Going once, going twice, it is history now.
Narrator:In 2022, Pappy Van Winkle's 23 year old family reserve went for a jaw dropping $52,500 at Sotheby's in New York, exceeding presale projections and going far beyond anyone's expectations. It's hard to dispute the public's enthusiasm for the Pappy family brand. And the story behind it is a marketing masterclass with extraordinary insights that can apply to any business. Welcome to AudioPost from Loyel Media, where we talk about using the power of media to market your business. Coming up, how more than a century of one family's bootstrap ingenuity and shrewd marketing built the iconic Pappy Van Winkle brand.
Narrator:In the late 1800's, just out of college, Julian Van Winkle, later known as Pappy, traveled Kentucky by horse and buggy, selling liquor for Louisville wholesalers, W.L. Weller and Sons. He was a star salesman with enough success to band together with a coworker and buy up the operation not long after W. L. Weller passed away. Even before this, the 2 salesmen were sourcing whiskey on the side at APH Stitzel, a local distillery.
Narrator:In time, Pappy and his partner would purchase Stitzel too and merge the whole seller and distillery.
Newsreel Announcer:It's Kentucky Derby Day, and we're at Churchill Downs in Louisville with a record crowd...
Narrator:Stitzel Weller Distillery opened on Derby Day in 1935, and Pappy ran it until the year before he died in 1965. It would become the most famous distillery in the world and produce what is considered by connoisseurs to be the finest bourbon ever made. Bourbon is a distinctly American product. About 95% of it is made in Kentucky. As a matter of fact, there are more barrels of bourbon than people in Kentucky.
Narrator:But to be classified as bourbon among other things, at least 51% of a whiskey's mash bill or recipe must come from corn. The maker has the liberty to choose the other 49%. And rye was traditionally added as the second grain. Then malted barley to round it off. But rye wasn't native to Kentucky.
Narrator:Little of it was grown in the state. Distillers would ship it in from the Midwest. To distinguish his spirit, Pappy chose native Kentucky wheat as his secondary grain, making his bourbon a bit smoother and sweeter, more complex. He introduced this wheated bourbon to the masses and established a product unique to Kentucky. The brew was around, but Pappy was the first to bring it to market on a grand scale.
Narrator:Pappy set a high bar. His commitment to excellence and uncompromising production standards have informed 4 generations of Van Winkle Bourbon Making. His image is the hallmark of the Pappy Van Winkle brand today. And his promise is honored and celebrated still for its honesty and simplicity. We make fine bourbon at a profit if we can, at a loss if we must, but always fine bourbon.
Narrator:According to Pappy's granddaughter, Sally VanCampbell, making fine bourbon was his bottom line. And he believed that if he made it right, everything else would take care of itself. Oddly enough, it would be 30 years after his death before the first bottle of bourbon that bore the name Pappy hit shelves. Stitzel Weller Distillery produced 800,000 cases a year of bourbon during its heyday in the 19 fifties sixties. But by the seventies, vodka and rum were becoming increasingly popular.
Narrator:A new generation wasn't interested in drinking what their parents drank. Ultimately, cheap bourbon flooded the market, forcing the sale of the family distillery. Fortunately, Pappy's son, Julian Van Winkle junior, who ran the business after Pappy's death, had the foresight to retain the rights to procure old stocks from the distillery and keep the Van Winkle brand name as a condition of the sale. This would be key to the brand's success in years to come. By the time Julian Van Winkle the 3rd, Pappy's grandson, inherited the business from his father in 1981, it was little more than a small distribution company.
Narrator:Still, Julian, now 3rd in line at the reins, saw untapped opportunity. Hardly anyone was selling aged bourbon, let alone premium aged wheated bourbon. It was a gap in the market he could not only fill but dominate. This bold venture would allow Julian to not only reenvision the brand but also uphold Pappy's promise to never compromise on quality. Julian the 3rd was 32 with a wife and 4 young children when he took over the family business.
Narrator:Building a business around aged bourbon would mean a substantial investment of time and money for even a shot at big dividends further down the road. He wasn't sure if he could pull it off or not, but it was the only thing he knew how to do. So he kept at it. Julian started buying up old inventory of his family's bourbon from struggling distilleries and other brands that had been sitting in barrels for years. He launched the Pappy Van Winkle label, featuring his grandfather Pappy's now iconic image, and began releasing his premium bourbon.
Narrator:Looking back, he says, what really kept him going was that he knew he was selling a great product. He just had to convince whiskey consumers of that too. In 1994, Julian released the world's first 20 year old bourbon. Soon enough, he would have the proof that trusting his gut was the right call. Julian remembers exactly when the Pappy brand took off.
Narrator:It was in Chicago when his 20 year old Pappy was awarded an unprecedented 99 out of 100 rating at the Beverage Testing Institutes World Spirits Championship, the highest rating for whiskey ever given by the institute. After that, according to Julian, the phone started ringing off the hook, and he was short, didn't have nearly enough of it. It wouldn't be long before Pappy Van Winkle would become not only the world's most sought after bourbon, but also its most sought after spirit, returning bourbon to its prominence. The papy distilling and aging today will be ready to drink in 15, 20, or 23 years. Low production and high demand make Pappy extremely hard to find.
Narrator:In keeping with Pappy's conviction to always bottle less than you can sell, Julian only releases stock once a year. By limiting supply, demand increases
Narrator:and the brand takes on an air of exclusivity.
Narrator:Julian says this can be an ideal strategy for small businesses facing off big competitors, making the point that companies often get into trouble when they try to grow too fast. If they make a great product and keep production low, they'll never get stuck with big inventories when the economy turns tough. That's been the downfall of a lot of bourbon producers, he says. They just make too much of it. It loses all of its cache and it's not as special.
Narrator:Pappy knew where his product fit in the marketplace and had no interest in competing with lesser brands. He produced a top shelf bourbon steeped in tradition, the finest expression of indulgence and craftsmanship. And like his grandfather, Julian stuck to the high end market. According to bourbon historian Michael Veach, Julian had the advantage of purchasing only what he thought was good whiskey and passing on barrels below his standards. This commitment didn't come without sacrifice.
Narrator:Putting away bourbon for so many years was hard on the family. It cost a lot of money, and as Julian says, it's just sitting there for 10 to 23 years, so it's an expensive deal. The time, craft, and resources that go into producing a product at this level make it rare, allowing Pappy Van Winkle to command a premium in the marketplace. Aged bourbon is pricey for a lot of reasons. Years pass before it's ready to drink.
Narrator:Nearly a quarter of the bourbon evaporates while aging. And barrels are stored in rick houses for years. Then, year over year property taxes are imposed on each barrel. So the rub is if a barrel bourbon has been aging for a decade, the owner pays the barrel tax 10 times. But Kentucky is gradually phasing out the bourbon barrel tax with plans to eliminate it altogether by 2043.
Narrator:When he was starting out, Julian ran a small operation on a shoestring budget. He rolled up his sleeves and pounded the pavement to get the word out about his whiskey. Julian would use what were back then unconventional methods to promote his brew. He couldn't afford to advertise, so he got creative. He orchestrated bourbon tastings, hosted whiskey paired dinners and placed Pappy Van Winkle in high end restaurants, where his 23 year old Pappy would sell for $50 a glass.
Narrator:And at the urging of a colleague, Julian went so far as to pull together a Van Winkle type study at trade shows and events with wingback chairs, oriental rugs, bookshelves, and Pappy's grand image hanging above a make believe fireplace, all to attract potential distributors. His Pappy was showing up on the radar with impeccable timing. Just down the road, the Internet would break into the mainstream. And by the mid 2000s, social media would skyrocket. Both online and off, a surge of word-of-mouth buzz around the Pappy brand would help build customer loyalty and boost revenue to levels never seen before in the industry.
Narrator:It took a lot of sweat, a bit of luck, and unquestionable resilience to shepherd the family business through hard times for the next generation. But through all the setbacks and adversity, Julian has come out on the other side with a thriving heritage brand that enjoys worldwide name recognition. In his book Pappyland, award winning journalist Wright Thompson says, Julian and his wife, Cissy, have been working closely with their 4 children to create a solid succession plan. In 2001, Julian's son, Preston, joined him to help run the business. And in 2013, his triplet daughters launched Pappy and Company, a bourbon inspired lifestyle brand.
Narrator:The Van Winkle's have all been focused on the pivotal next steps for both the dry goods business and the whiskey business. It's not easy, Julian says, but we're learning how to do it right. If you'd like to learn more about how to make your marketing more powerful, check out episode 8, expert tips from the Golden Age of Advertising, when ad industry giants ushered in the creative revolution. Thanks for listening to audio post from Loyel Media. You'll find additional resources with practical tips and useful insights about leveraging the power of media to market your business at loyelmedia.com.