I'm encouraged Heaven Hill is even considering expansion which bodes well for the industry prospects generally.
Adding capacity doesn't mean you have to use it, of course, but they obviously feel that their sales will continue to grow.
I know there is nothing the people at Heaven Hill (and most businesses) hate more than saying no to customers and prospective customers. MGPI may be posing a challege to their contract and bulk business. Although as a private company they don't post sales results, I'm sure they've seen the same kind of explosive growth everyone else has experienced in the last two years. If you look at Beam, Brown-Forman, Buffalo Trace and Wild Turkey, at least, they all are producing well below their current capacity. So is Heaven Hill, but not by nearly as much.
By the way, the reports say they are adding four fermenters, which may not sound like much, but Heaven Hill has the biggest fermenters in the business: 120,000 gallons each.
I suppose this buries any notion that they will ever build another distillery in Bardstown. They may, however, have to build some more warehouses soon. Or start using the largely empty ones in Louisville more. They don't like those masonry warehouses for bourbon. They age brandy in them, some contract-distilled bourbon, and the bourbon they sell in Australia for pre-mixes, but not the bourbon destined for Evan Williams, Elijah Craig, etc. I think they'll stick to that, because they have built some new ones on the main campus in Bardstown.
One funny thing about Bernheim. While many of the front office people at Heaven Hill commute to Bardstown from Louisville, many of the distillery hands make the reverse trip.
Trying to avoid tying up too much capital for the next six years.
I'm sure memories of the glut years aren't far from their minds.
I know one company smiling about all the new small stills and expansion of the big boys. Vendome. They are swamped.
Vendome was slow to get in the pool, but they're making up for lost time.
You never want to operate at capacity because that means you can't grow. Production is based on sales projections, which are constantly adjusted. They'll adjust maybe every six months. Their projections are based on current sales, less any business they know is going away, plus any known new business, plus a factor based on a general prediction of business trend. Jack Daniel's once told me that they kept it simple and just increased production by five percent every year. But if they see data that tells them to change that, they'll change it.
Storage is a dynamic of the system that most people don't think about. An expansion that increases distillery capacity by a million gallons requires a new warehouse, which holds about 20,000 barrels, which is about a million gallons. The move to super premiums means longer aging. You need more warehouses if you're selling at 8 years than you do if you're selling at 4. This is also why companies are typically very agreeable to selling new make, whereas aged stock is more dear. You can't make more whiskey unless you have someplace to put it.
Buffalo Trace has excess distilling capacity because it has two distilleries and BT itself is huge. Planned in 1990 or 1991, when the business was depressed, Bernheim was relatively small. It was smaller than the distillery it replaced for Heaven Hill. It was probably smaller than its predecessor on that site. After HH took it over, they continued to buy new make from Brown-Forman until they could expand. I don't know how long they thought that expansion would hold them, but probably longer than it did since they're already doing another one.
They're on a city lot, not out in the country where they can just claim another corn field, although they have some buildings they don't use such as the old dry house, which could be demolished to make room.