The whiskey boom's dirty little secret

PEMBROKE, Ky. -- Whiskey is booming. Once the drink of gruff old cowboys, today whiskeys like bourbon and rye are surging in popularity with young Americans. More than 130 new brands were introduced just this year.

Most popular are the so-called hand-crafted bourbons. But there's a dirty little secret in the distilling industry: Many companies don't make what they bottle, even though their labels give the impression that they do -- a sore point for the growing legions of whiskey purists across the country.

Templeton Rye Whiskey's label, for example, says it's "produced" in Templeton, Iowa using a recipe dating back to Prohibition.

But in fact Templeton, and many other brands, are actually made at a massive plant in southern Indiana, where each barrel holds about 63 gallons of aging bourbon.

A worker unloads barrels of whiskey at MGP Ingredients' plant in southern Indiana CBS News

A former Seagram's distillery, it's now owned by MGP Ingredients, which sells its whiskey, in bulk, to dozens of smaller companies who then add their own finishing touch. MGP sends out nearly 300 barrels every day.

I talked with MGP CEO Gus Griffin about the process and asked if it gives the false impression that the smaller company made the whiskey.

"I prefer to think of it as them taking our product cause we make a good product and using it as the backbone for their product," Griffin told me. "So what they do with it is really up to them."

Paul Tomaszewski of MB Roland Distillery CBS News

On a small farm in southern Kentucky, Paul Tomaszewski and his wife Mary Beth make their bourbon, MB Roland, the old fashioned way, from scratch.

"We put on our label mashed, distilled, and bottled by MB Roland distillery because we don't want anyone to be confused and ever question: 'Did you make this?'" Tomaszewski told me.

Federal regulations require accurate labels but they're often vague and there's little enforcement. When the words "bottled by" appear on a label, it means it was bottled by the company but doesn't necessarily mean they made the whiskey, according to Tomaszewski.

"If they made it, they'd probably put it there proudly like we do," he said.

Templeton recently said they will change their label to make it clearer. But in the murky world of whiskey, Tomaszewski says consumers would be wise to take what's written on some labels with a grain of salt.

  • Chip-Reid_bio_140x100_bw.jpg
    Chip Reid

    Chip Reid is CBS News' national correspondent.