Sourcing, Labeling & Lawsuits: Why American Whiskey Should Improve Its Labels

The more the average American spirits drinker dives into whiskey, the more he or she learns remains unknown. Confusion currently reigns across much of the landscape, with some of the largest issues at hand surrounding who is actually distilling the whiskey being sold by a particular brand, and what that brand is actually disclosing, or not, on the label.

Sourcing & MGP

Many of today's "craft" brands are actually buying their whiskey from large producers, and selling it under their own name. This practice is known as "sourcing." These brands are not distilling their own stuff, and may or may not be responsible for aging it on their own property. They're either blenders or bottlers, but certainly not distillers. In other words, they're middlemen in the process of producing whiskey and getting it to the shelf. Collectively, they're known as Non Distiller Producers or NDPs. While sourced whiskey is often rather good on its own merits, matters get murky when NDPs play it off as a product they are distilling.

In the U.S., the biggest player on the sourcing scene is MGP Ingredients, based in Lawrenceburg, Indiana. MGP rose to the top by producing quality whiskey at huge volumes for others. While recently the company debuted a limited release under its own label, MGP almost entirely distills for other companies, and the whiskey it produces ends up under dozens of different brands. Many of these labels are now known, and many are upfront about where they get their whiskey, but many others remain hidden, hoping to go unexposed.

A visit to MGP's website won't reveal a customer index, thanks to nondisclosure agreements, but it will provide a "product list" that includes all the types of whiskey and alcohol it distills. A brand could choose from five different bourbon mash bills, three rye whiskeys, wheat whiskey, malt whiskey, corn whiskey, and more.

The public at large caught wind of this truth last year, and its outcry was heard far and wide. People felt spurned and lied to, and suddenly didn’t know who or what to believe in terms of American whiskey. Yet, sourcing whiskey as a practice, and MGP itself even existing, is far from a new story, and those involved in the whiskey or spirits scene on any level were already well aware of sourcing and its prevalence.

"... if you call yourself a distiller, there ought to be some distilling going on in your place of business—otherwise, you're just fabricating ways to describe a bottling plant." - Ben Lyon, Lyon Distilling Co.

On its own, there's absolutely nothing wrong with sourcing, as long as there's honesty about what's taking place, rather than deception. With Scotch, there's a longstanding and still highly respected history of independent bottlers, companies completely devoid of distilling, who either select barrels to sell under their own label, or blend stock from multiple sources to create something entirely new.

"There is nothing wrong with sourcing spirits as long as the seller doesn't attempt to imply otherwise," says Ben Lyon, distiller and co-owner at Maryland's Lyon Distilling Co., and founder of the Maryland Distillers Guild. "Where I really cry foul is when a 'distiller,' who had no part in the spirit coming off the still claims to have 'handcrafted' it. I also contend that if you call yourself a distiller, there ought to be some distilling going on in your place of business—otherwise, you're just fabricating ways to describe a bottling plant."

Sourcing discussions sometimes make MGP look like the bad guy, like some kind of industrial villain. But, simply put, the company is making enough really good whiskey that brands continue to line up around the corner for a chance to purchase it. Like other distilleries, MGP has a master distiller. It's no more a dirty industrial factory than any other major players like Wild Turkey or Jim Beam—each is a mammoth, computer-controlled, industrial operation. So, MGP shouldn't be frowned upon or held responsible for the sometimes shady or duplicitous acts of its customers. MGP isn't the bad guy, and "sourcing" need not be a dirty word, either.

Many small brands who are opening their doors for the first time often source whiskey so they have a product to sell immediately while their own stuff ages. It's a fiscal necessity, since it's impossible for most of these brands to sit around for years, not generating revenue, while their whiskey is left maturing in the barrel.

Therefore, they buy somebody else's whiskey as they begin the process of putting away their own stock. Along the way, these new brands may begin incorporating their own juice into the purchased whiskey, or they may simply wait until their whiskey is fully of age and release it separately.

... MGP shouldn't be frowned upon or held responsible for the sometimes shady or duplicitous acts of its customers.

Even if a brand has no intentions of ever distilling its own liquor—relying instead upon a unique aging or blending process to distinguish its whiskey—or it plans to bank on superior marketing, there's nothing wrong with either act as long as the brand isn't trying to deceive the consumer. Sourcing in and of itself is fine, and is a common practice.

A Close-Up on Bulleit

It's not just smaller brands who source whiskey though. For instance, take the case of Bulleit, a popular and well-regarded Diageo-owned brand, who, as of now, does absolutely zero distilling. A new Diageo distillery is set to open in Kentucky's Shelby County in 2016, and Bulleit will be distilled there moving ahead. But that means the brand is still many years away from filling its bottles with bourbon made at Diageo's distillery.

A visit to the Bulleit Experience—a tourist attraction housed at the historic Stitzel-Weller Distillery, which is where the Pappy Van Winkle lineup was formerly produced— is shrouded in mystery. The barrel warehouse which is accessible to the public is roped off at the entrance, so visitors can't meander through it, presumably able to see on the barrels who made what, where and when.

Visitors are also barred from taking photographs in the narrow swath of rickhouse that they are able to enter. On a recent trip, Bulleit reps explained that photography was a fire hazard. But to this writer's knowledge, nobody in the group was utilizing a century-old shattering flashbulb camera. Needless to say, on the same trip, every other brand's warehouse allowed full access, and full photographic privileges.

Bulleit doesn't mind disclosing that they source rye whiskey from MGP, but the picture for their bourbon is far murkier. Until recently they had a contract with Four Roses, one of the traditional major bourbon brands and producers, to handle their bourbon distilling, but that deal expired and was not renewed. So who's making Bulleit now?

It's an issue of much discussion, and one the company doesn't love to talk about. Bulleit won't say where, but does acknowledge that its bourbon is made in Kentucky, and features a mash bill of 68 percent corn, 28 percent rye, and 4 percent malted barley. There are only so many other Kentucky distilleries out there with the bandwidth to make as much bourbon as a brand the size of Bulleit needs. Here's looking at you, Barton, Heaven Hill and Jim Beam.

None of this need necessarily scare you away from Bulleit—although the secrecy discovered at the Bulleit Experience was a touch unsavory. Still, diving into the brand's backstory explains their situation more clearly.

What is now known as MGP was formerly owned by Seagram, and Bulleit was formerly a Seagram brand. That simply means that the parent company's distillery was making the juice for one of its brands, and the practice continued as ownership changed and new brand conglomerates were formed.

Four Roses was also under the Seagram family. So when they were making Bulleit’s bourbon, it was again simply the case of synergy between different brands and assets under the same company roof. Nothing unsavory about that.

When Seagrams was sold and divvied up in 2000, Four Roses was sold to Pernod Ricard rather than Diageo, and Diageo contracted Four Roses to continue production for Bulleit. Diageo then began contracting other producers to make Bulleit's bourbon as well, including Brown-Forman, Barton, and the aforementioned Beam, and they quietly began incorporating those bourbons with the juice from Four Roses.

Four Roses is out of the picture now, so who's left? Since we know that the distillery supplying Bulleit is in Kentucky, that potentially nixes Brown-Forman, as the distillery producing Jack Daniel's is in Tennessee, and Woodford Reserve's distillery in Kentucky doesn't have that capacity, leaving only the Brown-Forman distillery in Shively as a viable option. Woodford's Master Distiller Chris Morris also confirms that Woodford's facility does not sell to anybody. "We're very fortunate that we don't source whiskey from anybody, and we don't sell whiskey to anybody," he said. "We're one of the exceptions. We make it and sell it all under our label."

In a conversation with Jim Beam's Fred Noe, he discussed the issues of producers selling whiskey to other brands, as well as the labeling issues which result. "If you're just bottling, and you go out and buy whiskey from me, all you can put on it is 'bottled by,'" he explains. "But if we make it and bottle it, then it says 'distilled and bottled by.'"

Noe therefore acknowledges people buying whiskey from Beam and selling it under their own brands, although he was more tightlipped on the specific matter of Bulleit, perhaps a tell in and of itself for the usually highly gregarious Noe. "If you dig deep enough, you'll find where everything is made," Noe said. "You can track it down." Signs are pointing, at least partially, in his direction.

Lawsuits

Confusion over what's actually in the bottle has led to a collection of lawsuits filed against a range of different brands. But none more prominently than Templeton Rye, the label which has come to signify in the minds of many the practice of sourcing and the negative issues of deceptive labeling.

"Many producers engage in less than forthright labeling practices ... to mislead the consumer ..."- Don Poffenroth, -Dry Fly Distillery

Templeton Rye formerly touted a lofty story, both on its website and on its bottle, about utilizing a Prohibition-era bootleg rye whiskey recipe favored by Al Capone. Meanwhile, the stuff was being made at MGP. Multiple lawsuits were levied, with several now seemingly headed toward mediation.

Another MGP customer, Angel's Envy, has been targeted with a lawsuit as well. WhistlePig came under similar fire, although in their case they're not utilizing MGP's juice. They're now more upfront about purchasing their rye whiskey from Canada, but in the past the company had been a bit mum on the fact, and touted the spirit as an American rye.

Regardless, the bottle still says, "Hand bottled at WhistlePig Farm" in Vermont. And, while correct, that statement could lead a consumer to mistakenly believe WhistlePig is making the whiskey there, which they're not. WhistlePig is growing their own grain and has imminent plans on beginning their own distillation, however that means it'll be quite a few years until what's sold as WhistlePig is distilled by WhistlePig.

Others have filed lawsuits against Jim Beam and Maker's Mark, each due to "handcrafted" or "handmade" statements, and beyond the world of whiskey there have been additional disputes flying as well. Most prominently, Tito's Handmade Vodka has come under legal fire for its own "handmade" designation, the brand's own rapid fire growth pushing it well beyond the small batch status it touts.

Labeling Issues

Yet, all of the above lawsuits only target individual brands, not an industry as a whole. Shutting down a single brand doesn't inherently mean that others change their own practices.

Of course, wary consumers could have a larger say by shutting their wallets for whiskey or spirits whose story or label they distrust. "Many producers engage in less than forthright labeling practices," says Don Poffenroth, co-founder of Spokane, Washington's Dry Fly Distillery.

"Many of these producers do so to mislead the consumer," he continues. "We find consumers are unhappy to learn that what they thought they bought from a producer, is indeed a product made by someone else. In the end, the consumer will decide whether the misleading practices are acceptable."

If brands didn't have as much wiggle room, there would be far less deception and confusion from the start.

Noe agrees. "Just stay away from them," he says, referring to brands with a reputation for being deceptive or lying about their whiskey. "There's enough good whiskey out there ... if you want to know what you're drinking, make sure you're buying it from the folks who make it."

Ultimately though, broader action needs to be taken from a regulatory standpoint. If brands didn't have as much wiggle room, there would be far less deception and confusion from the start. The TTB, or Alcohol and Tobacco Tax and Trade Bureau, is the government agency responsible for alcohol product labeling, and that's where regulation or reform would need to begin.

"The regulations at the TTB exist to clear up any confusion regarding these issues," says Poffenroth. "Unfortunately, the staffing and resources do not exist to enforce those regulations. It’s kind of like the Wild West right now, and some producers are taking significant advantage."

"The bottom line is that if the producer is honest, we have no issue with [sourcing]," he continues. "We believe we do something entirely different, and it’s important for the customer to understand those differences."

Lyon doesn't necessarily want to see increased regulation either, but he does believe that inconsistent policies lead to consumer confusion, and need to be resolved."The labeling requirements for American whiskies are best described as arcane, arbitrary, and oftentimes bizarre," he says. "More transparency where it truly matters could benefit the consumer."

It all comes down to being forthright, straightforward and honest about what's in the bottle. Sourced whiskey can be wonderful to enjoy, and most drinkers care far less about where the whiskey is made, as opposed to the quality of what they’re drinking. But if the companies can't seem to get it together on their own to be completely clear about what they're using, who made it, and where it's from, then there needs to be legal reform.

An Easy Solution to Whiskey Labeling

There are many issues at hand, including the consistent enforcement of current regulations. The best and most straightforward real solution though would be a mandate that all labels include a clear designation of where the spirit was distilled, and where it was bottled.

Lyon suggests a few key improvements. "If sourced, identification of the actual distiller would be present," he says. He also wants to see any artificial flavorings listed on the label, noting that the TTB allows "up to 2.5 percent 'harmless coloring or flavoring materials'" to whiskey with no mandate to declare it on the label.

"When we speak about our labeling, we focus on the producer statement," says Poffenroth. "The words 'Distilled By' or 'Distilled and Bottled By' are clear indications that the named producer at least does the final distillation and packaging in house. 'Produced by' or 'Bottled by' or anything else other than the word 'Distilled' indicate a product that was not produced by the named company."

That doesn't sound like too much to ask—that every bottle of whiskey sold in the United States be legally required to actually tell you where it was made, and by whom. Some phony brand legends might be squashed in the fallout, but what other negative consequence would there be of such a mandate?

Distilled by [Distillery], in [City], [State]. Bottled by [Company], in [City], [State].

Problem solved. Your move, TTB.