How Bourbon Barrels Went from Rubbish to Valued Resource

Pretentious mixologists at overpriced bars the world over will tell you that every glass of booze has a story to tell – usually to justify charging $12 for a gin and tonic. But in one case, they are correct, and the story is particularly inspiring. This is the case of bourbon. There are incredibly specific constraints to what qualifies as bourbon.

From what we know, the evolution of bourbon took place primarily between the 1820’s and the 1870’s. Small distillers, many of Scottish heritage, experimented with replicating whiskey with corn as the base of the mash, instead of more traditional grains like barley and wheat. These early experiments led to improvements in taste and quality, though few of them would be recognized as bourbon today. This may not be because they are inherently different spirits, but because today there are incredibly specific constraints to what qualifies as bourbon.

According to the Federal Standards of Identity for Distilled Spirits, bourbon made for US consumption must fit narrow criteria. It must be made in the United States, the mash must consist of at least 51% corn, it must be distilled to at least 80 proof, and it must be aged in an unused, charred white oak barrel.

It is this last requirement that is the crux of our tale of heroism.

From Trash to Treasure

For over 100 years, bourbon barrels were used for multiple batches. One barrel can age at least three batches of bourbon before the structural integrity of the barrel is compromised. Reusing barrels kept costs down and prevents the waste of wood, metal, and other resources. Barely-used barrels, rendered unsuitable for production, become waste where they had once been valuable.

Forcing distillers to use one barrel per batch destroys the value of the resource. Distillers were left with few options for what to do with all of those barrels. While some larger distilleries had the option of cycling into production for the European market, which does not require barrels to be unused, small distillers simply did not have that option.

Then entrepreneurs like Matt Jamie stepped in. Jamie, an entrepreneur with a chef’s background, was inspired to find inventive uses for bourbon barrels that were going to waste, and thus no longer creating value in his home-state of Kentucky.

Currently, there are more barrels of bourbon aging in Kentucky than there are people in the state. That level of production created a lot of waste. When Jamie founded Bourbon Barrel Foods in 2006, barrels were basically free. This created a unique opportunity for low-cost experimentation, which Jamie and other bourbon-barrel entrepreneurs seized.

Today, Jamie’s company Bourbon Barrel Foods creates 34 products, most notably their Bluegrass Soy Sauce. Bluegrass is the only American-made micro-brewed soy sauce, and it’s fermented in used Woodford Reserve bourbon barrels. While this seems like an odd pairing, Bluegrass has elevated soy sauce to great heights when compared with the watered-down Kikkoman that arrives in plastic pouches from your local takeout restaurant. Chefs describe Bluegrass Soy Sauce as deeply umami and capable of enhancing food in a way that commercial soy sauces just can’t. The culinary South has truly embraced Bluegrass, and it is used by celebrity chefs in kitchens across the country.

Bourbon-Flavored Everything

Matt Jamie is not the only entrepreneur in this game. In fact, bourbon flavoring is almost as ubiquitous in the South as pumpkin spice is in the fall. Because bourbon barrels absorb about 25 pounds of bourbon in their first batch, they can impart their deep, smoky sweetness to all sorts of products. This includes spices, salts, sugars, liquor, coffee beans, and sauces.

Bourbon flavors have become especially present in desserts, including bourbon-aged caramels and bourbon vanilla. My favorite distillery, St. Augustine Distillery Co., recently partnered with a local coffee bean roaster to create barrel-aged coffee beans.

Now, bourbon barrels, which the government effectually reduced to waste, are creating value for millions of consumers by enhancing the products they already love. Simultaneously, new demand for bourbon creator’s secondary product has lowered the price of bourbon from previously inflated levels experienced when barrels were relegated as waste. Leave it to the market to create value from waste.

The story of bourbon barrel entrepreneurship is a parable for all those who love the free market and believe in human innovation. It shows how government intervention can burden an industry, but it also shows that there will always be people who can create value from waste. It shows that entrepreneurs look at limits and smirk, then quietly find a way around them.

Tricia Beck-Peter is the Outreach Associate of the Foundation for Economic Education (FEE). She is a graduate of Flagler College, with a B.A. in Economics and a minor in International Studies.

Source: FEE

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The views expressed on austriancenter.com are not necessarily those of the Austrian Economics Center.

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