| WASHINGTON, March 18
WASHINGTON, March 18 If anyone should find it
odd that a Japanese distillery was planning to merge with a U.S.
bourbon brand steeped in the history of the American South, the
answer could be found on a cocktail menu.
Suntory Pacific Ltd won U.S. antitrust approval
this month to buy Jim Beam, the No. 4 premium spirits company in
the world, just as the liquor known as "America's whiskey" is
enjoying a surge in U.S. interest -- and sales.
Prices for bourbon, a type of whiskey distilled from at
least 51 percent corn, have risen faster than inflation in the
United States for years. Analysts believe prices will increase
from 3 percent to 10 percent annually over the next three to
This is partially because bourbon, which by law must be
produced in the United States, must be aged typically for two to
nine years but sometimes for longer. That makes a sudden ramping
up of production impossible even if demand rises.
Higher corn prices in recent years raised production
costs, although the impact varied depending on how companies
sourced their supplies. Jim Beam's website says its bourbon is
made of "at least 51 percent" corn, mixed with yeast and smaller
amounts of barley, malt and rye.
Beverage industry analysts said Suntory's $16 billion deal
for Beam Inc. won't by itself make pricing worse.
American consumers have lately regained interest in
cocktails, translating to sales for spirits such as bourbon.
Bourbon makers sold 6.8 percent more in 2013 than in 2012 in
the United States, with revenue jumping 10.2 percent to $2.4
billion, according to the Distilled Spirits Council of the
United States. About 18 million 9-liter cases of bourbon were
sold in 2013.
Premium and super-premium spirits saw the biggest increases.
The most expensive bourbon, also the hardest to find, was Pappy
Van Winkle's Family Reserve from Sazerac Co Inc. A 70-centiliter
bottle of the 23-year-old Kentucky whiskey goes for $500 or
more, and prices are higher on the secondary market.
Sales of cheaper spirits fell in 2013 but sales of high-end
brands rose by 7.2 percent and sales of super-premium products
rose by 6.3 percent, said the council.
CRAFT LEADS TO CACHET
Just as interest and sales of craft beer rose even when
major breweries consolidated over the past decade, craft bourbon
took off despite the rise of behemoth spirits distributors.
Though the term craft is associated with an artisanal touch,
no legal definition exists and some bigger companies disagree
that small whiskey makers take more care with their products.
The American Craft Distillers Association, however, limits
membership to distilleries that sell about 42,000 cases or fewer
Craft bourbons, while maybe 1 percent of the market, give
the drink a cachet that touches even a brand name like Jim Beam.
Some of the better-known craft distilleries include Garrison
Brothers in Texas; Prichard's in Tennessee, and Willett in
Beam's stable includes small-batch labels such as Knob
Creek, Booker's and Basil Hayden's.
The growth in the number of distilleries came after years of
little interest in whiskeys and bourbons that led dozens of
producers to shut down, said Tom Fischer, host of an online
television show and website, Bourbonblog.com.
"There about 400 to 500 craft distilleries that are on the
map right now. We just see them popping up everywhere," said
Fischer. "We're seeing it more and more with the cocktail
culture. When I started this blog about 10 years ago, people
were a little into bourbon and now they're crazy into bourbon.
It's just going to grow."
WHEN CONGLOMERATES COLLIDE
Jim Beam as a brand began when corn farmer Jacob Beam
distilled his first whiskey in 1795 in Bullitt County, Kentucky,
where it is still made.
Beam Inc, its holding company, was part of Fortune Brands
until 2011. The global vodka, tequila and whiskey powerhouse is
headquartered near Chicago and is the second-biggest in sales in
the United States.
Like Suntory, Beam grew largely by acquisition. In 2005, it
bought Mexico's Sauza tequila company; Laphroaig single malt
Scotch whisky; premium Kentucky bourbon Maker's Mark, and other
Suntory was founded in 1899 when store owner Shinjiro Torii
decided to make wine. It has a large stable of alcoholic brands,
among them the vivid-green, melon-flavored liqueur Midori.
Acquiring Beam would make Suntory the third-largest
distiller globally, after Diageo Plc of Britain and
Pernod Ricard of France. The Suntory-Beam merger,
which was announced in January, would give Suntory about 11
percent of the U.S. market, up from just one percent.
Suntory, which won U.S. approval for the deal on March 5,
is awaiting approval from the European Union. The merger was
expected to close in April.