Our ongoing observations about whether the boom has peaked

[The Black Tot]

Excellent post, WRI. You are totally right. The thing to focus on is the building stocks. It's empirical evidence of only one thing - more future whiskey.

The longer the boom runs, the more rackhouses will swell. And the more they swell, the more quickly and intensely any downtick in cultural interest will yield glut 2.0.

Even a leveling out of cultural interest will allow production to catch up.

Let the boom ring loudly, I suppose. We are witnessing the seeds of better times.

[The Black Tot]

I personally see this as 2 part question. The first question is whether the price of exceptional bourbon has peaked or not. The answer to this is no. Look to the new Col E H Taylor Cured Oak. Quality or not, the price rose instantly on the secondary market to $300 - $500 per bottle - if you can find it. The price has not peaked. The second question is whether or not the release of exception bourbon has peaked or not. I submit that the overall question to this is yes. While we may see the occasional exceptional bourbon released these days, the average bourbon released these days is just.................average. Not to say that they are bad, but they are not deserving of the prices being charged for them.

I'm not sure. I mean, the NUMBERs of ultra-premium bourbons has been on a steady rise - they've just been eclipsed by the rise in demand. They're the slowest category to accelerate production for, being aged the longest the way they are. But we're getting more special releases (which whether overpriced or not, are good whiskeys) per year with each passing year.

I think it might be an interesting production shift down the road, with companies shifting their focus to put a heavier weighting on the top shelfers. The memory of the Pappy excitement is going to carry forward for quite a long time, for example. People buying it in their 30's now will still probably have a fond memory of it in their 40's, and not be inclined to leave it on the shelf. Perhaps a time is coming when most people, wrongly or rightly, don't want to consider anything that isn't on the top shelf. A huge appetite is being grown for the top shelf. Today's mid-shelfers might be tomorrow's bottom shelfers. I'm not sure you're going to convince many young people today to investigate the bottom shelf apart from budgetary reasons.

Take single malts. There is a steady flow of top shelfers readily available. Because the top shelf in that category has been established and regular, broad demand is expected. I think US whiskey always had its top shelf devotees, but nobody was prepared for a whole wave of new people clamoring for a full top shelf of US whiskey, at all times. The middle shelf mostly stays in stock.

The distilleries can see this top shelf vacuum. I think they're going to fill it given a few more years. People say we won't see BTAC back on shelves again, but given 10 more years, they could probably triple the output. Hell, they should be ready to CRANK out the Handys pretty soon, since it only take 6yrs to make and they've been ramping up for about 5yrs, from some reports. After a few years of people grabbing and hoarding the first of such a production swell, I'm ready to see Handys on the shelf. I'd love to make that a regular rye for me when the time comes.

I'm not sure how much we can beef about pricing when good whiskey can still be had in the $20s. That's like 2 bucks for a stiff pour. I also think the science involved in the process controls and the rise in chemical engineers is going to lead to some pretty excellent quality control and development for the future. Lots to be happy about now, and going forward too.

All the Cured Oak like products were made, and are still out there. If for some unforeseen reason the whiskey secondary market crashes, not only will we all sing hallelujah, but the collector types have kept it all well preserved for us to pick up and drink at a later time. The drinker has had to go underground at this point in whiskey history, but his/her time shall come again.

[Harry in WashDC]

Josh_NC got me thinking, too, since I was disappointed yesterday when my go-to store had NO VOB BIB and one handle of VOB86 (which I passed on). I pouted then bought several KCs on sale at $21 per. Chuck just posted on his blog the recent BT announcement on inventory, and my VOB store had many BT 750s and handles. I figure if there's a shortage in one thing, I'm flexible enough to find something else at about the same price to consume while I'm waiting for the next truck.

[Harry in WashDC]

And another thing -- some of the NDP releases in the $50+ range were sitting right next to multiples of 7 & 10 & cask strength SAOS - the 7 & 10 around $35-40. Anybody else seen a moderation in the more established (like, Breckenridge, etc.) NDPs over the last year? They seem to hang around on the shelf a little longer or maybe I'm just not paying attention.

[The Black Tot]

Anybody else seen a moderation in the more established (like, Breckenridge, etc.) NDPs over the last year? They seem to hang around on the shelf a little longer or maybe I'm just not paying attention.

[Tony Santana]

Breckenridge, Stranahan's, Templeton, Bib & Tucker, Beer Barrel Bourbon, Tin Cup, Lexington . . . I never have a problem finding most or all of that ilk on the shelf.

[squire]

I find 'em and leave 'em there. I don't wish them ill, just view the whole thing as a temporary blip on the Bourbon timeline.

[meadeweber]

I find 'em and leave 'em there. I don't wish them ill, just view the whole thing as a temporary blip on the Bourbon timeline.

Exactly squire. We can't wish them ill will. Those bourbons help to keep the people away from "our" bourbons like OGD 114 and BiB. :grin:

[Tony Santana]

Exactly squire. We can't wish them ill will. Those bourbons help to keep the people away from "our" bourbons like OGD 114 and BiB. :grin:

I said I could find them. I didn't say I was buying them.

[The Black Tot]

We know you weren't buying them. We know you've got cases of them bunkered

[mark fleetwood]

Exactly squire. We can't wish them ill will. Those bourbons help to keep the people away from "our" bourbons like OGD 114 and BiB. :grin:

That is a very good point, had never considered it that way before. Sort of a play on the old adage "the enema of my enemy is my friend."

[KyleCBreese]

I sometimes like to scroll through old Purchase and Pass Up threads and came across these two quotes in the "Pass Up - Summer 2010" thread. They stood out to me because of how fast things have changed in bourbon in just a few years.

"Passed on a PVW23 at $250. Are you kidding me? Picked up some Pappy 15 and ORVW 10 instead."

"Passed on a 2001 ER17 for $100??? Also an old label Baker's for $100. I guess they will sit 9 more years at that price"

[meadeweber]

I sometimes like to scroll through old Purchase and Pass Up threads and came across these two quotes in the "Pass Up - Summer 2010" thread. They stood out to me because of how fast things have changed in bourbon in just a few years.

"Passed on a PVW23 at $250. Are you kidding me? Picked up some Pappy 15 and ORVW 10 instead."

"Passed on a 2001 ER17 for $100??? Also an old label Baker's for $100. I guess they will sit 9 more years at that price"

Kyle, that is really funny. Yes, how things have changed.

[T Comp]

I sometimes like to scroll through old Purchase and Pass Up threads and came across these two quotes in the "Pass Up - Summer 2010" thread. They stood out to me because of how fast things have changed in bourbon in just a few years.

"Passed on a PVW23 at $250. Are you kidding me? Picked up some Pappy 15 and ORVW 10 instead."

"Passed on a 2001 ER17 for $100??? Also an old label Baker's for $100. I guess they will sit 9 more years at that price"

Good on you Kyle! I understand, now, is all that most care about but the best way to really understand the now (especially before blathering away) is to mine the rich history here.

[portwood]

The boom may or may not have peaked but the news from Four Roses today (expansion to double capacity) is one more indication it won't be long before supply exceeds demand by a good margin, and what the Scots call a "whisky loch" is just around the corner.

[The Black Tot]

The boom may or may not have peaked but the news from Four Roses today (expansion to double capacity) is one more indication it won't be long before supply exceeds demand by a good margin, and what the Scots call a "whisky loch" is just around the corner.

I wouldn't say around the corner, but down the road for sure. It's going to be 2yrs to build these things, then another 10yrs to age the whiskey.

[CL]

If international markets continue to develop, we might not see supply meeting demand for a while.

[The Black Tot]

If international markets continue to develop, we might not see supply meeting demand for a while.

It's going to be a while in any case due to the aging backlog. But I think people are putting too much faith in international markets.

It isn't just US whiskey. Scotland is running its stills in the red. The amount of whiskey coming off of stills today worldwide is WAY high.

The gamble seems to be that the whole world needs to increase their whiskey consumption to keep this thing going. That's a BIG gamble, and one that's been played before.

Let us not forget that international markets existed during the last glut, too. They didn't save it then, either. Why would it be so different now?

[CL]

I'm no expert, but the international market seems to be expanding. How much and how long? I don't know. Perhaps a clue that the past is not prologue is foreign companies owning such a large portion of the bourbon distilleries.

I do wonder, though, about all the new construction plans, e.g., Diego and Bulleit. It does seem like a lot of capacity. I wonder if all will ever really be built.

[The Black Tot]

What I'm thinking more and more these days is that there is that distilleries are going to have to re-orient their product portfolios such that special releases make up a higher percentage volume of their output than they do now.

Once America has well and truly got too much booze in their bunkers (THAT can't be far off, if we aren't there already!), they're going to get a whole lot more picky about what they buy, and fast. I think there are going to be much less middle and bottom shelf purchases, and all of these collectors will only be interested in the top of the line. This is going to be a hard period for distilleries - on the one hand their lower shelfers aren't paying the bills, and on the other hand they've got to come up with more of the hardest stuff to produce. They might try to push their lower brands overseas at this point, but I don't think it's easy to get overseas demand ramped up in a hurry - it's been JBW and Jack internationally for a very long time.

Anything with "bourbon" on the bottle has sold recently, because of all the newbies flooding the stores trying everything they can. I'm not making fun of them - I was one of them a few years ago. When all of this group has 30 or 40 bottles under their belts, their palate development might move them to more specific purchases, possibly hyper-focused on the top shelves. At present, bars and restauarants are well-positioned to take advantage of these folks when that extra-frustrated premiumization wave comes on "I know it was $50 pour, but where else am I going to get the chance to taste..." fill whatever in the blank there.

The craft distilleries may soon be able to help out with this. I can see later on bourbon fans running to this craft distillery and that one chasing "this year's Pappy". But that's still at least 5 years off when they start to hit some 10yr+ product.

Still, like you say, will this extra capacity ever get built? I hope so, because it certainly stacks the deck in the enthusiast of tomorrow's favor. But this bourbon market has shown itself to be getting pretty wild and fast-moving. All that pressure could end up relieving itself with a bang in a direction nobody expects.

I think the people who expanded a few years ago have a much better chance of getting some payback from the results than the ones that are upcoming. But I celebrate any rackhouse that gets completed, because I'll be in there picking in 10 or more years.

Edited June 5, 2015 by The Black Tot

[TunnelTiger]

If international markets continue to develop, we might not see supply meeting demand for a while.

Agree 100% and anyone who works for an enterprise that is developing product for international markets sees it first hand.

[squire]

It occurs to me they can do much more with those new stills than just make Bourbon. True, it takes 4+ years of aging to produce traditional Bourbon/Ryes but much younger stuff can be used as a base for flavored whisky/liqueurs or whatever is trending in the market.

[dboland]

Let us not forget that international markets existed during the last glut, too. They didn't save it then, either. Why would it be so different now?

The international markets now are growing middle classes of 2+ billion Chinese, Thai, Vietnamese, Indians, and others who did not have wide access to U.S. spirits nor the disposable income 15-20 years ago. In many of those developing markets, U.S. products are often seen as premium/luxury brands, so a seller doesn't necessarily have to discount a lot to make money.

I don't know all the intimate details of international liquor trade however the nature of the new markets is very different from the slow-growing Europe and Japan of decades ago.

[squire]

These new markets did exist the last time we had a Bourbon glut, though I expect in a much diminished capacity than what we have today. What we may well see however is market collapse when a specific Country falls on hard financial times. I recall Jim R. stating in an interview one of the reasons Four Roses Straight Bourbon was reintroduced into the US was because the economy tanked for some of their European customers.

Edited June 5, 2015 by squire

[tanstaafl2]

These new markets did exist the last time we had a Bourbon glut, though I expect in a much diminished capacity than what we have today. What we may well see however is market collapse when a specific Country falls on hard financial times. I recall Jim R. stating in an interview one of the reasons Four Roses Straight Bourbon was reintroduced into the US was because the economy tanked for some of their European customers.

Not sure it was that specifically that led to it being reintroduced but the downturn in Greece and Spain in particular as I recall allowed them to have the volume of aged spirits to keep the mad rush of the past few years going. They are reaching the end of that bolus of unexpected inventory and are now likely to face some of the same issues that other distillers have.