A | A | A

Bourbon’s New Frontier: The Innovation Path Leads to Growth

Posted on  | August 29, 2012   Bookmark and Share
Written by |

Filled barrels are prepped for loading into a warehouse for aging at Buffalo Trace

It’s hardly news that American whiskey is on fire. Fueled by supplier innovation and a broader consumer demographic thirsting for something new, bourbon in particular has become the toast of towns from coast to coast. True to its Southern hospitality roots, bourbon has extended an open invite to younger drinkers, both male and female. The category has become more approachable, led by an explosion in flavors like cherry and honey. And bourbon distillers have amped up production of limited expressions—whether by age, barrel finish or batch—fueling demand among core collectors and enthusiasts.

Rob Mason, senior director of U.S. bourbons at Beam Inc., attributes the bourbon surge to people looking to expand their spirits repertoire: “With all of the innovations we are seeing, consumers are discovering the fantastic quality, versatility and different tastes available within the bourbon category.” Nearly all of the leading bourbon brands have introduced line extensions or new products to capitalize on this growing trend: Jim Beam, Evan Williams, Maker’s Mark, Early Times and Wild Turkey. Even top-ranked American whiskey Jack Daniel’s (technically a Tennessee whiskey) posted gains with flavors as part of its 10.6 million 9-liter cases.

She’s the New Bourbon Drinker

So who is drinking bourbon these days? Long seen as the drink of older males, bourbon has captured the interest of LDA consumers, both male and female. “We see more of the younger demographic, as well as more females, starting to branch out and try bourbons straight as well as in signature cocktails,” says Robert DeGrange, general manager of Nashville’s Whiskey Kitchen, whose cocktail menu skews heavily bourbon. However, Larry Kass, director of corporate communications for Heaven Hill Distilleries, points out the core audience of 30-50-year-old males with high household income is stronger than ever and has propelled the growth of single-barrel, small-batch and extra-aged bourbons.

The rise in “bourbon belles” has inspired supplier-backed promotions like Campari America’s “Women & Whiskies” program and Diageo-sponsored events with Bulleit Bourbon put on by the Bourbon Women’s Association, founded in 2011 by the first female master bourbon taster, Peggy Noe Stevens. The Ambassador Fan Club of Maker’s Mark is comprised of one-third female members, while 25% of drinkers of Beam’s 5.8 million cases are women.

Many attribute the rise of higher-quality, better-tasting bourbons and usage in cocktails as a major influence on women. Rachel Sergi, beverage director at Jack Rose in Washington, DC, has noticed that “women are becoming more adventurous is the their alcohol consumption with bourbon being the first choice in trying something new.” Brands of choice among her clientele include Maker’s Mark, Woodford Reserve, Knob Creek and  Eagle Rare.

Even famed distiller Lincoln Henderson came out of retirement to launch Angel’s Envy in April 2011, the only Kentucky distillery to finish their bourbon in Port barrels. Angel’s Envy was developed, in part, with a female palate in mind, says Henderson, who spent 40 years at Brown-Forman making iconic brands like Old Forester and Woodford Reserve, then served as the U.S. brand ambassador for Suntory Japanese whiskeys.

The American heritage of bourbon is a significant macro-trend driving the category, points out Jason Dolenga, Beam’s director of Maker’s Mark. “Staying true to our core values is how we stay relevant,” he says. “Authenticity, heritage and handcraft never go out of style.” Maker’s Mark sells around 1.2 million 9-liter cases annually and showed a 19% net sales increase in the first quarter of 2012.

 

Diversifying the Genre

As with vodka, bourbon marketers are looking toward innovation to keep the category fresh, not only to attract new drinkers, but also to answer the demand of enthusiasts. Enter terms like “alternative wood finish,” “small batch,” “single barrel” and “cask strength.” With little wiggle room for experimentation under standards of what constitutes a bourbon, distillers are left to play around with the mash bill, entry proof, wood grain size, aging location and temperature, char level and barrel-stave seasoning.

In 2010, Maker’s Mark introduced Maker’s 46, which uses toasted oak staves in finished barrels to deliver a stronger (96 proof) product with a bolder flavor that Mason calls “a sophisticated taste that you don’t have to acquire.”

Buffalo Trace Distillery has turned to the internet to generate user feedback for their Single Oak Project, launched in 2011 with the goal of making the perfect bourbon. This research project began in 1999 with the distillery choosing 96 trees with different wood grains, cutting them in half to form top and bottom pieces, to create 192 unique barrel selections. Each Single Oak Project Bourbon is released in a series every three months, and enthusiasts are encouraged to review each whiskey online; the top choice will later be bottled.

“Not everyone has the same journey—that’s what makes the Small Batch Collection so unique,” explains Rob Mason of Beam’s Knob Creek, Basil Hayden’s, Booker’s and Baker’s brands. The term “small batch” was coined in 1992 by sixth-generation Master Distiller Booker Noe, and the Beam brands still lead this sub-category. According to Nielsen, in the last 52 weeks, Knob Creek Bourbon (the world’s #1 super-premium bourbon) and Knob Creek Single Barrel Reserve have grown 13.8% in volume, and Basil Hayden’s Bourbon has grown 20%. The difference in the brands keeps consumers exploring, says Mason: “For instance, the spicy finish of Basil Hayden’s is a different experience than the big, full taste of Knob Creek. Meanwhile, Booker’s features its signature unfiltered, straight-from-the-barrel flavor, and Baker’s has an incredibly silky, smooth texture and taste.”

Heaven Hill’s Kass sees small-batch and single-barrel expressions becoming more popular, and points to the industry’s expanded production investments: “The bourbon industry is undergoing its largest expansion period since Prohibition with more than $170 million in capital projects underway or recently completed. A number of new, super-premium products are commanding higher prices than American whiskey has ever been able to command before. What we do is probably the best proof that we believe what we say.” In May, Heaven Hill launched a limited-edition Elijah Craig 20-Year-Old Single Barrel Kentucky Straight Bourbon at SRP $130. This month, they debut a new brand called Larceny in 12 markets; priced at $24.99, this 92 proof offering is uses the Old Fitzgerald tradition of wheat in place of rye as the third grain in its mash bill.Michter’s, which has been distilling whiskey since 1753, has had great success with 10 Year-Old Single Barrel Bourbon, named the “Best American Whiskey” by Food & Wine magazine. They also released an extremely limited 25 Year-Old Single Barrel Bourbon at 108.6 proof, retailing for $300 a bottle.

Other classic brands like Old Forester, owned by Brown-Forman, have introduced higher proof bourbons for more experienced palates, citing a richer flavor. Old Forester Signature 100 Proof is presented as “spicier and more robust” than the 86 proof Old Forester Classic.

Multiple Ways to Stand Out

Not that bourbon has gone totally straight. With mixability a driving force on-premise, Wild Turkey 81 proof hit the market in 2011 with the goal of becoming a staple in cocktails in key mixology markets. The Wild Turkey brand launched its first television advertising campaign in 157 years called “Give ‘Em the Bird,” a play at attracting core consumers as well as a younger, urban audience. At 550,000 9-liter cases in the U.S. (1.1 million internationally), the brand has shown strong growth, led in part by its flavored line extension, American Honey. Campari America also recently invested over $50 million in a new 140,000-square-foot facility that will more than double the production capacity of Wild Turkey.

The popularity of barrel selections among retailers and the on-premise is a marketing tool that gives the trade a personal stake in promoting a brand. Four Roses takes it a step further with two distinct Private Barrel Programs for consumers. “We have our 100 Proof Program that offers the customer the opportunity to choose a barrel from our current Single Barrel recipe, and our Private Selection Program that offers the opportunity to select a barrel from one of our ten recipes. This barrel is bottled at barrel proof and non-chill-filtered. We create personalized labels for the bottles from each barrel. This program is popular among our retailers across the country,” explains Patty Holland, national sales manager for Four Roses Bourbon.

While brand recognition is high among the category leaders, it isn’t stopping new entrants from throwing their hat in the ring. Once such example is John B. Stetson Kentucky Straight Bourbon Whiskey, a lighter style at 84-proof and retailing for $26-$29.99.

Regional bourbons have also captured bartender and consumer interest, like Nelson’s Green Brier Distillery’s Belle Meade in Nashville and William Grant-owned Hudson Baby Bourbon from upstate New York. Dozens of craft distillers outside of Kentucky have begun to make and market bourbon with positive results. (While it’s true that 95% of bourbon comes from Kentucky, it can legally be made anywhere in the United States.)

 

Flavor: the Mod Twist

Love them or hate them, flavored whiskeys are not going anywhere. According to Impact Databank, they were the fastest-growing spirits type in the U.S. in the first quarter of 2012, growing to 94,000 9-liter cases, up 155% over the previous year. In short, the flavored whiskey category (which includes whiskey-based liqueurs) has taken many by surprise. Even Beam considered the launch of a flavor “a bold move” back in 2009 with the introduction of Red Stag Black Cherry.

But a smart one, says Mason: “Consumers are specifically seeking flavor, variety and mixability in their spirits—three trends that flavored whiskeys meet head-on.” Red Stag partnered with Travel Television host Adam Richman for the “Track the Red Stag Food Truck Tour” in the first half of 2012, to showcase the flavors via various menu items.

Simply put, flavored whiskeys are for people who don’t like the taste of straight whiskey, but want to. And there are a lot of those people, mostly female, but male too. Typically lower proof, anywhere from 16-40% ABV, with the average price of $12-$22, flavored whiskeys are often considered an entry point in to the broader whiskey category, both for cost and taste. (Phillips Distilling in Minneapolis claims to have introduced the first flavored whiskey back in the early 2000s with Phillips-Union, a blend of Canadian whiskey and Kentucky bourbon with added cherry or vanilla flavor.)

In 2011, its first year, Jack Daniel’s Tennessee Honey sold 320,000 cases. Launched in 2009, Jim Beam Red Stag sold 300,000 cases in 2011, up 40% from 2010; the brand also just introduced two new flavors—Honey Tea and Cinnamon. Performance in 2011 was also solid for Wild Turkey American Honey (230,000 cases), Evan Williams Honey Reserve and Cherry Reserve (100,000 cases) and Seagrams 7 Crown Honey and Cherry (80,000 cases). Evan Williams added a Cinnamon Reserve in February 2012 and is introducing a new seasonal product called Apple Orchard in September 2012. Hailed as the first bourbon-based apple-cider liqueur at 34 proof, the point of sale materials will promote “A Bushel of Flavor Meets a Barrel of Smoothness.” Apple Orchard retails for $11.99.

Diageo’s popular Jeremiah Weed brand offers a Sweet Tea Bourbon as well as a 90 proof Cherry Mash Flavored Blended Bourbon. And in a clear sign that the company is bullish on flavor, earlier this year Diageo acquired Cabin Fever Maple Flavored Whisky, a small New England-based craft brand aged 3 years and infused with dark maple syrup.

On the value end of the spectrum, ready-to-drink brands like Twisted Shotz Killer Bee (Kentucky bourbon and honey liqueur) and Hot Licks (Kentucky bourbon and cinnamon liqueur) retail at just $5.99 for a 100ml 4-shot pack.

Successful Selling

As most suppliers, distributors, retailers and bartenders point out, education is crucial to the process of selling the array of new bourbons on the market. With increased ambassadors and “train the trainer” trade programs, bourbon knowledge is becoming more commonplace. This has been a cornerstone of growth for Four Roses, a brand with strong international volume that was reintroduced to the United States market in 2002 after previous owner Seagram discontinued it in the late 1950s.

At just 31,000 9-liter cases domestically (but over 440,000 internationally), Four Roses focuses on their broker and distributor network to spread knowledge to the trade, who in turn convert new customers at point of sale. “With our five yeasts and two mash bills, and our ability to create ten different bourbon recipes, we know that we must convey this to our customer in a way that they can understand,” Holland says.

In Oakland, the upscale Southern bar and restaurant Pican carries over 90 bourbons. Manager Sam Babalola says his passion for bourbon is paramount to successful turnover behind the bar. Among his best sellers are Angel’s Envy, Heaven Hill Alchemist 12 Year, and local San Francisco Bay area distiller St. George Spirits’ “Breaking and Entering” Bourbon, which follows a model popular with smaller craft distillers called sourcing and blending: aged bourbon is procured from suppliers in Kentucky and brought back to be blended and bottled in the distiller’s home state.

It comes as no surprise that Kentucky has become a top tourist destination. The Kentucky Bourbon Trail has seen record number of visitors year after year and Barton 1792 Distillery even produced a special bourbon—1792 Ridgemont Reserve Barrel Select—to commemorate Kentucky’s statehood. It has since become the official toasting bourbon of the Kentucky Bourbon Festival, which takes place every September.

A Smooth Finish

Like with any good bourbon, only time will tell how the category will age in the coming years. Will a flavors proliferation reach vodka-like heights? Will bourbon surpass white spirits, harkening back to its pre-Prohibition glory days? Are consumers’ palates changing for good? The facts today show we’re in the middle of a bourbon boom with no signs of slowing down. Distillers and suppliers are rising to the occasion with exciting innovations, while staying true to the spirit of our great American whiskey.


Comments

  1. Bourbon’s New Frontier « Brandy Rand
    September 6th, 2012 @ 2:33 pm

    [...] in the September 2012 issue of Beverage Media [...]

Register for our BMG eNewsletter

Subscribe to our eNewsletter today for related and useful information.

Enter your email address below.

 
About Us | Contact Us | Wholesaler Login | Publisher Login | Licensees Login
Copyright © 2014 Beverage Media Group ALL RIGHTS RESERVED
152 Madison Avenue, Suite 600, New York, NY 10016
Phone: 212-571-3232 | Privacy Policy