Bourbon shortage in the news

[sutton]

Question for those of you with long industry knowledge - the industry had a certain capacity when the last "glut" hit and put many out of business. In this current hot market for whisk(e)y, has industry capacity for bourbon now exceeded what existed before the last glut? My question goes to whether the next "glut" could be worse, in the sense that the current producers get whipsawed if there is another protracted period of low demand, and given their massive investments in this cycle, whether a next oversupply period could put even more out of business than the last time.

[cowdery]

Talking Shortage But Thinking Glut

One thing that happened with the 'Great Glut' of the 80s and 90s was that the industry had been running behind demand ever since 1933, so when the industry started to slide in the late 1960s, literally no one alive had ever experienced that before. Since the 'Great Glut' is still within living memory, the industry is much more likely to respond appropriately, so I predict we'll have a succession of mild shortages, like the one we're in now, followed by mild gluts.

[sutton]

Great post Chuck, thanks. Yes, I suppose they will manage it better this time around - I think in terms of the time needed to bring a product like whiskey to market, capacity lagging demand is a smart strategy. And I agree with you that short periods of oversupply are preferred - I think most would trade some of those dusties to have some of those closed distilleries still in operation.

[mbroo5880i]

I don't know the bourbon industry as well as heavy manufacturing. I know often manufacturers add capacity at the top of a market cycle (chasing the demand) resulting in excess capacity and product when the inevitable downturn in demand occurs. The weak hands shake out, either by shutting down, being bought out or mutual consolidation. I also know that true manufacturing sectors are impacted by more than just supply and demand and typical market forces, for example, political and government economic policies create unequal and inefficient markets in some sectors.

I am curious how the expanding global markets will factor in when the inevitable bourbon downturn occurs. What are the critical factors that could create a decrease in demand (e.g., global economy, etc.)? I also wonder what effect a downturn in demand will have on smaller producers. My guess is some of the smaller producers will get shook out of the market. I also wonder how well the lessons of the last significant downturn in bourbon market, which was primarily U.S. based in the past, will be interpreted and applied by foreign owners who may not have experienced it. I see a lot of capital investment and just wonder how that investment will be viewed 5 to 10 years from now, if profit margins are squeezed.

One history question I have is...did some of the "major" distillers, for example, ND, HH, Schenley, S-W, etc. experience negative income some years or were they just more profitable in some periods than others?

[White Dog]

Some Bourbon 'journalists' also claimed a couple years ago that the 'Rye Boom' wasn't actually happening. Take what you read with a grain of salt.

[T Comp]

Some awfully interesting stats in Chuck's blog post yesterday courtesy of Chris Middleton that is further food for thought.

And did I miss the "rye boom"? Always plenty of Whistle Pig, Jefferson's and its like on shelves here. Age stated Barton evaporated in a few weeks once word broke but older Rittenhouse DSP 354 or WT Rye 101 still lurks if one looks...even regular Saz. I'll give you the BTAC's and super aged Willett-Vintages-Black Maple Hill oldies.