The Bourbon Industry Was Opposed to Change. Then Jefferson's Bourbon Started Changing Everything -- and Winning.

Jefferson's Bourbon has upended the staid Kentucky liquor's heritage.

Magazine Contributor

April 26, 2018 15+ min read

This story appears in the May 2018 issue of Entrepreneur. Subscribe »

Trey Zoeller walks into Jack Fry’s, a Louisville bistro founded in the 1930s by a beat cop with the winnings from a fixed horse race (or so the story goes), takes a seat at the bar and orders us a couple bourbons. And then a couple more. And then some more. And as time drifts past and Jack Fry’s fills with diners and drinkers, and more bourbon flows, Zoeller -- a tall, slim, engaging man with blue eyes and a dimple in his chin -- tells the story of how he became a heretic.

In April 2008, Zoeller flew to Costa Rica to celebrate his 40th birthday with a group of childhood friends from Louisville -- including a guy named Chris Fischer, who was also turning 40. Fischer and Zoeller were well along their own unique life paths: Zoeller had been in the bourbon business for 10 years by then, and Fischer was on his way to distinguishing himself in the field of great white shark research.

To celebrate, Fischer took Zoeller and his buddies out on his research vessel, the Ocean, where he showed them how he had been developing a new model for scientific research by funding his shark tracking not with government grants but with corporate sponsorships from the likes of Yeti and SeaWorld. While Fischer talked, however, Zoeller was focused on something else: how the bourbon he had brought onboard sloshed around the bottle as the boat moved through the waves.

Instead of making him seasick, it gave him an idea. “Hey, we should put some barrels on here,” he told Fischer.

Zoeller believed that the heaving of the ocean would maximize the aging process by constantly sloshing the bourbon against the insides of the charred oak barrel, leading to a deeper, darker bourbon than people were used to. The notion was about as close to blasphemy as one could come in the bourbon world at that time. In those days, before Zoeller cut a swath through the industry by spinning off a string of bold and wildly popular innovations, bourbon was one thing and one thing only: whiskey made mostly with corn, and aged for at least two years in barrels warehoused in Kentucky rickhouses. To purists, the combination of Kentucky water and Kentucky weather was what made bourbon bourbon. Anything else was just…whiskey.

Zoeller was born and bred in Kentucky, and his family had deep roots in bourbon, but he’d never bought that old line. He saw an opening, a chance to innovate, to create something new, so he took it. He and Fischer struck a deal. He’d put five barrels aboard the Ocean and donate a portion of the proceeds to fund Fischer’s research. And Fischer would circle the globe for three and a half years while he tagged sharks.

Of the original five barrels, only three survived. When Zoeller opened them up, what he discovered was a revelation. The whiskey came out as a dark bourbon -- a deep color that would take a land-aged bourbon at least twice as long to achieve. It pulled so much sugar from the wood staves over rough seas that it took on the caramel flavors of dark rum. And as the sea air permeated the barrels, it gave the whiskey the salty notes of a Scotch aged near the sea. All these notes combined into the undeniable flavor of salted caramel.

Eureka. He called it Jefferson’s Ocean, named after Fischer’s boat.

When Zoeller got those three barrels of ocean-aged bourbon to market in 2012, there was a measure of grousing from purists. “They said, ‘That’s not real bourbon, not aged here in Kentucky,’ ” Zoeller tells me. But instead of failing, it caused nothing short of a sensation in the bourbon-drinking world. Bourbon drinkers are quick to sneer at anything calling itself bourbon that’s been aged in Ohio or California, but bourbon aged at sea was so out of left field that their curiosity overcame their conservatism. They tried it. And damned if it wasn’t delicious.

As Zoeller watched his crazy experiment succeed, his mind began to race. He wondered, What other unorthodox things could I do that would delight the senses while separating people from their money? After all, his was a business whose leading lights had long made it a point of pride to say no to innovation. What would happen when one of them started saying yes?

From the very beginning, Trey Zoeller had a vision.

“All I ever wanted to do was have my own business,” he says. And he started early, as a kid growing up in Louisville. His first venture as an entrepreneur came at 12 years old, when he went into Cherokee Park with a shotgun to hunt mistletoe out of the treetops. He would bundle the mistletoe with ribbon and sell it door-to-door in the rich park-side neighborhoods during the Christmas season.

Then, after graduating from Tulane University in the early ’90s, Zoeller moved to Las Vegas, where he owned a business distributing medical supplies. Specifically: He sold HIV tests to sex workers, who were required by the Board of Health to take the tests weekly. “That,” he says, “was a really, really good business.”

Meanwhile, back home in Kentucky, his father, Chet, a trial lawyer who had successfully moved into telecom, discovered that there had been distillers in their family history. In fact, Trey’s eight-generations-back great-grandmother had been arrested in 1799 for production of illegal spirits. That got the Zoellers interested in rekindling the family tradition and opening a distillery of their own.

Easier said than done. There are barriers to entry for newcomers in any industry, but the bourbon business presents a unique challenge to entrepreneurs. In order to be called bourbon, the product is required by law to be aged at least two years. That means an upstart must invest a ton of cash on equipment, real estate and ingredients on the front end, and then wait for years before it can take a product to market. And that’s when the real trouble starts, as the new company works to find distributors, retailers, bar managers and customers to buy the stuff.

Even if a bourbon startup did manage to open a plant and start distilling its own product, it would still be far behind. The big distillers had spent the past century perfecting the science of distilling. They were very good at it, and they could do it at scale. Sure, the Zoellers could try it, but in all likelihood, they would have spent a lot of money and time and wound up with an inferior product.

But here’s the other thing with bourbon. Distillation is just the start. It’s one step, and it essentially yields moonshine. “It’s the maturation process that can turn [bourbon] into an art form,” Zoeller says. “That’s everything.” So what if they got someone else to handle the distilling and they focused entirely on maturation and marketing? Then, theoretically, they wouldn’t need the whole plant. And they wouldn’t need to wait years to get good product.

Eureka.

Here’s something most people don’t know about bourbon: The inventory systems of those old bourbon-aging warehouses are not the greatest. That means a distillery might misplace barrels in a warehouse and then discover a batch of them that have been there for 10 years longer than anyone had intended. Oops! It happens all the time. In the past, a distillery would just blend these over-aged barrels with its usual batch. This was in the mid-’90s, before the golden age of premium aged bourbon, so the distilleries didn’t have much use for the older, richer, darker stuff on its own. It would all just be lost in the blending vat.

This was the opening the Zoellers were looking for. They began approaching big, legacy distilleries to see about buying some barrels of this over-aged bourbon. The plan was to bottle it themselves, and then market it as an ultra-premium product selling for $50 -- about double the going rate for a bottle of bourbon. The old-school distillers, having no use for this stuff, were happy to oblige. Relative to today’s prices, Zoeller got it “very inexpensively,” he says. The old-line distillers were so caught up in their tried-and-true methods that they didn’t see the opportunity Zoeller saw. Single-malt Scotches with big age statements were all the rage then. “I thought we could build the same demand in bourbon,” he says.

At the time, only two other people were doing this, one being Julian Van Winkle, creator of the now almost hysterically sought-after Pappy Van Winkle reserves -- but the Zoellers saw in the approach the seeds of a bourbon renaissance. And they named their product accordingly: “Jefferson was certainly a renaissance man,” Chet Zoeller says.

In 1998, with a 15-year-old bourbon called Jefferson’s Reserve in the bottle, the Zoellers were finally ready to take it to market. In April 1998, they headed off to California for the Wine and Spirits Wholesalers of America convention at the downtown Marriott in San Francisco. The established liquor companies had rented suites of rooms to display their products to distributors and clients, but the Zoellers couldn’t afford that. So instead, Trey, then 29, rode the elevator and offered samples of Jefferson’s Reserve to anyone who would try them -- literally pulling bottles of his bourbon out of a briefcase. The approach worked. He snagged his first major distributors.

With the business up on its legs, Chet sold his half to his son, and Trey Zoeller kept on finishing and marketing bourbon that had been distilled and aged by legacy distilling operations. (Exactly who supplies them with booze is a contractual secret.) Trey grew the business methodically, adding a couple of states per year, and then moved into Australia and Russia. His innovations came from his “marrying different recipes of different ages together to get a more balanced and complex bourbon,” he says. He rolled out new brands like Sam Houston, Jefferson’s Rye and Jefferson’s Very Small Batch, in addition to the Jefferson’s Reserve.

Along the way, Jefferson’s product line attracted the attention of Castle Brands, a small U.S. conglomerate with Irish roots, which acquired Jefferson’s in October of 2006. “They saw potential in the American whiskey category and thought our product was where the growth in the category was heading,” Zoeller says. For him, it made sense. He was a “one-man band,” and he didn’t have the time or capital to invest in growth. And now he did.

The modest success of Jefferson’s Reserve and the boom from Ocean in 2012 gave Zoeller the confidence to push the boundaries of bourbon even further -- an instinct his partners at Castle Brands supported. “The great part of the relationship has been that they’ve given me almost complete autonomy to try things out,” Zoeller says. “Each idea I’ve come up with, they’ve said, ‘Sure, let’s give it a shot.’”

One of those big ideas came during a night of drinking in 2013. Zoeller was in Louisville with some wine guys from out of town, and he took them to Chef Edward Lee’s flagship restaurant, 610 Magnolia. At dinner, one of the guys with him said, “I’ve got this wine. What should we pair with it?” Zoeller said, “Screw that; I’m going to keep drinking bourbon. What sort of food should we order to pair with the bourbon?”

That started a conversation between Zoeller and Chef Lee. They spent the next nine months trying different formulations to match Lee’s food -- specifically his fried chicken -- eventually settling on a blend of 70 percent bourbon and 30 percent rye. They took that whiskey to market, and it was a hit with bourbon lovers, even though it wasn’t a “pure” bourbon. “Trey’s always looking to shake things up,” says Lee. “He’s not just open-minded; he’s actively pushing the limits.”

That collaboration begat more collaborations. Zoeller persuaded Groth Vineyards and Winery -- which has a cabernet that was the first California wine to score a perfect 100 on a blind taste test by influential wine critic Robert Parker, Jr. -- to give him some of the French oak barrels that had stored the cab for 22 months. Winemakers try to keep their barrels at a cool, even temperature for the duration of the aging process to limit evaporation, but Zoeller decided to put them in hot boxes fashioned out of shipping containers to sweat the hell out of them and pull out every bit of flavor the wine left in the wood, especially the dark, fruity flavors that Napa Valley cabernets are famous for, giving the bourbon a whole new flavor profile. It was another hit.

That collaboration brought Zoeller together with another Napa Valley stalwart, Cyril Chappellet, whose Pritchard Hill cabernet sauvignon sells for more than $350 a bottle in restaurants. Chappellet sent some used Pritchard Hill barrels to Zoeller, eager to see how his robust cabernet would complement Zoeller’s bourbon. Another eureka moment. They sold the end result as Jefferson’s Reserve Pritchard Hill Cabernet Cask Finished. “He’d already done it with Groth, but I think our bourbon is better,” says Chappellet.

Zoeller agrees: “Right now, that’s my favorite of our bourbons. It’s what I’m drinking more than anything.”

The real coup, however, was marketing. The collaboration with Chappellet produced more than a good bourbon. “It opens us up to a whole new market of people who would have never even sniffed our bourbon before,” Zoeller says. The Pritchard Hill Cabernet Cask was getting coverage in Wine Spectator and Wine Enthusiast because now he was operating in their space. He was not only redefining what bourbon was but also helping broaden the definition of a bourbon drinker. “That just expands our reach,” he says.

Zoeller’s ascent hasn’t been without its trials. “There are still those who do not like that I am disrupting the traditions of bourbon,” he says. “There are traditionalists who insist that I am doing it wrong, just like there are hipsters in Brooklyn who tell me I am drinking bourbon wrong because I like a big chunk of ice in mine.”

The bourbon old-boys’ club still sees Zoeller as an outsider, more of a marketer than a true distiller. And he is uncommonly skilled at marketing, at developing innovations that produce not only good bourbon but also good, catchy stories. Still, despite being seen as an interloper by his old-school peers, he says he gets away with it because he’s not trying to cheat the fundamental process. “We are starting with mature Kentucky straight bourbon whiskey and then putting in more time, money and effort to organically massage the juice one way or the other,” he says.

That combination of quality source material, craft and a willingness to experiment has gained Zoeller a dedicated following among adventurous bourbon aficionados. “He recognized a market out there of people who want something special and are willing to pay for it,” says Steve Thompson, former head of Brown-Forman, a legacy corporate distiller. These are not the normal tipplers, he says. “They are the baseball card collectors of the bourbon industry.”

Image Credit: Cristiano Rinaldi

Ironically, as Jefferson’s flourished, its entire model became a major vulnerability. Zoeller relied on legacy distilleries selling him barrels of aged whiskey. And that worked great, as long as he didn’t need that much. But as demand grew, so did the odds that his partners either wouldn’t have enough to meet his needs or would come to see him as a threat and cut him off.

So Zoeller began to plan for the future. That meant becoming his own distiller, after 20 years in business. In 2014 he struck up a partnership with the aforementioned Steve Thompson, who had built the Kentucky Artisan Distillery.

Having his own distillery had the effect of supercharging Zoeller’s experimental streak. He began running an untold number of experiments, in little bottles with plain labels tucked away in glass cabinets in every room, like the Willy Wonka of bourbon. More than ever, he was trying things you’re not supposed to try, and asking questions you’re not supposed to ask. And among these was the biggest taboo question of all: Where is the best place to age bourbon?

For any traditionalist, the answer is simple: Kentucky, and only Kentucky. But Zoeller wasn’t so sure. “Kentucky is a great place to age whiskey, much better than Scotland,” he says. “But is it the be-all and end-all of places to age bourbon? I don’t know.”

Just out of curiosity, Zoeller sent two barrels to Arkansas to age in a freshwater duck blind (an open-air hunting shack), and two more barrels to the eastern shore of Virginia to age in a saltwater duck blind. Meanwhile, he kept a batch of the same whiskey at home in Kentucky as a control group to see how the weather in Arkansas and Virginia affects the aging process. While the outcome isn’t yet known, “these different environments are going to change the maturation in one way, shape or form,” he says. Next winter he will be helicoptering a barrel to a ski hut above the tree line in the mountains of British Columbia to see what that does as well.

Those experiments, however, pale in comparison to his latest, which is possibly the greatest blasphemy ever committed in the bourbon world. After the success of aging bourbon at sea, Zoeller developed a new hypothesis: Maybe the success of Kentucky bourbon in the late-18th and early-19th centuries didn’t actually have that much to do with the environmental conditions in Kentucky. Maybe it was more about the journey the whiskey took to the marketplace in New Orleans and the cities on the Eastern Seaboard.

In other words: “Maybe we got it all wrong.”

Historically, a Kentucky frontiersman would have put unaged, clear whiskey -- essentially moonshine -- into a charred barrel to send it downriver when the waters rose from springtime floods. That journey was a two-month float from Kentucky to New Orleans through the hot summer months, as the clear whiskey sloshed around the charred oak barrels. At New Orleans, that whiskey was either off-loaded and served there -- bourbon on Bourbon Street -- or put on ships destined for the ports of New York, Philadelphia and Boston. There were plenty of whiskey distillers in Pennsylvania, New Jersey and New York state, but all those distillers had a counterintuitive location problem. Their proximity to market was actually a disadvantage, because Kentucky’s whiskey was getting better with every mile it traveled by water.

That was Zoeller’s hypothesis, anyway. In June 2016, after years of planning, he finally completed all the preparations necessary to send two barrels of whiskey from Kentucky to New Orleans the old-fashioned way: by flatboat. That included getting all the required permits from the federal Alcohol and Tobacco Tax and Trade Bureau. “Trying to get TTB to approve it -- that was like an act of Congress in itself,” he says. “It was a giant pain in the ass.”

When they were ready to set sail, they filled two barrels to send on the journey, and two barrels that would stay to age in Kentucky as a control group. Once onboard the flatboat, it took 58 days to float to New Orleans. From there, Zoeller and a chef friend piloted the barrels from New Orleans to Tampa, where they went to port to dodge a hurricane, and then to Key West, where they took to port to dodge a second storm.

By this point, the barrels had become so beaten up that Zoeller had two new barrels shipped by FedEx from Kentucky to Key West, and transferred the contents by siphoning it by mouth from one barrel to the other. From Key West, the barrels made it through the Florida Straits to Fort Lauderdale, where a third storm drove them to port for the winter.

Finally, in June 2017, the two barrels of Kentucky bourbon arrived on the West Side of Manhattan. The end result of this whiskey that aged only 18 months on the rivers and coastal waterways was, to Zoeller’s palate, “the smoothest whiskey I’ve ever had…just as dark as a double-barreled 16-year-old,” meaning a bourbon that is aged for 11 years in one barrel, and then five in new one. “There’s no doubt that what they were tasting on the Eastern Seaboard [in the 19th century] was so much superior to what we had in Kentucky,” he says. “The people who were making it here had no idea how good this was at the end of its journey.”

He dubbed it Jefferson’s Journey, and bottled it at 92 proof into 1,500 flask-size bottles of 200 milliliters -- about 6.75 ounces. It will retail at $200, a dollar per milliliter. “This is, without a doubt,” he says, “the most expensive whiskey ever made.”

When Zoeller and I began our interview, the dining room at Jack Fry’s was nearly empty, but after hours at the bar, the 12 white-tablecloth tables behind us filled up with the evening dinner crowd, as the house jazz pianist kept the atmosphere hovering at some point just before 1940. In four hours together, we drank an untold amount of bourbon, sopped up with burgers. He’s quick and engaging, asking me as many questions as I throw his way. He remembers things I told him hours before, and connects them to what we are discussing now. At some point, my notes indicate, he tells me about a collaboration he’s doing with Vivian Howard, a chef with a PBS reality show. She recently moved back to her hometown of Kinston, N.C., and opened a restaurant called Chef & the Farmer. They’re working on a bourbon that has tobacco staves inserted into the barrels. At first, the stuff was like lava. But they’re getting closer. “It has finally started to really balance out,” he says. “We are about to bottle the first experimental barrel and serve it at her restaurant.”

Zoeller’s marketing savvy and knack for collaboration and experimentation has paid off well for Jefferson’s. His bourbon has led Castle Brands’ growth, which posted a net year-over-year sales increase of 31.5 percent in December 2017, with whiskey revenue up 28.9 percent. And since 2010, Jefferson’s Bourbon has increased its market share among small-batch bourbons from 10th place in 2010 to fourth place now, behind only Woodford Reserve, Knob Creek, and Basil Hayden’s -- all bottles that are well-represented, though growing a little fuzzy around the edges, at Jack Fry’s bar.

As the crowd thins out but the piano still plays, I wonder what other taboos Zoeller can take aim at, and our conversation turns to the great new challenger to the distilled spirits industry: legalized marijuana. Unlike his corporate bourbon peers, who tend to be conservative, Trey Zoeller isn’t afraid of marijuana at all, he says. His mind darts across the possibilities: bourbon infused with THC extract, or marijuana buds seasoned with the essence of bourbon. You can see him puzzling out the process. He takes a sip and smiles. “That’s the future,” he says.