The Bourbon Barrel Problem

In 2021, Kentucky distillers filled 2-point-6 million bourbon barrels. Each one of those barrels was a new, charred oak barrel…just like the law requires. Other states don’t track Bourbon production specifically, but if we look at more than 2000 distilleries operating now in the other 49 states, it’s easy to get to somewhere between 3 and a half to four million new barrels that are needed every year, not to mention what makers of other spirits and wine need. 

That’s created a lot of pressure on cooperages to meet the demand, and those distilleries without long-term supply contracts are often being turned away.

“I had a person I know through the industry met at a convention a couple times reach out to me on Instagram, PM’d me on Instagram and said, ‘Hey, can we have a conversation? I’ve been tasked with trying to find barrels.’ And so she and I got on a call and and I was like, have you tried these people and these people? And I gave her some I had talked to and most of them were like, she said, ‘Oh, I talked to them and, you know, they’re not even returning calls,'” said American Craft Spirits Association president Becky Harris of Catoctin Creek Distilling in Virginia.

Over the last decade, the number of distilleries in the U-S has exploded exponentially, while only a handful of new cooperages have come on line. Melissa Zoeller of the Associated Cooperage Industries of America, the cooperage industry’s trade group, said her members are also facing the same factors that have affected other manufacturing industries over the last three years.

“During COVID, the price went up astronomically. And then also with a lot of the loggers, the next generation not wanting to get into logging, so there’s been a price increase there. It’s been hard to get the wood for the mills, and then the mills are struggling for with labor as well. So from our members’ standpoint, I think we’re still struggling to keep up and that’s where the shortage comes in,” she said.

It’s a perfect storm: labor shortages, increased cost for logs, and surging demand. All those factors have combined to raise the cost of barrels by up to 40 percent over the last two years…when you can find them. Earlier this month, the ACSA held its annual conference and trade show in Portland, Oregon…and while cooperages were on hand for the trade show, they largely left their order books at home, preferring instead to deepen relationships with existing customers instead of trying to get new business.

“If you have a current customer and they’re going to grow every year,  correct. The whole intention of a business is to grow each year. So if your current customers are growing and you’re keeping up with their demand, how are you going to take on new demand,” says Ben McGinnis of McGinnis Wood Products in Cuba, Missouri. The family-owned cooperage recently added a second shift and an extra half-day to the production schedule to keep up with its current contracts from Heaven Hill and other clients.

“We’re getting logs right now, we got plenty of employees, but just because you can get logs today doesn’t mean that you can double your size in a year because other people are putting in new distilleries and there’s not as many loggers there used to be. That’s been the big issue is getting people to cut the timber to compensate for demand,” he said.

Logging is one of the most dangerous occupations in the U-S, and most logging companies are small, family-owned operations where younger generations aren’t interested in taking on the family business. In fact, logging industry employment is down about 1 percent a year over the last five years, and the cooperage industry competes with lumber companies and the housing industry for supplies of American White Oak timber.  That’s led to sharp increases in the price of raw timber, as well as a shortage of staves, the rough cut dried wood that goes into making barrels. There’s an equal shortage of stave and heading mills that supply the cooperages, though more mills are coming on line each year.

Brown-Forman is the only U-S distiller that owns its own cooperages. It sold off three of its four stave and heading mills to new ownership recently, but signed long-term supply contracts for the output from those mills. The company’s two cooperages in Louisville, Kentucky and Trinity, Alabama produce around 4,000 barrels a day, but even that’s not enough to meet Brown-Forman’s needs. It still has to buy 800 to a thousand barrels every day just to keep up with the growing demand for Bourbon.

Greg Roshkowski manages the Brown-Forman cooperage operations, and notes the headlines almost every day about distillery expansions.

“I know from our aspect, Brown-Forman is in the process of doubling the capacity at Woodford Reserve, we’re expanding or distillery here in Shively, as well as our distillery at Jack Daniels. And that, you know, is going on throughout the U.S. and the bourbon industry and worldwide,” he said.

Roshkowski believes capital investment is the only way to solve the problem, though he says cooperages fall at the bottom of the list behind distilleries, warehousing, and bottling facilities when it comes to that investment.

Not everyone sees a barrel shortage. Independent Stave CEO Brad Boswell said in an email that the opening of his third cooperage and expansion industry-wide mean there’s no shortage of barrel-making capacity, but he does see the need for more stave and heading mills. Independent Stave is currently building its ninth stave mill in Batesville, Arkansas, and Boswell expects to announce plans for a tenth stave mill soon.

What’s the advice from coopers to those trying to build distilleries? Don McGinnis of McGinnis Wood Products has seen too many distillery owners fail to plan for their barrel needs.

“There’s a lot of them that contact us already building their distilleries, but they don’t have any barrels. They said they never thought about not being able to get them,” he said.

Catoctin Creek’s Becky Harris believes distillers will have to become more creative when it comes to making their whiskies in order to be able to use used barrels. She cites examples of corn whiskey, light whiskies, and the catchall “American Whiskey” category where the use of used barrels is allowed under federal regulations. Harris also sees the need to start a discussion with regulators over whether once-used and recharred barrels could qualify as new barrels. That’s something the cooperage industry isn’t ready to explore yet.

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Links: American Craft Spirits Association | Associated Cooperage Industries of America| McGinnis Wood Products | Brown-Forman