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!
On June 22, 2018, half of Warehouse 30 collapsed at the Barton 1792 Distillery in Bardstown, Kentucky, spilling around 9,000 barrels of whiskey. The rest of the warehouse collapsed on July 4 with another 9,000 barrels. Crews have been working since then to recover as many barrels – and as much Bourbon – as possible. The site is closed to reporters, but Sazerac has released a video and new images showing cleanup work at the warehouse site.
July 26, 2018 – To show their unity, leaders of the nine major whisky trade organizations planted an American White Oak tree on the corner of 9th and Main Street outside the Frazier History Museum in downtown Louisville following their first-ever summit meeting. Even before the first shovel of dirt was turned, observers noted that the raised brick-lined bed had routinely been damaged by vehicles using 9th Street to merge onto Interstate 64 and wondered how long the tree would last before being wiped out by a recklessly driven truck.
It’s an apt metaphor for the state of the whisky industry weeks into a global trade dispute pitting the United States against many of its most important global trading partners, many of whom have imposed punitive tariffs on imports of American-made whiskies to retaliate for the Trump Administration’s tariffs on their exports of steel and aluminum to the US. Years of growing global whisky sales spurred by reduced – or eliminated – import tariffs are now threatened as whisky has become one of many pieces in play in a political game of “chicken.” With their collective futures at stake, the Kentucky Distillers Association invited colleagues from the other trade associations representing the world’s major whisky and distilled spirits producers to a two-day conference in Louisville.
“Together, we form the W9, or the ‘Whisky 9,’ to serve as an open exchange of ideas, strategy, and a shared commitment to preserving free and fair trade,” KDA President Eric Gregory announced at a news conference following the closed-door “Spirit of Collaboration Summit.” As an example, Gregory cited the significant growth of whisky traded between the US and the European Union following the elimination of most tariffs in 1997 and similar expansion in trade with Canada following the elimination of tariffs in 1995 with the North American Free Trade Agreement.
“The bottom line: the world whisky market is large, and it’s growing, and we all drink one another’s whisky,” Gregory said. “Trade agreements have been important to the development of this large and diverse market that consumers have chosen to create, and that’s why we started expressing concern when our industry was caught in the middle of this dispute.” The summit produced unanimous agreement on a resolution calling on world leaders to de-escalate the current trade conflicts and return to a system of “free and fair trade.”
Listen to the “Spirit of Collaboration Summit” news briefing:
The summit started late Wednesday, hours after a White House meeting between US President Donald Trump and European Commission President Jean-Claude Juncker. That meeting, while not producing any concrete agreements, resulted in both sides agreeing to hold off on additional sanctions against each other while negotiators work toward a resolution of the original dispute over steel and aluminum trade. If – and only if – an agreement on that issue can be reached, it would clear the way for the European Union to remove its tariffs on American-made whiskies and other exports.
Without exception, the industry leaders praised that development as a positive step. According to Scotch Whisky Association CEO Karen Betts, the Trump-Juncker meeting “clearly has put a positive momentum behind trade talks between Europe and the US, and we hope that those now move forward to strengthen that really important trading relationship.”
The pause in rhetoric would appear to delay the retaliatory moves threatened by the Trump Administration following the tariffs imposed by the EU, Canada, China, Mexico, and Turkey over the last month. The administration’s public position has been that retaliation could come in the form of new tariffs on imported cars and auto parts. While Japan has not yet joined the list of countries targeting American whiskies, Jun Tanaka of the Japan Spirits & Liqueurs Makers Association predicted his country would likely follow suit if the US made that move.
“I think our government has tried to persuade the US government in a quiet way,” he said in an interview. “If things come to cars and automobile parts, an important Japanese product, they would think about retaliating.” Tanaka also pointed out that his country is also being affected by the current tariffs on American whiskies, since Suntory (Beam) and Kirin (Four Roses) have significant investments in the United States.
While some of the large American whisky makers have been able to minimize the impact of tariffs on their export sales by shipping extra stock to Europe and Canada in the first half of 2018, the largest impact so far has been felt by craft distillers. Margie Lehrman of the American Craft Spirits Association represented her members at the summit, and noted several instances where the trade dispute created problems even before the imposition of tariffs.
“Just the threat of some sort of trade war was enough to cut down discussion and any kind of negotiations on contracts,” she said, citing a specific case where an importer forced one of her members to reduce its wholesale prices by 15 percent while an export shipment were in transit or risk losing the entire deal. “I have one distiller in Ohio who let me know he expected next year to do about 25 percent of his volume going to export, and now it’s been cut down to 15 percent. In terms of dollars, that makes a big difference…he didn’t say what is not going to happen, but I’ve talked with others who said ‘you know, we were just about to institute these health benefits for employees…might not be able to do so now.'”
Lehrman and her colleagues also cited the ripple effect of tariffs throughout the economy, especially for agricultural-based products like whisky. The effect has been felt widely throughout the agriculture industry, which was promised up to $12 billion in assistance by President Trump this week. However, the tariffs reach all the way from agriculture to transportation, the manufacturers who produce bottles and packaging, and other industry sectors.
Gregory’s team put together the summit in just a couple of weeks, and he deemed it a success. While members of Congress were turned away after requesting to attend the meeting, they have been in regular contact with the KDA. It also appears the industry leaders will be in regular contact with each other following this inaugural summit, as Gregory noted.
“I thought it was a good sign when we all met last night and got talking…and people were already talking about where to hold the summit next year,” he said.
Listen to this week’s WhiskyCast for more coverage of the Spirit of Collaboration Summit.
July 20, 2018 – “We just felt it was time to get the family together…”
That’s how Kentucky Distillers Association president Eric Gregory describes the impetus for the first-ever “whisky summit” with the leaders of nine major global whisky industry associations. The summit will take place in Louisville July 25-26 and focus on a common response to the global trade conflicts that have dragged the industry into the middle of a trade war.
“Every trade organization in whisky has been talking about this and issuing statements about this,” Gregory said in a telephone interview. “We’re looking forward to getting everyone in a room and discussing what’s going on and how we can possibly be an influence as an industry instead of just separate partners in all this. I would like to think that we can come out with something that really encourages our world leaders, as we’ve all said, to de-escalate this conflict and get back to free and fair trade so we can get back to the business of making the world’s greatest whiskies,” he said.
The summit will include leaders of nine different associations representing a significant majority of the world’s whisky producers:
- Distilled Spirits Council
- Kentucky Distillers Association
- Scotch Whisky Association
- Irish Whiskey & Spirits Associations
- Spirits Canada
- Japan Spirits & Liqueurs Producers Makers Association
- The Presidents’ Forum (USA)
- American Craft Spirits Association
The summit will be held behind closed doors, and Gregory noted that he’s turned down requests from members of Congress to attend the meetings. The group will hold a news conference following the summit’s conclusion on Thursday, July 26 at the Frazier History Museum on Louisville’s “Whiskey Row” along Main Street, and will also plant an oak tree in front of the museum.
Whisky has become collateral damage in the global trade dispute between the United States and many of its key trading partners, including Canada, the European Union, Mexico, and China. All four have imposed tariffs of between 10 and 25 percent on American whiskey and other US exports over the last six weeks in retaliation for US tariffs on steel and aluminum imposed by the Trump Administration.
The impact has already been felt by smaller US whisky distillers, who have seen export orders cancelled after the tariffs took effect. Earlier this week, the United States filed a complaint with the World Trade Organization over those retaliatory tariffs, while defending the decision to impose its own tariffs on national security grounds.
WhiskyCast will have coverage of the summit from Louisville on our midweek episode this week.
Editor’s note: This story was edited to reflect the addition of the American Craft Spirits Association to the summit after the original announcement was issued.
With the ongoing trade dispute between the US and Canada, it’s important to keep in mind that Canadian Whisky remains extremely popular in the US. Crown Royal has released the latest edition in its Noble Collection series – a 13-year-old “Blender’s Mash” using one of the five different styles of whisky Crown Royal makes at its distillery in Gimli, Manitoba. They call it a different name at the distillery, though…and when they tried to use that “Bourbon Mash” name in the US…let’s just say it didn’t go quite as planned.
Links: Crown Royal
July 4, 2018 – Twelve days after half of a maturation warehouse at Sazerac’s Barton 1792 Distillery in Bardstown, Kentucky collapsed, the remaining half of the structure has now come crashing down with another 9,000 barrels of whiskey inside. That half of the structure survived the initial June 22 collapse, but the potential for it to come down had structural engineers trying to find a way to shore up the structure and allow for workers to begin removing the estimated 9,000 barrels damaged or destroyed in the initial collapse. In a statement, Sazerac executives said there was no way to stabilize the remaining structure due to worker safety concerns. There were no injuries reported in the second collapse.
A response team from the Kentucky Department of Environmental Protection responded to the site. Energy and Environment Cabinet spokesman John Mura told WhiskyCast in an email that it appears all whiskey spilled during the second collapse was successfully captured in two containment ponds dug after the June 22 collapse. The Sazerac statement indicated that plans had been put in place after that collapse to have equipment on site in preparation for any additional spills, and that the distillery’s team was able to respond quickly to the second collapse. The state’s response team will be at the distillery on Thursday and has been monitoring the situation since the June 22 collapse, when spilled alcohol killed an estimated 1,000 fish in Withrow Creek and the Beech Fork River. Sazerac is already facing citations for the original alcohol spill and for not reporting it promptly to state officials.
Bardstown Fire Department Chief Billy Mattingly provided photos of the scene, which has been off limits to reporters since the initial collapse. According to WDRB-TV in Louisville, people living near the distillery were asked to not set off Independence Day fireworks because of the potential fire hazard.
The warehouse was constructed in the 1940s, and Sazerac indicates it will likely be several weeks before the cause of the collapse is determined. The company is developing plans for a new warehouse to store barrels recovered from the site. In addition, structural engineers have inspected all of the other warehouses at Barton 1792 since the original collapse. All of those warehouses passed inspection, as did the warehouses at Buffalo Trace Distillery in Frankfort and Glenmore Distillery in Owensboro, Kentucky.
This story will be updated with additional information as necessary, and listen to this weekend’s WhiskyCast for more coverage.
Editor’s note: This story was updated with additional information provided by Sazerac and the Kentucky Energy and Environment Cabinet.
July 3, 2018 – While the European Union’s new 25 percent import tariff on Bourbon, Tennessee, and other American whiskies has only been in effect for a couple of days, distillers are already facing the costs of the growing trade dispute between the United States and many of its key trading partners. Whiskey is just one of many American-made products being targeted by the EU, Canada, Mexico, China, and Turkey in response to the Trump Administration’s tariffs on imported steel and aluminum. China is the next country scheduled to impose tariffs, with its 25 percent tariff to take effect on Friday.
Sazerac-owned Buffalo Trace Distillery has decided to eat some of the increased costs of its export business – for now. In an email to WhiskyCast Tuesday, Buffalo Trace spokeswoman Amy Preske confirmed a Bloomberg News report that the company will reduce its wholesale prices. “For the near term we are adjusting our FOBs to offset any impact that the new tariffs would have on our current retail prices in affected global markets,” she said. Buffalo Trace only exports a fraction of its annual production, primarily to Canada and Europe.
Brown-Forman’s Jack Daniel’s Tennessee Whiskey is the most-exported American whiskey brand globally, and the company gets about half of its annual sales outside of the United States. The Louisville-based distiller announced last month that it had prepared for the potential of a trade conflict by increasing export shipments of Jack Daniel’s and its Woodford Reserve Bourbon to markets where it controls its own distribution. As those tariff-free stocks start to become depleted, the company now plans to pass along the cost of the tariffs to consumers in the form of a 10 percent price increase.
The European Union and Canada are the largest export markets for American-made whiskies, according to Commerce Department export statistics. Canada is the largest single market, while six European Union member nations individually rank among the top ten overall export markets for American spirits, of which whiskies account for almost 70 percent of total exports.
This story will be updated as necessary.