Kentucky bourbon, a quintessential American spirit, experienced a surge in popularity following the end of the last Great Recession. However, with the current economic downturn in the wake of the pandemic, coupled with the looming threat of trade wars, the bourbon market may be facing a significant slowdown.
While the origins of this whiskey, traditionally crafted from corn and aged in charred oak barrels, can be traced back to the 18th century, it wasn’t until 1964 that Congress formally recognized it as a “distinctive product of the United States,” solidifying its iconic status.
However, shifting consumer preferences are a constant, and by the late 20th century, bourbon was often perceived as somewhat outdated.
“You often see these kind of generational shifts where people don’t want to drink what their parents drink,” said Marten Lodewijks, the US president of IWSR, which collects alcoholic beverage data and provides industry analysis.
As the global economy recovered from the 2008 recession, bourbon experienced a resurgence in popularity, driven by several factors.
Its attractive price point made it a desirable option for bars incorporating it into cocktails and for younger consumers exploring new spirits. In 2013, a Kentucky law streamlining the purchase and resale of vintage bottles further fueled the market, creating a high-end collectible segment. The rise of mid-century nostalgia, propelled by shows like Mad Men, also contributed to bourbon’s revitalization.
Data from IWSR reveals that global bourbon sales grew by 7% between 2011 and 2020, more than tripling the growth rate of the preceding decade.
This surge transformed some bourbon distillers into local celebrities, and bourbon bottles increasingly became investment assets rather than solely beverages.
“Everyone was going crazy over the bourbon market, and treating like a commodity, like a stock,” recalls Robin Wynne, a general manager and beverage director for Little Sister in Toronto, Canada, who has been a bar manager for about 25 years.
“People would go in as a prospector, to flip bottles for two to three times the value.”
However, like many market bubbles, this one was destined to deflate. Pandemic-related lockdowns decimated bar sales, and inflation has led consumers to opt for cheaper alternatives or abstain from alcohol altogether. Notably, many Gen-Z individuals are consuming less alcohol than previous generations at the same age.
These factors have collectively contributed to a decline in overall alcohol sales, with bourbon sales growth specifically slowing to just 2% between 2021 and 2024, according to IWSR data.
The imposition of global tariffs under President Donald Trump has further exacerbated the situation. The EU has announced retaliatory tariffs on US goods, including Kentucky bourbon and Californian wine, although their implementation has been temporarily delayed.
Moreover, most Canadian provinces have ceased importing American alcoholic beverages in retaliation, impacting a market that accounts for approximately 10% of Kentucky’s $9 billion whiskey and bourbon industry.
“That’s worse than a tariff, because it’s literally taking your sales away, completely removing our products from the shelves … that’s a very disproportionate response,” Lawson Whiting, the CEO of Brown-Forman, which produces Jack Daniels, Woodford Reserve and Old Forester, said back in March when Canadian provinces announced their plan to stop buying US booze.
Trump has argued that tariffs will stimulate American businesses.
However, Republican Senator Rand Paul, representing Kentucky, contends that the tariffs will negatively affect local businesses and consumers in his state.
“Well, tariffs are taxes, and when you put a tax on a business, it’s always passed through as a cost. So, there will be higher prices,” he told ABC’s “This Week” in May.
These combined economic pressures have led to a growing number of challenges within the bourbon industry.
Liquor giant Diageo reported a 7.3% decline in sales for Bulleit, a Kentucky distillery producing bourbon, rye, and whiskey, during this fiscal year.
Wild Turkey, a Kentucky bourbon owned by Campari, experienced an 8.1% decrease in sales over the past six months.
While major international brands are likely to weather these challenges, the sales downturn has resulted in a rising number of struggling businesses.
In July, LMD Holdings filed for Chapter 11 bankruptcy, just a month after opening the Luca Mariano Distillery in Danville, Kentucky.
This spring, Garrard County Distilling entered receivership.
And in January, Jack Daniel’s parent company closed a barrel-making plant in Kentucky.
Mr. Lodewijks cautioned that the industry may not have reached its lowest point yet.
“I’d be extraordinarily surprised if there weren’t more bankruptcies and more consolidation,” he said.
In part, bourbon’s current predicament stems from its own success. The surge in sales and the growth of the premium market fueled the proliferation of small distilleries. However, due to the years-long aging process required for bourbon, current market offerings reflect predictions made several years ago, resulting in an oversupply that is driving down prices.
Despite these challenging economic conditions, Mr. Lodewijks noted that history has demonstrated how adversity can spur innovation. Scotch whisky, once a relatively simple blend, saw distillers begin aging excess bottles during a period of declining sales in the latter half of the 20th century. This practice ultimately led to the creation of the premium, aged Scotch whisky market that exists today.
In Canada, where bourbon imports have dwindled, local distilleries have started experimenting with bourbon-making techniques to impart a similar flavor profile to Canadian whiskey.
“The tariff war has really done a positive for the Canadian spirits business,” noted Mr. Wynne.
“We’ve got lots of grains to make these whiskeys without having to rely on the States.”
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