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cowdery
09-11-2008, 17:45
Increasingly, I'm hearing that the choke point in terms of producing more American whiskey is warehouses. Even a few years ago, there was excess warehouse capacity. Today there is virtually none, and Turkey, Beam and Maker's have been steadily building new ones. A new warehouse, depending on the size, costs about a million dollars.

You can't start up a distillery unless you have someplace to start putting full barrels on day one. Right now, that's what everybody is up against, including people who have plenty of reserve still capacity.

Some people in the industry are actually nervous that too much new capacity is being added, especially when it's by people who don't have their own brands to fill and will be selling a lot of it in bulk. There's going to be a sudden, significant increase in supply in five or six years. Will there be enough pent up demand? Or will there be a short term (they hope) glut?

Stu
09-11-2008, 17:57
Chuck,

Doesn't this cycle repeat itself every X years? It seems like when there is a great demand, they increase production and the demand may not be there by the time it matures so there is a glut. They cut production and in a few years there is a shortage again and we start all over. Doesn't that pertain to all whiskey, including Scotch? They don't face the problem with vodka and most "pop" liquors because they don't need to age them. I don't know if this is a fact, but it's the way it appears to me. They need a crystal ball to tell them what the demand will be x years in the future, but all they have to rely on is marketing majors.

Stu

mozilla
09-11-2008, 18:15
If a distillery were to invest heavily in the warehousing of their aged products, I would think it also be necessary for them to diversify their product lines to accomidate some increased cash flow. Products such as vodka, gin and blended whiskies of various ages. With the extra product lines and contract bottling there should be enough cash flow to provide for the added expense of warehouses and aging.

Some examples of companies that have taken this approach are Seagrams, Publicker/Continental, Heaven Hill and Hiram Walker. Though, some of these are out of business, their philosophy lives on.

craigthom
09-11-2008, 18:17
How long ago were those "modern" ('50s or '60s) warehouses at BT sold and converted into office buildings? I'm guessing at the age, but the architecture looks like that period.

I wonder if they are regretting getting rid of them.

cowdery
09-11-2008, 21:01
If a distillery were to invest heavily in the warehousing of their aged products, I would think it also be necessary for them to diversify their product lines to accomidate some increased cash flow. Products such as vodka, gin and blended whiskies of various ages. With the extra product lines and contract bottling there should be enough cash flow to provide for the added expense of warehouses and aging.

Some examples of companies that have taken this approach are Seagrams, Publicker/Continental, Heaven Hill and Hiram Walker. Though, some of these are out of business, their philosophy lives on.

There are no bourbon companies or, for that matter, whiskey companies. Everybody who makes whiskey makes a lot of other things, and in some cases is part of an even more diversified corporation. So everybody does what you said. That's been true for decades.

cowdery
09-11-2008, 21:05
Chuck,

Doesn't this cycle repeat itself every X years? It seems like when there is a great demand, they increase production and the demand may not be there by the time it matures so there is a glut. They cut production and in a few years there is a shortage again and we start all over. Doesn't that pertain to all whiskey, including Scotch? They don't face the problem with vodka and most "pop" liquors because they don't need to age them. I don't know if this is a fact, but it's the way it appears to me. They need a crystal ball to tell them what the demand will be x years in the future, but all they have to rely on is marketing majors.

Stu

In theory, yes, but the aging cycle is so long and the American industry, especially, has been disrupted so many times that a "normal" predictable cycle has never been fully established. For that matter, the whole economy and many of its key components (insurance, new housing, many others) are cyclical, have been for decades if not centuries, and we're no more able to predict those cycles than we've ever been. Whiskey-making is all that and a bag of chips.

jeff
09-12-2008, 06:20
How long ago were those "modern" ('50s or '60s) warehouses at BT sold and converted into office buildings? I'm guessing at the age, but the architecture looks like that period.

I wonder if they are regretting getting rid of them.

I remember them being office buildings in the early '80s, at which time they were probably very happy to have unloaded them on the State. Right now, I'm sure they'd like the space, but there are probably only a handful of people there that remember them as warehouses.

mozilla
09-12-2008, 07:29
There are no bourbon companies or, for that matter, whiskey companies. Everybody who makes whiskey makes a lot of other things, and in some cases is part of an even more diversified corporation. So everybody does what you said. That's been true for decades.

Other than Dr. McGillicudies....what else is Sazerac into? BT recently got into the vodka market, though I would not say with both feet. Do they have other product lines?

KBD is another that does not include other product lines, though they are on the cusp of becoming a full blown distillery.

Four Roses only works with whisky at this point, though they were previously owned by a fully diversified company.

I can think of many smaller, out of production distilleries that did not have a full product lines. Could that have been part of their troubles in staying afloat?

Many of these distilleries have bottling lines. Is there money to be made in bottling products for others? What kind of income can be made in a year of bottling for others?

barturtle
09-12-2008, 07:40
Sazerac is also a major importer and distributor, handling a number of Irish and Scotch brands along with tequila and some wine.

They have a number of vodka brands, Taaka, Denaka and Mims along with Rain; several gins, Canadian Whiskies, rums and liqueurs.

mozilla
09-12-2008, 07:43
Thanks Timothy.


____________________________________________

barturtle
09-12-2008, 07:45
Four Roses is owned by Kirin, a company out of Japan best known for their beer in the US, but also a subsidiary of Mitsubishi (yes the guys who make cars and TVs)

OscarV
09-12-2008, 13:52
Yes, all this is a problem in the American corporate culture of making the bottom line look good this week or month or quarter.
But for us bourbon drinkers we get to stock up during the "glut" eras and ride out the "shortage" eras which we seem to be in now, ie. the dropping of my favorite two brands Eagle Rare 101 and WLWeler Centennial.

But thankfully President Lyndon B Johnson signed the 1964 Bourbon Bill.
You know that at corporate headquarters of the parent companies of the bourbon distilleries they must cuss it when there are times of glut and shortages.
I can hear them now,....
"Hey, what do you mean we have to use a new barrel?!?"
"Age it at least four years?!?"
"No added color?!?"
"51% corn?!?"
"No chemical additives?!?"
"Rush is right, LBJ sucks!!!"

cowdery
09-12-2008, 14:25
Other than Dr. McGillicudies....what else is Sazerac into? BT recently got into the vodka market, though I would not say with both feet. Do they have other product lines?

Sazerac is a fully diversified beverage spirits company with primarily commodity brands in most categories. They are "affiliated" (cross ownership is a sticky issue) through the family that owns the company with a huge, multi-state liquor distributor. Look at their web sites.


KBD is another that does not include other product lines, though they are on the cusp of becoming a full blown distillery.

KBD is a tiny company that bottles and markets bulk whiskey. They have been on that same cusp for about 25 years. Their market share is negligible.


Four Roses only works with whisky at this point, though they were previously owned by a fully diversified company.

Four Roses is part of Kirin, a very large international corporation that primarily makes beer but is involved in a lot of other businesses. Kirin in Asia is a fully diversified beverage spirits company. Look at Kirin's web site.


I can think of many smaller, out of production distilleries that did not have a full product lines. Could that have been part of their troubles in staying afloat?

Distilleries are plants, they're not companies. A plant might be closed for many different reasons. Distilleries aren't producers. Companies are producers.


Many of these distilleries have bottling lines. Is there money to be made in bottling products for others? What kind of income can be made in a year of bottling for others?

Currently and recently, no, not unless you have your own business need for a bottling line and contract bottling is a way to make some incremental revenue off surplus capacity. Distilling is much the same way, which is why I wouldn't necessarily rush right out and buy Angostura stock. Setting yourself up strictly as a bulk producer is dicey, as those are who owned those empty distilleries you're talking about.