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Distillers struggle to quench thirst for whiskey

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Saturday, June 28, 2014, 11:24 p.m.
 

A global whiskey renaissance is straining supplies of some types of spirits, so some aged bourbons could become scarce in Pennsylvania stores, state Liquor Control Board officials said.

Sales of bourbon and Tennessee whiskey increased 86 percent during the past decade, according to the Distilled Spirits Council of the United States. And for the first time, American whiskey exports exceeded $1 billion last year, up from $400 million in 2002.

Industry experts say the growth is driven by:

• The popularity of locally made craft liquors, with a new generation of whiskey drinkers becoming interested in pricier, high-end products.

• The easing of export tariffs, which has boosted international sales but made less whiskey available to American consumers.

• The popularity of television shows such as “Mad Men,” on which alcohol is consumed freely and frequently.

• A resurgence in classic cocktails, such as Manhattans and whiskey sours, with whiskey as the primary ingredient.

LCB officials are analyzing sales of some scarce, aged bourbons to ensure that stores with healthy sales of those spirits are given adequate supplies, spokeswoman Stacy Kriedeman said.

“We are trying to make sure consumers that buy the products have access to them,” she said.

Brands in short supply include Buffalo Trace bourbon, Eagle Rare Single Barrel bourbon, Weller Reserve bourbon, Elmer T Lee Single Barrel bourbon and Blanton's bourbon, Kriedeman said.

She said that when demand is outpacing supply, a distillery often will raise its prices, stop putting items on sale or offering coupons and limit distribution so every place gets a few bottles.

“All of those tactics are being used in this case,” Kriedeman said.

Three brands will increase in price starting on Aug. 1. The price of Buffalo Trace bourbon will increase $1 to $24.99 per 750-milliliter bottle; Eagle Rare Single Barrel bourbon will increase $2 to $28.99 a bottle; and Blanton's bourbon will jump $4 per bottle to $57.99, according to the LCB.

Overall bourbon sales were up 2.5 percent this year through May, with double-digit growth in top-of-the-line products that sell for $36 or more and those at the next level that sell for $25 to $36, said Chandler Carranza, who recently left his post as the LCB's spirits category manager.

No easy solution

For distillers, meeting increasing demand is not as easy as simply producing more whiskey.

There are specific rules about the length of time some types of whiskeys must be aged and the types of barrels used to age them. For instance, a minimum of four years is needed to properly age some bourbons, so it's impossible to just ramp up production to meet a surge in demand.

In February 2013, Maker's Mark announced that it would stretch its dwindling bourbon supply by adding water, a move that would decrease the alcohol content but provide about 6 percent more volume, the company said. Because of outcry from customers, the company reversed its decision within a week.

The distiller now is looking at other methods to increase production.

“We currently have supplies ... to support consistent healthy growth for Jim Beam, Maker's Mark and our Small Batch Collection, though as we've said before, demand may run ahead of supply for brands like Maker's Mark from time to time,” said Chris Bauder, general manager for whiskies at Beam Suntory, which makes bourbon and whiskey brands such as Knob Creek, Suntory, Red Stag and Old Crow.

“To meet demand well into the future, we've been investing substantially over the past several years to increase our bourbon-making capacity,” Bauder said.

Tricky calculation

In some cases, craft or artisan spirits that are produced locally are filling gaps left when the big producers can't keep up with demand, Carranza said.

That's a best-case scenario for craft distilleries such as Wigle Whiskey in the Strip District, said co-owner Meredith Grelli.

“Those (large, national) companies were a bit too conservative in their production of rye whiskey, so now there's not enough of it to go around,” Grelli said.

Predicting how much to produce and how much to age is a tricky calculation.

Grelli said Wigle barrels and ages about 80 percent of what it produces. The other 20 percent is made up of unaged whiskey, gin and a rum-like spirit, she said.

“The whiskey business is a very strange business in that you make a very expensive product that you have to sit on for years and years,” Grelli said. Capacity limitations, plus the “huge financial risk to over-producing and to storing all this whiskey for so long,” factor into decisions, she said.

“The hope is that you get it just right where you can meet the demand that you have and you're not upsetting your distributors and all of those relationships you've worked so hard to create who rely on you for a supply,” Grelli said.

Some industry experts urge caution when talking about the whiskey shortage.

There's no need to panic, said Frank Coleman, a senior vice president with the Distilled Spirits Council of the United States, although he did say there is some “tightness in the top end of the market in smaller, high-end brands.”

But generally speaking, “no one needs to race down to their local liquor store,” he said. “There's plenty of supply to support a healthy growth in demand.”

Kari Andren is a staff writer for Trib Total Media. She can be reached at 724-850-2856 or kandren@tribweb.com.

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