Welcome to the Straightbourbon.com Forums.
Page 1 of 2 12 LastLast
Results 1 to 10 of 13

Thread: The Choke Point

  1. #1
    Bourbonian of the Year 2002 and Guru
    Join Date
    Sep 1999
    Location
    Chicago
    Posts
    12,393

    The Choke Point

    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?

  2. #2
    Connoisseur
    Join Date
    Sep 2006
    Location
    Arkansas
    Posts
    982

    Re: The Choke Point

    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

  3. #3
    Disciple
    Join Date
    Jul 2006
    Location
    Austin, Texas
    Posts
    1,606

    Re: The Choke Point

    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.
    ______________________________

    Jeff Mo.

  4. #4
    Virtuoso
    Join Date
    Jan 2007
    Location
    Louisville
    Posts
    1,091

    Re: The Choke Point

    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.

  5. #5
    Bourbonian of the Year 2002 and Guru
    Join Date
    Sep 1999
    Location
    Chicago
    Posts
    12,393

    Re: The Choke Point

    Quote Originally Posted by mozilla View Post
    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.

  6. #6
    Bourbonian of the Year 2002 and Guru
    Join Date
    Sep 1999
    Location
    Chicago
    Posts
    12,393

    Re: The Choke Point

    Quote Originally Posted by Stu View Post
    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.

  7. #7
    Administrator in exile
    Join Date
    Aug 2002
    Posts
    3,904

    Re: The Choke Point

    Quote Originally Posted by craigthom View Post
    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.
    Simplicity is the essence of universality - MK Ghandi

  8. #8
    Disciple
    Join Date
    Jul 2006
    Location
    Austin, Texas
    Posts
    1,606

    Re: The Choke Point

    Quote Originally Posted by cowdery View Post
    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?
    ______________________________

    Jeff Mo.

  9. #9
    Bourbonian of the Year 2010 and Guru
    Join Date
    Aug 2005
    Location
    Kentucky!
    Posts
    4,749

    Re: The Choke Point

    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.
    2010 Bourbonian of the Year

    As long as you have good whiskey you're not "unemployed", you're "Funemployed!!!"

    I'm no Pappyophile

  10. #10
    Disciple
    Join Date
    Jul 2006
    Location
    Austin, Texas
    Posts
    1,606

    Re: The Choke Point

    Thanks Timothy.


    ____________________________________________
    ______________________________

    Jeff Mo.

 

 

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •  
Back to top