Predicting The Future

Distillers have to have a talent for predicting the future. They have to predict what their sales are going to be for their whiskey for years in advance to make the right amount of whiskey to fill that demand. It can be as little as four years for brands such as Jim Beam and as much as twenty-three years for brands such as Pappy Van Winkle. They also have to consider the angel’s share and produce enough barrels that will have enough whiskey in them to fill the bottles. The longer they age the whiskey, the more barrels they have to produce today. A twenty three year old whiskey may only have a few gallons of whiskey left in the barrel at the end of the aging period. They have to consider many different aspects like the taste of the consumers, and political realities into the future. It is a difficult task.

If they get it wrong they have problems like over production which costs them money in storage of whiskey they can’t sell, or shortage of whiskey because of the demand. There is a history of distillers getting it wrong. In the 1870s, the column still made the production of whiskey cheap and plentiful. This led to over production in the 1880s and caused distillers to look for ways to cut production. Distillers supported the Federal tax increase because it would force the industry to cut production to what they could afford when the tax was due. In the 1950s, Schenley over-produced because they wrongly predicted the Korean War would cause another war-time prohibition on making beverage alcohol. There was no world war and the conflict never caused the prohibition. Schenley (one of the four largest producers at the time) faced bankruptcy in the late 1950s because they could not pay the tax on the whiskey they had stored in their warehouses when the bonding period ended after eight years. This caused them to lobby the government to increase the bonding period from eight to twenty years. It saved Schenley, but flooded the market with cheap whiskey that hurt the smaller distilleries who did not over produce whiskey and fill their warehouses, forcing many of them out of business.

The turn of the century had a different problem. After decades of declining sales, the Bourbon industry started to grow in the late 1990s. The distilleries were conservative in their production numbers and this led to a shortage of whiskey to support some brands. You started to see age statements disappear off labels and many age stated brands were discontinued. It took years before this shortage was eliminated and production caught up with the growth of whiskey.

This leads us to the overproduction problem of today. There are political problems that have cut the export market that the distillers failed to predict. There is a change in taste as younger consumers are not drinking as much alcohol, another factor the distillers failed to predict. Over confidence in the Bourbon boom has led some distillers to over production and many distillers have paused production to reduce inventory in their warehouses.

The distilleries have always had a problem looking into the future and do not always get their predictions correct. That is a problem when you make a product that takes years to produce.