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Virginia Distillery Faces SWA Lawsuit Over “Virginia-Highland” Whisky

July 9, 2019 – When is a “Highland” whisky not a “Highland” whisky? That’s the crux of a federal lawsuit filed Monday by the Scotch Whisky Association against the Virginia Distillery Company over its “Virginia-Highland Whisky.” It’s the latest legal battle for the Edinburgh-based trade association over the use of words traditionally associated with Scotch Whisky on whiskies produced outside of Scotland – a battle the association has been fighting vigorously for years.

Virginia Distillery Company Port Cask Finished Virginia-Highland Whisky. Image courtesy Virginia Distillery Company.In this case, “Virginia-Highland Whisky” is a blend of malt whiskies imported from Scotland with American single malt whisky distilled at Virginia Distillery Company’s own facility in Lovingston, Virginia. The SWA’s complaint filed in the U.S. District Court in Wilmington, Delaware argues that both the use of the term “Highland” and the spelling of “Whisky” falsely give consumers the impression that “defendant’s product is Scotch Whisky when it is not.”

Virginia Distillery Company’s web site clearly describes the various expressions of “Virginia-Highland Whisky” as “marrying whisky from Scotland with whisky made on-site in Virginia.” While previous court rulings have not declared Tax & Trade Bureau label approvals to be a “safe harbor” from lawsuits, the whiskies have received label approvals from the agency required before they can be legally sold in the United States.

The company was founded in 2011 by the late Dr. George Moore, and continues to be run by his family. CEO Gareth Moore declined an interview request on the advice of legal counsel, but issued a statement pledging to fight the lawsuit.

Virginia Distillery Company CEO Gareth Moore. Photo ©2019, Mark Gillespie/CaskStrength Media.

Virginia Distillery Co. CEO Gareth Moore.

“We are confident this complaint will be resolved, and we will be responding through the court system.  We stand behind our product and its labeling. Our independent distillery launched the Virginia-Highland Whisky series over three years ago. Our production process pays tribute to both old world and new world techniques while taking advantage of our location and the climate provided by Virginia’s Blue Ridge Mountains. Our label clearly indicates the source of our whisky, stating “Whisky from Scotland, Married with Virginia Whisky”, and we have always been upfront in descriptions to our customers. Our team invested countless hours and took the necessary and appropriate steps to design labeling for the series in conjunction with the federal TTB regulations and an additional inquiry from the Scotch Whisky Association. We’ve always been extremely transparent about our production process – from our labeling to the product’s marketing. As the largest independently owned American Single Malt distillery in the U.S. with the capacity to make over 120,000 9L cases of ultra-premium American Single Malt whiskey per year, we’re proud of our role in growing and championing the American Single Malt category. We plan to continue our expansion of the Virginia-Highland Whisky series line across the U.S. and look forward to the upcoming release of our Courage & Conviction American Single Malt line.” 

In addition, the SWA accuses Virginia Distillery Company of violating U.S. regulations banning the use of words associated with Scotland. In a statement, the association called its legal strategy vital for protecting the intellectual property of Scotch Whisky.

“In this instance, we believe that Virginia Distillery’s products are being passed off as Scotch Whisky, particular on account of their use of the term ‘Highland’ which is reserved exclusively for Scotch Whisky under US Federal Regulations. These proceedings were not taken lightly, but only after more than 12 months of attempts by the SWA to resolve this issue privately with the company in question. The Association would still welcome a resolution of the matter without the need for Federal Court involvement.”

The Virginia Distillery Company in Lovingston, Virginia. Photo ©2019, Mark Gillespie/CaskStrength Media.

The Virginia Distillery Company in Lovingston, Virginia.

The complaint also cites a partnership between the distillery and “Scotch Trooper” photographer Brett Ferencz for a “Scotch Trooper Cask” release last December as further proof of the intention to create a “false association between its products and Scotch Whisky. Ferencz’s Instagram feed largely focuses on his passion for “Star Wars,” and often feature photos of action figures from the series interacting with whisky bottles or glasses. He is not named as a party in the lawsuit.

The Scotch Whisky Association’s legal team has a successful track record over the last 15 years in lawsuits similar to this filed in courts around the world. Its only significant loss came in 2009, when Canada’s Supreme Court rejected the SWA’s appeal of lower court rulings allowing Nova Scotia’s Glenora Distillers to continue using the “Glen Breton” brand name for its Canadian single malt whisky. The distillery released a “Battle of the Glens” whisky in 2010 to celebrate the ruling.

No date has been set for a hearing in the case, and Virginia Distillery Company has 21 days to file its response to the SWA’s complaint with the court.

This story will be updated as necessary.

Editor’s note: We have provided a link to view the SWA’s complaint at the WhiskyCast web site. As in all civil lawsuits, court filings only present one party’s side in a dispute and should not be considered as proven facts until argued and ruled upon in court. We will update this story with a link to the defendant’s response once it is filed with the court. 

Links: Scotch Whisky Association | Virginia Distillery Company 

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Jim Beam Warehouse Fire Leaves Behind Environmental Impact

July 8, 2019 – Investigators are now looking through the rubble of a rickhouse at Beam Suntory’s Old Crow warehousing site near Versailles, Kentucky to confirm whether a lightning strike started the fire that destroyed 45,000 barrels of Jim Beam Bourbon. The fire started around midnight on Tuesday, July 2, and burned until Saturday as firefighters allowed spilled alcohol that had pooled in the warehouse’s basement substructure to burn off. There were no injuries reported from the fire.

While the investigation continues at the site that was home to the Old Crow Distillery for more than a century, state environmental officials are monitoring environmental damage downstream from a plume of alcohol that stretches more than 23 miles to the Ohio River. Spilled whiskey from the warehouse flowed into Glenns Creek, which feeds into the Kentucky River and reached the Ohio River Monday morning, according to John Mura of the Kentucky Energy & Environment Cabinet.

“We’re still trying to aerate the leading edge of the plume,” Mura said in a telephone interview. State fish and wildlife officers are reporting thousands of fish killed or dying because of a lack of oxygen in the water. “We are seeing dead fish floating on the Ohio River…people who use the river are seeing and smelling the dead fish,” Mura said, noting that the impact is on a scale similar to that from a Wild Turkey warehouse fire in 2000 when an estimated 228,000 fish were killed when whiskey flowed directly into the Kentucky River.

According to Mura, when alcohol from a warehouse accident flows into a creek or river, bacteria in the water eat the sugars in the alcohol and multiply rapidly, which robs the water of its oxygen content and causes fish to suffocate. Sampling at the trailing edge of the plume near the Old Crow site shows oxygen levels returning to near normal, and the plume is expected to dissipate quickly as it enters the Ohio River’s faster-moving currents. While the river is safe for boating, Mura said swimmers should avoid areas where there may be stagnant water or dead fish for now.

The Kentucky River also provides drinking water for Frankfort’s water utility and other systems downstream from the site, and traces of alcohol have turned up in samples of drinking water. However, Mura says tap water is safe to drink despite some residual aroma or taste. There are no “boil orders” in place, but fish from the river should not be considered safe to eat at the present time.

Mura credited Beam Suntory executives with responding quickly to the fire and the environmental issues, noting that Beam has hired two environmental contractors to respond to the spill and has been participating actively in daily meetings with state regulators. The drinks company will eventually face one fine for polluting the river system and a separate fine from the Fish & Wildlife department for the damage to fish stocks.

On Monday afternoon following the original publication of this story, Beam Suntory provided the following statement:

“With the fire extinguished and everyone safe, we are focused on minimizing and remediating environmental impacts. Since Wednesday, we have been working collaboratively with local, state and federal government agencies. In this collaborative approach, we immediately initiated actions to minimize the environmental impacts. This included deployment of aerators to support regeneration of the affected water. Once it was safe to do so, aerators were placed in the creek on Wednesday, and a barge was deployed in the Kentucky River to operate aerators late Thursday. We’ve seen oxygen levels rebound well in both waterways. We have built berms at our site, to avoid further runoff to the nearby waterways, and we are conducting water sampling and water field screening to get real time results of water quality on the river, as part of a coordinated effort. We have been informed that the situation is now sufficiently under control that the State of Kentucky is preparing to end emergency response activities and transition to longer-term, more routine monitoring. We look forward to partnering with them to protect water and the natural environment. As we focus on remediating the environmental impacts, we remain grateful for the outpouring of support we have received from the community and government partners.”

This story will be updated as necessary.

Editor’s note: This story was updated to include a statement provided by Beam Suntory.

Links: Beam Suntory | Kentucky Energy & Environment Cabinet | Kentucky Department of Fish & Wildlife Resources

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Jim Beam Bourbon Warehouse Still Burning in Kentucky

July 5, 2019 – The fire that destroyed a Jim Beam Bourbon maturation warehouse is still burning, nearly three days after it started late Tuesday night. The blaze is being fueled not only by 45,000 barrels of whiskey being stored inside the warehouse on the site of the former Old Crow Distillery near Versailles, but by the wooden structure of “ricks” that held the oak barrels in place during the years of maturation time.

Woodford County Emergency Management Director Drew Chandler says the fire will be allowed to burn itself out unless it poses a danger to other warehouses at the site. “The warehouse that collapsed has a basement substructure to it, and it is acting as a pool for some of the distillate that is still continuing to burn off,” he told WhiskyCast in a telephone interview Friday afternoon.

According to Chandler, the decision was made because flooding the structure with water could create more environmental problems. Spilled whiskey from the warehouse flowed into nearby Glenns Creek and from there into the Kentucky River, which supplies drinking water for the city of Frankfort downstream. While state and federal environmental officials are monitoring the water supply, they recommended that firefighters allow the remaining whiskey to burn off instead of risking additional contamination.

Beam Suntory, which has used the Old Crow maturation warehouses since 1987, has deployed excavating equipment to the scene to start removing barrel hoops and other debris in order to allow firefighters to better monitor the fire. The debris pile sits on top of the basement substructure, and there is no way to tell how much whiskey remains to be burned off. The company has not commented on the incident since an initial statement Wednesday morning shortly after the fire began.

There is still no word on what caused the fire, which started during a thunderstorm late Tuesday night. At its peak, the fire spread briefly to a second warehouse at the site, but firefighters were able to knock that fire down before it spread throughout the building. There was no damage reported at the Glenns Creek Distillery, which is located about 300 yards from the fire scene on 16 acres of land that was originally part of the Old Crow complex.

Chandler told WhiskyCast he was not able to get close to the scene for several hours because of the intense heat. He credited Woodford County ambulance personnel with keeping firefighters safe during the worst of the fire, which generated temperatures similar to those of aircraft accidents involving burning jet fuel.

“The firefighters were not actively fighting fire for more than a few minutes at a time, and then (the medics were) rotating them out and back in when their vital signs and hydration had occurred, contributed to no heat exhaustion injuries,” Chandler said. “The kind of protective clothing they needed to get closer than they did would be similar to what airport fire and rescue would use.”

The Old Crow site is in a rural area along McCracken Pike, and the fire did not spread to the nearby woods along Glenns Creek that sit between Old Crow and the Castle & Key Distillery less than a mile away. Castle & Key co-owner Will Arvin told WhiskyCast in an email that the fire caused no impact on operations at the distillery, which reopened in 2016 after two years of restoration work on what was known for decades as the historic Old Taylor Distillery. “The fire department was valiant at controlling a very scary situation…hoping for the best for our friends at Jim Beam,” Arvin said.

While firefighters allow the remaining whiskey to burn off, they have reopened McCracken Pike to traffic. Chandler noted that at least one Bourbon tour provider has added the fire scene to its itinerary. “There was a minibus that drove by slowly with people hanging out the windows with their cameras…ordinarily, the bus would have turned around in the parking lot at the distillery next door (Castle & Key) because this stretch of McCracken Pike really doesn’t go anywhere, but they extended their tour so the folks could see where the fire happened,” he said with a chuckle.

Links: Jim Beam | Woodford County Emergency Management

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TTB Moves Forward with Proposed Deregulation of Whisky Bottle Sizes

July 3, 2019 – In a move certain to set off fireworks within the distilled spirits industry, the U.S. Treasury Department’s Tax & Trade Bureau appears to be “fast-tracking” a plan to eliminate most of the requirements for distilled spirits and wine bottle sizes. The agency published its notices of proposed rule making on Monday, kicking off a public comment period that will end August 30.

There are separate proposals covering distilled spirits and wine, since they appear in different sections of Title 27, the section of the Code of Federal Regulations that covers alcoholic beverages. While the wine proposal only sets a minimum size, the proposal for distilled spirits would set a minimum and maximum size for the “standards of fill,” which defines what sizes distilled spirits can be packaged in. The current standards have been in place since a switch to metric sizes in 1980.

A graphic displaying the current authorized standards of fill for whiskies and other distilled spirits (50ml, 100ml, 200ml, 375ml, 750ml, 1 liter, and 1.75 liters)

When the agency first announced on June 10 that its agenda for upcoming regulatory changes would include the standards of fill question, TTB officials declined to say be more specific on when the proposals would be published. A number of industry officials believed at the time that the proposal would not receive more attention until later this year. The Distilled Spirits Council has already expressed opposition to a large-scale revision of bottle sizes, while allowing that some flexibility might be appropriate.

The agency’s rationale for considering the change covers both increased purchasing options for consumers while eliminating regulations that “inhibit competition and the movement of goods in domestic and international commerce.” The current regulations ban the import and sale of distilled spirits in 700 milliliter bottles, which is the European Union standard. As a result, U.S. whisky makers who want to export their products to Europe face the increased cost of producing 750ml bottles for the domestic market and 700ml bottles for export. European whisky and spirits makers, including all Scotch and Irish Whiskey brands, face the same problem when they want to export their products to the United States. 

Last week, the TTB closed its extended public comment period on a wider re-write of many Title 27  regulations. The agency acknowledged that a number of comments on that proposal also included feedback on the standards of fill issue, and will apply those comments to this rulemaking as well.

Links: Tax & Trade Bureau

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Fire Strikes Jim Beam Bourbon Warehouses in Kentucky

July 3, 2019 – First responders are on the scene of a massive fire involving two Bourbon maturation warehouses at a Jim Beam facility in Woodford County, Kentucky. The fire started shortly before midnight Tuesday night at the site of the former Old Crow Distillery on McCracken Pike as thunderstorms hit the area. The distillery closed in 1987, but Beam Suntory continues to use the warehouses on the site to mature whiskey.

According to Lexington television station WKYT, approximately 45,000 barrels of whiskey were in the one warehouse still burning as of Wednesday morning. The fire spread to a second warehouse nearby, but firefighters were able to contain it shortly after arriving on the scene. There is no word on what caused the fire, but Woodford County emergency officials are not ruling out a lightning strike as the potential cause.

Beam Suntory has declined to make executives available for interviews at the present time, but issued a statement Wednesday morning:

“We are thankful that no one was injured in this incident, and we are grateful to the courageous firefighters from multiple jurisdictions who brought the fire under control and prevented it from spreading. Initial reports suggest the fire resulted from a lightning strike, and we will work with local authorities to confirm the cause and to remediate the impacts. We have a comprehensive warehouse safety program that includes regular inspections and rigorous protocols to promote safety and the security of our aging inventory. We operate 126 barrel warehouses in Kentucky that hold approximately 3.3 million barrels for our brands, and the warehouse that was destroyed contained 45,000 barrels of relatively young whiskey from the Jim Beam mash bill. Given the age of the lost whiskey, this fire will not impact the availability of Jim Beam for consumers.”

A map showing the location of the Beam Warehouse fire in Woodford County, Kentucky. Image courtesy Google Maps.

The Old Crow site is a key part of Kentucky Bourbon history. Oscar Pepper built the original distillery along Glenns Creek, and distiller Dr. James Crow made what would become known as “Old Crow” there in the years leading up to the Civil War. The distillery passed through several hands in the years before and after Prohibition until it was purchased by National Distillers. In 1987, Beam Suntory’s predecessor company, American Brands, acquired the distillery along with the whiskey brand and promptly closed the distillery.

Glenns Creek Distilling resumed distilling in 2015 on 16 acres of the original Old Crow site adjacent to the Beam warehouses. A distillery worker told WhiskyCast there has been no impact on their operations from the fire, other than water pooling in the yard outside the distillery and the access road being closed for emergency equipment. The scene is less than half a mile from Castle & Key Distillery, which is also located along Glenns Creek.

This is the second major incident involving a maturation warehouse in Kentucky within the past month, and the third in the past year. Part of a rickhouse at Terressentia’s O.Z. Tyler Distillery in Owensboro collapsed during an overnight thunderstorm on June 16, and barrel recovery work continues at the site. Weather is also believed to be the cause for that collapse, but investigators are still going through the wreckage to determine the exact cause. On June 22, 2018, half of a warehouse at Sazerac’s Barton 1792 Distillery in Bardstown collapsed, while the rest of the warehouse collapsed on July 4, 2018. No cause has ever been disclosed for that incident.

This story will be updated with additional information as it becomes available.

Links: Beam Suntory | Glenns Creek Distilling

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U.S. Threatens New Tariffs On Scotch, Irish Whiskies in Aviation Trade Dispute

July 2, 2019 – When the European Union imposed punitive tariffs on Bourbon and other American-made whiskies a year ago in the ongoing trade dispute with the Trump Administration, distillers in Scotland and Ireland waited nervously for the other shoe to drop.

It dropped Monday, as the Office of the U.S. Trade Representative (USTR) included Scotch Whisky, Irish Whiskey, and whiskies from all European Union member nations on a new list of $4 billion in European goods that could be hit with new tariffs later this year. The U.S. is the leading export market for both Scotch Whisky and Irish Whiskey, which have had tariff-free status on exports to the United States since 1995. Based on 2018 data, whiskies would account for nearly half of the imports subject to the proposed tariffs.

The proposal comes on top of punitive tariffs announced by the U.S. in April on $21 billion of European imports – including wine, brandy, liqueurs, and cordials – in connection with a long-standing dispute over subsidies for Airbus and Boeing. Both sides have complaints pending at the World Trade Organization accusing each other of illegally subsidizing the aviation giants, and a WTO arbitrator has already ruled that both are violating global trade rules. The arbitrator is expected to rule later this summer on countermeasures the U.S. can legally impose to compensate for the economic impact of those subsidies, while a ruling on the European Union’s case is expected early next year.

The EU’s 2018 25 percent tariff on imports of American whiskies was in response to the Trump Administration’s decision to impose tariffs on imports of European steel and aluminum on national security grounds using a provision of U.S. law, while this dispute has been working its way through the WTO’s resolution process for years.

Scotch Whisky exports to the U.S. set a record in 2018 with a value of $1.3 billion on shipments of 137 million bottles, according to HM Revenue & Customs data compiled by the Scotch Whisky Association, which estimates that its exports account for 12% of all U.S. whisky sales. SWA executives have not been available for interviews, but in a statement provided to WhiskyCast, the association expressed disappointment that Scotch Whisky has been drawn into the dispute.

“The Scotch Whisky industry has consistently opposed the imposition of tariffs, which harms economies on both sides of the Atlantic which depend on trade for their continued prosperity. There is a close relationship between the US whiskies and Scotch Whisky, not least due to the use of bourbon casks for maturation which generates around £70m for the US economy each year. We continue to urge the UK government, the EU and the US government to resolve the Airbus-Boeing subsidies dispute without resorting to tariff retaliations for unrelated sectors.”

Irish Whiskey has been the fastest-growing segment of the global whisky market for the last several years, and the United States is not only the largest export market for Ireland’s distillers, but the largest single market period. According to Bord Bia, Ireland’s national food and drink promotion agency, whiskey exports to the U.S. in 2018 were valued at €620 million ($700 million USD), while sales in the U.S. broke the billion-dollar mark for the first time on sales of nearly 4.7 million 9-liter cases (approximately 56.4 million 750ml bottles).

Irish Whiskey Association spokesmen declined a request for interviews, but said in a statement that the trade body will file its objections with the USTR.

“The Irish Whiskey industry opposes the imposition of tariffs, which harms distillers and businesses both in Ireland and in the US. Any tariffs imposed on Irish Whiskey entering the US market will negatively impact investment and employment in both jurisdictions. We urge both sides to continue to strive to achieve a mutually acceptable solution to this issue and to avoid imposing barriers to trade which will ultimately adversely impact businesses and consumers on both sides of the Atlantic.”

Scotch and Irish whiskeys account for almost all of Europe’s whisky exports to the United States, with small amounts of exports from England, France, the Netherlands, and other countries that collectively add up to fewer than one million cases annually. Many of those whiskies are imported into the U.S. by smaller independent importers, for whom the potential impact of even small tariffs could be significant.

Both Scotch and Irish whisky producers and importers are also represented in the United States by the Distilled Spirits Council, which counts among its members the largest producers and importers of both whisky categories. The group’s 2018 economic data showed a significant impact on American whiskey exports in the second half of the year following the imposition of the European Union tariffs, and the Council issued a statement today citing an 18 percent drop in American whiskey exports to Europe because of the tariffs.

Robert Maron, the Council’s Vice President for International Trade, warned that the USTR’s proposed tariffs could backfire with “unintended consequences,” based on an analysis of the domestic impact from the drinks tariffs proposed by the USTR in April. “A 10 percent tariff on all of those products would result in a loss of about 6,600 jobs, a loss of 15,000 jobs for a 25 percent tariff, and a loss of 45,000 jobs for a 100 percent tariff,” he said in a telephone interview. Those job losses would likely be spread throughout the entire three-tier system made up of importers, regional distributors, and local retailers. While the organization has just started calculating the potential impact from adding Scotch and Irish whiskies to the tariff list, Maron projected those numbers would likely increase.

In addition, the European Union has prepared its own list of more American goods that could be subject to retaliatory tariffs, including American-made rums, vodkas, and wines. “There’s a potential for this to further escalate and impact American spirits exports to the EU even more on top of the 18 percent decline we’ve seen in American whiskey exports to the EU,” Maron said.

The USTR is currently seeking public comments on the impact of the proposed tariffs on American businesses and consumers, and will hold a hearing on the proposal in Washington on August 5. However, the Trump Administration is reserving the right to impose the tariffs immediately if the WTO arbitrator’s ruling comes before the public comment process is complete.

WhiskyCast has requested interviews with the USTR, and this story will be updated with more details as they become available.

Editor’s note: This story has been updated with comments from the Distilled Spirits Council’s Robert Maron and additional information. 

Links: Office of the U.S. Trade Representative | Scotch Whisky Association | Bord Bia | Irish Whiskey Association | Distilled Spirits Council

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Fets Whisky Kitchen Loses SMWS Legal Battle with British Columbia Regulators

June 21, 2019 – The Vancouver whisky bar raided in January 2018 for selling Scotch Malt Whisky Society whiskies has lost its bid to have the case dismissed as a violation of Charter rights. A British Columbia Liquor & Cannabis Regulation Branch adjudicator rejected the arguments by Fets Whisky Kitchen owners Eric and Allura Fergie, and ordered a fine of $3,000 in addition to the loss of 242 SMWS bottles seized in the raid.

Fets is one of four Scotch Malt Whisky Society “partner bars” in British Columbia that were part of the province’s undercover “Operation Malt Barley” investigation that began with an anonymous tip in late 2017. Little Jumbo and the Union Club in Victoria, along with the Hotel Grand Nanaimo, all settled their cases with the province without going to a hearing. The Fergies, faced with losing approximately $40,000 worth of SMWS whiskies, chose to fight the “contravention” on the grounds that the raid was illegally conducted without a search warrant, and that Allura Fergie was never notified of her Charter rights or given time to contact a lawyer during the January 18, 2018 raid.

Adjudicator Nerys Poole issued a written ruling in the case following two days of hearings last month, declaring that the Branch’s liquor inspectors were authorized under provincial law to enter the bar and seize “illegal” product without a search warrant. Poole ruled that the liquor agency acts in an “administrative” function under provincial law instead of a “criminal” one, and that liquor license holders have a reduced expectation of freedom from search and seizure than they otherwise would as private citizens because of the highly regulated nature of the liquor licensing system.

In a statement provided to WhiskyCast, the Ministry of Attorney General said the LCRB’s approach to enforcement has not changed, and that liquor inspectors follow up on all complaints. “This is done to ensure fairness to all licensees and to prevent law-abiding businesses from being put at a disadvantage,” the Ministry said, noting that the LCRB “expects the licensee will use this contravention as a means to review its business practices and ensure that all aspects of its licence are being operated lawfully.”

In an email to WhiskyCast, Eric Fergie said he and his wife will ask for reconsideration of the ruling by a different adjudicator within the liquor agency – a mandatory prerequisite to appealing the case in court. “What the ruling states is that the government is not required to follow their own rules and that they are free to interpret their own guidelines and the rule of law,” he said, claiming that Poole made her decision in the case before hearing any of the evidence. Fergie declined an interview until after consulting further with their attorney.

SMWS Canadian Chapter owners Kelly and Rob Carpenter also criticized the ruling. “We support Fets and their request for re-adjudication. BCLDB regulations that deny restaurants like Fets the right to purchase bottles from private liquor stores take choice away from B.C. consumers and have been identified as anti-competitive by Canada’s federal Competition Bureau. And allowing the BCLDB, the agency that pursued a covert investigation against Fets and then raided it, to rule on its own actions while at the same time denying Fets the right to any evidence related to the investigation and raids, is fundamentally unjust. We urge B.C. consumers and the B.C. hospitality industry to continue to support Fets in their efforts to free the whisky,” they said in an email to WhiskyCast.

The case stems from a British Columbia regulation requiring bars and restaurants to source all of their liquor directly from the Liquor & Cannabis Distribution Branch or a designated outlet, limiting licensees to products that the provincial wholesale monopoly chooses to make available in its retail outlets. The SWMS whiskies are not available legally to “hospitality” licensees through that system, but are available to consumers through two privately-owned retail stores in Vancouver and Victoria which order them through the provincial agency.

Fets and the other three bars bought their SMWS whiskies through either Legacy Liquor Store in Vancouver or The Strath in Victoria, and Allura Fergie testified during the hearing that she believed Fets was acting legally by sourcing the whiskies through Legacy, a licensed British Columbia retailer that paid all of the required taxes to the province.

“When the LDB does not have the products that we require to have a successful business, we need to go to the alternative store to find the products.We can’t have a strong business with the monopoly. We buy so much from the LDB, you look at all the taxes and now we are being treated like criminals. So wrong,” she testified. However, neither store is considered a “designated outlet” by the Liquor & Cannabis Distribution Branch for sales to hospitality licensees.

Fergie also argued that liquor inspectors had never raised the issue previously during routine inspections, but Poole rejected that, noting that the Fergies never asked inspectors whether they were operating within the rules. In addition, she cited that “the liquor regulatory regime relies on voluntary compliance and expects liquor licensees to comply with the rules and regulations, regardless as to how they feel about them.” The $3,000 fine is the maximum for a first-time offender, and Poole determined that the length of the violations warranted the maximum fine. Poole could also have ordered a one to three-day suspension of the Fets liquor license, but chose not to impose that penalty.

Editor’s note: This story was updated to include comments from the British Columbia Ministry of Attorney General.  The adjudicator’s ruling is available for download at the WhiskyCast web site. 

Links: Fets Whisky Kitchen | British Columbia Liquor & Cannabis Regulation Branch | Scotch Malt Whisky Society Canada

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Cleanup Work to Begin After Bourbon Warehouse Collapse

June 18, 2019 – When the phone rings at a distillery manager’s house in the early morning hours, rarely is it someone calling with good news. Jacob Call’s phone started ringing early Monday morning after the discovery that part of a maturation warehouse had collapsed overnight at the O.Z. Tyler Distillery in Owensboro, Kentucky. Around 4,500 barrels crashed to the ground after severe thunderstorms in the area Sunday night, and while engineers will determine the exact cause later, Mother Nature is getting the initial blame.

No one was hurt in the collapse, which came hours before warehouse workers would have reported to the distillery Monday morning. “We’re thankful that it happened at midnight on a Sunday night, nobody was injured, nobody was around…really a blessing that it happened the way that it did,” Call told WhiskyCast in a telephone interview Tuesday just before he was scheduled to meet with local officials to discuss cleanup plans. The road running alongside the rickhouse remains closed to traffic, but distillery operations have not been affected.

Equipment is being staged around the remains of Warehouse H to prepare for cleanup work expected to start Wednesday morning. “We’re sort of treating it as a controlled takedown of the warehouse…there’s really no safe way to get the barrels out with laborers, so we’re going to use a machine and probably take the roof off and just start picking the barrels out of the ricks,” Call said. The warehouse has a capacity of 20,000 barrels, and the collapse affected one corner of the building while leaving the rest too unstable for workers to safely enter it.

Fortunately, there appears to be no major environmental damage from spilled whiskey, as Call said very few barrels broke open in the collapse. “We’re still trying to analyze how much actually broke, but there’s no EPA issues, there’s no river of Bourbon, the grass really isn’t stained…right now, it’s looking pretty good.”

Warehouse H was built in the late 1960’s when the Medley family owned the distillery, and is one of seven rickhouses on the 26-acre site. All of the rickhouses have undergone extensive repairs and ongoing maintenance since Terressentia acquired the distillery in 2014, according to Call. “It was in really bad shape when we got here, and we spent nearly $30 million rebuilding the facility, did a lot of work on all of the warehouses,” he said.

Ironically, this is not the first time Mother Nature has targeted Warehouse H. In September of 2008, the warehouse was heavily damaged when the remnants of Hurricane Ike tore through the Owensboro area and required extensive repairs at the time.

“I don’t know if it’s just bad luck or what,” Jacob Call said.

This story will be updated with additional information as necessary.

Links: O.Z. Tyler Distillery

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O.Z. Tyler Distillery Rickhouse Suffers Partial Collapse

One corner of a rickhouse at the O.Z. Tyler Distillery in Owensboro, Kentucky collapsed on June 17, 2019. Photo courtesy WEHT-TV. June 17, 2019 – Cleanup work is underway as investigators begin to search for the cause of an overnight rickhouse collapse at the O.Z. Tyler Distillery in Owensboro, Kentucky. No injuries were reported in the collapse, which affected one corner of the 20,000 barrel capacity rickhouse and followed a series of thunderstorms in the area Sunday night.

According to Evansville, Indiana television station WEHT, wooden debris from the collapse and the potential for additional parts of the rickhouse to come down forced police to close the road alongside the rickhouse. The station quotes master distiller Jacob Call as saying about 4,500 barrels fell during the collapse, but there appears to be no environmental damage from spilled whiskey at the present time. WhiskyCast has requested an interview with Call, and this story will be updated with additional information as available.

The O.Z. Tyler Distillery is owned by South Carolina-based Terressentia, and was known for decades as the Medley Distillery. Terressentia acquired the distillery in 2014 and renamed it in 2016 for scientist O.Z. Tyler, who invented the company’s proprietary accelerated maturation process that uses ultrasonic sound waves to break down chemical compounds inside young whiskies. The company has not yet said how old the rickhouse is or when it was last inspected for potential structural issues.

The incident comes almost a year to the day after half of a Barton 1792 rickhouse collapsed on June 22, 2018 in Bardstown, Kentucky. The remaining half of the warehouse collapsed on July 4, 2018, affecting about 18,000 barrels of maturing whiskey. Sazerac, which owns Barton 1792, has not yet released the results of its investigation into the cause of that collapse.

Editor’s note: This story was updated to include details on weather in the area before the collapse. 

Links: O.Z. Tyler Distillery 

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Pernod Ricard Returns to Kentucky with Rabbit Hole Acquisition

June 14, 2019 – Ten years after exiting the Kentucky whiskey business with the $575 million sale of Wild Turkey to Gruppo Campari, Pernod Ricard is back in the Commonwealth. The second-largest spirits producer is acquiring a majority stake in Louisville’s Rabbit Hole Distillery from founder Kaveh Zamanian and his investors.

Zamanian is heading to Paris, where the deal will be celebrated at Pernod Ricard’s annual summer party at Centre Pompidou. “Hopefully, I’ll serve up some Rabbit Hole Mint Juleps,” he said in a telephone interview from Cincinnati, where he was honored by Ernst & Young last night in its annual Entrepreneur of the Year regional awards. In addition, he will join Pernod Ricard CEO Alexandre Ricard to promote Rabbit Hole at next weekend’s French Grand Prix Formula One race to be held at Circuit Paul Ricard – named for Alex Ricard’s grandfather.

“What Kaveh and his team have done with Rabbit Hole in the last couple of years in terms of establishing a showpiece distillery in downtown Louisville and creating a great reputation as a new craft whiskey producer really attracted us to the business,” said Pernod Ricard USA’s Jeff Agdern. “After meeting Kaveh and the team, we really wanted to partner with them and help them to achieve the ambition that they wanted to achieve,” he said in a telephone interview. Agdern heads up the New Brand Ventures unit within Pernod Ricard USA, which is responsible for finding potential acquisitions in the craft spirits sector. The unit’s investments include a similar 2016 acquisition of Smooth Ambler Spirits, along with Del Maguey mezcal and a recent deal for Italy’s Malfy Gin.

Terms of the deal were not released, but Zamanian retains a majority of his shares in the distillery and the Rabbit Hole Whiskey brand and will continue to manage day-to-day operations. In addition, two of his family members will also retain small stakes in the company, while all of the shares held by other investors are being acquired by Pernod Ricard. “I’m so thankful for their support to help us get to where we are,” Zamanian said. “We were able to bring a lot of relatively small investors, local investors, probably 95 percent of them from Kentucky…these folks have lived and breathed Bourbon all their life. They’ve been on the sidelines, and this was an opportunity for them to join a brand and see it get launched, get off the ground, and get to the point that it is.”

Rabbit Hole Bourbon. Image courtesy Rabbit Hole Distilling.While Rabbit Hole’s Bourbon and Rye whiskies are currently produced using sourced whiskey, Rabbit Hole’s state-of-the-art distillery opened near downtown Louisville in May of 2018 and has been laying down stocks for future releases. In addition, Rabbit Hole recently released a gin finished in Rye whiskey casks. However, Zamanian said future growth depended on finding the right partner. He received many offers from potential suitors over the last two years, but rejected them all until the Pernod Ricard CEO asked to meet with him earlier this year.

“Alex really presented it in a way that, very candidly, was unexpected,” he said. “He approached me and my team in a very respectful way, and after a lot of conversation, a lot of discussions, it was clear that we were fully aligned when it comes to our culture, particularly for me the entrepreneurship element of it that’s really important.”

Zamanian also cited the access to Pernod Ricard USA’s extensive sales and distribution network as a crucial benefit. “That’s one of the biggest challenges as you know, with all of these consolidations going around, the most recent one being with Young’s and RNDC – it really showcases how challenging it is to take a brand to market,” he said. The deal between Young’s Market Company and Republic National Distributing Company was announced Thursday, with both companies agreeing to a joint venture partnership with operations in 33 U.S. states. As the number of independently-owned spirits distributors shrinks through mergers and acquisitions, that has left smaller brands such as Rabbit Hole facing challenges when it comes to getting space on retail shelves and bar menus.

Rabbit Hole’s whiskies and gin are available now in 18 U.S. states, and Agdern told WhiskyCast his goal is to expand that to all 50 states by the end of 2020 – then work on the export market. “We’ve got the largest distribution network in the world, so I’m sure that we’re going to have international affiliates of Pernod Ricard asking us when they can get their hands on some,” he said.

Listen to this weekend’s episode of the WhiskyCast podcast for more on this story.

Editor’s note: This story was updated following our interviews with Rabbit Hole founder Kaveh Zamanian and Pernod Ricard’s Jeff Agdern. 

Links: Rabbit Hole | Pernod Ricard

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