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Your Ongoing observations for the Upcoming Glut

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Harry in WashDC

Nice observation and summary, FP.  AND, I say that as I sit here and contemplate my multiples of  KC 9yr, OGD 114, and Booker's that have a good five or more years' dust on them.

 

Speaking of bubbles, anybody remember FRBdChair Alan Greenspan's "irrational exuberance" speech?  How about the mortgage-backed securities rise and fall (ENTER Hank Paulson at the end of the W Administration)?  DOTCOM, anybody?  Going back to the early 1980s, anybody else sleep in their office while "the thrift crisis" was in progress?  How about the 1987 NYSE market drop?  Some of us lived those bubble pops which is why I have jars full of Susan B. Anthony dollars buried in the back yard.  JUST IN CASE!!:rolleyes:  Not really, but it makes a GREAT, SCARY story.B)

 

EDIT #2 - Uh, those things were just money.  BUT, with bourbon and rye, I DO have stuff squirreled in the bunker in order to protect me from the Apocalypse. :D

Edited by Harry in WashDC
To clarify what obscure econ events I mentioned.
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BrokeCal

I know the whole FC thing is off topic, but I Noticed on HH's website it states that FC is aged 6 years!! So.... Did they quietly bring back the 6 year age or is it just an outdated web page?  Hard to believe it would have gone unnoticed this whole time.  It became NAS in 2015!

4296AE33-A2AF-462B-B941-BA438154947F.jpeg

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PaulO

There is a book - The Wealth Of Nations by Adam Smith 1776.  He explains how markets react.  I agree with a lot of what Black Tot says, as far as what dovetails with Adam Smith.

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GeeTen
38 minutes ago, PaulO said:

There is a book - The Wealth Of Nations by Adam Smith 1776.  He explains how markets react.  I agree with a lot of what Black Tot says, as far as what dovetails with Adam Smith.

 

I took Economics (14.01 - everything at MIT has a number, even the rest rooms!) from Paul Samuelson as a sophomore in 1967.  Does that count?   Just askin'.   😅

 

 

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Harry in WashDC
2 hours ago, GeeTen said:

 

I took Economics (14.01 - everything at MIT has a number, even the rest rooms!) from Paul Samuelson as a sophomore in 1967.  Does that count?   Just askin'.   😅

 

 

Is there anybody who took ECON 101 in college who did NOT use his book?  BTW, the first edition (1948) is available in paperback as a reprint, and the 20th was published in Jan 2019.  My copy hit the recycle bin YEARS ago.  EDIT - Yeah, reading his book is not the same as hearing him live, but I fell asleep with the book; wouldn't want to do that with the Prof.:rolleyes:

 

ON THREAD - tomorrow can't come soon enough - I have my itinerary all mapped out while my wife picks up groceries.  The boom shall get a nudge up tomorrow.

Edited by Harry in WashDC
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smokinjoe
11 minutes ago, Harry in WashDC said:

 

 

ON THREAD - tomorrow can't come soon enough - I have my itinerary all mapped out while my wife picks up groceries.

 

The boom shall get a nudge up tomorrow.

This is as beautiful as it gets.  😂

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PaulO

Before my son interrupted me, I was going to say - we can't expect all the companies to react the same.  During the last glut, Beam made all those collectible decanters.  Other companies got bought out, or went out of business.

I bet a lot of "craft" distilleries will go out of business this time.

Also, I predict the major companies will keep the numbers of their high price brands relatively low.  It's an artificially low supply even now.  That's how it goes with luxury goods.  

I'm all for returning age statements and good deals.

One final thought - what's a distillery to do when the warehouses are all full?

I figure they have to make room one way or the other.

They can't lay off all the production people indefinitely and stay in business.  Meanwhile the barrels age longer and longer, maybe beyond their intended profile.

 

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Clueby
16 minutes ago, PaulO said:

It's an artificially low supply even now.  That's how it goes with luxury goods. 

 

This. For example, Ive often thought why a product like Thomas Handy couldn't be part of a regular lineup. They already have a 6 year rye in Baby Saz.  THH is technically the same thing at barrel proof. There may be some limitations on barrels that match a profile, but there has to be a ton of 6 year + rye in barrels. 

But..THH carries that "luxury" connotation. 

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Old Dusty
20 minutes ago, PaulO said:

Meanwhile the barrels age longer and longer, maybe beyond their intended profile.

 

Which is how we got Saz18, Weller 19, the Ritt 21/23/25 ryes and all of the delicious Bernheim rye that KBD bottled. Part of me hopes some of that serendipity comes our way again. But it will mean layoffs mergers and closures again.  Which are painful for the industry and the people involved. 

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The Black Tot
21 minutes ago, Old Dusty said:

Which is how we got Saz18, Weller 19, the Ritt 21/23/25 ryes and all of the delicious Bernheim rye that KBD bottled. Part of me hopes some of that serendipity comes our way again. But it will mean layoffs mergers and closures again.  Which are painful for the industry and the people involved. 

 

True about the layoffs but there is much more automation now than there was in the last glut. Certainly in the bottling halls.

 

The machines may be running at 1/3 capacity, but they still need the same number or people to run 'em.

 

This doesn't help some of the jobs in the rackhouses though.

 

If I had an 18yr old niece or nephew I'd tell 'em to get a degree in entomology and become the top Kentucky termite consultant.

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The Black Tot
40 minutes ago, Clueby said:

This. For example, Ive often thought why a product like Thomas Handy couldn't be part of a regular lineup. They already have a 6 year rye in Baby Saz.  THH is technically the same thing at barrel proof. There may be some limitations on barrels that match a profile, but there has to be a ton of 6 year + rye in barrels. 

But..THH carries that "luxury" connotation. 

 

THH should already be a 10yr age stated offering with a plan to get it to 12 or, as you say, a regular daily shelfer. 

 

Maybe the new rye large-fermenter megabatches will give us another nice surprise in 2025 in that department.

 

There again, VWFRR sure went awful quiet in recent years...

Edited by The Black Tot

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Old Dusty
22 minutes ago, The Black Tot said:

If I had an 18yr old niece or nephew I'd tell 'em to get a degree in entomology and become the top Kentucky termite consultant.

Agreed. Compromised rickhouse structures are an issue that may get worse and may already be dangerously ignored-depending on who you believe. Howard , the BourbonTruth guy, made an alarmist blog post about it in 2014 IIRC. He re-upped that post after the Barton collapse. 

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Clueby
35 minutes ago, Old Dusty said:

Agreed. Compromised rickhouse structures are an issue that may get worse and may already be dangerously ignored-depending on who you believe. Howard , the BourbonTruth guy, made an alarmist blog post about it in 2014 IIRC. He re-upped that post after the Barton collapse. 

Freddie actually discussed rickhouse construction during our tour at BT and claimed that the red oak used in construction was used due to it's natural property against insects. The claim was that white oak (used for barrels) is sweet while red oak is bitter and naturally insect and critter repellent.

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Old Dusty

I assume as much money as they are putting into new construction and as much money as they have at stake with the barrels inside that they would be taking precautions. But you wonder about some of the older rickhouses. Though I’m sure termites and ash borers and whatever else might chew on wood have been an issue since the first modern rickhouse was built......by A.Ph. Stitzel? It was somebody pretty famous in the industry who started the rack system. 

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BottledInBond

A few mentions of Sazerac rye here including a 6 year reference. It is not currently an age stated product. It doesn’t say 6 year anywhere on the bottle. A few years ago there were still 6 year references on the BT site but they got rid of those now too. So, it is an NAS product.

 

If there is a glut again, I think there is also certainly a possibility that some producers pivot some or even all of there capacity towards producing other beverages as well. If bourbon demand drops it means demand for one or more other beverages is increasing. If it is a different distilled spirit that is gaining in demand like rum/gin/brandy whatever they could also just switch to distilling whatever that is to keep busy and making money. I mean, most of them are part of beverage conglomerates that overall make a variety of products anyway. 

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flahute
2 hours ago, Old Dusty said:

Agreed. Compromised rickhouse structures are an issue that may get worse and may already be dangerously ignored-depending on who you believe. Howard , the BourbonTruth guy, made an alarmist blog post about it in 2014 IIRC. He re-upped that post after the Barton collapse. 

While at Heaven Hill last November doing an EC pick, the barrel program manager answered our question about new rickhouse construction we were seeing by telling us that some of the older ones had become unsafe and they were transferring barrels so they could be rebuilt.

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Kyjd75

During my last couple of visits to Willett this year, they were doing both new construction, and repair of old, rickhouses.  I have to confess that when I was on the 5th floor of one of their rickhouses during a barrel selection, I wondered if the thing was going to collapse while I was in there. LOL!

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bobinbuff

I have watched the popularity of bourbon grow over the years.i bought 5 cases of prohibition bourbon in 2003 .threw it my cellar and drank and gave it away.now i  see 1917 old taylor quarts go for stupid money and a 1921 mount vernon just sold in england for 1500 pounds.sellinv the balance and putting a down payment on a bmw. The old taylor drinks great but makers mark in a sterling julip cup is fine

 

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Richnimrod
5 hours ago, Old Dusty said:

I assume as much money as they are putting into new construction and as much money as they have at stake with the barrels inside that they would be taking precautions. But you wonder about some of the older rickhouses. Though I’m sure termites and ash borers and whatever else might chew on wood have been an issue since the first modern rickhouse was built......by A.Ph. Stitzel? It was somebody pretty famous in the industry who started the rack system. 

'Termites'? Maybe.  'Ash borers?  I don't think so. They only feed upon the cambium layer (just under the bark) of live ash trees, AFAIK. 

The pests I'd be more concerned with are Powder Post Beetles.      ...And ordinary dry rot.

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B.B. Babington

Glut coming when?  Never.

1) folks on this bored drink a lot of whiskey

2) when folks tire of whiskey the global climate change apocalypse will be in full swing with limited fermenting grains available

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Bbstout
On 1/13/2020 at 4:18 AM, The Black Tot said:

 

Can you imagine the board meeting?

 

"We've spent 40 million dollars over the last 6 years on expansions - a lot of it debt financed. Now that the bourbon is ready for sale, we're going to leave it sit in the rack houses and pay taxes on it, and interest on the debt, for five more years"

 

There will be intense business pressure to sell the extra bourbon that has been produced. And the first distillery (and there WILL be one who does it first) to reduce prices will leave the others with no choice but to compete, or lose all their market share and brand loyalty/familiarity.

 

You don't have to imagine a glut of bourbon. You can read about it. It's already happened before. For absolute reals. Ask any distillery worker who's been doing this for more than 40 years if this is a cyclical industry. 

 

All those pictures you see around facebook of people clearing shelves, or even buying 2 or 3 bottles of something at a time and putting it away in bunkers (at various stages of development)? The current sales figures have that kind of purchasing entangled in them. 

 

SB.com members may not reflect the nation's bourbon buying habits in general, but there is no question that even if it is only a tiny fraction of bourbon enthusiasts who are hoarding/building bunkers, the national home inventory of bourbon is increasing, even in this time of apparent shortage. And market observers and distillery expansion planners are treating all of it as though it has been/is being consumed. 

 

Even if there had been zero expansion of bourbon production, and everyone who had a bunker suddenly turned to drinking it down, we would probably be in a production balance. Because the bunker builders are the heaviest buyers, particularly of the LEs and "the good stuff." 

 

It only takes one semi-serious hoarder per 100 or even 200 mile radius to hit all the local stores, buy all the BT products and give what is ultimately a false impression of absolute scarcity. All the producers have to do to fix the bubble is to make enough that those heavy buyers (and the heavy buyers in waiting behind them) hit saturation. Contrary to popular belief, I don't think we're too far from that, in the sense of the mid shelf tater bait such as non-BTAC BT and Booker's, McKenna, ECBP, etc. 

 

The rise and expansion of bourbon bunker building is a fairly recent phenomenon.  Most bunkers, apart from the serious early adopters (many of whom we look up to on this board) were started less than 5-7 yrs ago. The rise in prevalence of discussion about "bourbon zen" is proportional to the rise in the number of people who are now realizing (some with the indelicate assistance of their significant others) that they now have so much bourbon in reserve that they don't need to fear shortages anymore. Bunker building is all about fear (and I say that as someone who has spent the last 9yrs building a substantial bunker). It is fun to do as well, but fundamentally it expresses the concern that availability, quality, and price will never be as good as they are right now. There would be no reason to put bottles away if you thought they'd always be there on the shelves for the same good price.

 

Anyway, the bunker building story has an end. A huge bunker (with everyone's definition of huge being subjective), and the decision that "I have enough". So there will be a point at which, maybe 5-10 years after the onset of bunker building culture, that we start to hit the onset of bunker completion culture. A building wave of zen. 

 

Get the BT products and the Booker's back on the shelves regularly through increased supply, then get their prices down through distillery competition, and the fear drops out of it. When the fear drops out of it, we hoarders, now freed of our insecurities, will turn inwards toward the bunker. Double whammy - extra production meets the cessation of purchases by the highest-volume customers. 

 

Glut.

Well said Tot! Can't argue with history.

Edited by Bbstout

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ThirstyinOhio

It was awfully quite on the Bourbon Trail this past weekend...I know its not peak tourist time but I've been coming to KY several times a year for the past decade and was a bit surprised at just how slow it was.  I was the only one in the gift shops at many of the places that I stopped at and this was on Friday and Saturday.  I know that the Bourbon Trail broke records last year but even the Bourbon Festival felt a bit light in attendance.  I think we've hit full market saturation here in the United States and there aren't too many more people left to "introduce" bourbon to....except maybe those who are turning 21.  I think we will start seeing a lot more of the mass produced stuff lingering on shelves and people passing on the "ultra premium" $200+ offerings that are produced in the thousands of bottles, like the recent Angel's Envy Cellar Collection and Kentucky Owl Bourbon bottles.  I'm not expecting to start finding PVW, BTAC, or even Birthday Bourbon on the shelves anytime soon but I think we are all going to have a lot more choices in the near future when we visit our local spirits purveyor.  

Edited by ThirstyinOhio
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flahute

Last week was mid winter break for a lot of schools and a lot of people were on vacation somewhere warm. Traffic here in Seattle was amazing. You could actually move around. This week it’s back to gridlock. I suspect that had something to do with light attendance last week. 

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The Black Tot
On 2/27/2020 at 10:38 PM, ThirstyinOhio said:

It was awfully quiet on the Bourbon Trail this past weekend...I know its not peak tourist time but I've been coming to KY several times a year for the past decade and was a bit surprised at just how slow it was. 

 

Totally Coronavirus. Boom is still on full march.

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