Boom time for bourbon

LAWRENCEBURG, Ky. — To Wild Turkey master distiller Jimmy Russell, the piercing sounds of a warehouse rising in the Kentucky countryside are the sounds of prosperity.

"As long as you see work going on — and the construction, and increasing your size — you know your business is doing well," said Russell, who started working for the bourbon maker in 1954.

Distillers are expanding their bourbon production and storage and dispatching sales teams around the world, bullish for a traditionally Southern beverage gaining popularity worldwide. Surging exports, the weak U.S. dollar and rising popularity among younger Americans are driving the boom.

"It's an exciting time to be in the bourbon business," said Max L. Shapira, president of Heaven Hill Distilleries Inc., a family-owned liquor company based in Bardstown. "Most of the time that I've been in the business, up until about the last 10 years, everybody was trying to consign the bourbon category to that great liquor store in the sky."

Heaven Hill recently spent nearly $4 million boosting capacity 50 percent at its distillery in Louisville, where it makes Evan Williams and Elijah Craig bourbons.

Wild Turkey, part of beverage company Pernod Ricard SA, based in France, sold more than 1 million cases worldwide last year for the first time. Its $36 million expansion near Lawrenceburg will nearly double its production. The distillery at Jack Daniels Tennessee Whiskey in Lynchburg, Tenn., is about to undergo a nearly $6 million addition to install nine more fermenters.

Maker's Mark is preparing for a second expansion. And Jim Beam, the world's biggest bourbon maker, is in the midst of a $70 million expansion in Kentucky. Beam and Maker's are part of Fortune Brands Inc.

International expansion in this quintessentially American segment is more than offsetting the pinch of rising grains and fuel costs. Grain accounts for a fraction of the overall cost of making bourbon, even though it's made from a mix that must be at least 51 percent corn.

Eric Schmidt, research director at Beverage Information Group, formerly known as Adams Beverage Group, said much of the sales growth has been in higher-priced small-batch and single-barrel products.

"Younger consumers are interested in drinks that were, you might say, their grandfathers' drinks," Shapira said.

According to Beverage Information Group, a market-research firm tracking the liquor industry, 14.7 million 9-liter cases of straight whiskey sold in the United States last year. Up about 1 percent from 2006, the figure still lags behind vodka and rum in sales and percentage growth but is outpacing Scotch whisky, the firm said.

But Maker's Mark U.S. sales rose 8 percent last year, while Evan Williams sales grew 5 percent and Wild Turkey 4.6 percent, Beverage Information Group said. There are no figures tracking international bourbon sales.

Heaven Hill spokesman Larry Kass said the company expects to recoup its investment "in short order." It will pass along higher grain costs eventually, but bourbon makers can do that gradually because bourbon ages for years before reaching store shelves, Kass said.

Virtually all of the bourbon made in Kentucky ages at least four years.

F. Paul Pacult, an industry observer as editor of Spirit Journal, said that, despite escalating production costs, American whiskeys remain "the best bargains in spirits."

Wild Turkey is projecting 12 percent growth this year in its export business, having beefed up distribution of its premium brands and expanded offerings in such key markets as Australia and Japan. Heaven Hill expects low-double-digit growth overseas, where it has boosted its sales staff.

At the Hemingway Bar at the Hotel Ritz in Paris, Kentucky bourbon is the choice for one in five cocktails, head bartender Colin P. Field said, though it still trails vodka and cognac in popularity.

"Although bourbon wasn't made to make cocktails, it works so well with cocktails," Field said.

Keith Neumann, global director of bourbons at Beam Global

Spirits & Wine, said Jim Beam has had strong growth in Russia, Spain, India, China and Italy and positioned itself as a spirits leader in Australia.

Jim Meehan, bar manager at PDT in New York City, said the same premium small-batch products that made him a bourbon drinker in college are attracting new fans.

"You get a taste for bourbon, you don't stop drinking bourbon," he said.