The Spirit of Kentucky: Selling bourbon is like catching lightning in a bottle

jpatton1@herald-leader.comAugust 10, 2013 

  • ABOUT THIS SERIES

    This is the second in a four-part series, The Spirit of Kentucky, looking at the state's bourbon industry.

    Through the remainder of 2013, about once every other month, the Herald-Leader will explore a different facet of one of Kentucky's most well-known, important and fastest-growing industries.

    June's first part focused on making bourbon, and future installments will delve into the lifestyle that has sprung up around the drink, and the industry's future. Also look for occasional features in print and online exploring the drink.

    Find all the coverage collected online at Kentucky.com/kybourbon.

NEW ORLEANS — As a marketing venue for Kentucky's most famous spirit, Bourbon Street is hard to beat — and in July, it's steamy enough to make any drink look good.

At "Tales of the Cocktail," a booze- and handmade bitters-soaked five-day party loosely draped in bartender education, the liquor trade holds the drinks equivalent of "fashion week."

It takes the stamina of a professional to navigate more than 115 tasting rooms, launch parties, pop-up bars, and temporary sidewalk watering holes called "street activations" — not to mention the actual seminars.

This year, bourbons were bubbling up in a variety of places: at the Southern Tailgate Kick-Off with Bulleit; in the Indie Spirits room with Kentucky craft bourbons Willett and Corsair; at the Jacob's Ghost Midnight "Ghost Bar."

Bourbon is the fastest-growing sales category for American spirits but its distilled sisters tequila, rum, cognac, scotch, gin and vodka are ceding no ground: The battle to catch the palates of 25,000 celebrity mixologists, cocktail enthusiasts and media types is as fierce as a New York catwalk.

The payoff for a drinks darling can be big. Ask Tom Bulleit, who first came to Tales of the Cocktail in 2002, when a few hundred people gathered to talk cocktails in the city where they were invented.

As the recent bartender-as-chef scene exploded, Bulleit rode the cocktail craze from obscurity to cult brand, becoming one of the top-selling labels among premium bourbons with virtually no advertising.

Bulleit learned why from his distributor, John Magliocco of Empire Merchants of Brooklyn, N.Y.:

"Brands are built on premise (in bars). And bartenders are the captains of our industry," Bulleit said. "I have found that to be so dramatically the case. ... You go into a bar and say, 'I'll have a Schlitz,' and the bartender will say, 'No, have this wonderful drink we have just made for you.' And you'll say, 'OK.' It's like a Jedi mind trick. ...

"He can sell anything, all night, with absolute control."

Steering them to whiskey

At a Tales dinner at the Bourbon House restaurant, Jim Beam master distiller Fred Noe led the charge for Kentucky at The Great Whisk(e)y Debate, a combination comedy roast and whiskey seminar that for years has sold out performances around the country.

Noe's role: Convince a room full of spirits lovers that his bourbons are better than Canadian, Irish or Scotch whiskies. The representatives of top brands Canadian Club, Kilbeggan and Laphroaig have brought their best material, and their best whiskies.

"Eventually, it's going to come down to ... the three of us against Fred Noe," cried Kieran Folliard, carrying the Irish colors for Kilbeggan. "Vote Irish, vote early, vote often."

Noe has some good zingers — and good whiskey — of his own.

Over the Vietnamese lamb chops and braised bacon rice paired with Knob Creek bourbon, the crowd of 80 industry insiders gets a generous shot of barrel-proof Fred.

Noe's earthy, blunt and entertaining rebuttal lays out the case for bourbon's superiority:

"To quote my good friend Jimmy Russell, who is the master distiller at Wild Turkey, if we didn't sell our used barrels with that bourbon left in them, you wouldn't be able to drink that s--- they make at those places," he said, pointing at his opponents.

"Bourbon, it's down-home, just like the guys like me that make it. Bourbon was the favorite of presidents like Lyndon Johnson. Writers like Mark Twain. People like Hootie and the Blowfish, Hank Williams Jr., Kid Rock. That's what we do. We drink bourbon. It was declared America's spirit by an act of Congress. ... This is America. You guys are on foreign turf. Don't be coming in here trying to infiltrate my country. That's bulls---. ... We're going to drink bourbon on Bourbon Street in the Bourbon House. Vote bourbon."

The crowd loves it all, every line and every drop.

The deck is stacked: The brands are all part of Beam Inc.'s portfolio and the goal is to get the crowd to "vote whiskey," no matter which nationality they choose.

By the end of the night, Noe and bourbon may have the edge. Butthe real winner is Beam, because everyone leaves as a convert to the cause: bartenders for Beam.

Sales are up, so is competition

For spirits makers, the aim of an event at Tales of the Cocktail is to recruit bartenders to become advocates — in the case of Kentucky's distillers, for bourbon and, if possible, for a specific brand.

To do so, distillers host expensive tastings, where they can present their wares in inventive drinks and frame the brand image, with everything from parties and dinners at well-known New Orleans restaurants to streetside bars that are part carnival tent, part food truck.

The price to throw a conventional tasting room event at the Hotel Monteleone or Royal Sonesta starts at $3,500 — plus the cost of the liquor, cocktail ingredients, food, celebrity bartenders, glassware, trinkets and giveaways. And the company personnel to staff it. For Tales events, brands often wheel out the big guns: their master distillers.

That's a drop in the bucket for the spirits industry.

Distillers rarely disclose individual brand promotional spending, but suburban Chicago-based Beam Inc. and Louisville-based Brown-Forman, two U.S. publicly traded companies, spent about $400 million apiece last fiscal year on advertising and marketing globally for all brands.

"You really are trying to get to the hearts and souls of extremely important influencers," Larry Kass, Heaven Hill's director of corporate communications, said of Tales events. "This is all about creating advocates and surrogate ambassadors on the frontlines, on-premise, which is where a lot of people will try our products."

In 2011, Heaven Hill spent about $9 million worldwide just on Evan Williams and Bernheim Wheat, two of its voluminous portfolio of whiskies, according to Beverage Information Group, which tracks sales, revenue and spending of the liquor trade.

This year in the Royal Sonesta's Evangeline Ballroom, Heaven Hill showcased its "Full Barrel" program, which allows bars and restaurants to buy a barrel of bourbon to sell bottled with their name on the label. Five bartenders — including Larry Rice of Louisville's Silver Dollar — served cocktails made from personally selected barrels of Evan Williams Single Barrel Vintage, Elijah Craig 12 Years Old Small Batch, Bernheim Wheat Whiskey or Henry McKenna Single Barrel.

The drinks were impressive but the big hit has been the program itself: Bars and restaurants bought several hundred barrels last year and sales are on track to triple this year, Kass said. More bars buy into their own bourbon and barrel sales are becoming big movers for many Kentucky distillers and an important way to establish niche brands.

Bars and restaurants "get personal equity in their selections, they get labels and displays, and pride of ownership," Kass said. "It gives the account something unique, rare, something to promote on social media."

Because the selections are slightly different from whiskey's typical age and proof profile, the program doesn't cannibalize existing brand sales. In fact, they increase it.

Because the bars and restaurants are invested in the product, they "will sell much more incremental volume of that brand," Kass said. "If an account sells on average 10 drinks a night of Elijah Craig, when they buy a barrel of Elijah Craig they will sell it much harder and could sell two or three times that."

Events like Tales also provide invaluable research on what is hot and what other spirits companies and brands are doing.

"This is the one event of the year where you get all your heavy-hitter bartenders, and you see other companies and how they execute events," said Randal Stewart, public relations and events manager for Campari America, parent of Wild Turkey in Lawrenceburg. "We realize we're not the only company reaching out. So everyone's trying to get creative. ... We're not the only bourbon out there. You want that bartender to say, 'You've got to try this Wild Turkey.'"

The field is only getting more crowded: The boom in bourbon sales in the past decade has drawn a flood of newcomers. According to the Distilled Spirits Council of the United States, the industry's trade group, 46 new bourbons or Tennessee whiskies were introduced in 2012, along with 22 ryes, eight "white whiskies" and two corn liquors.

Sales, in 9-liter cases, of bourbon and Tennessee whiskey were up more than 13 percent from 2007 to 2012, to almost 17 million last year. But the revenue growth is even more dramatic: up more than 28 percent in the same time period to $2.2 billion.

That has been fueled by the industry's push toward "premiumization," higher-quality products that are often older and always more expensive.

In five years, sales of premium labels, ones that retail for $18 or more a bottle, grew 80 percent, with the revenue soaring for the most expensive, according to the Distilled Spirits Council.

This move to premiumization has driven the industry to new heights. Most distilleries release at least one reserve, a small-batch, a single-barrel or other "special expression" each year. Add on "white" and flavored whiskies, and it is easy to see that the bourbon industry has a lot more scope than it used to.

Harlen Wheatley, master distiller at Buffalo Trace in Frankfort, outlined his distillery's price-point arc: At the "value" end, there's Benchmark; Buffalo Trace is in the middle; and then brands like Eagle Rare, Pappy Van Winkle, Elmer T. Lee, George Stagg and Weller are the top shelf.

"If you don't have a brand along the bell curve, you will lose customers. We'd kind of like to have all the customers we can," Wheatley said.

Buffalo Trace has a "white dog," or unaged, whiskey for sale but doesn't have a flavored whiskey ... yet. "We're looking into that, obviously," Wheatley said.

Four Roses blooms again

The return to premium bourbons also has helped another brand make a big comeback: Four Roses, which kicked off its 125th anniversary celebration with a brunch at Tales of the Cocktail.

That Four Roses has lasted for more than a century is something of a miracle. The label was one of the few whiskies sold legally (by prescription) during Prohibition and for decades afterward remained the top-selling straight bourbon in the country. (In Alfred Eisenstaedt's iconic photo of a sailor kissing a nurse in Times Square on V-J Day in 1945, they are celebrating under a Four Roses sign high in the background.)

But by the 1950s, with blended whiskies more dominant than ever, then-owner Seagram stopped selling the straight Four Roses in the United States.

By the 1990s, the once-premium yellow label had been relegated to the bottom shelves of American liquor stores.

Then something strange happened: In Japan, where the real Lawrenceburg-made Four Roses was still sold, bourbon was having a rebirth. Master distiller Jim Rutledge lobbied to bring it back to the United States as well but Seagram's executives said resurrecting the brand would be too expensive.

Instead, in 1997, Seagram's partnered with Bulleit, which was then a boutique family brand. Seagram's was preparing to ramp up production when the beverage business was sold in 2000.

Bulleit went one way, to Diageo, and Four Roses went another, ending up eventually with Kirin, a huge Japanese beer maker, which reintroduced the real Four Roses to Kentucky in 2002. (Ironically, the bourbon never moved: It is an open industry secret that Four Roses' distillery still makes Bulleit's bourbon.)

Jim Rutledge and Tom Bulleit also end up in the same place a lot: on the road, promoting bourbon and their brands.

Rutledge planned to be in New Orleans for Tales, pouring samples of his 10 different versions of "white dog" and aged bourbon. Instead, he was on his way to Tokyo for a new festival celebrating bourbon and American whiskey.

Meanwhile, Bulleit and his daughter, Hollis, take center stage at a penthouse media luncheon at the Monteleone to talk bourbon and tout the signature Bulleit mint julep cocktails at Ruth's Chris Steak House.

The two have their patter down, and they are pros. Tom Bulleit has his soft-spoken Southern charm; Hollis Bulleit works an eye-catching costume, this time with a feathered headdress.

"My dad and I are basically 'whiskey hobbits,'" Hollis Bulleit jokes, referring to their diminutive stature. So she uses her artistic talents to help her stand out in what has traditionally been a masculine field.

They educate on what makes high-rye Bulleit Bourbon work so well in cocktails. ("Don't say selling; it sounds crass," Hollis Bulleit scolds.)

Their formula — for their bourbon and for their promotional strategy — has worked.

Bulleit's sales have soared in the past decade with the growth of premiumization, which Tom Bulleit credits Maker's Mark's Bill Samuels with popularizing.

"When the water rises, all the boats float higher," Bulleit said. "I think we're second now after Maker's Mark among premiums."

This kind of soft-sell has been especially effective for bourbon — much more so than the white spirits, the natural enemy of brown.

"People associate with the brands, with that personal touch. That connection is huge. The master distillers in the American bourbon industry have been very influential in the sales end of it," Bulleit said.

And so have brand ambassadors like the Bulleits, who each get on more than 100 flights a year to travel the country for their family-name bourbon.

"I have stumped hard for 15 years ... and Hollis has done the same thing. It's a relentless pursuit of our ambassadorships and making relationships," Bulleit said. "You are in the trenches."

It only looks like a party. Really, it's a ground war.


ABOUT THIS SERIES

This is the second in a four-part series, The Spirit of Kentucky, looking at the state's bourbon industry.

Through the remainder of 2013, about once every other month, the Herald-Leader will explore a different facet of one of Kentucky's most well-known, important and fastest-growing industries.

June's first part focused on making bourbon, and future installments will delve into the lifestyle that has sprung up around the drink, and the industry's future. Also look for occasional features in print and online exploring the drink.

Find all the coverage collected online at Kentucky.com/kybourbon.

Janet Patton: (859) 231-3264. Twitter: janetpattonhl

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