Bourbon Remains a HOT Commodity in 2023
This is the year we have been waiting for… Additional distillation capacity in Kentucky, Tennesee, begins to come online, with demand continuing to exceed available supply. For wholesale buyers with brands in the market, the breakneck pace of rising values continues to be a cost of goods challenge. For consumers, economic uncertainty has not dampened acceptance of rising prices when it comes to Bourbon, and American Whiskeys overall. This bodes well for investors who have put their faith and funds into new fill barrels since 2020.
The Bourbon Landscape as we see it in 2023 to 2025: Toggle to reveal the details. All views are our own, based on historical and most recent market dynamics, along with a does of forecasting. (see “Forward Looking Statements”)
Sourcing Demand Grows Stronger
The quest for an increased market share of the thriving American Whiskey category has led global brand leaders like Campari and Pernod-Ricard to acquire and invest in as much production capacity as possible for their own needs. This, along with the MGP acquisition of Luxco brands, has cut off smaller to medium buyers as their need for contract production and bulk mature spirits has grown exponentially since 2015.
There has been no new fill available in KY since mid to late 2021, except to those with locked-in allocations, most of whom are investors (not brands.).
Selling Younger at Higher Values
Many of those investors with control of 2021 and 2022 new fill have sold inventories as 1 yo because the market has driven up values to what used to be what they would garner at 2 years old.
This means barrels that would have been released as 2 YO in 2023, will not be available this year. In fact, we are also witnessing presales of future new fill at 1 and 2-year-old prices.
Our view is that even with the additional capacity becoming available, it will be at least 2025 and, more likely not until 2026 that what’s been produced would be adequate to meet 2023 demand.
Seeing Beyond Kentucky
So much of the demand and driving up of values has been about Kentucky distillate.
Besides history, KY can take credit for its origin marketing juggernaut unmatched by other states with deep distilling history. (We’re looking at you, Tennessee and North Carolina).
Another reason for the increased value is that more brands have been built and rely on KY-sourced production.
Primarily because, besides MGP, most of the available capacity for contract production was from Bardstown, Green River, Wilderness Trail
While KY-distilled whiskeys remain in high demand, there is ample evidence that consumers are less attuned to the origin than brand, price, and taste.
We see a shift towards more TN, which makes sense since the #1 American Whiskey brand in the world is from Lynchburg, TN, and the fastest growing emerging brand–Uncle Nearest–is from Tennessee.
We’re investing our time and money in helping distillers in Tennessee expand production in 2023 and beyond. There are substantial investment opportunities to be had.
At the same time, we remain determined to continue to secure high volumes of KY distilled and barreled Bourbons and Rye to serve the needs of wholesale buyers and the investors who make it possible to secure new and young inventories for release as mature in 2023-2026.
Crystal Ball: Supply, Demand and Values
If 2023 is the year of increased new production from new sources, it’s not going to be enough to fill the void that the 2022 acquisitions (Wilderness Trail, Luxco) create.
The big brand buyers will still need to secure capacity until their 2023-2025 production gets some age on it.
Let’s also recall that we remain 8-9M annual cases sales for American Whiskey then we were in 1971. And the domestic and global markets for American Whiskeys are considerably larger in 2023.
We see continued strong appreciation, even with the increased costs of securing new fill or young barrels. What would have been unthinkable two years ago, new fill costing $1050 to $1250 per barrel, even at high volume, is the new norm. This also means 1 year values holding at $1700-$1800, two year at $2400-$2800, three year at $3000 to $3400 and 4 year $3700 to $4200.
Forward Looking Statements
Forward-looking statements are provided to allow potential investors to understand management’s beliefs and opinions in the future so that they may use such beliefs and opinions as one factor in evaluating an investment.
These statements are not guarantees of future performance, and undue reliance should not be placed on them. Such forward-looking statements necessarily involve known and unknown risks and uncertainties, which may cause actual performance and financial results in future periods to differ materially from any projections of future performance or result expressed or implied by such forward-looking statements.
These statements are not guarantees of future performance and undue reliance should not be placed on them. Such forward-looking statements necessarily involve known and unknown risks and uncertainties, which may cause actual performance and financial results in future periods to differ materially from any projections of future performance or result expressed or implied by such forward-looking statements.
Although forward-looking statements contained in this presentation are based upon what management of the Company believes are reasonable assumptions, there can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements.
In 2022 we paused on new Bourbon Bond Funds. largely because as soon as we secured new fill availability, we had wholesale buyers and institutional investors clamoring to buy it.
Coming up in 2023, we have set aside thousands of barrels of allocations in Kentucky and Tennesee that will be filled later in the year so that we can resume Bourbon Bond Funds providing individual accredited investors a so-called bite of the apple that is the strong appreciation of barrel-aged bourbon and other American whiskeys as they mature.
Be sure to sign up and submit your investor accreditation to be on the list to receive word as these funds open throughout the year.