Each week, we bring you the latest whisky news on WhiskyCast. Now, we’ll be bringing it to you as it happens here on our News Updates page!
September 22, 2014 – A Chicago-based law firm has targeted Iowa’s Templeton Rye as the first whisky brand to face a class-action lawsuit over allegations that it misrepresented its whisky’s origins. Edelson PC launched a web-based campaign in August looking for consumers to represent in legal action against Templeton and other “small-batch” whisky producers, and filed its first suit in Cook County Chancery Court September 9 with Christopher McNair as the lead plaintiff.
In McNair’s complaint as reported by Courthouse News Service, he claims that he bought more than a dozen bottles of Templeton Rye between 2008 and 2014 based on the belief that the whisky had been distilled in Iowa, according to the distillery’s own marketing materials. As Templeton’s founders have told WhiskyCast for many years, the whisky is distilled at the MGP distillery in Lawrenceburg, Indiana, but blended and bottled in Templeton, Iowa, where the company maintains a small distillery that has been used primarily for tours. From the filing:
“If plaintiff knew that Templeton Rye was not made in Iowa but was distilled and aged at MGP’s facilities in Indiana, he would not have purchased Templeton Rye or he would have paid less for each bottle.”
Templeton founders Scott Bush and Keith Karkhoff said in last week’s episode of WhiskyCast that they are working on plans to build a larger distillery in Templeton with a goal of replacing the bulk whiskey supplied by MGP-I with their own recipe. They also have committed to changing the Templeton Rye label to include “Distilled in Indiana” as required by federal regulations for whisky producers based in a different state than where their whisky is distilled.
MGP is the former Seagram’s Distillery in Lawrenceburg, Indiana, and produces bulk whisky, vodka, and other spirits exclusively for sale to independent bottlers and producers. Its whiskies are used in Diageo’s Bulleit Rye and George Dickel Rye whiskies, as well as some of the bottlings from High West, Redemption, and other small whisky producers. The lawsuit claims Templeton is misleading consumers by claiming to be a “small-batch” handmade product, when it actually comes from a large commercial distillery’s standard recipe.
No court date has been set for a hearing in the case, though the Chancery Court’s docket lists a “case management” conference for January 7, 2015. WhiskyCast has contacted McNair’s attorney, Amir Missaghi of Edelson, along with spokesmen for Templeton Rye.
This story will be updated as we receive additional information.
Editor’s note: Court filings in civil cases only represent one party’s side of the story, and civil courts allow each party time to file a response to filings made by other parties in the case. As of this posting, Templeton Rye’s lawyers have not yet filed a response to the claims made in the McNair lawsuit.
September 22, 2014 – Scotch Whisky exports fell 11 percent during the first six months of 2014 from the same period in 2013, according to new figures released today by the Scotch Whisky Association. The total value of Scotch Whisky exports for the period was £1.77 billion GBP ($2.89 billion USD), down from £1.99 billion in 2013, based on data from HM Revenue & Customs. The decline is being blamed on several factors, including economic uncertainty in several key markets, government austerity measures in China, and the strength of the British Pound on currency markets.
In a news release, Scotch Whisky Association officials described the downturn as a “leveling off” of demand, while remaining optimistic about the industry’s long-term future. SWA chief executive David Frost said “we are confident that Scotch Whisky will continue to grow in the long-term as markets stabilise and new ones, such as emerging economies across Africa, open up. However, it is clear that in the short-run that there are economic headwinds affecting exports. The latest figures also act as a reminder that the success of Scotch Whisky can’t be taken for granted. We need support from government to beat down trade barriers and help us access new markets overseas.”
The announcement comes days after Scottish voters rejected a break with the United Kingdom, a position that received tacit support from the SWA and stronger support from several industry members. SWA executives and corporate leaders had suggested that an independent Scotland might face problems joining the European Union immediately, with the potential to lose tariff-free export status with key European trading partners. As an example, today’s SWA report cited continued growth in France, where the value of exports grew by 6 percent during the first six months of 2014 to £211 million GBP ($345 million USD), cementing France’s place as the second-largest export market for Scotch Whisky behind the United States. France is the top-ranked market by volume, with 86 million bottles of Scotch Whisky exported to France during the reporting period.
Scottish Cabinet Secretary Richard Lochhead said in a statement that “Scotch whisky is an iconic product, though I recognise is not immune from wider current economic difficulties across the globe. I welcome the industry’s confidence in the long term future of Scotch Whisky, and its continued commitment to £2 billion of capital investment in Scotland.”
Exports to the US dropped sharply during the period, with a 16 percent drop in value to ¢327.7 million GBP ($536 million USD) and a 12 percent drop in volume to 54.7 million bottles. China’s anti-extravagance campaign led to declining imports of Scotch Whisky, with Brazil, Mexico, and Singapore also reporting declines. Singapore is significant because it serves as a regional transfer hub for shipping, and much of the whisky shipped through Singapore is destined for other Asia-Pacific markets. It should be noted, though, that some of that traffic may have been routed through the United Arab Emirates, where Dubai has become another major transfer point for shipments to Asia, Africa, and India. Exports to the UAE rose 54 percent during the period to an estimated £54 million GBP.
Other markets reporting gains in export value included Taiwan (39%), India (31%), Japan (18%), Canada (5%), and Australia (4%).
Links: Scotch Whisky Association
September 21, 2014 – After losing an initial round in New York Supreme Court and facing more costly legal battles ahead, Diageo has reached an agreement with The Explorers Club to settle the group’s ongoing lawsuits over Diageo’s use of the Explorers Club name on a line of Johnnie Walker whiskies. In August, Manhattan Justice Charles Ramos issued a permanent injection barring Diageo from using the Club’s name on the travel retail range, citing a New York state law banning the commercial use of established names for “benevolent, humane, or charitable” organizations without permission. Diageo had appealed the ruling, and also faced a separate trademark infringement suit in federal court over its use of the name. Talks between the two sides had broken down before the range was launched in late 2012.
In a news release issued late Friday, both sides announced that Johnnie Walker will become a corporate sponsor for The Explorers Club through a global sponsorship and licensing agreement. In the release, Johnnie Walker Global Brand Director Guy Escolme said “this collaboration with The Explorers Club brings the history and importance of exploration to life and allows us to share our joint passion for exploration and discovery. The Explorers Club is leading the way in world exploration, and we are privileged to be able to join them in this extraordinary effort.”
The club’s 3,000 members range from mountain climbers to astronauts, and past members have included legendary explorers such as Sir Ernest Shackleton. Explorers Club President Alan Nichols said in the release that “we salute Johnnie Walker for joining with us in furthering the quest for knowledge through exploration and discovery, which holds the key to all human progress. With this new and exciting relationship, The Explorers Club will be able to enhance its grant programs, further develop its highly successful lecture series and educational events, and expand its role as the World Center for Exploration.”
Terms of the agreement were not disclosed, but likely include royalties to be paid based on sales of the Explorers Club range in travel retail outlets worldwide. In the April court hearing before Judge Ramos, those sales during the first year of the Explorers Club range were estimated at $50 million USD.
Johnnie Walker has also decided to end its longtime support for the McLaren Formula One racing team, according to the Mirror, which placed the value of the sponsorship package at £155 million ($252.4 million USD) annually in a story published today. The brand will remain in Formula One by shifting that budget to become the official whisky of the series.
September 19, 2014 – After a sleepless night of waiting for returns from around Scotland, Scotch Whisky Association leaders are praising the stability that will come from a rejection of the independence referendum. 55 percent of Scottish voters cast ballots opposing a break from the United Kingdom, and First Minister Alex Salmond has accepted the defeat while calling for Scots on both sides of the issue to unite.
“Something like 85 percent of Scots actually voted, which is an incredible turnout and shows just how important the debate has been,” David Williamson of the Scotch Whisky Association said in a telephone interview Friday morning. “We have 55 percent of Scots voting to stay in the United Kingdom, and that from the Scotch Whisky perspective is welcome in that we’ve raised issues about potential business risks from Scottish independence and we welcome the stability that the decision this morning brings.” The SWA’s main concern in the weeks leading up to the election centered on an independent Scotland’s ability to maintain uninterrupted membership in the European Union. A break in that membership, which was not guaranteed, would have affected the tariff-free status of Scotch Whisky exports within the EU, along with the protected status Scotch Whisky enjoys against counterfeiting.
UK officials have pledged to move forward with granting increased control over Scottish affairs to the Scottish Government and Parliament based in Edinburgh, and the BBC reports Prime Minister David Cameron has acknowledged that England, Wales, and Northern Ireland must have similar powers granted to them as well. Cameron has appointed Lord Smith of Kelvin to oversee negotiations on taxes, spending, and welfare, with basic agreements to be in place by November and draft legislation ready for Parliament by January.
Williamson said the SWA will take an active role in the talks. “We’re looking forward to working with all parties going forward because this is a big industry in Scotland…we’re the second-biggest industry behind oil and gas, and it was important that we made our views known…but Scotch is going to be a major cornerstone of the economy going forward, and I think we’ll continue to work well with politicians from across the political spectrum.”
Links: Scotch Whisky Association
September 17, 2014 – Ireland’s newest distillery has opened as William Grant & Sons dedicated its Tullamore D.E.W Distillery, bringing whiskey production back to Tullamore for the first time since the old D.E. Williams Distillery was closed in 1954. The €35 million ($50 million USD) distillery has four copper stills designed to resemble those from the original distillery, and will be capable of producing 1.8 million litres of alcohol annually.
William Grant & Sons acquired the Tullamore D.E.W. brand from C&C International in 2011 and made the decision to build a distillery of its own the following year. The whiskey supply for the brand has come from Midleton since 1975 under a long-term supply contract, but the new distillery will eventually supply all of the whiskey bottled as Tullamore D.E.W.
To mark the occasion, William Grant & Sons is releasing a limited edition (2,014 bottles) of Tullamore D.E.W Celebratory Phoenix Single Batch. Tullamore has used a Phoenix as part of the town’s crest ever since a fire destroyed most of the town in 1785. In addition to the dedication ceremony at the distillery, a special celebration is being held in New York City featuring the great-grandson of Daniel E. Williams. Patrick Williams will preside over a barrel-signing ceremony with guests invited to sign a special barrel that will be shipped to the distillery, filled with new make spirit, and laid to rest with a similar barrel signed at the distillery’s event.
Links: Tullamore D.E.W.
September 16, 2014 – Chip Tate, the embattled founder and master distiller at Balcones Distillery in Waco, Texas, has formally denied accusations by the distillery’s majority investors in a court filing earlier this month. A court hearing set for Thursday in Waco has now been postponed until October 7 on the distillery’s request for a restraining order to continue Tate’s suspension last month for what the investors described as “actions detrimental to Balcones.” The private equity firm PE Investors II, LLC took on a stake in Balcones last year to help fund the development of a new $10 million distillery in downtown Waco and an expansion of the current Balcones distillery founded by Tate in 2008. The move was prompted by the success of Tate’s whiskies in competitions and the need to expand capacity to meet demand.
Since that filing, Tate has switched lawyers, and is now represented by David Clouston from the Dallas-based law firm of Sessions, Fishman, Nathan & Israel. Clouston filed a response to the distillery’s original allegations September 12 denying claims that Tate threatened the life of Balcones board chairman Greg Allen and threatened to burn down the distillery, and accusing Allen and his partners of mounting a hostile takeover to “to purloin the plump ripe peach that is Balcones from the founder Chip, who built it with his own two hands from scratch.”
The filing claims that Tate was not “suspended” as Balcones charges, but terminated after discussions between Allen and Tate over buying each other out broke down. From the filing:
“After an extended, multiple-week dialogue between Chip and PE about buying each other out of Balcones, Greg Allen of PE, barged, unannounced and without warning, into a meeting (literally throwing open the door and stopping the meeting) Chip was having with a corn supplier at Balcones on August 5, 2014. As Chip tried to diffuse the situation created by Allen, it was revealed to Chip that two sheriff’s deputies were waiting outside with instructions to remove Chip from the Balcones premises. Chip, contrary to the alleged threats stated in the Petition, assured the employees that their positions were not in jeopardy and that this was merely an issue to be worked out between owners, gathered some of his personal belongings and left the distillery with the understanding that he and Allen would continue to work towards finding a resolution to buy one or the other out. Chip had no firearms on his person, nor did he threaten Allen—as alleged in the inflammatory and false Petition. Despite being ambushed and threatened with removal by two armed deputies who were hired and told they were there to assist in the termination of an unruly employee, Chip calmly attempted to work towards a business solution with Allen, reassured the employees as to their jobs, and peacefully left the facility. He certainly never threatened, as once again falsely alleged in the Petition, to set fire to the very equipment that he had spent the majority of the previous six years helping to build, re-build, operate and maintain with his own hands. In fact, the evidence will establish that Chip was the de facto safety officer of Balcones and a compulsive “safety Sam” who constantly strove to ensure the safety of Balcones employees.”
The filing also accuses Balcones directors of illegally attempting to dilute Tate’s ownership stake from 27% to less than 10% by issuing $15 million in debt that could be converted into Balcones shares at $70 per unit, along with violating Tate’s rights under the company’s bylaws and his management agreement. According to the filing, the company’s bylaws state that Tate must be present at any meeting of directors for a quorum for binding decisions to be made and that he was not present at any meeting where his suspension or the need for additional capital was discussed. In its original filing, the Balcones directors claimed Tate had not been present for several board meetings and had hurt the company’s ability to raise outside capital.
In the filing, Clouston accused Allen and the Balcones directors of mounting a smear campaign to silence Tate based on false allegations, suggesting that “somewhere, Vladimir Putin is smiling.” The temporary restraining order issued against Tate August 22 bans him from discussing Balcones with employees, industry contacts, and the media, along with banning him from the distillery premises.
In an email to WhiskyCast’s Mark Gillespie, Clouston said “I believe Chip Tate to be a man of integrity, as well as passion for his craft.” Clouston has just taken over representing Tate, who had previously been represented by Waco attorney Peter Rusek.
The attorney for Balcones, Jeffrey Armstrong of Naman, Howell, Smith, & Lee, declined to comment on the charges raised in Tate’s filing today. He provided a statement from the company’s directors on the $15 million in funding to finance construction of the new distillery, which is expected to begin in early 2015.
“Jared Himstedt, Distillery Manager, who’s been responsible for production since day one, is still producing and releasing the same whisky our customers have come to love. This week Balcones closed on a $15 million deal to fund the construction and provide operating capital for an expanded distillery. The Company offered all of the current owners the opportunity to participate in the investment on a pro rata basis. This important funding commitment comes entirely from the owners who elected to participate.”
The statement accounts for 73% of the Balcones ownership structure, with PE Investors II, LLC and Michael Rockafellow holding the combined stake. Rockafellow first bought into Balcones in 2010 with Steven Germer, acquiring a 67% stake at the time. While not specified in the statement, it is believed that Germer sold his shares in Balcones to PE Investors II. The outstanding shares are believed to be the 27% held by Tate, whom the company referred to in its statement only as “one of its management team members.”
The temporary restraining order prohibits Chip Tate from speaking with the media, but he posted this tweet on his personal Twitter feed Tuesday night after our story was published with the Balcones statement:
Tate deleted the post shortly after posting it.
This story will be updated as more details become available.
Links: Balcones Distilling
Editor’s note: This story was updated to include a delay in the court hearing until October 7. The September 16 statement from the company is available as a PDF file here. A PDF version of Tate’s filing is available here. Court filings in civil cases represent only one side’s story, and civil courts allow each side several days to respond to filings made by other parties in the case.