Straight up: How the Kentucky bourbon industry is going high tech

This article was originally published as a TechRepublic cover story.

Afternoon sunlight filters through the dusty windows of a 125-year-old bourbon warehouse as Wild Turkey master distiller Eddie Russell explains the process of making Kentucky's most famous export.

As Russell talks about the nuances of his art, the intoxicating scent of aging bourbon fills the air in the warehouse, which sits serenely on Wild Turkey Hill overlooking the Kentucky River and houses more than 14,000 bourbon barrels.

"You're smelling the angel's share. You're smelling some of that oak, some of the whiskey that's coming out of that oak, some of the water," he said. It's called the angel's share not because it's heavenly, but because it evaporates into the atmosphere before ever touching human lips.

Making bourbon, even on the scale that Wild Turkey does with close to 100,000 barrels of bourbon a year, is something that takes time and is steeped in tradition. Some parts of the process have remained unchanged for decades, such as for Wild Turkey, the water from the nearby river that's naturally filtered through limestone rocks to create a softer, sweeter taste. However, high-tech change has arrived in Kentucky's bourbon industry.

"For the distillery, everything's very modern, very computerized. But we're still using the same old recipe, the same old yeast. This part of it hasn't changed since the beginning. You just put it in here [the warehouse], and let nature do its thing. You need the hot weather to push the whiskey into the wood, the cold weather to pull it out of the wood. So you pick up 100% of your color and a lot of your flavor from the barrel," Russell said.

Distilleries are doing everything from adding IoT sensors to equipment for collection of data analytics, to adding RFID tags to bourbon barrels, to creating experimental aging warehouses in an attempt to refine their centuries-old craft.

None of this is to done to create bourbon faster--it's about making the process smarter and more efficient. It takes more than 20 years to produce some bourbons, and that's not going to change. The consensus among bourbon experts and master distillers is that there is no shortcut to making good bourbon. And in Kentucky this is big business, with the state's distilleries producing about 95% of the world's bourbon in an $8.6 billion a year industry for the state.

The birthplace of bourbon

Kentucky is the birthplace of bourbon. In 1783, Evan Williams opened the first commercial distillery in Kentucky on the banks of the Ohio River in Louisville. Bourbon making evolved over the centuries and even continued during Prohibition in the US in 1920, although only four distilleries were making bourbon by the time Prohibition ended in 1933.

There's plenty of tradition associated with bourbon whiskey as America's only native spirit, as declared by Congress in 1964. Bourbon must be made with a minimum of 51% corn, aged in charred new oak barrels, distilled at a maximum strength of 160 proof, stored at no more than 125 proof, and bottled at 80 proof or higher. Contrary to popular belief, bourbon can be made in any state in the US, not just Kentucky. Aficionados around the globe appreciate the nuanced flavors of vanilla, oak, tobacco, and caramel in bourbon.

Kentucky bourbon whiskey has a reputation as the finest in the world. The mint julep—a sweet concoction of bourbon, muddled mint, and simple syrup over crushed ice—is as much a part of the Kentucky Derby as the thoroughbred horses in the famous race.

For more about the Kentucky Derby, read these posts on our sister site CNET: Kentucky Derby horses get first-class treatment on Air Horse One, How to do Kentucky Derby 2019 like a boss, and Best party-planning apps for hosting a Kentucky Derby party in 2019. 

Today, there are 68 distilleries spread out across 32 Kentucky counties. Tennessee is the second-largest producer of whiskey in the US, making bourbon, as well as whiskey, rum, gin, vodka, and moonshine. It's important to note that bourbon is a type of whiskey, but not all whiskeys are bourbon.

Nationwide, there are more than 1,400 bourbon distilleries, but most of those are boutique producers making small volumes. In Kentucky, there are six major distilleries making the bulk of bourbon produced in the world: Brown-Forman, Wild Turkey, Diageo, Jim Beam, Heaven Hill, and Four Roses.

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The growing popularity of bourbon

Bourbon is in the midst of a popularity boom, and this means that more barrels of bourbon need to be made. Since these spirits take years—sometimes decades—to age, Kentucky distilleries are in a race to produce as much bourbon as the world can drink.

According to the Kentucky Distillers' Association, the state's distilleries filled 1.7 million barrels of bourbon in 2018, the most since 1972. With a total inventory of 7.5 million barrels of bourbon being aged, this means that there is nearly twice the number of barrels of bourbon in Kentucky than there are people, since the state's population is approximately 4.4 million.

Between 2012 and 2017, sales of bourbon whiskey grew by more than 50% to $3.3 billion.

The bourbon boom is apparent in the growth of the number of distilleries in Kentucky. In 2018, there were 68 distilleries in the state, up from 19 just 10 years ago. Bourbon production has increased more than 115% in the last five years, with premium small batch and single barrel brands driving the bourbon renaissance, and millennials are among those driving demand.

SEE: Photos: Kentucky bourbon gets a tech twist (TechRepublic)

Kentucky is a state that takes its bourbon seriously. And while this amber liquid is steeped in tradition, the new technology that some distilleries are using can improve production and distribution.

It doesn't matter if it's an old distillery or a brand new one, technology is playing an ever-increasing role in bourbon making, particularly if a new generation is taking over at an existing distillery or a new parent company has purchased the distillery. For instance, Buffalo Trace is owned by Sazerac, and Wild Turkey is owned by GruppoCampari. Bardstown Bourbon Company is new and independently owned by a group of investors.

Millennials are driving the bourbon boom

One of the key reasons for the push to make more bourbon is because of a newfound love that millennials have for the taste of brown spirits. Eddie Russell said this is because preference in drinks tend to skip a generation, with people in their 20s and 30s not wanting to drink what their parents did.

All brown spirits are up in sales, but bourbon is the pinnacle. "Bourbon's what started the revolution. It was the mixologists or the bartenders coming back making the Old Fashioneds, the Manhattans, the classic drinks again. So they brought it back into where it was cool for the younger generation to drink it, where it used to be just vodka drinks," he said.

SEE: What is digital transformation? Everything you need to know about how technology is reshaping business (ZDNet)

Bottles of some iconic names in bourbon making, such as Pappy Van Winkle 23 Year from Buffalo Trace, are selling for more than $200 a shot and $2,000 a bottle. That is, if a bottle can be found to buy.

"Pappy is a great story for us. It's a bourbon that everybody seems to talk about, and there's a super high demand for that. And of course, and I always ask the question, 'How many people were drinking Pappy 23 years ago?' And hardly anybody raises their hand. And that's how I explain why we're short. I mean, nobody knew the demand 23 years ago was going to be like it is today, and we're making more every year. And the demand is at its all-time peak right now for that brand, and pretty popular," said Harlen Wheatley, master distiller at Buffalo Trace.

But Wheatley stresses that there's no way to take a shortcut when making bourbon.

"There's just no way to cheat mother nature or father time. We've proved it over and over again. You can't artificially get those true, balanced three-dimensional flavors that you get with a good bourbon," he said.

Show me the money

Of course the world's love affair with bourbon means more money for Kentucky's economy. The combination of economic growth from jobs, taxes and tourism related to bourbon is something local politicians call bourbonism.

Bourbon generates 20,100 jobs in Kentucky with an average salary of $95,000, for an annual payroll of $1 billion. The state is home to more than a third of all distilling jobs in the US.

Taxes are part of the benefit, too. Bourbon, both production and consumption, pours more than $235 million into state and local tax coffers annually.

In addition, there are $2.3 billion in capital projects completed or planned from 2019 to 2022, including new warehouses for aging and new distilleries in Kentucky. This will create an additional 1,800 jobs with $70 million in payroll, according to the Kentucky Distillers' Association.

Wild Turkey, for instance, is investing $2.2 million in a new warehouse that will hold 46,000 barrels.

Kris Comstock, senior marketing director at Buffalo Trace, said, "We're investing quite a bit of money to double up our capability to make more. We'll invest $1.2 billion over the next decade, increasing our capacity. More cookers, a new boiler, a new still, more warehouses, a new bottling facility--all in the hopes that people continue to be thirsty for bourbon for years to come."

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Working with new technology at Wild Turkey

The Wild Turkey distillery and visitor's center is a scenic area filled with pastures, rolling green hills, tobacco barns, and horse farms.

Wild Turkey was established in 1850 by Austin Nichols and Co. and today, legendary master distiller Jimmy Russell works with his son, Eddie Russell, as the only father/son team of master distillers in the bourbon industry. The elder Russell is 85 years old, and he's spent 65 years making bourbon at Wild Turkey. His son joined Wild Turkey in 1981 and became a master distiller in 2015. Both Russells are in the Bourbon Hall of Fame.

In 2009, Gruppo Campari purchased the distillery, but even though it's corporate-owned, it's still very much a family affair. The entire Wild Turkey line is distilled onsite in Lawrenceburg, just five miles from Jimmy Russell's birthplace. He is in semi-retirement, but he still spends many afternoons sitting in the visitor's center, regaling guests with his stories about bourbon and Kentucky.

Since the purchase by Campari in 2009, Eddie Russell has begun adding more technology to the bourbon-making process. He's upgraded the distillery, built a new bottling and packaging facility, added several warehouses, and constructed a new visitor's center.

The distillery now uses a control room that opened in 2010 to monitor all aspects of the bourbon-making process via sensors on the equipment where mashes are done and fermentation takes place. Before the control room opened, there were five jobs, since everything from grinding the grains to making the mashes and fermenting the yeast had to be done manually; now there are two people overseeing that in the computerized control room. Data points are measured from daily samples to make sure that all sugars are converted to alcohol at the right point. Barrels are also tracked with RFID tags.

"Technology has made things a lot easier. In Kentucky, we have 7.5 million bourbon barrels aged. So to keep up with all those barrels, you don't want to have what you would call lost barrels. The government wants to make sure they know where everything is because they get $13.50 a proof gallon tax off this. So with the RFIDs, that's a technology that's really helped us because when you're walking through here just looking at numbers on a barrel, it gets pretty confusing when you've done 20,000 in two hours. So the dates get mingled. So with RFIDs, you know where everything is," Russell said.

When the new control room and updated distillery were completed in 2010, the average length of service for employees was 27 years, and many weren't computer literate, he said.

"We had a little pushback from some of the older employees because they didn't understand the computers. It scared them a little bit. Some of them had to go to classes just to get the basic skills because you do have to use the computer to start the process and stuff," Russell said. "It changed the level of our people working here because our mechanics were what I called 'shade tree mechanics.' They had wrenches in their pocket, and if something broke down, they were tearing it apart to figure out what it was. Now you have electrical technicians that walk up and plug in a computer to figure out what's going on."

SEE: Digital transformation: An IT pro's guide (free PDF) (TechRepublic) 

In addition, Russell said, "We computerized our still, which is very important to keep correct proofs and everything. But moving over and building the distillery we built, we wanted to be very modern. And it's just a little difference in me and everybody here wanting to be a little more consistent, a little more in control of the situation than where we were before."

New products are another part of the changes taking place. Back in 1976, Jimmy Russell created the first flavored bourbon liqueur for Wild Turkey with a honey-flavored product that's now known as American Honey. Spirits cannot legally be called bourbon once anything other than basic ingredients as stipulated by law has been added to it, and that includes flavors.

Eddie Russell said he's not a big fan of adding flavors to bourbon, anyway. However, one of his newer products, Wild Turkey Master's Keep Revival Bourbon, is aged for 17 years in charred oak barrels before finishing in 20-year-old Oloroso sherry casks to give the bourbon aromas of cherry pie, raisins, citrus, nuts, and a touch of oak with a soft and creamy feel on the palate. But many bourbon lovers stick to the classic Wild Turkey Bourbon or the award-winning Wild Turkey Rare Breed that's uncut with water for a 116.8 proof bourbon in the current distillation.

Last year, Wild Turkey collaborated with Matthew McConaughey as its creative director to create a new bourbon named Longbranch inspired by McConaughey's Kentucky and Texas roots. Eddie Russell and Shaylyn Gammon, regional associate R&D scientist for Campari, worked closely with the Academy Award-winning actor to create Longbranch. They collaborated to find the right bourbon flavor profile for Longbranch and the resulting sweet bouquet of caramel, vanilla, and toffee with a layer of nutmeg and oak.

Gammon said McConaughey took his job seriously, and he worked with them to find the perfect bourbon nuances. Sometimes she'd wake up to find emails he'd sent at 3:00am with ideas and questions. McConaughey wanted to create a flavor that "was a roller coaster in your mouth," she said.

Finding such flavors and working with individuals to create the perfect bourbon is the one of the best parts of Gammon's job.

"It's still very much an old-school art. The thing that's cool about my job is it's science meets art. So blending and the art of creating flavors is very much an art, whereas the actual distillation and the part that you get to the finished product is the chemistry portion," Gammon said.

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Buffalo Trace Distillery and data analysis at Warehouse X

Eighteen miles north in Frankfort sits Buffalo Trace Distillery, which was established in 1787 by Hancock Lee. A new distillery was built in 1872, and over the decades, additional warehouses were built and new technologies were added, such as steam heat in 1886. The distillery has changed hands several times and was purchased by its current owner, the family-owned Sazerac Company, in 1992.

Many different technologies are used at Buffalo Trace, where they're doing experiments in bourbon making, specifically at Warehouse X. The distillery has collected tens of millions of data points on experiments with temperature, air flow, temperature, humidity, sunlight, surface temperature on barrels, and pressure inside the barrels to see what impact they have on the end product.

Master distiller Wheatley said, "When I started in '95 we were still kind of in the past. We didn't have a single computer in the whole distillery, so I was able to be a part of the technology expansion. We started incorporating computers and doing some upgrades on our systems in general. And what that's allowed us to do over the years is of course being able to manage the process a little tighter."

"For us it was all about capturing the history and the historical way that we have always made bourbon, but we wanted to be able to tightly manage that and be more consistent. So we were able to incorporate as much technology as possible without changing the process. That was a really important thing. There's a big difference between starting a system from scratch and developing the software and necessary controls to do it, versus having a preexisting system that we thought worked really well, that we wanted to preserve. So we designed all of our controls around that existing system, so it was a little bit different," he said.

SEE: Data, AI, IoT: The future of retail (ZDNet special report) | Download the free PDF version (TechRepublic)

When Wheatley first joined Buffalo Trace, some people complained about new technology being put in place.

"When we started, there were some comments made like, 'You can't make bourbon the old-fashioned way with the new technology.' If the wrong person tries to implement those changes without considering and appreciating the history behind the processes, you could mess it up," he said. "But the one thing we were really serious about was designing our technology changes around the existing system. It is a mindset difference, because some people say, 'Well, I can cool that off faster, and make that done faster.' But the first question is, will that change the flavor of your whiskey? And is that different than your original process? And if the answer is 'yes,' then that's not going to happen."

Wheatley said, "We have been really careful to protect that original process. And we were resistant to changing that process, but the idea was we were going to make the job more consistent, easier, more repeatable along the way. So it was an easy sell, really, when it came to that. But we were really protective of the process, and we just haven't changed it. We've been doing the same thing since Prohibition, as far as the process goes."

One employee at Buffalo Trace refused to accept some of Wheatley's changes. Wheatley installed a catwalk so that employees could avoid using the stairs to get to the stillhouse. "He refused. He'd been here about 40 years, and he refused to use the catwalk. He was going to continue to go down the steps and up the steps to the stillhouse. That's a perfect example of somebody that's just not going to change. But the employees that we have now incorporated the technology mainly because it made their job easier and they were able to see that up front."

Warehouse X opened in 2013, and there Wheatley is assessing the aforementioned variables to see how they might change each batch of bourbon. There are sensors on each of the 150 barrels in Warehouse X, and the data is analyzed to show how the barrels are aging.

"At the end of 20 years, we want to be able to explain why a barrel tastes the way it does aged here in Buffalo Trace," he said.

They're also planting their own corn so they can experiment with that and see what impact it has on the end product. This also ties into an increased interest in the authenticity of bourbon, with consumers wanting to know the story behind the ingredients in the bottle, Wheatley said.

Buffalo Trace has millions of barrels of bourbon stored and is busy opening warehouses, with a new one opening every four months during its current expansion phase, which includes investing $1.2 billion in new facilities. Although Buffalo Trace doesn't divulge specific numbers, Wheatley said each new warehouse holds 58,000 barrels. That means three new warehouses in one year will add 174,000 barrels to the supply.

Marketing ties into technology as well, with a new online virtual tour to give fans a chance to see behind the scenes even if they don't have time to visit Buffalo Trace in person. In 2015, the company launched a Craft Your Perfect Bourbon marketing campaign with people picking out their favorite flavor profiles for bourbon. It turned out that many people were creating a wheated bourbon recipe that aged for around eight years on the top floor of the warehouse. Since so many people were asking for it, Buffalo Trace decided to create it. In 2018, they launched Weller C.Y.P.B. (Craft Your Perfect Bourbon).

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Bardstown Bourbon Company

Bardstown Bourbon Company is working with state-of-the-art technology at its facility in Bardstown, a town of just 13,000 people in the center of bourbon country. The project so far has totaled about $40 million.

The idea behind the distillery was to create a Napa Valley style destination for bourbon enthusiasts. It's the brainchild of David Mandell, Steve Nally, and two other founders. Nally is an esteemed master distiller in the Bourbon Hall of Fame and former master distiller at Maker's Mark.

The distillery opened in 2016, and in mid-2018 the team opened the minimalist chic Bottle & Bond kitchen and bar. The restaurant is run by Felix Mosso, the former chef at the 5-star Greenbrier Resort in West Virginia. It's an unusually upscale restaurant for a town that is better known for southern-style comfort food. Yet it draws a huge crowd night after night, showing that residents and visitors were ready for something new, particularly something new that involves bourbon.

An upcoming multimillion dollar expansion on the 100-acre property will include a visitor's center, a warehouse bar, and a hotel to offer even more to visitors.

The distillery makes bourbon for other brands that are non-distilling producers, which means they're brands that don't have a distillery behind them. They currently make bourbon for 22 different customers including High West and Jefferson's.

"We have expanded twice since we started in 2016. We've actually quadrupled the size of the distillery in a little over two years," said Mandell, who is president and CEO.

The distillery isn't fully automated, and Mandell said he did that on purpose to include the human touch during the process. "We did that because we want the human being, our distillery operator, and our team working side by side with our customers. So because we're doing custom production, because they're on the floor together, you needed a system that allowed everybody to work together," he said.

SEE: Digital transformation: A CXO's guide (ZDNet special report) | Download the free PDF version (TechRepublic)

"We have a very complex automated system in the sense that we have a home-built system that tracks our data, our histories, monitors several hundred points across the system with sensors. It keeps excellent quality control. Each time we have expanded, we have upgraded our technology, and we're continuing to do so," Mandell explained.

The key focus isn't efficiency as much as quality control and data analysis, which is shared with customers. "They get a complete data package in real time about what is happening with their product, and they can see it," he said.

Some of the data points that are shared include what's taking place in the fermenters and the overall stability of the system. "All of these data points ultimately impact the product that comes out at the end. Are we making exactly what we decided to make together? How do we hold ourselves accountable for doing that? We have a dedicated lab technician team that is testing the fermenters all day, inputting that data. They're basically following and monitoring the entire manufacturing process, then taking that data set, giving it to the customer, reviewing it with them together saying, 'This is how you know you are getting what you are paying for and what we are creating together.' So it is your accountability, it's your customer service, it's everything," Mandell said.

Master distiller Nally said the bourbon-making process is the same as always, but now he can monitor every step along the way through the data points. "We're actually not changing the process itself--we're just critiquing and letting the customers know exactly what's happening during that process. The importance of this is the flavors. If I change, say the condenser's temperature, I can change the flavor of the product. If I change the cook time, I can change the flavor of the product. So what we're doing with every customer we have is trying to replicate or duplicate what they already have. So by doing this we can critique all the points of the system to make it their product."

Bardstown Bourbon Company is adding flavors to bourbon for its customers, such as a brandy finish, because that type of innovation is a growing trend. The distillery also makes rye, but it steers away from vodka, gin, and other spirits.

"We're doing finishing, where technically it is no longer a bourbon. For example, if we take bourbon, or an aged product, and we put it into another barrel, whether it's a wine barrel, whether it's a different spirits barrel. It could be rum, cognac, you name it. There's a lot of that in the market," Mandell said.

SEE: Digital transformation: A guide for CXOs (Tech Pro Research)

John Hargrove, executive director of distillation operations at Bardstown Bourbon Company, said he was previously with the Barton 1792 Distillery, and he's watched bourbon distilleries add innovation to give more control over the process.

"A lot of things we have are automated, but not to the point where we don't have to have people out on the floor. We have a working class facility, but we can capture a lot of the data. That's a big thing that's changed so we can capture temperatures, we can put them in the history, and I can walk in on any given day and pull the last two years of information that we've been running at this distillery," Hargrove said.

"That's key for the type of business model we have with our customers. We built a production package that's really transparent and all the processing metrics that are executed across the board here. So what's that mean? So my condenser temperatures, fermentation temperatures, my header pressures, my pumped pressures. Any little part of the process that can have an impact on the distillate quality, we capture that data, we can mine it, and we can make decisions that will directly affect the quality of the distillate that we are producing for our customers. So in the distillation industry, process control is key to making sure we're producing a quality product for our customer, and the more data we can gather and the more relevant data we can gather, the better decisions we can make on how to run the equipment," Hargrove explained.

Technology is making the job both easier and more precise, as customers want to know the data surrounding the fermentation process. "Process control is key when it comes to the quality of the distillate that we're producing," he said.

An update later this year will include a software package that allows customers to use an app to log in and see how their production run is going at any time for pure transparency, Hargrove said.

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What the future holds for bourbon

There's no end in sight to the bourbon boom, although all spirits have an ebb and flow in popularity.

Bourbon tourism is up in Kentucky, with a record 1.4 million stops at distilleries around the state expected in 2019, up 370% since 2009. The Kentucky Bourbon Trail is a big draw to visitors from around the world, with 1 million visits last year. The Urban Bourbon Trail in Louisville is another draw, as is the Kentucky Bourbon Trail Craft Tour, where distilleries hosted 340,000 visits in 2018.

At Buffalo Trace, there were 225,000 visitors last year, and the number is growing. The distillery, gift shop, and visitor's center are being expanded, as well as the warehousing and bottling facilities. At Wild Turkey, a visitor's center opened in 1998, and it only had about 1,000 people come by each year; now, Wild Turkey draws nearly 100,000 visitors each year.

And there's a big growth potential in international markets as bourbon finds more fans around the globe.

"I think what we are all expecting is that international markets will be opening up in India, China, and South America. And if in any of these countries their drinking habits change a little bit from scotch to bourbon, we don't even have close to enough resting in the state of Kentucky or elsewhere to feed that demand. So while there's a lot being produced, if we even shift one or two percentage points there, we're still not even close to having enough," Mandell said.

The draw is in part because people love to experience a Kentucky hug. And that's not the kind of hug you get from your mother. Instead, it's the warm sensation you feel in your upper body after you sip some bourbon. And luckily for Kentucky distilleries, it's a feeling that people everywhere in the world enjoy and will hopefully continue to crave for decades—or centuries—to come.

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Also see

• How Beam Suntory is taking bourbon high tech (TechRepublic)
• How Woodford Reserve tapped a growing luxury goods e-commerce market (TechRepublic)
• How tech can create better quality bourbon and whisky (TechRepublic)
• Video: Bourbon lifestyle brand Pappy and Co. talks cloud, analytics for SMBs (ZDNet)
• Making bourbon, with a tech twist (CNET)