Just a couple of decades ago, most of the action in the Bourbon and American whiskey category fell between $10 and $20 a bottle at retail. While wines began to move above $100 and vodkas and craft beers started to push pricing thresholds, Bourbon faced a serious decline as prices stalled. Whole seasons would go by without introducing new brands or line extensions. Today, the market has completely changed. Fresh finishes and age statements have taken the whiskey category by storm. Perhaps the most noteworthy trend is the relentless drive upward in pricing.
For several years, Diageo North America has hung its hat on the upscale Bulleit brand ($30 a 750-ml. bottle). In 2014, the company launched the Orphan Barrel Whiskey Distilling Co. with such offerings as Rhetoric ($100), Lost Prophet ($120) and Old Blowhard ($150). This past May, Diageo introduced the Blade and Bow brand, which includes a 22-year-old Bourbon retailing for $150. If these prices look expensive, Diageo isn’t worried: Virtually every one of these labels has sold out within weeks of release. “The response has been spectacular,” says Yvonne Briese, vice president of marketing for North American whiskies at Diageo. “Retailers are embracing these products and making space for them on shelves. Consumers seem to be really interested in hard-to-find whiskies, even if they’re above $100.”
Retailers aren’t disputing that assessment. Chris Zaborowski, the co-owner of the single-location Westport Whiskey & Wine shop in Louisville, Kentucky, priced his allocation of Blade and Bow 22-year-old at $176. “I put my first 30 bottles of it out on the floor, and they were all gone in less than 24 hours with no advertising or promotion at all—just word of mouth,” he says.
Zaborowski also sells the 50-percent alcohol-by-volume (abv) extra-aged Jim Beam Distiller’s Masterpiece for $198. “So many new Bourbons today are routinely starting off at $50 to $75 or more,” he notes. “It’s amazing since so many of them have no history at all.” The retailer identifies a certain class of customer willing to pay $2,000 for a bottle of the elusive Pappy Van Winkle’s 23-year-old Bourbon—whose recommended retail price is $265—on the secondary market. “If it’s rare, consumers want it,” Zaborowski says. “Yet there are also whiskey connoisseurs who are increasingly willing to throw extra money at a premium Bourbon that is getting good reviews in the media.”
Bourbon consumption advanced a solid 5-percent to 18.5 million nine-liter cases in 2014, according to Impact Databank. Throw in higher prices, and the numbers look even better: Nielsen reports that Bourbon sales—with volume and higher prices analyzed together—are running more than 10 percent ahead in 2015 compared with last year. The standout sellers among the top 10 have been Bulleit, with sales up an astonishing 45.5 percent to 480,000 cases in 2014, and Heaven Hill Brands’ Evan Williams, which enjoyed a 13-percent jump to 1.87 million cases last year.
Inventories Rise
The greatest challenge for whiskey makers is simply keeping enough stock to meet demand. The industry is preparing for bigger days ahead. The Louisville-based Kentucky Distillers Association (KDA) estimates that there are currently 5.7 million Bourbon barrels in inventory, the highest level since 1975. The state’s distillers laid down 1.2 million barrels in 2014, marking the third year in a row with the total above 1 million—a streak not seen since the early ’70s. Two years ago, there were just 10 whiskey distillers in Kentucky. The total has grown to 31 at present due to new craft labels, and KDA president Eric Gregory projects that there will be at least 50 within two years.
Many of Kentucky’s 120 counties are still at least partially dry, but a deluge of whiskey-sippers continue to descend upon the state. The KDA estimates that 725,000 tourists visited the Bourbon Trail last year, up from 388,000 in 2010, and expects that visitor totals will surpass 1 million by 2018. Gross sales of Kentucky whiskey have advanced by two-thirds since 2012—from $1.8 billion to $3 billion. Between 2000 and 2010, Bourbon’s workforce grew by 20 percent.
“This is the golden age of Bourbon,” Gregory says. “When will the Bourbon bubble burst? We don’t think it will. We’ve just begun to take advantage of sales opportunities overseas. Distillers are now reaching into Asia, Australia and Russia—places they’ve never been before—and the only thing holding them back is a scarcity of product to sell.”
Gregory notes that Kentucky distilleries are still in the middle of a $1.8 billion building boom, especially in Louisville and along the Bourbon Trail. Diageo is investing $115 million in a distillery in Shelby County for Bulleit, a brand that’s rapidly growing too big for its former outsourcing strategy.
Merger and acquisition activity is also heating up. White Plains, New York–based Deutsch Family Wine & Spirits bought Redemption Whiskey in June. Redemption’s ryes and Bourbons are all line-priced at around $30, and Deutsch has no immediate ambitions to move much higher. “Recently, a lot of options have come up for consumers willing to spend $50 to $150 for a bottle of Bourbon,” says Deutsch president Tom Steffanci. “But what about the consumer who can only spend $30? That’s the audience we want to serve with Redemption.”
Bacardi Ltd. purchased Louisville Distilling Co., which produces Angel’s Envy Bourbon, earlier this year, and the company is moving beyond contract distillers to open a $12 million distillery on Louisville’s Main Street, slated for mid-2016. The brand hasn’t been shy about focusing on the high end: Angel’s Envy Finished rye whiskey—aged for seven years or more and then finished in rum barrels—is priced at $80 a 750-ml. bottle. In 2014, its small production of Angel’s Envy Cask Strength Bourbon sold out within 48 hours of release at the retail price of $189. “Ten years ago, $189 was a price you’d never see for a Bourbon,” says Louisville Distilling Co. cofounder Wesley Henderson. “It was a price you’d see only on single malt Scotches with some age on them. Today, consumers aren’t so hung up on age. They’re more in tune with quality, taste and craftsmanship.”
Meanwhile, Chatham Imports–owned Michter’s Distillery plans to introduce a Toasted Barrel Bourbon—the barrels are lightly toasted, not charred—for $53 a 750-ml. bottle in October. That same month, the company will also release a Michter’s 20-year-old Bourbon ($600) to complement the Michter’s 25-year-old rye whiskey that’s already on the market ($700). Michter’s operates a distillery in Louisville that opened last year, and it’s beginning work on a second facility on Main Street in a former tobacco warehouse.
Campari America is targeting the high-end as well. Its Wild Turkey brand recently launched a new 17-year-old Bourbon called Wild Turkey Master’s Keep, priced at $150 a 750-ml. bottle. The company will also replenish supplies in the distribution pipeline for Wild Turkey Forgiven ($50), a blend of 6-year-old Bourbon and 4-year-old rye whiskey.
Stalwart’s Comeback
Consumers remain in tune with heritage names. Brown-Forman Corp. is putting new marketing muscle behind its legacy Old Forester brand ($20 a 750-ml. bottle), which is being discovered by millennials. A new $45 million distillery and tasting room on Main Street in Louisville will serve as a visitors center when it opens in 2017. The company reports that Old Forester’s sales rose 16 percent last year to 110,000 cases in the Unites States, and the brand is on track to boost that total to 500,000 over the next five years.
In addition to its Old Forester investment, Brown-Forman is moving upmarket on a variety of fronts. The company raised prices on its Jack Daniel’s line over the past year, which may have dampened demand a bit and held growth to less than 2 percent, though the brand still recorded category-leading sales of 4.9 million cases in 2014, according to Impact Databank. The most formidable new name in the Jack Daniel’s Tennessee whiskey line is the Sinatra Select label, a 45-percent abv special offering that retails for $200 a 750-ml. bottle. That price will be trumped by a new expression called Sinatra Century—released in celebration of namesake Frank Sinatra’s 100th birthday—that’s due in October and priced at $500. The Sinatra bottlings have all been aged in special barrels with grooved wooden staves. “We’d never done that before,” explains John Hayes, senior vice president and chief marketing officer for Brown-Forman. “It really draws the whiskey into the wood.”
Later this year, Brown-Forman is introducing Jack Daniel’s No. 27 Gold ($100 a 750-ml. bottle)—a lighter, charcoal-mellowed whiskey that was previously only available at travel retail. Also due out is Jack Daniel’s Single Barrel Barrel Proof ($65) and Jack Daniel’s Single Barrel rye whiskey ($50). These prices are high, but Hayes thinks the public will be receptive. He pegs Bourbon at the intersection of Scotch and vodka. “Vodka producers haven’t been able to do much in moving their products up in price,” Hayes says. “On the other hand, Scotch moves easily up and down the price ladder. Now we’re finding that Bourbon is moving more easily upwards as well.”
The most obvious challenge in offering more pricey Bourbons in recent years has been in finding enough liquid to sell. Buffalo Trace makes more of its Blanton’s ($49 a 750-ml. bottle) every year, but the product has recently vanished off many retail shelves. Eagle Rare 10-year-old ($30) is harder to find, too. “We’re distilling more of these whiskies than ever before, but even so, we’ve never been so severely allocated,” says Kris Comstock, marketing director for Bourbon at Buffalo Trace. “Demand is simply outpacing supply. Right now, we’re trying to decide how much Bourbon we can sell in 2026 so we can plan current production. It’s hard to extrapolate out 10 years.”
Open Opportunities
At Heaven Hill Brands, where many products are under similar supply pressures, the great frustration has been foregone international sales, according to director of trade relations Larry Kass. The KDA’s export data shows that American whiskey exports totaled $768 million in value in 2012, then grew 30 percent in the following two years to surpass $1 billion in 2014. But that total could have been much bigger. “We’ve barely been able to supply whiskey for domestic purposes,” Kass says. “There hasn’t been nearly enough stock for us to meet international demand. The best guess is we’re currently fulfilling less than 50 percent.”
When Kass joined Heaven Hill in 1998, the company sold 600,000 cases of its products annually. Last year, that total reached nearly 1.9 million cases. Some of the growth has come from flavors: In May, the company added a peach variant to its Evan Williams line, priced around $14 a 750-ml. bottle. Some of the gains have come from new products, such as the Pikesville 110 Proof Straight rye whiskey being introduced this fall around the country at $50—a significant contrast to the original Pikesville 80 Proof Straight rye whiskey ($11) previously sold only in Maryland. “The 110 proof makes the Pikesville name very intriguing to many whiskey lovers,” Kass says.
Flavors have become particularly important at Beam Suntory, where the segment now accounts for one-third of whiskey sales, compared to 13 percent of all American whiskies sold in the United States. The company, which is in the midst of building its own “urban stillhouse” on Louisville’s Fourth Street, is tinkering with plenty of other new expressions. Its Jim Beam rye whiskey—previously a 40-percent abv offering priced around $17 a 750-ml. bottle—is being reimagined as a 45-percent abv product with new packaging and priced at $23. In the past year, the company has also released such rarities as Jim Beam Signature Quarter Cask ($40) and the Harvest Bourbon Collection expressions Soft Red Wheat and Brown Rice (both $50 a 375-ml. bottle). “Most growth in Bourbon is happening in the premium-plus price level these days,” says Rob Mason, vice president of global marketing at Beam Suntory. “It’s become important for us to offer consumers more breadth in our portfolio.”
Just 10 years ago, private barrel whiskey was a rare commodity for retailers, bars and restaurants. Today, the idea has taken off. Four Roses Bourbon, which is in the middle of a $55 million project to double distilling capacity at its plant in Lawrenceburg, Kentucky, has been selling about 50 barrels a month to private buyers. The company offers 10 different expressions, and some big retail chains will buy all 10 at once—each barrel yields 150 to 170 bottles on average—selling them as exclusive products. “Typically, a retail customer will select a barrel they like, and we’ll bottle it at cask strength for them—between 54-percent abv and 61-percent abv—with no chill filtration,” says Four Roses master distiller Brent Elliott. “The growth in our private barrel program has been insane. It only started about five or six years ago, but the program has picked up a lot of momentum in the last three years or so.”
On-Premise Outreach
Although many whiskey brands are in short supply, advertising and marketing vie for consumers’ attention, often in the form of Bourbon tastings and dinners. The Signature Room at the 95th, an elegant restaurant atop Chicago’s John Hancock Center, staged a five-course dinner ($85 a person) last winter with Beam products that drew a capacity crowd of 40 people. Chef Cardel Reid served a venison loin with pomegranate reduction sauce alongside a cocktail called the Black & Bitters that comprised Jim Beam Black, Aperol aperitif, Campari aperitif, Royal Combier Grande liqueur and maraschino cherry juice. The dessert was a raisin bread pudding with caramel ice cream and coffee Bourbon cream sauce, served with a cocktail dubbed the Pumpkin & Spice, mixing Knob Creek Bourbon, RumChata cream liqueur, Kahlúa Cinnamon Spice liqueur, pumpkin syrup, and half and half.
Reid is planning another Bourbon dinner at The Signature Room this fall. He’s never done a Scotch dinner, noting that Scotch is harder to pair with food. “Bourbon, on the other hand, is much more versatile,” Reid says. “It works in cocktails, in sauces and sipped neat. Bourbon is a great drink that can be used in a lot of different ways.”