Bourbon faces historic slowdown
The Bourbon industry is reeling from a dramatic boom-to-bust cycle. Overproduction, shifting consumer trends and global trade tensions are creating a crisis for distillers across Kentucky and Tennessee. Ron Emler reports.
The distillers of Kentucky and Tennessee are experiencing one of the biggest boom-to-bust cycles seen in the spirits industry, more severe possibly than the woes that beset Cognac in the 1980s and the renewed crisis which the French brandy is wrestling with today.
The Kentucky Distillers Association reports that Bourbon production increased by 475% between 1999 to 2022, but figures from the Distilled Spirits Council of the US show domestic sales of US whiskey growing from US$1.3 billion in 2003 to $5.27 billion in 2023, a roughly 300% increase.
So even in the boom years, output was rising faster than consumption and today there are more than 14 million barrels of spirit ageing in the face of a shrinking market.
Pandemic-fuelled cocktail craze fades fast
Nowhere has this been more emphasised than by the rapid shift away from bourbon following the end of the coronavirus pandemic, in which US consumers stayed at home and experimented with cocktails, many of them bourbon-based.
That trend is over as younger consumers, especially, have heightened concerns about alcohol’s health effects and look to low and no-alcohol drinks, with many also switching to cannabis.
This has led producers to make handbrake turns to reverse the production glut of the past 20 years.
Small distillers hit hardest as bankruptcies rise
As ever in a crisis, smaller players feel the pain more acutely and so three different Kentucky distilleries have recently filed for bankruptcy as the industry grapples with a slowdown.
Chapter 11 bankruptcy in the US does not signal the end of a business; its purpose is to allow the owners to attempt restructuring of debt while preventing creditors from seizing the enterprise and selling the remaining assets. The three recent filings typify that.
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Luca Mariano Distillery was launched only in June and has yet to produce a single bottle, while Garrard County had been in business for 14 months. Kentucky Owl, owned by the Stoli group, was founded in 1879, although it was discontinued for a period before being revived in 2014. Stoli bought it in 2017 in a bid to cash in on the bourbon boom.
Luca Mariano has debts of $34.5 million after trying to build a business, while Garrard County is $28 million in the red after spending $250 million to build a new distillery.
Industry giants also under pressure
The big boys of the industry are suffering too. At the start of this yea,r Brown-Forman, famous for its Jack Daniels range, said it was cutting 12% of its global workforce and sold its cooperage in a bid to cut costs. It has also drastically reshaped its US distribution arrangements in the US.
After reporting results below even pessimistic expectations – Jack’s sales were down by 6% – Brown Forman’s shares slumped to their lowest level since 2013. Campari-owned Wild Turkey’s US sales fell by 8% in the first half of this year.
Trade wars compound the crisis
“This has been an extremely difficult time for distillers across the country who are dealing with increased production costs, a slowdown in spirits sales in the U.S. marketplace, and a significant disruption to spirits exports due to the threat of tariffs and retaliation related to ongoing trade disputes,” the Distilled Spirits Council of the United States told Newsweek.
Bourbon is being bashed by President Trump’s tactics to Make America Great Again.
His trade war with Canada saw US spirits removed from Canadian shelves – their second largest export market – a move that Lawson Whiting, CEO of Brown-Forman described as “worse than tariffs”.
Trump has imposed tariffs of 15% on all products entering the US from the European Union, including wines and spirits. Brussels has yet to decide on any retaliation while talks continue, but in previous wrangles, bourbon has been hit with 50% tariffs, so the omens are not good.
Eyes turn to India – but trouble looms there too
Little wonder that bourbon distillers are desperately seeking new markets, not least India, the second-largest whisky market in the world. They have ample supplies to ship there. But only yesterday, Trump hit India with 50% tariffs. Might Delhi target Bourbon in revenge?
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It might help if prices on the shelf dropped.. I went shopping for a bottle of domestic.. perhaps craft bourbon this week and the high prices are still there.. I bought a reasonably priced bottle of wine instead!
so much for my smoked old fashioned..
I’ll have to get off that kick..
Buy you a bottle of Early Times BIB. Awesome 25 dollar price. 100 proof perfect for straight sipping or for cocktails!
Brown-Forman sums it up best, the removal of whiskey from the Canadian shelves was “worse than tariffs”. Trump doing his very best to shoot Americans in the foot.
Some of the issues have been created by the distilleries in the US. I really enjoyed top rated bourbon such as Heaven Hill Old Fitzgerald and Elijah Craig. It is extremely hard to find in my liquor stores in Tennessee and Alabama. People line up at 2 or 3 in the morning when the allocations are being sold. The solution is simple. Instead of shipping these hard to find bourbon to European countries, make them available to people like me in the US. Buffalo Trace has the same issue. Great bourbon is hard to find in the US. Eagle Rare, Blanton Gold, Van Winkle, and EH Taylor are hard to find. Make your bourbon available to US consumers. Your sales will double and problem solved. Bottled in Bond bourbon should be made a shelf item instead of allocated and hard to find. I have no desire to purchase a 86 proof cheap bourbon. So do many of my friends.
Absolutely!! Very well stated. Hoping the distilleries see your comment. It really is simply common sense.
All the more reason to support your local distillery. Missouri has lots of distilleries that have very good bourbons that will suprise u on the taste and quality.
The tree-tiered Distiller-Distributor-Retailer model in the US has been dysfunctional for many years. During Bourbon’s meteoric rise, retailers went nuts on pricing. Prices for even non-allocated bourbons went up by as much as 100%. They priced bourbon like 20 year old scotch, and it not only wasn’t deserving of that kind of price but it turned many bottom shelf everyday brands into unobtanium. And anyone watching GenZ should have noticed the wine industry was already being snubbed and liquor was going to meet the same fate. There aren’t any health benefits from liquor really, and the industry should have been working overtime to address the few positives of alcohol…namely responsible consumption and reasonable pricing. But instead….here we are. They mismanaged their own market.
Well said. Totally agree.
I have owned a tavern for 31 years, in the past I was able to buy bourbon by the case, since this latest BS over the last 10 years or so most is allocated, I am tired if fight for the fact I have no choice but to buy form my distributors, and might get a bottle every 9 to 12 months.There is no reason I should have to wait when my customers are asking for it and I use to be able to buy cases.
I agree with many of the sentiments above. The trade wars suck. I remain faithful to my regular brands but they have not rewarded me. A couple of weeks ago my liquor store had a rep for Punchers Chance. I didn’t know anything about it but they offered samples and a BOGO. That is a free $34 bottle. Heaven Hill and Buffalo Trace listen up!