The bourbon boom has been going on for so long that by now it’s old news. After decades in the doldrums, American whiskey sales — of which bourbon makes up the overwhelming majority — have been rising since the 21st century began, accelerating in the last decade to reach $5.1 billion in 2023, according to the Distilled Spirits Council. To keep those bottles flying off shelves, bourbon producers — both established and start-up — have sunk billions into expanding capacity and filling ever more barrels: over 2 million a year for the last four years.
The investments are numerous and often massive. Buffalo Trace is in the midst of a $1.2 billion expansion that is expected to double capacity when complete. Beam Suntory announced a $400 million project to increase capacity at its Boston, Ky., distillery by 50 percent — this just a couple of years after opening the Fred B. Noe Distillery, a specialized production facility, on its Clermont campus. Heaven Hill is building a second distillery at an estimated cost of $135 million with the goal of doubling capacity, and Wild Turkey just announced plans to do the same, constructing a second plant with a 5 million proof-gallon capacity and a $161 million price tag. Willett is adding a new $93 million facility, and Diageo has built not one, but two whiskey distilleries in Kentucky since 2017.
And that doesn’t even take into account the sizeable new distillery projects that have been announced: Blue Run ($50 million), Kentucky Owl ($150 million), Horse Soldier ($200 million), and a distillery for Jefferson’s from Pernod Ricard ($250 million) are among the splashiest of these up-and-comers, though only Horse Soldier has started construction so far.
Bourbon country is clearly betting big on the future. And with today’s rosy conditions, why shouldn’t it? Most folks seem to think the wave hasn’t yet crested. “Bourbon’s been on a run for a long time, but I think all of us that are in it are still betting on a long time to come,” says Mark Erwin, CEO of Bardstown Bourbon Co., which has been in a constant state of expansion since its founding in 2014.
Eric Gregory, president of the Kentucky Distillers’ Association (KDA), says the massive investments are proof of the industry’s confidence. “They’re spending billions of dollars over the next few years to expand and grow, and I don’t think they’d be doing that unless they had some pretty secure feelings that we still have a good, positive trajectory over the next 10 years or more.”
But no one has a crystal ball, and predictions in the whiskey industry are notoriously difficult to make. Many distillers of the past confidently sank money into expansions only to find themselves with a glut of unwanted whiskey a few years later. Will we eventually look back on this moment as one of blissful ignorance, before bourbon comes crashing down? A decade from now, will the bourbon industry find itself with a surplus on its hands and no way to get rid of it? Or are we just at the beginning of the wave?
Lessons From the Past
Whiskey tends to move in cycles of boom and bust: Demand goes up, supplies get squeezed, investment pours in, and then — POP! Back to the bottom. The sequence is aggravated by the fact that whiskey takes years to reach maturity; producers that want to respond to today’s trends should have anticipated them not a few months ago, but several years ago. Bourbon is no stranger to this: The late 19th century saw periods of overproduction that resulted in price crashes, a pattern that tended to repeat itself until heavier federal regulations and, eventually, Prohibition disrupted it.
It took distillers decades to come back from Prohibition, especially with the Great Depression and a world war hampering progress. But eventually, the post-war economic boom of the 1950s and ’60s created an environment for distillers to happily make and sell plenty of bourbon — which they did, until a combination of misjudgment and overproduction led by industry leader Schenley, and a rising preference among Americans for clear spirits, created the conditions for a bourbon glut. Whiskey distilleries floundered, and many closed, leading to an extended low point for the industry from the 1970s until the dawn of the new millennium.
Bourbon isn’t alone in its cyclical pattern; it happens in Scotland’s whisky industry too, and the most recent boom there offers lessons for the American contingent. Scotch’s current renaissance preceded that of bourbon by about a decade, as connoisseurs began gravitating toward single malt in the 1990s and sales grew rapidly from the early 2000s on. Companies began investing heavily in expansions and new construction to meet newly booming demand. Glenlivet, Glenfiddich, Macallan, and numerous smaller producers all increased capacity, often by 50 percent or more over previous production.
It echoed another period, more than a century prior: In the 1890s, about 40 new distilleries opened in Scotland, buoyed by robust global sales of blended whisky and, in some cases, speculative investments. But by 1912, the same number had closed, victims of a market downturn that saw reduced demand for whisky, especially the massive amount that had been optimistically laid down. Becky Paskin, founder of OurWhisky and a Scotch expert, notes that a similar boom is taking place today: In the 2010s, more than 20 new distilleries opened and there are even more in the planning stages.
“Even if there is a slowdown, the likelihood of going from robust growth to zero is hopefully zero.”
“The decade after [the 1890s boom], the market crashed,” she says. “Could we see something similar happen again? That’s always going to be the danger.” Scotch whisky’s other famous crash, the so-called “whisky loch” of the 1980s, also resulted from overproduction and a general decline in whisky drinking worldwide, leading to the closure of roughly 20 distilleries.
But lessons from those difficult periods aren’t easily forgotten, and today’s whisky companies are quicker to exercise caution. Case in point: Earlier this century, China was among Scotch whisky’s fastest-growing markets, but after President Xi Jinping imposed austerity measures that curbed lavish spending, Scotch sales dropped 30 percent in 2014. In the uncertainty of the moment, Scotch companies reconfigured their plans. Diageo, for example, paused planned expansions at Mortlach and Clynelish as well as work at other sites, and opted not to go forward with constructing a new single malt distillery in Speyside — projects that had previously been announced with a total price of 1 billion pounds (roughly $1.65 billion, at the time).
Yet the momentary panic seems to have passed, as Scotch sales have continued upward, for the most part, in the decade since. While some projects haven’t yet come to fruition, other investments — especially in smaller, boutique-size distilleries — are pushing ahead.
Nothing but Upside in Sight
There has been barely a hiccup in bourbon’s trajectory since the category began its revival two decades ago; with a couple of exceptions, production has been growing since 2000, and accelerating in the last six or seven years. Throughout Kentucky, distilleries say they have already sold what’s aging in their warehouses, and even what they plan to make for years into the future is already earmarked.
“We look at how our brands have grown over the past two, five, 10 years, whatever that window is, and we make educated guesses about how we plan on those to continue growing.”
But their confidence isn’t blind; producers are weighing the risk with potential rewards. “Even if there is a slowdown, the likelihood of going from robust growth to zero is hopefully zero,” says Conor O’Driscoll, master distiller at Heaven Hill. The company is building its new distillery in phases, a hedge against potential decelerations in demand.
Bardstown Bourbon Co. has expanded multiple times since its first production in 2016, and currently boasts an annual capacity of 7.4 million proof gallons, plus another 6.6 million proof gallons at Green River Distilling Co., which it acquired last year. That kind of growth might make other companies nervous, but Erwin says that Bardstown has to turn away new customers for contract distilling constantly. And if something changes in the future, the company could convert its operations to make other kinds of spirits. “We’re building flexible. … I’m not going to say we’re going to start making vodka or gin, but we could any day if we wanted to,” Erwin says.
No one sees a slowdown coming, though. “We look at how our brands have grown over the past two, five, 10 years, whatever that window is, and we make educated guesses about how we plan on those to continue growing. That’s where corporate strategy comes in,” O’Driscoll says. He also points out that, as a family-owned company, Heaven Hill has more agility to react to events and make decisions than a public corporation that’s beholden to shareholders and quarterly reporting.
All these factors give bourbon companies confidence that they’ll be able to match supply with future demand. But there’s a wild card in play, one that could throw all the best-laid plans off course.
A Potential Spanner in the Works?
Beyond investments in production facilities and stock intended for specific companies or brands, there is increasing speculation in bourbon by private equity and venture capital firms, which are paying distilleries to fill casks in the hopes of making a handsome return once the whiskey is aged. “Funds are buying tens of thousands of barrels,” says bourbon industry veteran and Proof and Wood founder Dave Schmier. “That’s supercharging the demand for new-make whiskey.”
On paper, it’s obvious why this looks like a good investment; people who filled barrels years ago are currently selling them for thousands of dollars apiece. “[They] look really smart because they’re able to sell aged whiskey at high prices,” Schmier says. “How sustainable that is, I’m not really sure.”
“We don’t just have distilleries making whisky: We have brands, we have stories, we have personalities and characters.”
All of this sets up an environment of uncertainty. Even Gregory of the KDA admits, “It’s something we’re watching very carefully … to see if it has any impact on the market. We may not know for six, eight years when those barrels come of age.”
When that does happen, will investors decide to trickle the mature whiskey out, or sell out all at once? What if demand, or prices, haven’t held, and the firms decide to cut their losses by flooding the market with bargain bourbon? What if the big, recently expanded distilleries end up with oversupply simultaneously, with customers developing a taste for, say, rum or tequila instead of bourbon? There are any number of scenarios that could prove harmful to bourbon as a whole, especially if coupled with a black swan event — like a pandemic or recession — that impacts every industry and market.
The Key to Bourbon’s Future Fortunes
In short, there’s no way to know now if one day we’ll look back at 2023 wistfully as the peak of the bourbon frenzy. And it’s not the right question to ask. Instead, we should be looking at how bourbon distillers are anticipating the inevitable peaks and valleys and setting up buffers to avoid the catastrophic busts of the past.
“There’s tons of runway for growth.”
Today’s producers have several advantages their historic counterparts did not, such as access to sophisticated market insights, supported by teams of analytics experts. They can also reach consumers instantly and directly through social media and other modern communications. These are both crucial tools when doing outreach in global markets, an increasingly important space for bourbon brands — especially those that enjoy international ownership under the likes of Diageo, Beam Suntory, Pernod Ricard, and Campari.
“Unlike the ’70s and ’80s, when bourbon took such a nosedive, we’ve got a global market now and a level playing field in a lot of countries that we didn’t have back then,” Gregory points out. “We’ve barely scratched the surface in places like India and Russia and even China. … If any of those populations switched from Scotch or other spirits to Kentucky bourbon, we’d probably run dry pretty quickly.”
Gregory’s optimism isn’t misplaced: America remains the dominant market for bourbon, with the rest of the world largely untapped. “More than 90 percent of [bourbon] is sold domestically and I think what that leaves is tons of space to grow in international markets,” Erwin says. “There’s tons of runway for growth.”
And perhaps most significantly, whiskey itself has evolved as a consumer product. It’s not just a consumer good anymore: It’s a lifestyle. “We don’t just have distilleries making whisky: We have brands, we have stories, we have personalities and characters,” Paskin says. “This is not just people buying into a liquid because they like it; they’re buying into a whole world.” Part of that world-building, she adds, includes centering authentic stories and people in a way that wasn’t done in the past.
In Scotland, a large part of that push has come through tourism; Paskin points out that following the 2014 China sales hiccup, many Scotch producers refocused investment on creating visitor experiences rather than simply maxing out production. And bourbon country has surely noticed; among the billions being sunk into capacity increases, a significant portion of spending is also going toward visitor centers, restaurants, hotels, and other tourist amenities. Many distillers cite Napa Valley as the model they’re emulating, with the hope that more and more people will come to Kentucky for extended stays, spending money on distillery visits, cultural experiences, and, of course, bottles of bourbon.
“It’s definitely a golden age right now of Kentucky bourbon, and we’re all staying pretty busy,” Gregory says. What comes in a decade, or a generation’s time, is still anyone’s guess. For now, everyone in bourbon is working overtime to bring the dream to fruition.