Spirits Industry

SPIRITS INDUSTRY

SPIRITS INDUSTRY. The fermenting and distilling of fruits and grains into alcoholic beverages was a practice that the first American settlers brought with them to the new colonies. In the colonial period, Americans made several kinds of beverages, including whiskey, cider, brandy, and most popular of all, rum. Rum was manufactured from imported molasses. Although colonial authorities at times attempted to control consumption, distilled spirits were widely accepted and enjoyed. Distillation was decentralized in rural settings, so mass production was not characteristic of the spirits industry.

The Nineteenth Century: Domination and the Onset of Decline

In the late 1700s and early 1800s whiskey replaced rum as the spirited beverage of choice among Americans. Whiskey, which was distilled from grain, was not only cheaper—especially when turbulent foreign relations made it more expensive and difficult to import molasses—but was also a homegrown product and therefore a symbol of America's newly won independence. Considering the high per capita consumption during much of the nineteenth century—nearly five gallons per person in the early decades—whiskey can be considered America's national beverage during the 1800s.

Although whiskey was made in small distilleries across the new nation, it was a specialty of Scotch-Irish immigrants who settled in western Pennsylvania and then the Kentucky region. Kentucky soon became the center of whiskey production. Distillers there prided themselves on the manufacture of bourbon, which differed from other whiskey because it was made from corn, or corn mixed with other grains, instead of from rye or barley. Furthermore, the distinctive taste of bourbon, which was produced mainly in Bourbon County, Kentucky, derived from the charred wooden barrels in which it matured.

Despite its popularity, whiskey was at the same time often condemned. The temperance movement, which emerged in the 1820s, targeted spirits, not beer or wine. Historically, Americans have viewed beer and wine as benign in comparison with whiskey and other spirits, which they have regarded as intoxicating and potentially harmful. This explains why taxes on spirits have always been higher than on other alcoholic beverages. Whiskey distillers have often objected to the high tax on their product. In the Whiskey Rebellion of 1794, farmer-distillers in Pennsylvania objected to the high tax on whiskey and staged a violent revolt. Although the rebellion was quelled, protest was effective enough so that in 1802 the federal government acknowledged that the tax was uncollectable and repealed it. Except for a brief period, the federal tax on whiskey was not reinstituted until the Civil War.

In the second half of the nineteenth century, the whiskey industry experienced overproduction and intense competition, which led to price wars and concentration. A small number of huge distilleries in Peoria, Illinois, had come to rival Kentucky's whiskey industry. The Peoria-based Whiskey Trust tried to control production and raise prices but without much success. By the end of the 1800s, many Americans were switching to beer, which had become cheaper to brew and was less burdened by taxes. It has been estimated that as much as one-third of all whiskey was produced by moonshiners trying to avoid taxes. Another reason whiskey was more expensive than beer was that in the 1860s Congress had created a bonded period that let distillers store their product tax-free until they found buyers. That gave the distillers an incentive to store their whiskey longer, which improved its quality and justified a higher price.

The Twentieth Century: Projecting an Image

Some firms were interested in maintaining high quality standards for their product and fostering public trust in the industry. They turned to federal government officials for assistance. The government responded with the Bottledin-Bond Act of 1897, the Pure Food and Drug Act of 1906, and the Taft decision of 1909, all of which outlined definitions and standards for whiskey. Afterward, the industry experienced considerable consolidation, with the 613 distilleries of 1909 reduced to only 34 in 1919. The spirits industry was a particular target of the temperance movement into the twentieth century, but now the industry came under increasing attack for its association with big business and trusts. The industry was further damaged by the increasing connection of the consumption of whiskey with Irish immigrants. During Prohibition, about thirty distilleries operated legally under medicinal permits.

In the decades after Prohibition, the industry trod carefully, trying to win the goodwill of the American people and establish itself as a good corporate citizen. The industry's trade association, namely the Distilled Spirits Institute (later the Distilled Spirits Council of the United States), pressured firms into complying with government regulation and urged them to be careful in their advertising. In their Code of Good Practices, established in 1934 and revised several times since, distillers agreed to refrain from radio and television advertising and to ensure responsible and tasteful advertising that did not target youth. In the post-Prohibition period, the industry became further concentrated and was led by the large firms Seagram, Hiram Walker, Schenley, National Distillers, and Brown-Forman. Some small distillers, such as Jack Daniels and the Beam Distilling Company, reorganized. The industry, however, was an oligopoly and new entrants faced high barriers. Major distilling firms maintained plants across the nation.

With the advent of the baby boom generation in the second half of the 1900s, even more Americans chose beer over spirits. Preference in spirits shifted from the brown liquors to clear and sweet spirits such as vodka, gin, and cordials. Although spirits consumption increased in the post–World War II period, its rate of increase was much less than for beer. Beginning in the late 1970s, spirits consumption actually began to fall. The industry largely blamed its misfortunes on government regulation and on an ongoing movement to curtail alcohol advertising. The industry complained often of tax discrimination and claimed that spirits were the most heavily taxed consumer product in the United States. The industry's most important strategy in its battle against increased regulation and taxation has been public relations campaigns that tout moderation and anti–drunk driving messages. In 1991, some members of the industry established the Century Council, an organization to fight drunk driving and underage drinking. At the same time, some firms, led by Seagrams, have favored more aggressive tactics. They have pushed the concept of equivalency, which aimed to show that beer and wine are just as intoxicating as a mixed drink, and broken the taboo against broadcast spirits advertising. At the end of the twentieth century, the spirits industry contributed about $95 billion in U.S. economic activity per year and employed 1.3 million people in the manufacture, distribution, and sale of nearly four thousand brands of spirits.

BIBLIOGRAPHY

Barr, Andrew Barr. Drink: A Social History of America. New York: Carroll and Graf, 1999.

Downard, William L. Dictionary of the History of the American Brewing and Distilling Industries. Westport, Conn.: Greenwood Press, 1980.

McGowan, Richard. Government Regulation of the Alcohol Industry: The Search for Revenue and the Common Good. Westport, Conn.: Quorum Books, 1997.

Pamela E. Pennock

See also Brewing ; Wine Industry .