Just about two years ago, I wrote this article on “The Future of American Whiskey”. Once you get past the relatively limited visual stimulation of the old website, it’s actually quite the interesting read. The rapidly expanding distillation market in the U.S. was ripe for innovation and my major prediction of more niche production versus traditional category based growth via bourbon and rye has in large part continued to play out. But not necessarily in the manner I was thinking.
Success stories like Balcones Distillery in Texas have proven that American Whiskey doesn’t have to follow one mold or another. But the insane expansion of bourbon and ryes in the market suggests the more traditional distilleries are finding ways to grow within the U.S. spirit space just as well. For the Buffalo Traces of the world, the model has been portfolio building. Multiple brands at multiple price points meant to capture all of the bourbon drinkers and all of their drink moments has proven quite successful. But for the little guys, the name of the game has been diversification.
As more and more passionate booze hounds are pairing up with savvy business team members, or more and more savvy business men/women are finding the drag of Corporate America too much to handle, craft production of spirits has become way more economically feasible. Take for example the model our friends at New York Distilling launched years ago with a long term vision of selling American Rye but with a short term business sense to sell an unaged spirit (they now have 3 gins in the marketplace) to make the business viable. If you haven’t been to a distillery you may not realize just how impressive and expensive the still itself can be. Smart businesses have learned that the key to making money is to leverage that expensive resource for as many things as it’s capable of producing.
And now we see this model expanding. As Drew wrote about last month, the number of breweries that are now distilling is also growing. It turns out, craft brew lovers overlap quite nicely in the marketplace with craft spirit lovers and combining production of both seems like a nice expansion opportunity. Take this even further, and no wonder we now see operations being set up in locations that have the agricultural means to support “locally” sourced branding. Hops on Long Island, Apples in New York, and the list goes on.
So what comes next? Well two years later, and I’m still optimistic about the growth potential in the industry: look at this tally of the American Whiskey Distilleries and try not to get excited! Yet, more and more, some trepidation about the fate of the craft spirit and craft beer industry has popped up as growth has tapered off a bit. But like any industry that has prospered with a high degree of opportunity for new market entries, at some point saturation becomes an issue. Welcome to the beginning of craft beer and spirit marketing…
We’re already starting to see the signs as folks like Sam Adams feel the need to fight off the Craft Beer surge, but my guess is that no one who cares about craft beer gives a shit what Sam Adams is saying. More interesting: what happens when the small guys have to switch focus and begin to fight off each other? It’s been easy to operate with a common enemy in the form of “Big Beer” and “Big Liquor” but the competitive landscape has changed. How it manifests? I guess we’ll have to wait and see but the Future of American Whiskey (and Beer) still remains damn exciting. And I’m just thrilled to be a part of it!