Bourbon Empire (28 page)

Julian Van Winkle III created the brand named after his grandfather in the early 1990s. At the time, Americans had little interest in old bourbon and he was easily able to procure leftover glut stocks from the Stitzel-Weller and Old Boone distilleries, both of which were now shuttered. By the early 2000s the old stocks Van Winkle was sourcing from were running low and the brand was preserved when Buffalo Trace agreed to make a very similar version of it under contract. Bottles originally cost in the range of fifty to seventy dollars, which was the high end of what anybody would really pay for a bourbon. For that reason, bottles of Pappy usually lingered on liquor store shelves collecting dust.

Then, around 2007, Pappy blew up after receiving several relatively high ratings from liquor marketing services such as the Beverage Testing Institute. By 2011 it had become the “ultimate cult brand,” according to
Fortune
magazine. When the magazine asked Julian Van Winkle III to explain how he had created it, he replied that it was built through a “strategy of scarcity.” Each year, roughly seven thousand cases were released, just enough to get it nationwide attention with a few bottles in most of the country’s higher-end liquor stores. It had presence, but not so much as to undermine its own sense of exclusivity. This careful positioning, combined with a catchy name and the flashy age statements, put Pappy into the marketing sweet spot bound to attract the celebrity chefs, food writers, and
other various apparatchiks of the foodie-industrial complex who are responsible for converting their fetishes into national obsessions. After that, Pappy passed into the vocabulary of people who might not know a single other bourbon brand but at least knew that one and wanted to try it.

Everything had come together perfectly. Bottles of Pappy became nearly unobtainable—finding one required hard-earned connections at the liquor store and a pile of cash. During the times of year when Pappy was released, those lucky enough to get a bottle lit up social media to proudly boast of their prize. Pappy became a quintessential bauble of bourgeois bling, akin to what Porsches were to New York stockbrokers in the 1980s and rare tulip bulbs to Dutch merchants in the 1600s. Everybody knew Pappy’s price, but few knew its value, save for Julian Van Winkle III. Thanks to the three-tier system, he watched much of the money people were paying for his brand go to middlemen merchants. When the
Wall Street Journal
asked him about the astronomical prices people were paying, he just replied, “If they’re dumb enough to pay that much, that’s their prerogative.”
*

The Pappy phenomenon helped create a new kind of top-shelf bourbon. Up until that point, the whiskey industry had divided brands into three categories: premium, high-end premium, and super premium, distinctions based entirely around price and branding rather than production methods. Between 2000 and 2013, sales of the first two categories, which include classic old brands such as Wild Turkey, Old Forester, Maker’s Mark, and Four Roses, only increased by about 17 percent as a group, whereas sales of super-premium brands—anything priced above about fifty dollars—increased by almost 90 percent, according to DISCUS data. People wanted brands they perceived as exclusive, as the Pappy craze indicated, and the market responded predictably: new brands increasingly priced themselves for the higher shelves, even if they didn’t always deserve to be there.

The trend was quickly noticed. In a 2013 interview, one market analyst told
Whisky Advocate
that top-end whiskies were increasingly
marketed to people who were simply rich, rather than true connoisseurs. As a result, the quality of the highest-price offerings had slid as a group because their new customer base was less likely to realize when the product didn’t live up to the price tag. Many of these high-priced whiskies were still excellent, but there was indeed a notable uptick in the number of lukewarm reviews they received in knowledgeable ratings publications.

As always, marketing filled the gaps between what people thought they were getting and what they were actually getting. In the 1950s,
the
New York Times
had pointed out the tactic of upmarketing whiskey through fancier glass bottling in an article headlined “Can’t Improve Whiskey, So Distillers Turn to Its Container.” A half century later, the tactics became more sophisticated. In 2013, Michter’s created a new category of whiskey, one it called “ultra-premium,” when it released its Celebration Sour Mash brand. It was $4,000 per bottle, the highest retail price in history for an American whiskey. The price was arbitrary, but by setting it so high Michter’s was able to grab media attention that doubled as free advertising from the kind of magazines—
Robb Report
,
Elite Traveller,
and so on—found littered about airport business-class lounges. By offering Celebration Sour Mash as a “limited edition” release, Michter’s also employed a marketing tactic bourbon drinkers were finding more common since the 1990s, one that created urgency by suggesting scarcity, pushing customers to buy a bottle before the apparently “limited” supply ran out.

Was Celebration Sour Mash worth it? That was hard to tell. The brand was sourced, and when connoisseurs asked for specifics—the who, what, when, where, why, and how of what was actually inside the bottle—Michter’s skirted the issue by citing “confidentiality agreements,” a common industry response that, while legally binding, also allows companies to hide a bourbon’s provenance and details (preventing customers from finding the identical spirit offered for a lower price under a different label). Hidden in the roar of press about the world’s most expensive bourbon were the faint voices of savvy whiskey bloggers and other industry watchers. They quickly pointed out the shrewd
marketing mechanics behind Celebration Sour Mash and gave the brand nicknames like “Billionaires’ Bourbon” and “Fool’s Gold.”

Of course, marketing to people with money to burn is nothing new. Companies had offered “exclusive” brands even when bourbon was a staunchly blue-collar drink and the industry was cratering in the 1960s and ’70s. But even so, those predecessors—such as Stitzel-Weller’s Very Old Fitzgerald and a line extension called Very Very Old Fitzgerald—rarely cost more than two or three times the average. Even Maker’s Mark, which famously advertised, “It tastes expensive . . . and is,” was only a few dollars pricier than its downmarket competition.

The astronomical prices behind brands like Pappy and Michter’s Celebration Sour Mash are partly driven by increased demand, but they are also a result of “irrational exuberance,” the term that former Federal Reserve chairman Alan Greenspan used to describe how overvalued markets led to the dot-com bubble of the 1990s and the world financial meltdown of 2008. Longtime whiskey drinkers regularly complain that the Pappyification of bourbon is causing a pricing and buying arms race leading to market bubbles.

The whiskey market always has and always will undergo ups and downs. Brokers in the nineteenth century created volatile boom-and-bust cycles when they traded whiskey as a commodity. The bullish whiskey market of the early twenty-first century is merely a reflection of its own era, as consumers attempt to capitalize on bourbon’s resurgent popularity by trading bottles at events like the Universal Whisky Experience in Las Vegas. After reading about new “exclusive” or other hard-to-find releases on the Internet, collectors buy and stockpile bottles with the hope of flipping them after they increase in value.
*
These vast collections of whiskey stockpiled in closets and basements have
been nicknamed “bourbon bunkers.” Here bottles sit in sad loneliness, waiting for somebody to drink them instead of checking their prices against auction indexes. The death of one renowned collector in 2013 created shock waves among whiskey hoarders when people realized that the departed hadn’t been able to take his collection of more than a thousand bottles with him into the afterlife. Collectors swarmed the auction at which his wife decided to dump them, ensuring that the bottles would remain unopened and unenjoyed.
Whisky Advocate
called the emerging scene a “paradigm shift” for whiskey. Other die-hard whiskey fans worried that bourbon was becoming a snob’s drink.

Either way, the phenomenon offered a new chapter in bourbon’s story, and perhaps a glimpse into a corner of its future. Bourbon will forever prove the old maxim that it’s life simple pleasures that matter most, but the smoke and mirrors of creative marketing and misinformed hype sometimes upends that truth. Whenever that’s the case, it’s worth remembering that the Bourbon dynasty of France, the ultimate source of the spirit’s name, was toppled after it became an inbred and calcified aristocracy that lost touch with its people. We’ll know we’ve reached a similar point when we hear the cry, “Let them drink Pappy!”

But enough melodrama. When I first mentioned Pappy to Bill Samuels Jr. during our afternoon together, he rolled his eyes at a drink he described as doing strange things to people’s minds. But he also had another point he wanted to make about the brand: “Even though [Pappy’s handlers] don’t make whiskey, and all those details that are supposed to matter, people are buying it, and they’re happy,” he said. Then he smiled and put a finer point on what his business is about: “Anything that aggrandizes what Kentucky has a monopoly on, is a good
thing.”

A
merica is experiencing a second Whiskey Rebellion. This century, the number of craft distilleries in the United States has mushroomed from just a handful in 2000 to almost six hundred by 2015, aided by the loosening of state and local laws that had previously restricted small-scale distilling. The phenomenon carries the distinct feel of the “locavore” movement that has already revolutionized beer and wine culture.

The rise of craft movements in the United States, food or otherwise, often seem like a response to the sense that Hamilton’s vision is outweighing Jefferson’s. The relative strengths and weaknesses of each side rely on one another for equilibrium, yet it seems like the nation’s destiny is pooling into the hands of just a few corporations and banks. Ever fewer Americans are truly their own bosses. Scott Harris, who runs Catoctin Creek Distillery in Purcellville, Virginia, alongside his wife, Becky, summed up the attitude of many upstart distilleries when he told me why he got into distilling: he said he wanted to build something of his own, and that to do it he had gladly ditched the beige cubicles of a government contractor job where he had been making “ungodly sums of money.”

Food has become one of the ways we have chosen to battle the creeping trend of consolidation and homogenization. Historically, food
has usually been a chore. Over the course of the twentieth century, America minimized the nuisance by churning out increasingly processed foods to save time: TV dinners, powdered breakfast shakes, precut vegetables resembling something off an assembly line. But looking back on the numbing effects of what these changes in our eating habits represent, many Americans have decided to change course. They have decided to make food a pleasure again, a therapeutic release that can be used to escape the stresses of modern life and reconnect with friends and family. The very names of the Slow Food and locavore movements declare a crusade to slow things down and move them closer to home. The do-it-yourself aesthetic of these campaigns suggests they intend to shift things back to individuals and restore proper balance to life. The boom in new distilleries is a part of this, a way to take back control, achieve independence, and satisfy a desire to tinker.

The few large companies that dominate America’s whiskey scene make good products, but two centuries of consolidation have made their handful of winning formulas narrow examples of whiskey styles that used to be more diverse. What was once a sprawling road trip down America’s highways and byways—and through the occasional grimy alley—became a short jaunt through a couple of counties in Kentucky before hopping over the border into Tennessee.

America’s new distillers promise to reintroduce variety. Corsair Distillery in Nashville is at the forefront of America’s “alt-whiskey” movement, meaning whiskies made with unconventional ingredients (buckwheat, quinoa, all-wheat mashes) and aging techniques. Corsair’s Triple Smoke label uses barley malted in three different ways (with smoke from cherrywood, peat, and beechwood) and it’s a distinctly American take on smoky scotch styles of whiskey. The Citra Double IPA uses hops in the distillation process and has a long, constantly evolving finish—it’s the whiskey version of Willy Wonka’s Everlasting Gobstopper. Another style that Corsair calls “Grainiac” uses nine different grains, including spelt. As of 2015, new distilleries in the United States still only produced less than 5 percent of American spirits—compared to the eight companies controlling the other 95 percent—but
the exciting nature of their endeavors would give them press coverage far out of proportion to their actual output. Established distilleries like Buffalo Trace and Jim Beam quickly noticed, and both would start experimenting more—Jim Beam in 2014 announced plans to release spirits made from triticale (a rye/wheat hybrid), brown rice, and rolled oats.

Of course, vanguard new whiskey styles such as those made by Corsair aren’t as new as they first seem. Their roots reach back to the experimentation exhibited in distilling manuals from the late eighteenth and early nineteenth centuries, when Americans gladly fermented whatever ingredients lay at hand and threw them into a still to see how they turned out. Corsair doesn’t make a bourbon for wide release—established distilleries already do this style well. Instead, the distillery focuses on making something different, a strategy that’s probably its best chance at success. David Pickerell, the former master distiller at Maker’s Mark who would go on to consult for many new upstart distilleries, calls Corsair’s strategy the “spaghetti-on-the-wall approach,” meaning, “Just throw a bunch of ideas on the wall and see what sticks.”

Nor is this strategy all that new—it is in fact how bourbon got its start. As the distiller Harrison Hall pointed out in 1811, coastal Americans were initially skeptical of the West’s corn-based whiskey. Many Europeans before that called corn a grain “fit only for beasts.” But all were eventually convinced, and bourbon would become the undisputed king of American whiskey. Pickerell’s “spaghetti-on-the-wall” comment also hints at another reality of wildly experimental entrepreneurial startups: there is a lot of failure. Despite Corsair’s successes, the taste of its Quinoa Whiskey conjures up a sense of wet dust, and its Wry Moon label is equally unpleasant. Nevertheless, the sheer audacity of the distillery’s ambition and its guts to try these new things is still thrilling—the efforts are always interesting, if not always worth revisiting.

Regardless of the occasional missteps, many of America’s new distilleries have already mastered gin, rum, and other spirits that require little or no aging. But there is one success that has largely eluded them: bourbon. Making exceptional bourbon requires the better part of a decade, which is an eternity for a craft distiller on a shoestring budget.
With other spirits or beer, craft producers can make hundreds of batches, working out any kinks, in the time that it takes to make one batch of bourbon or any of the more traditional styles of whiskey.

Unfortunately, avoiding the time crunch tempts many new distillers to rely on questionable methods that threaten to undermine their “craft” status as quality producers and jeopardize their potential to truly improve American whiskey. The most obvious of these is the common and long-standing practice of simply relabeling whiskey from a bigger supplier and marking up the price. This is acceptable as long as companies are open about it, but many try to disguise this fact. Whiskey geeks, channeling the spirits of consumer protection heroes like E. H. Taylor Jr. and Harvey Wiley, have attempted to step in and help overburdened federal regulators keep up with violations that have slipped through the cracks. In 2014, at the TTB’s request, a group of whiskey enthusiasts on one social media site even supplied to the government a list of almost thirty violations of CFR Section 5.36(d), requiring that brands note distillation location on the label. Some of the infractions seemed like the honest mistakes of new companies learning the ropes of a heavily bureaucratized industry, while others appeared suspiciously like deliberate attempts to convey misleading impressions.

The other way to avoid the time crunch is by making what could be described as “insta-whiskey.” Some upstart distilleries claim that the use of smaller barrels, wood chips, ultrasound machines, or pressure cookers age their whiskies in months rather than years. These methods have limited potential, but their use is problematic in an industry that so heavily emphasizes tradition and high standards. Because the craft distilling movement can sometimes resemble the heady days of the early dot-com boom, drinkers who balk at the use of controversial aging shortcuts are sometimes accused of resisting progress, of failing to see the future. But perhaps we should look to the past for a glimpse at the future, and remember that companies that have already made claims about quick-aging—such as Publicker in the 1930s—never had very good reputations and ultimately went out of business. Experimentation
and innovation are always laudable, but cheap shortcuts masquerading as such things are still just cheap shortcuts.

In 2009, a man named Tom Lix created a brand called Cleveland Whiskey. He claimed he had made, in just six months, a whiskey that tasted as if it were aged ten years. The basics of his process were simple. He purchased new whiskey from outside suppliers, then dumped the spirits into stainless steel tanks along with barrels chopped into small pieces. The whiskey was pressure-cooked into the wood chunks like a sponge. Soak, squeeze, repeat. Co-opting the language of Silicon Valley, he called his process a “disruptive technology” and promoted the brand with T-shirts that read, “Screw Tradition.”

Normally, six-month old whiskey is pale, but Cleveland Whiskey is black as coffee. The nose is sweet but with a kind of chemical aroma—almost like a garbage bag full of sugar that has melted in a microwave—and is plagued by the worst qualities of both extremely young and extremely old whiskey: hot grain notes alongside the kind of eye-wateringly bitter tannins you might get from boiling a tea bag for hours. Lix sometimes urges drinkers to compare his whiskey with Knob Creek, a brand that is far less expensive but aged for close to an actual decade, rather than six months in a pressure cooker.

According to Lix, sales of his whiskey are good in Cleveland. This is no doubt due to the loyalty of a local community wanting to support one of its own, per the rules of a locavore movement that instinctively roots for the hometown team even if it’s not a champion. However, when people outside of Cleveland first start trying the whiskey, the reaction is less polite. In reviews, drinkers treat Lix as brutally as he himself treats the dismembered barrels dumped into his whiskey. Chuck Cowdery, a longtime contributor to
Whisky Advocate
and
Whisky Magazine,
wrote on his blog—where such writers’ insights are usually more colorful than they are in the magazines—that Lix’s “Frankensteinian” process was a “strangler-of-babies-in-their-cradles.” Cowdery then harangued against national media outlets NPR and
Forbes,
which had covered Lix’s company under the approved narrative that it was a
courageous smallholder shaking up an old-fashioned industry through innovation. “Nobody tells the emperor he’s buck naked,” Cowdery complained. That was the real story.

Cowdery’s comment about Lix’s whiskey and media coverage of it underscored another trait of America’s emerging whiskey renaissance: most are hesitant to disparage underdogs they naturally want to support, even if the whiskey is subpar. The backlash against Cleveland Whiskey also made another message clear: neither producers nor consumers are done a favor when a whiskey’s obvious flaws are overlooked in favor of an inspiring backstory. Craft whiskey won’t rise to its true potential unless drinkers stay focused on, and truly honest about, the liquid in the glass and nothing else.

Of course, Cleveland Whiskey is an extreme example. A more common aging shortcut is the use of small barrels, a method that’s problematic but has shown potential when used in moderation. By increasing the amount of surface area coming into contact with the whiskey, the use of ten- or fifteen-gallon barrels has given insta-whiskies the same dark color and much of the sweetness as whiskey aged for years in conventional barrels. However, small barrels often fail to temper the coarse, moonshiney qualities of young whiskey. They tend to simply cover up undesirable qualities, rather than transform them the way that large barrels do. Though a small-barrel-aged whiskey might have gained sweet notes of vanilla from a quick blast of wood extraction, it often carries a nose reminiscent of cut plywood or the smell one might associate with the inside of a Home Depot outlet, a sure sign that little esterification has occurred. Sometimes this youth can have a pleasing vitality—similar to the freshness of a Beaujolais or other kind of wine meant to be enjoyed young—but the lack of other parts of the maturation process often undermine the kind of complexity that keeps the whiskey interesting until you reach the bottom of the glass.

Even so, some new distilleries claim that small-barrel aging allows them to cultivate flavors they are specifically seeking. It’s a reminder that taste is subjective, as well as that whiskey distillers, dating back to the days of nineteenth-century drummers, always promote and rationalize
whatever it is they’re selling. But with that said, Catoctin Creek makes a pleasing rye that is aged in thirty-five-gallon barrels, only slightly smaller than the fifty-three-gallon standard. Even at a young age—less than two years—the whiskey’s grain notes balance nicely with the wood. Balcones, a small Texas distillery, has produced some intriguing young whiskies aged with both small and large barrels (meaning that the whiskey is transferred at some point, which helps limit some of the properties that typically plague small-barrel aging).

Nevertheless, most insta-whiskies are expensive, made by small companies with relatively high overhead and low economies of scale. Their price tags threaten to prevent them from ever becoming more than one-time novelty purchases for drinkers caught in craft whiskey’s early glow. When the whiskey market is good, everything flies off the shelves, but when it inevitably dips, as it has always done, other business fundamentals will matter. Because of this, many new distilleries quietly admit that they plan on eventually upgrading to traditional barrels. Small barrels only allow them to save money by getting whiskey out the door faster, not because they are cheaper. (Surprisingly, there isn’t much of a price difference between small and large barrels. Also, because small barrels use more wood relative to liquid, they are arguably worse for the environment.) Not only do large barrels provide more complexity—if one can afford the time—they provide economies of scale that help distilleries lower costs as they grow. And if there is one eternal truth of the whiskey industry, it is that cost always matters.

But regardless of whether or not unconventional aging techniques create good whiskey, there is no doubt they create valuable hype. When Tuthilltown Spirits in Gardiner, New York, opened in 2006, thumping bass music made the distillery resemble a dance rave. Visitors learned that the music gently helped vibrate whiskey into the wood of the small barrels the distillery uses. The approach was gimmicky but nonetheless grabbed the attention of reporters in nearby New York City, who helped turn Tuthilltown’s line of Hudson whiskies into an early darling of the craft whiskey movement. The only thing missing from the stories about the distillery—which followed the predictable format of championing a couple of likable entrepreneurs—was a critical and honest evaluation of
the rather mediocre whiskey that struggled to justify its astronomical price.