The Bourbon Value Chain

Good morning. Welcome to the Fourth Edition of the Bourbon Central Bulletin!

With the whiskey aisle being totally inundated with various brands, labels, and concepts as of late, we find it to be exceedingly difficult for the consumer to differentiate between true value and a poisoned chalice. Case in point: our inquiries asking for comparisons between any 2 brands have gone up twofold in 2024. With that said, we thought the best way to tackle the problem begins with insight—a deep dive into where your favorite whiskies are produced, how the make it to market, and the process of picking a banger vs a dud.

Let’s dive in!

WHISKEY CONVO OF THE WEEK
The Bourbon Value Chain

(1) Production

It should be simple right—buy a parcel of land out west, become a yeoman and farm the crops (wheat, barley, corn etc), harvest, mash, distill, bottle, and ship. Grains in, beautiful bourbon out.

Right and wrong. Yes, this process exists—it’s called the ‘field-to-glass’ category of whiskey and involves distillers vertically integrating across the value chain. For example, Jim Massey, the founder of Fugitive Spirits in TN, founded the distillery with an eye towards specifically growing their own heirloom corn, which would radically change the profile of its constituent whiskey. Recently, the heritage grain whiskey movement (to become ‘field-to-glass’) has had a bit of a revival, but for the most part faces various economic restrictions.

Naturally, it’s incredibly capital intensive. You’re single-handedly responsible for standing up the vertical supply for your end product before actually going to market. With the emerging category of ‘craft’ distillers, the focus lands on being nimble which is obviously not aligned with becoming one with the earth for years to have your own crop yield. The result: sourcing and contract bottling.

Before we get to that, you can typically identify these ‘field-to-glass’ bourbons by virtue of it being their core value proposition on the back of the label. On the front you have also see a ‘Distilled in’ location—if this matches with where it’s bottled, it’s a good indicator of homegrown whiskey. The exception are bottlers in KY and IN, where a lot of bourbon could be grown, so the classification may be deceiving.

(2) Contract Distilling

Have you heard of the name 'MGP’ thrown around? This is where is belongs. MGP, headquartered in Lawrenceburg, Indiana, is America’s most prolific commodity producer of distilled spirits (read: they have barrels of distilled whiskies available for sale). Interestingly, the also have a branded products arm called Luxco (owns Ezra Brooks, Blood Oath, and now Penelope), but the bread and butter remains contract distilling.

If you see a bottle of bourbon that says ‘Distilled by MGP in IN’ on the back, here’s what went down under the hood: the distiller bought barrels from MGP, dumped the whiskey, and either (1) finished / blended it to give it a unique spin or (2) bottled the juice directly and priced in some markup.

Another way to identify contract distilled whiskies is by the mashbill (usually on the back label). MGP’s most popular bourbon mashbill is 75% corn, 21% rye, and 4% barley—if you see this on your bottle, odds are it’s a downstream MGP product.

Now, just to clear the air, we don’t have an ax to grind with MGP. In fact, we think they spin out phenomenal product, with nuance from barrel-to-barrel. Most famously, MGP was the juice behind all of Penelope Bourbon (even the special cask finishes)—a fan favorite across the states.

We simply think it’s important to know what you’re buying. A different label doesn’t mean wholly different juice. It could sourced from an identical barrel composition in IN, and now you know.

(3) Finishing + Bottling

The final, and perhaps the most exciting phase of bringing a bourbon to market. 5-6 years ago the industry rarely prided itself on cask finishes; almost all of the consumer’s focus was directed to age statement, leading to a constant quest of seeking the ‘10 Year Old’ instead of the ‘8 Year Old, Olorosso Cask Finish’.

That has materially changed recently, and we think it’s a change for the best. There’s limited growth in the breadth of bourbon within the end stage (mostly just contributes to angel’s share); anything that more than X+ years is often also just too oaky. In our opinion, anything that 5+ years old is typically in that prime window to be finished or bottled.

So, cask finishes are a great way to amortize the consumer’s focus across another key value proposition, beyond age. We’ve just about seen it all at this point—Maple Barrel Finish, Cognac Cask Finish, Zinfandel Barrel Finish, and the list goes on. 

‘Finishing’ in practice implies that a distillery will buy a used barrel from a fellow producer of the spirit/wine profile they want to imbue to their product. They will refill the finishing barrel with their bourbon and typically wait 3-9 months to give it that perfect connotation.

The rest is self-explanatory: the juice is dumped, bottled, and pushed out to a distributor to stock your local shelves.

Like what you’re hearing?

We just launched our Whiskey Connoisseur Collective, or what we call the Internet’s Favorite Whiskey Club. The contours are simple: receive 1 curated bottle per month & get at least 1 allocated pick throughout the year (from the time you join).

The impetus goes back to what we were chewing on earlier: there are simply too many choices in that whiskey aisle. Too much difficultly in delineating the greats from the average. Too much uncertainty in lotteries and other store-run initiatives, where you buy for a chance at allocation. Abstract all of those concerns away and drink better with our collective.

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Have any questions or suggestions for us? Please let us know by directly responding to this email - we’d love to chat!