Whiskey House founders: In their own words
For the November 2023 issue of Kentucky Living, distilling industry veterans David Mandell and John Hargrove spoke to Kentucky Electric Cooperatives Vice President of Strategic Communications Joe Arnold about the founding of Whiskey House of Kentucky, the facility’s technology and the future of custom bourbon and American whiskey.
In addition to the Business Spotlight article in the magazine, Mandell and Hargrove agreed to allow KentuckyLiving.com to share more details and a transcript from their interview.
Kentucky Living: How did Whiskey House of Kentucky come to be?
David Mandell: I’m the cofounder of Bardstown Bourbon Company, Other partners in this, John Hargrove and Dan Linde both played instrumental roles in founding Bardstown Bourbon Company and building that company. So, you really have the original founding and operating team that built Bardstown Bourbon Company.
As we developed that business, one of the niche pieces of the business that we figured out early on — and we’re going back here to 2014/2015 when we began building the distillery — was we saw the opportunity to do custom whiskey production for others.
I distinguish it a little bit from just straight contract production in the sense that what we figured out was we created an exclusive program for brands that needed excellent customer service, that needed careful attention to detail in creating liquid for them. These could be companies that range from multinational companies to smaller startup companies that needed whiskey for their brands.
So, we developed this program, went out and sold the program. It was certainly a little bit more challenging to execute than the idea we had, and that’s how John and I met. That’s how John joined the team and really was responsible for so much of what you see out of Bardstown.
This niche is what drove the revenue growth for Bardstown. It is what allowed us to build the restaurant, the bar, the visitors experience, our own brand, all of the development out there.
I stepped back as CEO in 2019, then John left a couple years after me. Dan stepped back with me at the same time when the founders left Bardstown Bourbon Company, and then Bardstown sold, and we got together. The selling of Bardstown was a very important moment, certainly in my life and in the founding of Whiskey House, too.
We stepped back, we looked at the market, and we said, there is a great opportunity, even better opportunity for this concept of custom whiskey production that we had developed at Bardstown. There’s a better opportunity to take that now to the next level and to create a facility that focuses solely on that, so it is not distracted by running hospitality and creating its own brands. And if we had the opportunity to design a facility from scratch, to do nothing but that, if we could take everything we learned, start from scratch with that and then employ the best technology, look at developing that facility with all of the kind of capabilities that are out there.
Food manufacturing was John’s background before he got into distilling. It’s about 15 years ahead of where distilling is if when you look at companies like PepsiCo and Frito Lay in terms of advanced manufacturing techniques. So, when you take the technology that exists out there, when you begin to layer in some of the other interesting technologies like AI that are out there, wouldn’t it be incredible if we built a facility that used all of these things?
It will be the largest, it will be the most innovative, it will be the most sophisticated custom whiskey production facility in the country that focuses only on great brands. Whiskey House will reshape the contract whiskey market in the United States.
Kentucky Living: Most distillery announcements include news about tours and a visitor experience. But Whiskey House will not be open to the public?
David Mandell: This facility itself will not be open to the public, but we do have some plans for public facing aspects of it that will not take place on the grounds there. But with our distilled spirits license, we can have a tasting room within 10 miles of the facility, and a second one anywhere else in the state which we would look to operate and launch for the benefit of our customers.
So, those that produce with us, those brands will be able to showcase and sell them through the Whiskey House tasting room, which will be something that we’re already looking at doing right now in Elizabethtown and then we’ll be exploring for another location within the state.
So, we get to have that public facing place, but Whiskey House itself will be closed to the public. Our focus is solely on the brands that we produce for our customers. They understand that because they’ve got long term contracts that are secured.
Kentucky Living: What are some recent developments in the industry that factor into Whiskey House plans?
David Mandell: You’ve had consolidation, you’ve had facilities sold, you’ve had service that has kind of degraded in some instances. And you have the introduction of the investment barrel. The pure investment barrel is a vehicle where financial institutions are buying whiskey and holding it as an asset and then hoping to sell it into the market. That has taken up contract capacity and driven pricing up. At Whiskey House, we are not doing that business. We are focusing only on brands or companies that have a direct pathway to a brand.
Kentucky Living: What sets Whiskey House of Kentucky apart? What is special about the manufacturing technology Whiskey House will employ?
John Hargrove: When we talk about our manufacturing, the first thing to point out is how we’re designing our facility with the flexibility to make different types of whiskey and bourbon and be a low-cost producer for those both on economies of scales and on some really proprietary technology that we’re implementing in the process.
Our focus will be on manufacturing, customer service, quality and the culture of our business. Those are the four main focal points that we’re focusing on right now. Plus, our team. We’ve hired a great internal engineer Roger Henley, in operations Jim Hunger, both with vast experience in this space and managing distilleries and designing distilleries. So, across the board to support what we’re designing, we’re really focused on building the next level team to really support this and bring distillation operations up to par with food manufacturing facilities.
It’s a big, real important focus to point on what what’s going to separate us out, and then bringing that visible transparency to our customers. So instead of focusing on doing tours, when we have our contract customers come in, for instance a multinational customer knows exactly what whiskey they want, they know what it tastes like, they know exactly when it’s going to market. Basically, here’s our recipe, here’s the technical details that you guys need to know. And smaller craft non-distillery producers may need help formulating what a good whiskey, what a good bourbon entails, all the way through bottling.
So, we’re going to be able to really satisfy the needs across the board from what we call non-distillery producers all the way up to big strategic supplemental production brands if we need to. So that’s where our focus lies.
And then I’d say our other focus is on pushing the boundaries, really honoring the art, but really pushing the envelope on technology and manufacturing processes and how we can always improve on these processes.
I always tell people the Wild West is really in the aging of bourbon now. We are implementing state-of-the-art instrumentation across the entire manufacturing and aging process to collect all the data, analyze it and make real time decisions and provide that for our customers, arming them with the knowledge and the data they need to make great, impactful decisions.
Kentucky Living: In addition to the developments of great interest the bourbon industry, what would you like the readership of Kentucky Living to know about Whiskey House of Kentucky?
David Mandell: What we’re building at Whiskey House is really about promoting and creating a very healthy industry. The services that we offer support a healthy bourbon industry, which is critical to Kentucky and to the economics of our state.
By having these services, what we are also doing is supporting brands and both small and large distilleries. We’re allowing them to focus on marketing, on doing the things that they do really well, building their tasting rooms, building their storefronts, marketing their brands. We’re able to focus on liquid innovation for them, on production, so that they don’t have to go out in some instances and just build another distillery.
A lot of distilleries across the state, they don’t need to continue to expand. They can work with us and then they can focus on marketing their brands.
The second piece is promoting a healthy industry by not continuing to produce investment barrels. We think that that is not a healthy piece for the industry.
And three, we plan to be a place for innovation from a thought leadership standpoint.
The data that we are developing, we believe, is going to not only be very useful for us and our customers, but it’s also information that over time we’ll be able to share with the industry and the community and begin to improve manufacturing processes across the board.”
It’s something we care about. We live in the community, I’m the chairman of the Kentucky Bourbon Festival. You’ve got to live in these communities as part of this industry.
John Hargrove and David Mandell.
Kentucky Living: Nolin RECC is excited and proud that Whiskey House is a co-op member. Why did you choose Elizabethtown?
John Hargrove: Nolin RECC really went above and beyond with our partnership with them. We owe a lot to them with this project—not just providing electricity, but keeping on timeline and really working together to help build this thing. We couldn’t be more proud of that partnership.
David Mandell: We laid out what this facility is, what it’s going to do, the promises to the customers. In order to achieve those promises, you have to have infrastructure that supports the business. Elizabethtown provided the perfect infrastructure. We have 176 acres, a fully mature industrial park with great utilities. We have water both from the city and we sit on a large aquifer. We’re able to take out 400 gallons a minute out of the ground at 50 degrees. We have rail which is critical for our goals in terms of international supply. We’re setting this facility up for the long term so that we can meet those demands as well.
We looked all over the state, and we were very, very lucky to have it 25 minutes from where we live and the Bourbon capital world.
Kentucky Living: Can you give us an example of how AI will be used?
David Mandell: You have many different data points in the production process and lots of different variables. AI allows you to create connections and look at things in a way to figure out like how how does
In bourbon, we’re always trying to figure out, how do you replicate something, or why was this process or this product better than this one at the end of the day?
You can start narrowing down and figuring out the exact conditions, the exact parameters. This is where the grain came from, and this is how we got here. AI provides a way of looking at the data to create those correlations.
John Hargrove: Simply put correlation analysis, correlation.
There’s a lot of old production facilities in this industry, I mean, some dating back to 1800s. Multiple pre-prohibition, post-prohibition distilleries, a lot of them haven’t been upgraded. Now, there’s been a big drive in the past ten years since the bourbon boom to do that. But there hasn’t been that many of our size from a green pasture project to start with a heavy emphasis and a heavy capital spend on the technology aspect, the AI that supports the correlation analysis.
And basically we can begin to connect those dots of what happens in the warehousing. Why are some tasting this way compared to other? And we can really start to paint a picture. From harvesting the wood, harvesting the grain to the day we start blending in the lab for a final project.
This is just future talking, maybe that the days of somebody in the lab just tasting, tasting, tasting… we can analyze the data and say, hey, this is the most likely outcome for that, the kind of product that we’re looking to build for this brand.
Not to say we’d get rid of the tasters. Like I said, we want to honor that because there are people out there that I don’t know how they do it, but the most amazing tasters I’ve ever seen, it’s kind of like the computer playing the chess champion, right? You’ll always have a place for blenders, master blenders, but let’s also push the boundaries and see what AI can provide to us in the future.
Kentucky Living: Is Whiskey House going to be a place where existing brands we already recognize are going to be produced, as well as new ones can be born?
David Mandell: Correct. To be in our program, we’re very — again we use the word exclusive — we’re very selective. What we do is we go through, and we look at a number of different factors from the kind of company, any relationship we’ve had with the company, their reputation in the marketplace, the strength of the brand.
So, we have a really nice mix in the program of well-established brands, well-established companies and then you also have brands in there that are up and coming that are doing a great job that we believe in. We know their leadership teams; we have background on them and their performance.
And then of course you have the international market, too, and the international market is a really important one. Our facility will support that growth in the international side. More companies overseas are looking to develop bourbon products. Bourbon is being used in ready-to-drink products all over the world.
And so, as the industry itself is looking at the growth internationally, and as you look at all of these doublings… Heaven Hill doubling, Brown Foreman doubling, Diageo doubling, all of this doubling of capacity is not just for our domestic market, obviously. These great companies are looking at India, they’re looking at China, they’re looking at Japan, they’re looking at South America, they’re looking at Africa, they’re looking at continued growth in Europe because we’re just at about a billion dollars in export for bourbon. And our current U.S. market is something like 4.7 billion in sales. So, as you can see there is huge potential internationally.
So as that growth comes… and it it’s not something that will happen overnight, this facility is set up to meet that international growth with the ability to produce at the levels that we’ll be able to produce and a cost structure that we can produce. And then having rail. Being able to produce it, age it and ship it out on rail overseas is really important.
John Hargrove: And I’d also say we have recognizable food safety certifications with ISO 9001, ISO 22,000. So, as we talked about the technology piece, the food safety piece is a really big aspect for us, even though it’s alcohol production or treating it like a food safe manufacturing facility.
Kentucky Living: We have written previously about bulk spirits, and distilleries that produce the liquid that is aged elsewhere. Is Whiskey House doing any of that, or will all the barrels age in Elizabethtown?
David Mandell: The majority of the production is here and then will be stored on our facility. But we also have the capability to produce bulk liquid that could be shipped out overseas to be stored internationally, could be shipped to another facility to be barreled and stored, or we will produce.
We have customers where we will produce and barrel and then ship their barrels to other warehouses within the state or around the country depending on what they’re creating.
John Hargrove: Just to put it in perspective, over 10 years we’ll build 33 rickhouses on site with 43,000 barrel capacity. So, there’s going to be a lot of barrels being stored in Elizabethtown under Whiskey House.
David Mandell: We will do 220,000 barrels a year by 2027.
Kentucky Living: Congratulations on the beginning of Whiskey House and how you’re advancing the distilling industry in Kentucky!
David Mandell: Thank you! The facility we are building is going to be here to support the industry and the tourism component across the state by providing the kinds of services that we’re providing. By the advancements, by the technology, by our focus, all of that is going to help the industry in, in many ways and we really like to be good partners, good stewards of the industry. We care about it. We fundamentally care about it. It’s why we’re not doing certain things and we’re focusing on others.
John Hargrove: It’s all about what we’re doing from an employment standpoint, how we support this awesome facility, how we support the local community and just make sure that ties together and that’s where our focus is at right now.
