Deutsch “Bullish” on Whisky, Plans More Acquisitions

June 11, 2015 – Deutsch Family Wine & Spirits’ acquisition this week of Bardstown Barrel Selections is just the beginning for the family-owned company, which wants to become a key player in the whisky market. “We are really bullish on American whiskey,” Deutsch president Tom Steffanci said in a telephone interview. “We look at vodka having been a 30-year trend…and we think we’re in the early stages of a 30-year plus trend in American whiskey.” Steffanci also noted the increased consumer interest in the provenance and variety of the spirits they buy, especially as more whisky labels note specific mashbills, barrel types, and the like.

Bardstown Barrel Selections, which was founded by Dave Schmier and Michael Kanbar in 2010 to bottle Redemption Rye, is the company’s first major acquisition in the whisky sector following a failed experiment with Original Moonshine beginning in 2011. “The view at the time was…could we do with white whiskey or moonshine what Patron did with their Plata…could we come out with a really good product and price it at a really premium price and create a new segment…we had a lot of success in getting distribution, but in terms of the consumer takeaway, it didn’t measure up to what we had hoped,” Steffanci said. The brand is under new ownership and now is known as Stillhouse Original Moonshine, but Steffanci notes that the experiment taught them several lessons that will carry over as Deutsch begins to market Redemption Rye. “We’re really good students, and we’re pretty humble about learning as we go.” While not revealing the price Deutsch paid for Redemption, Steffanci admits that the company paid a premium because of the demand for good American whiskey brands.

The company spent more than two years looking at deals before pulling the trigger on the Redemption Rye acquisition. “We had a list of criteria that starts with quality, then it runs to scalability…can we grow the thing and maintain the quality, does the brand have the right prices and the right offerings, does it have trade credibility…so do mixologists and aficionados feel like this is something worth their admiration,” Steffanci said. The final item on the list was what he calls the “trademark Deutsch element” – delivering quality for the price. “Everything that we do checks that box, and it’s real important to us that we’re going to be able to deliver something where the consumer gets real value.”

Bardstown Barrel Selections sources all of its whiskey from the MGP-I Distillery in Lawrenceburg, Indiana, and Deutsch has already completed a long-term supply agreement with the distillery. While stocks will be in short supply for the next two years, the company plans to make the Redemption range available nationwide over that point. While some critics have been harsh on brands that rely on MGP-I’s standard recipes, the Redemption whiskies bottled by Schmier and Kandar have won awards in major US whisky competitions and Steffanci notes that the distillery’s quality and efficiency is key to his goal of keeping Redemption priced at around $30 per bottle.

“The most important thing is that they understand what we’ve been doing,” Dave Schmier said in a telephone interview. “The company has always just been simply about good whisky at a fair price and getting out there and telling the story,” Schmier said, adding that Deutsch has the financial capacity to expand Redemption to a scale that he and Kandar would never be able to accomplish. The two will work with Deutsch for at least the next year during the transition, and the whiskies will continue to be bottled at Kandar’s Strong Spirits bottling plant in Bardstown, Kentucky for the foreseeable future.

As for future acquisitions, Steffanci is open to exploring deals with “grain to bottle’ craft distillers, but wants to avoid creating internal competition with the Redemption range by adding more Rye or high-rye Bourbon brands to the portfolio. He believes there are still wide-open possibilities in the American Whiskey segment that Deutsch could enter, and is equally bullish on the Irish Whiskey market because of the company’s emphasis on value. “We really want to be able to bring things to a wide base of consumers,” he said. The company generally prefers to own equity in brands and trademarks, but does handle US distribution for Pernod Ricard-owned Luksusowa Vodka. Steffanci  admits to a current fascination with Japanese whiskies, and “if the right opportunity were available, that might be available to sort out under any terms.”

Links: Deutsch Family Wine & Spirits | Bardstown Barrel Selections