The statue of Booker Noe at the Jim Beam Distillery in Clermont, Kentucky.This is where you’ll find extended versions of WhiskyCast interviews, along with audio and video from special events that were too long to include in a regular episode of WhiskyCast. The original idea behind WhiskyCast was to gather oral histories of whisky, and this is a place where you can listen and learn more about the “water of life”.

Top 10 Whisky Predictions for 2018

January 2, 2018 – As a journalist, I spend much of my time covering news that has already happened. There isn’t always as much time to anticipate who may or may not “commit news” in the short-term future, and of course, it’s risky to commit predictions to paper – or pixels – for public consumption. On New Year’s Day, one of my Twitter followers, Dave Parker (@MaltTroll), challenged me to do just that, though.

A Twitter question from WhiskyCast listener Dave Parker. Image courtesy Twitter.

Now, it would be easy to come up with a humorous and possibly even snarky list of predictions, and I’ll even admit that I thought of a few. The hard thing is to come up with ten serious predictions and be able to back them up with logical reasons for each one.

Will 2018 be a bright, sunny year for the whisky industry, or will it be a year more like the label on the barrel at top right. Photo ©2016, Mark Gillespie/CaskStrength Media.

Will 2018 be a bright, sunny year for the whisky industry, or more like the label on the barrel at top right?

Some of these may not happen until 2019, and some may not happen at all, but I have a bit of a track record for this stuff. Back in 2010 during a session at the World Whiskies Conference in Glasgow, I predicted that one of Scotland’s major distillers would invest in the U.S. craft whiskey sector within five years. My reasoning was based  not on the emerging consumer interest in small-scale distilling, but because an investment in a U.S.-based distillery would allow a Scotch Whisky maker to experiment with new product development while neither affecting current production nor running afoul of the laws limiting Scotch Whisky production. Several months later, William Grant & Sons acquired the Hudson Whiskey brands from Tuthilltown Spirits and went on to buy the entire company in 2017. My only regret is that I’ve forgotten the name of the other panelist who laughed at that prediction and promptly bet me £100 that it wouldn’t happen – I’ve never been able to collect on that bet.

That said, here are my ten predictions for what may – or may not – happen in the whisky business during 2018.

1: Whisky prices will continue to go up worldwide as demand increases, especially for rarer expressions.

This one’s a no-brainer, given that whisky prices have been increasing consistently over and above the rate of inflation as worldwide demand for whisky continues to grow. The corollary is that the number of consumers who complain about rising whisky prices will also continue to grow, and I’ll address that later.

2: We’ll see several more acquisitions of small distilleries by the industry giants, but the trend will expand even more outside the USA.

Most of the recent acquisition spree took place in late 2016, with deals closing or being announced in early 2017. Möet Hennessy’s July purchase of Woodinville Whiskey Company in Washington was the only major U.S. deal of the year, but I wouldn’t be surprised to see three or four craft distilleries change hands this year once the impact of the new U.S. tax reform legislation on corporate finances becomes clearer. We don’t have a good handle of how much cash U.S.-based companies like Sazerac and Brown-Forman may be holding overseas for tax reasons, and the changes to the tax code designed to repatriate some of those funds might spur some acquisition deals.

3: Those acquisitions will not just be complete buyouts, but minority investments designed to hedge their bets for the future.

Diageo (Distill Ventures) and Pernod Ricard USA (NBV Investments) both have in-house units looking for investment opportunities in the craft distilling sector. Until now, most of Diageo’s investment has been outside of the U.S., with minority stakes in Denmark’s Stauning Distillery and Starward Distillery in Australia. NBV Investments was responsible for the Smooth Ambler acquisition in late 2016. While that was a complete buyout instead of a minority stake, it was structured in a similar fashion with co-founder John Little remaining in place after the sale closed.

The stills at Teeling Whiskey Company in Dublin, Ireland. Photo ©2017, Mark Gillespie/CaskStrength Media.

The stills at Teeling Whiskey Company in Dublin, Ireland.

The best example of this in 2017 was Bacardi’s move to acquire a minority stake in Ireland’s Teeling Whiskey Company along with the U.S. distribution rights. That deal gave Bacardi a piece of the growing Irish Whiskey market to go along with its Scotch Whisky (John Dewar & Sons) and Bourbon (Angel’s Envy) portfolio.

4: The flavored whiskey craze will finally start to die (and not too soon!).

Really, folks … how many more flavored whiskey ideas are left, and is there any evidence that consumers are actually moving up from flavored whiskies to “real” whiskies? There will always be a place for them, but this is one area where whisky makers can learn from the vodka sector. Too many flavored products cannibalize the market and confuse consumers, and if there’s one thing the whisky industry needs to avoid, it’s creating any more consumer confusion. We already have enough trouble getting whisky newcomers to understand the difference between Scotch, Bourbon, and “Whisky” – and people who ask for a “Japanese Scotch.” That leads us to…

5: The push for an official “American Single Malt” designation will gain some momentum outside of Washington, but will be caught up in the Trump Administration’s deregulatory push and not be approved this year. 

Given that the Trump Administration’s current policy is that “two existing regulations need to die for every new one that’s approved,” I don’t see this happening in 2018. We’ve already seen examples where the Treasury Department’s Tax & Trade Bureau process for approving new American Viticultural Areas (AVA) for winemakers has been affected by the policy. Only one new AVA was approved in 2017, and according to Wine Searcher, 18 more are waiting for final approval, with some on the waiting list since 2015. Given that the TTB has not yet opened a formal rulemaking proposal to add an American Single Malt standard to the Standards of Identity list for whiskies, I don’t see this happening until at least 2019.

6:  Look for some of the whisky makers that released no-age-statement whiskies several years ago to gradually bring back 10 or 12-year-old editions as maturing whisky stocks catch up.

We’ve already seen at least two indications of this. Chivas Brothers recently indicated that it will gradually start to reintroduce The Glenlivet 12-year-old single malt in many global markets where it was replaced in 2013 by the no-age-statement Founder’s Reserve. In addition, when it introduced the Ballantine’s Single Malt Collection this fall, all three malts from Glenburgie, Glentauchers, and Miltonduff carried 15-year-old age statements, when it would have been just as easy to introduce them to the market without an age statement.

It’s probably still too early for Nikka to start bringing back age-statement whiskies after supply shortages forced it to replace the entire range with no-age-statement whiskies a couple of years ago. Other distillers that made similar moves are likely to start using age statements as soon as they can.

Whisky bottles ready for labeling on the bottling line at Duncan Taylor & Company in Huntly, Scotland. Photo ©2018, Mark Gillespie/CaskStrength Media.

Whisky bottles ready for labeling on the bottling line at Duncan Taylor & Company in Huntly, Scotland.

7: Exports of Bourbon and Tennessee whiskies will continue to expand in 2018, but begin to slow down late in the year when the U.S dollar gains strength against the British pound and Euro as the Brexit breakup deadline gets closer.

There’s one word that describes the Brexit mess right now, and it begins with “cluster…” Great Britain’s exit from the European Union comes in March of 2019, and there has been little progress toward a resolution on post-Brexit free trade between the two sides. The markets despise uncertainty, as we saw in June of 2016 when the pound crashed following the U.K.’s Brexit vote. Without some form of a trade agreement in place by the current deadline this autumn, don’t be surprised if the currency traders respond by switching to U.S. dollars in a search for stability (though the U.S. midterm elections in November will bring their own concerns about stability). The pound’s post-Brexit vote crash against the dollar led to increased Scotch Whisky exports to the U.S., while raising prices for Bourbon and Tennessee Whiskey exports to Great Britain. While American whiskey exporters can count on selling to more markets than just Great Britain and Europe, both represent a significant percentage of annual export sales and a late-year slowdown in shipments is not out of the question if currency markets swing on political issues.

8: The long-predicted shakeout in U.S. craft distilling will largely be avoided because of the cut in Federal Excise Tax that should help struggling distillers. Those that do go under would have done so with or without a tax cut because they weren’t financed well to begin with.

While the overall tax reform legislation signed into law just before Christmas has plenty to criticize, depending on where your individual priorities lie, there is no question that small distillers benefitted the most from changes to the tax code. Yes, the big distillers will gain from saving almost $1.1 million dollars in tax on the first 100,000 proof gallons they remove from bonded storage for sale each year, but for distillers that sell millions of cases of whiskey each year, the tax savings will be a blip on the radar for the accountants.

Until now, small-scale distillers have been counting pennies while they wait for their whisky to mature, only to be hit with a whopping tax bill as soon as they’re ready to start selling. For a craft distiller who only removes 25,000 gallons of whisky from bonded storage in a year, the tax bill will drop from $342,500 to just $67,500. That $275,000 in savings could mean the difference between a profitable year or another year of losses for many small-scale distillers.

The stills at Republic Restoratives, a craft distiller in Washington, DC. Photo ©2017, Mark Gillespie/CaskStrength Media.

The stills at Republic Restoratives, a craft distiller in Washington, DC. 

9: Whisky sales in the USA will show slight gains in 2018, but increasing competition from tequila and other brown spirits could be a sign that prices are rising too fast for consumers.

Never underestimate the fickleness of the American consumer. Brand loyalty – especially in the drinks business – is a fantasy, and most people are looking for something new and unusual to drink. They want bragging rights in their circle of friends for being the one to jump on a new trend first, and that’s part of the reason for whisky’s booming sales over the last decade. Given that prices are rising for most whisky categories – especially the premium ones – the point is coming where more consumers will be priced out of the market and start to look for alternatives. While they may switch from mainstream brands to craft whiskies for the “artisan” or “local” flair, many craft whiskies already are priced at premium levels that could discourage some consumers. That opens up a market for producers of tequila, rum, brandy, and other brown spirits to come in at lower prices and take some of whisky’s market share.

10: Look for several of the small distillers in Scotland that have opened in the last 3-5 years (or are being built now) to merge their business operations as a way to save money and create economies of scale for purchasing grain, barrels, bottles, and other commodities. 

At least a dozen new distilleries have opened in Scotland over the last three years, and as many as ten more may open this year. Their backers are betting on continued growth of Scotch Whisky sales globally, but the annals of Scotland’s history are filled with stories of distilleries that went under because supplies exceeded demand…and the costs of doing business greatly exceeded revenues.

Here’s another area where distillers might want to remember the past. Back in 1877, six of Scotland’s major distillers merged to form the Distillers Company Limited, which went on to become the dominant force in the Scotch Whisky industry for many years and is one of the ancestors of today’s Diageo. In 1966, the three families that dominated Ireland’s whiskey industry realized they needed to merge together to succeed or all three would fail separately. They formed Irish Distillers, paving the way for the eventual comeback of the Irish Whiskey sector, and their successors are now sharing best practices and techniques with many of Ireland’s startup distilleries.

While each of the small-scale Scottish distillers have their own style of making whisky to meet the expected demand, their chances of future success could be greatly improved by teaming up on the business side. A consortium of small distillers might well be able to negotiate better prices for barrels, grain, bottles, and other commonly-used supplies and services. In addition, shared back-office functions could cut the costs for all members, along with providing technical support and mutual assistance as needed. Distillers have a long tradition of helping each other out when needed, and if investors are willing to put their egos aside, a partnership like this might lead to greater profits in the future.

There are plenty of other predictions that could have been added to this list, such as increased expansion in visitors centers and tourism, along with the overall expansion of distillery capacity, but there also remain plenty of questions to ponder.  Will the growth of Taiwan’s Kavalan and other “world whiskies” pose a serious challenge to the industry’s longtime leaders? Will craft distillers continue to increase market share by attracting new consumers, taking sales away from larger brands, or will they feed off each other by competing for the same share of the market? Are we oversaturated with whisky festivals around the world? Will Jim Murray pick a Scotch Whisky as his Whisky of the Year in the 2019 Whisky Bible?

Right now, I’m guessing “maybe,” “all of the above,” “possibly,” and “who cares?” Apply them to those questions as you see fit.

Editor’s note: This commentary reflects Mark Gillespie’s opinions exclusively, and the views expressed here do not necessarily reflect those of WhiskyCast or its sponsors. Our policy is to label commentary as such to avoid confusion with the news stories presented on WhiskyCast.com. All photos ©2018, Mark Gillespie/CaskStrength Media. 

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A $60,000 Whisky Tasting: The Balvenie DCS Compendium Chapter 3

Tasting The Balvenie's DCS Compendium Chapter 3 single malts. Photo ©2017, Mark Gillespie/CaskStrength Media.

What’s it like to taste five rare whiskies worth $60,000? In our latest “One on One” tasting, we’ll sit down with Gemma Paterson of The Balvenie to taste Chapter 3 of the DCS Compendium: five single cask whiskies selected by longtime Malt Master David Stewart MBE. Stewart selected a total of 25 casks in 2015 that represent the breadth and depth of his work at The Balvenie over 55 years, with the five casks to be released each year representing a different element of the whisky-making process.

The Balvenie DCS Compendium Chapter 3. Image courtesy William Grant & Sons.Chapter 3 has been dubbed “Secrets of the Stock Model” to represent Stewart’s record in managing the distillery’s cask inventory through both good and bad times for the Scotch Whisky industry.

The casks in this chapter range from a 13-year-old cask filled in 2004 to the oldest bottling ever of The Balvenie: a 55-year-old cask filled in 1961 – the year before David Stewart joined William Grant & Sons as a member of the whisky supply team. Only 50 sets of each chapter are available worldwide, with a recommended retail price of $60,000 each.

Listen to Mark Gillespie’s tasting with Gemma Paterson:

While the complete set of Chapter 3 bottles is priced at $60,000, there is a much less expensive way to taste them. The Four Seasons Hotel in New York City acquired a set for its Ty Bar, and offers a tasting flight of all five whiskies for $5,000.

Links: The Balvenie | Four Seasons Hotel New York

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One on One: Tasting Corby’s Northern Border Collection Rare Release Whiskies with Dr. Don Livermore

The Northern Border Collection 2017 Rare Release Series. Photo ©2017, Mark Gillespie/CaskStrength Media.

Corby’s release of the four whiskies in the Northern Border Collection Rare Release series should be enough to convince even the most diehard skeptic of the potential to be found in Canadian Whiskies. J.P. Wiser’s 35 is one of the oldest Canadian Whiskies ever bottled, while the Lot 40 Cask Strength, Pike Creek 21, and Gooderham & Worts Little Trinity each offer a unique take on their counterparts in the regular Northern Border Collection range.

All four whiskies were created by Master Blender Dr. Don Livermore at the Hiram Walker Distillery in Windsor, Ontario. During a visit to the distillery in October, 2017, he and WhiskyCast’s Mark Gillespie sat down to chat while tasting all four whiskies. This is the first in an ongoing series of “One on One” tastings that will appear exclusively here at WhiskyCast.com.

While the series will be repeated in future years, the four whiskies in the 2017 release will only be available in limited quantities within Canada. Prices range from $69.95 CAD ($55 USD) for the Lot 40 Cask Strength to $164.95 CAD ($129.50 USD) for the J.P. Wiser’s 35.

Links: Corby Spirit & Wine

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Reviving Whiskey Distilling in Dublin’s Liberties

Dublin’s Liberties neighborhood was once the center of the whiskey universe at a time when Irish Whiskey ruled the world more than 100 years ago. Changing tastes, wars, and economics ended that, and the last heritage distillery in the Liberties closed in 1976.

https://www.youtube.com/watch?v=LiStkh-z1ns

Four decades later, the resurgence of Irish Whiskey has led to a resurgence of distilling in the Liberties, with two distilleries now in production and two more under construction as the Liberties reclaims its place in the whiskey world. We’ll explore that revival with a visit to Dublin on this episode of WhiskyCast HD!

Editor’s note: Production support for this episode was provided by Irish Distillers Pernod Ricard. In accordance with our ethics policy, WhiskyCast retains full editorial control over the content of this episode. 

Links: Teeling Whiskey Company | The Dublin Liberties Distillery | Pearse Lyons Distillery

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Empire State Distillers Create New Empire Rye Category

The Empire Rye logo. Image courtesy Empire Rye Whiskey Association.October 22, 2017 – New York’s nickname is the Empire State, and of course, that is where New York City’s landmark Empire State Building gets its name from. While New York’s growing community of distillers has yet to achieve King Kong-like status, a handful of rye whiskey makers hopes their new Empire Rye style of whiskey can eventually become one of the whisky world’s 800-pound gorillas.

“Our hope is that this stands up in time to all of the great whiskies of the world, and is categorically respected and uttered in the same breath as Kentucky Bourbon, Tennessee Whiskey, Single Pot Still Irish Whiskey, Scotch Single Malt, Japanese whisky…Empire Rye,” says Christopher Briar Williams of Coppersea Distilling. His Hudson Valley distillery was one of the six founding distilleries behind the Empire Rye standard, which is not a specific brand of whiskey but a style of whiskey with specific parameters that allows each distillery its own creative flexibility.

The first whiskies certified as Empire Rye were introduced Saturday during an event at the New York Distilling Company in Brooklyn. In addition to Coppersea and New York Distilling Company, Black Button Distilling, Finger Lakes Distilling, Kings County Distilling, Tuthilltown Spirits, and Van Brunt Stillhouse have released whiskies that conform to the Empire Rye standard. Taconic Distillery and Yankee Distillers have whiskies maturing in their warehouses that will be released when they meet the standard.

The first whiskies to carry the Empire Rye seal. Image courtesy Empire Rye Whiskey Association.

The first whiskies to carry the Empire Rye seal. Image courtesy Empire Rye Whiskey Association.

“I think they’re on the Rye-ght track,” longtime distiller and industry consultant Dave Pickerell said with a laugh. Pickerell works with New York’s Hillrock Estate Distillery, which has released rye whiskies in the past but has not become part of the Empire Rye project. He noted that Colonial-era distillers were making rye whiskey long before Bourbon became the dominant American-made whiskey style.

In New York, rye remained the predominant style of whiskey for the state’s distillers right up until Prohibition brought an end to whiskey production in the state. The industry only began to come alive again when Tuthilltown Spirits co-founder Ralph Erenzo lobbied state legislators to create a special class of licenses for farm distilleries in 2007. Distilleries operating under those licenses must use grain or fruits grown within New York for at least 75 percent of their production, and the Empire Rye creators decided to make that the cornerstone of their standard.

“In deciding what a New York State whiskey should be, and having determined that that whiskey should be a rye, it was fairly simple for us to kind of look at that and say ‘oh, if we have to use 75 percent New York grain anyway, let’s require that the entire 75 percent be New York State-grown ryes’,” Williams said in a telephone interview for this week’s WhiskyCast. The Empire Rye standard is stricter than the federal government’s rye whiskey standard, which requires only that rye make up at least 51 percent of the mash bill (recipe).

Listen to Mark Gillespie’s interview with Christopher Williams:

The standards for Empire Rye are based largely on the U.S. Bottled-in-Bond Act of 1897, with two exceptions. The Empire Rye standard only requires two years of maturation instead of the law’s four-year minimum and does not specify that a conforming whiskey be bottled at 100 proof (50% ABV).

The standards for defining Empire Rye.

“We all liked the language of the Bottled-in-Bond Act in terms of insisting upon the provenance of the whiskey in terms of the distillery…so basically, you can’t source Empire Rye,” Williams said. “The authenticity of the whiskey in terms of where it’s coming from cannot be fudged.” Of course, an Empire Rye whiskey that has been matured for at least four years and is bottled at 50% ABV could legally use the “Bottled-in-Bond” designation.

The Empire Rye standard is not an official standard of identity as defined under federal regulations, but is owned by the Empire Rye Whiskey Association, a partnership of the founding distilleries and those who have signed on over the two years of development leading up to the public introduction. New York State has more than 100 licensed distilleries, though it is estimated that only between 70 and 80 are actively distilling at this time. At least four additional distillers have committed to distilling whiskey that will meet the Empire Rye standard, and any of the state’s distillers who choose to are eligible to have their whiskies certified as Empire Rye.

“We’re New Yorkers, and we love New York,” Williams said. “This is kind of our love poem to New York, to the extent that whiskey is our art, this is our gift to the state, and hopefully … to the world.”

Links: Empire Rye Whiskey Association | Coppersea Distilling | Black Button Distilling | Finger Lakes Distilling | Kings County Distillery | New York Distilling Company | Taconic Distillery | Tuthilltown Spirits | Van Brunt Stillhouse | Yankee Distillers

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The Top Whisky Stories of 2016…And a Look Ahead

December 30, 2016 – Every year is defined by the stories that shape it, for better or worse. Here’s our look at the stories that shaped the whisky world in 2016.

#5: The Continuing Growth of American Whiskey

American Whiskey sales continue to grow, not only in the U.S., but around the world with steady annual growth of between three and five percent, according to industry sales data. Long-term, the analysis firm Technavio projects six percent growth globally between now and 2020.

One example: the merger of Beam and Suntory three years ago. While Jim Beam was already the largest-selling Bourbon brand globally, the merger led to a new emphasis on export sales, especially in Japan. During a November speech to the Japan Society in New York, Beam Suntory CEO Matt Shattock described the company’s success in growing just the Japanese market.

“In the year before the acquisition took place, we sold about 350,000 bottles of Jim Beam in Japan. This year, we will sell six million, and if we look at the trajectory of growth in that business, I’m absolutely sure that will continue. By the time we get to the Tokyo Olympics in 2020, Japan will have become the biggest export market for the Jim Beam brand.”

With the growing number of American craft distillers pursuing export sales, combined with more than a billion dollars of investment in new distilleries and expansion projects since 2010 just in Kentucky alone, that growth is poised to continue – unless economic circumstances or consumer tastes change rapidly.

#4: Whisky Prices Keep Rising

Booker's Bourbon Batch 2016-03 "Toogie's Invitation." Image courtesy Beam Suntory.As whisky sales go up, prices are rising as well around the world, with much of that growth coming in the premium and ultra-premium segments of the market. While there’s no industry-wide gauge on retail pricing available, it’s clear from anecdotal evidence that retail prices for whiskies are rising faster than the rate of inflation. Much of that can be blamed on supply limitations combined with increasing demand, but once again, it’s clear that part of the increase can be attributed to whisky producers “premiumizing” their key brands.

One case in point: Beam Suntory’s announcement earlier this month that it will raise its recommended retail price for Booker’s Bourbon in 2017 from $59.99 (USD) per bottle to $99.99, an increase of 66 percent, while also cutting the number of annual batches from six to four. While most companies would have couched such an announcement in vague terms of “limited supplies” and “global demand,” Beam’s statement was upfront.

“We’ve long believed that this special bourbon – the prized legacy of Booker Noe himself – has gone undervalued. We feel this increase is a better reflection of the true value Booker’s deserves given the time-honored care that goes into each batch release.”

In other words: we really should have been charging more for Booker’s all along, and consider yourselves lucky we didn’t raise the price years ago.

#3: A New Golden Age for Irish Whiskey

The William Grant & Sons-owned Tullamore D.E.W Distillery in Tullamore, Ireland. Photo ©2016, Mark Gillespie/CaskStrength Media. The amazing comeback of Irish Whiskey continued throughout 2016, not only in worldwide sales but as an industry. Ten years ago, there were just four working distilleries in Ireland. As 2016 comes to a close, there are 16 active distilleries with 13 more in either planning or construction stages.

While Diageo is now out of the Irish Whiskey category after selling Bushmills in 2015, Brown-Forman and Sazerac are jumping in. Brown-Forman started construction of its Slane Castle distillery this year, and is working on launching a Slane-branded blend with whiskies sourced from other distilleries while spirit from its own distillery matures. Sazerac is expected to unveil the revived Michael Collins brand it acquired in late 2015 in the coming year, after acquiring the rights to Paddy Irish Whiskey from Irish Distillers Pernod Ricard this past summer. John Teeling’s Great Northern Distillery is producing bulk whiskey for contract bottlings, while Bernard Walsh’s Walsh Whiskey Distillery in County Carlow opened this year with supply contracts in place for up to a quarter of its annual production.

Is there too much growth – too fast? Walsh, who is also chairman of the Irish Whiskey Association, says no.

“It’s catch-up time…we’re coming from way back, and yes, you could argue that it’s a lot of distilleries coming on quickly. There’s no easy way to do it, but a lot of them are smaller boutique distilleries. These are desperately needed to give the sector the breadth and depth we need. While it’s great to have the big distilleries doing the volume and really pushing Irish Whiskey out there as a brand, absolutely fantastic, what I love and what I’ve seen already with the additional new distilleries that make up the sixteen is that they’re really pushing the boundaries on wood finishes, the whole distillation method which is well-defined, but there’s lots of room for innovation there…it does help to keep the larger distillers focused on their game.”

While the distillers have an ambitious goal of increasing visitor traffic at Ireland’s distilleries from 2015’s total of 653,000 to 1.9 million by 2025, 2016 will likely show a decline in visitors. That’s not because of any lack of interest, but the exact opposite. Ireland’s most popular whisky attraction, Dublin’s Old Jameson Distillery, closed at the end of August for an $11.6 million renovation that will be complete in early March. The Bow Street site attracts around 300,000 visitors annually, and its closing for the final four months of 2016 will have an impact on overall Irish Whiskey tourism.

#2: Are We Approaching “Peak Whisky?” 

The Vendome-built column still at Wyoming Whiskey in Kirby, Wyoming. Photo ©2015, Mark Gillespie/CaskStrength Media.Oil industry analysts talk about “Peak Oil” – the point at which the world’s known reserves of crude oil start to be depleted faster than new oil fields can be discovered. In the whisky world, there are whispers of “Peak Whisky” – where distillers are producing more whisky than the world can drink.

In the United States, where craft distilling is booming, the Treasury Department’s Tax & Trade Bureau has issued a total of more than 2,200 Distilled Spirits Plant (DSP) permits. A DSP is the basic federal license needed to operate a distillery, and around 1,500 may be actively operating right now. Not all of them are making whisky, of course…but are we reaching the point of saturation?

Sazerac CEO Mark Brown is one of those who sees 2016 as the beginning of a shakeout in the distilling industry.

“Inevitably, some of them will be quite happy as lifestyle ventures, perhaps with a distillery gift shop, doing tours…modest profitability, really a lifestyle venture for the owner, and you see some wineries in California that could probably be described as lifestyle ventures. And then…I think a lot of people won’t make it. It’s that inevitable shakeout that you see, and I think what’s happening is that people are beginning to see the shakeout coming, and there’s a lot of activity.”

#1: Is That a Rescue Helicopter or a Vulture Circling Overhead?

And that leads us to the story of the year: the flurry of distillery and brand sales throughout 2016, starting in April when Brown-Forman acquired the BenRiach Distillery Company in Scotland and its three distilleries for more than $400 million. Sazerac did ten separate deals for various spirits brands and companies, including previously-mentioned deal for Paddy Irish Whiskey, along with The Last Drop Distillers and in December, the Popcorn Sutton Distillery in Tennessee. Constellation Brands paid $160 million for Utah’s High West Distillery this fall, and over the final weeks of the year, there were deals for Westland Distillery in Seattle, West Virginia’s Smooth Ambler Spirits, and Australia’s Tasmania (Sullivan’s Cove) Distillery. Elsewhere in Australia, the Australian Whisky Holdings private equity group added the Nant and Redlands distilleries to its portfolio, which also includes stakes in the Overeem and Lark distilleries in Tasmania.

Is this the start of the shakeout? Perhaps, but in talking with John Little of Smooth Ambler Spirits, it seems more like a high-stakes game of musical chairs…and you’d better have a chair to sit in when the music stops.

“I was really concerned about what the future held for a lot of craft folks. I just think the market is flooded…every time I’m trying to expand our plant and make more whiskey, I feel like I lose market presence in some market that I’ve been in for four or five years, and so I felt like a strategic partnership had to be made for the future of our business to continue to grow our business, and if you’re not growing, I feel like stagnant means you’re going backwards.”

What stories will dominate the year to come? 2017 could be a year of more uncertainty, depending on what policies the incoming Trump Administration pursues in the United States. Not only is the U.S. one of the most important national economies globally and politically, but it remains the world’s largest overall whisky market based on annual sales. Keep in mind that while President-Elect Donald Trump has said a lot of things during the campaign and in the weeks since his election, he has never held elective office before and there’s no track record to give analysts a clear idea of where his administration may place its priorities.

The President-Elect has pledged to raise tariffs on imports, with a potential impact on Scotch Whisky, Irish Whiskey, and Canadian Whisky, along with whiskies from all other countries. The U.S. is the single largest market for all of those categories, with export sales to the U.S. often outpacing domestic sales for each category. If President-Elect Trump succeeds in that pledge, would other countries retaliate with tariffs on American whiskies? If so, that could hurt the projected growth in global sales of Bourbon and Tennessee whiskies, along with the fledgling American Single Malt category.

In addition, the incoming administration’s unconventional and untested approach to foreign policy could theoretically lead to boycotts of American-made products in other countries, and that could well include American whiskies. 

On the other hand, domestic whiskey producers could benefit from the President-Elect’s pledge to cut corporate taxes and reduce regulatory burdens. Looser regulations from the Labor Department and the Environmental Protection Agency could potentially lower production costs.

At some point during 2017, British Prime Minister Theresa May will pull the trigger on “Brexit” negotiations with the European Union, and while industry leaders are suggesting that existing World Trade Organization policies will largely protect Scotch Whisky, there are still many things that could cause problems for the larger whisky industry. That list includes political issues, such as the question of revived border controls between Ireland and Northern Ireland.

Look for more distillery deals in 2017 as the shakeout continues. Pernod Ricard has followed Diageo’s lead in creating a venture capital unit to invest in craft distillers, though its venture team is strictly focusing on the U.S. market for now. More small-scale distillers are starting to run up against the double-edged sword of needing capital to fund production or expansion, while having to wait for their existing stocks of whisky to mature before they can sell them to bring in needed cash.

We know that the big distillers are looking everywhere for opportunities in the craft distilling space – and have money to spend. I’m not forecasting any major mergers between the big players in 2017, but I wouldn’t be surprised to see a billion dollars in distillery sales in the coming year. This year was probably close to that figure, but because several of the key players are privately held, the total value of 2016’s distillery sales will likely never be publicly announced.

It should be an interesting year to watch…

Want to add your comments to this story? Let us know what you think the top stories of 2016 were by leaving a comment on this page or in the Your Voice section of WhiskyCast.com. 

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