Saturday, November 5, 2016

Buffalo Trace update - increasing capacity

When I toured the Buffalo Trace distillery back in February I had visited Four Roses earlier in the day and Maker’s Mark the day before. Both of those distilleries were in the midst of major expansion projects. Four Roses had announced their plans to add a second still as well as the rest of the equipment and infrastructure to go along with it six months earlier, doubling production at a cost of $55 million. At Maker’s Mark, their third still had just gone online three months prior and many new warehouses were under construction; the $67 million expansion would increase production by 50%.

Of course, I had to ask the Buffalo Trace tour guide if they were operating at the maximum capacity of their still and if there were any plans to expand. She told me the answer to the first question was yes and the answer to the second question was no. Well, it turns out that she was mostly right, but partly wrong. I’m not criticizing our guide, Shelly. She did an amazing job, and I’ve seen conflicting and even inaccurate information come directly from distillery managers and official press releases before.

She was right that there were no plans for expansion at that time, at least none that had been officially announced. That news broke in a press release dated May 19th. She was also right that the distillery was operating at maximum capacity. But the bottlenecks in production were in areas other than the still, so the still itself wasn’t operating at maximum capacity.

Buffalo Trace had already been ramping up production over the last six years. Whiskey supplies have been tight all around for several years, but Buffalo Trace seemed to hit a particularly rough patch with supply issues around 2014. Since most of their whiskey averages about six years of aging, I think it’s safe to assume that they cut production more than their competitors did in response to the 2008 financial crisis. Demand didn’t drop as expected and the chickens came home to roost six years later. They’ve been playing catch-up ever since.

Once they cranked production up as far as they could, warehouse space became an issue. Many of the warehouses on the distillery site had been converted to other uses when the industry cratered in the 1980’s. The eight warehouses that remained active (well, some may have been empty for a while, but they weren’t converted for other uses) were B, C, D, H, I, K, L, and M. They have a combined capacity of a little over 281,000 barrels.



In July of 2015, Buffalo Trace announced the opening of their new, high-tech, $20 million distribution center. This freed up three former warehouses, N, O and P, which were being used for finished goods storage. Four other warehouses, R, S, T and U, which had been sold off and converted to offices, were also recently reclaimed. Those seven warehouses each hold about 50,000 barrels, for a total capacity of 350,000 barrels. Three of those seven warehouses are already full and the other four won’t be far behind.

The big news in the May 19th press release was that Buffalo Trace was investing another $200 million to expand production. That investment will span seven years and include more equipment for cooking, fermenting and bottling, as well as new warehouses; basically everything except another still.

The warehouses will be built on 200 acres of farmland adjacent to the current distillery campus that was purchased a few years ago. There are plans for 30 more warehouses, with one being built every five months for the next 10 years. There was no mention of their size, but no one really builds small whiskey warehouses these days.

All of that begs the question, “How much capacity do they have with their current still?” Remember from my recent post about the Hard Hat Tour, their column still is one of the biggest in the industry at 84 inches. Figuring out capacity can be a little tricky because there are a few different ways to measure it. Also, some distillers will state their actual current capacity, while others will give a number that is the maximum their still is capable of, even though they don’t have the rest of the equipment to reach that number.

Proof-gallons are probably the most accurate way to state capacity. That is a gallon of distillate at 100 proof (50% alcohol). This standardizes the measurement since different distillers run with different levels of proof coming off the still. In Scotland the equivalent measure is LPA, or liters of pure alcohol. It’s the same thing but with metric volume and adjusted to 100% alcohol. One proof-gallon is roughly 2 LPA, if you want to compare. These are almost always measured on an annual basis.

Capacity can also be stated in barrels filled per day, week or year. This is a popular way to state it on tours because it’s easier for people who don’t work in the industry to relate to the numbers.

Another way to measure capacity is cases per year. This is standardized to 9 liter cases (12 bottles, 750 ml each). I don’t think this method is standardized around a particular bottling strength, e.g. 80 proof or 100 proof. This method is most often used to express the sales volume of a particular brand, but it is sometimes used as a measure of distillery capacity as well.

Poking around on Google, one can find many stories about the new distillery that Diageo is building in Kentucky to support their Bulleit brand. Most of them state the distillery will produce 1.8 million proof-gallons, or 750,000 cases. I’ve seen other sources that equate 1.5 million proof-gallons to 750,000 cases. Barrel production can be converted to proof-gallons if you know the size of the barrel (53 gallons is the Bourbon industry standard) and the barrel entry proof. But if a distiller tells you how many barrels they produce per day, you have to guess at how many days they are actually producing for each year.

In a 2007 interview, Mark Brown, the current president of Sazerac, said the Buffalo Trace distillery was capable of producing 6 million cases a year. That equates to somewhere between 12 million and 14.4 million proof-gallons, depending on which of the numbers in the paragraph above are used.

You could also look at barrels produced per day. That was stated at 800 on the tour. I’m assuming that they run five days a week and that they close down for eight weeks in the summer. That equals 220 production days per year, which gives 176,000 barrels per year. With 53 gallon barrels and spirit entered at 125 proof, you end up with 11.66 million proof-gallons.

It’s documented in the National Register of Historic Places registration form that Buffalo Trace’s annual production peaked at 200,000 barrels in 1973. The production equipment was the same then as it is now; but it’s well know that a lot of distillers used to enter their whiskey into the barrel at lower proofs than they do now. When the industry went through its rough times in the 70’s and 80’s, the accountants figured out that money could be saved with a higher entry proof. More water would be added at bottling, so you’d end up with the same amount of product but have to use fewer barrels to get there. Assuming that the barrel entry proof was 110 back then, 200,000 barrels still gives 11.66 million proof gallons.

So, how much capacity can Buffalo Trace add without bringing in a second still (or upgrading to an even bigger one)? It’s pretty hard to say. Maker’s Mark has three stills, each at 36 inches, but I couldn’t find any solid numbers for their capacity in proof-gallons. Four Roses is going from 4 million proof-gallons to 8 million per year by adding a second still, but I couldn’t find a figure for the diameter of the column still. The numbers that are out there for still diameter and annual proof-gallon capacity seem to be all over the place. I get the impression that some producers would rather add another still than run 24 hours a day, seven days a week.

The best equivalent I could find was Wild Turkey. They went through a massive expansion in 2011, growing from 5 million proof-gallons per year to 11 million. They put in a new column still, but it replaced the old one rather than accompanying it. Its diameter remained the same though, at 60 inches.

The cross sectional area of a column still equates to its production capacity. I’m assuming that the differences caused by the various internal still designs are negligible. The 60 inch still has a cross sectional area of 2826 square inches. For the 84 inch still at Buffalo Trace that number is 5539 square inches. If the 60 inch column is capable of 11 million proof gallons then the 84 inch one should be able to produce 21 million proof gallons.

It’s hard to say if Buffalo Trace will go that far, but we will be able to figure it out in the coming years based on what they add to their fermentation capacity. They have 12 fermenters now and can make about 12 million proof-gallons per year. If the new ones are the same size as the old ones (92,000 gallons), each additional one should give them another million proof-gallons of capacity.

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