Bourbon Empire (13 page)

Many modern distilleries claim they use pot stills but are actually using hybrid stills, equipment shaped like a pot still at the bottom but possessing a small rectification column on top. In marketing, the pot still’s old-fashioned, romantic appeal is emphasized, but the column portion of the hybrid equipment allows distilleries the benefits of the modern technology, which is ultimately best for the whiskey (or any type of spirit). In the scotch world, the romance around pot stills is far more extreme than in America, and often plays a major role in brand marketing. Nevertheless, Jim McEwan, master distiller of Bruichladdich, a Scottish distillery that uses pot stills, once admitted to a reporter from the
New Yorker
that much of the marketing arguing for the superiority of one kind of still over another was little more than “a kind of fairy story.” What really mattered in terms of the quality and flavor wasn’t the equipment as much as it was “the artisanal skills of the whiskymaker,” he said.
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Ultimately, the final judgment of a whiskey depends on one simple question: how does it taste?

During the Gilded Age, many distilleries dispensed with the kind of “artisanal skills” referred to by McEwan and used their column stills to make extremely high-proof spirits, which are more profitable because they can be stretched further. The quality of their whiskies varied
greatly. In some cases the flavorless neutral spirits were mixed with a small amount of aged whiskey to add aroma and character, producing a kind of pale echo of something better. Burnt sugar, prune juice, or other additives gave these whiskies color and sweetness—they were relatively harmless, if not exactly tasty. In the worst cases, ingredients like sulfuric acid or sulfate of ammonia—two items commonly found today in insecticides and bombs—were added in an attempt to mimic the effects of proper aging. Distilling manuals of the era that described how to make charlatan whiskies sold well. Pierre Lacour’s
The Manufacture of Liquors, Wines, and Cordials without the Aid of Distillation,
published in 1863,
advised rectifiers to make “Old Bourbon Whiskey” by mixing four gallons of neutral spirits with three pounds of sugar, one pint of decoction of tea, oil of wintergreen, tincture made with cochineal (a red dye made from the crushed and dried bodies of insects), and burnt sugar. The whiskey probably wasn’t good, but it was profitable.

 • • • 

Whiskey flavored with harmful additives and insect parts seems a perfect reflection of Gilded Age politics and business. Eventually, some of those lobbying the corridors of power lobbied on behalf of bourbon for changes to government regulations that would improve the spirit’s quality.

Kentucky Democrat John Carlisle wasn’t a particularly good poker player, but he did play cards with presidents and congressmen, meaning that whatever he lost at the table he often recouped by gaining legislative support for the whiskey industry. Serving in both the House and Senate and as treasury secretary, Carlisle, over a thirty-year career, lobbied for changes that improved whiskey by altering tax codes. This allowed distillers to age their product longer and not have to pay as much tax on spirits that evaporated during the maturation process. Drinkers no doubt appreciated his measure but Republicans, who enjoyed increased support from the temperance movement after the war, began using liquor for political attacks. They called whiskey the “national beverage” of Democrats. The term “Bourbon Democrat” drew on the word’s old
political meaning, rather than as a drink, to mock conservative but classically liberal Democrats such as Carlisle, Grover Cleveland, and a very young Woodrow Wilson—in Louisiana, the term was primarily used to associate Democrats with old-fashioned thinking, linking them with royalists who had opposed the French Revolution nearly a century earlier. A valuable marketing tool on one hand, a political insult on the other, the word “bourbon” was again proving that its protean nature endured.

As federal regulations began growing around the spirits industry, Carlisle and politicians from other whiskey strongholds, such as Pennsylvania senator James Cameron, ensured that their states fared well. In 1879, Carlisle lobbied to increase the bonding period on spirits—the amount of time whiskey can sit and age before it is taxed—from one to three years, which gave distillers an incentive to age their whiskey longer because they wouldn’t have to pay taxes on the evaporated portion. Considering the smoldering fallout from the Whiskey Ring scandal a few years earlier, it was a significant achievement. Then, in 1894, the bonding period was extended to eight years, giving most bourbon the time needed to find its sweet spot.

The whiskey industry and government were setting important precedents by learning how to work together, but missteps invariably occurred. For instance, whenever Congress raised taxes on whiskey, it never made the tax increases retroactive for spirits already aging in bonding warehouses, a move supported by distillers. If rumors of a looming tax increase drifted out of Washington, distillers responded by drastically boosting output to get whiskey into storage and take advantage of the old tax rate. The result was vast whiskey surpluses that far outstripped demand. When the bonding period ended and the tax was due, distillers were forced to sell at a loss or go out of business if the market wasn’t in a good mood. When prices went back up, entrepreneurs rushed back into the business, exacerbating an impulsive cycle.

The precarious supply gluts were aggravated on the trading floor. Almost every major newspaper in the country covered the whiskey industry in detail and the
Wall Street Journal
reported whiskey prices
daily, the same as for coal, steel, and pork bellies. In 1883, almost half the whiskey in Kentucky was actually owned by bankers in Boston, New York, and Cincinnati who purchased bonded whiskey receipts from distillers for immediate cash, giving distillers another reason to boost production without considering demand constraints. As a result, whiskey in storage went from about fourteen million gallons in 1879 to ninety million in 1882, almost six times the estimated amount people were actually drinking. The huge gluts caused volatile price drops, prompting banks to lobby for increases to the bonding period to protect their investments in what they called “Kentucky gold.” In 1883, the House Ways and Means Committee supported the proposal, but the Senate rejected it (the measure wouldn’t get approval for another decade). Angry at the government’s failure to increase the whiskey bonding period, one banker made a “too big to fail” case for the banks, claiming that Washington’s insistence on getting its “pound of flesh” would “ruin many banks, and incidentally cripple every branch of industry and every line of trade,” he told the
Boston Daily Globe
.

Some drinkers might think that price swings aren’t a bad thing, especially if they occasionally translate into cheap whiskey. But what if parts of the industry fold as a result of the volatility? Distilling was a huge industry spread throughout the country, woven into many different parts of the economy. Wherever distilleries opened, other businesses bloomed, such as cattle-feeding operations utilizing the distilleries’ spent mash. Shocks to the whiskey trade amplified other regional economic woes subject to a fickle Gilded Age economy that was prone to drastic and repeated recessions.

Chaotic boom-and-bust cycles made the whiskey trade a huge gamble, but the payoff was worth the risk. Whiskey made up close to 70 percent of America’s alcohol business in the decades after the Civil War. Beer, enjoyed by a midcentury influx of German immigrants, was gaining in popularity but still didn’t quite match whiskey sales (beer consumption increased fourfold between 1880 and 1913, the year when it finally edged out whiskey in popularity). Like any good gamblers,
distillers looked for ways to improve their chances. This required bringing order to the industry, which in true Gilded Age fashion meant price fixing and blocking competition by any means necessary. It meant forming a cartel.

 • • • 

After Standard Oil Company founder John D. Rockefeller became the richest man in the world, he offered gardening advice to a group of young men at a Brown University Bible study. He told his admiring audience, “The American Beauty Rose can be produced in the splendor and fragrance which bring cheer to its beholder only by sacrificing the early buds which grow up around it. This is not an evil tendency in business. It is merely the working-out of a law of nature and a law of God.”

Rockefeller's audacious winner-take-all metaphor about the American Beauty rose was a description of how Standard Oil had bested its competitors. The clumsy reference to God at the end of the remarks was a meager attempt to morally sanction the ideas of philosopher Herbert Spencer, who had recently seduced the robber baron community by adapting scientific ideas like “survival of the fittest” into a loose form of Social Darwinism that defined Gilded Age business.

So when a few powerful whiskey distillers decided to organize their own cartel in 1887, it surprised nobody when they modeled themselves directly after the most successful monopoly in the world: Rockefeller’s Standard Oil trust, which had been formed five years earlier. The Whiskey Trust, officially known as the Distillers and Cattle Feeders Trust, copied Standard Oil’s charter almost word for word. (Standard’s business model of creating a monopoly wasn’t yet technically illegal, but would be the impetus behind the Sherman Antitrust Act that was passed in 1890 to make it so.)

Reporters soon gave the Whiskey Trust a nickname: “the Octopus.”
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At its helm was Joseph B. Greenhut, the biggest distiller in America during the Gilded Age. Today, Greenhut’s legacy stands in stark contrast to his counterparts in the beer world—names like Anheuser, Pabst, Busch, and Schlitz—which still grace countless neon signs in bars and ballparks. Greenhut’s name, in contrast, is nearly forgotten, partly because he defined a whiskey industry far different from that of today. The big names in modern American whiskey—Beam, Samuels, Daniel—were relatively small during Greenhut’s era, gaining prominence only after sweeping regulations enacted in the twentieth century would enable their rise. Jim Beam’s home in Bardstown, Kentucky—which remains in the family—was a humble affair. Greenhut’s home in Peoria, Illinois, however, was a thirty-five-room mansion graced with turrets and a glass conservatory. In 1899, he entertained President William McKinley there, and in 1916 he lent another of his homes at the New Jersey shore to Woodrow Wilson to use as a summer White House. Today, his Peoria mansion, at the end of High Street at Sheridan Road, has been converted into condos that look like they could use a little maintenance.

But in his time, Greenhut was a giant whose importance was evident to anyone standing near him. He was handsome, with a bulldog’s stout build and the kind of bushy mustache you might find on a Prussian field marshal. People turned in his wake when he walked into a room, and he avoided making small talk and apologies. Born in Austria in 1843, Greenhut had immigrated to Chicago with his family in 1852. As a teenager he traveled to Mobile, Alabama, to find work as a coppersmith, a profession that led many people into the whiskey business for their ability to work on stills. A highly decorated Civil War veteran, he landed back in Chicago after the war but eventually struck out for Peoria in 1878.

Not only was the Peoria that Greenhut arrived in a whiskey town, it was
the
whiskey town. Between the Civil War and Prohibition, Peoria made more spirits than any other place in the United States. The city was the largest purchaser of corn in the world and produced 185,000
gallons of spirits per day
,
contributing more alcohol-related taxes to the government than any other place in the country (next in line were Chicago and Cincinnati, the other two biggest distilling centers). Peoria’s former primacy, however, was quietly forgotten after the whiskey industry later consolidated in Kentucky and Tennessee, the winners that ultimately got to write history. Much to Peoria’s chagrin, the city could never quite capture the same reputation as Kentucky, a perceived slight that various writers periodically tried to correct with frustrated editorials in trade magazines like
Bonfort’s Wine and Spirit Circular
. Nevertheless, Peoria was once America’s spirits capital, and Greenhut was its king.

In 1881, Greenhut founded the Great Western Distillery. It was the polar opposite of the kind of farm-based outfit Thomas Jefferson would have championed, the no-nonsense predecessor of a future corporate age where every detail was scrutinized. At Great Western decimal points were taken out a few notches and consultants specializing in matters like fermentation were brought in from as far away as Japan. Whereas the average distiller of the time coaxed around 4.24 gallons of alcohol from a bushel of grain, Greenhut knew that his operations were getting 4.535 gallons per bushel, that tiny extra fraction translating into more additional yearly income for him than smaller distillers might earn in a lifetime.

Greenhut corralled together sixty-five distilleries and some eighty industrial alcohol plants spread throughout the country to form the Whiskey Trust. These outfits were largely responsible for making industrial alcohol and the kind of grain neutral spirits many rectifiers and blenders used as a base to make their whiskey brands.
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Each distillery that joined agreed to turn control of its business over to nine trustees. If a distillery refused to join, the trust lowered prices to undercut its business and force it in. Once the rebel holdout was brought into the fold, the trust would increase prices, which it controlled by offering rebates to wholesalers who agreed not to carry competing brands. Straight
bourbon and rye producers—those generally making a quality, unrectified product—were explicitly excluded, which put them at loggerheads with the trust because their straight whiskies would be in direct competition. Insufficient labeling and trademark laws also made it difficult for customers to know exactly what they were buying, giving the trust and the companies it supplied with cheap imitations a distinct advantage with their invariably lower prices.