[SPEAKER_02]: There's a lot of noise right now, but what's going on in the whiskey industry, and depending on who you're listening to, some people say it's collapsing, it's correcting, or everything is totally fine, but today we're going to break it down, get away from the marketing hype and the BS, and just talk about it from a very simple standpoint.
[SPEAKER_02]: If you want to hear about it, then stick around.
[SPEAKER_02]: where we get started, some disclaimers, first off this episode discusses industry structure, but not individual brands with that mind.
[SPEAKER_02]: This meant to be context, not financial advice.
[SPEAKER_02]: And as always, some of the stuff is gonna upset some people, but try to take it in the spirit that it was intended, which is we want the average consumer to be a little bit more informed about what's going on.
[SPEAKER_02]: to be able to see through the nonsense that's being pushed out there on social media.
[SPEAKER_02]: So let's get into the problems that created the situation that we're starting to hear about now.
[SPEAKER_02]: The first problem was that demand was overestimated, and that came because pandemic error growth was treated like it was permanent, and people thought, oh, well, whiskey's just going to continue on this rocket ship up, and that's not actually the case, right?
[SPEAKER_02]: And another issue is that expansion decisions were made years in advance, and that's something that's very important to understand.
[SPEAKER_02]: When everybody was complaining that Buffalo Trace was purposely trying to make Papy Van Winkle rare and that they could make more of it, but they were deciding not to.
[SPEAKER_02]: And I was trying to come in and speak some reason in this situation and say,
[SPEAKER_02]: I don't think that's necessarily true.
[SPEAKER_02]: They would have had to have known to expand their distillery 20 years ago, blah, blah, blah, blah.
[SPEAKER_02]: Well, the verses that are true, right?
[SPEAKER_02]: If you start thinking that demand is going up and you expand, you know, you made that decision years ago and then you're going to have to deal with the consequences and a market that might actually be a little bit different than what you're anticipating.
[SPEAKER_02]: And, and that's what we're dealing with now.
[SPEAKER_02]: And I think that what we're seeing is demand is normalizing rather than just disappearing all together.
[SPEAKER_02]: And that's an important distinction, because, you know, some people feel like the sky is falling, but the reality is we're just getting back to a more normal level of demand because the pandemic or stuff was not normal.
[SPEAKER_02]: another problem that we're dealing with is that whiskey is slow to correct.
[SPEAKER_02]: So barrels that relate down years ago can't be undone, right?
[SPEAKER_02]: And those were based on those demand levels that the projections turned out to be wrong.
[SPEAKER_02]: And
[SPEAKER_02]: As a result, inventory decisions lag demand by years, the correction that happens can be abrupt, and so we saw almost a cliff of all of the FOMO went away all at once, and there's nothing that the distilleries could do about their demand planning mistakes that they made in the past.
[SPEAKER_02]: A third issue is that capital got very expensive, and higher interest rates increase the carrying
[SPEAKER_02]: of the distilleries having inventory.
[SPEAKER_02]: And financing inventory has become more painful.
[SPEAKER_02]: It's more difficult to get approved.
[SPEAKER_02]: The cost of interest is going to be higher.
[SPEAKER_02]: The proof that you have to have that the financing is going to result in a profit.
[SPEAKER_02]: There's much higher than it once was.
[SPEAKER_02]: There was a time period.
[SPEAKER_02]: And we saw this with an uncle nearest that you could almost walk in with a wing and a prayer and they go, okay.
[SPEAKER_02]: Well, here's a hundred million dollars for financing, right?
[SPEAKER_02]: And those days are long gone.
[SPEAKER_02]: And now we're starting to see some pressure from the banks.
[SPEAKER_02]: And they're wanting to see a whole lot more information than they did in the past.
[SPEAKER_02]: And that's causing problems for people's current banking relationships.
[SPEAKER_02]: And the results is we're not going to see a whole lot of expansion in inventory financing for new projects in the immediate future.
[SPEAKER_02]: The fourth problem is that there were just too many brands too quickly.
[SPEAKER_02]: We had a flood of new labels and entered the market, and most of those labels lack scale, distribution, and there wasn't a whole lot of differentiation, even from my own brand.
[SPEAKER_02]: There were other distilleries that were
[SPEAKER_02]: bottling effectively the same whiskey.
[SPEAKER_02]: Now, I believe that I was still bringing value to the market because I decided to leave an aging environment and we also always tried to be a little less expensive than our competitors or at least offer a product of higher value at the same price, maybe a little extra age, maybe a little extra proof.
[SPEAKER_02]: but there were a lot of other options for all of these new labels that were popping up.
[SPEAKER_02]: And what we're starting to see now is the slower growth and was expected as exposing the weaker distilleries and showing us who had survivability and who didn't.
[SPEAKER_02]: And a fifth problem is that there's been a lot of changes in consumer expectations and demand.
[SPEAKER_02]: So consumers have become way more selective.
[SPEAKER_02]: Their price sensitive like they weren't in the past, hoarding behavior has declined significantly.
[SPEAKER_02]: And so that's going to affect whether or not those those demand planning predictions are going to turn out to be true.
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[SPEAKER_02]: So what's actually going wrong is that, you know, we do have some demand problems, but whiskey's not dying.
[SPEAKER_02]: Bourbon's not going to disappear.
[SPEAKER_02]: The excesses of the industry are going to be punished and we're seeing that in the stories that are coming out.
[SPEAKER_02]: about some of the spending practices of the uncle nearest leadership team and things like that and some of the other bankruptcies that we're seeing and so the excesses are going to be punished but those who remain disciplined are going to be rewarded in the long term and the people that are going to be hurt the most are those that were over-leverage with their bank, height driven brands that only released a
[SPEAKER_02]: Effectively limited edition releases and sky high prices those those brands are going to struggle to find a space in this new new world We're living in Companies that expanded without patience and went way overboard I'm I'm thinking of one in particular that took on a lot of debt to expand their capacity And and they probably did a little bit too fast
[SPEAKER_02]: But it's not a disaster, at least not yet.
[SPEAKER_02]: Slow down, some pauses are good because they prevent absolute collapse.
[SPEAKER_02]: And early intervention will help companies avoid layoffs.
[SPEAKER_02]: It'll help avoid price crashes, which is ultimately bad for everybody.
[SPEAKER_02]: It's bad for the brands, it's bad for the companies, it's bad for their employees.
[SPEAKER_02]: It's bad for the vendors that rely on that business, and outside of the direct whiskey industry.
[SPEAKER_02]: And ultimately, it's bad for consumers because we start to lose brands and distilleries.
[SPEAKER_02]: I think we can all agree that the world would probably be a better place today if this distitzer well they're distilleries meant to maintain its operations.
[SPEAKER_02]: But as we know, because of the last major downturn,
[SPEAKER_02]: We lost that iconic distillery that was the birthplace of so many of the brands that we love today.
[SPEAKER_02]: And I don't want to see that happen to the brands that we have here today.
[SPEAKER_02]: And so I'm actually excited about some of the interventions that we've seen come out, where it appears that, you know, for those distilleries that had discipline, the adults in the room were making smart decisions to protect the future.
[SPEAKER_02]: So, going forward, we're probably going to see fewer new brands.
[SPEAKER_02]: I think if you're thinking of starting a non-distiller producer right now, you're crazy, and I've talked to a couple of people who wanted to have that discussion with me, and I just flat out, tell them you should not do this, unless you have a hundred million dollars in your willing to gamble it.
[SPEAKER_02]: And even still, I would probably wait for a different market before I jumped in, but, you know, there's still people out there.
[SPEAKER_02]: We're going to continue to see consolidation, whether it be asset purchases or outright mergers and acquisitions.
[SPEAKER_02]: We're going to see smarter, quieter releases.
[SPEAKER_02]: We're not going to have so many hype releases from smaller, smaller distilleries because there's just not demand for it anymore.
[SPEAKER_02]: And so, um, my thoughts, you know, nothing's happening now that's unprecedented.
[SPEAKER_02]: This is just a return to the fundamentals of whiskey and whiskey the man.
[SPEAKER_02]: And that's where strong whiskey comes from is, is from those brands that know how to weather these stores storm.
[SPEAKER_02]: So I hope you enjoyed this content.
[SPEAKER_02]: We always give away a little bit of whiskey.
[SPEAKER_02]: And since we were talking about the stilleries,
[SPEAKER_02]: Some that needed proper demand planning going to have to make some adjustments.
[SPEAKER_02]: I thought we'd give away some non-distorted produced whiskey.
[SPEAKER_02]: The first one I thought of was this barrel craft spirit five years, five year, the foundation series.
[SPEAKER_02]: This was their attempt to get ahead of this because they knew that there was going to be this upturn in the market.
[SPEAKER_02]: Many of their products were priced out of what the average consumer that it was going to be looking for.
[SPEAKER_02]: So they came out with something that's more of a value play.
[SPEAKER_02]: And then my good friends over at pursuit united these individuals are doing some pretty amazing things with other people's whiskey and creating some unique experiences.
[SPEAKER_02]: And now they have their
[SPEAKER_02]: And then, our frames over in Nevada at Smokewagon, they bottle the same whiskey that I bottle from the Prideful Goat.
[SPEAKER_02]: And I thought it'd be fun to give those two side by side.
[SPEAKER_02]: And then, our friends over at Old Scout, Bourbon Whiskey, this is a single barrel that I selected.
[SPEAKER_02]: So I'm going to do five one-out sample packs.
[SPEAKER_02]: And all you have to do to enter the wind is like this video.
[SPEAKER_02]: Subscribe to the channel and ring the bell to be notified of future pieces of video content because we do have a giveaway every time plus we think our content is pretty cool So we don't want you to miss it at miss out on it And of course you have to go to the YouTube channel go to the video description expand it find the link that says free giveaway fill out the warm form we will run a randomizer
[SPEAKER_02]: post-results publicly reach out to the winners and send you your samples absolutely for free.
[SPEAKER_02]: And if you like this content, you want to support the channel.
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[SPEAKER_02]: Now, everyone's names that you see that are on the screen right now.
[SPEAKER_02]: They're contributing at the top three levels.
[SPEAKER_02]: And we're very appreciative of those individuals.
[SPEAKER_02]: But just know, we do have a support level for all budgets.
[SPEAKER_02]: So if you like this content, you want to support for whatever reason, we can find a package for you that will work.
[SPEAKER_02]: But if you don't want to join Patreon, we do have Merchett Bourbonville Talk.com, much of which is customizable because we do have some commercial lasers.
[SPEAKER_02]: So it's whisky merch made by whisky people for whisky people.
[SPEAKER_02]: We think it's pretty cool.
[SPEAKER_02]: And if you happen to have a brand or some sort of a whisky club that you're a member of, we can actually set up a custom
[SPEAKER_02]: We'd love to hear from you about that, but mainly I'm a real estate agent and the Dallas and Houston metro areas.
[SPEAKER_02]: So if you need residential real estate services and you want to support the channel, I'd love to have a conversation about how I might be able to serve you.
[SPEAKER_02]: And you can find links to all three ways to support the channel in the video description on YouTube.
[SPEAKER_02]: And if this year first time tuning in, I'd love to tell you a little bit about why we do what we do, and that is,
[SPEAKER_02]: We love people.
[SPEAKER_02]: Whiskey's delicious.
[SPEAKER_02]: It's fun to drink, but at the end of the day, Whiskey's just conduit to create community and connection.
[SPEAKER_02]: And community connection is something that became a mission of mine when I lost my brother to suicide in 2014.
[SPEAKER_02]: And I realized he was missing some of the connections that keep us bound to this world.
[SPEAKER_02]: And I thought maybe if I got you connected to Whiskey, Whiskey to the rest of the job and get you connected to others.
[SPEAKER_02]: So we started this channel, but ultimately we needed to have a forum for people to interact where there wasn't all of the negativity that we were seeing on online forum.
[SPEAKER_02]: So we created a troll free environment called Bourbon Real Talk community.
[SPEAKER_02]: on Facebook.
[SPEAKER_02]: It's been very successful.
[SPEAKER_02]: Vibes in there are good.
[SPEAKER_02]: You can go join right now and check it out for yourself.
[SPEAKER_02]: In fact, Vibes have been so good that we were able to start a 501C3 suicide prevention and intervention nonprofit called LivestayProject.org.
[SPEAKER_02]: All administered inside the whiskey enthusiast community.
[SPEAKER_02]: And if you are involved in suicide prevention at a non-profit and anyway, we are looking for organizations to partner with.
[SPEAKER_02]: So you can go to our website at LivestayProject.org and fill out a grant request form.
[SPEAKER_02]: and we'd love to talk about partnering with you.
[SPEAKER_02]: But this has all been a beautiful thing that's been created by this community of whiskey.
[SPEAKER_02]: And we'd like to keep it positive and we'd like to encourage other individuals.
[SPEAKER_02]: And we realized when we were seeing some of the negativity online that if those people can hate someone online, there's nothing that keeps us from loving someone online.
[SPEAKER_02]: And that's why we had every episode the same way in that's this.
[SPEAKER_02]: If you woke up this morning, and you're unsure whether or not anyone loved you, just know that I love you.
[SPEAKER_02]: and I'll see you next time on Bourbon Real Talk.