Kentucky’s bourbon distilleries have been expanding at a feverish pace in recent years, building warehouses to age more whiskey than ever before.

The state’s $9 billion industry employs more than 7,000 people, with thousands more in related fields, including tourism.

So Tuesday morning’s news that industry giant Brown-Forman is laying off 12% of its workforce sent shock waves through the state.

The Louisville-based company is laying off 680 people worldwide, including more than 200 workers in Louisville with the closure of its cooperage there after more than 80 years in operation.

And they’re not the only company downsizing in Kentucky. In May 2024, Bardstown bourbon giant Heaven Hill offered buyouts to long-time employees to reduce its bottling plant workforce after pandemic demand for drinks slowed down.

Industry sales tracker IWSR reported that sales of U.S. whiskey, including bourbon, Tennessee and rye, fell 1.2% in 2023, the first drop in more than 20 years. Sales have continued to fall, down 4% in the first nine months of 2024.

So has the state’s long bourbon boom gone bust?

A look at Kentucky’s bourbon scene

There is evidence that the alcohol supply now surpasses demand: The U.S. Census Bureau reported in January that inventory of U.S. alcohol has been rising sharply since the COVID-19 pandemic, while sales have remained flat in recent years.

Bernstein Research industry analysts in 2024 predicted a surplus of U.S. whiskey within five years if demand remained constant, potentially leading to a glut.

And the Kentucky Distillers’ Association reported last month that there are now a record 14.3 million bourbon barrels aging in the state, with a record 3.2 million barrels filled in 2023.

Bernstein analyst Nadine Sarwat outlined the future of U.S. alcohol sales on a podcast hosted by her company in November.

“Having high inventory in itself is not a problem if you think demand is going to grow, because you need to prepare for higher demand in six years’ time. But today we also have an all-time high ratio of inventory to bourbon actually being sold. That tells us that not only do we have high inventory, but it’s probably higher than it should be when we consider the demand that’s out there,” Sarwat said. “So this really begs the question: Are we headed for a U.S. whiskey glut?”

Sarwat said in recent years many producers were worried about losing market share to other distillers, so they put up more and more barrels.

According to Gov. Andy Beshear’s office, his administration has seen more than $4.2 billion in new investment, including about 100 new locations and expansion projects, in bourbon and spirits.

Major distillers and small craft distillers have added bigger stills, put up more rickhouses now full of barrels and expanded offerings to consumers with aged bourbons, flavored whiskeys, and — especially — premium (read: expensive) expressions.

But after the COVID years of 2020-2021 of higher demand, consumer purchasing has normalized.

And now, economically challenged American consumers are experiencing grocery sticker shock and are making cuts across the board, including their spending on drinking.

Sarwat said in November that Bernstein estimates “excess supply in four to five years’ time” and predicted companies would mitigate a potential “hard landing” by encouraging further growth outside the U.S.

“Today about a third of U.S. whiskey volumes are sold outside the U.S. ... Penetration is incredibly low,” compared to Scotch and other categories, she said. “You have room for growth.”

Trump tariffs old and new

The possibility of impending tariffs could make overseas growth difficult.

Chris Swonger, president and CEO of the Distilled Spirits Council of the U.S., said in November, after the re-election of President-election Donald Trump, that retaliatory tariffs from trade disputes during Trump’s first term crashed the industry — and they could again.

“We are now currently facing the threat of a devastating 50% tariff on American whiskey by the EU at the end of March 2025,” he said. “Imposing a tariff on tequila and Canadian whisky (as President-elect Trump has threatened to do when he takes office later this month) from two of our largest trading partners could kick off more retaliatory tariffs on American spirits to Canada and Mexico.”

Neither tequila nor Canadian whisky can be produced in the U.S., so there are no American jobs in either industry, he pointed out.

“The U.S. spirits sector continues to experience a slowdown,” Swonger said. “At the end of the day, tariffs on spirits from our neighbors to the north and south are going to hurt U.S. consumers and lead to job losses across the U.S. hospitality industry, just as these businesses continue their long recovery from the pandemic.”

What’s behind the slowdown in demand

Why is demand in the U.S. flat or slipping?

Analysts point to several factors:

The closure of the cooperage was probably inevitable, said longtime spirits industry observer Chuck Cowdery. “More important is the whole cascade of bad news, he said, pointing to, among them, the uncertainty of the incoming administration and new anti-alcohol pressures:

▪ Increasing costs as distillers have “taken pricing” (the industry term for increasing the price) while other household expenses have also increased. The result is many people backing away from the bar.

▪ Tastes change with generations. Younger drinkers don’t want to be associated with what their parents coveted, meaning bourbon could be falling out of favor again.

▪ The widespread use of cannabis as an alternative as more states have allowed relatively inexpensive THC products for recreational use.

▪ The rise of Ozempic and other weight-loss medications that have been shown to also depress the appetite for alcohol.

▪ The recent call by Surgeon General Vivek Murthy for cancer warning labels on alcohol could impact interest, particularly by women concerned about the link to breast cancer.

“Alcohol provides an intangible benefit for a tangible cost,” Cowdery said. “That’s the reality consumers and the industry are coming to grips with. ‘Dry January’ is a symptom. Nobody ever got hurt by not drinking.”

What this means for Kentucky

So is bourbon doomed?

Not necessarily. The Kentucky Distillers’ Association, which lobbied successfully for a reduction in state taxes on aging barrels, wouldn’t comment on individual members’ business decisions.

But in a statement released in January, newly elected KDA board chair Ken Lewis, founder of New Riff Distilling, said the industry is eager to work with governments around the world on solutions to protect Kentucky jobs at distilleries large and small.

“Global trade has helped spirits of all kinds reach new markets, and while international bourbon curiosity has grown tremendously, it’s not the only spirit people are turning to,” Lewis said in the statement. “As governments work through disputes, the bourbon industry wants to do all it can to keep spirits out of the line of fire.”

Lewis told the Wall Street Journal that the Kentucky bourbon industry is making nearly three times as much as it is selling. “We’re in a very serious correction right now which is perhaps overdue,” Lewis said. Some investors are dumping stock, exacerbating the glut of barrels.

“The bourbon boom brought a tremendous amount of money into the industry and a lot of that was for the wrong reasons,” said Lewis. “In some ways it’s good riddance.”

KDA president Eric Gregory said inflation and changing consumer trends have implications for the future but can be dealt with.

“It’s no secret that our industry is experiencing a slowdown in sales and still working to recover from the pandemic and the last round of tariffs. We are clawing back, but all these challenges are real and come with success,” Gregory said. “Kentucky Bourbon has gone global, more barrels are aging than ever before, and distillers have big plans for the future. The one thing we know is that at every turn in history, good things follow when Kentucky distillers are unburdened and allowed to focus on making great whiskey.”

But Cowdery is less sanguine.

“I think the people making ‘full speed ahead’ statements are just whistling past the graveyard. All of these new distilleries are being built because there has been money available to build them. That tap is being cut off.”

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