I attend the CMDK coming-out party.

[cowdery]

Saturday, I got a peak at what we now know is called Charles Medley Distillers Kentucky (CMDK), the restoration of the old Medley Brothers Distillery in Owensboro by Angostura. More about my trip is here and here.

This is not a micro-distillery. It is a smallish bourbon distillery, built shortly after Prohibition, that operated until 1991. Charles Medley, who was its last Master Distiller, bought it then but was never able to reopen it. Last year he sold it to Angostura.

I spent some time with the plant manager, Derek Schneider, who is overseeing the refurbishment now and will run the place when it opens. He said it has been slow going and they hope to be fixing up the still house in earnest by fall. Roof repair has taken a lot of attention, as almost every building sustained roof damage last year in Hurricane Ike. They've been doing a lot of that sort of thing. To rebuild the interiors of the warehouses, they are getting ricks from the Lawrenceburg, Indiana, distillery Angostura also owns. They have two steel clads that are getting new skin.

About half of what they need to get the distilling part itself going is there, the rest will be new. They need new milling and grain handling, many new fermenters (Charles sold all of the cypress ones to Maker's Mark years ago), new boilers and a new beer well. The old mash cookers are still good, as are the beer still and doubler. They need all new modern process controls.

They're investing about $25 MM in the restoration.

It would appear that they are planning to get tourism going about the same time they get distilling going. They aren't going to wait until they have some product to sell.

The refurbished distillery as currently envisioned will have a capacity of 2,000,000 proof gallons per year which, as I said, is smallish for Kentucky.

I thought the people here might find this interesting, even though it is the complete opposite of what you guys are doing. Angostura plans to make Kentucky Straight Bourbon Whiskey, but they will be primarily a commodity producer, selling in bulk to bottlers outside the USA.

[Jonathan Forester]

Chuck- Thanks for the info.

[Andrew]

Very interesting, thanks for the info, Chuck.

Do you know if they'll be buying barrels to start their product pipeline sooner? Is the Bourbon Trail going to be officially extended their way? It's a pretty long haul from Bardstown.

Being new and in KY ourselves a couple people thought the press for this place was about us. I wouldn't mind being their level of "small".

-A

[cowdery]

Originally there was talk of them having their own cooperage, but that doesn't seem to be part of their immediate plans. They definitely intend to age their own product, not sell new make, so they will need a supply of barrels on day one, but day one is at least nine months away, so they aren't buying barrels yet. It's not something we talked about.

I haven't talked to Independent Stave recently, and I know there are a couple of new, smaller barrel suppliers in the mix, but Bluegrass Cooperage is currently not supplying anyone except their own family, i.e., the Brown-Forman distilleries, as they are at capacity and can't really expand without developing a new facility, probably in Tennessee, but they don't have any immediate plans to do that. It's possible that wood could become a choke point for this industry although it isn't there yet, and if there is softness in the wine barrel market, then a robust whiskey industry can just pick up that slack.

CMDK is putting a lot of their effort now into getting their warehouses ready to start accepting barrels and they will have seven warehouses with capacity of 20,000 barrels in each, so 140,000 barrels total, on day one. When they get up to full capacity they will be entering about 35,000 barrels a year, so you can do the math on that. What do you know? Thirty-five thousand times four (years) is ... 140,000.

They also have room to build at least one more warehouse on that property and already have the pad for it, as it's a space where a warehouse had to be demolished. There is also another old distillery site nearby, now vacant, but the foundation pads are still there as well.

It would appear that they intend to welcome tourists and be part of the Bourbon Trail sooner rather than later. Assuming they do start producing later this year or early in 2010, they'll probably open the tourism side next spring.

It's 176 miles from Owensboro to Lexington. It's 300 miles from Lexington to Lynchburg. Kentucky promotes Kentucky, but the whiskey tourist is interested in Tennessee too, so I don't think adding Owensboro is a negative. It's an interesting area, similar to other parts of Kentucky in some ways, very different than others, and with its BBQ tradition, the river, and the fact that it's a small city as opposed to a small town like Bardstown, I think Owensboro will be a good addition to the trail. CMDK will be more like a Buffalo Trace than a Maker's Mark or Woodford Reserve, but each distillery offers something different.

One thing I noticed, going there from Chicago, is that you can't get there from here, but for people coming from St. Louis and points west, Owensboro can be the gateway to the Bourbon Trail. As I'm sure you'll appreciate, Andrew, it makes including Bowling Green on the itinerary more convenient too and, like Owensboro, BG has some interesting tourism assets, like Mammoth Cave, that can plus-up a choice of BG as a destination.

As I'm sure everyone here can appreciate, the only fly in CMDK's ointment will be financing, and how quickly its parent can right itself in the current economy, but they seem to be spending their money wisely so they are making the asset more valuable and assuming demand for American whiskey stays strong, I think that facility will come back into production shortly even if something goes wrong with CL/Angostura.

[Andrew]

Thank you very much for the response. I'm glad to have the new neighbors, and it is beautiful country; I hope to visit them when I can find a spare moment. Interesting point about being a gateway for St. Louis, too. That would be a boon to our location as well.

[Guest sensei]

Wouldn't this be a DISCUS distillery rather than an ADI operation in the future?

[cowdery]

Wouldn't this be a DISCUS distillery rather than an ADI operation in the future?

It's not a micro-distillery in any sense. Their capacity will be about 2,000,000 proof gallons a year. I posted this here because micros need to pay attention to macros, since everybody plays in the same sandbox ultimately.

[Guest tom]

It's not a micro-distillery in any sense. Their capacity will be about 2,000,000 proof gallons a year. I posted this here because micros need to pay attention to macros, since everybody plays in the same sandbox ultimately.

I think it should inspire all of the people making whiskey. Also, I will bet they will be making whiskey in the old way, not trying to "burn the box". Something that should also inspire.