Production

When Will the Wood Run Out

The current demand for whisky has created a boom to beat all booms. But will a worldwide shortage of casks bring it to a juddering halt?
By Dominic Roskrow
Have you noticed how expensive whisky is getting and how rapidly prices have gone up? Or become aware that a high proportion of new releases no longer have an age statement, and that an industry that talked constantly about age and quality has about-faced?

Or started to feel that at least some of said whisky just doesn't taste as great as it once did?

Well brace yourself. For in the words of Bachman Turner Overdrive, 'You ain't seen nothing yet'.

We are at height of a perfect storm which has it roots in the American recession of 2008, has worked its way back to the forests of Missouri, and has now travelled into the very heart of the world whisky industry. When America sneezed and stopped making casks the rest of the world waited four years and then caught a cold. Simply put, we've all but run out of bourbon barrels and there aren't enough to go round.

"The situation was dire last year, it's dire this year, and it's not going to be much better next year," says the world's leading wood expert Dr Jim Swan. "We're 130,000 barrels short this year so it might not bring the whisky boom to an end, but it will certainly slow it down considerably."

The problem has been caused by a fall in demand of bourbon when the recession bit in America. The huge Kentucky distilleries cut back, so the two main cooperages, Independent Staves and Bluegrass, stopped buying wood. And in turn the wood loggers, typically independent single or two person companies, sought work elsewhere. And when the bourbon industry came back to them they had gone.

"There is plenty of wood because the industry plans it that way," says Dr Swan. "It just wasn't going to towards making American whiskey barrels." The situation was exacerbated by a terrible summer and winter, which meant felling equipment couldn't get in to the forests and nobody could get the trees out.

It means that right now someone, somewhere is scouring around the world and trying to broker a deal over wood. Any barrels that become available are snapped up, making the competition to secure supply a woody version of Mad Max. But, of course, they come at a price. A rising one.

Kentucky's distilleries are working flat out now, and the cooperages are expanding. With the supply of timber not an issue, Independent Staves is adding a new super cooperage to the two it already has. There is a big time lag. New barrels have to be filled with bourbon and a high proportion of it will be matured for four years before, under American law, they must be discarded.

Only being permitted to use a barrel once is common to all bourbon and Tennessee whiskey making, and the restrictions might explain why there has been a court attempt to allow Tennessee whiskey from refill casks, although given that the challenge has been made by Diageo, it's hardly likely to be the main reason.

Is there really a problem though? Back in Scotland there's a contradiction. Here the whisky industry is still expanding. A lot. So if the problems are so bad, how are the whisky makers hoping to deal with them? Glenlivet, for instance, is set to follow its expansion of four years ago with another one that will take its output to a whopping 20 million litres.

The answer is that the bigger players took preventative action when they saw the problem coming and any glitches in the supply of bourbon barrels will have gone in five years or so, with American cooperages are expanding to meet demand.

"With the boom in demand for Scotch and the huge investment in new distilling, there needs to be a commensurate increase in the ability to mature the spirit of course," says Luke Tegner, brands marketing director of Berry Bros & Rudd Spirits.

"The industry is alive to this and has been for years. Edrington is at the forefront when it comes not only to an understanding of the maturation process, but also to sourcing the best trees to make the best casks to age the best whiskies. Glenrothes benefits from that and there are concrete plans and agreements in place to secure the supply of the type and quality of casks required to meet the growing needs of Glenrothes."

That's also true of Diageo. The company has immense buying power and has long term relationships. Pernod Ricard, too, has a ten year supply agreement with Campari to take Wild Turkey casks following its sale of the Kentucky distillery to the Italian drinks company. Even the big companies will take what they can get, though.

"I know one company that is talking about the spirit it has and what wood would work for it and it's talking total nonsense," says Dr Swan. "They are going to have to make do with what they can get. All these people who are getting excited about opening distilleries are being caught out. The last thing they think about is getting casks. they think they can just pick up the phone and order them, and they're not there."

There is an up side too all this gloom. In countries not bound by the oak ruling, experimentation and innovation are likely to be the outcome. Australia uses a lot of oak which has previously contained port, because it has a thriving port industry. Many world distillers are so small they were able to tie up supply well in advance.

But unfortunately the negative effects for the whisky drinker are being experienced already - more expensive whisky and/or whisky of a poorer quality, as the costs of cask rises and either inappropriate casks are used for spirit, or casks are re-used more than they should be.

"And that's likely to happen in Scotland more than anywhere else", says Dr Swan. "When Scotch whisky is in high demand the quality goes down. Not just because of maturation but faster fermentation times and rushing everything through to maximise output".

Not everyone of course, but enough to make a difference. Makes you want to have a stiff drink, doesn't it?