The Sloppy Battle for the Future of Craft Rye
For much of his adult life, Raj Bhakta has lost, and a lot of people have seen him do it. First there was his turn on Season 2 of The Apprentice; he was fired in the ninth episode. Then there was his disastrous run for Congress as a Republican in Pennsylvania’s 13th District; he lost by 32 points. Of course, Bhakta didn’t do himself any favors. On The Apprentice, he was known for his lady-chasing ways; when he ran for Congress, he made an ad about border security in which he crossed the Rio Grande on an elephant while a mariachi band played in the background. There are a few DUI citations on his record. Google Image search him, and you’re likely to see him smirking, with a boarding school-worthy forelock of hair and bow tie that combine to frame a perfect strike zone for your fist.
Now, Bhakta is selling a “boutique” rye whiskey, WhistlePig, out of his farm in Vermont. At first glance this might appear to be just another page in the D-List Celebrity Handbook (Chapter 4: Monetize Your Brand!). But here’s the nutso thing. Bhakta has actually made something out of WhistlePig. If cocktails are still the new hotness, and whiskey remains at the center of that hotness, then rye—a spicier, drier brother to bourbon—is its plasmic, fusion-reactor core. Bhakta got there before most. “You go back to maybe 2003, 2004,” says Frank Coleman of the Distilled Spirits Council, “we were even considering not tracking rye anymore because it was just so small.” Since 2009, however, interest in the spirit has skyrocketed, with supplier revenue jumping 609 percent through last year. Bhakta introduced WhistlePig in 2010 and has seen sales go from $1 million in its first year to more than $10 million in 2015. Like a wise man from Van Halen once said: Everybody wants some.
WhistlePig isn’t cheap. A standard 750ml bottle of its least expensive variety costs around $75, and some special editions trade for as much as $1,000 among collectors/assholes. Such valuation runs counter to the beverage’s history. Unlike single-malt scotches and other liquors, rye has been decidedly anti-aspirational—its most common mixers were failure, disappointment, and regret. But the cyclical nature of the Next Cool Thing to Order at a Bar has put rye in the spotlight (it was a favorite of Don Draper), and WhistlePig is the fanciest you can buy. “WhistlePig’s got a lot of cachet now, and deservedly so,” says Kevin Brodeur, beverage director at Maysville, a whiskey-centric New York restaurant that offers more than 200 ryes and bourbons. “It just flies out of here.”
WhistlePig has given Bhakta the win he long sought. “I presided over a series of very public failures,” he says, “and I started to think, Maybe I’m just a f---ing loser.” WhistlePig changed that. Or promised to, until his partners turned on him, moved to remove him from the company, and dredged up every untoward thing he’d supposedly done in his life.
On a dank spring day, before any of this has gone down, Bhakta is walking around WhistlePig Farm, a 1,300-acre property in western Vermont. He wears khaki trousers, work boots, and a red plaid shirt that presents just the right amount of flinty New England threadbareness. A Belgian shepherd, Jezebel, walks beside him. We pass through an intersection of three gravel roads that Thornton Wilder could have named: Palmer, Shacksboro, Quiet Valley. The buildings they pass by, in turn, could have been designed by Fisher-Price, with traditional red sides and white trim. The land rolls and dips to a tree line of Vermont oak.
A split-rail fence near the main buildings holds a dozen or so Mangalitsa pigs, purchased in honor of the brand. The breed, Hungarian in origin, was once almost forgotten but is now considered an ultrapremium source of meat. The pigs come over to greet Bhakta. “They’re like the Kobe of pork,” he says, scratching their heads.
Bhakta came to own the farm in 2007, after a failed trip to India to find what he calls “the Indian Steve Irwin,” referring to the star of The Crocodile Hunter, who died in 2006. He thought he could find another animal whisperer on the subcontinent, someone around whom he could develop a reality series. “A billion people in that country,” he recalls ruefully, “and I couldn’t find one f---ing guy.”
Dejected, he returned to the U.S. and, at a friend’s suggestion, bought 500 acres of Vermont farmland. When the financial crisis hit a year later, he moved to the area; he lives there with his wife, Danhee Kim, who was previously a marketing manager for the company, and their two young children. In considering how to turn his acreage into a moneymaking enterprise, his mind turned to alcoholic beverages: first beer, then vodka, and ultimately whiskey. “My general thinking was: Well, you can’t go wrong. I mean, how can you go broke in the liquor business?” Bhakta says. “Obviously, I knew nothing. I knew nothing.”
To get WhistlePig up and running, he turned to old friends and colleagues from an earlier career in investment banking. When he was fresh out of college, he’d worked at a small company that employed Wilco Faessen, a Dutch banker who now works at Barclays, and Alejandro Santo Domingo, a scion of Colombia’s richest family, who are also major shareholders in SABMiller. Faessen came on to help raise capital; he also brought in Chris Evison, who’s chief investment officer of Quadrant Capital Advisors, the Santo Domingos’ family office. Both Faessen and Quadrant bought stakes in the venture, and Faessen and Evison took seats on the company’s board.
The farm became WhistlePig’s headquarters, featuring prominently in its marketing material. And it would be a hell of a place from which to make and sell whiskey: pastoral, scenic, historic. But it’s an open secret that none of the WhistlePig flying off store and bar shelves is made on the farm. The spirit comes from large distilleries such as Alberta Distillers (ADL), which is owned by Japanese liquor giant Beam (as in Jim) Suntory.
Bhakta came to this Canadian source thanks to a consultant named Dave Pickerell, who’s something of a legend in whiskey circles. He played football for West Point and, after serving in the military, earned a master’s in chemical engineering from the University of Louisville. He remained in Kentucky and worked as the master distiller at Maker’s Mark for 14 years before leaving in 2008 to become a consultant. Pickerell has been called “the Johnny Appleseed of whiskey” and has advised more than 60 startups with the desire, if not the know-how, to create a rye or bourbon.
The liquor Pickerell sourced from Alberta was unlike other rye whiskeys. Most are made from a mixture of rye and corn, but the ADL variant was 100 percent rye. Normally used in sparing amounts, as a flavoring agent for blended Canadian whisky, it’s less sweet than other ryes, distilled in what used to be known as the Monongahela style, named after the river where it was made in the years before Prohibition. The ADL rye had also been double-barrel aged. Ordinarily, if you leave whiskey in the same barrel too long, it starts to taste like sticks. But change the barrel partway through and you can continue the aging process, without harsh tannins and other compounds leaching in from the wood. “We were gutsy,” says Pickerell. “At the time, nobody had taken a flavoring component from Canadian whisky and just marketed it as a straight whiskey.”
Of course, most WhistlePig drinkers aren’t aware of its Canadian origins. “The company would talk about Vermont and show pictures of this pretty farm and all this stuff, and they certainly led people to believe that the product was made by a micro-distillery in Vermont,” says Chuck Cowdery, a whiskey blogger and author, “because that’s what people want to believe.” This isn’t uncommon. The Bulleit bourbon you can buy today isn’t made by Tom Bulleit or Bulleit Distilling, but by Four Roses Bourbon of Lawrenceburg, Ky. Basil Hayden’s and Old Grand-Dad are both part of Beam Suntory and even come from the same distillate. Almost every other rye for sale in the U.S. is made at a single distillery in Indiana. “We all want to think about the charm in the glass, not necessarily the billion-dollar company that has made what’s in your glass,” says Christina Philburn, producer of WhiskyCast, a podcast. “People don’t just drink the whiskey, they drink the concept of the whiskey, which is the backstory.”
Bhakta has been successful at bottling the Vermont concept, but he has higher ambitions. He wants to make his own rye, right there on his farm, and has begun moving in that direction. We head to the barn, where he shows me the centerpiece of this effort: a new distilling room, with a still that rises two stories up. It’s a steampunk dream rendered in copper, with glass portals along the neck, through which bubbling liquid is visible. Two men tend to it, tasting whiskey at various points along its path to distillation. The equipment was made by Vendome Copper & Brass Works of Louisville, a company that is to stills what Steinway is to pianos. Impressive as it is, WhistlePig’s still can produce only a small fraction of the more than 200 gallons of distillate a minute that Jim Beam’s Clermont, Ky., facility can make. But it’s the foundation upon which Bhakta wants to forge his legacy. “I’m trying to build a multigenerational family business,” he says.
Already, many of the farm’s 1,300 acres are being planted with rye grain, which grows easily in Vermont’s cold, wet climate—much more so than corn, which is why rye has traditionally been made in the North, and bourbon, a corn-based whiskey, in the South. Some of the oak trees at the back of the farm are being cut down and sent to a cooperage, to be made into barrels. “We like to call it ‘triple terroir,’ ” Bhakta says. “Our water, our grain, our wood.”
The new whiskey—tentatively called FarmStock and available next year—won’t replace WhistlePig’s existing product lines anytime soon. Both Bhakta and Pickerell are aware of the supply and quality problems that other craft distillers have encountered when trying to scale up. “Raj and I, we play chess,” Pickerell says. “A lot of craft guys are playing checkers. If our production levels get high enough and we’re good enough, we might source everything in-house. But if the growth rate continues to be astounding, we’re not going to cut off our source of supply until we’re sure that we’ve got enough.”
To further hedge against supply issues, Bhakta made another smart gambit early on. One of the obstacles to entering the whiskey business—as opposed to vodka or gin—is the necessary step of aging, which prevents you from earning money on Day One. By law, straight bourbons and ryes must be aged at least two years before they can be sold as such, and many distillers age the liquor a minimum of four. WhistlePig has secured a pipeline of aging rye ready to support three different rye vintages, aged 10, 12, and 15 years. Bhakta estimates that the inventory is worth $300 million. “We’ve effectively cornered the market on aged premium rye,” he says.
With WhistlePig’s value so high and its sales growing at a steady clip, you might think Bhakta’s partners would be happy. But on May 6, six weeks after I visited the farm, Faessen and Evison moved to unseat Bhakta as operating manager. Bhakta says they sat him down and told him, “Listen, you’ve got two options here: One is easy, one is difficult. The easy option is you step aside and we put this company on the block, and you walk away with a lot of money. And the second option is we bankrupt you in the courts and engage in a character assassination campaign.” Faessen and Evison declined, through their attorneys, to comment on the record and referred me to their court filings.
In a phone interview, Bhakta describes the turmoil as “a blatant power play. … And I think it’s a rank and dirty gangster move.” He filed a suit in the Delaware Court of Chancery to block his removal and gained a status quo order allowing him to remain at least until the trial begins in the fall. Faessen and Evison retained the services of the high-profile law firm Boies, Schiller & Flexner and filed a response to Bhakta’s suit, in which they outlined to the court their reasons for wanting him out.
One reason Bhakta is unfit for the job, Faessen and Evison allege, is his history of driving under the influence, for which he was cited in 1997, 2004, and 2015. They also say in the filing that “Bhakta ignored the Board of Managers’ repeated warnings that he must use alcohol responsibly” and that he is “indifferent to his responsibilities and obligations as head of a liquor company.” They further allege that he has smoked marijuana on company property (though the farm is, after all, in Vermont).
They also say that Bhakta, without seeking the board’s permission, granted an equity stake in the company to Kim while she was working there and that he used company funds to enrich himself. (In his court filing, Bhakta describes the equity stake as “good faith oversight, not fraud,” and denies the latter allegation.) Faessen and Evison also argue that Bhakta misrepresented his plans to investors when he was raising funds. They claim that WhistlePig was presented to investors as a craft distiller and that, like most startups, it had an endgame in mind, whether it led to an initial public offering or a sale to a private equity or larger liquor company. “If potential investors had known Bhakta planned to maintain control of the company in his family in perpetuity,” Faessen and Evison state in their filing, “they either would not have invested in WhistlePig at the same price and on the same terms or would have declined to invest at all.”
Bhakta disagrees. “We have been talking about a long-term, farm-based business in WhistlePig from the beginning,” he says. Ever the politician, he tries to cast his plight in populist tones, invoking broader themes about small businesses and the American economy. “The current trend in this country is that large corporations get what they want and the little guy gets screwed,” he says. “If I just wanted to be rich, I would’ve taken their money and walked away, but I’m not. I’m trying to make a stand because this company is something I believe in.”
The idea that a large spirits company would be interested in WhistlePig isn’t altogether surprising. (Rumors abound in the industry that Bacardi has been sniffing around.) It would be difficult even for a big multinational to re-create what Bhakta has been able to assemble, and in both liquor and beer, consolidation has been happening at a rapid pace over the past few years. The Santo Domingos have seen their already considerable fortune grow by becoming the second-largest shareholder in SABMiller, which is being acquired by its archrival, Anheuser-Busch InBev. In November 2015, San Diego-based Ballast Point Brewing & Spirits was acquired by Constellation Brands for $1 billion. In whiskey, the same combinations have been taking place. Maker’s Mark and Jim Beam were bought by Beam Suntory for $16 billion in 2014. Angel’s Envy bourbon was purchased for an undisclosed sum by Bacardi in March 2015.
Turning WhistlePig into a prime target for acquisition was a spike of success for Bhakta after a series of disappointments. If he can convince a judge of his business acumen and his respectability—no small feat given his past—in the face of some deep-pocketed adversaries, he may yet be able to keep the company he built. “Look, I’m by no means perfect,” he says. “I’ve drunk too much. I’ve partied too much. I’ve been guilty of perhaps womanizing. There are a lot of things that I’ve done that I’m not proud of.” But he also claims those days are behind him: “I made a resolution six months ago to change in many respects. And one of the areas was removing alcohol as part of my daily life, and the results have been terrific.”
That spring night at Bhakta’s Vermont farm and distillery, before the attempted coup and the promises of sobriety, we have drinks before dinner, then dinner and drinks, then drinks with employees at a bar, then more drinks back at the office. (When you write about a whiskey company, you wind up drinking a lot of whiskey—at least I do.) The conversation ranges across Austrian military history, progressive conservatism, and Vermont’s antibusiness proclivities. At one point the topic turns to something more anodyne: cars. Bhakta is into them, and so am I. When I tell him that I drive a Volkswagen diesel, one whose emissions protocols the company has admitted to having rigged, his eyes light up. “Come with me,” he says. “I want to show you something.”
We drive to his house, which is empty; his wife and kids are finishing a trip to South Korea. We pass through a ramshackle living room and enter the garage. “Check this out,” Bhakta says, turning on the lights. “You’re not going to believe this.”
Oh. It’s an early-’80s Cadillac Seville. “Oh, it’s an early-’80s Cadillac Seville,” I say.
“No! You’re missing the key detail—check the badge at the back!”
Ah. It’s an early-’80s diesel Cadillac Seville—one of the darkest chapters in American automotive mediocrity. Coming off the fuel crisis of the late 1970s, U.S. carmakers started flirting with more fuel-efficient diesel engines. General Motors wanted to produce a diesel quickly, so it modified an existing gas engine for diesel use. The result was about as powerful as a hair dryer, and as reliable as a Lauryn Hill concert appearance. After a few years of embarrassment, GM pulled the plug on the engine, sealing diesel’s fate in the U.S. for decades, until VW came along to revive and then bury it again.
What Bhakta has, in other words, is a tacky 1980s Cadillac with a fatal flaw at its core. Most people would be glad to be rid of such a car, but he keeps his in near-mint condition. “It’s such a mess,” he says, “but there’s nothing like it.”