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A bartender on the early shift cleans a whisky glass as light filters through a window draped with velvet curtains and falls on the rows of bourbon lining the bar. A collection of antiquated muskets and shotguns is carefully arranged on the wall beside skulls and antlers sourced from Texas, giving the room an air of the antebellum South.
Yet this bar isn’t in Kentucky. It’s in the epicentre of one of the world’s burgeoning bourbon markets — London, England.
At the Lexington, the London bar named for one of the cradles of Kentucky bourbon, you’ll be hard-pressed to find a scotch. When it opened in 2008, the bar was stocked with 70 varieties of bourbon. Ten years later, patrons can choose from roughly 150 bottles.
“No one foresaw just how popular it was going to be,” owner Stacey Thomas said.
Rows of bourbon line the bar at the Lexington. (Jordan Omstead/CBC)
Sales of American whisky topped £1 billion in Britain for the first time in 2016, according to analyst Euromonitor.
But purveyors and purchasers of the Kentucky hooch and Tennessee whisky that have been fuelling that boom in spirits are worried the market could take a hit in the face of the retaliatory tariffs the European Union is poised to put on U.S. products next month.
“Everything that’s been booming so far is just going to contract. There’ll be less out there and it’ll be more expensive. I don’t think it’s good for anyone,” Thomas said.
Going off scotch?
People in the industry have often chalked up the bourbon boom to a growing distaste among young people for scotch, with its conservative and traditionalist connotations.
“American whisky is the rock and roll of scotch,” said Martyn Simpson, or Simo as he’s know around his London whisky shop, Milroy’s. “There’s a lot of ties to music and fashion, parties. It’s seeped into pop culture because it had just so much more freedom in marketing.”
Whether it’s Frank Sinatra calling Jack Daniel’s “the nectar of the gods” in 1955, a picture of Mick Jagger draining a bottle backstage in 1972 or Mila Kunis’s introduction as the face of Jim Beam in 2014, American distilleries have capitalized on celebrity pop culture for generations.
Martyn Simpson says the shelf space for American tipples has doubled at his shop over the past three years, something he expects will quickly be undone if the tariffs are imposed. (Jordan Omstead/CBC)
American producers have also been willing to adopt sweeter, flavoured varieties with honey or apple liqueur infusions for broader appeal — something that’s illegal for tightly regulated scotch distillers.
More than that, Thomas said, budding bourbon aficionados increasingly have more high-quality selections to choose from at an economical price point.
“People are realizing that a 10-year-old bourbon can be just as good as a 30-year-old scotch,” she said.
The U.K. is the fastest-growing European market for American spirits, led by the popularity of whisky and bourbon, according to the Distilled Spirits Council. The British export market jumped 45.6 per cent last year alone.
The EU plan to impose tariffs on $3.3 billion worth of American exports comes after U.S. President Donald Trump reversed an earlier decision to exempt Canada, Mexico and Europe from a levy on steel and aluminium. The laundry list of tariffs is set to be imposed in July, but spirit producers are already seeing the ramifications.
Shares in Brown-Forman, the parent company of Jack Daniel’s, fell by roughly 10 per cent on the New York Stock Exchange in the week following Trump’s announcement on May 31 as it became clear the EU would hit back with its own measures.
‘Vagaries of international conduct’
For craft distillers such as Paul Hletko, founder of FEW Spirits based in Illinois, the U.K. was a promising growth market, but Brexit-induced currency inflation and the proposed tariffs are driving up the price of his spirits and dissuading potential customers.
A bottle of FEW bourbon that retailed for £40 before Brexit could jump to £60 or £65 when the tariffs set in, he said.
“I’ve spent a lot of time, money and effort going to Europe to promote, trying to get products launched. So it’s really frustrating that all of that work can be undone by a capricious tariff,” he said. “It’s just an extra £25 caused by the vagaries of international conduct.”
Paul Hletko, founder of FEW Spirits based in Illinois, was part of a delegation of distillers who knocked on congressional doors in Washington to express concern over retaliatory tariffs and caution against a trade war. (FEW Spirits)
In an effort to dull the shock of the tariff, Brown-Forman has ramped up shipments of Jack Daniel’s to Europe, which is responsible for a quarter of its revenue.
But Hletko and many other craft distillers simply don’t have the cases ready, which means their prices will likely be hit harder in the short term than those of the brand name bottles.
‘A pawn in the game’
“I’m a little guy and at the end of the day, no one really cares that much about me, but it’s frustrating being a pawn in the game,” he said.
Hletko was part of a delegation of distillers knocking on congressional doors in Washington weeks ago expressing their concern over retaliatory tariffs and cautioning against a trade war.
A letter sent to U.S. Commerce Secretary Wilbur Ross on behalf of the Distilled Spirits Council, which represent the likes of Brown-Forman and Beam Suntory — the parent company of Jim Beam — noted that 65 per cent of global American whisky exports are facing or at risk of facing retaliatory tariffs.
It’s exactly the kind of lobbying the EU is hoping for, according to trade experts.
Add another 25 per cent on top of that bottle, that price all of a sudden has people second-guessing.– Andrew Watson
Many of the EU tariffs on American exports are aimed squarely at high-profile Republican states. Motorcycle manufacturer Harley-Davidson is headquartered in Wisconsin, the home state of former House speaker Paul Ryan.
Orange juice comes from the perennial swing state of Florida and all but a fraction of the bourbon supply comes from Kentucky, the home state of Senate majority leader Mitch McConnell.
“When a country is developing retaliatory tariffs, their goal is not necessarily to inflict the most macroeconomic damage on the other country, but to inflict the most political damage on the lawmakers responsible for the tariffs and try to get them to back off,” said Matthew Oxenford, an expert in transatlantic economic relations at the international affairs think-tank Chatham House.
What about growth?
Inside Milroy’s, the oldest whisky shop in London, the worries are more microeconomic, as owner Simpson looks at the display cases stocking American whisky.
His style is more New York rocker than Victorian gentleman. He rides a Harley, he wears Levis, he smokes American cigarettes and his first whisky was a Jack Daniel’s — all products on the EU tariff list.
Andrew Watson, co-founder of the British Bourbon Society, sips on bourbon at Milroy’s, the same bar where the society was thought up during a bourbon-fuelled evening. (Jordan Omstead/CBC)
The shelf space for American whisky at Milroy’s has doubled in the past three years, he said from behind the bar, where a Louisville Slugger nicknamed The Manager is mounted. If the tariffs are imposed, he expects most of the growth will be undone.
“It kills that mass market,” he said. “It’s just going to become too expensive compared to its scotch equivalent or Japanese equivalent.”
‘America brand’
Across the bar from Simpson, Andrew Watson, co-founder of the British Bourbon Society, takes a sip from a glass of Barton 1792 bourbon. The society was dreamed up on a bourbon-fuelled night at Milroy’s in 2016 and has since grown to an online community of nearly 2,000.
“Add another 25 per cent on top of that bottle,” he said, “that price all of a sudden has people second-guessing.”
Simpson points out that American whisky’s popularity isn’t kept afloat by folks buying bottles for £1,000, but people buying mid-range bottles, for around £40 to £80, that could become too expensive after the tariffs kick in.
The Lexington may be in London, but but skulls and antlers on the wall from Texas give it the air of the antebellum South. (Jordan Omstead/CBC)
“Maybe it creates an elitism in bourbon that just isn’t bourbon,” Watson said.
While American whisky producers — and craft distillers especially — will feel the brunt of these tariffs, Watson said the “America brand” is too strong for one president to break.
“People aren’t going to stop wanting that Americana experience.”
They may just have to pay more.
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