This image describes James E. Pepper Distillery & how Live Oak Bank helped provide craft distillery financing.

The Return of James E. Pepper Distillery

Armed with a passion for American history and a formidable entrepreneurial spirit, Amir Peay has painstakingly resurrected what was once one of the most prominent whiskey names in this country, James E. Pepper. Inspired by the rich history of the Pepper family that spanned generations, Peay has worked tirelessly to re-establish the once-abandoned brand and rebuild the original distillery in Lexington, Kentucky. Peay’s success is rooted in his shrewd approach to early-stage bootstrapping and creatively scaling the business, while also seeking out industry-focused partners when necessary.

James E. Distillery - 2019 Facility

A self-proclaimed history nerd and whiskey lover, Peay initially stumbled across the Pepper name while watching a Ken Burns documentary about the famous boxer, Jack Johnson. During an infamous boxing match in 1904, Johnson was sponsored by “James E. Pepper Whisky” – clearly a once iconic brand, but no longer in existence. This prompted Peay to start digging for more historical context around the Pepper name. As he began to piece together the fascinating story of James E. Pepper, Peay knew this would become his next business venture and acquired the rights to the brand.

To fully understand the magnitude of Peay’s accomplishments thus far, you must step back in time – way back. Established in 1780, the Pepper family brand of whiskey enjoyed success for three subsequent generations with the founder’s grandson, James E. Pepper, ultimately guiding the brand to peak popularity in the Gilded Age of the late 1800’s.

“As I slowly compiled the Pepper story, I learned that James was a larger than life character and a flamboyant promoter of his brand, which was one of the most sought-after whiskeys of that time. Word has it that the ‘Old Fashioned’ cocktail was invented in his honor at the Pemdennis Club in Louisville, Kentucky. He took immense pride in using his grandfather’s Revolutionary-era whiskey recipes,” Peay explains.

The whiskey remained a top brand through the early 20th century but in the late 1950’s, the bourbon industry as a whole faltered. Unfortunately, the James E. Pepper distillery and brand were abandoned and all but forgotten.

Fast forward 50 years later to 2008, when Peay decided that there was opportunity to build a solid business around the revived James E. Pepper brand. It was an important piece of Americana that deserved to be brought back to life and more importantly, a viable business venture. Instead of seeking startup capital from investors, he partnered with an established distillery to produce the award-winning line of James E. Pepper “1776” whiskies, while also devoting time to organically bolster the brand. The prolific and captivating history behind James E. Pepper spoke for itself, while the product delighted whiskey aficionados across the world. Of note, three of the Pepper whiskies recently took home Double Gold Medals from the San Francisco World Spirits Competition—the event’s highest honor.

James E. Peppers Rye Whiskey

While he was tactfully re-establishing the Pepper brand name, Peay was simultaneously hatching a plan to rebuild a distillery and museum in the abandoned James E. Pepper Distillery. He felt strongly about bringing the Pepper name back to its rightful home in Lexington. The vast property had two main structures, a 100,000-barrel rick house and a large main distillery building which, despite being abandoned for decades, were still structurally sound.

Yet again, Peay wisely approached this challenge with the intention of remaining independent and sought capital from Live Oak Bank to rebuild the dilapidated distillery. Live Oak offers a unique approach to financial solutions for small businesses and has a team solely devoted to the craft distillery industry. In partnering with Live Oak, Peay gained not only the financing he needed to move forward on the distillery renovation, but also seasoned industry experts who had full working knowledge of the craft spirits business.

“I began working with Tracy Sheppard and his team at Live Oak as the plan to rebuild James E. Pepper Distillery came together. It was great to have a bank that truly understood the industry – no need to spend time explaining the all of the unique equipment or the maturation process involved. On average, James E. Pepper inventory ages about four years, with some barrels aging out much longer. Unlike traditional banks, Tracy was not afraid to use my inventory as collateral and was confident in my business model. Live Oak understands that there is intrinsic value in a barrel of good whiskey,” offers Peay.

Sheppard sheds additional light on Live Oak’s distinctive whiskey barrel financing. “We’re excited to have an entire industry-focused team and offer this type of custom loan, which no other bank really has. For small and growing distilleries who are looking to invest in future growth, our whiskey barrel loan can be a huge advantage. It’s a great option for distilleries poised to scale their operation. Amir was already well established but had a ton of potential – we just helped take his business to the next level,” says Sheppard.

“With the capital from Live Oak, I was able to move forward on the massive reconstruction of the distillery property and to purchase equipment. Additionally, the line of credit covered whiskey cost purchases which allowed me to divert existing cash flow that had been going into whiskey, into the distillery project,” Peay continues.

Peay’s dedication to restoring the James E. Pepper Distillery went as far as re-digging the original limestone well to tap the same water source as the founders used in the late 19th century. He also reconstructed the still system by studying detailed mechanical drawings from 1934, as well as reviving the historic Distilled Spirits Plant number, DSP-KY-5. Being number five means it was the fifth issued in the history of Kentucky. Since the federal government never reissues DSP numbers, a new distillery built in Kentucky today will be in the 20,000s.

On December 21, 2017, the culmination of years of hard work paid off — the distillery filled its first barrel to kick off the latest chapter in the fascinating history of James E. Pepper whiskey.  With a fully operational distillery and a museum chock full of Pepper history, the Lexington, Kentucky landmark serves as a lesson that some history is worth repeating. Having spent so many years looking to the past for answers, Peay is now focusing his efforts on the future.

Peay summarizes, “My goal all along has been to create an independent, world-class whiskey distillery positioned for long-term success, while paying homage to this brand’s incredible history.”

Tracy Sheppard is a Vice President for Live Oak Bank’s Wine and Craft Beverage Lending Division. In 2014, Tracy joined the bank to help found this new group, which has been ranked as the Top SBA Lender to wineries & vineyards, craft breweries and distilleries nationwide since 2015. He is also responsible for developing and launching Live Oak’s Asset Based Lending (ABL) program specifically for whiskey inventory. Tracy works from the bank’s office in Santa Rosa, California, but travels across the country to meet with craft beverage producers seeking expansion and advise them of their best loan options for their growing business.