The Results Are In: New Study Proves Kentucky Bourbon On Cusp Of Golden Age

FRANKFORT, Ky. – The meteoric rise of Kentucky’s signature Bourbon industry has nearly doubled the size of its workforce in the last two years, tripled the number of distilleries and set major new benchmarks for payroll, tax revenue, exports and barrel inventories.

Gov. Steve Beshear outlined the momentous growth in a six-month study released today by the University of Louisville’s Urban Studies Institute, in conjunction with the Kentucky Distillers’ Association and the Kentucky Agricultural Development Board.

“We all knew the Bourbon renaissance was taking this iconic industry to new levels, but this data is absolutely phenomenal,” Gov. Beshear said. “The amount of progress is unrivaled and unparalleled. This proves the Bourbon boom is real and producing results for all Kentuckians.

“At the same time, it’s clear that we still have work ahead of us. We have the most distilleries since Prohibition, yet we’re losing ground in attracting new companies as other states modernize their alcohol and tourism laws to make it more appealing to locate there.

“We must continue to work together to help our homegrown Bourbon industry, entice this next generation of distillers and strengthen Kentucky’s rightful place as the one, true and authentic home for Bourbon.”

The announcement was made at Beam Suntory’s new Long-Term Distribution Center, spanning the equivalent of 13 football fields at 600,000 square feet. Opening early next year, the facility will store Beam’s finished goods bottled in Frankfort before they are shipped to U.S and international markets.

Senate President Robert Stivers, R-Manchester, hailed the industry’s achievements and said, “The numbers are impressive, especially when you look at planned investment and jobs created over the next five years as the barrel tax is phased out.

“This is a perfect example of government working with business to remove barriers to growth.”

The 67-page report – the third study since 2010 – is the most comprehensive analysis ever conducted on the economic and fiscal impact of Bourbon and distilled spirits in Kentucky, said KDA President Eric Gregory.

“To be honest, we’re all blown away by the findings,” he said.

Major highlights include:

• Distilling now contributes $3 billion in gross state product to Kentucky’s economy every year, up from $1.8 billion just two years ago, a 67 percent increase.
• More than 15,400 people owe their paychecks to the Bourbon industry, compared to 8,690 in 2012, a 77 percent increase.
• Payroll for those workers has skyrocketed to more than $707 million from $413 million in 2012, a 71 percent increase.
• Average salary for distillery employees is $91,188.
• Distilleries plan to spend $630 million in capital investment over the next five years as the ad valorem “barrel tax” is offset by a corporate tax credit that distillers are required to reinvest in their Kentucky operations. This will create an additional 1,500 jobs, $43 million in payroll and $5 million in tax revenue.
• Total capital investment will surpass $1.3 billion in projects over a 10-year period starting in 2008.
• The number of licensed distilling companies has tripled – from 10 to 31 in two years. That’s the most distilleries in Kentucky since the repeal of Prohibition.
• Distilling remains one of the state’s top job creators with a 4.35 spin-off factor. It now ranks second, behind animal processing, in total employment and job multiplier out of 245 industries.
• Distilling industry employment is up 21 percent since 2000, while the rest of Kentucky’s manufacturers lost 26 percent of their jobs.
• New craft distilleries employ 127 people with salaries totaling more than $4 million. They have invested $30 million and plan to spend another $25 to $30 million in the next five years.
• Total property tax assessments have jumped to $2 billion from $1.3 billion in 2012, a 54 percent increase.
• More than $166 million in tax revenue for local and state governments is generated by spirits production and consumption, up from $126 million in 2012 (a 32 percent increase).
• Bourbon and Tennessee whiskey account for $1 billion of the total $1.5 billion in distilled spirits exports, up from $768 million in 2012. It is, by far, the largest export category among all U.S. distilled spirits.
• Barrel inventories are at their highest levels in 40 years, with more than 5.3 million aging currently in Kentucky. Production levels are up 53 percent in the last two years and 150 percent in the last 15 years.

In addition, House Majority Caucus Chairwoman Sannie Overly, D-Paris, said Bourbon tourism continues to impress visitors and pour money into local coffers. Rep. Overly represents Bourbon County, where the amber nectar earned its name 200 years ago.

“Bourbon County just opened its first distillery in 95 years, and it’s been astonishing to watch the transformation in our downtown as restaurants and other business capitalize on Bourbon’s momentum,” she said.

“The Kentucky Bourbon Trail® and Kentucky Bourbon Trail Craft Tour® experiences are changing the face of Kentucky tourism. Bourbon isn’t just a drink anymore. It’s a unique part of our culture and our heritage, and people want to experience that authenticity.”

The study found that visitors who tour Kentucky Bourbon Trail® distilleries are affluent and overwhelmingly come from outside the Bluegrass, which leads to multi-night hotel stays and more dollars spent in local communities.

On average, travelers spend nearly $1,000 during their stay, up from $737 two years ago. The average household income is $95,800; average length of stay is 3 days; and nearly 75 percent said the Kentucky Bourbon Trail® tour was their primary reason for visiting Kentucky.

More than 630,000 people visited a Kentucky Bourbon Trail® or Kentucky Bourbon Trail Craft Tour® distillery last year, a 43 percent increase over the 2012 report findings.

A new focal point in the study was the distilling industry’s impact on agriculture and Kentucky’s farm families. The Kentucky Agricultural Development Board contributed funding to research and develop the report.

Kentucky distillers purchase about 40 percent of their grains from local farmers, supporting 1,500 jobs and nearly $60 million in farm output. Kentucky farmers could potentially supply up to 80 percent of those needs, which would double the impact and add more jobs.

The study said several distillers expressed a desire to purchase a greater percentage of corn and wheat from Kentucky producers, but that depends on price and quality requirements, including corn from non-genetically engineered seeds.

KDA President Gregory said, “We believe this is a great opportunity as more distillers locate in Kentucky and source local grains. We look forward to working with the Governor’s Office of Agricultural Policy, the Kentucky Corn Growers Association and others to explore this issue.”

Kentucky distillers also give away about $2.5 million worth of “spent grains,” the grain solids that remain after the distillation process ends, to local farmers as a feed source for cattle and other livestock. In fact, the report says distillers produce enough spent grain to feed 90,000 cows a year.

While all signs point to continued growth, state leaders need to continue to look for ways to make the Commonwealth even more attractive for new distilleries and related businesses, said David Adkisson, President and CEO of the Kentucky Chamber of Commerce.

Kentucky now ranks eighth in the number of operating distilleries, according to the study. Five leading states have enacted new rules that relaxed regulations and lowered entry costs – Washington, New York, Colorado, Oregon and Texas.

Also, Kentucky taxes spirits higher than any open market state except Alaska, Illinois, Minnesota and Washington. In comparison, California ranks near the bottom in wine taxes. The top beer states – Missouri, Colorado and Wisconsin – also are at the bottom with low beer taxes.

“We are fortunate to have a thriving Bourbon industry today, but what happens if our historic monopoly starts to slip away?” Adkisson said. “Suddenly, we only produce 80 or 85 percent of the world’s Bourbon. We can’t afford to let that happen.

“We made great strides this past legislative session to nurture new growth, but we must be proactive as other states look to capture more of our signature spirit. That means modernized tourism and alcohol laws that put Kentucky on a level playing field.”

Joe Fraser, Chairman of the KDA Board of Directors, finished the press conference by toasting the Governor and state leaders for their support, and wondered what Kentucky’s distilling forefathers would have thought about today’s announcement.

“I’ll bet they never dreamed that Bourbon would one day be a $3 billion global industry, and that people from all over the world would travel to Kentucky just to see how it’s made,” said Fraser, Vice President of Operations at Heaven Hill Distilleries, Inc.

“When we look back 50 years from now, I think we’ll find that Kentucky was just entering the Golden Age of Bourbon, and the best is yet to come.”

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For additional information, contact KDA President Eric Gregory at (502) 875-9351. A full copy of the report is available online at http://www.kybourbon.com/index.php/key_facts/.

The KDA, founded in 1880, is the state’s leading advocate on spirits issues. Heritage members include Beam Suntory (Jim Beam and Maker’s Mark), Brown-Forman Corp., Diageo North America, Four Roses Distillery, Heaven Hill Distilleries, Inc. and Wild Turkey Distillery. Proof members include Michter’s Distillery.

Craft members include Alltech’s Town Branch Distillery, Barrel House Distilling Co., Boundary Oak Distillery, Copper & Kings American Brandy Distillery, Corsair Artisan Distillery, Dueling Grounds Distillery, The Gentleman Distillery, Kentucky Artisan Distillery, Limestone Branch Distillery, MB Roland Distillery, New Riff Distillery, The Old Pogue Distillery, Silver Trail Distillery, Three Boys Farm Distillery, Wilderness Trail Distillery and Willett Distillery. The Distilled Spirits Epicenter is the KDA’s official educational distillery.

KENTUCKY BOURBON TRAIL®, BOURBON TRAIL™, KENTUCKY BOURBON TRAIL CRAFT TOUR® and KENTUCKY BOURBON AFFAIR™ are trademarks/service marks of the Kentucky Distillers’ Association. Please drink responsibly. Visit http://www.kybourbon.com and http://www.kybourbontrail.com for more information.