Whiskey makes a comeback
Construction equipment is strewn about the hills that sweep across Jack Daniel’s sprawling southern Tennessee distillery property — a small price to pay for a resurgence of the American whiskey industry.
The machinery, siding and temporary fencing on the otherwise bucolic landscape are a byproduct of a new $140 million expansion project that, the company announced last month, is needed to keep up with increased demand for one of Tennessee’s most iconic products.
U.S. whiskey sales are on a five-year upswing, with supplier revenues rising 8 percent — roughly double the 4.1 percent growth in the overall distilled spirits sector — last year alone to eclipse $8 billion, according to the Distilled Spirits Council of the United States (DISCUS).
Whiskey’s comeback comes, in part, at the expense of the fading vodka industry, which has seen sales slow after exploding in the 1980s and 1990s. Although vodka remains the top-selling spirit by volume, revenue inched up only 0.5 percent last year.
Instead, drinkers are increasingly choosing whiskey — particularly American styles, including bourbon, rye and Tennessee whiskey, said David Ozgo, chief economist for DISCUS. Distillers sold more than 20 million cases of American whiskeys in 2015.
“We’re really entering a period of whiskey nirvana. The consumer just has an incredible fascination with the product, and the marketplace is responding with a variety of well-crafted, easy-to-drink products,” Ozgo said.
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Tennessee whiskey, defined by state law and bound by a rigid distilling process, remains one of the state’s top exports and is increasing its overall market share. Supplier sales rose by 7.4 percent last year, compared with the 5.2 percent growth in the broader American whiskey category.
That demand, coupled with loosened restrictions on where distillers can operate in the state, is giving way to a new crop of whiskey-makers working to pack store shelves with a host of new brands. Once dominated by big producers Jack Daniel’s and George Dickel, there are now 30-plus distillers in the state.
“Whiskey is in somewhat of a renaissance,” said Jeff Arnett, Jack Daniel’s master distiller. “There are more people drinking and looking at whiskeys than there ever have been.”
Nashville's whiskey scene
Nashville brothers Charlie and Andy Nelson are among a new generation of area distillers looking to get in on Tennessee whiskey's renewed popularity, deciding back in 2006 to resurrect their great-great-great-grandfather’s once-thriving business.
Charles Nelson's Green Brier Distillery was the largest maker of Tennessee whiskey in the late 1800s, but statewide Prohibition shuttered the operation in 1909.
Today, the revived Nelson’s Green Brier Distillery occupies 30,000 square feet in Nashville’s Marathon Village complex and employs nearly 30 people. The distillery’s yet-to-be-released signature Tennessee whiskey is aging in barrels. Meanwhile, the company’s Belle Meade Bourbon, Nelson’s Green Brier Tennessee White Whiskey and Belle Meade Bourbon Sherry Cask Finish have already hit the market.
“The demand for whiskey worldwide is just crazy right now,” Charlie Nelson said. “We’ve had people reaching out to us from pretty much every state in the country … and distributors and importers from different countries, asking about Tennessee whiskey and bourbon.”
Nelson’s Green Brier is just one Nashville distillery working to meet growing consumer demand. Corsair Distillery, which produces handcrafted, small batch spirits such as Quinoa Whiskey and Vanilla Bean Vodka, recently opened a new facility in Wedgewood-Houston and plans to open another one to increase capacity.
All around Nashville, consumers are proving they’re thirsty for whiskey of all kinds.
Grant Johnson, a manager at Red Spirits & Wine, said whiskey is one of the highest sales volume categories for the liquor store.
“The entire whiskey category is really good for us, one of our best, but what we’re seeing is the aficionado types, who for a while were just after the new bourbons or cool new Tennessee whiskeys, (and) are now branching out,” Johnson said, referring to growing interest in Scotch, Irish whiskeys and Japanese whiskeys.
A Tennessee tradition
A centuries-old industry in Tennessee, whiskey-making flourished in the late 1880s with hundreds of distillers across the state. However, Prohibition closed those operations and nearly killed the industry.
After a 29-year hiatus, Jack Daniel’s started making whiskey again in Lynchburg in 1938. Just 18 miles northeast, George Dickel was rebuilt near Tullahoma in 1958. Those two big-name brands have largely dominated the Tennessee whiskey industry for decades.
In 2013 state law established a legal definition of Tennessee whiskey for the first time. Known as the “Lincoln County Process,” it requires bourbon to be filtered through maple charcoal and aged in new, charred-oak barrels. There are only a handful of Tennessee whiskey-makers in the state, but several newer distillers are in the process of aging their own brands, which are expected to land in liquor stores in the coming years.
The one exemption from the law is Prichard’s Distillery, which opened a facility in Kelso in 1999 and was grandfathered in. The distiller sells Tennessee whiskey that does not undergo the charcoal mellowing process.
Ozgo, the chief economist at DISCUS, said the labor-intensive whiskey-making process — and its storied history in America — has helped spur consumer interest in the product.
“There’s something romantic about distilling whiskey in copper stills and then sending it away in these very, very charming barrels for a number of years,” Ozgo said.
Another key factor in whiskey’s recent boom was the launch of AMC’s television series "Mad Men." The show is often credited with helping to popularize brown spirits and helping to drive the modern craft cocktail movement.
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“We like to say it’s the whole ‘Mad Men’ craze of Don Draper bringing back the classic cocktails. … Things like the Manhattan and Old Fashioned, those are just examples of a few things that are popular again,” said George Dickel distiller Allisa Henley.
Whiskey's rise also has benefited U.S. farmers. According to the Distilled Spirits Council, corn production used in spirits jumped 176 percent from 2010 to 2014, and rye production used in spirits grew 64 percent during that time period.
Industry remains bullish
As Jack Daniel’s celebrates its 150th anniversary this year, the distiller is anticipating a record 300,000 visitors will pass through for tours and tastings.
George Dickel also expects a record 25,000 visitors this year. The company, owned by London-based Diageo, the world’s largest distilled spirits company, plans to add a new warehouse to its 600-acre property to increase capacity.
Arnett said Jack Daniel’s $140 million expansion — which comes just three years after a $103 million project — will include renovating the visitor center, building two new barrelhouses and expanding the existing bottling facility. There are 87 barrelhouses spread across the behemoth’s 2,000-acre property, each packed floor to ceiling with aging whiskey.
The expansion will add about 30 jobs to the 500-employee operation. Louisville, Ky.-based parent company Brown-Forman, which reported $684 million in net income last year, employs about 4,400 workers.
Arnett said Jack Daniel’s sells 12 million to 13 million cases of its flagship “Black Label” whiskey per year. The company’s products are sold in 160 countries.
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Still, the U.S. accounts for about 40 percent of Jack Daniel’s overall market share, and Arnett said there is plenty of growth opportunity at home, particularly with flavored whiskeys and rye. The company released its Single Barrel Rye earlier this year that's made with 70 percent rye, 18 percent corn and 12 percent malted barley.
Still a small segment of overall whiskey sales, rye's marked growth in popularity in recent years — supplier sales jumped from $15 million in 2009 to $129 million in 2015, according to DISCUS — gives Tennessee's distillers another source of optimism that the industry's upward trajectory will continue in the coming years.
“I still believe that (rye) could be a huge opportunity for us going forward. That gives us a reason to believe we can grow the U.S. market and any other market that we’re currently in because we’re going to try to continue to put out new offerings that kind of keep interest around our brand,” Arnett said.
Reach Lizzy Alfs at 615-726-5948 and on Twitter @lizzyalfs.