Tuesday, March 18, 2014

Tempest in a Tennessee Teapot


There have been a lot of pixels spilled in the whiskey blogosphere lately about a new bill in Tennessee to amend the definition of Tennessee Whiskey.  Most commentators have portrayed this as a cynical move by Diageo, owner of George Dickel, to undermine their big competitor Brown Forman, owner of Jack Daniel's.  There are a lot of accusations flying on both sides, so I thought some background might be helpful.

Before May of last year, there was no legal definition of Tennessee Whiskey.  None.  While Dickel and Daniel's both made a spirit that complied with the federal definition of bourbon, there was nothing stopping anyone from marketing any other whiskey as Tennessee Whiskey.

What was it that necessitated a new law last year?  Some speculated that it was the craft distillery movement and Popcorn Sutton in particular.  Popcorn Sutton was a legendary Tennessee moonshiner, and the his namesake brand was making an unaged whiskey and marketing it as Popcorn Sutton's Tennessee White Whiskey.  This may not have sat well with Brown Forman, who moved the bill to create a definition of Tennessee Whiskey based on how Jack Daniel's (and George Dickel) made it.

That law's definition mirrored the federal definition of bourbon except that the whiskey (1) had to be filtered through maple charcoal prior to aging; and (2) had to be manufactured and aged in Tennessee.  When the law came up last year, Prichard's, a Tennessee craft distiller that does not use the Lincoln County process of sugar maple charcoal filtering, objected.  As a result, a special clause was added to the bill exempting any distillery that was licensed in the year 2000, a very narrow bracket that included only Prichard's.

Now, Diageo has proposed an amendment to the law which makes several key changes, eliminating the requirements that Tennessee Whiskey must be:  (1) aged in new barrels; (2) aged in Tennessee; and (3) filtered through maple charcoal, replacing that provision with a requirement that it be filtered through charcoal (i.e. not necessarilly maple charcoal). It also includes an exception for any whiskey that includes words between "Tennessee" and "Whiskey."  This would make it clear that "Tennessee White Whiskey" is a permissible usage, but that merely codifies the interpretation given by the Tennessee ABC, which advised last year that it would allow the terms Tennessee White Whiskey, Tennessee Corn Whiskey and Tennessee Unaged Whiskey to be used without complying with the law's requirements for "Tennessee Whiskey."

It appears that the amendment hadn't even been formally introduced when Brown Forman fired the first shot, accusing Diageo of trying to weaken the standards of Tennessee Whiskey. Diageo responded saying that they were trying to maintain flexibility.  Both Chuck Cowdery and Mark Gillespie of WhiskyCast have covered the back and forth extensively.

For my part, I think this is a much smaller deal than it's being made out to be.  People have been quick to beat up on Diageo, and that's always fun, but I'm not sure I buy it.  Chuck Cowdery opines that permitting aging in used barrels is an attempt by Diageo to weaken Jack Daniel's not because of Dickel but because Daniel's is challenging Diageo's flagship brand, Johnnie Walker.

The problem with this theory is that allowing some producers to reuse barrels doesn't hurt Daniel's at all. The amendment doesn't require Daniel's to age in reused barrels so nothing they do would have to change.  And I don't see how other Tennessee Whiskeys aging in used barrels hurts Daniel's.  Let's face it.  For most of the world, Jack Daniel's is Tennessee Whiskey (and probably bourbon too).  They don't know or care how it's made.  No change in what the other, comparatively tiny brands do is going to hurt Daniel's or its giant slice of market share.

Second, as noted above, this law has been in place for less than a year. A year ago, nothing was stopping anyone from aging Tennessee Whiskey in used barrels, and no one seemed to think the sky was falling the way Brown Forman seems to think it is now.  If this truly is an attack on Jack Daniel's, it's a weak and ham handed one.

Curiously, everyone is talking about used barrels, and almost no one is talking about the fact that this bill eliminates the requirement that Tennessee Whiskey use the Lincoln County Process, the thing that has been the single defining feature of Tennessee Whiskey.  The new law substitutes "charcoal" filtering for "maple charcoal filtering."  That's a small change with a big impact.  Maple charcoal filtering is the Lincoln County Process traditionally used for Tennessee Whiskey.  Charcoal filtering would include that but presumably would also include filtering through activated charcoal (think Brita), which is the chill filtering process used by many bourbons.  From the perspective of the integrity of Tennessee Whiskey, I would be more worried about the elimination of the Lincoln County Process requirement than the used barrels.

While Diageo may be facing a barrel shortage that would make it beneficial to age in used casks, the real benefit for them could be aging whiskey out of state.  On WhiskyCast, Brown Forman's spokesman noted that Diageo has been shifting some aging to the Stitzel-Weller site in Kentucky.  Perhaps Diageo would like to shift some of its Dickel barrels to Kentucky and just threw in the used barrel and other provisions to try and secure allies among the craft distillers.

The other reason that this strikes me as silly on everyone's part is that none of this impacts what whiskey can be made, just what it can be called.  Nothing is stopping Dickel from aging whiskey in used barrels or aging the whiskey out of state; they just couldn't call it "Tennessee Whiskey."  Would anyone really notice if Dickel changed their label to say "Whisky Distilled in Tennessee" or something similar?

To summarize, Diageo's amendment is unnecessary and Brown Forman's reaction is overblown.  Add to that the fact that it is very unlikely that a whiskey bill can pass the Tennessee legislature without Brown Forman's support, and I'd say this is the archetypal tempest in a teapot.


12 comments:

Dg Blackburn said...

Thanks for adding another barrel of thought and perspective to this conversation...

Chuck Cowdery said...

Before Prohibition, Irish whiskey was more popular in the US than scotch. During Prohibition, the east coast was awash with fake Irish whiskey, i.e., illegally made fake whiskey posing as Irish, because that's what people wanted. This ruined the good name of Irish whiskey and, after prohibition, Scotch became much more popular, as it is to this day. What you're missing, Steve, is that a few years of Popcorn Sutton's Tennessee Whiskey (and others) will spoil the good name of Tennessee Whiskey. Jack fans won't notice or care, but it just might slow Jack's growth enough to prevent Jack from surpassing Johnnie Walker as world's #1 whiskey, a rank Diageo is desperate to protect.

sku said...

Chuck, I get what you're saying, but I think the prohibition analogy is a bit extreme. Sure, if Jack were forced to stop producing for ten years and the gap was filled by terrible stuff, it would have an impact. But Jack will remain the most important TN whiskey regardless of what Popcorn Sutton or anyone else does.

There's tons of crappy bourbon out there, but I don't think it has damaged the credibility of the good stuff.

stilldaddy said...

I'll say one thing. Regardless of Diageo's reasons, or the pros and cons of passing said amendment, the George Dickel name is certainly being passed around more lately. Publicity, maybe?

sam k said...

Good point, stilldaddy.

The thing that bugs me most may be the least influential, the fact that aging no longer needs to take place in Tennessee. Shouldn't aging in-state be a point of pride for these brands?

I'm also disappointed that the Tennessee legislature, like os many others, is obviously for sale. Wear it with pride!

And so it goes...

Rich Thomas said...

Sku,

I think there might be two reasons so few comment on the attack on the Lincoln County Process. First, some Tennessee distillers, like Prichards, don't use it and oppose the 2013 law for that reason. Second, some scorn the entire notion of "Tennessee whiskey" as a meaningful distinction in the first place, and therefore would prefer to ignore the Lincoln County Process.

As for the used barrels aspect, what strikes me about that is how it strikes down the new oak requirement. If I understand this correctly, the 2013 law doesn't prevent finishing any more than the 1964 Federal law does, so that isn't what this is about. New oak is one of the core, consistent features of American whiskey, and that's what makes the used barrel proposal so bizarre, if not to say worrying.

Josh C said...

B-F is closing in on a 50% increase in sales overseas in 6 years. If Diageo is scared of B-F's growth, does it make any sense at all that they would use Popcorn Sutton to tarnish the TN whiskey lore that threatens J. Walker when Popcorn Sutton will probably never see European or Asian soil? How will Popcorn Sutton's quality influence the buying habits of some guy in love with James Dean, the Ford Mustang, and Marlboro Reds in Belgium, Dubai or Macau? I am lost.

sku said...

Josh C., Exactly! I'm with you on that.

Rich, thanks for your comments. You're certainly right that Prichard's doesn't care for the LCP. I was more wondering why BF, which touts it for JD went after Diageo on used barrels and not LCP.

As to the barrels, you're absolutely right. The amendment gets rid of the requirement that TN Whiskey be aged in new barrels. And you're absolutely right that it's a fundamental part of American whiskey, but before the 2013 law, there was no requirement for new barrels in TN Whiskey since TN Whiskey wasn't defined and the TN Whiskeys didn't choose to label themselves as bourbon, which would have required the use of new, charred oak.

Don't get me wrong, I would hate to see Dickel start using used oak. It's just seems odd that this has become a big issue now, and one full of histrionics on both sides, when this law has only been on the books for 10 months.

Anonymous said...

Diageo is The Man. Why enable and enrich The Man? Drink something else. Noone's holding a gun to your head to drink their "products" or "brands"...yet.

ad said...

I agree with the idea that the legislature likely never should have become involved in this matter and just left "Tennessee Whiskey" undefined by State law. They didn't, however, and specifically codified the commonly-accepted industry definition of the term into State law. Now that the legislature took that action, I think its ridiculous that Diageo and other distillers want to come in a year later and have the term redefined to mean something no one in the industry understands it to mean.

And as to whether this is a big deal or not, Diageo and the independent distillers obviously feel there is enough cache behind the term "Tennessee Whiskey" to push forward with modifying the term to encompass whiskey falling outside the lincoln county process. In other words, the distillers want to trade off the goodwill the term "Tennessee Whiskey" engenders in a consumer to increase sales of their product without having to do the work/spend the money required to fall under the commonly-understood meaning of the term. If I worked at JD, I'd be pissed off at that move as well.

Lazer said...

"Diageo is The Man. Why enable and enrich The Man? Drink something else. Noone's holding a gun to your head to drink their "products" or "brands"...yet."

What do you think Bulleit Bourbon is all about? They will be holding the Bulleits to our heads soon. Its already happening in India. They don't call it frontier whiskey there, its called drink Bulleit or eat lead.

On a serious note... Diageo is going for world domination, there's no doubt about that. To achieve this they have to weaken JD. Weakening the name of Tennessee whiskey will do this. In India they don't know that JD is JD, they just see tennessee whiskey next to bourbon whiskey next to scotch whiskey, and if all the tennessee whiskey sucks, it hurts JD and helps Diageo. But little micro-distilled Tennessee whiskey is not available in India? Diageo can fix that.

BMc said...

If the proclamations from the famous shareholders' meeting still hold, Diageo really intends to boost bourbon sales. It's also partnering with Beam, which may result in a vastly increased supply.

However, there's also a barrel shortage, and Diageo doesn't own its own cooperage (while Brown Forman does and likely won't share). Put these together and it just seems like Diageo wants to make expansion easier, while still being able to trade on the novelty of the label "Tennessee whiskey".

Admittedly, this would work only with Dickel's production. I don't know if they intend to put Bulleit in used barrels and just call it "whiskey" instead of bourbon.

It just seems smart if they anticipate their sales to keep increasing. Currently, "getting wood" seems like their biggest weakness.