New distillery, restaurant deals, private equity add up to growth for Ole Smoky

Posted at 6:00 AM, Oct 26, 2014
and last updated 2014-10-27 09:58:56-04

A tall, lanky figure wearing denim overalls and sporting long hair and a gray bushy beard, Bruce Whaley stood in front of the tasting bar at Ole Smoky Tennessee Moonshine’s newest distillery at The Island in Pigeon Forge and pointed to a dozen or so Mason jars filled with various flavors of corn whiskey.

Pumpkin Pie. Orange. Sweet Tea. Apple Pie. Blackberry. And his favorite, Charred.

“It’s a good taste. You wanna try some of it?” asked Whaley, an Ole Smoky employee whose Appalachian accent completed an image reminiscent of a stereotypical mountain bootlegger.

For a company like Ole Smoky that’s trying to sell the once-illegal spirit, getting consumers to taste its product for the first time is critical in what has become an increasingly crowded beverage category.

It only takes one swig of bad moonshine to turn someone off for good, according to Ole Smoky CEO John Cochran.

“The best way to introduce people to our brand and the category is to have them come visit us,” said Cochran, a beverage industry veteran who joined Ole Smoky in 2013, after leading the successful growth of the Pabst Blue Ribbon and Fiji bottled water brands. “As a premium player, we want their first moonshine experience to be with us.”

Ole Smoky Tennessee Moonshine has been on the front end of an emerging category since the state Legislature loosened laws regulating production of distilled spirits in 2009.

The first legal moonshine brand in Tennessee, Ole Smoky opened a distillery in downtown Gatlinburg four years ago and hasn’t looked back. It is now distributed in 49 states and Canada with an eye toward international growth. It already has deals in Europe, South America and Asia.

Its moonshine is also served at hundreds of Outback Steakhouse and Logan’s Roadhouse locations nationwide and, come November, in 1,000 Buffalo Wild Wings restaurants.

The Sevier County business that has more than 200 employees expects to double in size over the next couple of years while strategically adding several more distillery and retail locations. Cochran declined to say where those would be, but Ole Smoky just opened its second distillery, a 6,000-square-foot, multimillion-dollar facility at The Island, a tourist attraction just off the Parkway.

It also has made substantial investments in marketing and trade promotions and development.

“It takes all that stuff,” Cochran said. “We’re seeing dividends from that, but it takes a while. We’ve come a long way in four years.”

Last November, Ole Smoky sold half the company to Connecticut-based private investment firm Centerview Capital and used the proceeds to help accelerate growth. Private equity typically exits an investment after three to seven years.

Asked where he sees the company in five years, Cochran replied, “You would assume if all goes well, the founders and private equity investors would want to sell the company in the vicinity of four to five years. Our objective is to grow the business to create enough profit to make everybody happy. It’s gone very well. We continue to grow this year. The future is bright. That puts us in a revenue position that’s quite good.”

The road to success hasn’t been without its hurdles. The company is in a legal trademark fight with Knoxville-based restaurant chain Copper Cellar Corp. That suit and countersuit are still pending.

And there are a lot more choices for moonshine today than when Ole Smoky launched.

The fastest-growing whiskey segment, corn whiskey has seen its volume increase by more than 1,000 percent since 2010, according to Technomic, a food-and-beverage analysis firm.

Ole Smoky founder Joe Baker, a 39-year-old Sevier County native who spent a decade practicing criminal law before persuading two other attorneys to join him in his moonshine efforts, said he’s heard that 200 brands have started since then.

“It’s crazy,” Baker said. “I think it’s seen as, ‘If that fella can do it, I can do it better.’ So it’s an easy thing to say, ‘I’ll do that.’ It has grown, but there’s only two or three brands that you’ll see on a national level.”

One local competitor working to become a major player is Sugarlands Distilling Co., which opened a distillery in Gatlinburg in April and has about 50 employees. Its products are in 12 states and should be in nearly all by mid- to late-2015.

The company has already been approached by several international distribution firms, said Brent Thompson, Sugarlands director of strategy.

“It’s a conversation we’re just starting to have,” he said.

Thompson acknowledges that competition is fierce, and some play better than others.

“It comes across in different ways,” he said. “It’s definitely highly competitive in the spirits world. You’ve got these big whiskey companies on their toes because it’s taking away market share. Distributors have to take it seriously. That’s good for us. We feel the door is open for us to focus on taste and authenticity. Marketing is great, but there has to be something to the product.”

While he’s excited about being part of a new category, Thompson echoed Cochran’s quality concern, noting “there’s a lot of crap and the consumer has to sort it all out.” Efforts to unite distilleries in a guild network that formed earlier this year, he said, should go a long way to help.

Still, they can’t get distracted by the competition.

“We’re just focused on us,” he said. “We know there will be more on the way. And we’re OK with that. We feel really good about what we’re offering and the strength of what we’ve been able to do in the last six months to position ourselves where we’re really catching up with brands that came out in the last few years. It’s really a race to the top in my mind. The way we’re expanding … we wouldn’t be able to do that if it wasn’t a good product.”

When Cochran worked in the bottled water category, it had 600 competitors. The biggest opportunity for corn whiskey, he said, is to work together as a group to persuade consumers to move away from spirits they’ve been drinking for years.

“You can’t wake up every day and worry about competition,” Cochran said. “We’re all little companies. We are the little guys, and the big guys like it when the little guys kill each other.”