Recreational Marijuana Initiatives Make Progress in Election Year

FILED JUNE 29, 2016

2016 is going to be a big year for marijuana (mj) in the US. Four states currently allow recreational marijuana use, Colorado, Washington, Alaska and Oregon. And yesterday, California's Secretary of State's Office greenlit a recreational marijuana initiative. So come November, the state's citizens will vote whether to legalize adults 21 and older to possess, transport and use up to an ounce of weed, and the ability to grow up to six plants, per the LA Times.

But beyond California, there are several other states that could vote on marijuana legislation this fall, per Marijuana Business Daily.

-- States confirmed to vote on recreational mj: Maine and Nevada. According to recent polls, the majority of of voters back the initiatives in both states at 55% and 60%, respectively.

-- States waiting on gov't approval of signatures gathered for recreational mj initiative: Massachusetts and Michigan, which came up short on signatures, but filed a lawsuit to contest.

-- States still gathering signatures for recreational mj initiatives: Arizona and North Dakota.

-- States to vote on medical mj: Florida wants to expand the medical mj system already in place.

-- States waiting on approval of petitions for medical mj: Arkansas (which is one of the few states with two legalization campaigns underway), Missouri and Montana.

-- States still gathering signatures for medical mj: Arkansas and Oklahoma.

Stay tuned, this year could very well be a turning point for the marijuana business if supporters get what they're asking for.

BREXIT UPDATE: FOREIGN EXCHANGE RATES

Following the shocking news of the Brexit last Thursday, various reports have come through speculating the long term implications for the global economy. For the alcohol industry, the largest effect could end up being the foreign exchange rate fluctuations as the pound drops in value against the USD, according to BW166 report*.

The following effects are based on the presumption that the new exchange rates will become the norm:

-- Overall, exports from the UK to the US will be more profitable for UK-based exporters, and Scotch stands to be the biggest potential beneficiary. They are unlikely to reduce price, but incremental margin may be put back into marketing spend.

-- For US-based producers, the UK market will become much less profitable if the pound remains weak. Prices will need to increase or export margins will be reduced.

-- International producers are likely to shift focus to the US and other markets to achieve growth objectives.

And with a strong USD, now's a great time to visit the UK for sales meetings or buy barrels and equipment from Europe.

[*BW166 provides alcoholic beverage data analysis and was created by industry veteran Jon Moramarco in 2014.]

EDDIE RUSSELL ON LIVING UP TO MASTER DISTILLER TITLE

While new distilleries are handing out the title of master distiller like they're Fireball shots at a college bar, Eddie Russell worked under his father's tutelage (hall-of-famer Jimmy Russell) for 34 years at Wild Turkey before he was promoted to master distiller in 2015. Notably, he was already in the Kentucky Bourbon Hall of Fame himself by that point.

This year marks Eddie's 35th anniversary with the company, so on a recent trip to Kentucky your editor took the opportunity to sit down with him to discuss the significance of the title, how the role has changed over time and what he has been working on these days.

Wine & Spirits Daily: What have you been up to this year?

Eddie Russell: This year is a little more traveling for me. Last year, coming out with Master's Keep 17-year-old was my first release as a master distiller, and I'm working on a second one called Master's Keep Decades. It's going to be a 10 to 20-year-old bourbon, non-chill filtered at 104 proof. I actually planned on coming out with it right now. My 35th anniversary was a week ago Sunday [June 5], but we're having a little problem getting the bottles. So we're doing a little bit now, but most will be out in 2017.

So things like that. I'm making a lot of rye right now--which is different than it used to be--and piddling with a few things, trying to come up with something different and neat. We've got some surprises on the horizon, as far as our marketing campaigns that we've been working on this year. It's been super busy.

WSD: Since you mentioned it, I want to talk about how you've seen the role of the master distiller change over time. You mentioned that you're on the road a lot more that you had been in the past.

Eddie: When I was growing up, Booker Noe, and Jimmy and Elmer T. Lee, and Parker Beam were best friends. When I was a kid, nobody knew who they were. They were just making whiskey. And then as our industry was sort of going downhill, Jimmy and Booker, from Jim Beam, were the first two that really got out on the road. I know Freddie [Noe] talks about it the same way I do. They got out, and handshake by handshake, talked to each individual, explaining what our industry was about because people didn't really understand.

For me, growing up, Jimmy and Booker and those guys, they were distillers, "master distiller" was sort of a marketing name [at the time.] But those guys, to me, were real master distillers because they didn't just make the whiskey and pass it off to somebody else. Nowadays, there are people that call themselves master distillers that have never made a drop of whiskey.

WSD: As distillers became part of the marketing, did you feel like you had to learn a whole new skill?

Eddie: I did. I think it was very natural for Jimmy, which was surprising. Growing up, he was a very quiet man around home. He just turns on when he gets in the market. For me, it was a little bit more scary. His advice to me was, "You're the expert. There's nothing they can ask you that you don't know." That made it.

Yes, I would rather just be here making whiskey, but I realize what it means to be out there, what it means to bring people here… and [share] that knowledge that they can take back to the different states they're from. I think any time you meet an Eddie Russell or a Jimmy Russell or a Freddie Noe, or anybody from the distilleries, you get a little piece of them. We're just normal people. We love what we do. We grew up in this industry. I see that that's important.

And I think, not only has our job changed, but our whole consumer. Up until 10 or 12 years ago, 90% of my consumer was an older male. Now, what's growing our industry is that 21-45 year old male and female. My son now started working for us. He's a brand ambassador in Austin, Texas. He's going to try everything, where my consumer 10 or 12 years ago was very brand loyal. That's changed. You have to figure out what your brand is. For us it's easy because Jimmy's been so staunch and doing it the same way his whole life.

WSD: Now that you're on the road and you talk to consumers more often, is there anything that surprises you that you didn't expect to hear from people?

Eddie: Not really. The surprising part was the knowledge they had. Back when I was younger, the number one question you got was: "What's the difference in American whiskey, Scotch whisky, Irish whiskey, and Canadian whisky?" Now it's: "What's your pH levels when you set your fermenters, and what's the temperature of your still?" These young mixologists and young consumers are just--there's so much information.

I think I started seeing [the transition] quicker than a lot of people because I was out on the road. I saw rye growing before it ever really started growing, but as I did more of what we call on-premise...I also saw bartenders that weren't bartending to get out of college, or just mixing whatever they could in a drink. They were making their own bitters, they were making their own flavors. A lot more craft, and they wanted that knowledge.

15 years ago it was a little more about, "What are you doing for me today, [then] I'll promote your product." Now, they really get behind the brand. They understand the brand. I think for Wild Turkey, it's only helped. There is no marketing story that's not true here.

WSD: With the recently completed expansion, how close are you to production capacity?

Eddie: This year, I'm still at probably two-thirds capacity now. Our new distillery is set up to expand even more pretty easily. Really, when we first did it, we were going to go a little further. Then we decided let's just hold on and see. Right now, it wouldn't take me very much to add another nice little expansion to our facility.

WSD: What about bourbon supplies in general? It's in high demand. What is the situation at Wild Turkey?

Eddie: We're definitely growing and working more. We're making more with our new distillery. We're still doing it the way we always did it. We shut down in the summer months because we don't like the whiskey that's made in the hot months of the year, because we don't control the fermentation process.

We've always just made our own whiskey. I think it's a little easier for us because we only have one recipe. We don't have 20 different brands like a lot of distilleries do. The guys that are basically making one product: Maker's Mark, Four Roses, us, we're in a little better shape than like a Buffalo Trace that has a bunch of different brands.

WSD: What do you think about the flavored bourbon trends? Do you think it still has some life left in it, or is it starting to taper off?

Eddie: Well for me, I'm not interested too much in it. Even though Jimmy came out with Wild Turkey Honey Liqueur in 1976, he was by far ahead of everybody. Then I changed it to American Honey in 2006 and it went crazy.

I don't think that's the way for Wild Turkey to go, so I want to do more traditional type stuff. I am interested in barrel finishing. We were doing that back in the '90s. We had a product called Sherry Signature that was finished in a little sherry cask. Back then I couldn't give it away. Nobody wanted it because my consumer was that older guy that wanted his bourbon in a glass. Now, I probably couldn't make enough of it. I am playing around a little bit with that.

I don't know that I want to go back and redo something I did back then. If you look at my dad, he gets so frustrated. If you're putting bourbon and finishing it in a cask, it is really legally not straight bourbon whiskey anymore. Back when I did Sherry's Signature, in little letters down at the bottom it would say, "Kentucky straight bourbon. Finished in a sherry cask." Now, if somebody does it it's, "KENTUCKY STRAIGHT BOURBON" and "finished in a port cask" in little letters.

It makes him mad. For me, it doesn't bother me as much. People eventually are going to figure out what's right, what's wrong, what's good, what's bad.

WSD: Since your father rather famously does not like whiskey older than 12-13 years, I'm curious to know what your stocks are like. Do you have a lot of old bourbon that you're sitting on?

Eddie: I'm getting really low on it. I did have some, but doing the Diamond I did for him, and doing the 17 Year Old Master's Keep, now I'm pretty well wiping most of it pretty clean. For us, we always had a 12-year-old in Japan. People got older whiskey because times weren't as good, and they had excess. A lot of mine went into that 12-year-old, which is now a 13-year-old in Japan...But yeah, I'm getting pretty low right now. The 1998 I did last year, that was only 23 barrels.

WSD: Anything else we forgot to talk about?

Eddie: Not really. For me, it's like I said. I will play around a little more than Jimmy, but I'm not going to change what he's built here. I love this industry and I always have. If you could talk to most of us, we didn't grow up thinking we wanted to work in this industry. It's just like I came here for a summer job. I was the bottom man in the union. Within two or three weeks, I knew it was home for me. That was 35 years ago.

WSD: It's funny how common that scenario is.

Eddie: Well, you talk about it in your blood, which seems crazy to say, but I think there are certain things you're meant to do. Some people are lucky enough that they actually fall into those. Coming here was a summer job. The things I did while I was in the union was the best things that could ever happen to me. I took a relief operator job in the distillery. I had to learn the yeast, I had to learn how to grind the grains, make the mash, run the thermos, run the still. Instead of just knowing one job like everybody else did, I knew every single job from start to finish. I never thought "I'm doing this for later down the road." I was doing it because they gave me 60 cents more on the hour. It was probably one of the best things that ever happened.

WSD: Thank you for your time, Eddie.

WSD BRIEFS:

LITTLE BLACK DRESS WINES ADDS ROSE TO PORTFOLIO. LBD Rose is 54% Gewurztraminer, 23% muscat, 14% chardonnay, 5% zinfandel and 4% other complementary white varietals and bottled at 12.5% abv, per a release. It is available nationwide through Excelsior Wine Company at about $12 a bottle.

2017 WINE & SPIRITS SUMMIT EARLY BIRD PRICING - The Wine & Spirits Daily Summit will be held at the Hotel del Coronado in San Diego Jan 30-31, 2017. Come a couple days early and get special discount pricing to attend the Beer Industry Summit on January 29-30. Register and learn more here.

Until tomorrow,
Emily

"Better days are coming. They are called Saturday and Sunday."

------- Sell Day Calendar ----------
Today's Sell Day: 21
Sell days this month: 22
Sell days this month last year: 22
This month ends on a: Thurs.
This month last year ended on a: Tues.
YTD sell days Over/Under: +1

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