51FORBES.COMHO
W^
TO
PL
AY
IT^
BY
AN
TO
IN
E^ G
AR
A:^
PA
TR
IC
K^ W
EL
SH
(R
IG
HT
)
C O N T R A RIA
N(^)
(^) F
O
R
B
E
S
(^) L
IF
E
JUNE 30, 20 19
along with some funds from friends and fam-
ily—to start Barrell. But it immediately became
evident that he would need more cash to stay
competitive. In 2016, after several rounds of ne-
gotiating, Beatrice thought he’d found a great
partner. A $3 million private equity injection
would help him buy more barrels and double
down on his guerrilla marketing strategy of en-
gaging with infl uencers.
Then a phone call derailed the deal: The fi rm
(which he declines to name) demanded that Bea-
trice become an “at-will employee,” meaning “if
they didn’t like the color of my shirt they could
fi re me,” he remembers. So he turned down the
money until he found the right local investor,
Brook Smith, who sank an undisclosed amount
into Barrell. Beatrice says he has also declined at
least fi ve other investments.
“Joe is the Lone Ranger of the bourbon indus-
try,” says Edward C. Normandin, Barrell’s out-
side counsel and a partner at New York’s Pryor
Cashman. “He’s more willing to walk away from
deals than most entrepreneurs. And I had con-
cerns that he could harm the business.”
Normandin now admits that the traits that gave
rise to those concerns are among Beatrice’s stron-
gest attributes. In fact, Beatrice analyzes every
small detail, like studying hundreds of label vari-
ations to learn why consumers will pay $20 more
if the label is on the lower third of the bottle. Even
the name, Barrell, came from weeks of debating
various monikers (including Blue Dingo) before
he landed on it. In the end, Beatrice believed that
the name would explain exactly what was in the
bottle—whiskey straight from the barrel.
This thoroughness even extends to his Louis-
ville conference rooms. “You want the chairs to
be really uncomfortable, so the meetings don’t go
too long,” Beatrice says. And he must use those
seats when negotiating for whiskey, because Bea-
trice has a simple philosophy: “Never pay retail.”
If a broker wants $5,000, Beatrice won’t pay a
dime more than $3,500, and his self-trained pal-
ate can detect cask quality. Barrell says it has an
inventory of 3,500 to 5,000 barrels at any time
and will produce about 35,000 cases of spirits
this year.
“There’s just not fooling Joe,” says Jeff Hopmay-
er, founder of the Brindiamo Group, a beer and
spirits broker. “He will know where something is
from and knows what he should pay for it.”
That hard-nosed attitude has also kept Bea-
trice from spending too much on something as
basic as building or buying a distillery. While he
has purchased some equipment, “we have decid-
ed to approach a distillery in a diff erent way, on
a diff erent scale, to have an impact on our blend-
ing,” he says.
Above all, Barrell’s revenue wouldn’t have
grown from more than $300,000 in 2014 to an
estimated $8.5 million in 2019 if its whiskey
lacked character. And Beatrice is not beholden
to one state. The Barrell Bourbon New Year 2019,
for example, is a blend of Kentucky, Tennessee,
Indiana, New York, Texas and Illinois straight
bourbons. In the history of American whiskey,
that combination did not exist prior to Barrell.
And he’s only shaking things up more, receiv-
ing federal approval for an American vatted malt
and pursuing rum cask releases. His approach to
rum is the same as with whiskey, tasting casks
until the fi nest fl avors surface.
“We let the barrels speak to us,” Beatrice says.
“We fi nd thematic tastes and pair based on what
we want in that moment. If we taste chocolate
in a barrel and really like it, we select barrels to
amplify that note. I want the sum of our parts
to be better than the individual components.”
FINAL THOUGHT
“THERE IS NO BAD WHISKEY. THERE
ARE ONLY SOME WHISKEYS THAT
AREN’T AS GOOD AS OTHERS.”
— Raymond Chandler
HOW TO PLAY IT
According to
Ben Axler
Not all bourbons
age well, but bet-
ting on whiskey
makers like Brown-
Forman, maker of
Jack Daniel’s, and
Diageo, owner of
Bulleit, has been
a market-beating
trade for years.
With enterprise
values at 20 times
operating cash
fl ow, these stocks
are no longer
cheap. Investors
should avoid the
sector’s highest
fl ier, MGP Ingredi-
ents, says activist
short-seller Ben
Axler of Spruce
Point Capital Man-
agement. Unlike
others in the sec-
tor, MGP doesn’t
own any notable
brands but is an
outsourced dis-
tiller, and it pays
a paltry 10-cent
quarterly dividend.
A slowing of new
entrants in bour-
bon and rye will hit
MGP hard, Axler
argues, as will any
insourcing of pro-
duction by existing
customers. MGP’s
operating profi ts
fell 18% in the fi rst
quarter.
LOUISVILLE SLUGGING
Barrell Craft Spirits founder Joe Beatrice fell in love
with Louisville in the 1990s and has since moved there.
Here are his top three bars.
Lola at Butchertown Grocery:
“I love the feel of the restaurant and bar,” he says. “They
do fun drinks such as a bone-marrow-washed cocktail.”
Commonwealth Tap:
“An amazing bourbon list and great people-watching.
You can see what the new Louisville looks like here.”
Jack Fry’s:
“This is classic Louisville.”
F
Insider Info
Lola