A worker at the Maker's Mark distillery in Loretto, Ky., seals a bottle of bourbon with the brand's trademark red wax. Prompted by increasing demand, Kentucky distillers have stashed away their largest bourbon stockpiles in more than a generation due.
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A worker at the Maker's Mark distillery in Loretto, Ky., seals a bottle of bourbon with the brand's trademark red wax. Prompted by increasing demand, Kentucky distillers have stashed away their largest bourbon stockpiles in more than a generation due.

Bourbon makers say, ‘Bottoms up!’

By Bruce Schreiner

The Associated Press

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LOUISVILLE, Kentucky – Bourbon makers are making a big bet by stashing away their largest stockpiles in more than a generation.

To put it in bartenders’ lingo: Distillers are putting up the tab for millions of rounds of bourbon years before they even are ordered.

The move poses an inherent risk, but hitting the moment right – a big supply meshing with big demand – could mean a serious payday for companies big and small. Missing the target would leave bourbon makers awash with supply and leave future production in question, particularly for craft distilleries that have seen a surge in popularity.

“People keep asking us, ‘When will the bubble burst?’” said Eric Gregory, president of the Kentucky Distillers’ Association.

For most in the business, the answer is not anytime soon.

Large companies are banking on continued international demand from places such as China and a culture in the United States that currently has a taste for bourbon, which has to be aged at least two years in new charred oak barrels.

“We are busier than I ever could have imagined,” said Chris Morris, master distiller at Brown-Forman Corp., producer of Woodford Reserve and Old Forester bourbons.

Kentucky distilleries filled 1.2 million barrels of bourbon in 2013 – the most since 1970, according to the Kentucky Distillers’ Association. Inventory has topped 5 million barrels for the first time since 1977.

“For many, many years, bourbon was considered a Southern gentleman’s drink,” said Jimmy Russell, the longtime master distiller at Wild Turkey. “Now bourbon’s become a worldwide drink.”

The last time the industry spiked production in the 1970s, distillers ended up with a glut when demand went in a tailspin.

Back then, the industry had grown stale and many consumers switched allegiance to vodka, Scotch and other spirits.

“You had the same old brands, you were pretty much on autopilot,” Morris said.

Now, distillers constantly are dabbling with premium small-batch offerings or putting new twists on recipes and flavors and companies are looking to real-time data from the digital world.

Sales trends and developments are tracked in markets worldwide. The numbers are crunched to make the best educated estimate of future consumer demand for a product that takes years to mature.

Straight bourbon ages a minimum of two years, though the average maturity is four years or older. Many popular super-premium brands age six years or longer, which are the toughest to stock in bars, eateries and liquor stores.

“Bourbon as a category is on fire,” said Bill Thomas, a Washington bar owner whose establishments include Jack Rose Dining Saloon. “Every week, there’s stuff that’s out of stock.”

Expansions have occurred at Jim Beam, Evan Williams, Wild Turkey, Maker’s Mark, Buffalo Trace and Woodford Reserve. Global liquor giant Diageo PLC recently announced plans to build a new distillery in Kentucky. Microdistilleries are taking a foothold in the state.

Every drop of bourbon is precious for makers trying to keep up with demand.

“If they had more, they could sell it right now,” said Fred Noe, Jim Beam’s master distiller and descendant of Jacob Beam, who set up his first Kentucky still in 1795.

Exports of bourbon and Tennessee whiskey passed $1 billion for the first time ever in 2013, the Distilled Spirits Council said.

“It’s never been like this in my lifetime,” said Bill Samuels Jr., who retired after a long career as the top executive at Maker’s Mark, the brand started by his parents. “It doesn’t feel like a fad. It feels like a legitimate trend.”