regular’ whiskey as well? Are we in the same paradigms?

    Maybe this isn’t the same paradigm, because the “regular” whiskeys are pretty damned good right now–and relatively less less expensive when normalized by age.

    What do you all think?

    • Red_Arremer says:

      If a distinct market for craft whisky exists it is supported by the novelty of craft whisky to enthusiasts and the sense that craft whisky embodies some sort of pioneering or anti-corporate sentiment– not the types of consumer-interest points that typically spell big business.

      Likely then, that the distinct market for craft whisky is an unimportant one and that the successful craft whiskies will be those that succeed in the mainstream whisky market competing successfully with the best it has to offer

    • sam k says:

      The “regular” whiskeys are exceptional right now, across the board, and at wonderful pricing. We can get Elijah Craig 12 year old, 94 proof for barely more than twenty dollars, while what likely is the same mashbill, unaged TryBox (though at 125 proof) is a couple dollars more.

      Guaranteed that the Rittenhouse Bottled in Bond 4 year old is the same mashbill as the rye TryBox (which is again bottled at a higher proof), but at five dollars less.

      I don’t blame Heaven Hill at all for their pricing strategy here, but for now I’ll stick with the more mature set, especially when they offer much greater value for my taste.

      Much like lager has ruled the beer world almost since its introduction in the mid 1800s, so has aged spirit ruled the whiskey world since it began to appear in quantity here just before that.

      Craft brewers and distillers offer a worthwhile and steady diversion of our attention. They do not yet, nor may they ever, provide total replacement of the accepted standard, but I’m looking forward to giving as many as possible a shot!

  13. Robert the Yoeman of the Malt Guild says:

    “Shocker!” There is no difference between the established distilleries and the small craft distilleries. Let me explain: In the late 80′s Jim Beam began introducing their premium lines such as Knob Creek and Bookers. These were labeled as “small batch.” This began the introduction of premium lines onto the liquor store shelves. With the premium lines came the higher prices and the consumer was taught that small batch meant better whiskey. When other established distilleries began introducing their premium lines they began using words like hand crafted and small batch. Again, hand crafted, hand made, and small batch have been in the whiskey drinkers lexicon for more than a decade before some craft brewer decided to begin distilling his own beer.

    Without the whiskey tier already established small craft distillers would be hard press to find a market. If you look at what Maker’s 46, Basil Hayden’s, or Eagle Rare’s price points are and then look at where some of the craft distiller’s price points are they are both pretty comparable. So, if the established distillers use “Hand Crafted,” Hand Made,” and “Small Batch” already and the prices of new whiskeys from craft distillers are being purchased at the same prices as existing premiums whiskeys how is there a line between them. I look at this from a Joe Consumer point of view since he/she is the only one that really matters.

    • Red_Arremer says:

      I very much appreciate the coherence of your thinking, Rob. However, I must ask:

      1. Who is Joe consumer?
      2. Why is he the “only one who really matters?”
      and
      3. How do you know him so well?

      In fact, a sizeable chunk of the consumers of high-end whiskies are not average liquor consumers, but whisky enthusiasts. They provide the economic support for weird pricey brands like Springbank, Michael Courvre, and Bruichladdich. They also make significant contributions to the impressions of many average drinkers, who are interested in trading up to better drinks. Further, as the recent acquisition of Malt advocate suggests, their numbers are definitely on the rise.

      • Robert the Yoeman says:

        The Joe Consumer whom I speak is one of several million average whiskey drinkers who roam the aisles of the average liquor stores. We know there are millions of whiskey drinkers out there because last year Maker’s Mark sold one million cases of whiskey and that is but a fraction of product being produced every year from the industry. If this wasn’t being consumed the wholesalers would not be ordering anymore whiskey from Maker’s Mark. I know the consumer and the consumer knows me. (at least in my little part of the world) I am working on a second decade in liquor retail and have started whiskey clubs. I have been a professional whiskey presenter for more than three years. I give tastings all over and get paid. (nice!) It is my job to know the consumer.

        We need to look at the figures. Right now there is still a huge gap in the market place for high end spirits. There are thousands of liquor store shelves out there that still do not offer even a small fraction of craft spirits for the consumer. You will still see amazing growth in this sector for several more years. But, if there is no turnover of the shelves this demand will soon end and you will see craft distillers begin to struggle with over supply and falling values of their product. I whole heartedly agree that the premium liquor consumer is an enthusiast but have you ever seen an enthusiast only buying one whiskey and that is it? I have twenty seven in my cupboard. Again, economically the large amount of enthusiasts can not consume enough whiskey to sustain the craft industry or the high end market. Knob Creek came on the scene back in 1988 and it took them how long to build a market? Yep, more than ten years. This takes me back to the initial thought. When Knob says its small batch and Rowan’s Creek says its small batch what’s the difference to the consumer. We are so biased with knowledge and we hang out with folks like us. And we talk about things we like. But, we are still the vast minority when it comes to whiskey consumption.

        • Red_Arremer says:

          Perhaps the differences in our views can be accounted for by the fact that I’m coming from a Scotch whisky perspective and you’re coming from an American whiskey one. I think I may, mistakenly be making an analogy between the distinction between independent vs corporately owned Scotch operations and that between craft vs. small batch american distillers.

          • Robert of the Malt Guild says:

            An analogy between the corporate and independent whisky operations in Scotland and the big box whiskey distilleries and the small craft distilleries is a good one. Here you have Bruichladdich being closed in 1994, I believe it was owned by Whyte & Makay and then being wrestled away from this corporate distiller by two individuals from the whisky industry in the early 2000’s. Rebuilt and up and running an independent distillery is born and now Bruichladdich is rebuilding the Port Charlotte distillery just down the road. Tullibardine is another, now independent, distillery which used to be corporate owned. Four guys got to together with some investments and in 2003 began distilling again.

            Kilchoman on Islay is a brand new distillery from ground up. Built on a farm the converted buildings are not producing whiskey for the last 4 years. Daftmill distillery in 2003 was started by the Cuthbert brothers on their family farm. They live not twenty minutes from my sister in Fife. Then you have Ladybank which is a boutique distillery and convention center, I guess?

            The point I would like to make with this list of new and reopened distilleries is the people of Scotland are beginning to enjoy choices as well as the people of the United States. You have many new small independent craft distillers making great whisky alone side the large established distillers like Diageo’s single malt whisky lines: Coal Ila, Cardhu, Clynelish, Cragganmore, Dalwhinnie, Glen Elgin, Glenkinchie, Knockando, Lagavulin, Oban, Royal Lochnager, Singleton, and Talisker. Plus, you have the Campari Group, William Grant & Sons, Pinard Ricard, and Fortune Brands just to name a small group of other big companies making whisky in Scotland.

            So, the analogy of lines being blurred between small craft distillers in Scotland and small craft distilleries in the United States is very good. I bet that Joe Consumer in Scotland hasn’t really got a clue about what he/she is drinking over their either.

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