Turner Wathen and Jordan Morris, a couple of liquor entrepreneurs, bought five barrels of Trinidad rum.
They developed a process where they would further age that rum in three different casks: rye, port and sherry.
And then they got set to launch a new liquor brand from Louisville with a flavor profile all its own.
That’s pretty much where the train goes off the rails in this story.
Wathen, 36, said he knew something had gone wrong when he visited the facility where his rum was being dumped into the other casks.
“I’m taking photos. Feels cool. Everything is happening,” he said.
But after a while, he starts to think that something is amiss. Workers at the facility start clearing out. And the scale on the holding tank where his rum had been dumped registered much more than five barrels.
Finally, after a couple of minutes, a leader from the facility comes down and asks Wathen and his partner to join them in a conference room upstairs.
It’s a tough market
Rolling Fork Spirits makes Rolling Fork Rum and a funny little product called Fortuitous Union (we’ll get to that in a second.)
Morris and Wathen started the business with a few thousand of their own dollars after being introduced by their wives. Their tale is a hardscrabble one that’s worth repeating — not only on its own merits but also because it’s illustrative of some of the wacky challenges young entrepreneurs face in Kentucky’s signature spirits industry.
If this were Silicon Valley, we’d be talking about two people launching a software company or some phone-powered scooter thing. But this is Kentucky, where booze and beverages are the entrepreneur’s weapon of choice.
And as Morris, Wathen and several other spirits entrepreneurs have convinced me over the years, the liquor business is a frustrating hellscape of a marketplace that only the bravest souls would dare enter. And it’s unfortunate a growing industry that has become key to Kentucky’s identity (and has annual economic output of $8.6 billion, according to a recent study) is so difficult for small companies to navigate.
“I think [spirits are] very important for us because, bourbon in particular is a signature industry, for Kentucky,” said Kaveh Zamanian, founder of Rabbit Hole Distillery, one of the most successful spirits ventures we’ve seen pop up in Louisville in recent years. “It’s spawning a lot of other industries as well, certainly starting with tourism and bringing more people. I think part of it is being able to showcase Kentucky, showcase Louisville and showcase what we have here. It allows others to come in and see the value of what we have.”
That said, Zamanian believes spirits are a “very, very risky” business because of the high cost of entry.
Buildings like the Rabbit Hole’s facility on Jefferson Street are monuments to the type of success a liquor industry entrepreneur can have.
But not all stories have big gleaming payoffs such as those.
The room upstairs
“Why don’t you just tell us what happened,” Wathen asked, speaking to the facility leader who had led him to the room upstairs.
He’d just seen the scales and knew something happened to the rum he and Morris had acquired for their business.
Rolling Fork Spirits isn’t a distiller itself. It doesn’t have a distillery or any type of blending facility. Instead, Wathen and Morris had an idea for a brand of liquor. They bought their rum and hired a Kentucky spirits producer to handle their barrel-aging process.
For legal reasons, Wathen and Morris declined to name that producer for this story. We’ll call them Mixy Corp., because we’re going to need a pseudonym.
Mixy Corp. was assuring them that everything was going to be made right. But the scale keyed Wathen into the fact that their rum had been mixed with something it should not have been.
“What did you blend it with?” Wathen finally asked the Mixy Corp. leader after going around and around a while.
He was at Mixy Corp. with a silent partner overseeing the barreling process. Morris wasn’t there that day but was informed later by phone.
“At this point, our Trinidad rum is now ruined,” Wathen said. “Our formulated processes is now out the window.”
It was a Wednesday. They decided to drink on it.
Hard market to predict
Morris and Wathen told me this story over a couple of cocktails one August afternoon at The Limbo, a tiki bar near the corner of Fourth and Chestnut streets in downtown Louisville. To get the full effect, I ordered a Three Dots & A Dash, a cocktail that includes Rolling Fork’s 4-year-old rum and came served in a green glass that was shaped like a fish.
Tiki bars are having a cultural moment — a resurgence of relevance that has brought them back into the nightlife scene. That resurgence factored into Rolling Fork’s plans to launch a rum brand.
Here in Louisville, we’re always talking about bourbon and rye. But that market is so competitive that a small entrepreneur is hard-pressed to find traction there anymore.
“I mean, it’s a bloodbath,” said Morris, 34, an attorney by trade. “And I don’t have anything that I can do better than the establishment.”
With that in mind, the spirits entrepreneur has to find a product that can gain traction elsewhere. And that’s difficult because alcoholic beverage consumers can be unpredictable.
In the mid-2000s, vodka was hot. Then bourbon got huge. Gin seemed to be everywhere last year. And then, over the summer, hard seltzer went on a rocket ride that surely no one expected.
Rum hasn’t had a huge resurgence but, they thought, it might be due.
The rise in popularity of bourbon already proved that consumers wanted aged spirits with a distinctive flavor, Morris said. The tiki bar scene only added to that.
But they didn’t have rum anymore. They had rum mixed with rye whiskey, courtesy of the folks at Mixy Corp.
Mid-week magic
It was a Wednesday afternoon when Morris and Wathen learned about what had happened to their rum. Sitting in the upstairs room, Wathen went back and forth with Mixy Corp. officials about how to handle the situation.
Finally, Wathen said, they decided that the best course was to take some samples of the accidental blend home to taste. They’d come back Friday and talk about it more.
Morris had already gone into “lawyer mode,” trying to figure out how much the rum was worth in order to determine damages. He figured if they sued Mixy Corp., any judge would probably give them an easy win.
The two were already financially invested in launching a rum brand. Wathen estimates that they were each in for $10,000 to $15,000.
Part of that had been spent on designing labels for a rum brand that, after that Wednesday, no longer existed.
But that line of thinking gets cloudy after they try the accidental drink.
“We go in the parking lot and I try it,” said Wathen. “Our other partner tries it. And everyone’s like: “What the F is this? This is good. This is really good. I call Jordan (Morris) and I say: ‘Jordan, this is good.’”
The three of them hop on a text chain and start talking about selling Mixy Corp.’s accidental blend. They came up with the name “Fortuitous Union.” The initials were F.U. — and you can probably fill in the blanks here on the dual meaning.
When they met back up with Mixy Corp. the following Friday, they tell them they don’t want to sue. Instead, they asked the company to make good on the screwup by helping them get the product bottled and out the door quickly.
That didn’t happen.
They eventually became convinced that Mixy Corp. tried the product and wanted to bottle it themselves. A lawsuit was threatened. Morris admits there was at least one profanity-filled phone call between him and Mixy Corp.
I’m glossing over a conflict here for the sake of brevity, but they eventually got the product released and into the hands of another bottler, who got it ready to sell.
Bold plan, right?
People told them they were idiots.
Hard to make a new product stand out
The fact that there are so many people interested in being spirits entrepreneurs means there are a whole lot of new products out there. More new products means more competition.
Trying to make your product stand out in the midst of all that innovation is tough, many have told me.
“It is an absolute dogfight, every single day,” said Paul Tuell, founder of Ballotin Chocolate Whiskey. “We’re out-resourced and out-muscled in every case.”
Ballotin is another small, Louisville-based brand. Like Rolling Fork, it doesn’t have a distillery of its own but it’s been plugging away out there the last few years, trying to break into the conscience of consumers who are looking for something new.
Gaining access to those consumers in a new competitive marketplace busy with innovations is the most challenging part of having a new brand, Tuell explained.
A new product is a headache for many people in the liquor business, he said.
Regulations keep producers like Tuell or the Rolling Fork duo from selling directly to consumers. Those regulations go back decades.
Following the repeal of Prohibition, regulations were enacted to keep liquor producers from being liquor retailers. In most places in the U.S., producers have to sell to distributors, who then sell to retailers. You’ll often hear this referred to as the three-tiered system.
With that, the liquor distributors are now the gatekeepers — very selective gatekeepers, Tuell said.
The workaround here for small brands like Rolling Fork or Ballotin is events.
Sure, a small liquor entrepreneur can’t sell directly to consumers in most cases, but they can have their product available for tastings, festivals and charity events. Having a consumer walk into a liquor store and ask the owner for a product like Ballotin is a very powerful thing for distributors, Tuell explained. Working these events is how you make that happen.
“It’s almost like the farmers market scene,” he said.
This level of regulation is one more way Kentucky’s signature spirits industry might be harder to break into than signature industries in other states. In addition to the regulations around selling the product, there’s also regulation around how you can market it — which is why Wathen and Morris were called idiots for producing the product they did.
Everyone’s a critic
“You guys are idiots. This doesn’t sell,” Morris remembers being told.
Because of the regulatory environment, you can’t just combine a couple of spirits and put a clever name on it. Regulators have a long list of product classifications, such as rum or whiskey. If your product doesn’t fit into any of those classifications — and Fortuitous Union didn’t — it’s classified as a “distilled spirits specialty.”
“Do you know where the distilled spirits specialty goes in a liquor store?” Wathen asked me as we sat at Limbo, rhetorically of course. “It doesn’t. Nobody wants it.”
Distilled spirits specialty is like the “black mark of death” in the industry, said Morris. Every businessperson they talked to told them it wouldn’t go on a shelf anywhere.
But they made it anyway. Why?
“Because we’re idiots,” Morris said, jokingly.
Actually, it was because they felt like they had a good product and believed they had support from some bartenders they had let try it at tastings.
Since the release, a couple of positive things have happened. For one, they sold it all — 1,698 bottles. And secondly, they’ve heard from people who have liked it.
They said a group called the Houston Bourbon Society, out of Texas, gave them a lot of positive praise.
The company can never replicate Fortuitous Union because of the accidental way in which it came about. But it is planning another release in late summer 2020.
It will be similar in age and composition of rum and rye, but will not be exactly the same as the first batch, Wathen said.
That said, the original run of Fortuitous Union is still available locally. Wathen said it can be found at Mayan Café, 610 Magnolia, Marketplace in Theater Square, Lilly’s and Seviche, for example.
Retailers like Liquor Barn, Party Mart, State Liquors, Total Wine and Spirits, Old Town Liquors and Theater Square Wine and Spirits also carried it for a time, and it could still be available there.
Probably the best sign since launch: Jim Beam Distillery announced a limited-edition bottling of Basil Hayden’s Caribbean Reserve Rye in June 2019. That’s a blend of 8-year-old Kentucky rye whiskey and 4-year-old Canadian rye whisky finished with the addition of Caribbean Black Strap Rum, according to The Bourbon Review.
Imitation is the sincerest form of flattery, as they say.
With all the ups and downs, Wathen and Morris have mixed feeling on whether or not this wild ride has been worth it.
Crowded market is tough for distributors, too
From a distributor’s perspective, it is difficult to sort through all the new products and innovations that are coming to fore.
Pete McLaughlin, executive vice president of Southern Glazer’s Wine & Spirits, which distributes all over Kentucky, can attest to the number of different products coming to market. A company will produce a peanut butter flavored bourbon that consumers love, for instance, then all the sudden there are 10 other companies looking to replicate that.
An executive committee at Southern Glazer’s has a meeting each month to consider and try out new spirits products. Most suppliers present their products with information about their price point, who they see as potential customers and so on. If a price is way too high or way too low, he said, they’ll discuss that with the producers.
He estimated that the company takes on about 80% of the new products that are pitched.
“You just can’t take everything,” he said.
A supplier really needs to have invested in the packaging, point-of-sale displays, social media messaging and so on in order to have an impact.
McLaughlin said he hadn’t heard of Rolling Fork’s rum and rye blend. But he noted that a company offering a mix like that would need to provide information about where it’s going to go in a store (either the rum section or the rye section, according to Morris.)
And it would have to present its vision of how such a product would be consumed. If it’s to go in a cocktail, for instance, what would the recipe look like?
He agreed with Tuell’s assertion that having a liquor store owner ask for a new product is a huge bonus when deciding what to carry.
“That’s a tremendous help. In-store tastings are really important,” he said.
Is it worth it?
Many liquor entrepreneurs left other careers in order to pursue ambitions in the spirits field.
Zamanian spent his career as a clinical psychologist. When he decided to venture into the spirits business, he remembers the reactions he got.
“Yeah, most people thought I was out of my mind. They listened to me and they were very respectful and cordial, but obviously, did not join in,” he said.
Tuell worked for Louisville-based distilling giant Brown-Forman Corp. for most of his career. He liked his time there, but said he doesn’t regret leaving to start his own brand.
“Not even for a second,” he said.
Since launching Ballotin, he said, he’s been able to attract some investors and get distribution in 22 states. He declined to disclose any hard figures, but he said sales are up about 110% during the last 12 months — signifying growth since the company launched in 2015.
“I don’t look back at all,” he said.
Wathen and Morris say their thoughts on being a part of the industry tend to change depending on what’s going on at the moment.
“Every week we think we have [messed] up and we should call it quits,” Wathen said.
The venture is profitable, but they continually put the money they make back into the business. They don’t take a salary from it and both have other jobs.
Morris said they want to keep putting money into buying inventory because if the business does take off, they don’t want to be caught with no supply.
They’ll get frustrated sometimes, but then a retailer will call and praise their product or they’ll get good news about a potential partnership and the business will roll on.
Every so often someone will tell them: “You guys are killing it.”
Morris sighed.
“This is what killing it feels like?”
— Reporter Haley Cawthon contributed to this story.
Kentucky distilling facts
- Kentucky has 68 distilleries as of 2018 – up 250% in the last decade.
- There are 32 counties with at least one distillery. Only 8 had at least one in 2009.
- Bourbon is an $8.6 billion signature industry in Kentucky, generating 20,100 jobs with an annual payroll of $1 billion.
- Kentucky creates 95% of the world’s supply of bourbon.
- Kentucky holds more than a third of all distilling jobs in the U.S., boasting an average salary of $95,000 – up 23% since 2009.
- Kentucky is on pace for record growth by 2020 — more than 24,000 people will owe their paychecks to the distilling industry for a total payroll of $1.2 billion annually and $10 billion in economic output.
- More than $2.3 billion in capital projects have been completed or are planned to be underway by 2022, including new distilleries and aging warehouses to bottling facilities and tourism centers. The next amber wave of investments will create 1,800 new jobs, $70 million in payroll, and $8.4 million in tax revenue.
— Kentucky Distillers' Association
Attendance: 2018
| Rank | Prior Rank | Name / Prior rank |
|---|---|---|
1 | 1 | Huber's Starlight Distillery |
2 | 2 | Buffalo Trace Distillery |
3 | 3 | Jim Beam Distillery |