Press-Republican

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March 31, 2014

Whiskey debate divides distillers

(Continued)

The 2013 rule defining Tennessee whiskey concerns another major player in the distilled spirits industry, Diageo, the London-based parent company of brands ranging from Smirnoff vodka to Baileys to Guinness. Diageo has two products in the mix: George Dickel, the second-largest producer of Tennessee whiskey, headquartered just a few miles up the road from Jack Daniel's, and Johnnie Walker, the best-selling blended Scotch whisky.

Diageo has positioned itself as the defender of the small distilleries, standing up for the right to make Tennessee whiskey by other methods, even though George Dickel uses new oak barrels to ferment its product. They say the year-old law actually excludes a lower-priced Brown-Forman product, Early Times, from calling itself Tennessee whiskey.

"We don't think there should be a law that says this is how we, or anyone else, have to make whiskey," John Lunn, George Dickel's master distiller, said in a statement. Diageo North America executive vice president Guy Smith said the current law "creates an anti-competitive situation that will stifle innovation from skilled Tennessean distillers, both large and small."

Brown-Forman, on the other hand, says Diageo is worried about market share - not George Dickel's, but Johnnie Walker's. Jack Daniel's sales grew 5 percent in 2013, though Johnnie Walker sales were flat.

"They're concerned and they're trying to do what they can to undermine Tennessee whiskey," Lynch said.

Distillers around Tennessee are concerned the year-old rules will prevent them from producing as much whiskey as they could because of a shortage of the new oak barrels. A rainy year in 2013 saturated oak across the eastern United States and made harvesting wood more difficult.

Jack Daniel's has its own cooperage, in Louisville, Ky., and is in the process of opening another plant just outside of Decatur, Ala. But smaller distillers can't always find a reliable supply of barrels. Even if they can, new barrels can cost between $150 and $600 each.

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