The Rise and Fall of Kentucky Bourbon: A Tale of Market Dynamics

Bourbon, a quintessential American spirit, enjoyed a resurgence after the 2008 recession but now faces challenges including a post-pandemic slump, tariffs, and generational drinking shifts, leading to a downturn that could change the industry landscape.

Kentucky bourbon, a staple of American culture often likened to the warmth of apple pie, has seen a sharp decline following a period of significant growth. After the last Great Recession, the bourbon industry was in the midst of a renaissance, captivating both seasoned drinkers and new fans alike. However, recent economic downturns, particularly in the wake of the pandemic and looming trade conflicts, have stifled this once-thriving market.

Historically tied to the 18th century, bourbon officially gained recognition as a distinct American product in 1964 when Congress passed a law to protect its heritage. Yet, for a time, bourbon lost its appeal and became viewed as an outdated choice. But with the resurgence of interest in classic cocktails and distinctive spirits, fueled by nostalgia and strategic legislation that enabled easier resale of vintage bottles, bourbon sales skyrocketed from 2011 to 2020 — witnessing a 7% growth globally during this period, more than tripling the previous decade's rate.

However, what goes up must come down. The pandemic severely hit the bar culture, causing sales to plummet, while inflation pushed consumers towards lower-cost options. A notable demographic shift has also emerged, where younger generations, particularly Gen-Z, are engaging less in alcohol consumption compared to their predecessors. This perfect storm has led to bourbon’s sales growth stagnating to just 2% from 2021 to 2024, according to ISWR data.

President Trump’s global tariffs represent another significant hurdle. The EU has responded with retaliatory tariffs affecting Kentucky bourbon, combined with Canadian provinces pulling American spirits from store shelves. This has compounded existing market tensions, with Kentucky bourbon accounting for a substantial portion of the whiskey market, valued at $9 billion.

As reported, leading brands such as Bulleit Bourbon experienced a staggering 7.3% decrease in sales this past fiscal year. Likewise, Wild Turkey reported an 8.1% drop in the last six months. While major brands may endure the struggle, smaller distilleries have not been so fortunate. The recent bankruptcy of LMD Holdings and the receivership of Garrard County Distilling illustrate the severe economic repercussions faced by the industry.

Expert insights suggest that the bottom of this market slump has not been reached yet, with predictions of further bankruptcies and possible consolidations on the horizon. Years of bourbon barrel aging yields an oversupply in the current market, contributing to price drops.

Despite the discouraging circumstances, some believe that adversity can breed innovation. Past trends within the spirits industry indicate that downturns can spur creativity. Canadian distilleries, for instance, have begun experimenting with bourbon-making processes to create similar flavor profiles, thus diversifying their offerings in tough economic times.

As the future remains uncertain for Kentucky bourbon, the ongoing saga of rising and falling fortunes continues to unfold, shaping the landscape of this historic American spirit.