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  1. #1

    Why all the consolidation?

    I am very puzzled by the bourbon industry. Being a "wine guy" I am used to lots of small wineries producing a great product. I love to go to wine country and visit many of these small independent wineries, taste their wines, buy their wines, and in some cases join their wine clubs.

    It seems to me that the bourbon industry consists of a few companies, Heaven Hill, Jim Beam, Buffalo Trace, and Wild Turkey, producing virtually all of the bourbon on the market.

    Maker's Mark is the only bourbon that I know of that is it's own company.

    What gives? How did this happen and why? Why, for example, is the van winkle family of bourbons now a buffalo trace product. What happened to the old facility, the old employees, etc. Why did it happen? Very curious.

    Joel

  2. #2
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    Quote Originally Posted by mythrenegade
    Maker's Mark is the only bourbon that I know of that is it's own company.


    Joel
    This, too, is owned by Jim Beam and is not it's own company any more.
    Joe
    Colonel Joseph B. "Bourbon Joe" Koch

    "Bourbon.....It's cheaper than therapy!!"

  3. #3
    Bourbonian of the Year 2011
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    There are many reasons for this consolidation. Whiskey-making unlike wine making is a capital intensive-business. While land is the main investment to make wine, whiskey requires both land, plant, raw materials sourced from elsewhere, sturdy warehouses and most important, time. Wine is sold, even the best of it, young and any aging is done by the consumer. Distillers must age their product and invest money in doing so for years until they see a return. The risks and vagaries associated with this model caused distilleries to combine to create economies of scale and to benefit from national brands.

    Also, the federal laws regulating the liquor trade after Prohibition favored large, "transparent" groups which were amenable to regulation and would not cause the type of abuses (including product adulteration) seen before 1920 when the market was divided into an unruly group (as perceived) of distillers (producers, not all of whom aged the product), middlemen (some of whom bought the product young and aged it) and retailers.

    All this said, there is a clutch of some 30 or 40 small (micro) distillers in America. Some will probably start to age and sell straight bourbon before long.

    It is important to realise that bourbon represents a certain level of industrial sophistication. There is nothing in a winery comparable to a large column still and the correlative level of science needed to ensure a consistent and safe product. Like many other larger industries, the larger producers tend to hold sway because they can keep prices low and undercut the small inefficient producers. Also, the large players can and do diversify (Beam is into luggage for example) to manage better the risk of the cycles in the liquor business. Bourbon today is on the upswing but it wasn't 20 and 30 years ago.

    The fact remains that with only about 9 plants operating there is still a large range of bourbon flavours out there. Each plant makes many kinds and some people (merchants or independents) still buy and age young distillate to "produce" bourbon themselves which tends to widen the range of available products.

    Gary
    Last edited by Gillman; 03-26-2006 at 03:47.

  4. #4
    Bourbonian of the Year 2003 and Super Moderator
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    This, too, is owned by Jim Beam and is not it's own company any more.
    Joe
    Makers was owned by Hiriam Walker before Beam bought it, so they haven't been on their "own" for some time.
    ___Bobby Cox___
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    May you have wonderful things thought of to do...

  5. #5
    Bourbonian of the Year 2010 and Guru
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    About the only distilleries missing from the list here are: Four Roses(owned by Kirin of Japan), Old Forester and Woodford Reserve.

    I went to a lecture given by Fritz Maytag once. He said that navigating the paperwork was a lengthy process, but the ATF was very friendly and helpful. Of course this is coming from a guy who can afford lawyers(and lots of them) to help the process, and also from someone who can afford to sell at a loss if he just wants to run a distillery for fun(at a loss here meaning that he's not trying to recover his startup costs, I think at the scale he's working at the high price of his product probably is break even for his production costs)
    2010 Bourbonian of the Year

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  6. #6
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    And yet, everytime you´ve taken a nap, a new single malt distillery seems to have popped up somewhere around the world. With all that competition that already exists, surely this should be even more risky than unleashing a Bourbon distillery?

    And all these micro distilleries : they seem to be interested in producing almost anything except Bourbon.

    Is Bourbon really on the soar? The answer on my part has to be an inconclusive one.

    I applaud the high quality and diversity of the existing producers but as sure as eggs is eggs, if no fresh blood is injected, then, in the long run, this will prove to be detrimental to the industry as a whole.
    Delighted to see you if you can find me!

  7. #7
    Bourbonian of the Year 2010 and Guru
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    The biggest problem with starting a new distillery is the time till first sale, however some of these micro distilleries could be outputting product that can be sold quickly(rum, eau de vie, vodka, gin) while aging some whiskey. Are they? I hope so.
    2010 Bourbonian of the Year

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

    I'm no Pappyophile

  8. #8
    Heaven Hill, though large in the spirits industry, IS its own company -- not part of a larger corporation. It is owned privately by the Shapira family.
    Similarly, Sazerac (which owns Buffalo Trace) is privately-held and majority-owned by a single family, the Goldrings.
    Seems to me you can blame Prohibition for much of the diminution in numbers of distilleries. Being shuttered for 14 years simply killed many. It took a lot of money, patience and by-then-stale knowledge to 'reinvent' the industry, so few made the effort. Sure, the number of active distilleries has been winnowed even further since, but the real contraction in numbers is from pre-Prohibition to post-Prohibition.
    Tim

  9. #9
    Bourbonian of the Year 2004 and Guru
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    Is Bourbon really on the soar?

    That's a understatement, in my view. I have worked in this industry for nearly 14 years It's grown in leaps and bounds...

    I watched Heaven Hill nearly double it's lines in the short time I've been working there. Now, we are expanding again. We just can't produce enough to satisfy the demand...

    Robotics, PLC's...It's evolved into a high tech industry. I learn something every day

    I was at Maker's Mark a few weeks ago. I noticed that they have alot of new equipment in their bottlinghouse. PE executive labeler's were the most prominent. I've watched at least 5 new warehouses go up in Loretto.

    Jim Beam, Booker Noe Plant in Lebanon Junction has added alot. Massive 4 story buildings and several warehouses to boot.

    I know, there is a list probalby about a mile long for the "growing demad" for Bourbon....but that's just a few...to start

    Yes, Bourbon is booming right now

    50-60+ hour work week gets old really fast...

    Bettye Jo
    Last edited by boone; 03-26-2006 at 11:25.
    Colonel Bettye Jo Boone
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    Bardstown, Kentucky

  10. #10
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    Quote Originally Posted by TNbourbon
    Seems to me you can blame Prohibition for much of the diminution in numbers of distilleries. Being shuttered for 14 years simply killed many. It took a lot of money, patience and by-then-stale knowledge to 'reinvent' the industry, so few made the effort. Sure, the number of active distilleries has been winnowed even further since, but the real contraction in numbers is from pre-Prohibition to post-Prohibition.
    Even our government makes some very large mistakes it seems. This was a biggy in my opinion. I cannot fathom what a dark time that must have been to live through!
    C

    "everybody defamates from miles away
    but face to face
    they haven't got a thing to say"

 

 

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