Archive for the ‘Regulatory issues’ Category

If you hate flavor-added booze; here’s another reason

Friday, March 7th, 2014

Author - Lew BrysonPresident 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.”

Graph 1 shows a 30 year drop of over 50% in U.S. whiskey sales.

Tax-driven drop?

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.

DISCUS Briefing Confirms Surging Growth of American Whiskey

Thursday, February 6th, 2014

Author - Lew BrysonAt the annual Distilled Spirits Council of the United States (DISCUS) industry review on Tuesday, February 4, the usual graphs and numbers on domestic sales of distilled spirits and export sales of American spirits were presented, and they told a great story about American whiskey producers. American whiskey is solidly on its way back, after thirty years of steeply declining sales. (see graphs 1 and 2). I started writing about whiskey in the mid-1990s, and much of what there was to write about back then was how the decline in whiskey sales was slowing down (I referred to it as “the glide path” to emphasize that it was a gradual decline, but I must have forgotten that glide paths always end on the ground!), and optimistically noting that there were some small niches in the overall category that were showing growth: single malt Scotch whisky, and small batch bourbon. Everything else was dropping.

Graph 1 shows a 30 year drop of over 50% in U.S. whiskey sales.

Graph 1 shows a 30 year drop of over 50% in U.S. whiskey sales.

Now things have turned around, and the DISCUS numbers were rosy indeed, especially in the export market for American whiskey. Exports of bourbon and Tennessee whiskey topped $1 billion for the first time, and represented 2/3 of total U.S. spirits exports. The top six markets for export growth (by dollar sales) were Japan, Germany, France, the UK, Spain, and Panama, while Canada remained the single largest export market by far. DISCUS attributed this export growth to economic recovery, a recognition of American quality, a drop in tariff barriers in key markets, and a continuing strong interest in classic cocktails. They also noted the Department of Agriculture’s promotion of American spirits overseas.

Graph 2: 13 years of accelerating growth in U.S. whiskey sales

Graph 2: 13 years of accelerating growth in U.S. whiskey sales

Here at home, total spirits sales were up 4.4%, to $22.2 billion, and a lot of that stemmed from the growth in sales in the “High End” and “Super Premium” categories, the most
expensive bottles. It was noted that whiskey provides substantially higher revenues per standard 9-liter case (an average of $133, compared to $85 for vodka), and the whiskey category’s growth of 6.2%. In volume, total spirits cases sold were up 3.9 million cases, and whiskey’s 3.1 million case increase was 80% of that growth. It’s not all American whiskey, either. While total whiskey volume was up 6.2%, Irish was up 17.5%, “Blended” (which includes flavored whiskey; more on that shortly) was up 14.3%, single malt scotch up 11.6%, bourbon/Tennessee/rye was up 6.8%, Canadian up 2.9%, and blended Scotch whisky was up 2.0%.

Flavored whiskey continued to grow strongly, with 1.4 million additional cases sold, accounting for 45% of the total whiskey category growth. Straight whiskeys, however, accounted for 80% of the revenue growth, so you can bet that the distillers won’t abandon them in a rush to flavors. There was talk of how distillers are being cautious about introducing the rainbow of flavors that has typified vodka sales, and open speculation over whether vodka has gone too far with flavors, jumped the shark; it seems doubtful to me that the bottom of that well has yet been plumbed, but whiskey is going to be a different case. Don’t expect birthday cake bourbon anytime soon.

Where is all this growth coming from? It appears that a good chunk of it is coming from the decline in sales of beer, particularly traditional major brands. The folks from DISCUS saw this as a triumph of their focus on increasing accessibility (by encouraging Sunday sales where restricted and urging modernization of control state systems) and encouraging cultural acceptance of spirits. As spirits become easier to buy, as people don’t have to make a special trip out of their way to buy them, people are choosing them more often than they have in the past. But a lot of it, clearly, is coming from the increased appreciation for whiskey, and the increased innovation and choice presented by whiskey makers, both from the traditional regions and from the increasing number of craft distillers.

You can see the full report at the DISCUS website here.

That’s the end of vat…

Friday, January 6th, 2012

As of November 23, 2011 the term “vatted” has been declared illegal for use on the label of whisky. Dominic Roskrow reports on this historical day in whisky history.

That’s the end of vat…

By Dominic Roskrow

Few companies have done more to further the cause of vatted malt whisky than London-based producer Compass Box. So it was fitting that when the term was consigned to the dustbin of history by the British Government, whisky maker John Glaser and supporters were on hand to mark the occasion.

Assorted Compass Box staff, bloggers, and retailers marched to the British Parliament buildings at Westminster on a warm winter evening to watch Glaser mix the last ever vatted malt on Westminster Bridge as the chimes of midnight rang out from Big Ben, marking the official last time that a whisky can be described as a “vatted malt.”

Vatted malts are a mixture of malts from different distilleries; they are distinct from blended whisky because they contain no grain whisky. But a few years ago the Scotch Whisky Association moved to have the term outlawed, and to have it replaced with the term “blended malt whisky.” Critics of the change, including Glaser and Compass Box, were vociferous in their opposition because they argue that the new term is far too similar to the term ‘blended whisky,’ and it is very difficult to explain to people, particularly in languages other than English.

Many of Compass Box’s most successful whiskies are vatted malts, so John Glaser felt it right to mark the occasion in style. “It was in the Houses of Parliament that a term that was almost as old as whisky itself was outlawed,” he said. “So it was only fitting that it was there that we went to mark the end of vatted malts.”

It says much about how trendy quality whisky is today that the protest began with a party at one of Soho’s most fashionable style bars. Cocktails made with Compass Box whisky were served before Glaser appeared, coincidentally arriving as the DJ put on Black Sabbath’s “Iron Man.”

From there about 20 supporters walked down to the River Thames and on to the bridge at Westminster. As Big Ben rang out the chimes of midnight Glaser mixed and bottled the last-ever “vatted whisky.”  Both vatted malt and vatted grain whiskies were put on sale by Compass Box, but sold out quickly due to huge demand.

And you wonder why whisky companies don’t import their whisky to the U.S.?

Friday, December 3rd, 2010

It’s not always because they don’t want to. Sometimes our government’s bureaucracy makes it nearly impossible for them to do so.

Yes, we addressed this issue before here with Amrut from India. Well, here’s another example of your U.S. tax dollars at work.

It’s true that “straight” whiskeys here in the U.S., like straight bourbon and straight rye whiskeys, must be aged in new, charred oak barrels. But it’s ridiculous for our government to require a whisky outside of the U.S. be aged in new charred oak barrels to be called a “single malt,” as described below by the importer of Amrut and (hopefully, some day) The English Whisky Company.

Many of you will recall that last year I wrote lamenting about the TTB’s decision to not allow Amrut to be designated as a “Single Malt Whisky”. After appeals and clarification they relented allowing US consumers to enjoy another Single Malt Whisky.

At Purple Valley Imports we are focused on bringing world class single malts to US consumers and have been working to offer the English Whisky Company Single Malts to the US market.

Well, the powers that be are up to the old tricks again.

We recently presented The English Whisky Company’s Chapter 6 and Chapter 9 to the TTB Beverage Lab for analysis. (Any “Whisky” not from Scotland, Ireland, Canada or the US must go through lab testing).

Although the English Whisky distilled spirits taste, smell and drink like Single Malts the TTB department has deemed that we may call these “Whisky or Whiskey” but not “Single Malt”. Their reasoning? Well, the spirits are not aged in “new oak charred barrels”. 

As all of you are aware the majority of distilleries in Scotland use ex-Bourbon barrels. Bourbon is aged in new oak charred barrels and can only be used once. So, technically whisky is being aged in “new oak charred barrels that have had bourbon pass through them”.

The English Whisky Company, is the first new distillery in England in over a century. Located some 250 miles from Scotland they produce “Single Malt” Whiskies using barley grown and malted in England. (By the way some 60% of the barley used for Scottish Malt Whiskies is grown in England).

Andrew Nelstrop, Managing Director of The English Whisky Company commented: “We use only English barley, malted in England. The whisky we are producing at present was also peated in England. I am not aware of any distillery that can claim they use 100% barley, water and yeast produced in their own country other than ourselves”.

So, here is a small Distillery producing a wonderful dram (can I  call a whisky that isn’t from Scotland a dram?), that the US will not allow to be labeled as “Single Malt”.

Yet, they will allow whiskies from a distillery in Wales (which is much further in distance to Scotland then the English Whisky Company is) to do so.

Well while the rest of the world enjoys The English Whisky Single Malts, the consumers in the US can only dream. 

We are appealing this from here and from the UK. As always we appreciate your support and comments

Cheers,

Raj Sabharwal

Guest blog: Chuck Cowdery on those confusing bourbon regulations

Friday, June 11th, 2010

Chuck is a leading authority on American whiskey and, of course, one of Malt Advocate magazine’s regular feature writers. He also has a great blog you should be checking out. He’s here to clear up all the confusion about those subtle nuances of American whiskey regulations. Take it away Chuck. (And feel free to ask that question you always wanted the answer to.)
There is a lot of activity in the distilled spirits world right now, much of it at the intersection of production, marketing, and government regulation. Tuthilltown’s sale of its Hudson Whiskey line to William Grant & Sons has raised questions about differences between American and European definitions of whiskey, which have nothing to do with how the word is spelled and everything to do with how and for how long the spirit is aged.

Alcoholic beverages also seem prone to myths, some of which die hard. Although bourbon whiskey is strongly associated with Kentucky, for example, there is no law restricting its manufacture to that state. Many people also believe that Kentucky is the only state name that can appear on a bourbon label but that’s false too. There are similar myths about the relationship between bourbon and Tennessee whiskey.

The actual rules can all easily be found in one place, the Code of Federal Regulations, title 27, part 5, subpart C. The rules apply to all products sold inside the United States, whether made here or imported.

The rules don’t restrict what producers can make, just what they can call it.

They can be confusing.

One easy way to understand them is as a hierarchy or winnowing. The legal definition of “alcohol” is very broad. The definition of “whiskey” is more narrow and the definition of “bourbon whiskey” is even more restrictive. Each level incorporates the requirements of the one below.

To simply use the term “whiskey” the spirit has to be made from grain, distilled at less than 190° proof (95% ABV), and stored in oak containers. The rules don’t say anything about the type of oak container (new, used, charred, toasted. etc.), nor barrel entry proof, nor minimum age.

European Union (EU) rules are the same except they require a minimum of three years in wood.

For a product to be labeled “bourbon whiskey” it has to meet tighter requirements. The mash must be at least 51% corn, the distillation proof has to be less than 160° proof (80% ABV), the barrel entry proof has to be less than 125° proof (62.5% ABV), and the oak containers have to be new and charred, but there is still no minimum age specified.

Hence Hudson Baby Bourbon Whiskey may be just three months old and legal in the USA, while in the EU it can be called bourbon, but not whiskey.

That brings us to “straight bourbon whiskey,” which has to comply with all of the above plus spend at least two years in wood. Why the word “straight” was chosen to mean “aged in wood for at least two years” I cannot explain.

Finishes and infusions are another controversial area. Many people have argued, incorrectly, that Red Stag by Jim Beam forfeited the right to call itself bourbon by adding a maceration of black cherries and other flavors. Some are raising similar concerns about the new Maker’s Mark 46, which spends a little time in what are technically used barrels, with additional un-charred wood surfaces added. Woodford Reserve, Jim Beam, and Buffalo Trace have all used wood finishes, comparable to single malt scotch finished in sherry casks.

The best way to understand finishes and flavorings is that just as you can’t un-ring a bell, you can’t un-bourbon a bourbon. What you get when you add something to it is “bourbon and…” The official description of Maker’s 46, for example, is “Kentucky bourbon whiskey barrel-finished with oak staves.”

The purpose of these regulations is not to protect the purity of bourbon, it is to ensure that consumers know exactly what they’re buying.

Glenora releases new “Battle of the Glen” 15 year old Glen Breton single malt

Thursday, June 10th, 2010

Glenora has release a new 15 year old Glen Breton single malt called “Battle of the Glen” (a.k.a “Take that, SWA!” :)).

All joking aside, here are the details, straight from their press release.

VICTORY IN THE GLEN

Glenora Distillers International Limited takes great pride in announcing a Special Edition 15 Year Old GLEN BRETON Single Malt Whisky.

One year ago, on June 11th, 2009, the Supreme Court of Canada delivered its judgement dismissing the application of the Scotch Whisky Association for leave to appeal in its unsuccessful campaign to oppose the trade-mark registration of Glen Breton, Glenora’s flagship single malt. That decision finally terminated nine years of litigation by the Scotch Whisky Association, involving four levels of appeal in the Trade-marks Opposition Board and the courts.

On November 19th, 2009, Glen Breton was entered as a registered mark on the Trade-marks Register of Canada. We at Glenora express our deep appreciation for the support and loyal patronage of the many who stood with us to win our cause.

In celebration of the registration of Glen Breton®, and to commemorate our victory in that Opposition, Glenora is releasing a unique bottling of select 15 Year Old Single Malt, the BATTLE OF THE GLEN™ Special Edition.

Lauchie MacLean, President of Glenora, says of this Special Edition Glen Breton,

“As far as we are aware, BATTLE OF THE GLEN is the first and only product created as a result of intellectual property litigation. The packaging and special booklet enclosure chronicle our fight for the inspiration of lovers of fine single malt whisky, and records our struggle for posterity. I am tremendously proud of the work of our people here at Glenora in producing this Special Edition. Glenora also wishes to acknowledge the creative talent of Famous Folks/Creative Communications based in Halifax and Toronto, for concept and development of the presentation box and labeling of the BATTLE OF THE GLEN Special Edition.

With release of this Special Edition Glen Breton, as Cape Bretoners, as Nova Scotians and as Canadians, we also honour all of our families who have gone before us, in courage and with sacrifice, to defend their rights in all just causes.”

We invite you to pour yourself a goodly dram of BATTLE OF THE GLEN, savour the apple and maple of our Cape Breton highlands, and join us in toast to victory for Glen Breton – hard-won, richly deserved.

Glenora has, by its perseverance in craft distilling and the quality of its single malt, now earned a respected position in the world. Glen Breton Rare, Canada’s only single malt whisky, received recognition as one of “Top 50 Spirits 2006” by Wine Enthusiast Magazine.

For further information, please contact:

Lauchie MacLean

President

lmaclean@glenora1.ca

902-468-6516

Bob Scott

Vice President

bscott@glenora1.ca

902-468-6516

New Scotch Whisky Regulations Take Effect

Monday, November 30th, 2009

As many of you know, new Scotch whisky regulations are now in effect. A summary of these regulations, along with a link to the actual regulations, was posted on the Scotch Whisky Association’s website. I have included it below.

Some of the requirements are significant. Do you have any thoughts or comments on these new regulations and its impact on whisky?

1. The Scotch Whisky Regulations (2009/2890) represent a definitive statement on the definition and presentation of Scotch Whisky. Full details of the new law can be found at
http://www.opsi.gov.uk/si/si2009/uksi_20092890_en_1.

 

2. The key provisions of the new law include:

? Five categories of Scotch Whisky are defined for the first time; Single Malt Scotch Whisky, Single Grain Scotch Whisky, Blended Malt Scotch Whisky, Blended Grain Scotch Whisky, and Blended Scotch Whisky.
? These compulsory category sales terms will be required to appear clearly and prominently on all labels.

? A requirement to only bottle Single Malt Scotch Whisky in Scotland.

? New rules to prevent the misleading labelling and marketing of Single Malt Scotch Whiskies.

? A ban on the use of the term ‘Pure Malt’.

? A ban on the use of a distillery name as a brand name on any Scotch Whisky which has not been wholly distilled in the named distillery.

? Protection of five traditional whisky regions of production; Highland, Lowland, Speyside, Islay, and Campbeltown.

? A requirement that Scotch Whisky must be wholly matured in Scotland.

? Clear rules on the use of age statements on packaging.

? Designation of HM Revenue & Customs as the verification authority for Scotch Whisky.

When is a “single malt” whisky not one?

Monday, September 7th, 2009

The distillers of Amrut Indian whisky want to import their products into the United States. (This is great news!) To do this, the need label approval from the TTB (the governmental agency that regulates alcohol).

I just received this note from Ashok Chokalingam from Amrut:

When is a Single Malt Whisky not one? The TTB does not recognize “Single Malt” or “Peated Single Malt” as an acceptable designation for Single Malt whiskies produced outside of Scotland. Purple Valley Imports, the importers of Amrut Indian Single Malt Whiskies have been trying to get their products approved for labeling for what it is – Single Malt Whisky. However the TTB does not have a designation for “Single Malt Whisky.” With all of the world class quality Single Malts being produced outside of Scotland isn’t it time for the TTB to acknowledge that “Single Malt” is not unique to Scotland?

So, if they want to bring their single malt whisky into the U.S., they told me they would have to label it as either a “Straight Malt Whisky” or “Malt Whisky.”  (Straight Malt Whisky??) They have argued that a number of non-Scotland whiskies (e.g. Yamazaki from Japan and Penderyn from Wales) can label their whisky as “Single Malt,” but they are not allowed this designation.

Anyone out there know someone at the TTB who can help them label their whisky as what it is, a single malt?

Crazy!