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TheStreet Open House

Can Beam Still Call Its Brands Bourbon?

Stocks in this article: BEAMDEO

PORTLAND, Ore. (TheStreet) -- Beam  (BEAM) has a new owner in Suntory (STBFY), a new home in Japan and a new portion of the Asian market to explore.

But does it still have the right to call its flagship brand, Maker's Mark and Knob Creek "bourbon?"

The $13.6 billion Suntory plunked down for Beam on Monday entitles it to all of the distiller's brands, but it in no way entitles it to call the brands it produces "bourbon." Half a century ago this May, Congress declared bourbon whiskey a "distinctive product of the United States" and, as such, laid the foundation for what distillers could rightfully call bourbon when selling it here in the U.S.

According to federal standards, bourbon made for U.S. consumption must be produced in the United States; made from a grain mix of no less than 51% corn; aged in new, charred-oak barrels; distilled to no more than 160 proof (80% alcohol by volume); entered into the barrel for aging at no more than 125 proof (62.5% alcohol by volume); and be bottled at 80 proof or more (40% alcohol by volume). Age it for two years or more and keep it free of coloring and flavoring, and you've got yourself some straight bourbon.

It's a fairly straightforward rule and it's exactly what both domestic and overseas bourbon drinkers are looking for. According to the Distilled Spirits Council trade association, whiskey made up a whopping 70% of the $1.5 billion in liquor the group estimates the U.S. exported in 2012. That's triple the nation's beer exports and $250 million more than its overseas wine shipments.

Meanwhile, the Kentucky Distillers' Association notes that bourbon accounts for 35% of all spirits produced in the U.S. Bourbon fuels $2.5 billion in sales in the U.S. and in the 126 countries where it's exported and makes up the majority of U.S. whiskey exports. Kentucky would know, as it produces 95% of the nation's bourbon at distilleries including Jim Bean's in Clermont, Maker's Mark in Loretto, Buffalo Trace in Frankfort and Four Roses in Lawrenceburg. The 4.9 million barrels of bourbon aging in that state outnumber its 4.8 million residents.

But not all bourbon makers manage to hang on to their birthright whiskey. Consider the case of Four Roses, which exists today primarily as a small-batch brand. It was the most popular bourbon in the country during the depression and World War Ii, when it was purchased by Seagram in 1953. Seagram wasn't taken with Kentucky's straight bourbon and decided to focus on blended whiskey in th e U.S. instead. While Four Roses' trademark straight bourbon made its way around Europe and Asia, its blended whiskey reduced its brand to bottom-shelf fodder in the U.S.

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