transcript

Speaker 1:
[00:00] 30 years ago, you could not be an established, what we call, NDP, and be proud. You could be an independent bottler in Scotland, puffing your chest out, I was one of the best in the land. Could not do that here in America. It's only relatively new where blending is accepted, and non-distiller producers are accepted as equals to the distillers.

Speaker 2:
[00:32] This is Bourbon Pursuit, The Official Podcast of Bourbon, bringing to you the best in news, reviews and interviews with people making the bourbon whiskey industry happen, and I'm one of your hosts, Kenny Coleman. So do you think the era of secret source bottles is finally over, or are we just getting started? Well, today, we're gonna start talking more about contract distillation. We're gonna start tracing back from the early days of the, you know, shh, don't tell anybody that it's MGP, to the massive high-tech operations like Bardstown Bourbon Company that have turned being an NDP into almost like a badge of honor. But, you know, as being the consumer, you get more sophisticated. The demand for transparency is hitting an all-time high. And that's why we're talking about how you can't fake the funk with a made-up story that just doesn't fly today. We also tackle the elephant in the room, which we're seeing right now as market oversaturation. How do we deal with that? With speculative investments pouring in and foreign tariffs starting to squeeze the exports, the landscape is certainly starting to shift right underneath our feet, but it's not all bad news. Because of this, we're now seeing a potential true risky renaissance. As those massive inventories of aging barrels, they will hit the market eventually, likely leading to some of the most unique, high-quality releases that we never even expected. With that, enjoy this week's episode. And now here's Fred Minnick with Above the Char.

Speaker 1:
[01:53] I'm Fred Minnick, and this is Above the Char. This week's idea comes from Philip Bosch, who writes me on Patreon in our chat. If people are drinking less, does that include collectors who aren't emptying bottles as quick and running out of space for new bottles? Is oversaturation erasing fear of missing out? Well, that's a great question. That's a deep one. We should probably actually tackle that for a Bourbon Community Roundtable. But my thought on that is collectors are actually going to the auction house a lot. You're seeing a lot of these collectors go to Unicorn or Christie's and they're just selling their entire collection. Within their collection, they'll have some kind of cool barrel pick from Pappy in the 90s. They'll have something tied to the Blackhawks from the 40s. They just have all of these really cool and rare bottles. They're just like saying, you know what, I've been keeping them long enough, time to get rid of them. So I think a lot of collectors that were holding on to whiskey for investment purposes, I think they're out. I think a lot of those people are moving on. And then the other side of the collectors, the people that hang on to them for special occasions, I do indeed think they're drinking them. I know this because I've personally seen it. I've seen people dipping into special bottles of Pappy, birthday bottles of Blanton's, one of the first mickters ever. I've just been seeing this more and more and more. And what has changed with that group is they are not necessarily buying them, not because they're out of room, but because they know that today's, they're handpicking what they're going for. Like they don't think that today's Pappy is going to be a collectible in 20 years. I would say that most collectors who are buying things for investment have moved on from buying Pappy for investment. They may get a special one of the Buffalo Chase Antique collection, but what I have seen them move to quicker than anything else in the collectible side of things is King of Kentucky. King of Kentucky, in my opinion, has replaced Pappy as the main collectible for people who are looking at Bourbon as an investment. And you do not need to look any further than the charity auctions that go on in Kentucky when you see people bidding for a bottle of King of Kentucky. So great question there, Philip. And if you all want to be like Philip, hit me up on Patreon, go to the chat and just drop your question in there, or you can hit me up on fredminnick.com. That's fredminnick.com. Click the contact button, and if I like the idea, I'll read it on the air. Until next week, cheers.

Speaker 2:
[04:46] I get to talk about Whiskey Festivals all the time on the show, and I have seen this one firsthand, and I know the type of crowd and the enthusiasm that's there. And if you're a fan of craft whiskey, you need to be going to Bruisel Fest, and it's back for its third year, and it's shaping up to be the number one craft whiskey festival. So mark your calendars for August 29th, 2026, where you'll get pours from smaller brands from all across the country. You can sit on educational panels and meet the faces behind some of your favorite bottles. Ticket sales will kick off on April 27th with early access for those Bruisel Club members, and Early Bird General Mission starts at only just $80. They have VIP tickets at $210, but those discounted prices will only last until the end of May. So whether you're a seasoned collector or just now getting into craft whiskey, this is the festival you can't miss. Go to bruisel.com/festival2026 to learn more about tickets. This episode is brought to you by Sip and Bourbon, the app built for bourbon drinkers. Discover new bottles, explore curated recommendations, and connect with fellow whiskey fans just like yourself, all in one place. There's no gimmicks, just great bourbon and a smarter way to sip. You can download the Sip and Bourbon app today, or you can visit at sipandbourbon.com. That's S-I-P-N bourbon.com, or just grab it on the app store. You hear us talk about whiskey clubs all the time on the show, but there's a common theme. Most of them are about keeping people out. There's insane membership costs. There's no choice in what bottles you actually receive. So here at Pursuit Spirits, we're changing that game. That's why we introduced P Club. It's our way of bringing our distillery straight to you. We've scrapped the whole mystery box model. So as a member, you get total control with a customizable cart. You can choose anything from our everyday offerings that may or may not be available on retail shelves around you, or we have once a quarter brand new exclusive distillery gift shop only releases that will never hit store shelves. And that includes everything from our Melwood Legacy collection. Plus, you'll get 10% off all merch, invites to VIP virtual tastings with Ryan and myself, and $15 off distillery experiences here at our home at Whiskey Row in downtown Louisville. It's not about being exclusive, it's about finally having the access you deserve. Join our inner circle today at pursuitspirits.com/pclub, or just go to pursuitspirits.com and hit that P club link to come and join us. Hey everyone, it's Kenny here. I know you're just like me. We all love a good Bourbon to wind down at the end of the day, especially right before we go to bed. But right now, those Kentucky nights are starting to get humid, and that nightcap actually ends up spiking your core temperature and can ruin your deep sleep. And that's why I actually got myself an 8 Sleep Pod 5. It's a smart cover that goes right on your existing mattress, and it can cool down to a crisp 55 degrees, so no more hot feet at the end of the night for me. It has an autopilot AI. It can actually sense my body signal and knows how to adjust the temperature automatically, helping me get actually more sleep at the end of the night as well too. It's really the difference between waking up foggy and actually feeling rested. And for me, it's been a game changer. So, you can use my code. It's Bourbon Pursuit. So, go to 8sleep.com/bourbonpursuit and you can get up to $350 off your own Pod5. You can also get it 30 days to try it at home. And I'm confident that you're going to love it. Go to 8sleep.com/bourbonpursuit.

Speaker 3:
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Speaker 4:
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Speaker 2:
[09:33] Hey, everybody, welcome to Bourbon Pursuit, The Official Podcast of Bourbon. I'm Kenny Coleman. And Ryan Cecil here.

Speaker 1:
[09:40] Fred Minnick here.

Speaker 2:
[09:41] Whole gang, talking about something that maybe a little close to Ryan and I's field of view or purview or wallets, I guess you could say, is another way to kind of look at it. But contract distillation, you know, this is something that has been around for a very, very long time. As long as distilling has been around, I'm sure that Fred will give us a nice little history of a little bit of contract distillation here. But we'll talk about the state of contract distillation. And you might not notice that there's not a fourth person, there's no guest on the show today. And that's because I don't think anybody's going to come on and divulge either how great or how bad their business is doing. So from an outsider perspective, that's what we're going to kind of do. And I say outsider in the fact that we have some ties in the industry, we are doing contract distillation at a few different places. So therefore, we have a good sort of knack on sort of probably what the state truly is without having to have somebody come on and show us their Excel spreadsheets. Yeah, it's fascinating. I don't even think you could have this conversation 10 years ago and people even care, but the fascination and the growth of Bourbon also to NDPs or non-distilling producers are becoming more and more accepted by whiskey fans and even sought after. Everybody is always looking for where is this made? How do you get that? Because most people don't even understand that this world even exists. They just see a bottle on the shelf. They assume that that brand has made it. But the consumer today is so educated, wants to know where it's made, the match bill, what cooperated in, this and that. There's a ton of interest in contract distillation. Then you have people, I guess, lofted spirits now, that's like Bardstown and Green River, that really, and Whiskey House, that market themselves as the premier contract distillation where you can do custom this, that, this and that. Whereas before contract distillation was not really marketed, it was just kind of like this back in, back behind the scenes thing where you're like, oh, I need some whiskey made, I'll go to... You had to know Max Shapira. You had to go in over there at Heaven Hill or wherever else you're going.

Speaker 1:
[11:56] Let's just count down some of them. All right, so let's see if we can name all of them, because there's a ton of contract distillers now. All right, so MGP, that's obviously a big one. Lofton, which is BBC and Green River. There's Western Kentucky Distillers, which is also in the Owensboro area. You got Denny Potter, Denny Potter, Potter Jane. You got Eastern Light, which that is Caleb's. And then you've got Whiskey House, okay.

Speaker 2:
[12:26] And then you got RIP, Gerrard County and Luca Mariano.

Speaker 1:
[12:32] Didn't Gerrard go out of business?

Speaker 2:
[12:34] Yeah, he said RIP.

Speaker 1:
[12:36] Oh, okay. All right. I was like, I was like RIP, I've not heard of that one. Okay. All right. So and oh, Middle West and Ohio is doing a ton.

Speaker 2:
[12:48] Southern Distilling.

Speaker 1:
[12:49] Southern Distilling is huge.

Speaker 2:
[12:51] I'd say anybody that will take a phone call that is extra still time would be interested in doing that. I mean, you've got pretty much Tennessee Distilling Group. You've got the partners that we work with, obviously, so like there's all the major brands. Yeah. And that's what I think.

Speaker 1:
[13:05] People who are focusing really building a contract isolation company. Yeah.

Speaker 2:
[13:10] Yeah. Yeah.

Speaker 1:
[13:11] Yeah. Those I think that's a good 10 or so right there.

Speaker 2:
[13:15] Yeah. Where you can pick up the phone and immediately make that phone call.

Speaker 1:
[13:18] Right.

Speaker 2:
[13:19] Yeah. But getting contract distillation anywhere shouldn't really be an issue. As of today, as it was, I mean, five years ago, it's been a complete different structure change. Because not only did you have this huge growth, but people were making a bunch of stuff for their own particular portfolio, thinking that this was going to keep going. But now that that has sort of subsided a little bit, I mean, obviously, there's still time available, but a great story even from our perspective and our own journey was getting in touch with Sagamore. I mean, this was a company that did not do any contract distillation. They had done some stuff, they had created some bourbon, there was a few Sagamores flying around, floating around on the market that were acquired by some individuals. But they had never really intended to be a contract distillation facility. I still remember to this day of us going up there to Baltimore, having to meet the team, Brian and Drew, who are no longer there with them. I think Ryan is still there as a part of it. But meeting those three particular key individuals and getting a chance to go and sit down and truly talk through what do we want our production look like, how much are we going to be able to do? When we told them, I don't even forget what number we said and how many barrels that we're going to be doing. Do you recall? Yeah, it was like 140 or 200. It was way more than that. No, sorry, 400, something like that. I thought it was more than that. I forget each contract we have. Yeah, I was about to say. Actually, it's probably up around, yeah, it's got to be around 400, something like that. But when we had talked about that particular number, I remember looking over at Drew and he said this like, he's like, oh, crap, his eyes lit up. He goes, we could run another shift. It's based for a night shift. Yeah, they finally saw the ability to get more utilization out of their equipment that they had never really thought of before. This conversation isn't something that most people, even at the time, thought, oh, we could make a whole other revenue stream out of it. Now, I think it goes without saying, anybody that owns and operates a still, they're seeing, they have downtime, especially if you're running a column still, you don't want downtime, so you're wanting to try to feed as much mash in that as possible and get as much possible output.

Speaker 1:
[15:44] Yeah, and that's really kind of like where contract distillation even comes from, is that it was meant to basically supplement the downtimes for the larger companies. And that's why, you mentioned Max Shapiro and Evan Hill, that's why they were always selling their whisky. And by the way, they weren't custom contract distilling. They were like, hey, here's what we got. You want it or not? You know, so.

Speaker 2:
[16:11] Unless we have the Lux. I think Lux had a lot of their own stuff over there, but they were buying a ton.

Speaker 1:
[16:17] They were buying a lot, and I'll never forget Don Lux's Hall of Fame speech basically was-

Speaker 2:
[16:22] It was the best.

Speaker 1:
[16:23] He was basically spitting like 15 minutes, ripping on Heaven Hill for cutting them off and making him build a distillery. I'm like, dude, this is your crowning moment in the bourbon industry. You just rip it on Mac Shapira. I mean, it was funny.

Speaker 2:
[16:37] It was funny.

Speaker 1:
[16:38] But yeah, I mean, that's where, all of these basically come from that. There's really only one prominent blue blood distiller that was born to be a custom creator, and that is Barton. Barton was, early on, was like, we'll make whiskey for you. We'll help you. So when they opened and were selling stuff in the 60s, they were like, let us help you build your brand. So that's a company that at the time would have been very much a part of the modern style, which ironically, or coincidentally, Barton's still involved in the custom side of things now.

Speaker 2:
[17:22] Before you get in that, I just want to say, like, historical context to it. I mean, contract distillation's been around forever. I mean, this is a commodity at the end of the day, right? So you create a commodity, it's up to you to build a brand around it.

Speaker 1:
[17:35] Yeah, I think what's different today versus history is historically, it's like, nothing was done for you specifically. It was not custom. It was usually just like bought barrels or like you want some new make, here's our recipe. There wasn't anyone going in there and saying like, all right, well, we got to change the grain we're using. Oh, different yeast for you. Like it just wasn't done like that. And if it was, it's not to the level of being reported. And today, like you go to these places and they'll like Jackson Purchase, that's another one.

Speaker 2:
[18:08] There we go. I feel like this is gonna happen. All of a sudden these things are just gonna start coming to life.

Speaker 1:
[18:13] I was like, oh, there's like 20 of them now. But it's not like you can go, like today, like you go sit down with Craig Beam and Jackson Purchase and you're like, all right, what do you want? What yeast do you want? And same with Bardstown Bourbon Company or Lofton. There's just all these menu items that you can choose from now. Whereas back in the old days, it wasn't like that. And they certainly didn't give two shits about your brand. It was like, here's your whiskey, get the hell out of here. And then the companies that would do that would often say talk shit about them in their advertisements saying like, they didn't make their whiskey, you know, like it was kind of like, yeah, you guys made the whiskey for them and now you're talking shit on them. What's up with that?

Speaker 2:
[18:55] Sorry, I mean to cut you off. No, I was going to say, do you know the history of like when, with Seagrams to LDA, MGP, when they kind of switched their model to contract distillation?

Speaker 1:
[19:08] Yeah. So how long can I go on this one?

Speaker 2:
[19:11] You got five minutes.

Speaker 1:
[19:12] I don't know if I can do it in five. I'll do my best. Just interrupt me if I go too long. All right. So basically, the Seagrams plant gets divested and the brands, a lot of the brands went to Diageo and Pernod Ricard, a lot of the facilities and Pernod Ricard got the Lawrenceburg, Indiana facility and there they were basically, they had a whole vision of having an RTD campaign in Australia with the whiskey that was made there. They were still supplementing the Diageo brands that were former Seagrams. They were still supplementing them with that whiskey there from Indiana. But Pernod Ricard had a vision of doing RTDs in Australia. Australia changed the tax structure there and it basically destroyed that entire vision. And so then they were like, well, screw it, we can't make any money on this plant. Let's mothball it. And so they were in the process of about to mothball it when Angostura Bitters is the most prominent brand in this portfolio. It came out and the parent company of Angostura, which was CL Financial, came in and bought the facility and renamed it Lawrenceburg Distillers Indiana. I remain to say that that is the dumbest freaking name ever, but it called LDI. So it became known as LDI. And they had a slight vision of making their own brands down the road, but they were very into the spirits industry, and the people behind that move and that brand were incredibly smart in seeing how the industry shifts. And they were seeing like a bunch of craft distillers come online, and they were selling whiskey, but everyone's like, your two-year-old whiskey sucks so bad. And so they're like, hey, we got all these barrels over here. Why don't you take these barrels, do whatever you want with them, but we're happy to supply you with your whiskey. Now, what would end up happening is you would have people say like, they would buy, they would start their business one day by LDI 13-year-old rye whiskey the next day. And then day three, they were like, come try my grandpa's recipe over here, 13-year-old rye whiskey. May just like my grandpa. That became the controversy. But LDI absolutely crushed it in that market. And then the world global financial crisis happened. They all financials caught up in it. And LDI is, they go bankrupt. They're dead on the vine. And so MGP comes in and buys the assets and the brand and everything from LDI. So this happens, I think, in 2012, 13, between 2011 and 2013. Somewhere in there that that's when that happened. And MGP, which had been a pretty much to this point, a vodka manufacturer with plants mostly in Kansas, but some other plants around the globe, thought, let's get into whiskey. They maintained the LDI portfolio, grow it, but had a vision of doing custom creations for people. So they had buckwheat whiskey, they had single malt whiskey, they were doing gins for people. So they would be a little bit more custom at that time. And then they also had a vision of making their own products. So they acquired a brand from an NDP in Cincinnati called Remus. And that was kind of like, you know, the evolution of what MGP is, obviously where we are now. But early on, that's what it was. I know that was more than five minutes.

Speaker 2:
[23:04] Actually, you're right underneath of it.

Speaker 1:
[23:05] Was that under five minutes?

Speaker 2:
[23:06] You are, you're under five. Yeah, so then, not to make this a history lesson, but you have MGP, which is pretty much the only place you get it. You have a handshake deal with Mike Shapiro. Barton's pretty readily available. Turkey Buffalo Trace, very rarely did you get it. H&H would sometimes sell barrels back in the day, but very few far between. But then you have like Bardstown Bourbon is like, oh, I know you can buy stuff from there, but it says distilled in Indiana. Here you can say it's distilled in Kentucky.

Speaker 1:
[23:39] That matters.

Speaker 2:
[23:40] And then you start to see, not only brands use that facility for contract distillation to make customization. They're really one of the first ones to be like, customize anything, everything. But then you start to see like investors get into the barrel game. And I think that's what's led to the state of industry. Historically, have investors always gotten into like the barrel commodity game, or is that just like a modern phenomenon?

Speaker 1:
[24:09] That's very modern. No, you did not see this prior to like, investment was in into the brand and the distilleries. And when you started to see, it's different, but it's very similar to like when California wine became very popular, all those investors would go out to Napa and buy up Spots. It's very similar to that. But they just, over a five year period, you had people who didn't really care about whisky, getting into whisky to make money off whisky. And that to me is probably when we, in 10, 20 years, when we look back on this timeframe, that's going to be the little thing that I probably circle. If I'm looking at like judging this period of time, it was like all the people getting into this space, just to make money off it, but didn't have a passion for it, which means that the minute that the market dips, they sell and it creates an issue across the entire industry. But this is new. And I think it's also like you can add to, you can add to the investors to the, you can add like the the Cascades, those types of like companies as well, you know, that have a little bit more, you can be-

Speaker 2:
[25:25] Well, they're truly doing it for a investment purpose, but they try to make it for retail investors, if you will.

Speaker 1:
[25:30] Yes, yes. Not your, not someone dropping 15 million. But if you've got, I don't know, I don't know what their minimum investment is, but-

Speaker 2:
[25:37] Let's say it's five grand or 20 grand.

Speaker 1:
[25:39] Yeah.

Speaker 2:
[25:39] Yeah, whatever it is.

Speaker 1:
[25:40] Like the Robin Hood approach, right? So if you have like just a little bit amount that you want to invest and here you go. It's part of a portfolio for you. So that is absolutely new. And it is-

Speaker 2:
[25:50] It's new in American whiskey, but it's been around in Scotch for quite some time, right? Of being able to buy-

Speaker 1:
[25:56] Yeah, yeah, yeah. Independent bottlers.

Speaker 2:
[25:58] By Hogg's Heads or whatever they want to call it over there.

Speaker 1:
[26:01] Yeah, very, it's very, it is fascinating, like how different the two, the various countries are. Like you can, you could not, 30 years ago, you could not be an established, what we call NDP, and be proud. You know, you could be an independent bottler in Scotland and be, you know, puffing your chest out, I was one of the best in the land. Could not do that here in America. You know, it's only relatively new where blending is accepted and non-distiller producers are accepted as equals to the distillers. You know, and with that, a little bit of varying degree is that you do have people who would own portions of like a warehouse in Scotland, and you would have like blending houses. Going back to the 1800s, there would be blending houses in London and Belfast and places like that. And just that model didn't not get created in the United States. It just never did. It was a, you know, really kind of after, really after the bottled and bond fights in the late 1800s, when bottled and bond act was passed, the distillers were basically became a legion protecting their own, which was straight whiskey. And they blocked, they blocked blenders, they bad mouthed blenders, and they kept blends that were not within their own, like protected community off of the shelves in a lot of American liquor stores.

Speaker 2:
[27:29] But those blends were not today's straight whiskey blends, right? Those were feeding in neutral spirits, or color neutral spirits, people don't make that happen, too. Which it's not as much as a problem today, I guess you could say. So we don't really see that too much anymore.

Speaker 1:
[27:45] Well, it's not for our audience, but for those who go to the liquor store at nine in the morning to get drunk before they go to work, those blends are very much in play.

Speaker 2:
[27:54] Kesslers, very much a blended type of product.

Speaker 1:
[27:57] You know, that's like when you go to the liquor store, like say 10 o'clock or whatever to get something on your lunch break, and you see that little bottle of Kessler's over there in the corner, and you're like, yep, I know who drank that. Yeah, make it cause it's not listening to Bourbon Pursuit.

Speaker 2:
[28:11] No, they're probably not listening to Bourbon Pursuit. But let's take it back to the industry a little bit. So obviously right now we are in a certain period where the barrel market has, for lack of a better term, cratered. There are probably a lot of people that got on the retail side that are, I don't know if they have lost their investment, but they are definitely not going to be making the 4 to 10X they were probably anticipating on getting in these types of investments either. So what do you think that ultimately means for the contract distillation market when it comes to say investors, Ryan? Yeah, I mean, it's funny, because you had, say you were an early investor in Bardstown Bourbon Company, say 2016, not a lot of people were bold enough to say, oh, I'm going to buy barrels and sell them. It was just kind of like a fun one-off auxiliary investment. But say you lay down whiskey in 2016, that barrels four or five years in 2020, 21, you can't get whiskey. There's no source whiskey because all the big brands are growing so fast, they're not selling it. All of a sudden, those barrels that got bought, say for $600, $700 a barrel, we're now trading for $4,000 a barrel for four-year whiskey. What you had was all these investor groups were like, wow, look at these returns that you can get. Then all these hedge funds got put together to like, oh, we can offer this investment platform for not only institutional investors, but like as Fred said, retail investors. It just created this massive, massive glut. I remember when we were going through our process of laying down whiskey for Pursuit Spirits, and I'm like, I knew this was going on, but I just didn't know the scale of it. I was like, oh, there's people investing, but they're like with brokers and this and that. I was like, there's no way. I mean, a barrel prices are going to come down eventually because there's going to be more, but I just had no idea the scale of it. How many investor barrels or how many barrels that weren't dedicated to brands were actually out there? Exactly. I knew the contract distillation source barrel game for investors was in trouble when I got a phone call from my cousin. My cousin lays floor and he makes a great living. He's a great person. He calls me up and says, I just bought 200 some barrels from XYZ. He's like, do you think that's a good investment? This is like 2022. I was like, I don't think it is. How did you get access to this? What you have here is this glut of inventory that was sold on these once in a lifetime returns and so there is a massive amount of whisky. And two, a lot of NDPs, whatnot, a ton of brands were created during this time. They were making their own contracts to secure their cost of goods. And so it's like, just like us, we have 5,000 barrels of inventory and you're like, well, who's going to absorb all this? So right now you have a massive glut. The spirits industry has gone down, say, one to 2%. All of a sudden, you have this excess. Prices have just plummeted. And so investors, obviously, it's so funny. Bankers and investors always want to invest when times are good. They never want to look at, when times are bad, they're like, no, no, no, this is a bad time to get in. No, let's get in when it's at the peak. That's what banks and investors always do. It's just a human irrationality. Whereas somebody like Warren Buffett- Buy high and sell low. That's my strategy in the stock market too. Exactly. What you have now is a lot of these investor groups that signed up for two-year, three-year, five-year contracts, they're like, we're out of this game. We're not making the returns we thought. We took out bank loans with the interest added, this and that. We can't make any money at these prices. While you have a glut of whiskey now, you're seeing a lot of these contracts getting backed out of. And so, to me, it's like, wow, are five and six years, are we going to be on the low side of whiskey? Because they're not a lot of, I mean, you read some reports that distillation has been cut back like 60% this year based on proof gallons to the TTB and this and that. And you're like, wow, are we going to have shortage? Well, this would be a great time to invest in barrels. But the contract distillers are definitely fill it because they're filling it now because A, they can't sell the contract still time. But two, also the barrels they laid down that they would sell to brands aren't moving. And so you just have this massive, like- The holding pattern. Supply chain that, how do you move through this? And you keep seeing prices going lower, lower, and lower. And I have seen them kind of stabilize and maybe go back up a little bit, but that was a long-winded way of asking about investor barrels, but- Yeah. Well, I mean, you brought a lot of good points because this is definitely a tricky time to be in that business. The one thing that why you do contract distillation is because you get money in the door today. You don't need to distill today. You don't need to wait two, three, five, six, seven, eight, nine years to sell that barrel. You get money in the door today. That gives you money to do operations, to pay your people, to do everything. I think that's probably the hardest part that you get somebody that's like Potter Jane out there, that said, we're not going to do Clear Spirits, we're not going to do gin, we're only going to do bourbon, we're only going to do whiskey. Well, they're not going to turn their first dollar for their own brands for at least four to six years. Right. Their only option to get money in the door right now, to help feed off either banknotes or investors or anything like that is they have to bring in contract distillation. It was such a great model of when Bardstown started, because that's how they were able to get as big as they were, and they could take all that money from the contracts. I mean, they picked a great time to be able to do it, because they were able to get all that money in from the contracts. What did they do with that money? They not only started doing expansions to bring in more contracts, but they followed that money into their own brands, into their territories, and started building the Bardstown brand to help, hopefully, that could be the thing that they're truly known for. Then they start divesting, and then it's like, okay, now we're lofted spirits, because we don't want people to start associating Bardstown with only being contract and also that kind of stuff. They have their own internal marketing at play there. The one thing that I think is really interesting and how this is going to play out over time, is to see exactly if you are doing the contract distillation, how long can you go until you realize, it's really not work to squeeze anymore. This is the part that we're currently all facing, is to know, all right, and you've done the math on this on our own barrels, to try to figure out if the barrels drop below X price, it makes no more sense to do contract distillation because I can go ahead and buy a barrel at four years old, six years old, and now I know the breakeven point of what I would pay for a new fill plus storage insurance and banknotes for that loan until it gets to that timeframe as well. We got into a time where you didn't really have that option. You had to go do contract distillation. You had to own your future. I look at companies today, River Roots being a great example of somebody that didn't necessarily go and say, I had to go, and rare character to agree as well. But they're starting to do their own contract distillation. But being able to come in and just be like, hey, I can come in now. There's a lot of really good aged whiskey that's available. With a few phone calls, you can find some random things. But they don't necessarily have to take a lot of the capital that we spent in millions of dollars to try and secure our future. But instead, that aged inventory is now available. I'm not going to say that there's... I mean, obviously, you have your buff turkeys and some of the 18-year Bartons that made themself available. But those are kind of one-offs. Those aren't... That's nothing that you can look at and go, I can build a business off this because that well is going to run dry.

Speaker 5:
[36:54] I'm Bryn Elliott. I'm the master distiller here at Four Roses.

Speaker 3:
[36:57] My name is Chris Morris.

Speaker 5:
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Speaker 2:
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Speaker 1:
[40:52] What I find absolutely fascinating about all of this is that there was a five-year stretch of ground being broke, ground being broke, governor coming out to do the ribbon cutting.

Speaker 2:
[41:06] He's like, ah, another bourbon company? Jesus, what's going on around here?

Speaker 1:
[41:09] And everyone kept talking about contract distillation, and everyone kept talking about the interests in the foreign markets and bourbon.

Speaker 2:
[41:16] That's true, we should bring that up too.

Speaker 1:
[41:18] You know, it's just like all of these things, the growth domestically, the interests in the foreign market, everyone jumped in with the dream of this all taking off. And it's just like, it's amazing. If you change one little thing here and one little thing over here, it's like, now you look at it, it's like, oh shit, it's all collapsing. It's just such a volatile, it can be such a volatile industry. Just, man.

Speaker 2:
[41:48] It's like a, I want to try to equate this to the hot Christmas item or Christmas toy of the year, where all of a sudden there's huge demand and you are creating, and maybe it's not just the Christmas toy, but you think of anything that- Like Tickle Me Elmo? Well, maybe that, I mean, you take like a day-

Speaker 1:
[42:07] Cabbage Patch dolls?

Speaker 2:
[42:08] A yo-yo or a slinky or the Pogs craze. Like you take this craze that lasts for a couple years and then all of a sudden-

Speaker 1:
[42:15] Can we make it the Cinnamon Challenge? Maybe it's like, put it on social media where the kids will know. Remember the Cinnamon Challenge?

Speaker 2:
[42:21] I remember the Cinnamon Challenge. But you have this fad and this craze that goes on for maybe a year or three years and overnight, I mean, it just turns over.

Speaker 1:
[42:32] Yeah.

Speaker 2:
[42:32] And I think that's exactly, it's analogous to what's happened. It's like you bring in all this extra manufacturing, you bring it on, and now you're stuck with all this inventory and you're going, what the hell do I do with all this thing? And you're probably waiting for the next wave of something to come through. But I do want to talk about foreign markets real quick, because I'm so glad you brought that up, because that is something that as we start talking to some of our distillation partners, foreign markets is definitely still a very healthy part of their business. Yeah. It blows my mind how many companies from India, China, Japan, Europe, I was meeting with an individual today that's in Germany and France, and they're wanting to start a brand, this and that. But the political climate that we're in with tariffs and this and that, five, six years ago when people were laying down these barrels, tariffs didn't exist, they thought that they wouldn't exist. So it's really been the perfect storm of like, this is where those barrels, if they can't go domestically, they'll go over there and then you're like, well, wait a minute, no, they can't, because now it's too expensive to get them over there. Yeah, it is fascinating how many institutional investors are outside of the US. And so when you don't have that outlet, it just creates another pressure squeeze on the market. I do think that'll subside and that here, what do we have left, two or three more years of the Trump administration? After that happens, I think things will kind of go back to normal, but it's, and Fred can probably talk about the history of this. You look at Bourbon and you either produce too much or too little. They've never had just the sweet spot of like, oh, everything's going great this year, guys. Everything we're selling is, everything we're making is getting sold or crap. We're selling out and we don't have enough. And it's just that industry, because you're having to wait six to eight years and things can change in so much time, in that timeframe that you have no idea what external forces are gonna happen. And that's why it's so challenging.

Speaker 1:
[44:31] Yeah, and I really do, I assess, like if you look at the end consumer, and I've studied our pocket, we would call them connoisseurs or collectors, I don't know why the hell we call them. People who we see with 50 bottles or more, okay?

Speaker 2:
[44:48] Let's just say they have-

Speaker 1:
[44:49] The enthusiasts. The enthusiasts, I like, that's good. That's really good. I like that. That genre of drinker has gotten irritated with the industry, and they're tired of chasing bottles. And they're like, you know what? I still love bourbon. I am sticking with the one I like or the five I like. And to me, that is the foreign stuff, the younger drinkers not drinking bourbon or whatever. To me, that's not the metric that has concerned me of where we're at. It's the guy that has been going and standing in line for a bottle, no longer wanting to do that. If that crowd goes away, okay, because that's where the safe place is for bourbon, is the high-end stuff. Money's still going up there. People are still buying those. But when the guy who has 50 bottles says, I've had enough, I'm good, I'm going to go with what I got, and sticking to Pursuit Rye, whatever it is. When that person goes away, bourbon's screwed. Right now, that person's still standing in line, but there's enough of them saying, yeah, I'm good.

Speaker 2:
[46:10] Oh, you're not wrong at all. Obviously, we've talked about the modern bourbon craze starting in the mid-2000s, and maybe the early 2010s of really seeing this when people would go and stand and hunt and chase, and really the proliferation of Facebook and everything that played into the boom of what I'd still consider, we're still in a boom, no matter what you say. Is it deflating a little bit? Yeah. But we're still in the boom, but probably on the tail side of it. I do like what you had said. I still feel that there is going to be a time where, as somebody gets to that point where they're like, I've had 50 bottles, I have too much. Well, we've been very fortunate that there's already somebody there ready to take their place. You've had this cycle of people that go in and go out of it. Our own friends where they had their couple of years where they would go and chase everything and buy every bottle of EH Taylor cured oak that they could get their hands on. Then now they're not into it, now they're trading Pokemon cards. But there's somebody else that's going to be behind them because they got burnout. I think it's maybe just a cycle of what it is. It's like you go in, you do it, you acquire, you get burnout, and then you kind of fall back. But we're at a very peculiar point where there's going to be somebody that else wants that bottle. And so they're going to go ahead and stand in line. Yeah.

Speaker 1:
[47:32] I think Bob Gaffigan is going to bring more people. I think like his whole-

Speaker 2:
[47:36] You mean Jim? Jim over there.

Speaker 1:
[47:38] Is that what I say, Bob? Jim Gaffigan. Sorry, Jim.

Speaker 2:
[47:42] Jim Bob. Yeah.

Speaker 1:
[47:43] He's going to make fun of me later on the thing. Now, you know, there's this guy in an Ascot. But I love Jim. But I think like his routine, like what he's doing now, it's going viral. And I think that the Bourbon needs pop culture. It needs connection to people who are famous or it's on TV. Because when Bourbon jumped, and there were people who argued against him, but you could not deny it was on Mad Men and Justified, or Boardwalk Empire, all the time. So anytime you see Bourbon doing well on the screen or with really popular celebrities, not necessarily having their own brand, but that helps.

Speaker 2:
[48:27] And bartenders, the bartending community really helped push it forward. And now you see, I don't know that bartenders are tired of obesity. I'm like, oh, agave or Megascal or gin is like a real hot craze because you can create all these crazy, interesting, unique cocktails. And like, too, like the seltzer craze and the spritzes and the THC drinks. But to get back to another challenge, I think that's going to hit contract distillery. Distilling operations is like the big brands you're starting to see. We'll get, you know, inventories and you'll start to see, like barrels from Heaven Hill, Beam, Turkey, you know, the big brands and you know, there was a Facebook group the other day was like, what NDPs do we want to partner with that have this juice? And it was like, and they said they didn't want to buy it from actual distillery. They wanted to buy it from an NDP. They owned it from a different distillery. It was very interesting. And I think the problem, you see the big brands are now, because they're not hitting their numbers, they're putting barrels on the market. And so it's like, you know, we looked at it and we're like, oh, contract distillation, that's a way we can differentiate ourselves, create a different flavor profile that we can be interesting and unique. But then over here, you have these consumers that are like, well, I just want to pay $250 for a... A Wild Turkey or a Heaven Hill or a Beam, because they know they like it, but they just, I don't know, it's fascinating. And so I think that's a challenge because NDPs can look at that side of the market and be like, well, I know I can buy a Heaven Hill, Wild Turkey, whatever, charge $250, make a really good margin. Why the hell would I go this contract distillation or take a chance on these younger barrels from contract distilleries? So we need the category as a whole. These contract distillers need the category as a whole where the big brands don't start putting their own products onto the bulk market.

Speaker 1:
[50:32] Yeah, that's a problem. That's a real problem if you're a contract distiller. You gotta be very nervous about that. And honestly too, if I'm starting a product, if I'm starting a brand or if I'm you all and I have an opportunity to buy a Beam, Heaven Hill, Wild Turkey, hell yeah. Yeah, I'm doing that every day of the week. I mean, that's scary.

Speaker 2:
[50:55] Yeah, but it was not an available option when we were starting, right? So that we had to kind of take a different path. Yeah, and we had actually talked about it a little bit before we started recording about are you going to be doing the right thing by your customer? And I remember sitting at Kentucky Bourbon Festival this past year, 2025 KPF, September of this past year. And there was a panel. You have this huge, it's at the Bourbon 30 area, and there's a ton of seats. And Dave Mandel was on the panel. Everybody knows Dave. He was the guy that started Bardstown Bourbon Company, sold that left, and then started a whiskey house. And he's on stage, on stage. And he says, if I was to start a bourbon company right now, I would not do contract distillation. And I was like, Dave, that's your whole fucking business?

Speaker 1:
[51:42] Maybe that's his way of keeping competitors out.

Speaker 2:
[51:45] Well, it's a really good idea of like, what are you doing that's really good for your customers? But that was a clear tell sign that I was him, I would look at it and be like, how could I tap dance around this, but still sell? And it's like, well, do you want something that's unique or different? Or do you want something that's generic that everybody else has access to? That's the way I would have spun it. I just thought it was a very interesting thing that he would say, no, I wouldn't do it. But that is the obvious answer that if you were getting into it today, I would look and figure out, well, what's available out there that I don't need to sit on this capital for years and I can start making a return today.

Speaker 1:
[52:24] Yeah. I love Dave. Dave Mandel is a calculated businessman. He's so great with the knowledge of where things can go and how they go. What he's doing at Whiskey House has been pretty exceptional. I know I'm going to be the minority here. I know neither one of you are going to agree with this.

Speaker 2:
[52:50] I already don't agree with you.

Speaker 1:
[52:51] I don't know what you're going to say. I think there is a fraction of opportunity in contract. I think there can still be a place. But because I've talked to these people and how miserable they are under their current contracts, that's the thing about some of these companies, they treat their customers like crap. I'm not saying who, we've named off a dozen of them. But some of the brokers, some of the contract distillers really don't have good customer service with the NDPs who are buying from them. So I think that if you are someone who is very catered to the customer, and you are very much on top of getting them what they need, and you're checking on them all the time, making sure they're happy, maybe even bringing in a bottle consultant, a cork consultant or whatever. You help them from soup to nuts. I think a contract distiller could do quite well. I think probably put one of these other companies out of business, but I talk to these guys all the time, and they're not happy. They may be okay with the whiskey, but they feel like they get dicked around by their partners, if you will.

Speaker 2:
[54:03] Absolutely. I think that's the reason why Lofted and Whiskey House and some of the premier, I'd say, contract distillers also still exist today, is because they're a one-stop shop.

Speaker 1:
[54:15] Yeah.

Speaker 2:
[54:16] Not only can you go there for your whiskey, but you're bottling there. They have helped us with labels and doing TTB approval. They have helped us with anything. If you need help finding a source for labels or corks or anything along the supply chain, they're a good partner to have. That's what I think that they provide beyond just a bottling or distilling capacity, is they provide a whole portfolio of things that they can offer as somebody that tries to build a brand. That is something you can't replace if you're just buying a bunch of MGP or buff turkey. I do think from my points earlier, within the next 12 to 18 months, I think if you have cash, there's a great opportunity to contract a still because I do think there's going to be, we're about six years from now, there's going to be another shortage and you're going to be able to cash in. Maybe not to the point where we were in 2020 with barrel prices, but you're going to make a really good solid return.

Speaker 1:
[55:22] But to your point earlier, banks don't come in when it's low. And so, this could be one of those business moments of like, in two years, it's going to be too late. Now could be the time, you know? And so, you mentioned that earlier about banks, like they buy high. But I've seen the data and people are still drinking the high-end bourbon and it's off the charts. So if you have a, I will tell you, if you have a plan, if your entire mission statement and the company and your plan is to take on Jack Daniels, throw that thing out the window, you're done. But if you want to be like Dark Arts, what they're doing, or if you want to like, you know, maybe-

Speaker 2:
[56:08] Take on Pursuit, how about that?

Speaker 1:
[56:09] Pursuit, high west, you know? Angel's Envy even, you know, like high-end is where it's at. People want that, people want luxury. So the people who have money and who are drinking are not buying the $25 bottle. They want the $75 bottle.

Speaker 2:
[56:24] I'd say you have to have some sort of intention, though. You have to have some sort of alignment, I would hope, to a brand, because that's what put us in this pickle at the very beginning with, right? People were coming in and there's the overproduction and then there's a huge surplus and now people aren't necessarily looking. Because, you know, we got it, obviously, because we can control our cost of goods because we know where it's gonna end up into a bottle one day. It's the same exact thing as, I don't really know a good analogy, maybe going back to the toy thing and buying the hot toy item for the year and hoping to sell a bunch on eBay. And then all of a sudden, you're stuck with it. Be like, well, I really don't like to yo-yo. That's not really my fun thing to do. But now I've got 200 of these things. What's my out here? So that, I think, is the safe play is just to make sure that you are aligned with a brand, are you doing something that is gonna have an outlet. But why whiskey is still a great investment is because you don't have to bottle it. It can still age, it'll improve over time. And assuming that it doesn't sit there for 18, 20 years, you're gonna have a tangible asset that will get better and grow more monetarily over time. So that's why it's still a safe investment. I think the problem that we're in right now is that people were promised, you in vex this now, four to five years, you're gonna have 10x return on your investment, and they're not realizing that. And so that's why people are panicking and running. But a lot of great brands were built on the flip side, in the late 2000s, not late 2000, but late, like, say, 2008 to 2015. You know, when MGP had all that excess stock, they couldn't sell it. What did they do? They let it age, and then all of a sudden, you have this beautiful nine-to-fifteen-year whiskey that OKI and Boone County and Old Scowl and all that. And so...

Speaker 1:
[58:26] Those are the good old days, man.

Speaker 2:
[58:27] What we're gonna see, too, probably in five to six years is that you're gonna have this renaissance of really just well-aged contract to still whiskey that's gonna be available as well.

Speaker 1:
[58:37] Yeah, it's gonna be glorious. It's gonna be... Because there's gonna be flavor profiles that we've never seen before.

Speaker 2:
[58:43] Yeah, because most of the contract distilled stuff, say, pre-2016 was all just what I call commodity mash bills. There's like... You got a high rye one, a medium rye one, and then a weeded one. And that's it. And then a 95... You really think you'll even see the weeded one. You really had four mash bills that these contract facilities were making. And so it's like there's not much variance in that.

Speaker 1:
[59:05] Willard and Estrell had started... Their stuff's going to be starting to get out from when they were doing contract distillation. I mean, it's just going to be incredible. And if you are a fan of whiskey, if you like the flavor profile of American whiskey, the next 10, 15 years are going to be glorious. They're going to be fantastic. Like, this is an incredible time to be a whiskey geek.

Speaker 2:
[59:29] Yeah, that's a good way to kind of... The uplifting side of this, because the whole time, we've been like, well, contracts, not so good, but...

Speaker 1:
[59:37] But we've been talking business, right? We're talking about investment. I'm talking about like, as a consumer. As a consumer, if you are like staying in this dance, you're going to be rewarded. I'm not saying become a full-fledged alcoholic with this stuff, but man, there's going to be so much good whiskey. And if things continue, which from a business perspective, I don't hope that for any of my friends, but if the prices stay where they are, I mean, we'll be having 12, 15-year-old bourbon for 60 bucks. That's possible.

Speaker 2:
[60:10] We'll see. Oh, I think the days of a Weller 12 being even 60, because it's about what?

Speaker 1:
[60:18] Oh, it was like 20 bucks, 22 bucks.

Speaker 2:
[60:21] Oh yeah, oh yeah, I remember. I cleared out Texas, at least part of Dallas with it. But getting back to that, I don't know. I don't know if I ever see the day of 12-year-old getting back to, well, it might be actually 60 bucks. Look, if somebody's, that's the thing that I kind of hate about this part of the industry is sometimes it is a race to the bottom. Like, can you hit those three different factors? Is it good? Is it cheap? And does it have a high age statement or even high proof?

Speaker 1:
[60:47] The problem is the reaction from the industry historically, different times, different consumer, historically is to lower the proof, to stretch the bottles out for more profit. In today's time with how people like proof, I don't think they'll do that. But there's probably another way they'll find it cheap and to make more profit off of it. And you never know when the next hypnotic will come out. And they're like, well, you know what? It's cheaper for us to put it in hypnotic or fireball or something like that. They can make more money off that way.

Speaker 2:
[61:22] That's what Bourbon needs to find a way to compete with the high noon, the surfsides and all that. They need to have someone come out with something like that. They can take that on to get, unload a lot of this whiskey. And they have the old fashion. That has done pretty well for us.

Speaker 1:
[61:38] Yeah, that's, I think, that's bottled, right? Is that bottled or is that canned?

Speaker 2:
[61:43] Well, I'm just saying, old fashion in general, because it's just sold at every single restaurant across the United States and getting in the globe now.

Speaker 1:
[61:50] The bourbon cocktails don't do well in cans.

Speaker 2:
[61:54] They do not.

Speaker 1:
[61:55] They're great in bottles, but no one wants a bottle cocktail. They want it in a can.

Speaker 2:
[62:00] Easy to go, easy to take.

Speaker 1:
[62:01] So maybe, the Japanese have highballs, right? So they're really big in the highballs. If someone could properly brand a highball, an American way to get it where it's like, you get Sam Elliott drinking one as the sun setting and he's on a bell of hay looking at a coyote, like, yes, this is what I drink here in America. And then, right there, you know.

Speaker 2:
[62:24] Like an old Budweiser commercial.

Speaker 1:
[62:25] Yeah, just have that moment. That's all, that's all it needs. That's all you need if you're in RTD. The unfortunate part is like, there's thousands of them. Yes.

Speaker 2:
[62:35] That's experiencing it right now. We could probably talk about if there's over production at RTDs, maybe we'll say that for the next episode, right? But this was a good one, talking about the state of the market of contract distillation, and yes, we did not have a guest on this time because you got to hear it from people that are actually in the industry, they get to speak at least some knowledge about it. Can't wait to get the emails from the people. We're like, hey guys, things are great over here. What are you talking about? Yeah, but everybody kind of knows the nature and the state of whisky right now, and it also extends to other tentacles inside the industry, and contract is just one of those. But if you do like the show, you enjoyed what we talked about, and if you know somebody that's in contract distillation, send them the show. They'll be like, what do you think? Are they just blowing smoke up their ass or is it a real thing? But if you do like it, make sure you share. If you also want to help support the show, you can do it as little as $5 a month over at patreon.com. You can always leave a review, subscribe on YouTube podcasts of Spotify, Apple, wherever you get this as well. We appreciate it and always leave a comment there too. But with that, cheers everybody. We will see you next time. Toodles.