Revolutionizing the American Whiskey Market: The Whiskey House of Kentucky

There’s a new player in town that is set to shake up the American whiskey market. The founders of Bardstown Bourbon Company have been quietly working on a groundbreaking project called Whiskey House in Elizabethtown, Kentucky. Located just an hour drive south of Louisville, this distillery is unlike any other, as it is solely focused on producing highly customizable contract whiskey orders without creating its own brand.

To truly understand the impact of Whiskey House, we need to take a step back and delve into the history of sourced whiskey and its role in American whiskey production. I had the pleasure of speaking with Heather Greene, a whiskey expert and CEO of Milam & Greene Whiskey, to gain some valuable insights. Despite the criticism often thrown at “sourced” whiskey by bourbon enthusiasts on Twitter, Greene highlights that it has always been an integral part of American whiskey history.

“It’s part of history in this country to have barrels flowing and moving back and forth,” Greene explains. She goes on to mention that even the highly sought-after Pappy Van Winkle whiskey is sourced from Buffalo Trace distillery. So, it’s safe to say that sourcing whiskey has always been a part of the fabric of American whiskey production.

However, the way in which whiskey has been sourced has evolved over the years. In the 1980s, as vodka sales surged and demand for whiskey dipped, larger companies like Jim Beam, Heaven Hill, and Sazerac started contract distilling for smaller brands. But as cocktail culture experienced a resurgence in the 2000s, brands realized the need to have their own production facilities to meet the demand for their unique products. This shift put an end to external contracts with distilleries.

This is where companies like MGP in Indiana and Bardstown Bourbon Company stepped in to fill the void. They started offering contract distilling services, providing custom mash bills and producing whiskey to meet the specific requirements of individual brands. As the popularity of American whiskey soared in the following years, a new trend emerged. Third-party investors, ranging from individuals to large funds, began buying barrels of whiskey with the intention of selling them later for a significant profit.

This surge in demand and the emergence of third-party investors led to a sharp increase in whiskey prices. Heather Greene explains that the general rule of thumb now is that for each year someone holds a barrel, the price increases by $1,000. Craft brands that rely on sourced whiskey for blending have felt the brunt of this price inflation, resulting in higher costs for consumers.

David Mandell, co-founder and CEO of Whiskey House, recognized this unsustainable trend and decided to take a different approach. Unlike traditional distilleries or contract distillers, Whiskey House does not produce or hold investor barrels. Instead, they only work with producers who have a clear path to utilize the whiskey in their own brands. This not only helps keep prices in check but also ensures that capacity is available for brands that genuinely need it.

Mandell emphasizes that Whiskey House aims to build long-term relationships with its customers, allowing for the creation of truly differentiated and custom liquid that stands out in the market. The focus is on quality and storytelling, rather than simply catering to investor demands. To achieve this, Whiskey House offers extensive customization options for mash bills, grains, and even barrel toast and char levels. The possibilities are limitless.

But Whiskey House isn’t just revolutionizing the way contract whiskey is produced; they are also reimagining the distillery layout. Drawing from John Hargrove’s experience in food manufacturing, the team has designed a unique facility where raw goods enter one end and the semi-finished product exits the other, ready to be transferred to on-site warehouses. This layout not only optimizes efficiency but also allows for real-time quality control and optimization.

With its visionary approach and commitment to quality, Whiskey House is poised to reshape the American whiskey market. By offering limitless customization options and focusing on building long-term relationships, Whiskey House is setting a new standard for contract distillers. It is no longer just about meeting demand; it’s about providing unparalleled quality and a unique story that captures the spirit of whiskey enthusiasts everywhere.

What’s the Buzz about Whiskey House?

Whiskey House, a new player in the spirits industry, is making waves with its innovative approach to manufacturing and distillation. Thanks to a Microsoft for Startups Founder’s Hub Grant, the company is set to revolutionize their production process by incorporating AI technology. This exciting development has caught the attention of industry experts and major players alike.

Scheduled to commence operations in July 2024, Whiskey House aims to have an annual capacity of over 7 million proof gallons (112,000 barrels). By 2027, they plan to expand to more than 14 million proof gallons (224,000 barrels). While the specifics of their clients remain undisclosed, Whiskey House has revealed their collaborations with non-distilling craft brands, brands seeking supplemental supply, and major spirits players looking to enter emerging international markets.

Monica Wolf, a prominent figure in the industry, has expressed great interest in Whiskey House. As the founder of The Spirits Group, a spirits consulting firm, Wolf brings a wealth of knowledge and experience to the table. With her background as a senior financial analyst and her father’s expertise in the industry, she understands the importance of a steady and guaranteed source of product. Wolf’s clients, including Lucky Seven and EJ Curley, are also excited about the prospect of partnering with Whiskey House.

Amidst the hype surrounding new investments in the spirits industry, Wolf acknowledges the complexities that arise. She highlights the issue of inventory owners holding onto their stock to increase its value, which ultimately affects the profitability of brands. Recognizing this problem, Wolf sees Whiskey House as a solution. With a dedicated focus on brands and a commitment to the long-term health of the industry, Whiskey House provides a refreshing alternative to investment-centric approaches.

Marci Palatella, another industry veteran, is equally impressed with Whiskey House’s unique proposition. Having witnessed smaller companies struggle with the lack of supply due to industry changes and the prioritization of personal brands, Palatella sees Whiskey House as a reliable partner. By exclusively working with non-investor barrels and not producing their own brands, Whiskey House prioritizes the needs of their clients and allows brands to concentrate on what sets them apart.

Whiskey House’s distinctive approach is appealing to dedicated brands that may not have the resources or interest in distilling. By positioning themselves as experts in customization and relying on their partners for distillation, Whiskey House offers a state-of-the-art solution for serious brands.

As Whiskey House gears up to transform the spirits industry, their integration of AI technologies, focus on client needs, and dedication to long-term success prove that they are not just another distillery — they are leaders in innovation and collaboration. The buzz surrounding this new venture is well-deserved, and we eagerly anticipate the impact they will make in the industry.