The Art of the Whiskey Deal: An Interview with Wilderness Trail Co-Founder Pat Heist

It may be somewhat old news, but the sale of Wilderness Trail to Campari Group in late 2022 in a deal valued up to $600 million remains the biggest declared American whiskey acquisition since Jim Beam sold to Suntory in 2014 (for 16 billion). Balcones traded hands to Diageo for an undisclosed sum not long after, followed by Skrewball (also to Campari) and then Blue Run to Molson Coors, making it seem as though the flood gates might open on American whiskey acquisitions in 2024, but big buys have been few this year.

While plenty of distilleries appear to be building and investing toward a potential buyout, few have been able to make it happen and none quite so successfully or quickly as Wilderness Trail. In little more than a decade, co-founders Pat Heist and Shane Baker went from a 3-gallon pot still to a 36-foot column — from small even by craft distillery standards to the 14th largest distiller by volume in the country. That rapid growth surprised even them.

When Constellation Brands bought High West in 2016 for $160 million, lots of observers, me included, speculated that preferential access to MGP or other contract suppliers may have helped fuel what, at the time, was a significant valuation for a new brand. But with Wilderness Trail, Campari got not just a brand and a ton of premium whiskey but also a profitable contract supplier in its own right, perhaps more so than most realized. Still, Wilderness Trail’s impressive success has had as much to do with favorable timing and the courage to seize opportunities when they presented themselves, as co-founder Pat Heist discussed with me at length earlier this year.

This interview has been lightly edited for readability.

Drinkhacker: Before we talk about the Wilderness Trail sale specifically, what was your education and background before starting the distillery?

Heist: I did well enough to pass college. I went to school for 13 years, but you can get what I got, two Masters and a Ph.D., in 8 years. When I went to graduate school, it wasn’t because I had planned to go to graduate school. I took a summer job working for the Department of Plant Pathology at the University of Kentucky. By the end of the summer some of my professors noticed my work and offered me a position in the graduate department. It just happened.

After that, I got a job as a medical microbiology professor at a medical school in Pikeville. The school needed two professors for each class to maintain its accreditation, but it wasn’t a research school. I was splitting one class with a professor who wanted to teach most of the class, so I had a lot of free time to do extra things. That’s how I started Ferm Solutions with Shane Baker.

Drinkhacker: How did your work with Ferm Solutions lead you to start Wilderness Trail?

Heist: At Ferm Solutions, we worked with breweries and distilleries to make their fermentation processes better. We didn’t realize that that would be such a great brand story and foundation of knowledge for starting a distillery. I also think we recognized the opportunity. Shane and I at some point in time at Ferm Solutions realized we had capital, and knowhow, and we’d worked with thousands of distilleries and breweries to know what to do and not to do.

Drinkhacker: At the time of the sale, Wilderness Trail was the 14th largest distillery in the country by volume. What was your capacity when you first started out?

Heist: We started off on a 3-gallon pot still that we bought on eBay. Then we graduated to a 50-gallon hillbilly still. Then a 200-gallon Vendome pot still. We were proud to make one barrel a day starting out.

Drinkhacker: That sounds like a lot of craft distillers, but you didn’t stay small-scale for long. How did you expand so quickly?
 
Heist: We started getting calls from folks in need of contract distilling. The bigger guys had stopped for the most part. Then the financial guys started calling, wanting to explore cask investment opportunities. All of those opportunities came when we only had the capacity to make a barrel a day. So, you start adding it up, we realized we were missing out because we didn’t have the capacity.

Drinkhacker: How did you create the capacity to take advantage of those opportunities? Did you take on significant debt?

Heist: We had Ferm Solutions spinning off some good revenue. We took every penny we made in Ferm Solutions and Wilderness Trail and put it into filling as many barrels as we could. Since 2020, we’ve built 10 more 24,000 barrel rickhouses. Shane and I never had any outside investors and never really had any appreciable amount of debt because we were just capitalizing as we went along. But our growth in a short period of time was overwhelming.

A couple of other things were key to us getting a lot of business right around the time we started contract production. One was that it happened right when they required putting the state of distilling on the label, when all the Templeton drama was going down. There was a bit of an exodus when contract buyers left non-Kentucky suppliers. Everybody wanted Kentucky juice. That was definitely in our favor. We were also already known for high quality. Right around the time we really started appreciable amounts of contract distilling, we had just released our first Bottled in Bond. Clients could taste what they were investing in.

Drinkhacker: You weren’t the only distillery taking advantage of the demand for contract production. Did the arrival of other big producers like Bardstown Bourbon Co. worry you?

Heist: From a distillery competition perspective, I don’t ever remember feeling nervous. Our focus was always on Wilderness Trail as a brand and taking advantage of the climate. When we started Wilderness Trail, you could buy a barrel of new make for $450, and we were getting double or triple with high efficiency production and high-quality bourbon, so our margins were great.

Drinkhacker: Besides contract sales, did you explore any other revenue streams?

Heist: The contract production is what allowed us to get our capacity to an unbelievable point. Your average craft distillery would have a hard time getting there because of the capitalization that it takes. With contract production, we were able to capitalize our operation, purchase more property, and build rickhouses, which were another source of revenue. When big producers stopped contract producing, they also kicked people out of their rickhouses. Some big brands were left without warehousing. We found ourselves able to fill our first big warehouses and get some revenue out of storage.

Drinkhacker: So, production and warehousing were booming for you. Did you invest heavily in brand marketing, also?

Heist: Not really. We got into 44 states, and we would have been in all 50 if we just had more product. Our number one state for sales is California, and we’ve never had a single employee or brand ambassador in California. If anybody ever benefitted from earned media, it was us. We sought it out. I did a TED Talk. Hell, I was just at Whole Foods and bought this bourbon magazine I didn’t even know had an article on me in it. We were even a question on Jeopardy!

Drinkhacker: What led you to consider selling? Was that your business plan all along?

Heist: We didn’t set out to build this thing up and sell it. We’re entrepreneurs, we set out to build a good business. And we’re two of the biggest bourbon fans on the planet. We’re not Wall Street guys trying to make money. Our goal has always been to make the best whiskey on the planet. But we knew if we just kept doing this, we’d eventually have 55 rickhouses and billions of dollars in bourbon.

More recently, we started thinking about succession and how to keep the brand alive. Shane and I used to always be effectively signing our homes away when we borrowed money from the bank. Now, we have property and a brand and all the holdings. Thinking about all that is what took us into negotiations with Campari. And it got us a pretty incredible sale price.

Drinkhacker: Incredible might be an understatement. What were the particulars of that deal?

Heist: We divested 70% of our interest. We have 30% left, but they have the option to buy that in 2031. So, retirement isn’t really retirement. I’ve actually been busier since the sale than I’ve ever been. We’re still very much in the game. We’re working with almost every new distillery coming on [with Ferm Solutions]. And now with Campari, we’ve got a whole subset of things we’re doing with them. Wilderness Trail is our baby, so we want to take care of it. You’d think we’d take it easier, but it’s just in our blood to stay busy.

Drinkhacker: There’s more and more talk lately of the whiskey market getting oversaturated again. Do you worry about that?

Heist: Top of everybody’s mind is when is the bubble going to bust? Any time there’s an industry with opportunity, then people start moving in. There’s probably ten 50+ million-dollar distilleries being built as we speak. Not to mention everyone is expanding. It seems like we’re about to get into a glut, but having said that, just when you think it can’t get any crazier in this industry, it does. I mean, people pay $9000 now for a bottle of Pappy 23!

When is all this whiskey ever going to end up in bottles? At that point in time, it could make things interesting. But we’ve got new markets coming on like South Korea and Japan. To my knowledge, Australia hasn’t gotten but a few cases of Wilderness Trail. When does that demand reach a saturation point? It’s hard to say. I think there’s always room for good brands and high-quality whiskey.

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