When will BT catch up?

[TunnelTiger]

Reading through the "distillery of the year" posts I realized how much BT's shortages have affected most of us.

So that begs the question when will their production catch up with demand? 6 yrs? 10 yrs?

Did they misread the market or were they slower to react than their competition?

When they do catch up will they be able to regain shelf space and market share?

[The Black Tot]

This is an excellent question and you've saved me opening my own thread on it.

What was the year that BT started running the stills harder (by which I mean year round at the high end of their annual capacity)? Did they get ahead of the boom by a year or two, or did they lag it?

Did they build new warehouses? A new 83K sq ft warehouse is scheduled to be completed by 2015. I suppose that means we can expect to see W12 back on shelves in 2027?...cough. No worries though, OWA will be back by 2022.

Seriously though...we have all heard that they've been distilling like crazy for a while, but in what year did it start? When should we start to see the leading edge of glut 2.0?

Presumably the design of this new warehouse will be informed by the experiments conducted in warehouse X. That should mean that by now they know how to build one of the best warehouses in the world for maturing whiskeys.

How many barrels fit in an 83K sq ft warehouse? Mark Brown said they were about 100K barrels short of inventory to meet demand. Will this warehouse hold about that much?

[nd2005]

This is an excellent question and you've saved me opening my own thread on it.

What was the year that BT started running the stills harder (by which I mean year round at the high end of their annual capacity)? Did they get ahead of the boom by a year or two, or did they lag it?

Did they build new warehouses? A new 83K sq ft warehouse is scheduled to be completed by 2015. I suppose that means we can expect to see W12 back on shelves in 2027?...cough. No worries though, OWA will be back by 2022.

Seriously though...we have all heard that they've been distilling like crazy for a while, but in what year did it start? When should we start to see the leading edge of glut 2.0?

Presumably the design of this new warehouse will be informed by the experiments conducted in warehouse X. That should mean that by now they know how to build one of the best warehouses in the world for maturing whiskeys.

How many barrels fit in an 83K sq ft warehouse? Mark Brown said they were about 100K barrels short of inventory to meet demand. Will this warehouse hold about that much?

They just started the Warehouse X thing this summer - so I doubt they will have any reliable enough results to inform the construction of their new warehouse.

[The Black Tot]

Drag. Obviously I haven't been in warehouse X, or paid enough attention to it

[dhedrick]

This is tough because while we all want them to catch up, they certainly don't want to have too much excess inventory when demand slows and the general public moves on to a different spirit.

[Hop]

I'm not sure it's about catching up for BT/Sazerac. They may be looking at what some others are seeing as an impending bubble in an overproduction of Bourbon.

I'd have to say that it would be fiscally responsible for a company to look at what has occurred over the previous several years and conclude it may be more prudent to "slow play" their hand in this game.

[dhedrick]

Agreed. I'm thinking it's going to be less a matter of supply catching up than demand slowing down. Either way, I'll be glad when availability improves though.

[B.B. Babington]

and they better watch quantity over quality. If quality slips, so does the name. Is ER10 slipping?

[MauiSon]

This is tough because while we all want them to catch up, they certainly don't want to have too much excess inventory when demand slows and the general public moves on to a different spirit.

You mean like what has happened with scotch?

[393foureyedfox]

I'm not sure it's about catching up for BT/Sazerac. They may be looking at what some others are seeing as an impending bubble in an overproduction of Bourbon.

I'd have to say that it would be fiscally responsible for a company to look at what has occurred over the previous several years and conclude it may be more prudent to "slow play" their hand in this game.

its not a regional item of demand in a country with a total population of 250 million anymore though. its an international item of demand in a world with 7+billion. even a future 'slump' should still far outstrip current production. least, thats how Im seeing it.

[MauiSon]

It wasn't so long ago that Four Roses was ONLY supplying foreign demand - worldwide demand slowed at about the time they re-entered the U.S. market. I seriously doubt demand has grown to the hand-to-mouth masses of the world, tho I have been adding bourbon to care packages. Even so, I'll believe in a future slump only after the fact.

Edited November 23, 2014 by MauiSon

[GaryT]

I think they were hit by the general bourbon boom, as well as a growth for their brands. No one seemed to know about ETL, W12, OWA until the last year or two - so their demand has shot up at a higher rate than bourbon demand in general (I think).

I wonder about BT, if they won't be short for the next 7-10 years - and if they don't mind that. There is something to be said for being sought after, not impossible to find (like PVW), but challenging enough. Some risk that folks find replacements out there, but thinking about OWA - no one seems to be looking at a high proof wheater to compete (other than MM CS which to me isn't priced to compete; and I would rather have OWA for the same money). This recent purchase of land next door and talk of a farm, along with Warehouse X - it seems like they're focused on going for some niche markets rather than just grow-grow-grow. Growing their own ingredients would certainly make them unique - and (just as important) a really nifty tour experience that lets folks see the WHOLE process.

[danz]

BT is in a very unusual situation with the incredible hype around BTAC and Pappy. I have been seeing multiple posts of tables full of these products and internet folks insulting each other over how it's stupid not to say they are worth over $450 a bottle. The current market for these products is not remotely rational and I think it is the result of years and years of incredibly favorable, almost obsessive, reviews by Jim Murray, John Hansell, Robert Parker, and F. Paul Pacult, just to name the highest profile reviewers. These are great whiskeys, but the hype has gotten ridiculous and irrational. I don't think it's something a reasonable person could plan for and it sounds like BT is trying to take a measured approach to increasing supply for what the real, sustainable long-term demand is likely to be. I hope that is the case, and in particular, I hope they keep the quality up on Eagle Rare, Old Weller Antique and Weller 12 and ensure they are distributed better and affordably in places like NY and DC. It has gotten to the point in NY where it is almost as much of a chase to find OWA as the headline limited editions, and Weller 12 is harder to find than most of them. I think if I really wanted to, I could easily get more Pappy this year, at a smaller percentage markup over MSRP, than Weller 12. Frankly, though, the Pappy hype is turning me off to that line.

[nd2005]

BT is in a very unusual situation with the incredible hype around BTAC and Pappy. I have been seeing multiple posts of tables full of these products and internet folks insulting each other over how it's stupid not to say they are worth over $450 a bottle. The current market for these products is not remotely rational and I think it is the result of years and years of incredibly favorable, almost obsessive, reviews by Jim Murray, John Hansell, Robert Parker, and F. Paul Pacult, just to name the highest profile reviewers. These are great whiskeys, but the hype has gotten ridiculous and irrational. I don't think it's something a reasonable person could plan for and it sounds like BT is trying to take a measured approach to increasing supply for what the real, sustainable long-term demand is likely to be. I hope that is the case, and in particular, I hope they keep the quality up on Eagle Rare, Old Weller Antique and Weller 12 and ensure they are distributed better and affordably in places like NY and DC. It has gotten to the point in NY where it is almost as much of a chase to find OWA as the headline limited editions, and Weller 12 is harder to find than most of them. I think if I really wanted to, I could easily get more Pappy this year, at a smaller percentage markup over MSRP, than Weller 12. Frankly, though, the Pappy hype is turning me off to that line.

The problem with the pappy hype right now, at least anecdotally, is that the people chasing it aren't actually bourbon fans - just prestige fans. They are chasing it because it is elusive. They are also used to single malt prices, so the secondary market prices on PVW don't seem so outlandish through their eyes.

[LCWoody]

I think one of the biggest problems with getting more volume to the market (other than time) with any distillers lies with the Cooperage. Their is already a shortage of new barrels of the existing market, and Cooperages can't just hire some one send them to a 40 hour class and start making barrels. That is a true craft that takes years of apprenticeship. Their are a lot pieces to the puzzle that has to fall into place over the next several years. I hope that people have the patience to stick around. I would hate to see distillers shutting doors in 10 to 15 years.

[BourbonGuy]

Every CEO makes a choice and has to spend to expand or keep things as they are. From all the articles I read, they saw the bourbon sales and interest rising in the 1980's. Brown Forman, made a choice and expanded. Jack Daniels has never been hart to find. Plus the now have Sinatra and Holiday Limited select. Had Buffalo Trace expanded and even raised their prices, they probably could have sold all the Pappy Taylor, Blanton's Elmer T Lee and BTAC they made. Return on investment for making a new and bigger distillery plus expand warhouses?

Maybe they feel the bourbon bubble will burst or maybe they like having their bourbon sought after. Not sure.

[Flyfish]

Back in the '70s and '80s I worked for an electric utility. Since the end of WWII, demand had been growing at 7% so we needed to double generating capacity every 10 years. But new plants were more efficient so consumer prices, kept falling. Then the cost of environmental regs kicked in and prices started going up. High inflation led to higher costs for materials and labor and interest rates on funds needed for construction doubled and tripled. Ticked off consumers led to construction decisions being heavily influenced by bureaucrats and "activists." Construction times stretched from 4-5 years to 10-12-15 or "never." (As in, you might spend a decade and a billion $$ and never recover your costs.) Consumers had a hard time understanding why they were paying more. Some industrial customers were willing to pay a lot more for "uninterruptible" service. (If you are melting 20 tons of glass and the power goes out you end up with one huge paper weight.)

If you run a distillery and you suddenly see a huge spike in demand, do you invest $$ millions in new capacity? What if the market goes bust when whiskey consumers move on to the Next Big Thing before your product is mature enough to sell? How do you allocate your current stock without alienating loyal customers? What about customers who would gladly pay a few dollars more for your product? Do you let the flippers reap those profits or do you price your product to what the market will bear? Objectively speaking, your top shelf stuff is made from exactly the same ingredients as your bottom shelf stuff so the cost is the same. Subjectively speaking, though, there is a world of difference that can not be accounted for in production costs but should be reflected in price. Is it evil to divert AAA 10YO stocks to some "higher purpose"?

It seems to me that there are no wholly satisfactory answers to any of these questions.

[dcbt]

I wonder if there's much risk to people defecting to new brands, just tired of not being able to find ETL, W12, or whatever, and finding alternatives in EC12 and Larceny, to the point that when BT's products DO appear on shelves again that people have already moved on and don't go back. It'll be interesting to see how the entire industry moves over the next few years.

[ryanc]

This obsurdity wont last forever...look at the poker boom to name one. Texas hold'em was the thing for quite a few years after Moneymaker won the WSOP. Popularity has definitely decreased, at least that is my impression. I cant imagine folks paying 500 for a bottle of 15 year Pappy forever.

[amg]

I'm not sure if this is a marker of overall quality dropping, but the last OWA I had was very young-tasting and disappointing. The ETL I have open now (bottled this year) tastes an awful lot like BT to me.

[PaulO]

Here are just a couple observations. I have not noticed any shortage of regular Buffalo Trace bourbon or Eagle Rare. I see it in grocery stores, pharmacies, liquor stores (and often on sale). When all the VW brands became BT made whiskey; Weller 12 and Antique seemed to never be re-stocked in stores again. From a business sense, I can't really fault the BT company. If aging their product only a few more years means crazy money... There are only a small number of BT products I really care about enough to buy on rare occasion when I can: OWA, W 12 (haven't seen one for a long time), Saz. Rye, and ETL. Sadly (for me) these are what has disappeared from shelves. I like Rock Hill Farms and Blanton's, but they're a bit pricey to buy often.

Edited November 23, 2014 by PaulO

[HD 335]

I cant imagine folks paying 500 for a bottle of 15 year Pappy forever.

[The Black Tot]

OK, so LCWoody made a good point about the limits of cooperage supply.

I think these are the things we need to know to answer the question of the thread (and I don't know who knows the answer, but it would be cool if someone does):

1. What year did BT turn their distilling capacity up to 10? I read somewhere that fermenting used to be predominately done in the spring and fall when temperature and humidity considerations were ideal, but now they're running full tilt year round. If so, what year did that start?

2. What year did cooperages hit the wall? Did they have to shorten their wood seasoning times to meet THEIR demand? If so, what year did they start straining to meet the spike in demand?

3. Prior to the 2015 warehouse completion (and of course, we are STILL prior to that!), when was the last time BT added a warehouse? What year?

The answer to those questions should get us on the right track to assessing when we should see the demand for BT's products get met.

The discontinuation of AA10 - what year did that happen? As far as a higher purpose goes, was there anything higher than AA10 on that line? Looking at my bourbon family tree, Ancient Age 10 was the highest of that pile, although it could have been chopped off by re-purposing the younger barrels that were in the pipes to make Blanton's instead - which is reasonable - Blanton's seems to have always been available throughout the boom.

A few things are curious to me. That WLW is a 12yr product, W12 stocks are being eroded, and even OWA is getting hit now. OK, so, what's happening to the wheaters? Re-purposed for the Pappys of tomorrow? Julian has stated that there will be higher numbers in a few years...I know that it could either be a demand OR a supply problem, but although W12 is valued by drinkers, it's not particularly hit hard by flippers is it? Certainly nobody is flipping OWA successfully? The W12 situation seems to smell of barrel re-purposing a-la-AA10 above more than consumer mania, although certainly W12 does get discussed in a minor grail-like fashion in this community sometimes. Texas residents don't understand that, but from what I've read recently we soon might?

Recently some people here have said that they've had recent bottles of OWA that convinced them that BT was back on track, that the quality was returning after a few years of that expression being stretched thin in a way you could taste. But then two posts above I read that someone just got one and it wasn't like before.

People are buying more bourbon than they are drinking. That seems to be clear. The rack houses have been emptied quicker than expected, and they've been re-filled with new distillate which the stills have been running year round to replace and the cooperages have been struggling to make the barrels for.

For me, the big question is - when the buying cools off (which I believe it must do because sooner or later you've got to face the fact that you've got an entire liquor store's worth of stuff to drink), will the new young distillate have suffered from off-ideal-season fermenting, short stave seasoning, and less pickiness about wood selection? In other words, yes, we will have a glut, but will the whiskey be as good as the stuff that was distilled in the spring or fall when the cooperage was ideally seasoned and not rushed?

Also, where is all this oak coming from? Last I heard, it takes quite a while to grow a big oak tree. Is American White Oak being reforested at a rate that will sustain the future of barrel requirements? Or will we be cutting into less and less ideal forests as time pushes on?

Edited November 23, 2014 by The Black Tot

[The Black Tot]

I should add that what I meant about pointing out that WLW is a 12yr product is that technically, you should just be able to pull W12 barrels for this and pour it in a prettier bottle with no water or filter. That should be the easiest BTAC to ramp up, since apart from the Handy (which has nothing to do with the wheaters of course), it's the youngest.

But instead what we get is half the number of WLWs as GTSs. That, along with everything else, suggests the depth of BT's wheater famine. ETL and RHF will stabilize after a short while. I'm wondering if this new warehouse in 2015 is going to be predominately wheaters? Perhaps we will be able to tell by what kind of construction they use on the 2015 warehouse what kind of profile they're trying to expand, since the warehouses are fairly different in construction at BT by product line.

[nd2005]

I think the wheated stock just has too many masters to serve - the full PVW lineup, WLW, and the regular Weller stocks.

Though I would argue that the ready availability of WSR and OWA suggest this is an aging problem at this point, more than a production standpoint.

I think they are just still playing catch up.