Saturday, June 4, 2016

A Comment About Yesterday's Post

I did not intend yesterday's post to launch a micro vs macro war. (Read the comments.) You don't have to produce more than 500,000 proof gallons of whiskey per year to be significant or successful. Every business defines its mission its own way. Small isn't automatically good or bad, nor is big. Thinking that way misses the point. My purpose yesterday was just to identify, factually, where and by whom all but a very small percentage of America's whiskey is distilled. Opinion has nothing to do with it. All I am interested in is the volume of liquid coming off the stills.

Part of that post's message is that, despite the proliferation of new products at retail, and the constant drumbeat of new this and new that in the media, the list of actual distillers hasn't changed very much. The big have all gotten bigger.

My baseline of 500,000 proof gallons per year is arbitrary. As I learned today, of the two new distilleries on the list, only Michter's has actually achieved that level. New Riff is very close at 450,000. I left them in place, with an update, because I don't believe anyone else is bigger. If I missed someone who is, please let me know. (Update 6/6/16: After crunching the numbers a bit more, New Riff says it is right about at 500,000.)

If we're being picky, I'm not entirely sure the Woodford Reserve Distillery belongs on this list. I'm checking to see if, in fact, it produces more than 500,000 proof gallons per year. It might not. Brown-Forman's other two distilleries produce many millions, with Jack Daniel's being the biggest whiskey-maker in the country. (Update 6/5/16: It's confirmed. Woodford produces more than 500,000 proof gallons per year.)

In Scotland's biggest malt distilleries, you see row after row of huge copper pot stills. That's what it takes to produce a large volume of spirit using pot stills, which is what Woodford uses. If anyone can come close to Woodford using only pots it is Popcorn Sutton in Tennessee, but they currently are using only a small fraction of their capacity. No one in the USA, not even Woodford, approaches the size of Scotland's biggest malt distillers.

In recent years, micro-distilleries have become an important part of the American whiskey mix, just not in terms of volume. They bring excitement, new ideas, and new customers to the whiskey category. God bless them. Many never will approach 500,000 proof gallons and do not aspire to. That's not their business. Some small distilleries make good whiskey, some do not. That is not a function of size.

The actual output of America's small distilleries is all over the map, but most are very small, producing maybe 10,000 proof gallons per year if that. Many make a variety of products, not just whiskey, using the same equipment. If a 10,000 gallon distillery upgrades to 100,000 that is a huge deal for them and their fans, and for the overall industry in other ways, but it still doesn't make them very significant in terms of total industry volume.

All of this is very new and changing rapidly. The most exciting recent development has been the emergence of the 'mid-majors,' of which Michter's and New Riff are the vanguard. This segment is on track to explode in the next two years. You can read all about it in the new issue of Whisky Advocate.

As for the term 'craft distillery,' I don't mind people using it, but recognize that it is a marketing term. Whatever 'craft' actually means, it too is not a function of size. 'Craft Distillery' has a more appealing sound than the more accurate 'Micro-Distillery,' and 'Micro-Distillery' isn't perfect either. There is nothing 'micro' about the new Michter's. Perhaps in time we will have better terminology for all of these classifications.

One place where the large and small distilleries are on more equal footing is tourism. Sure, Jack Daniel's logs 250,000 visitors a year, but even the rest of the majors don't come close to that. Many visitors enjoy their small distillery visits more than the large ones because often their 'tour guide' is the owner and distiller. That very intimate contact is something the big guys can't match and it does inspire brand loyalty. Economically, the importance of tourism is based on how much money each tourist spends. The small distillery visitor spends the same amount on lodging, meals, and entertainment as the large distillery visitor. Distilleries are economic boons to the communities in which they are located regardless of size.

In Kentucky, which obviously has the most highly developed whiskey tourism economy, small distilleries have been a huge contributor. Kentucky's mix of small and large distilleries is an appealing combination for visitors. The same effect is being felt in Tennessee.

So take yesterday's list for what it is, nothing more, nothing less. The new players are hugely important in many different ways, but any suggestion they will supplant the entrenched behemoths is beyond laughable. That is not even important. What is? That American whiskey has never been stronger. Quality is high, there are many options, and always something new. American whiskey has become more than a beverage, it is a phenomenon. Lots of people are having fun with it and lots of people are making money from it. It's all good.

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