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Other Interviews & Round Tables Classics:
Rye Roundtable |
Independent Bottler's Roundtable
Bourbon Roundtable Part II
by Lew Bryson
We had a chance to call a rare gathering of bourbon producers together at the Chicago WhiskyFest in March: Craig Beam (Heaven Hill), Lincoln Henderson (Woodford Reserve/Brown-Forman), Elmer T. Lee (Buffalo Trace), Fred Noe (Jim Beam), Jimmy Russell (Wild Turkey), Bill Samuels (Maker's Mark), and Julian Van Winkle (Van Winkle Distillery). After they were all done saying hello to each other (some of these guys have been friends for years, remember), we asked them some questions we'd been saving. We've split the interview into two parts we called How and Why. We ran How, the part about making bourbon, in this issue. Next issue we'll run Why, which is more about bourbon's image and these people. Enjoy, cheers!
Bourbon distilling has a tradition of tradition, doing things the way they've always been done. But automation has come in, stainless steel's replacing cypress... What has changed, and how do you know what's safe to change when it sometimes takes four years to find out what's changed?
Lincoln Henderson, Brown-Forman: You can pretty much change a lot of things in the beginning, and right away, in five days, seven days, whatever, you can pretty much judge what that whiskey's going to be like after it matures. I mean, it's not rocket science. But you can make specific changes, and when that whiskey comes off the stills, if that whiskey tastes different, you know it right away. You just take care of that later on, and then you go back to the way you should have done it in the first place!
Bill Samuels, Maker's Mark: The other thing is, fortunately, with the emergence of bourbon onto the market, those who have skill sets are more indispensable than they used to be. They're more valued to the company. So while technology may be coming on, a lot of the old farts are still around.
Jimmy Russell, Wild Turkey: [whispering to Elmer Lee] He's talking about you now.
Elmer T. Lee, Buffalo Trace: Yeah, he's talking about me, isn't he?
What parts of the job are really done by hand and probably will not be automated? Obviously, the sensory part, but is there anything else? Barrel management: some people, the Canadians, for instance, are doing palletization of barrels. Is that going to come in?
Lincoln: We've looked at it. Jimmy, you've looked at it, Beam-
Jimmy: We've looked at it.
Fred Noe, Jim Beam: Palletized houses, yeah, we've got a couple of them. We're looking at it, we've got some.
Lincoln: We're always looking at it.
Fred: But the thing is, when it comes to Booker's bourbon, we can't put that in a palletized house, because he wants it on the fifth or sixth floor. Certain bourbons are going to have to go in the 9-story houses. Jim Beam White Label, that's pretty much what we're working on in the palletized houses.
Julian Van Winkle, Van Winkle Distillery: If it ain't broke, don't fix it.
Craig Beam, Heaven Hill: That's right.
Lincoln: If you go to L&G, you look at it like, oh, this is the old way. But you go on the other side of the wall and you've got the computer controls. I think today we probably make better whiskey than we ever made a hundred years ago, because we can control it.
Fred: Control's a lot better, that's what we've got, it's more consistent from time to time.
Bill: The control's better and the margins are higher, which means the incentive's higher. It really is a combination of good things all coming together at once.
Jimmy: The controls we've got now, if something starts going wrong, we know about it in 24 hours, where it used to be, might be 24 days. But we can control that better with the systems we have now.
John Hansell, Malt Advocate publisher: How much of the improvement in the quality of the whiskey can be contributed to an overall better knowledge and control of wood management?
Lincoln: I think we're still trying to control it. We've made some steps at Bluegrass Cooperage in the past two years that-the thing we really want to control, and I've pushed this for about 20 years, is the toasting of the barrel. Because it was just hit and miss. The only thing that would save you is that you'd put enough barrels together to take care of the variation. But when you're only making 50 barrels a day, or whatever, it's kinda bad. So we have a process that we've worked on for about five years to really control that. But that's a small part of it. A lot of things we can't control. You can control where the wood comes from, but that wood's not always going to be the same.
Bill: I would suggest that we've been kind of pushed into it by demanding customers. I mean, the market is just 1,000% different from when this one, and this one, and your grandpappy [nods to Elmer Lee, Jimmy Russell, and Julian Van Winkle], Booker [Noe] and all of them were in it. It's just a much more discriminating market. Fortunately, bourbon makers have responded. And the accounting people have moved off to the side. Which has been a good thing.
[Laughter.]
Julian: I find at these tasting events... It's obvious how many different whiskeys are in a room. You want that group of people that like your flavor profile, but they're so discriminating because they've been introduced to so many different flavors and options out there. Bill's right, you have to kinda find that group that likes your product. But they're very sharp. They can pick up nuances that people years ago weren't looking for, I don't think, not in a bourbon. But we have all these different proofs and recipes and so forth, and aging and char levels and so forth, that make a difference, and people are getting pretty sophisticated. Which makes it fun.
Jimmy: Years ago, I don't think people was educated about bourbon a lot. Nowadays people are educated. They know what they're looking for, they know what you're talking about. Don't y'all find that when you ask them?
[General agreement.]
Jimmy: Used to be, they didn't have any idea. There was whiskey, that was it. Dark whiskey.
Bill: They weren't educated because they didn't care.
Elmer: It's partially our fault, we weren't out telling them about it.
Fred: Traveling around doing tastings and stuff, it's amazing some of the things you hear.
Jimmy: A lot of these people are well-educated.
Lincoln: You'll see that tonight [at WhiskyFest]. These people ask questions, and you'll think, "Where in the hell did you come up with that?" [Laughter.] Now when did you start [WhiskyFest], in New York?
John: 1998, five years ago.
Jimmy: At that time, a lot of people didn't know. Tonight, you'll get questions you wouldn't even think about somebody asking about the bourbon business.
Corn's the heart of things, but corn's changed a lot since bourbon started being made, especially in the past 50 years. I realize it's always tricky to speculate on what bourbon used to be, but has that difference in corn affected anything, or is it mostly a matter of efficiencies?
Elmer: In my opinion, the corn has not affected the quality over the years. It's still pretty much the same as it was 50 years ago.
Lincoln: You're just looking for clean corn that's got a lot of starch in it.
Jimmy: I think we're all looking for the same thing: the bushel weight, the moisture, cracked and damaged kernels-
Elmer: Trash.
Jimmy: Right, trash, don't want anything like that. I guess I've been in, well, not as long as some of you, but I haven't seen that much change in corn. We're having some problems nowadays in corn that I don't like to get into, but-
Bill: Well, it's a fact. It's a perception, a European perception.
[Numerous]: GMO [Genetically Modified Organism]. Yep. GMO.
Jimmy: Same reason I don't like to get into it. We're not using any of it. We're getting certified, and we're not using any of it.
Craig: We use a little bit of both, GMO and non-GMO, just because that's the way a lot of the farmers are starting to go towards.
Bill: Are you able to keep it separate?
Craig: No, we don't.
Jimmy: The thing about that is, I know one of the growers close by, most all of you know him, on the other side of Bagdad [Kentucky], he planted a hundred acres of GMO-free corn last year. [Pause.] Every bit of his crop showed up GMO.
Lincoln: Because it came from trucks somebody had -
Jimmy: No. In pollenation, they say it'll travel for miles -
Bill: In the air.
Jimmy: Yes. You find that?
Lincoln: Yeah. Yeah.
Jimmy: And some of the foreign countries are making you state...Did y'all have to send any of them statements? We have. We know from experience, Lincoln, you can verify on this more than I can...it does not distill over.
Lincoln: No.
Jimmy: But they're saying, if it's made from it, that you gotta state it. Not whether it's in the product or not, but if it's made from it.
Bill: That's the politics of the situation.
Craig: About two years ago we ran about a six-week program on GMO, and we just marked it on the barrels in case something came up about it. It was just to see if we'd see any difference in the yield, which really we didn't. As it came to find out, we had a lot of suppliers that already had GMO. Some of them I didn't even know it was GMO. So we just marked it on the barrels, just as a trial period.
Bill: Well, let's just not talk too much about this stuff, because half our customers don't even know it's an issue.
Jimmy: No, but if you go away from here, that's the first question you get.
Lincoln: People afraid they're going to become mutants.
Bill: If it was an issue, if we even suspected it was an issue, we'd deal with it. Collectively, not as individuals. And we are 100% certain that it is not a health issue.
Let's talk about four grain bourbons. Is it just not done because it wasn't done, or is somebody working on it, or...wheat and rye bourbon.
Elmer: Four grain bourbon, no. We're not working on it.
Jimmy: Lincoln's shaking his head, so I guess they are. Nobody else is.
Lincoln: The only reason I wouldn't do it on a regular basis is because it's just a pain in the butt. But the discriminating whiskey drinker, they're going to start looking for different things. So if you add another grain, do five grains. But it's really gonna be a mess. We've done a lot of work on that. I wouldn't recommend doing it on a big-time basis.
John: Why is that?
Lincoln: Because it doesn't affect your flavor that much. Now, if you're using wheat instead of rye, that's going to be a significant difference. But if you're using 70% corn, and so much rye, so much wheat, and so much malted barley, it's not going to have a significant effect on your taste.
John: That full, spicy characteristic from a rye bourbon, and that nice, smooth, mellow characteristic you get in a wheated bourbon: why should you have to compromise one for the other? In some ways the bourbon industry has been behind the curve in progress, compared to the Scotch whisky industry, and it's because of tradition. If it's not broken, great, but that doesn't mean it can't get better. I talked to [bourbon historian] Michael Veach about this, and his answer was that bourbon was traditionally a three-grain whiskey, and that's the hurdle that's been difficult to get over. Am I wrong?
Lincoln: Well, I think you can make more significant impact on the whiskey doing other things, than doing four grains. I mean distillation, your yeast, fermentation, the wood, whatever.
Elmer: Recipe. And age.
Lincoln: And even if the whiskey...it's going to be good whiskey, regardless. That's the only thing. It's going to be a different style of whiskey, but I don't think it's going to be that much different.
Julian: I think it would be more of a novelty that you'd put out for a special selection of customers that wanted a four-grain bourbon. Again, you could gear your marketing towards it, and you could sell it, I guarantee you. Because I know, people will drink anything, there's some stuff out there, and I'm not talking about just whiskey!
John: It's ironic, though, because all of you making wheated bourbons say it's so good, and different, and all that, and everyone who makes a rye bourbon makes their case that that's a positive thing. You can't say it doesn't matter, because it does, and you're telling everyone it matters.
Bill: That's not it exactly, John. First, I would say, one of the great things about this country is free enterprise. If it's such a good idea, then somebody will go do it. That's the way capital flows, to good ideas. And it hasn't flowed in that direction yet, just for openers. The second thing, some of us, certainly this one, has built his brand without telling people about the nuts and bolts, but doing it from an outcome, from an experience perspective. What we've found is that the design of our whiskey, bringing softness and gentleness in, it's making a market among young, professional females. Now why would I want to walk away from that? Because of all the e-mail I get, and I'm getting all these women calling, and it's wonderful! [pause] I'm just kidding about that part.
John: So the tradition remains. Okay.
Bill: Well, no. It's [a question of], what value do you get out of it? And these guys probably know a lot more than I do about this stuff, and they're saying [no], and they're not as traditional as you think. Look how fast everybody turned on a dime. Bourbon does not mean what it meant 15 years ago. It's a totally different market. Think how much trouble the blended scotch industry is having turning to new customers, young professional, urban customers. These guys have done it.
When I think about progressiveness, I think about being able to respond to real market interests. I'm as proud as I can be of all of us. Because I know, anybody who was here, trying to fight through what this industry had to go through to get out of Prohibition-and that was a bitch-and to get out of those two years being shut down [during World War II], and to get out of having the Daniel Boone image wrapped around you for two hundred years, and to come out the end with something that is perceived and actually is as sophisticated as the products we're all producing now...I think it's absolutely a miracle.
Jimmy: Getting back to changing the grains...You only got 100% you can work with. And you start changing grains, something's got to be cut back, and then you're going to change the profile and the taste of your product. If we change our whole formula and start making it different, if people don't like it, I've got eight years' supply sitting here, I'm not going to change back in three or four months.
Bill: That's a big point, too.
Lincoln: I think it's more important that we change our positioning. I've seen in the past few trips to Europe that the young people, and the young bartenders, are selling the heck out of bourbon. They're doing cocktails, very little on the rocks stuff. The image of bourbon is changing for these young people. You couldn't sell bourbon to a young person 20 years ago. I don't think it's necessary to change the product, just change the image, the positioning.
Bill: It's already changed.
Lincoln: That's right.
Bill: There's no question that our challenge is to capture the opportunity that already exists. We're the next great thing to happen in the industry. It's going to take a while, but it's well on the road.
How much of the flavor of bourbon is coming out of the wood?
Bill: Well, a lot.
Fred: Look at white dog and compare it to the whiskey.
Lincoln: We say anywhere from 60 to 70, 80%. I don't know if that's true or not, but it's a significant percent.
Julian: That's kinda what I use, as far as telling people what I believe the barrel does. Plus, as your whiskey gets older, you're really getting more from the barrel.
Jimmy: But, you know, if the flavor's not there going in the barrel...the barrel's still not going to do that much for it. But if you've got the basics going into that barrel, it is 70 to 80% of the final product.
So you can't put neutral spirits in there and get...
Elmer: No.
Jimmy: No, no.
You'd get wood-flavored vodka.
Jimmy: Right.
Lincoln: You'd get a nice product...
Jimmy: You'd get a decent product.
Lincoln: ...but it wouldn't be bourbon, I mean it wouldn't taste a whole lot like it.
Jimmy: It wouldn't have much flavor to it.
Bill: Our product, Maker's, was designed for that balance to be fifty-fifty. Deliberately. Of course, the test is when the wood gets in such concentration that it begins to bring the finish back, when it starts to dominate. That's when we get it out of the warehouse. Dad's idea in the very beginning was fifty-fifty, the relationship between the impact of the alcohol flavors and the wood flavors. And like somebody said, in order to be really interesting, you need to have some considerable flavor of the new whiskey, which bourbon has to a much greater extent than the other whiskies in the world.
Lincoln: That's what I tell people. Somebody asks me the difference between Maker's Mark and Old Forester, I say, well, they're different styles, but I think Maker's Mark doesn't believe in getting a lot of wood. It's sorta that balance. Where Brown-Forman likes the wood. Hey, throw that stuff in there, man. But that's a different style.
Jimmy: Different style, and you know all of us are located in different areas, where the storage buildings are. Depends on where the buildings are, that has a big difference on the aging process, too. If you're up high on a hill, like we are, lot of wind, air circulation, open all those windows, we're going to get a different aging process than somebody in other locations.
Is there a lot of effect from different weather from season to season? I remember I was out in Kentucky about four years ago and there was a heck of a drought going on. Does that have much of an effect?
Jimmy: You mean on the aging, or on the grain?
On the aging.
Jimmy: No.
Bill: Worse than that is the drought's effect on the timber, that's the real impact.
Jimmy: Yes. That's the big impact.
Bill: That's got us all scared to death.
You're talking about the trees growing...
Bill: Right, we're talking about the trees being impacted, which affects the quality of the barrels...
Julian: You can look at the cross-cut of a stave, cut in half, and you see this little thin layer, then a thick layer, then another thin one, that really effects the flavor of the whiskey. Because the wood's going to age that whiskey different.
Bill: It's going to penetrate differently, and that's going to be effective. And it's going to leak a hell of a lot more.
Lincoln: You look at the French oak...We actually make wine barrels from timber that's up in the north, Minnesota, it's a totally different density. You have to watch that, too, because you'll lose more whiskey through that light dense wood.
We talk a lot about things the industry has going for it. Things are better, but what's the greatest challenge the industry faces?
Bill: Taxes. That would have to be it. Yeah, I really think so. Because they're more likely to put differences between distilled spirits and beer, distilled spirits and wine. That's a concern. If we were on a level playing field with 'em, it would be a lot different, but I'm scared to death of that. Over the next five to ten years time, not tomorrow morning.
You think that puts you at a disadvantage, competitively?
Bill: Against beer and wine? Oh, yeah. And against alternatives.
John: So the Distilled Spirits Council's push for equalization, you're behind that, whether you're members or not?
Bill: You should be.
Elmer: Even though I agree with you 100%, Bill, I think it's going to be a hard sell.
Bill: To equalize? It's an impossible sell, unfortunately. It is absolutely insane to think the government ought to be making social policy on what form Americans ought to choose their beverage alcohol in. That's just Logic 101.
Fred: Alcohol's alcohol, what's the difference?
John: The way that spirits get this bad rap really pisses me off.
" Hard liquor."
Jimmy: It's hard liquor, that's it. I speak for Kentucky; I'd say 90% of the drunk drivers caught in Kentucky is beer drinkers. But no, it's the hard liquor that makes 'em crazy, that's all you ever hear about.
Lincoln: The image of drinking beer is different than whiskey. If you have a couple whiskey on the rocks, that's enough, but you probably think you can have ten beers and that's okay. I think one thing that's happened in the last few years, is that the image of bourbon has changed. And drinking responsibly, and they're bringing up the health issues.
Bill: And we're winning some of the health issues.
Lincoln: I never thought I'd see it.
Jimmy: I'd go back to like we said at the start, Bill: the education, people are beginning to understand when I talk about whiskey. They're better-educated than they were 25-30 years ago.
How much do you pay in taxes?
Jimmy: Two-thirds of every bottle is taxes, just about.
What's the story with the ad valorem taxes?
Elmer: Valorem, that's just like you pay tax on your home, and everything else, any property you own. It's a property tax. It's evaluated at so much every year.
Lincoln: It's less than it was.
Jimmy: It's less than it was, but it's still high!
Lincoln: We used to move our whiskey over to Indiana and keep it there for four years, then move it back to Kentucky. We saved a lot of money.
Bill: [Governor] John Y. Brown did it.
Jimmy: John Y. Brown was really the one that lowered it.
Bill: It's just one of the taxes, but it's the most odious, because what it does... There was a court case, way back in the 1960s I think it was. Ad valorem tax is a tax on finished goods. The Supreme Court of Kentucky decided bourbon was finished the moment it was made, produced, at the distillery. So therefore, we not only pay the ad valorem tax, if [the whiskey] is in the warehouse six years, we pay it six times.
The full tax, every year?
Bill: Six times.
Jimmy: December 31st of every year.
Bill: Even though we can't sell it as Kentucky straight bourbon until four years. So that's probably the sandpaper that just gravels everybody's ass.
Jimmy: The other thing is, you know how everything else, the older it gets, it depreciates in value? Not bourbon.
Bill: Absolutely. It's the only thing that gets higher, in the whole United States.
Jimmy: December 31st of every year, we have to turn in an inventory to the State of Kentucky: how many barrels we have of each year's age. They assess it at so much value, and you pay a county and state tax on it. You keep it 12 years, and you're going to pay that tax 12 times.
Julian: Up to eight years it's one rate, then eight years and older it's a different rate.
Jimmy: And it's higher! It's higher for the older whiskey.
Julian: And you've got less whiskey in the barrel, too.
Lincoln: I think we need another Whiskey Rebellion.
Julian: Which river we gonna go down after this one?
Jimmy: No nonononono! We done paid enough for the river! [Referring to fines paid after a large whiskey spill into the Kentucky River during a fire at Wild Turkey in 2000.]
Lincoln: The tax is about $26 a case, isn't it?
Jimmy: It's $13.50 of federal government tax for each proof gallon. Then you gotta add in state and county tax for every year it's been sitting there aging. Then when it goes to the wholesalers, depending on where they is, they're going to pay a tax.
Elmer: What is that in Kentucky now, the wholesaler's tax, about $3 a proof gallon?
Julian: $4.62 a case of 750s, whatever that comes to.
Jimmy: You can just about figure that when you buy a bottle off the shelf, of spirits, between 60 and 65% is taxes. So we're selling a cheap product, take all the taxes off it.
Bill: The real threat is that every state, except five, in the country, are in huge budget deficits. We're up at or near the head of the list of consideration for tax increases in many, many of those states. And that's a concern.
Jimmy: That thing's been proven many times over the years: every time they've increased taxes on spirits, they've actually lost money.
Sales go down?
Jimmy:Sales go down, but not only that. You look at all the employees, their taxes... Just about every time, it ...I better not even say this, but-
Bill:Jimmy, you're starting to sound like a Republican, God love you. I believe that's a canned speech, you don't have any Republicans in your part of Kentucky, do you?
Jimmy:Lawrenceburg? No. We're all independent over there. That's the thing, though. If you go back and look, every time they have lost money. But like Bill says, we haven't had an increase for...
[Numerous innocent looks and fingers to lips: "Ssssshhhhh."]
Jimmy:Because they look at it, and they go back and see what happened the last time.
Bill:We haven't had one at the federal level, but the reason was, the revenue dipped dramatically for several years after the last one.
Jimmy:That's what I'm saying.
Lincoln:I don't think they really care. It's a political thing. "We're going to raise taxes on alcohol!"
Jimmy: "That's sin!" That's what they call it, the sin tax.
Elmer:That's just another attack by the Drys. "Tax it out of existence!" That's one way to get rid of cigarettes.
Jimmy:They won't say that in Kentucky about cigarettes.
Bill: No, they won't.
Fred: You remember Kenny Lafer, he wanted to put a tax on soft drink syrup in the state of Kentucky? They about run him out of the state. He said, "Y'all have about taxed the bourbon industry to death. Why don't we tax soft drinks, that's a luxury item."
Julian:Some of the estimates on state tax increases are like 200%.
Bill:It's an easy hit. They don't generate much money from it, though. Within the scope of the size of their budget deficit. But it's an easy hit.
Jimmy:I'm gonna get in trouble for what I'm gonna say-
Bill: Well, then, don't!
Jimmy:They ought to equalize the taxes on spirits.
Julian:Well, sure.
Equalize the rates with beer and wine, you mean.
Jimmy:I know I'll get in trouble if I say that, because all of us is in the wine business!
Bill:That as really one of the worst things. Your grand-daddy was involved, Dan Street was involved, Jere Beam was involved, my grandfather was involved. After Prohibition, we agreed to those things, which have now become discriminatory. Voluntarily staying off the broadcast [media], limitations in access to markets, certain stores and all this. Different set of regulations for distilled spirits vs. beer and wine. And that was voluntarily agreed to, mainly by the Kentucky distilling industry at that time. So we put it on ourselves, in what, 1936, 1935.
Jimmy:I wasn't there, you was.
Bill:That's about right. No, whenever they wrote the act, 1934, 1935. And we're still paying for it. We have huge tax discrepancies. It's not going to get any better.
That's where things end this time. We'll pick it up again in the second half, next issue.
Click here to continue with Part II.
Other Interviews & Round Tables Classics:
Rye Roundtable |
Independent Bottler's Roundtable
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