Kentucky bourbon production continues to skyrocket despite pandemic
FRANKFORT, Kentucky – The Kentucky bourbon industry is signaling that it is increasingly optimistic about its future after reaching new production levels despite the COVID-19 pandemic and trade disputes in key overseas markets.
Bluegrass State Bourbon producers filled nearly 2.5 million barrels in 2020, setting a new production record, the Kentucky Distillers’ Association announced on Monday. It was the third year in a row that Kentucky distilleries bottled more than 2 million barrels of bourbon.
And for the first time in the modern era of American whiskey, Kentucky is said to be maturing 10 million barrels of bourbon in distillery warehouses. According to the latest figures, the state with 4.5 million inhabitants has more than 10.3 million barrels of maturing bourbon.
“Kentucky’s signature bourbon industry continues to invest in our Commonwealth on unprecedented levels despite global pandemic disruptions, exorbitant taxes and ongoing trade wars,” said Eric Gregory, President of the Distillers’ Group. “This is really a historic and landmark record.”
Massive stocks are a bet on the future, as most Bourbons typically age four to eight years before they hit market. Bourbon gets its taste and golden brown color during maturation. The new production numbers are based on inventory levels reported as of January 1, 2021, presented to the state for tax purposes.
The Kentucky distilleries are in the middle of a $ 5.1 billion investment campaign that includes facility expansion and warehousing to quench the global thirst for Kentucky bourbon.
Despite some headwinds in the industry at home and abroad, production has continued to rise.
Kentucky bourbon exports to the European Union and the United Kingdom – the state’s largest whiskey export market – have been hit by the ongoing Trump-era tariff disputes. As a result, total American whiskey exports have declined by 37% to the EU and by 53% to the UK, according to the United States’ Distilled Spirits Council.
American whiskey manufacturers have been embroiled in a transatlantic trade dispute since mid-2018 when the EU imposed a 25% tariff on American whiskey and other US products in response to then-President Donald Trump’s decision to impose tariffs on European steel and aluminum .
The Kentucky Distillery Group has joined a coalition of 50 US alcohol-related trade associations to urge President Joe Biden’s administration to get US whiskey tariffs suspended.
“Our industry is collateral damage in non-bourbon trade disputes,” said Gregory.
Meanwhile, Kentucky distilleries are calling for barrel tax relief on aging whiskey.
Distilleries will pay a record $ 33 million in aging barrel tax in 2021, a production cost that distillers in other states will not have to bear, putting Kentucky’s manufacturers at a competitive disadvantage, the Distillers Association said.
Most of the barrel tax revenue goes to the local school districts. According to a plan put in place by the group of distillers, distillers would continue to pay barrel taxes to maintain revenue for the schools, and the state would reimburse distillers the equivalent amount from the General Fund, Gregory said. The distilling industry will undertake to reinvest the refunded money in their operations, he said.
“The bourbon industry is investing more than $ 5 billion in this state to increase production, build innovative tourism centers and create thousands of new jobs,” said Gregory. âBut punitive barrel taxes are punishing this growth and affecting our chances of setting up new distilleries.
Kentucky lawmakers passed a corporate income tax credit in 2014 to offset barrel taxes, but the escalating number of barrels – and therefore taxes – far exceeds the loan amount distillers can draw, Gregory said. Some distilleries are now only realizing 30% of the loan, he said.
Kentucky is home to 95% of the world’s bourbon production, the association said. The $ 8.6 billion bourbon industry creates more than 20,100 jobs with annual salaries in excess of $ 1 billion, it said.