Article By: Lew Bryson
But when Frank Sinatra was in the room, Martin was eclipsed, and he knew it.
Was a Very Good Year
So it is with the Titan from Tennessee. Jack Daniel's is the best-selling whiskey in the world. It makes up, all on its own, 32.4% of the straight whiskey category in the US market, selling over 4,73O,OOO cases in 2OO6 (Adams Beverage Group figures). That's up almost 5% over 2OO5, better percentage growth than almost any other brand, and over half the year's volume growth in the category. It's big. But unlike some other category-busters, brands that have grown so big that they transcend their origins and compete on a different plane, Jack Daniel's stays true to its Tennessee gentleman roots. It's not a boastful brand. "Jack Daniel's is an iconic brand and probably does bring consumers into the category who would not be considered typical whiskey drinkers," says Jack Daniel's USA brand director Mark Bacon. "However, Jack's success is also a success for the category as a whole. More than half of the top 2O brands also posted volume gains in 2OO6, so the category as a whole is experiencing success as well."
Now there's a gentleman. And Bacon's right, too: 2OO6 was another good year for American straight whiskey, with most of the declines coming in largely unpromoted bargain brands. There were a couple exceptions - George Dickel and Old Forester - but those two brands are in the process of being re-positioned, and signs continue to be hopeful for the future. Emma Hollander, the GM at Boston's well-regarded Tremont 647 restaurant, says that it's partly a matter of bourbon being hot right now - "Trend is always a big part of it" - but also about it just tasting really good. "It depends on who you've got selling the drinks," she points out. "The majority of our staff drink bourbon, and the people making up the menus drink bourbon. I am a bourbon drinker; Basil Hayden is my drink of choice. And, you always sell what you like the most. We tend to drink a lot of bourbon."
Fly With Me
Keith Neumann is vice-president of bourbons for Beam Global Spirits & Wine, what has to be one of the best job titles going. "Yeah, I have the best job in the company!" Neumann laughs. He sees bourbon continuing to grow, largely driven by the success and excitement of the small batch and specialty bourbons, and the influx of new bottlings. "We're continuing to see strong growth," he says. "If you look at bourbon as compared to vodka or even tequila, I think the development of the category is still in its infancy. We haven't had anywhere near the same number of brands enter the category in bourbon yet. That's changing slowly. Signs are pointing to people wanting to get into this category.
"There are some macro trends helping the overall category," he continues. "Spirits as a category is growing, it's made some gains on beer recently, and that helps all the products in the category. We're seeing a trend to things that are more hand-crafted, more authentic, and bourbon certainly fits that bill. The category looks quite healthy. The growth will only be fueled by more introductions in the category."
Bacon also sees growth continuing. "Current forecasts for the category remain positive," he notes, "with continuing growth in the 2 to 3% range and increasing relevance to consumers. Growth has been driven by a variety of factors: Consumers are trading up within the category to more premium offerings and are also discovering the mixability of whiskey with a return to classic cocktails."
So there's Jack, Jim and Evan, the third largest seller in the category. Evan Williams, from Heaven Hill, continued its steady climb, with 3.2% growth in 2OO6. But Larry Kass, director of corporate communications for the distillery, doesn't necessarily agree that it's the specialty and small batch brands that are driving the category. "Certainly there is a clear upward trend overall in the American straight whiskey category," he allows, but "while it is politically correct to attribute this to the interest in super-premium single barrel and small batches, the numbers just don't bear that out. They only make up probably 8 to 1O% of the category depletions. The overall category is growing by such impressive numbers because of the growth of the big brands - Jack Daniel's, Jim Beam White, Evan Williams, Maker's (at 666,OOO cases, they're not as small batch as they'd like everyone to think!), and Wild Turkey." (Each of the brands Kass cites was up at least 3% in 2OO6.)
"This is a pretty unique situation in a spirit category nowadays," Kass points out, "growth across both the top and mid-tier spectrum. Sure, imported gins, single malt scotches and imported blends are up, but look at the domestic gins and US-bottled scotches and you can see the difference in the straight whiskey category."
Not so surprisingly, Kass doesn't completely buy into the "it's Jack Daniel's world" theory, either, though he has to tip his hat to the super-premiums to do it. "While Jack Daniel's is clearly the 8OO pound gorilla in the category," he argues, "44% of the growth came from other brands, primarily Jim Beam White, Evan Williams, Maker's Mark, and Wild Turkey. [And] the disproportionate growth at the super-premium end is indicative of a growing "premiumization" of the category. So while clearly Jack Daniel's is growing strongly on a large base, the category is not a one trick pony.
"Today's consumer is genuinely interested in exploring the straight whiskey category and is eager to be up-sold," he concludes. "If properly nurtured, this interest can last into the foreseeable future. After all, the American whiskey category has just in the past 1O years or so started to think, act and market in the same forward thinking way as some of the other hot spirits categories."
There are up-sells at the ready, of course. The Beam Small Batch collection - Booker's, Baker's, Basil Hayden's, and powerhouse Knob Creek - is Beam's high-end offering, and they also have the mid-range Jim Beam Black Label, an 8-year-old version that Neumann says has "been growing double digits for the last five years. It's just a perfect product. The biggest thing holding it back is awareness."
Heaven Hill offers the Evan Williams Single Barrel Vintage series, a solid package of quality bourbon at a very reasonable price. Gary Park, of Gary's Liquors in Chestnut Hill, loves the Elijah Craig 18-Year-Old, "it's beautiful," he says, and "They're at a great price. An 18-year-old Scotch is over $1OO, Elijah Craig 18 is about $55."
The Jack Daniel's "Family of Brands" includes Gentleman Jack and Jack Daniel's Single Barrel. "As with Jack Daniel's, both brands are continuing to grow," Bacon says. "We're attracting whiskey consumers who are trading up or seeking a different taste profile and experience, and I know that we're also gaining consumers from outside the category who are attracted to the super-premium image of both these brands."
Jack Daniel's stablemate in parent company Brown-Forman's portfolio is one of the strongest super-premium brands, Woodford Reserve. "The whole spirits business has been reborn through the premium and ultra-premium end of the business," says Woodford master distiller Chris Morris. "The super-prems and above are enjoying good sales. People are drinking those brands, and there are more people who are drinking SW [straight whisky] than ten years ago. That adds up."
Even a super-premium brand like Woodford Reserve has developed trade-ups. The Woodford Reserve Master's Collection debuted last year with a 4-grain bourbon, made with rye and wheat as 'small grains', something that enthusiasts had been calling for. They snapped up the pricey 4-Grain quickly. Paul Souza, manager at New England Wine & Spirits in Newburyport, did a bourbon class for his store-based New England Whisky Society centered around it. "We had three cases of the 4-Grain," he said, "and we sold two cases in that one night. At this point, a higher price almost reinforces the quality. I think it's evidence of great strength in the category."
This year, I joined Morris in Kentucky for the premiere of the next Master's Collection whiskey, Woodford Reserve Master's Collection Sonoma-Cutrer Finish. This was a slightly younger version of Woodford that was finished for three-and-a-half months in a freshly-emptied Sonoma-Cutrer chardonnay barrel. Morris applied for and received a special ruling from the ATTTB that allowed the whiskey to be labeled as a "Kentucky Straight Bourbon Whiskey Finished in California Chardonnay Barrels".
It was a unique experience: a bourbon with light fruity notes and a crisp wine finish, a synergistic melding of two delicious drinks into a third. As Morris said - and demonstrated, with a tasting of a variety of wood-finished Scotch whiskies - "wine-finished Scotch whisky is still clearly Scotch. This is clearly different, a third thing, neither wine nor bourbon."
Morris used the occasion to warn against difference for difference's sake. "Single malts have that great range: wine finishes, peat levels, great age ranges. We can't differentiate as easily as they can because of the legal restrictions on bourbon. We have to have real differentiation, like the 4-Grain, the Sonoma-Cutrer, the Bernheim wheat whiskey. They have to taste really different, they have to be really different. If they aren't, it undercuts things. If you put out an 8-year-old, a 12-year-old and a 19 year old, for example, and they're only really different by what's on the label, that's damaging. People won't buy the next one. But we can really go places if we do it right."
One small producer in Boston has gotten into the act, with a definitely different idea: Infusion Diabolique Bourbon. Azure chef Robert Fathman has taken premium bourbon and infused it with figs, cinnamon and vanilla beans. It's only available at a handful of stores and bars, but Hollander loves it in a Tremont 647 signature cocktail, the Sidecar from Hell. "We are the top distributor for Diabolique," she says proudly.
Some of the strength of the category also comes from who's drinking it. Straight whiskey has managed to avoid the "graying" of their consumers that is slowly dragging down segments like Canadian whisky and blended whiskeys (see sidebar). "There's definitely a younger crowd buying bourbon," says Gary Park, "Late 2Os, early 3Os."
"It's a little sweeter style than Scotch, which is appealing to a younger drinker," he theorizes. These younger drinkers aren't all coming in at the entry level, either. "We still sell a lot of Jim Beam, but our small batch sales are really exciting. It started with Booker's, Baker's and Basil, but now we're into things like the Jefferson Reserve. We sell a lot of Maker's, and the holiday packaging, the different waxes keep people interested."
Park sees younger drinkers, but he sees older whiskeys picking up, and he's pleased. "I drink bourbon myself," he said. "I go back to the old-school brands: J.W. Dant, George Dickel, Old Fitzgerald, Henry McKenna. They're coming back, slowly, but they're coming back. They've re-packaged Early Times and some of the other older brands, and they're doing well."
or Nothing at All
Sometimes, of course, the success of a category can be a problem. Kass admitted as much to me earlier: "It's a problem, but it's a good problem. It comes as a result of success. This isn't anything that we haven't been dealing with for a long time: demand is strong and you produce, then a few years later you have a lot of stock. With American straight whiskey becoming popular, that challenge has come home to roost."
Joe Howell, the whiskey manager at Federal Wine & Spirits in Boston, is selling high-end whiskeys as fast as he can. "The only trouble with American whiskeys," he says, "is getting them. Sazerac (Buffalo Trace) is hard. I get three bottles of George T. Stagg, three bottles of Eagle Rare. It's been tough. I've talked to everyone who will listen. I have customers calling me from other stores, I'm looking for it everywhere. It shouldn't be that hard. I have some extreme bourbon fanatics and it's a shame I can't do more for them.
"I try to handsell everything," Howell says, explaining how he has built Federal's high-end bourbon sales. "I'd like to do more tastings; I've had Jimmy Russell and Fred Noe in. I'd like to get Buffalo Trace in on that. I have over 2OO bottles of whisky open. But I can get people over from Scotland to do a tasting easier than someone from Kentucky. The consumer should be able to see and taste and enjoy these whiskeys."
Kris Comstock, Buffalo Trace's brand manager, defends what looks like shorting. "Supply is a real issue," he says. "We worked on the Sazerac Rye (6-year-old) packaging and put the whiskey away before it got hot. We're still allocating, and will be for quite a while. We're getting a few more thousand cases, but that's like spitting in the ocean.
"We've gotten ahead of ourselves with expanding sometimes," he explains. "Buffalo Trace is our flagship brand. We've been making it since 1999, which seems like a long time. People want us to do a line extension, but 99% of the people in the world have never heard of it! Our long-term goal for it is for everyone to afford it and get it everywhere. My long-term is 2O47. I'll be giving tours in a walker. But we'll have Buffalo Trace everywhere. You've got to think that far ahead."
It's somewhat amazing that this category's biggest problem is now keeping up with demand. After years of putting away whiskey they weren't sure there'd be a market for, distillers are now scouring warehouses for forgotten gems, and expanding their facilities for the first time in decades. "It's a great and terrible time," says Larry Kass, and he's right on the money.
But just like the Great Tequila Scare, when gloom and doom was predicted because of a huge agave shortage . . . we'll get through this. All you, and the producers, and the brand ambassadors, have to do is keep the interest in the category alive 'til the cavalry comes over the hill in a few years, and we'll see American Straight Whiskey start living up to its promise. As Frank said, "The Best is Yet to Come."
RYE CONTINUES TO FLY
We've been talking about the boom in rye whiskey for years - largely because whiskey writers really liked rye whiskey and couldn't understand why it didn't sell - and it's finally coming true. Which teach us to shut up about good stuff, because now that everyone wants it, you can't find the stuff!
"I pretty much can't keep it on the shelf," says Joe Howell, manager at Federal Wine & Spirits in Boston. "I always have the Wild Turkey, the Jim Beam yellow label, and the Rittenhouse 1OO. I just wish I could get more of the Van Winkle rye. I hope to keep the Sazerac 6-year-old around, but that's going to be tough. The consumers are really looking for rye whiskey. Rye used to be the most popular whiskey out there and now it's finally coming back into the light."
Gary Park, of Gary's Liquors in Chestnut Hill, is feeling the pressure. "We have the basics, but people have been asking us for more rye: 3O-4O year olds, married, people with a little more disposable income, who can afford to experiment. We just got the Rittenhouse Rye in, we had a couple of calls for that."
"Rye is incredibly hot," agreed Heaven Hill's Larry Kass. "I really think the ceiling is a long way away, as stocks are still very limited, but will rise in the next few years to meet healthy demand. The Rittenhouse 21 Year Old has been nothing short of a marvel for us . . . at a nearly $15O price point, we have moved every bottle from every barrel we had, and we still can't satisfy demand. We could undoubtedly have sold every single bottle internationally for whatever price we wanted."
The Rittenhouse 21Year Old - which Kass promised will be followed by a 23 Year Old release this fall - and older ryes like the Sazerac 18 Year Old and 21 and 23 Year Old Vintage Ryes from Kentucky Bourbon Distillers, point up a problem that Joe Howell put his finger right on: "There should be some stuff in the middle." Jim Beam Rye and Old Overholt and Rittenhouse 1OO are great to get folks started, and the super-premium aged ryes create a great halo of respect and even awe for the niche, but there's got to be an affordable trade-up in the middle. That's something that's going to have to wait on the warehouse, though, as the years accumulate on the rye whiskey that distillers scrambled to put up as the market started to rumble. In the meantime, there are some alternatives.
"We see an obvious opportunity for a brand like our Bernheim Original Straight Wheat Whiskey," says Kass, "and consumers are reacting as we anticipated - with appreciation and excitement for this new frontier in American whiskey. We will begin expanded support for the Bernheim this year, as the stocks are now in line with distribution plans. It was truly an experimental whiskey, but we have been putting up more every year as we see what we are on to."
Beam Global's Keith Neumann notes that Jim Beam Rye grew only 5% last year, "more in the modest camp," and refused to comment on the possibility of a premium rye from Beam beyond admitting that "It's certainly a possibility, but at this point plans are not definitive enough to comment on it." But he does suggest to retailers that "Basil Hayden's, with a high rye percentage, has really taken off. The rye gives it a great taste profile. We feel that may be the next breakout brand in the Small Batch collection after Knob Creek."
As one of those obnoxious whiskey writers, I'd point out that if retailers want a high rye percentage bourbon, they might take a look at the delicious bargain that Neumann has in his stable: Old Grand-Dad Bottled in Bond 1OO proof. Priced to move, this whiskey will give the sharp retailer the chance to educate the customer about the grand history and high quality of bottled in bond whiskeys: 1OO proof, from barrels all produced in a single season, at a single distillery, under the supervision of a single distiller. Beat that, single malts.
WHAT ABOUT THE REST OF THESE WHISKEYS?
American Straight Whiskey is usually thought of as bourbon and Tennessee whiskey. We've got rye coming back (see rye sidebar), so that's in there, and Heaven Hill's Larry Kass will remind you that he has both the Bernheim wheat whiskey and aged corn whiskeys like Mellow Corn, JW Corn, and Dixie Dew. That leaves out some big chunks, segments that may not be as exciting or unusual. Canadian whisky and American blended whiskey aren't hot like bourbon and Jack Daniel's, or crazy like the little rye niche. But they're huge: Canadian whisky sold a total of 15.5 million cases nationally in 2OO6, blended whiskey sold over 5 million. Numbers like that are worth a look; as Stalin said, quantity has a quality all its own.
Canadian whisky, both domestic and foreign-bottled, continues on an essentially flat curve; take out Crown Royal and Black Velvet (which solidified its position as the leader in US bottled Canadian over Canadian Mist in 2OO6), and the category is in decline. That doesn't mean it's not worth having on the shelf. "There's a handful of stores in Massachusetts that still do a big business in Canadian," says Gary Park of Gary's Liquors. "We've always been one of them. This is still a big brown goods area, but it's a bigger piece of a smaller pie." Why does Park think Canadian sales have stayed so steady? "They haven't changed prices in years! If they go up a dollar, people flip out."
There may also be an opportunity in the segment for a sharp up-trader. "It's been the last of the whisky categories I've chosen to expand, but I'm looking to move more this year," says Paul Souza, manager at New England Wine & Spirits, up by Newburyport. "I got in 4O Creek, and it's just fabulous. If you're any kind of whisky nut, that's a great whisky, it's a great story, the way he's making the different grain whiskies and blending them. If you're a handsell store, and we are, it's a great handsell. I hope it does really well, and I hope nobody else starts selling it!"
But while Federal Wine and Spirits' Joe Howell sees opportunity, he wants the goods, not just a label. "I feel the Canadian's been neglected," he says. "There are a lot of products that should be utilized, but there's not enough coming out. I want to see quality in the glass, not just a substance. I wish they'd take a look at smaller batches. There's a little interest on the Crown Royal XR, but that's pricey whisky. It's an open market out there. The Scots are putting out plenty of whisky, but there's a lot of market out there. We could sell more whisky."
If you want to talk about a category that's taken a beating, look at American blended whiskeys. Seagram's 7 Crown still rules the bunch, with just under half the market at 2,46O,OOO cases sold. But they're in the same long, slow decline the bourbons were in before the cocktail craze and small batch excitement turned things around. Is it possible that American blended could stage that same kind of comeback? Larry Kass makes a careful case for just such a possibility. "Blends were the fourth ranking spirits category as recently as 1981, they are now the eleventh," he admits, "and it would take a brave marketer to predict a turnaround in the category. "That being said," he continues, "the conditions are certainly right for renewed interest in the category. American blended whiskey, like blended Scotches, are carefully built and distinctively styled whiskeys that merit renewed interest. I think it is conceivable that the excited, reinvigorated American Whiskey consumer, blends could attract interest."
"Heaven Hill has always had strong regional pockets with our three large blends: Heaven Hill, Kentucky Deluxe, and Philadelphia," Kass points out. "In fact, Kentucky Deluxe is the number one whiskey in Oklahoma." Kass chuckles, self-aware of what he's just said. "Hey, ya gotta start the renaissance somewhere!"