The current national farm bill, a once-every-five-year piece of legislation that includes a hodgepodge of agricultural and nutrition policy, is set to expire at the end of September. Jason Meyer, executive director of the White Oak Initiative (WOI), is hoping the legislators working on the new bill are bourbon drinkers.
“Our hope is that our elected officials will remember landowners and the forest products industry as they sip their bourbon and include financial resources through programs that will directly support the long-term sustainability of the white oak,” he said.
High demand for white oak, the dominant wood used to age bourbon, has experts like Meyer sounding the alarm on a looming shortage that has been exacerbated by labor shortages, climate change, renovation frenzies during the pandemic, and of course a high demand for bourbon.
The shortage is slow-moving: experts have warned of the impacts on the bourbon industry for years. But just like agave sustainability innovations have emerged out of increased demand for products like tequila and mezcal, the bourbon boom is continually forcing more brands to address the issue. For some, that means backing the WOI’s goal to restore the sustainability of white oak forests. Other companies are forced to treat bourbon barrels as precious resources while diversifying their whisky offerings. For some, the shortage has meant inventing new technology to change the way bourbon is aged.
Bourbon Boom Tests Future Supply
In Kentucky alone the number of bourbon barrels reached a record 11.4 million last year, according to the Kentucky Distillers’ Association (KDA), and production has jumped 475% since 1999. The state’s aging bourbon inventory has more than tripled during that time, while the tax-assessed value of all barrels is now $5.2 billion, a $780 million increase over 2021. That reflects a growing share of bourbon in the U.S. whiskey market: In 2016, bourbon held 26% volume share of the whiskey market in the U.S and by 2021 grew to a 30% share, according to the IWSR Drinks Market Analysis.
That boom is expected to put pressure on white oak. With few exceptions, oak is the only wood used for aging spirits and while the law does not specify that it must be white oak, it’s the wood of choice. To be considered bourbon, aging must occur for at least two years in a brand new charred oak container. The cell structure of white oak prevents leakage, and it directly influences the color and taste of the bourbon, imparting on the liquid those sweet caramel and vanilla flavors. Beyond that, new and used white oak barrels are used for aging beer, wine, rum, and a number of other beverages.
But other industries are also white oak-dependent. The wood is a popular choice for furniture, flooring, cabinetry, trim, and boats. Nevertheless, bourbon rules: in Kentucky, white oak makes an $8 billion annual impact, 75% of which is generated by the distilling industry, the WOI estimates.
The bourbon industry as a whole accounts for roughly 10% of the American white oak harvested annually, according to Bindiya Vakil, CEO and co-founder of Resilinc, which provides supply-chain resiliency and risk management services. But currently, she added, the demand for bourbon far outpaces the production of white oak and oak barrels.
Supply Chain Issues Heat Up
Some supply chain issues, like port congestion and packaging shortages are quick to arise, others are slow-moving and more difficult to solve.
“The looming white oak shortage is the latter,” Vakil said.
The supply of white oak is currently plentiful, but because it’s not harvested until trees reach 80 to 100 years old, the importance of long-term sustainability and planning is essential. About 75% of all white oak acres across the eastern U.S. can be classified as mature from an economic or reproductive perspective, while the populations of young white oak trees are limited, according to the WOI.
But the solution isn’t just to plant more trees: proper forest management to plan for essential sunlight and protection from non-native species is essential for new white oaks to survive. In most cases, oak regeneration will not succeed until the right conditions are achieved. Under the farm bill money is allocated to programs that assist private landowners with forest management: Meyer is hoping white oak management will fall under the Natural Resources Conservation Service’s (NRCS) Environmental Quality Incentives Program (EQIP) which provides cost-share dollars to landowners managing their forests.
Other issues have become driving forces of the shortage too. Extreme weather from climate change is expected to impact forest composition. White oak’s popularity as a construction material is at an all-time high, and the uptick in pricing reflects that. The demand was also exacerbated by the supply chain issues and the renovation frenzies spurred by the pandemic, according to Vakil. Labor shortages, as loggers became scarce during the pandemic, also complicated what is already an inherently complex supply chain from forest to barrel.
The barrel process begins at white oak forests, which have a fragmented ownership base between small and large owners. To get to a distiller, loggers first buy trees from those landowners, then sell to sawmills. After the wood is processed into staves and barrel headings, sawmills sell to cooperages that manufacture barrels.
Prices across that chain have increased for years — after the 2008 housing crisis, hundreds of logging companies shut down, along with 40% of the country’s independent stave mills. The panic and actual squeeze on supply made barrel-quality logs and barrels go up in price. Again last year, compounded by the pandemic’s supply chain problems, independent distillers found themselves paying more and ordering extra inventory to compete with major spirit brands who had larger contracts with copperages, which were struggling to keep up with demand.
Challenges Stir Innovation
As a medium size craft producer, Los Angeles-based Broken Barrel Whiskey monitors the aged whiskey markets more closely than it does new barrels.
“But it’s clear there that barrel costs have risen exponentially if you track prices of new barrels over the last five years,” said Seth Benhaim, CEO.
The company produces over 15,000 9L cases of whiskey, often finished in untraditional barrel types, including an award-winning Kentucky finished cask-strength bourbon. Thousands more barrels are aging. By sourcing from multiple distilleries and suppliers for materials across the country, Benhaim says the brand has more freedom and less reliance than a standalone distillery that might have limitations if they don’t source from outside their own stocks or whiskey. But his suppliers of the aged whiskey do pass costs on, and new bourbon barrels are costing at least $100 more than they did just six months to a year ago.
To innovate, Broken Barrel has relied more on American whiskey, particularly types of whiskey that do not require new white oak but could have been aged in used bourbon or other kinds of barrels. Their Americana and Rare Americana whiskey lines feature whiskey that was aged in used barrels.
“As a result our customers are always on the lookout for our next unique offering or limited edition release which often exclude bourbon and opt for more differentiated whiskey types and finishes,” he said.
Major bourbon brands are shoring up supply in other ways. Brown-Forman, whose portfolio includes bourbon brands like Woodford Reserve and Old Forester, is the only major spirits company in the U.S. that produces its own barrels. It has also partnered with the WOI, as have Beam Suntory and Sazerac, joining major stave provider Independent Stave Company, state government agencies, conservation organizations, and educational institutions.
The WOI just initiated a large-scale approach to working with local, on-the-ground partners to educate and support landowners and forest practitioners like foresters and loggers about the variety of ways that properties can be managed to ensure a healthy population of white oak in the future. Its goal is to reach 100 million acres of well-balanced oak resources by 2070. Funding through the farm bill could assist private landowners, who otherwise would have to spend money out of their own pockets to conduct management efforts that they won’t see financial returns from until the oaks are ready for harvest.
“With the megaphone that the spirits industry holds, we can increase awareness and advocate about this issue to both the general public and our government representatives, especially those who are negotiating the Farm Bill right now,” Meyer said.
Leaders of major whiskey companies have publicly spoken about the topic before, but Sazerac, Beam Suntory and Woodford Reserve all declined to be interviewed for this story.
Meanwhile Chad Slagle, founder and COO of Two Trees Distilling, has taken a different approach to barrel sustainability. The company’s proprietary technology ages whiskey fast (hours compared to years), and uses less than 10% of the wood typically required to age bourbon in the company’s barrels it produces on site in Fletcher, North Carolina. The technology involved a nine-year patent process and uses an electrical current.
“There are other ways, we don’t have to have the blinders on and stick to traditional barrels,” he said.
The bourbon Two Trees produces— a few SKUs out of 16 of its own lines, as well as product for other brands — still utilizes new charred white oak containment. The company is just starting to innovate aging technology for tequila, another rapidly growing category. For other beverage aging, Slagle said the company can even use tree trimmings to create the barrels versus cutting the entire tree. In 2021, the company began offering its services for other brands, advertising the process as a method to reduce their carbon footprint.
The attempt to speed up aging is nothing new for distilled spirits, companies like Lost Spirit Distillery and Bespoken Spirits have also tinkered with aging technology, sometimes to the skepticism of purists. But much of those developments have been framed under innovation, a way to bring products to market faster or create interesting flavors. Now, with the high prices of source material and companies launching new carbon-reduction plans every day, Slagle is banking that an industry built on tradition may begin to adapt. He is on the Distilled Spirits Council of the U.S. (DISCUS) sustainability committee, and said that leaders of the advocacy organization have warmed up to Two Trees Distilling’s work as one of many steps forward to mitigate the shortage.
“We are not saying we have the solution to this problem, but instead we want to be a resource for others to use to help slow down the deforestation of white oak, to give the forests time to regenerate while still allowing spirit companies to produce amazing, wood crafted spirits,” he said.