Which Craft Distilleries Get Bought Out?
The big drinks companies are investing in craft distilleries pretty regularly these days, both with outright acquisitions and smaller minority investments. The latest is Texas-based Firestone & Robertson, the makers of TX Whiskey. There’s a reasonably comprehensive list of these investments and acquisitions over at Whisky Advocate, and it’s worth checking out. But let’s do a deeper dive and look into the types of distilleries that get bought.
What Kinds of Distilleries Get Bought?
There are almost 2,000 craft distilleries in the United States now, with more coming every year, and probably about half of them are making them whiskey. So let’s say that’s 800 or 900 craft whiskey distilleries. Of these, major drinks companies have invested in around… twenty. That’s a very select group, and that’s no surprise. With so many options out there, the big companies can certainly afford to shop around. And it’s clear that one particular type of whiskey company appeals to them more than the rest: distilleries that source whiskey from elsewhere while also making their own whiskey.
A large proportion of the distilleries that have partnered with a bigger drinks company fit into this model. High West, acquired by Constellation in 2016, is the biggest and most obvious example. They are making their own whiskey and starting to use it in their blends, but the backbone of their brand is blending whiskey from multiple different sources. They were a natural acquisition target: they already had a strong brand, a great tasting room in a unique location that attracts a lot of tourists, and perhaps most importantly, strong relationships with the companies they were sourcing from.
(A quick aside on sourcing: It’s really easy to source whiskey from MGP in Indiana. They have no shortage, and their entire business model is based around selling whiskey. Just about anyone can source from MGP directly. There’s a form right on their website! Buying casks from Dickel in Tennessee or various Kentucky distilleries, usually unnamed, is only slightly harder, although if you don’t have pre-existing relationships or a lot of money you’ll be going through a barrel broker.
But buying aged whiskey–especially whiskey that’s more than around 4 years old–is a different story. Sure, barrel brokers often have a handful of older barrels of Dickel, but buying older whiskey in quantity is a totally different story… unless you’ve been contracting with a producing distillery for years already. That’s why some of these acquisitions are so valuable: the distilleries have access both to a lot of sourced whiskey and to occasional lots of older stock.)
Many of the other big distillery acquisitions fall into this category, including Firestone & Robertson and Rabbit Hole, both bought by Pernod Ricard; Smooth Ambler, which sold a majority stake to Pernod Ricard; Angel’s Envy, now part of Bacardi; Limestone Branch, half-owned by Luxco; Nelson’s Green Brier and (on the brandy side) Copper & Kings in the Constellation portfolio; Woodinville Whiskey Co. (Moët Hennessy); and others. Some of them focus on relatively affordable sourced whiskeys; Firestone in particular is pretty mass-market by craft whiskey standards. Others, like Smooth Ambler, skew strongly toward the high end. But all of them built their businesses primarily on sourcing from Kentucky/Tennessee/Indiana while also developing a pipeline for their own whiskies. It’s a good business model, after all!
(Another aside: There’s nothing wrong with sourcing whiskey… as long as you’re transparent about it! That’s what we’re doing at Lost Lantern as well, although we’re not buying whiskey from any of the traditional sources. Of course, not everyone actually is transparent about sourcing, and that’s still a major issue in the industry.)
Distilleries That Make Their Own Whiskey
The lion’s share of the companies that have been acquired so far fall into the preceding category. Investments in distilleries that actually focus exclusively on making their own whiskey have been much less common, and for good reason–distilling is a really capital-intensive and cash-flow intensive business, especially in the start-up phase when you have to wait for your whiskey to mature.
That said, there have been a few investments in distilleries that don’t source… and most of those acquisitions have been pretty high-profile names. Hudson (Tuthilltown) was the first (or at least first with any profile); Scotch producer William Grant invested in them way back in 2010. Proximo (the U.S. arm of Cuervo) purchased Colorado single malt producer Stranahan’s; Rémy Cointreau jumped into Washington single malt with Westland; Edrington invested in Wyoming Whiskey; Diageo took a piece of Westward (formerly House Spirits) and Constellation took stakes in Catoctin Creek and Black Button, as well as Bardstown Bourbon Co.–which is a bit of an oddball in that it is primarily making whiskey to sell to others, a sort of Kentucky MGP.
That’s a markedly shorter list, but most of those distilleries have one thing in common–they’re big by craft whiskey standards. I’m not sure about Black Button or Hudson, but Stranahan’s, Westland and Westward are probably all in the top five single malt producers in the United States, and Wyoming is one of the largest Bourbon distilleries outside of KY/TN/IN. These distilleries are all making over a thousand barrels a year, sometimes a lot more than that.
And most craft distilleries are way, way smaller than that. Most of the places we visited on our eight-month road trip across the country were making around 50 to 300 barrels a year, and many more (including most of the places we skipped) are doing just one or two dozen. There certainly are other craft distilleries making thousands of barrels, but they are the exception, not the rule. But I guarantee you, even if the big drinks companies haven’t invested in them yet, they’ve come poking around to ask questions (of course, not every place is a fit, and not every craft distillery would sell, even given the opportunity).
The short version is this: the craft distilleries that are getting bought fall into two clear categories: most of them are releasing a lot of sourced whiskey while making their own, and a few, generally quite large, are entirely making their own stuff. But the former category is absolutely predominant so far.