Heaven Hill Flames On

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Heaven Hill Flames On

Unread postby cowdery » Tue Feb 13, 2007 10:06 pm

We're just a little past the 10th anniversary of the Heaven Hill fire. It's interesting, in retrospect, how little effect it has had on the big picture, although it was certainly a scary event and the loss of DSP 31 was a sentimental one, if nothing else.

What struck me as I was looking over some materials from back then is that Heaven Hill was only without a distillery for about 28 months, from November of 1996 to March of 1999. In the interim, they had whiskey made for them at Jim Beam and Brown-Forman. I don't believe they even built any more warehouses, although they did acquire some around the area. They acquired some at Bernheim too, but since they're masonry they don't like them and won't use them for whiskey.

Parker and Craig Beam made a lot of changes to Bernheim, but they are more or less content with it now. It is operating at capacity and they are still making whiskey at Brown-Forman, which is just about the only distillery that is not operating at capacity right now.

Today the Courier-Journal had an article about Beam investing about $120 million in its Kentucky distilleries. I know Barton has been increasing capacity and Brown-Forman is about to add more at Jack Daniel's. Wild Turkey has built some new warehouses. I don't know of anything specific going on at Four Roses, but they would seem to need it most of all.

Although Buffalo Trace says it is operating "near" capacity, I haven't heard about them adding any, but they're already the biggest distillery in Kentucky. They are adding a little bit of warehouse capacity by refurbishing Warehouse D.

It just seems like, before too much longer, somebody is going to have to either get one of the old plants out of mothballs or build a new one. Will Heaven Hill, perhaps, build a new plant in Bardstown? Will Kirin expand Four Roses? Maybe Diageo will get back in, perhaps by resurrecting Stitzel-Weller, which it does still own. That would kill two birds, because if they stop buying so much of the Four Roses output, Four Roses can double its distribution without increasing its production.

It looks like Beam is increasing warehousing and storage capacity at Frankfort (formerly Old Grand-Dad) but isn't thinking about firing up those stills again and is, instead, putting in another one at Booker (Boston). And, of course, Maker's is going forward with the plan announced some time ago to build what is, in effect, a third distillery on the site.

I was struck by the KDA statistics in the CJ article, showing annual production in Kentucky rising from fewer than 500,000 barrels in 1999 to more than 1,000,000 in 2006. In other words, doubling in eight years. I don't believe Daniel's and Dickel have increased that much, but they (especially JD) have been increasing production too. That the Kentucky producers doubled production without doing much to increase capacity shows you just how much excess capacity there was in 1999, but that's done. Something has to happen. I mean, it already is happening at Beam and B-F (at JD). I can't believe everybody else is going to stand on the sidelines and let those two companies increase their dominance, are they?

Just wonderin'.
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Unread postby bunghole » Fri Feb 16, 2007 12:29 am

63 views and not a single reply??? I didn't think this topic was so controversial or too hot to handle.

Chuck,

I don't rightly know how many stills Heaven Hill had originally, but I thought it was just one. As you well know Bernheim has two rather large stills that are stainless steel from the feed trays down and all copper from the feed trays up. Wouldn't that double Heaven Hill's distilling capacity with ease?

Why then would they need to distil elsewhere?

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Unread postby cowdery » Fri Feb 16, 2007 2:09 am

I don't have a direct answer, except that I have been told they are running Bernheim at capacity. My impression is that it has less capacity than DSP 31 did, but that could be a bad assumption. It could just be that they have ramped production up that much and if they still had DSP 31 going, it would be topped out too.

Of course, still capacity isn't the only limiting factor. Barton, for example, has plenty of still capacity but they need to add fermenters and that sort of thing.
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Unread postby bourbonv » Fri Feb 16, 2007 10:01 am

Chuck,
Within the past decade we have seen warehouse fires at Heaven Hill, Wild Turkey and Jim Beam. I would think the largest impact from these fires is their contribution to the shortage of aged whiskey today.Increased demand and the loss of one or more warehouses worth of stock has had its impact.
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Unread postby bunghole » Sat Feb 17, 2007 2:32 pm

Good point, Mike! The loss of the rackhouses themselves is also a critical one. Building new warehousing is quite an expensive endeavor. Do you know of any new construction of such?

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Unread postby bourbonv » Sat Feb 17, 2007 3:42 pm

Warehouses can be built and I do believe that some are being built at Beam, getting the permit to build a warehouse can be difficult. Since whiskey breaths hydrocarbons, strict anti-polution laws can make building new warehouse a tough prospect.

I went to a bourbon and cigar event last night and had a chance to talk to a couple of people whose opinions I value quite a bit - Julian Van Winkle and Al Young. We discussed the warehouse fires from the past decade and the shortage of aged whiskey now. They agreed with me that these fires, coupled with the rising demand made the situation we have today. Increased production back then was hard to do because first extra production was be used to supply Heaven Hill, then Wild Turkey looses a warehouse followed by Jim Beam doing so.
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Unread postby cowdery » Sat Feb 17, 2007 5:23 pm

Turkey, Beam and Maker's have all built new warehouses in recent years. Beam was building them when no one else was. They built those pallatized warehouses at Clermont about 15 years ago.
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Unread postby cowdery » Thu Feb 22, 2007 9:45 pm

As if on cue, Heaven Hill has just announced that it is expanding the capacity of its Bernheim Distillery to increase output by 40 percent. This is extremely exciting, especially coming so soon after the announcement of Jim Beam's expansion. We know Jack Daniel's is expanding too, so that's #1, #2 and #3 in American whiskey, all making substantial investments in new production capacity. This is a historic moment, the first time this has happened in half a century.

Heaven Hill is adding a new grain handling system, a new mash cooker, new fermenters and 15 new people, a 44% increase in full-time staff at the Louisville facility.

Meanwhile, yesterday I saw for the first time at a major retailer here in Chicago, two genuine American micro-distillery whiskeys, Wasmund's Single Malt Whisky and Stranahan's Colorado Whiskey, joining the two Old Potrero whiskeys and the two Forty Creek expressions as the only true micro-distillery whiskeys in wide distribution.

These events, occurring simultaneously, make these early months of 2007 a historic moment for us as American whiskey enthusiasts.

I think Dave Backus, retired George Dickel master distiller, said it best when asked when the then-silent Dickel plant would reopen, "when you drink it all, we'll make more."

Apparently, we drank it all.
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Unread postby Brewer » Sat Feb 24, 2007 12:48 pm

cowdery wrote:As if on cue, Heaven Hill has just announced that it is expanding the capacity of its Bernheim Distillery to increase output by 40 percent.


I think Dave Backus, retired George Dickel master distiller, said it best when asked when the then-silent Dickel plant would reopen, "when you drink it all, we'll make more."

Apparently, we drank it all.


Chuck,

Yes, indeed this is very positive news for us bourbon fans. :D Hopefully, the demand will be there down the road a few years to justify the additional expense that the distilleries are making. Do you know if the reopening of one of BT's old warehouses will be positively affecting their production?

Another question: you not the "then-silent Dickel plant"...does this mean that they are back in operation? That too would be good news.
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Unread postby cowdery » Sat Feb 24, 2007 2:19 pm

Off the top of my head, I think Dickel resumed production in 2004.

Buffalo Trace will increase warehouse capacity by 20,000 barrels, which isn't a huge amount, but it's something.
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Unread postby brendaj » Mon Feb 26, 2007 6:34 pm

Hey Guys,
I can't believe everybody else is going to stand on the sidelines and let those two companies increase their dominance, are they?


Let's not forget what Mr. Even and Drew are doing at the old Willett...
http://www.kentuckybourbonwhiskey.com/snapshots.php

I for one, cannot wait to see what comes out of the lavish amount of time and money the Kulsveens are committing to reclaiming a rightful place in the industry. They're sitting on 8 warehouses, just waiting for the production from a beautiful new distillery that (hopefully) is almost complete.

Hope Drew will jump in here, and give us an update.
Wish I could have taken pictures...but trust me, its gonna be nice.
Bj
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Unread postby fussychicken » Sat Apr 28, 2007 9:35 pm

cowdery wrote:I was struck by the KDA statistics in the CJ article, showing annual production in Kentucky rising from fewer than 500,000 barrels in 1999 to more than 1,000,000 in 2006.

<snip>

These events, occurring simultaneously, make these early months of 2007 a historic moment for us as American whiskey enthusiasts.


While I too find this a good sign for the consumer, may I play devil's advocate just for a bit? Could this simply be the peak before we enter into another whiskey glut? Does anyone know how many barrels were produced in, oh say, 1980 or 1985?
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Unread postby cowdery » Mon Apr 30, 2007 11:08 pm

fussychicken wrote:While I too find this a good sign for the consumer, may I play devil's advocate just for a bit? Could this simply be the peak before we enter into another whiskey glut? Does anyone know how many barrels were produced in, oh say, 1980 or 1985?


That's not so much Devil's Advocate as Chicken Little, since anything on an upturn will peak and either plateau or decline at some point, in the realm of popular taste certainly. There is, however, no reason to suspect the peak may be near and every reason to believe that we are still early in the boom. Certainly that's what the distilleries believe, since they are making decisions now that won't fully play out for a decade or so, and believe me they remember very well what happened in the seventies and eighties.

With most businesses, the risk of increasing capacity is the investment in new plant. With whiskey, it's that and the investment in inventory most of all.
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