By Maggie Kimberl

Opinion: Can distribution of American Whiskey keep up with demand?

Drinkers in Asian markets are buying whisky faster than it can be shipped out
People ask me all the time if I think American whiskey producers are overproducing. What if the market gets flooded like it was in the 1970s and they start having to put really good whiskey into ceramic collectible decanters just to get it out of the warehouse again?

American whiskey producers had a difficult time in the 20th century. The industry was just coming out of a largely unregulated cottage industry after the Bottled-in-Bond Act was passed in 1897, effectively putting farmer-producers out of business. This was closely followed by the passing of the Pure Food and Drug Act in 1906.

Just a few years later The Great War necessitated wartime ethanol production, then came Prohibition, then another World War. The 1950s saw tremendous popularity of distilled spirits, particularly whiskey, but a few distillers expected yet another round of wartime ethanol production with the Korean War, eventually leading to a flooded market with lower prices.

The concern about overproduction of whiskey is a valid one. Whiskey is in the unique position of having to be matured for several years before it can be sold, so distillers today are planning their inventory for 10 to 20 years down the road.

Schenley’s Lewis Rosenstiel began buying up distilleries and ramping up production as soon as the war in Korea began, according to bourbon historian Michael Veach. Unfortunately for him, wartime prohibition and ethanol production never materialised, and he ended up with a glut of maturing whiskey. Schenley was able to get the bonding period extended to avoid paying taxes on its eight-year-old stocks, but demand plummeted and Schenley had to get creative.

It began selling older, age-stated whiskeys and created a trade association to promote the image and sales of bourbon in foreign markets. It introduced the I.W. Harper brand to 110 markets by the mid-1960s, allowing other producers to follow.

But regardless of its efforts, Schenley still went out of business, largely because of overproduction. Could a sudden drop in demand coupled with the amount of whiskey being made in the United States lead to a similar situation today?

The first thing to keep in mind is that this is not the same economy of the 1970s. Imported goods are no longer a luxury, and exports are growing.

American whiskey has become very popular in European countries. But it’s not just European markets that are clamouring for new American whiskeys to try. Economies of Asian countries are growing and changing, as are the tastes of their growing middle classes.

A Reuters story from 2011 detailed the growing popularity of whiskey as a luxury item or status symbol in Asian markets. As whiskey grew in popularity, whiskey bars began to pop up, including Inns in Chengdu, LAB Whisky Bar in Shanghai, and Bar Constellation in Xuhui District, China.

There are now Whisky Live festivals in Bangkok, New Delhi, Singapore, Hong Kong, Manila, Jakarta, Shanghai, Tokyo and more – a testament to the popularity of the water of life.

We learned from Schenley that when you have too much whiskey, there’s always someone thirsty in another country. Kentucky alone has recently reached a barrel inventory not seen since the KDA (Kentucky Distillers Association) began tracking its state’s production in 1967, considered to be the peak.

Demand for American whiskey is soaring in other countries, particularly countries in Asia, and American whiskey enthusiasts are starting to recognise the emergence of Asian-produced whiskies, as well.

Countries such as India, Japan, China, and especially Taiwan are making stellar award-winning whiskies. Amrut’s Fusion Indian Single Malt Whisky won World Whisky of the Year at the World Whiskies Awards in 2011 and has continued racking up awards since.

Not only are Asian whisky enthusiasts generating a massive market for American whiskey producers, but Asian distilleries are adding more highly sought-after amber liquid to the global whiskey landscape. I’ll drink to that.