At the end of 2004, the last year for which figures are available, the Kentucky whiskey industry had 224,173 barrels of whiskey aged eight years or more in its collective inventory.Because bourbon and other American straight whiskey is always aged in new charred oak barrels, it matures fast. Eight years is old for an American whiskey, which typically has four to six summers under its belt when drunk.To consumers, American whiskey with eight or more years on it tends to be a speciality item, purchased by enthusiasts more so than ordinary drinkers. It is not the American whiskey producer’s bread and butter.But still, the stockpile in that age range dropped 40 percent in 2004 and today stands at its lowest level since 1998. No wonder then that Mark Brown, president of Buffalo Trace Distillery, characterises the current availability of whiskey aged eight to 10 years as “desperate.” With sales up both at home and abroad, has the American whiskey industry had too much of a good thing? Is demand starting to exceed supply? Are we running out of bourbon?After Diageo suspended production at George Dickel in 1999, fans of that Tennessee whiskey kept bugging master distiller Dave Backus about when distilling would resume.“If you drink it all, we’ll make more,” was his standard reply.Today, American whiskey producers are not so flippant as they watch their inventories of mature whiskey dwindle, not that there is anything they can do about it now. It isn’t even about capacity, according to Mark Brown, at least not at Buffalo Trace, Kentucky’s largest distillery. It is about financing and risk.“When we decide how much we are going to produce this year,” says Brown, “we are making a statement about demand 10 years from now.” With such long lead time, production forecasting for whiskey is a leap into the unknown, a finger uplifted into the wind, a guess; educated perhaps, but a guess nonetheless. Producing exactly the right amount of whiskey each year, and thereafter retaining exactly the right amount for additional aging, is a perennial challenge. Surpluses and scarcities are inevitable. We are in a period of scarcity now. Everyone is feeling the pinch, even the top-selling American, Jack Daniel’s.Although there are no current supply issues, after years of steady growth and expansion at the Lynchburg distillery, Daniel’s is once again producing at near-capacity.“The American whiskey industry as a whole has turned around and is growing again,” says Daniel’s global general manager Mike Keyes. “Things just turned for us a little earlier.” Jack Daniel’s has one advantage over some of its competitors, in that it sells no age-labelled products. Whiskey labelled ‘10 years old’ does not have to taste 10 years old, but it does have to be 10 years old. And it works the other way too. As Keyes explains, “age isn’t the sole determinant of quality. There are other significant maturation cues.” With no better ability than anyone else to accurately predict future demand, planners at Daniel’s simply “plan for success,” which usually means a small annual increase in the number of barrels filled. Industry-wide, whiskey production has been increasing at a rate of about five or six per cent a year.Where the present scarcity hurts most is in the spot market for bulk bourbon, upon which many private label brands here and abroad rely.“There are markets both inside and outside the United States that would like to buy whiskey but we don’t have it to sell,” says Mark Brown.According to Max Shapira, president of Heaven Hill Distilleries, “inventories in the industry generally are probably as tight as they have been for quite a number of years.” Asked specifically about the spot market, he says, “people who have relied on the spot market have had an increasingly difficult time finding a continuity of supply to support their brands.” He, too, says he knows of unfilled demand.Everyone cites unprecedented, across-theboard sales growth as the main reason for today’s tight inventories, but Shapira offers another explanation on the production side, a mysterious change in the volume of whiskey lost through evaporation during aging.“About five or six years ago,” says Shapira, “we noticed an increase in outage.The ‘angels’ share’ increased dramatically, by a few per cent. This was shrinkage nobody anticipated. Everybody experienced it, you can ask the other producers and they’ll confirm it.” Buffalo Trace’s Brown confirms the phenomenon, but characterises its effect on supply as “manageable.” No one is quite sure why it is happening or if it can be corrected. In addition to unfilled demand there have been lost opportunities.“It puts limitations on how much you can make a brand grow,” says Larry Kass, Heaven Hill’s director of corporate communications. “Take Elijah Craig for example. We probably could increase sales faster, but we likely would not have enough whiskey to keep up with it.” The two expressions of Elijah Craig are 12 and 18-years-old, respectively. Heaven Hill has more than half of the industry’s eightyears- old-plus whiskey.In the meantime, American whiskey continues to thrive. In New Zealand, American whiskey has just surpassed both Scotch and gin to become the number one distilled spirits category. It is growing in Germany, Australia, Great Britain and many other places. In some it is growing along with Scotch, in others it is gaining at Scotch’s expense. It has a long way to go. Scotch whisky exports are worth about $4 billion a year, compared to American whiskey at under $500 million.Just about every American producer now is making more whiskey each year, but they are cautious about it due to the impossibly distant forecasting horizon.Some are adding production capacity in one form or another. Maker’s Mark was in the early stages of a plan to increase its distilling capacity by 50 per cent when it was acquired by Jim Beam, which is itself building new warehouses.Wild Turkey, Maker’s Mark and Jack Daniel’s have all built new warehouses in recent years. Barton says it has enough still and warehouse capacity but plans to increase output by adding more mashing and fermentation.Brown-Forman, which owns Jack Daniel’s, also has two Kentucky distilleries. One of them, Woodford Reserve, is a showplace with limited capacity, all of which is being used. The Brown-Forman Distillery, in the Louisville suburb of Shively, could produce more than it does.For companies who sell American whiskey but do not make it, increasing production is not an option. Their only choice is to alter or discontinue the products they can no longer supply. David Sherman’s Ezra B bourbon, which was a 15-year-old, is now a 12. McLain & Kyne transformed its 15-year-old Jefferson’s Reserve into a “Very Old” with no specific age statement. Julian Van Winkle, whose company was the first to market only extra-aged whiskeys, merged with Buffalo Trace to ensure a future supply for his line of 10 to 23-year-olds.Age statements on any American whiskey are becoming rare outside the superpremium segment. Heaven Hill recently dropped the age statement from its leading brand, Evan Williams, which was for many years heavily promoted as a seven-year-old. Mark Brown says he hopes American producers won’t try to use higher prices to temper demand.“That would be short-sighted,” he says. “We have a commitment to our existing friends and customers. We would rather allocate than use price to solve the demand problem.” Whatever the industry does going forward, there is one immutable fact. Time, measured in years, always will be a primary ingredient of whiskey.