Will Templeton Rye's Iowa move change its taste?

Iowa's Templeton Rye is coming home.

After years of purchasing its whiskey from an Indiana distillery and then bottling it in Iowa,  Templeton Rye is moving ahead with a plan to make the liquor in Iowa. It is bringing distilling and finishing to its bottling facility in Templeton, Iowa, adding 99,000 square feet.

The move may muzzle critics who claim Templeton had been misrepresenting its liquor by labeling it as "small-batch rye" and "made in Iowa," when it actually was made from a stock whiskey distilled by MGP Ingredients in Indiana.

Complaints culminated in a series of lawsuits over the whiskey's authenticity, which the company settled in 2015 with promises to change its marketing materials and bottle labeling.

Lew Bryson, a longtime author and journalist covering the beer and spirits industries, says he thinks Templeton's move to bring production to Iowa is a direct reaction to the lawsuits.

"It’s a smart move," he said. "It's maybe a little late, but at this point I think it's something that has to be done."

Templeton officials did not respond to multiple requests for comment. But state documents released Thursday outlined the expansion project:

Templeton Rye plans to spend $26 million to build two barrel-aging warehouses totaling 64,500 square feet and a 34,500-square-foot distillery in Templeton, according to Iowa Economic Development Authority documents.

At its meeting Friday morning, the Iowa Economic Development Authority board will decide whether to approve about $1.6 million in tax credits and tax refunds for the company. Also, the city of Templeton is expected to approve a $254,352 tax abatement as an incentive.

The internally funded expansion would allow "the company to return the Templeton brand to its home base and expand its market internationally," according to IEDA records.

How will Templeton change?

The expansion is expected to create 27 jobs, 18 of which must pay at least $19.79 an hour to qualify for the state incentives. The facility currently employs three people, records show.

Templeton leaders told state officials they expect the project to be completed by spring 2019.

Bryson believes that Templeton's whiskey recipe could change as it begins to distill in Iowa. That's not necessarily unusual — or bad, he said.

"Every craft spirit I can think of has evolved in taste over the last four years," he said. "Change is a part of the process … everybody’s getting better."

He said consumers are increasingly demanding that whiskey-makers offer an on-site distillery "if they’re going to pay the craft price and have the warm fuzzies about it."

But much of that trend is driven by perception.

"There’s no Johnnie Walker distillery. It’s a blend made from a bunch of different whiskeys," Bryson said. "And that’s never been a problem — it’s the biggest whiskey in the world."

Matt Blaum, one of the brothers behind Blaum Bros. Distilling Co. in Galena, Ill., said it might be tough for Templeton to offer the same taste of whiskey once it begins Iowa production.

"It’s a very good rye, very, very enjoyable. I love the product," he said. "So as long as they can really replicate that exact same flavor profile, I don’t see why it would be a problem with anyone. It’s a matter of replicating that exactly."

Should Templeton Rye labels include Indiana?

What's in a name?

Templeton Rye originates from the same Indiana supplier as Blaum's Knotter Bourbon, named with the admission that it was not produced by the Illinois distillery.

The Blaum Bros. website is stamped with a disclaimer: "The brothers’ Grandfather did not distill moonshine for Al Capone, they don’t have a secret family recipe, and they were not the first distillery since prohibition to do this or that."

It's a playful dig at brands like Templeton that boast historical tales of Prohibition-era whiskey (Templeton is said to have long ago been a favorite of mob kingpin Al Capone).

Blaum said customers are increasingly picky about the origins of their drinks.

"It really wasn’t ever a question for us when we purchased the barrels. We immediately said we didn’t make this," he said. "We want to make sure we’re completely transparent with it."

Templeton move 'can't hurt'

In Iowa, Templeton sold about 68,000 bottles last year, according to the Iowa Alcoholic Beverages Division. Iowa sales dropped for the third consecutive year in 2015.

Templeton sold more than 192,000 bottles in Iowa in 2012.

Yet the company boasts coast-to-coast distribution. While its total sales are not public, experts believe it to be among some of the most popular rye whiskeys on the market. And having a local distillery in Iowa will add to its cachet.

"It can’t hurt, that’s for sure, said Ryan Burchett, an owner of Mississippi River Distilling Co. in LeClaire, Iowa. "Look around; the brand didn’t fall off the face of the Earth or anything. It just continued to grow."

Burchett's distillery produces whiskey, gin and vodka with locally sourced ingredients. While customers love coming to the eastern Iowa distillery to get an up-close view of the liquor-making process, Burchett said that experience might not be as important for a much larger brand like Templeton.

"But I think in the long run authenticity in a brand is important in everything you do," he said. "We all need to be who we say we are. Templeton is only going to enhance their brand by bringing it here."

Out-of-state ownership

Yet, even after Templeton brings  its production home to Iowa, most of its ownership will remain out of state.

The company told economic development officials that 73 percent of the company was owned by California distributor Young's Holdings. It reported that Iowa founders Keith Kerkhoff and Scott Bush owned 15 and 12 percent of the company, respectively.

Bush had held a majority stake in the company as late as 2015, according to the Iowa Alcoholic Beverages Division.

A Templeton notice filed with the Securities and Exchange Commission on Tuesday listed only Kerkhoff and two California investors' names.

Des Moines attorney Randy Wilharber filed one of the three lawsuits against Templeton Rye alleging misrepresentation. Since that time, he said the company has become an industry leader for addressing concerns about its product labeling and marketing.

Bringing production to Iowa is another positive step, he said.

"It's really tremendous news for consumers in the state of Iowa and nationally for people who purchase their product," he said. "What that means is that when a brand like Templeton Rye advertises they are a regional, artisanal brand with a story that ties back to their roots in Iowa, it's really what it is."