Compromise Proposed in “Tennessee Whiskey” Debate

March 22, 2014 – The next committee hearings are set for Tuesday in the Tennessee General Assembly’s debate over changes to standards for what can legally be called “Tennessee Whiskey”, but the proposal’s Senate sponsor is trying to broker a compromise. Sen. Mark Green has proposed an amendment that would allow distillers producing less than 25,000 cases of whiskey annually to use so-called “rejuvenated casks” and still be able to call their product “Tennessee Whiskey.” The casks would have to be ground or planed on the inside to remove layers of wood saturated with whiskey from a previous use.

“I sent that to the Jack Daniel’s guys on, I believe, Thursday,” Sen. Green told WhiskyCast’s Mark Gillespie in a telephone interview. “We’ve not heard back from them yet, so I’m just waiting to hear from them. If they like the new amendment, then we’ve got a win-win and if they don’t, then we’re back to the drawing table.” Green suggested that he’s willing to pull his bill off the floor and end action on it until next year if no compromise can be reached. However, that would be exactly what Jack Daniel’s owner Brown-Forman wants, since it opposes any changes to the bill passed in last year’s session and signed into law last May.

“Jack Daniel’s brought it to us last year, and we were told that the other guys didn’t have a problem with it. Well, we were told that by Jack Daniel’s…and we didn’t…I guess one of us should have picked up the phone and said ‘hey, Dickel, do you like this definition?’ We didn’t…and you know, this is what happens. I wasn’t involved in the legislation last year, other than to just support it…but when it was brought to me this year and the discrepancy revealed, I thought, well, this was probably not fair and not right, so we’ve got to do something about it.”

Listen to the entire interview:

Green introduced legislation last month at the request of Diageo and some of the state’s craft distillers to remove requirements enacted last year that force distillers to use new charred oak barrels and mature their whiskies entirely within the state in order to be able to call their products “Tennessee Whiskey.” That legislation was supported by Brown-Forman, which wanted to keep what it termed as “inferior whiskies” from hurting the global image of “Tennessee Whiskey.” Jack Daniel’s is the most widely-exported American whiskey, and is sold in more than 150 countries around the world.

Not only are Brown-Forman (Jack Daniel’s) and Diageo (George Dickel) on opposite sides of the debate, but many of the state’s craft distillers are split down the middle as well. Green wants both sides to come to an agreement that protects the overall integrity of the state’s brand while also protecting small-scale distillers and allowing them to compete, and said he will not allow the state to be dragged into a battle over international sales. In a March 14 WhiskyCast interview, Brown-Forman spokesman Phil Lynch accused Diageo of promoting the changes as a way to undermine global sales of Jack Daniel’s out of fears that it was cutting into sales of Johnnie Walker and Diageo’s other Scotch whiskies. While Diageo’s George Dickel is the number-two selling Tennessee whiskey, its sales are a fraction of Jack Daniel’s — though still large enough that it would not be covered by the exemption Sen. Green has proposed.

“I’m not going to kowtow to someone’s strategic initiative in their corporate international business practices. We’re going to maintain the definition of Tennessee Whiskey in a way that makes sense, so if it’s new oak wood that this whiskey touches and that’s what makes the taste, then I don’t see a problem with allowing the smaller guys to take the inside of that thing out, lower their costs, and allow them to compete.”

The senator also wants to hear from both companies on what effect the definition of “Tennessee Whiskey” included in the North American Free Trade Agreement and other international trade treaties has on Tennessee’s ability to set its own standard. NAFTA carries the weight of federal law, and in interstate commerce, federal laws generally take priority over state laws.

“Canada and Mexico shall recognize Bourbon Whiskey and Tennessee Whiskey, which is a straight Bourbon Whiskey authorized to be produced only in the State of Tennessee, as distinctive products of the United States.”

Thomas Hogue, a spokesman for the Treasury Department’s Tax & Trade Bureau, said in an email that those standards apply only to recognize Bourbon and Tennessee Whiskies as “distinctive products of the United States” when they are sold in foreign markets, but do not apply in the domestic market. While declining to comment specifically on the Tennessee law, Hogue noted that the 21st Amendment to the Constitution gives states broad powers over the sale, distribution, and labeling of alcoholic beverages within their borders. However, Green said there may be a question over whether Tennessee can set a definition for whiskey produced for sale outside of the state.

Links: Tennessee General Assembly | Brown-Forman | Jack Daniel’s | Diageo | George Dickel

Mark Gillespie

I'm the host and executive producer of WhiskyCast.

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