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article imageJack Daniel's angers rivals over 'Tennessee whiskey' rule

By Juliette Michel (AFP)     Mar 30, 2014 in Business

For Jack Daniel's, Tennessee's world-famous corn-based whiskey should be made according to a strict recipe -- basically, its own.

But to rivals, some with their roots in ginning up moonshine in the foothills of the Appalachian mountains, Jack Daniel's wants to lock them out of a booming business.

In a battle of two global giants of liquor distribution, Diageo versus Brown-Forman, Jack Daniel's wants legislators in the state capital Nashville to implement clear standards on what spirit can wear the "Tennessee Whiskey" label.

The industry powerhouse says only the drink that is made from at least 51 percent corn fermented mash, aged in new barrels of charred oak, filtered through maple charcoal and at least 40 percent alcohol should qualify as Tennessee whiskey.

Unsurprisingly, that is how the 148-year-old Jack Daniel's makes its own bourbon-style whiskey.

The distiller, owned by Brown-Forman, was able to push that standard through the Tennessee general assembly last year before competitors could mount resistance.

Diageo, whose George Dickel brand is the state's number two whiskey -- and is already made to the new official code -- said Brown-Forman engineered the change through "misleading and deceptive political moves" that gives it an advantage.

Establishing the pro-Jack Daniel's definition amounts to "effectively reversing the flexibility that has been enjoyed for more than 130 years by Tennessee whiskey distillers," said Guy Smith, Diageo executive vice president for North America.

"Diageo is willing to consider a standard for Tennessee whiskey," he said.

"However, it is imperative that standard be reflective of the collective input from Tennessee whiskey distillers large and small, not just from one oppressive company as is currently the case."

- Unfair competitive advantage? -

Jack Daniel's dominates the business from its headquarters in Lynchburg, just west of the Appalachians. It produced 11 million cases last year, compared to just 130,000 by George Dickel, located just a few miles away.

The fight is over principle, for one, but also over an economic issue that disadvantages especially the many smaller independent distilleries trying to make a mark in the spirits business.

The rule requiring the use of new barrels -- rather than reusing them -- can be a heavy cost, at hundreds of dollars each.

Phil Prichard, owner of Prichard's distillery, said the state law violates other laws against monopolies and gives Jack Daniel's an unfair competitive advantage.

"We have plenty of federal regulations that define our product type. But it is our choice how to combine those ingredients, how to manage the techniques that allow us to create those products," he told AFP.

"The final arbiter of quality, those who will judge our quality best, are those who buy our products," he added.

Jack Daniel's says the move is not to protect its market power but instead to help the Tennessee whiskey brand, in the same way that other famous drinks -- such as champagne, cognac, and scotch whiskey -- are defined by strict production guidelines.

"Not any kind of sparkling wine can call itself champagne," said Jeff Arnett, the master distiller at Jack Daniel's.

By maintaining a production standard, he said, "champagne is held in a higher esteem as a higher quality product ... It does not mean that all champagnes will taste the same. It is the same for cognac or armagnac."

The new rules, he argued, will help small distillers.

"They don't mind being held to a higher standard. They don't want to create cheap products that would become synonymous with the state name," Arnett said.

The fight has brought the weight of two industry giants down on the capital of the southern state.

Brown-Forman -- based in Louisville, Kentucky -- distributes Finlandia vodka, Pepe Lopez Tequila, Canadian Mist, Southern Comfort and Early Times whiskies, and Korbel champagne.

Diageo is much larger -- its brands include Smirnoff, Johnnie Walker, Baileys, Crown Royal and Guinness.

On Tuesday, the opponents of the Jack Daniel's standard scored a minor victory in the state's general assembly.

It decided to put the rule under study that would take input from the entire industry. But it stopped short of revoking the rule, which George Dickel and Diageo had demanded.

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