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Battle over Tennessee Bourbon whiskey intensifies

Published:  20 March, 2014

Both Diaego and Brown-Forman have made headlines in recent days over a battle that is brewing in the south of the US over what exactly is the appropriate definition of Tennessee Bourbon whiskey.

Background on the Whiskey War

Back in May 1964, the United States Congress recognised Bourbon whiskey as a "distinctive product of the United States." This opened the door for Bourbon to be produced across the US anywhere its legal to distil spirits - which is not everywhere in America.

The battle over Tennessee whiskey started with the passing of the House Bill 1084 on May 13, 2013. The bill outlines products that are labelled "Tennessee Whiskey" to adhere to specific process requirements similar to how Scotch whisky operates.

Specifically, Tennessee whiskey must be made in Tennessee, must be maple charcoal filtered prior to aging, be at least 51% corn and meet all other requirements of the definition for a product to be called Bourbon whiskey. 

Bourbon whiskey is defined as being made in the US, having a grain mixture of at least 51% corn, aged in new oak barrels, the barrels must be charred, must be distilled to no more than 160 U.S. proof, 80% alcohol by volume, entered into the barrel for aging at no more than 125 proof, 62.5% alcohol by volume, and be bottled like other whiskeys at 80 proof, 40 % alcohol by volume, or more.

The battle

The challenge came from Diageo, the UK based drinks giant, which has asked for distilleries to be allowed to make Tennessee whiskey in reusable barrels. This specific change does not just have ramifications for Tennessee whiskey, but will actually have a larger impact on the definition of the US definition of Bourbon whiskey. The desire to have Bourbon whiskey no longer be made in new oak barrels, changes both the definition of Tennessee whiskey, but also could change the definition of what is considered a Bourbon whiskey.

Bill Sanderson, the state representative who has proposed the bill to change the requirements, reportedly admits that he introduced the bill at the urging of Diageo.

The bill which was passed in May 2013, was lobbied by Jack Daniel's, one of Brown-Forman most internationally recognised brands.

Diageo has stated that it believes the current requirements are so restrictive they impede competition. They also have argued that the requirements will make all Tennessee whiskey taste like Jack Daniel's, a brand owned by Brown-Forman, Diageo's largest competitor.

Recent events

In January on the heels of Diageo's half yearly financial results the stock was downgraded by analysts after worse than expected performances in volume sales in key emerging regions, specifically in Africa and China. The chief executive did set out a strategy to help bolster profits by reducing costs and a plan to attain £200 million of savings by 2017. By reusing oak barrels Diageo could potentially save millions of pounds. 

Subsequently, Brown-Forman at the beginning of March raised its fiscal 2014 expectations, which was bolstered by Jack Daniel's brand underlying sales growing at 10% based in Q3.