Scraping the (Bourbon) Barrel

Ex-bourbon whiskey casks hold 90% of maturing Scotch. Cost has quadrupled...

THROUGHOUT history people everywhere have used wooden barrels to store anything from salt cod and nails to beer and whisky, writes Tom Bruce-Gardyne for WhiskyInvestDirect.

Scotch distillers, wanting to deepen the spirit's flavour as it aged, at first relied on hand-me-down casks from the wine trade, particularly European oak sherry casks. These were easily available, as the sherry would be shipped from Jerez and bottled in Bristol.

That supply of barrels began drying up when Spain's sherry bodegas started bottling at home and shipping the finish product in the 1920s. But within a decade a new source had emerged in America – bourbon casks. (Learn the difference between casks, butts and hogsheads here.)

Prohibition ended in 1933, the depths of the Great Depression. To stimulate jobs in the cooperage industry once the US began distilling whiskey again, it was decreed that bourbon should be aged in charred oak barrels, made new every time. The resulting surge in production made them cheap as chips once they'd been used, even after shipping across the Atlantic. So the American oak ex-bourbon barrel became the default vessel for Scotch storage.

Obviously no-one in the business would dream of referring to casks as storage – it's all about maturation. What is conceived in the still only becomes Scotch whisky by EU and UK law after three years in the barrel inside a Scottish warehouse. Indeed, the whole ageing process is said to account for perhaps two-thirds of the finished whisky's character.

Now all manner of exotic casks from Caribbean rum barrels to Sauternes casks are used to add value to single malts. Yet Scotch whisky is still over 90% dependent on its American cousin for second-hand wood. And over the last few years the supply has been squeezed as never before. 

The financial crash provoked a slump in bourbon production, with fillings down 25% in 2009 compared to 2007. Yet consumer demand bounced back faster than anticipated, with US sales now rising by a third since 2010. One year later, severe flooding in the oak forests of Missouri meanwhile signalled the start of a severe barrel shortage. This has been compounded by the number of loggers and sawmills who went out of business after the US housing crash of 2007.

All told, this tight supply means the price of an ex-bourbon barrel has quadrupled in a decade according to Bill Lumsden, Glenmorangie's head of whisky creation. Leonard Russell, MD of Ian Macleod Distillers, puts costs as high as £150, and describes the wood shortage as a real crisis. To secure good sherry casks he's had to have them specially built in Spain at £1,000 a pop. Meanwhile Diageo have been extending the life of their casks in a process known as 'de-char, re-char' at their brand new, state-of-the-art cooperage in Fife.

While the big Scotch distillers have long-term contracts with their barrel suppliers, the new generation of craft distillers on both sides of the Atlantic have no such luxury. There has also been talk of American distillers relaxing the rules on using new barrels only once. Given what that would do to Scotch, one can see the attraction for them.

It makes a nice conspiracy theory, but it seems unlikely, since it might damage the image of bourbon whose big players almost get their oak for free anyway, by passing the costs down the food chain.

Still, the changing bourbon barrel market has prompted the Scots to seek out new supplies from the wine trade, and also to use what they already have as much as possible. If maturation times are being cut to free up the barrels, it may partly explain the surge in NAS (non age-statement) whiskies, particularly single malts.