Prohibition in the United States

Whiskey and America: A post-prohibition reunion (Fortune, 1933)

June 24, 2012: 9:30 AM ET

Editor's note: Every Sunday, Fortune publishes a favorite story from our magazine archives. This week, we turn to a November 1933 series on whiskey, a spirit whose American roots run quite deep (founding father George Washington had a very successful distillery business in Mount Vernon, Va.). As the end of the U.S.'s 14-year prohibition period neared, a dormant beverage industry faced considerable challenges. How could it ramp up production to satisfy demand? What exactly was that demand? And how had tastes changed after 14 years of bootlegging? Today, American whiskey -- particularly rye -- is in the midst of a renaissance, with more craft distilleries setting up shop every year. And the U.S. spirits industry's revenues (which includes whiskey along with beverages like rum, vodka, and gin) were $20.4 billion in 2011, a 67% increase from 2001, according to data from the Distilled Spirits Council of the United States.

Newest U.S. business, oldest U.S. problem. The companies which will run it and the conditions under which it will be run. Such a subject needs a preface. This is it.

FORTUNE -- Fourteen years, five months, and approximately four and one-half days after it began on the wild midnight of June 30, 1919, national prohibition will end some time between nine and five o'clock on December 5, 1933. Because the Supreme Court has held that "it is approval by the requisite number of States, and not proclamation, that gives validity to an amendment," the Eighteenth Amendment will be repealed when the second of three constitutional conventions which meet upon that day has ratified the Twenty-first Amendment. It will be ironical if the thirty-sixth state is Ohio, where in 1874 the W.C.T.U. and prohibition were simultaneously conceived, but it may as likely be Mormon Utah or the old rye-distilling state of Pennsylvania: Anyway, prohibition will end the fifth of December.

On that day, the Volstead Act will become null and its kindred laws void and the rusty legal machinery of fourteen years ago will begin to grind again. On that day, the manufacture, transportation, and sale of intoxicating liquor will be permitted in twenty states where live almost exactly half of the 123,000,000 inhabitants of the U.S. On that day, a billion-dollar industry will have a rebirth for which it has been feverishly and confusedly preparing these past nine months.

It is not strictly accurate to say that the liquor industry will be reborn. The U.S. has already had two liquor industries; the one which is gestating now and will come to life December 5 is the third of the dynasty. It resembles each of its predecessors in many respects; it differs from both in many. The first liquor industry was a whiskey business, the second an alcohol business. The third will be both. Its character will be shaped partly by legislation, partly by its own self-conscious character building, mostly by the economic law of supply and demand.

The demand is not hard to estimate in quantity. Before prohibition, the U.S. drank 140 million gallons of liquor a year. During prohibition, it drank not less than 200 million gallons. The demand, then, will be for at least 200 million gallons the first year. Two hundred million gallons of what?

Statistically the answer is easy. In 1913, the U.S. consumed (in millions of gallons):

Native whiskey (rye, bourbon): 135
Scotch (plus a little Irish): 1.5
Gin: 5

plus an insignificant amount of brandy and rum, plus an insignificant amount of champagne and other wines, liqueurs, and things like that.

But it must not be supposed that such statistics will answer the question for 1934. The second liquor industry, the bootleg industry, discovered that the one thing prohibition prohibited was the manufacture of the native U.S. drink, rye and bourbon whiskey, and so it gave the thirsty citizens something else and changed the taste of a generation.

The calculation of the taste factor now baffles everyone in the business. Before prohibition, gin went into Martinis and Negroes. The alcohol industry of the 1920s made it a drink. The younger drinking generation was weaned on it and an entirely new body of drinkers, women, preferred it to whiskey, possibly because it is reputed to contain some of the medicinal properties of essence of peppermint and Lydia E. Pinkham's vegetable remedy. Furthermore, gin can be sold more cheaply than even the worst whiskey. Two classes of businessmen are confident that during the first year of repeal as much gin will be sold as whiskey: they are the officials of the alcohol companies (U.S. Industrial Alcohol, Commercial Solvents, American Commercial Alcohol, Publicker, etc.) and the bathtub chemists. More

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