Bourbon makers seeing a boom
To master distiller Jimmy Russell, the piercing sounds of a warehouse rising in the Kentucky countryside are the sounds of prosperity.
“As long as you see work going on -- and the construction, and increasing your size -- you know your business is doing well,” said Russell, who started working for bourbon maker Wild Turkey in 1954.
Distillers are expanding their bourbon production and storage and are also dispatching sales teams around the world as demand rises for a traditionally Southern beverage. Surging exports, the weak U.S. dollar and the liquor’s rising popularity among younger Americans are driving the boom.
“It’s an exciting time to be in the bourbon business,” said Max L. Shapira, president of Heaven Hill Distilleries Inc., a family-owned liquor company based in Bardstown, Ky. “Most of the time that I’ve been in the business -- up until about the last 10 years -- everybody was trying to consign the bourbon category to that great liquor store in the sky.”
Heaven Hill recently spent nearly $4 million boosting capacity 50% at its distillery in Louisville, where it makes Evan Williams and Elijah Craig bourbons.
Wild Turkey, part of the Paris beverage company Pernod Ricard, sold more than 1 million cases worldwide last year for the first time. Its $36-million expansion near Lawrenceburg will nearly double its production.
The distillery at Jack Daniels Tennessee Whiskey in Lynchburg, Tenn., a Brown-Forman Corp. brand, is about to undergo a nearly $6-million addition to install nine more fermenters.
Maker’s Mark is preparing for a second expansion. And Jim Beam, the world’s biggest bourbon maker, is in the midst of a $70-million expansion in Kentucky. Jim Beam and Maker’s Mark are part of Fortune Brands Inc.
International expansion in this quintessentially American segment has more than offsetting the pinch of rising grains and fuel costs. Grain accounts for a fraction of the overall cost of making bourbon, even though it’s made from a mix that must be at least 51% corn.
Eric Schmidt, research director at Beverage Information Group, formerly known as Adams Beverage Group, said much of the sales growth has been in higher-priced small-batch and single-barrel products.
“Younger consumers are interested in drinks that were, you might say, their grandfathers’ drinks,” Shapira said.
According to Beverage Information Group, a market-research firm tracking the liquor industry, 14.7 million 9-liter cases of straight whiskey were sold in the United States last year. Although up about 1% from 2006, the figure still lags behind vodka and rum in sales and percentage growth but is outpacing Scotch whiskey, the firm said.
But U.S. sales for Maker’s Mark rose 8% last year, while Evan Williams’ sales grew 5% and Wild Turkey saw a 4.6% increase, the Beverage Information Group said. There are no figures tracking international bourbon sales.
Heaven Hill spokesman Larry Kass said the company expected to recoup its investment “in short order.” It will pass along higher grain costs eventually, but bourbon makers can do that gradually because bourbon ages for years before reaching store shelves, Kass said.
Virtually all of the bourbon made in Kentucky ages at least four years.
F. Paul Pacult, an industry observer as editor of Spirit Journal, said that, despite escalating production costs, American whiskeys remain “the best bargains in spirits.”
Wild Turkey is projecting 12% growth this year in its export business, while Heaven Hill expects low-double-digit growth overseas, where it has boosted its sales staff.
