Bourbon Empire (24 page)

But things for Four Roses would eventually come full circle. In 1945, Four Roses had been a part of America’s most famous image of victory over Japan in World War II. A giant neon advertisement for the brand is
present in the background of Alfred Eisenstadt’s
Life
magazine photo of a sailor and a woman kissing in Times Square during the celebration of the war’s end. Over the next decades, Japan was rebuilt and brought into the fold of worldwide economic integration. Today Four Roses is owned by Japan’s Kirin Brewery Company, another consortium that lovingly retooled the brand’s recipe to make it a straight whiskey and return it to respectability. In a twist of irony, Kirin today happens to sit under Mitsubishi, the global conglomerate that made the A6M Zero fighter planes used by kamikaze pilots in the war that the
Life
magazine couple had just endured when caught by Eisenstadt in the middle of their kiss.

 • • • 

Amid the brutal consolidation rounds, a few smaller holdouts continued to stand independent. Some even found themselves moving up the ranks, most notably Stitzel-Weller, Beam, Heaven Hill, Glenmore, and a handful of others. In a way, they resembled a small group of frontier travelers who have grouped the wagons together to fight an encircling horde of bandits attempting to buy them out.

Or maybe they were just waiting for the bandits to make a good offer. The Blum family still owned Beam, which by the late 1950s had grown into a “moderate-sized” company, according to the
Wall Street Journal,
and was touted as an appealing purchase for a bigger player. At the time, Beam was an anomaly; whereas the conglomerates had diversified their portfolios, Beam was doing 90 percent of its sales volume in its single Jim Beam brand. Beam had worked its way up the ladder with an impressive strategy: it had started by concentrating on sales in California, then gradually moved the brand east, which allowed it to get strong distribution without spending a lot on advertising. “To the industry’s astonishment, Jim Beam has now jumped into third place in national sales volumes among straight whiskies,”
Barron’s National Business and Financial Weekly
reported in 1958.
The Blums held out on the smart little brand until 1966 when they sold Beam to American Brands, a New Jersey outfit that also owned Mott’s Apple Products, Jergens Lotion, and a biscuit company.

There was much complaining about consolidation, and the U.S. Justice Department once again became suspicious of monopolization. From a purely symbolic standpoint, it didn’t look great. Bourbon, as an icon of frontier independence—of Jefferson’s yeoman farmer—was becoming anything but. Ownership of almost every brand in the country could ultimately be traced to just a handful of individuals who spent their time in boardrooms outfitted with really nice wet bars. Then, contrary to the nation’s collective notion of Jeffersonian ideals, there were cases of some smallholders who were thrilled about being squeezed out of the industry.
Time
noted that many companies were witting accomplices that got paid handsomely in the buyouts.
The payout that went to Four Roses was considered extremely generous for the time and the family shareholders gladly took it. They had just inherited the company and wanted to avoid paying taxes on it, according to company historian Al Young in
Four Roses: Return of a Whiskey Legend.
The buyout allowed the brand to survive and for rich family members with little interest in the whiskey business to go off and do something else. Forty-two million dollars offered for a company in a cutthroat industry during a time when the nation was embroiled in a world war? That deal had looked pretty good.

But not everyone saw it that way—some naturally wanted to remain in control of the businesses they had built. In 1952, the House Judiciary Committee held a hearing on whiskey monopolies. The heads of many smaller companies showed up to testify, making it sound as if they were men fighting with their backs to the sea, their only choices being to succumb or die. Pappy Van Winkle told lawmakers that bigger producers were guilty of “skullduggery” and “squeeze moves” against smaller operators like himself. He pointed out that the Big Four now owned eight of the fourteen independent cooperages that had existed before the war, allowing them to prevent smaller companies from getting barrels. Van Winkle also claimed that some big distillers had rented warehouse space from him, then pulled their stock but kept the insurance plans they had taken out so that he couldn’t use his own storage facilities.

A standout among the smaller operators, Van Winkle by this point resembled the farmer who builds his house on land that a developer later
wants to put a highway through. He was the man reflexively turning down offers from other companies, spitting on the ground as the dollar figures crept higher. The most notable offer came in the 1960s from Heublein Spirits Group, the company that owned Smirnoff vodka and itself would eventually become part of RJR Nabisco. When Van Winkle died in 1965, he did so as the head of a company that had remained relatively independent, always the master of a house he had built with his own hands. If whiskey consolidation was a war—and many articles from the era refer to it that way—Pappy had won his battles.

But once Pappy was gone, Stitzel-Weller was fair game for a takeover. People familiar with the running of the distillery claim that Pappy’s son, Julian Jr., who was now in charge, struggled to match his father’s business acumen. According to Julian’s daughter, Sally Van Winkle Campbell, Stitzel-Weller’s other investors sidestepped her father to force a sell to the millionaire industrialist Norton Simon in 1972, for $20 million. After that, the distillery fluttered between a few more owners until it was finally shuttered in the early 1990s and its unique and flavorful bourbons were lost.

Rights to Stitzel-Weller’s brands were divvied up among the conquerors, and today reside primarily with Buffalo Trace and Heaven Hill. These companies would continue making them according to similar recipes, and they’re still quite good, perhaps even better than ever, but they’re not exactly the same as they once were. The little things that make separate distilleries unique were inevitably lost as companies continued to pool together and the industry streamlined. Bourbon was growing a little more homogeneous, and special standouts were being lost as consolidation took its toll.

I
f you’re a fan of older bourbon—anything older than eight years—you can thank the Korean War and one man’s misinterpretation of international affairs. During the buildup to war, Lewis Rosenstiel wagered that hostilities would again go global and that the U.S. government would be forced to ration grain and shut down distilling, just as it had done during World War II. This time, however, Rosenstiel planned to distill a large surplus of whiskey to carry him through the drought. Schenley went full blast, helping push America’s whiskey stocks past 637 million gallons, enough to supply the country’s projected demand for almost eight years. Rosenstiel’s foresight was typical of his business savvy, but the decision almost ended in disaster.

The problem began when the Korean War turned out to be a much smaller conflict than Rosenstiel had anticipated. There were no shortages and no rationing, and Schenley found itself holding a huge whiskey surplus. Now a single company owned almost 70 percent of the nation’s older whiskey stocks, according to its competitors. When the taxes on all that whiskey came due in eight years, according to the bonding period established by Congress back in the nineteenth century, Rosenstiel would be forced to sell to a market without enough demand to meet his supply. Prices would plummet, Schenley would sell at a loss, other producers would have to slash prices to compete, and parts of the industry could be
torn asunder—it reflected the same boom-and-bust cycles that had plagued the industry eighty years earlier.
Time
claimed that Rosenstiel’s “mistaken theory that a shortage was in store” was a “hammerhead,” while the
New York Times
ran the banner headline,
WHISKY
INDUSTRY
IS
FACING
A
CRISIS
.

Rosenstiel responded by leaning on his counterparts within the DSI to help him buy some time. To avoid the impending tax crunch, he wanted to lobby Congress to increase the bonding period past eight years, allowing the whiskey to age longer and remain untaxed as he figured out what to do with it. The plan seemed simple enough, but the DSI’s other members balked, turning against their powerful colleague. Hiram Walker and Seagram particularly opposed the aging increases, telling reporters that it would “put the Government in the position of underwriting Schenley’s inventory expansion” and place other companies at a pricing disadvantage. They supported tax relief, but wanted a provision preventing Rosenstiel from labeling his whiskies as over eight years old until the rest of them had a chance to build up their own inventories of similar whiskey. Rosenstiel had made a mistake, they argued, and was now lobbying for rule changes that would reward his error.

Rosenstiel was just trying to convert his weakness into a strength. The strategy would give him a huge advantage, and his competitors were simply trying to block what they knew would be his next play: Schenley would use its older bourbon to take advantage of a growing luxury market created by a booming postwar economy. Sidney Frank, Rosenstiel’s son-in-law and Schenley’s vice president and sales manager, told reporters that the company was refocusing toward “the class market.” (Decades later, Frank became a billionaire by upmarketing Grey Goose vodka the same way, taking a relatively simple product and convincing customers to pay more for it.)

The timing for Rosenstiel’s luxurification strategy was perfect, and gave him one more significant advantage. By 1956, the luxury trend in spirits had caught fire, but bourbon makers had no real way to capitalize on it since the product they offered wasn’t typically associated with high luxury. The very nature of bourbon itself stood in the way: a
simple and uncomplicated product requiring little more than some fermented grains, a wooden barrel, and a little bit of patience—it was just whiskey, not a Fabergé egg. To make their product seem more exclusive, bourbon makers increasingly sold their whiskey in cut crystal decanters and marked up the price. The whiskey, same as before, also found itself adorned with unregulated and ill-defined terms like “extra-aged,” which meant nothing because it was entirely relative and lacked specificity. (In later years the “extra-aged” term would be joined by other vague descriptors like “handmade,” “artisanal,” “small-batch,” and the ubiquitous “craft,” other terms without strict definitions that are used to justify charging a higher price.) In 1956, the
New York Times
condemned the trend with the headline, “Can’t Improve Whiskey, So Distillers Turn to Its Container.” As the
Times
elaborated, “This holiday season will see more fancy glassware than ever before, and some in the industry (whisky, not glass) are saying privately that they’re a little concerned about the extreme to which the trend has gone.”

If Rosenstiel’s lobbying strategy to extend the bonding period worked, his older bourbon would allow him to confidently distance himself from ambiguous marketing terms and advertise tangible qualities with specific age statements. Plus, he’d have a five-year head start on most of his competition. The only problem was that Rosenstiel’s Big Four counterparts were undermining his strategy, and he was about to fight back. He had not built an empire now worth $438 million because he was someone others could squeeze. He was the one who usually did the squeezing—in fact, Rosenstiel, who had a penchant for bugging his home and office spaces, was allegedly part of the reason why FBI director J. Edgar Hoover had been reluctant to pursue the Mafia. Hoover periodically attended parties at the liquor magnate’s house, where prostitutes and organized crime figures also made occasional appearances, and the blackmail potential of Rosenstiel’s tapes ostensibly kept Hoover at bay. The other Big Four heads were up against a powerful adversary, which Rosenstiel proved with his next move: he left DSI and started a separate lobbying group, calling it the Bourbon
Institute. (In 1973, the Bourbon Institute would merge with DSI and another trade group called the Licensed Beverage Industries to form DISCUS.)

In 1958, Rosenstiel and the Bourbon Institute successfully lobbied for passage of the Forand Bill, which increased the bonding period from eight to twenty years. The move happened against “the fury of the three other big distilling companies,” according to the
Economist,
but was such an enormous success for Rosenstiel that a few decades later it would get two entire paragraphs in the man’s lengthy
New York Times
obituary.

Not only was the Forand Bill good for Rosenstiel, it was good for bourbon. Many master distillers today claim that their favorite bourbons typically fall within the range of six to twelve years, depending on variances in aging conditions. The Forand Bill gave them more time to mature whiskey without having to pay taxes on spirits that would eventually evaporate. The twenty-year aging period allowed by the bill was extremely generous—after twenty years, bourbon aging in most parts of the warehouse has evaporated out of the barrel, leaving very little left to sell. What is left is often undrinkable, made bitter and astringent by too many wood tannins, with the few rare exceptions of bourbon aged in cool, relatively mild parts of the warehouse, where evaporation and absorption into the wood are less extreme.

Once the Forand Bill was passed, Rosenstiel did just what the rest of his industry counterparts had feared. In 1961, Schenley announced a $21 million advertising campaign promoting the age factor in its whiskies. Rosenstiel made it all look intentional, telling reporters that his aging program “represented years of planning and an investment of $1 billion in inventories of aged and aging whiskies.” The new ads focused on age: “Age Makes the Difference,” “Are you getting all the age you should get for your money?,” and “We Stand Alone,” which was Rosenstiel’s less than subtle dig at his Big Four counterparts, reminding them that they were a few years behind him.

These advertising campaigns were left to outside experts, whom Rosenstiel had learned early in his career were the best people for the
job. When his company was still young, he had once trained five thousand parrots to say, “Drink Old Quaker” and then gave the birds to bartenders. (The campaign fizzled in all the disastrous ways one imagines it would.) For Rosenstiel’s campaign to market older bourbon, he instead relied on a list of advertising agencies that reads like the credits of
Mad Men:
W.B. Doner (clients: General Electric, Coca-Cola, DuPont), McCann-Erickson (Chevrolet, the Spanish government of Francisco Franco), and Doyle Dane Bernbach (Volkswagen, Mobil Oil, the presidential campaign of Lyndon B. Johnson).

There was a lot of spin, all stemming from what had originally been a misreading of the market, but the effect on bourbon couldn’t have been better. Schenley boosted bottling proof and began increasing the ages of its bourbon brands so they were square in the middle of the perfection zone. James E. Pepper went from six to ten years, George T. Stagg went from four to seven years, J.W. Dant went from four to seven years, Melrose Rare went from seven years to ten or more, and Schenley Reserve went from five-, six-, and seven-year-old expressions to eight years. Old Charter became a twelve-year-old whiskey (“the whiskey that didn’t watch the clock”), as did I.W. Harper. These surpluses turned the period during the 1950s and early 1960s into a golden age for consumers, when supply for well-aged bourbon met demand and prices were relatively low.
*

Rosenstiel’s strategy to sell older bourbon in the United States by emphasizing luxury coincided perfectly with his next plan: sell more of it abroad. There was sizable demand overseas, if not entirely comparable to the large domestic appetite. Nevertheless, Lewis Rosenstiel still had surplus whiskey he needed to sell. When he announced his new $35 million campaign to begin taking bourbon global, he decided to hold the press conference not in a Kentucky cornfield but from his office in the Empire State Building.

 • • • 

In 1958, the British writer Graham Greene published
Our Man in Havana,
one of the Cold War’s best spy thrillers, which detailed how the world’s biggest superpowers were traipsing the globe in a comedy of errors, turning smaller nations into pawns in their game of chess. The United States and Britain were allies, but the book perfectly captured the contest that was about to erupt between bourbon and scotch as the two whiskey styles began competing for world market share.

Greene’s protagonist, James Wormold, is a hapless vacuum cleaner salesman in Cuba who has convinced the world’s intelligence agencies he’s a master spy. Havana’s police chief, Captain Segura, becomes suspicious of Wormold and challenges him to a game of checkers for his freedom. Instead of standard game pieces the men use mini-bottles of whiskey—bourbon for Wormold and scotch for Segura. The brands are classics: Old Taylor, Old Forester, Four Roses, and Kentucky Tavern for the bourbons, and for the scotches, Cairngorm, Dimple Haig, Red Label, and Grant’s Standfast. Each man drinks every mini-bottle he captures. The better a man plays, the drunker he gets. It’s a paradox in which success diminishes the chance of winning, and the victor is ultimately the man with the higher tolerance.

Scotch held an overwhelming advantage against bourbon. It was (and still is) the hands-down leader in global whiskey sales. At the peak of the British Empire, scotch had accompanied the Crown to every corner of the globe, and for most people it comprised the very definition of whiskey. But now, with the Cold War grinding forward, it was America’s turn to blanket the globe with military bases. American soldiers drank American whiskey, but base exchanges were choosy about what brands they carried, and soldiers were sensitive to price. In one maneuver that allowed it to vastly increase its market share and advertise its name in the years to come, Beam decided to install bottling plants in Germany, which helped it lower costs and supply the soldiers standing guard next to the Iron Curtain (it was still made in the United
States, but bottled abroad). Beam also became popular in Australia, where it’s still the best-selling whiskey brand. In some parts of the world you can still trace which bourbon brands established their bulkheads during the Cold War: Four Roses is an old standby in Spain and Wild Turkey is huge in Italy (and is actually owned by Gruppo Campari, an Italian conglomerate). By 1966, I.W. Harper was in 110 countries—today it is
only
available overseas, but is particularly big in Japan.

Bourbon’s biggest obstacle to gaining an international foothold was that nobody knew what it was or how it was different from scotch. It was more foreign to foreigners than vodka was to Americans,
Time
quipped while reporting Rosenstiel’s announcement of his global rollout. Bourbon generally peaks faster than scotch and often doesn’t have to be aged as long, but international customers were only familiar with scotch. Younger bourbons might very well be superior to their older scotch counterparts, but it wouldn’t matter, people would still think they were inferior because they were younger.

The reason scotch is often able to hold up to longer aging than bourbon is because Scotland’s climate is milder and most whisky there is aged in used barrels (meaning less oomph from the wood, akin to reusing a tea bag and steeping it for a longer period of time). The relatively higher humidity and lower temperatures in Scotland also mean less evaporation, so scotch producers lose less liquid by aging longer. In one experiment, American and Scotch producers exchanged barrels of whiskey and found that the bourbon aged in Scotland took much longer to mature and that the scotch aged in Kentucky developed much faster than it would have otherwise, simply because of the climate differences. Most people never get to try truly overaged whiskey, however, because most companies pull barrels from the hotter parts of the warehouse before the whiskey goes over the line. If there isn’t a market for it, they sometimes store it in metal containers, to stop it from aging while waiting for the markets to improve, although this move is usually prohibitively expensive and rare.