Today’s Wall Street Journal has an article, Jack Daniel’s Faces a Whiskey Rebellion, that highlights how politically powerful industries can use industry-protecting regulation to raise their rivals’ costs:
At the company’s urging, Tennessee passed legislation last year requiring anything labeled “Tennessee Whiskey” not just to be made in the state, but also to be made from at least 51% corn, filtered through maple charcoal and aged in new, charred oak barrels.
So there are three dimensions on which JD’s competitors could vary, at least slightly, and still make something that consumers could recognize as Tennessee whiskey (not bourbon, not whisky).
Who are the rivals in the Tennessee whiskey market, in which Jack Daniel’s has a 90+ percent market share? Dickel is the largest rival,
Diageo says the George Dickel brand is in compliance with the new law, and that it has no plans to change the way it is made. But the liquor giant says last year’s law puts a lid on innovation and that Brown-Forman shouldn’t be allowed to define the only path to high-quality Tennessee Whiskey.
“We’re in favor of flexibility that lets all distillers, large and small, make Tennessee whiskey the way their family recipes tell them,” said Alix Dunn, a Diageo spokeswoman.
… but unless you’ve been under a rock for the past two years you’ve surely noticed the craft distilling revival in the US. Some craft distillers agree with Diageo that such legislation stifles innovation.
But others see a clear legislative definition of what constitutes Tennessee whiskey as providing a strong focal point around which distillers can coalesce, and compete. Although one of these is quoted in the article, I don’t see the argument. Perhaps I’ll mull it over while enjoying a cocktail.