Friday, October 13, 2017

Counterfeits and Unlicensed Sales in the News



Mea Culpa.

I committed one of the cardinal sins of journalism. I printed a story without corroboration. Thankfully, Chanda Veno of Frankfort's State Journal is a much better journalist than I am. She fleshed out the vague story Buffalo Trace released yesterday by finding the New York state public record identifying the Pappy counterfeiter as Charles A. Bahamonde, 32, of New York, who pleaded guilty in New York City Criminal Court to petit larceny, a Class A misdemeanor. He was ordered to pay restitution and remain arrest-free for one year, and is scheduled to be back in court on January 5th.

Veno also uncovered two other cases supporting last Friday's story about selling whiskey without a license. Both cases involved the illegal sale of Van Winkle whiskey. As Veno reported, "Wade Collingsworth, 45, was nabbed by state liquor agents after advertising a bottle of Pappy Van Winkle’s Family Reserve 20-year on Craigslist. At the meet-up, undercover agents purchased the bourbon for an undisclosed amount. The suggested retail price is $169.99. Collingsworth was charged with a misdemeanor."

In the second case, "Bob Monk, also of the Keystone State, was slapped with an $1,800 fine and misdemeanor charges after purchasing a bottle of 12-year Van Winkle Special Reserve for $59.99 plus tax and selling it to an undercover officer for $500 in December 2015."

Congratulations to Chanda Veno and The State Journal for some excellent reporting.

Thursday, October 12, 2017

Van Winkle Bourbon Takes Action Against Counterfeiters



(The following was provided by Buffalo Trace Distillery)

Pappy Van Winkle Bourbon, the bourbon that is so hard to find it has been compared to unicorns, has become so popular it's often being counterfeited with knock off bottles and illegally re-sold on the secondary market.

The Van Winkles, along with partners Buffalo Trace Distillery, have taken action and successfully provided evidence of counterfeiting which resulted in a resident of New York pleading guilty for his sale of two bottles of counterfeit Pappy Van Winkle bourbon, which sold for $1,500 last year. The defendant will be sentenced in January 2018.

Although this case is the first successful prosecution for counterfeit Van Winkle Bourbon to date, other cases are under investigation. Buffalo Trace Distillery has spent over a half million dollars over the past year alone, to curb online marketplaces potentially selling fake bottles.

With the annual release of the much anticipated Van Winkle bourbons coming up soon, Buffalo Trace would like to take this opportunity to remind consumers to buy Van Winkle bourbons only from licensed retailers.

"Sadly, the Van Winkle bourbons are the latest victim of counterfeiting where innocent consumers are duped," said Mark Brown, president and chief executive officer, Buffalo Trace Distillery. "Avoid buying any bourbon or whiskey, especially the highly sought after ones, from anyone in the secondary market, which includes online private sellers, or in these social media groups that claim to offer genuine products. The only legal and reputable source you should be buying from is a licensed retailer." 

Scam artists have been operating in a variety of ways, some of which include taking empty Van Winkle bottles and refilling them with a variety of other liquids, sometimes cheaper bourbons, sometimes mixtures of products only known to the deceiver.

Nowadays, the con artists have gotten more sophisticated with the ability to print counterfeit labels on home printers and other technological advances. "It's disheartening to see this happening and to see innocent consumers being swindled," said Julian Van Winkle, president, Old Rip Van Winkle Distillery. "We cannot stress enough to be careful, and do not buy your Van Winkle products on the secondary market. The old adage of if seems too good to be true, it probably is, definitely applies here."

Van Winkle cautions that if you see a bottle that does not have a matching face label with a capsule on top with the proper corresponding color, that's a sure sign of fraud. Any consumers that run across suspicious looking bottles or may have purchased a bottle from a source other than a liquor store are urged to call their local law enforcement, their state's Attorney General, or their state Alcohol Beverage Control Board.

Friday, October 6, 2017

Sell Whiskey On the Internet and Spend Six Months in County



Whisky Advocate Magazine devoted most of its Fall 2017 issue to whiskey collecting and whiskey collectors. It is hard to collect seriously if you can only obtain whiskey through retail channels. In virtually all forms of collecting, most acquisitions come from the secondary market, either directly from other collectors, or indirectly through dealers.

But there is a problem. While secondary sale of beverage alcohol is permitted in much of the world, in the United States, with a few small exceptions, it is not. Both state and federal law prohibit the sale of any alcoholic beverage to any person unless you have the appropriate license or licenses. Penalties vary by state. In California it is a misdemeanor, punishable by a $1,000 fine and/or up to six months in county jail.

The exceptions are few. One is auctions, which only a few states allow. The owner of a collection can consign it to the auction house for sale. The auction house has a license from the state that allows it to auction the bottles, paying the proceeds to the collector, less the auction house's fee. Are those sales taxed? I'm not sure, but it's hard to imagine they're not.

Another is states that allow retail license holders to buy 'vintage spirits' from collectors for resale either by the drink or by the bottle. 'Vintage' is usually defined as a product that has not been available on the retail market for some span of years. The District of Columbia allows this. Kentucky recently passed a law to allow it but it won't take effect until January 1.

That's about it. Peer to peer sales are all illegal.

The other side of the coin is that these laws are rarely enforced against collectors. They are really aimed at bootleggers and unlicensed bars. That doesn't mean it can't happen. The laws are on the books.

The legality of buying from an unlicensed seller is less clear, but most people who buy also sell. It doesn't matter if you only trade and no money changes hands. It is the same thing.

Some people will be mad at me for writing this. They always are. Do they think I wrote those laws? Or that the people who are supposed to enforce them wouldn't know about them if I would just stop mentioning it? At the very least, if you sell alcohol without a license, you might want to ask the Google machine what the penalty is in your state.

Thursday, September 28, 2017

Is Stoli Building a New, $150M Distillery for Kentucky Owl Bourbon?



Janet Patton, the best bourbon reporter in Kentucky, has a story in today's Lexington Herald-Leader headlined, "Stoli plans $150m Bardstown distillery for Kentucky Owl Bourbon."

The gist is that the Kentucky Economic Development Finance Authority (KEDFA) has approved $2M in tax incentives for the project.

These KEDFA announcements usually are the first we hear of new distillery projects in Kentucky. The tax incentives are 'if come,' meaning that they only receive the benefits if they actually do the project. This is just a proposal at this point, by no means a done deal. Incentive recipients don't appear to be under any time pressure. Angel's Envy, for example, received its KEDFA approval several years before the distillery was actually built.

Although they are now doing some contract distilling at Bardstown Bourbon Company, everything Kentucky Owl has released to this point has been sourced from an undisclosed Kentucky distillery or distilleries. Earlier this year the brand's creator, Dixon Dedman, sold Kentucky Owl to the parent company of Stolichnaya Vodka. It is Stoli's only brand in the American whiskey space.

Although well-aged bulk bourbon has been in very short supply for the last decade or so, small caches can still be had for the right price. That is why most new non-distiller producer (NDP) brands are very limited availability and super premium. The main way Kentucky Owl differs from other NDP bourbons is it debuted at a price about twice what similar brands charge. That was their bold innovation and it succeeded. Each release has sold out quickly and Kentucky Owl commands a high price on the underground secondary market.

Why? The product is good, too woody for my taste, but many people like that sort of thing. Equally as good bourbons are available for much less, but Kentucky Owl has developed a cachet.

Although the new Bardstown distillery is just a proposal at this point, it is no doubt a serious one. For that kind of money, it will be a plant on the order of Bardstown Bourbon Company or Lux Row. It will join those two newcomers plus Barton 1792, Heaven Hill, and Willett as tourable bourbon facilities in the immediate Bardstown vicinity, with Jim Beam and Maker's Mark each about a half hour from town. All of these new distilleries are a huge deal for the economy of Bardstown and Nelson County.

One assumes Stoli will pay particular attention to the international market for bourbon and whether or not they pull the trigger will depend on continued strong export growth. Stay tuned.

Monday, September 25, 2017

'Tales of the Cocktail' Does It Again



Here is my take on the whole Tales of the Cocktail controversy, as an interested but very much outside observer.

If you are unaware of this controversy, you might want to keep it that way. If not, Tara Fougner gives a good account of it on the 'Thirsty' blog.

The news that has the hospitality industry roiling is the announcement that Ann and Paul Tuennerman are 'stepping down' from their role in Tales, but no one seems to know what 'stepping down' means.

Although Tales is ostensibly produced by the not-for-profit New Orleans Culinary & Cultural Preservation Society (NOCCPS), the Tuennermans are sole owners of a for-profit entity, Mojo 911 LLC, that owns valuable intellectual property such as the names 'Tales of the Cocktail' and 'Spirited Awards,' without which Tales cannot be produced. Mojo 911 also is paid a large fee to run the event. Although the announcement said Melissa Young will become president of Mojo 911, it was silent about the entity's ownership. If the Tuennermans continue to have a large financial stake in Tales, it is hard to see how their 'stepping down' changes anything.

Although the NOCCPS is required by law to file an annual tax return, called a Form 990, which reveals some financial information related to Tales, and which is public, Mojo 911 is under no such obligation. The way Tales is actually funded and run, who benefits, and how much, is a closely guarded secret.

Whoever controls Mojo 911 controls Tales, regardless of titles. Everything else is smoke and mirrors.

This controversy stems from the notorious blackface incident from earlier this year. The behavior of the Tuennermans then was so tone-deaf it appeared that Tales might collapse, but Paul Tuennerman 'stepped down' and Tales created a 'Diversity Council,' moves that induced many people of good will to give them another chance.

The events of this past weekend look to many like the Tuennermans have been simply and clumsily engaged in cynical damage control intended to protect their personal financial interest in Tales, and these 'resignations' are more of the same.

Will there be a Tales 2018?

Should there be?

Tuesday, September 19, 2017

Bourbon Distilleries, Ranked by Capacity



To understand this post, it is a good idea to read the two previous ones. Last Monday, we learned that the area of a beer still is the critical metric for determining capacity, that is the area of one of its plates. Although many factors contribute to a distillery's actual capacity, beer still area is something that can be compared across distilleries that use column stills for their first distillation, as virtually all large bourbon distilleries do.

Until last week, I was under the impression that still diameter was the key metric. It is when comparing still to still; larger diameter, more capacity. But since the largest distilleries use more than one beer still, you have to use area to compare them. You can't just add up the diameters. I know this is elementary to many of you, but math has never been my strong suit.

The other post, from September 6, was the announcement that one of Kentucky's newest bourbon distilleries, Bardstown Bourbon Company (BBC), is planning a major capacity increase. In their press release, they claimed it would make them "one of the largest bourbon distilleries in the world." I did some back-of-the-envelope calculations and decided they were about sixth. At an event during last week's Kentucky Bourbon Festival, they picked up on that number.

Based on what I subsequently learned about still area, I decided to revisit the numbers and do better calculations. BBC may be disappointed by what I found.

Since BBC made its claim based on planned future capacity, I have done the same, using stills I know about that should be in operation by the end of 2018.

So here is how America's whiskey distilleries rank, by the capacity of their beer still or stills. I did it by distillery, not company, although Brown-Forman, which owns Jack Daniel's as well as some Kentucky plants, ranks first either way. These are the kinds of choices, though arbitrary, that you have to make with this sort of thing. One could consider Beam's Booker Noe and Clermont plants as a single facility, since they operate under the same registration number (DSP-KY-230) and make the same products, but they are autonomous, and ten miles apart, so I count them separately.

Coming in at No. 1, then, is the Jack Daniel Distillery in Lynchburg, Tennessee. It has six beer stills, two at 72 inches (diameter) and four at 54 inches. That gives them more than twice the capacity of any other U.S. whiskey distillery.

No. 2 is Heaven Hill in Louisville, with three 60 inch stills.

No. 3 is Beam's Booker Noe plant in Boston, Kentucky, which has two 72 inch stills.

No. 4 is Buffalo Trace in Frankfort. They have just the one still, but it's a monster at 84 inches.

No. 5 is the Brown-Forman Distillery in Shively. 

No. 6 is a tie between the Jim Beam Distillery in Clermont and the Barton 1792 Distillery in Bardstown.

No. 7 is Four Roses in Lawrenceburg.

No. 8 is Maker's Mark in Loretto.

No. 9 is Wild Turkey in Lawrenceburg.

No. 10 is O. Z. Tyler in Owensboro.

No. 11 is Bardstown Bourbon Company in Bardstown. They're 11th, not 6th, but they are the largest new bourbon distillery in the world.

No. 12 is MGP in Lawrenceburg Indiana. This is an estimate. I have seen their still, but they refuse to tell me its size, so I estimate that it is 48 inches. (They are the only whiskey distillery in America keeping that information secret.)

No. 13 is a tie between the two Diageo distilleries, George Dickel in Tullahoma, Tennessee and Bulleit in Shelbyville, Kentucky.

No. 14 is Wilderness Trail in Danville.

No. 15 is Lux Row in Bardstown.

No. 16 is Michter's in Shively.

No. 17 is Angel's Envy in Louisville

No. 18 is where we will end this list. It is a six-way tie among Old Forester (Louisville), Castle & Key (Frankfort), Willett (Bardstown), New Riff (Newport), Rabbit Hole (Louisville) and Fulton County (Hickman). Of these only two, Willett and New Riff, are actually producing now. 

So what? Mostly it is just interesting. I was surprised that, figured this way, Heaven Hill is second only to Jack Daniel's but I guess I shouldn't be. Heaven Hill's top bourbon, Evan Williams Black Label, ranks third behind Jack Daniel's Old No. 7 and Jim Beam White Label.

This list should be good for the next year or so, since all of the construction underway or on the books is factored in. After that, who knows? These are crazy but exhilarating times to be a bourbon enthusiast. 

Monday, September 11, 2017

Beer Still Diameters and Distillery Capacity; It Is Not That Simple


The beer still at the new Bulleit Distillery is 42" diameter.
With all of the new distillery construction and existing distillery expansion going on, it is hard to get a handle on how much new capacity is coming into the industry. Distilleries can produce below their capacity, of course, but these days bourbon distilleries are making as much as they can, so questions of capacity matter.

Although not quite the same as the beer we drink, the fermented grain mash that goes into a still like the one pictured above is called beer, and the still itself is called the beer still. This still strips all of the alcohol from the beer. That vapor, which is still 20 to 30 percent water, goes to a second pot-type still called a doubler for a second distillation, to remove more water and 'polish' the spirit.

Many factors affect how much a distillery can produce. One of them is the size of its beer still. A beer still doesn't have to be a column (i.e., continuous) still, but that is what most bourbon makers use. Because they are so tall, still height is the dimension that seems to impress people, but the dimension that matters is girth, the diameter of the still.

In trying to assess the capacity of different distilleries, I have tried to base it entirely on still diameter but, of course, it is not that simple.

"The diameter of the column is a very important part of the maximum throughput, but it’s not the only thing," says Mike Sherman, Vice President of Vendome Copper & Brass Works, the primary manufacturer of stills and other equipment for America's whiskey makers. "Tray design (amount of open area in the perforation) and downcomer size (the pipe that takes the beer down the column from one tray to the next) play a huge part." Other factors include beer thickness, condenser size, and fermentation yield.

It is also not correct, as I had assumed, that two 36" columns would have the same capacity as one 72" unit, for example. "It is not the diameter of the column, it is the area of the column" that matters, says Sherman. (A=𝜋r²) A 36" diameter column has an area of 7.06 ft², so 14.12 ft² for two columns. A 54" diameter column has an area of 15.9 ft². So, technically, the 54” column can run more than two 36” columns as long as everything else is sized correctly.

It also matters how each distillery uses its equipment, in terms of hours per day, days per week, and weeks per year. Some run one shift per day for five days and have a six-week shutdown versus another that runs round the clock for six days per week and only shuts down for two weeks per year.

So still area is a better metric than still diameter for comparison purposes and it is only roughly comparable, since it doesn't factor in those other considerations.

There are no easy answers, dammit.