More Heaven Hill

[mosugoji64]

I'm sure memories of the glut years aren't far from their minds.

[tmckenzie]

I know one company smiling about all the new small stills and expansion of the big boys. Vendome. They are swamped.

[cowdery]

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.

Edited March 12, 2013 by cowdery