Wednesday night at a panel discussion sponsored by University of Louisville’s John H. Schnatter Center for Free Enterprise, four experts in the bourbon industry unanimously agreed: Kentucky bourbon is now poised to compete with scotch for a larger portion of the international whiskey market.
This insight was only one of the many topics discussed at “Kentucky’s Bourbon Boom: A Panel Discussion on the Economics of Bourbon,” which featured Bill Samuels, chairman emeritus of Maker’s Mark; Michael Veach, author and bourbon historian; Susan Reigler, author and president of the Bourbon Women Association; and Reid Mitenbuler, author.
Moderated by Conor J. Lennon, assistant professor of economics, the event was mostly attended by UofL students curious to see how they can play a role in Kentucky’s bourbon industry and learn more about the past, present and future of the state’s signature spirit.
Samuels began the discussion with some context.
While bourbon is certainly experiencing a renaissance, it hasn’t always been that way, he said. But here is what’s happening right now. According to Samuels, there are about 1,600 operating distilleries in the United States, with another 500-700 scheduled to open in the next two years.
Most of those 1,600 began less than four years ago.
Veach pointed out that we’re just now catching up to production levels of the 1940s and ’50s — but the profit margins are about 10 times higher.
Samuels named three reasons bourbon is booming today, one of which is linked directly to his father’s vision for Maker’s Mark bourbon.
“Between 1945 and 1995, there were only two bourbon distillery startups in the country — one in Pennsylvania, which did not make it, the other, Maker’s Mark, created by my father in 1953 as a retirement hobby. It has been quite a hobby,” Samuels said. “He wanted to bring connoisseurship to Kentucky bourbon.”
Sure, there was a lot of bourbon and whiskey in the ’40s and ’50s being produced, but it was considered more of a cheap, bottom-shelf spirit. Unlike scotch, it was not marketed as premium, or something you’d pour, savor and sip on over the course of an evening.
(For a quick and easy lesson on what makes bourbon different from scotch, check out this previous Insider article.)
Maker’s set out to change that, and so did two other leaders in the industry. In 1984, Blanton’s was released into the market (by master distiller Elmer T. Lee), making it the first single-barrel bourbon.
And soon after that, Booker Noe of Jim Beam released his small batch bourbon collection that included Booker’s, Knob Creek and Basil Hayden.
“It was these three pioneers, who re-imaged bourbon, who made it possible for the Kentucky spirit to share in a big way America’s ongoing love affair with premium spirits,” said Samuels.
Reigler mentioned that advertising and marketing also played a role in elevating bourbon’s image, and many companies spend a lot of their yearly budget on getting the word out. She said that last year, Brown-Forman spent 17 percent of its profits on marketing alone.
Mitenbuler reiterated that image has played a major role as well. Bourbon has gone from something you shoot in the back of a pickup truck to a premium product treated similarly to a single malt scotch.
So how does bourbon stack up against the scotch market? At the moment, bourbon only represents 10 percent of the scotch business, said Samuels, but he believes the industry is poised to take it on. All of those important steps that helped fan the flames for bourbon worldwide had to happen for it to be where it is today.
Unfortunately, however, politics could get in the way of a fair fight.
“The opportunity is incredible because we’re more attractive to young professionals, we have the positioning right, the image — but we just have to get the duties under control,” explained Samuels. “Maybe Trump is a good negotiator, but I can tell you the 10 presidents before him were not. We were put at horrible disadvantages going into these countries and getting any kind of tariff equality.”
Bourbon must expand globally so that it can compete with scotch, but the panel pointed out there are often outsized taxes on American exports.
Reigler said 65 percent of Jack Daniel’s is sold overseas, which is a huge number that factors into Brown-Forman’s future growth. With punitive taxes, broken trade agreements and political unrest, it’s a continuing concern for bourbon companies.
Even more concerning is something happening right here in Kentucky. According to Samuels, there are still antiquated tax laws in the state that are geared at keeping distilleries from growing. Distilleries are taxed more in Kentucky than in any other nearby state. And while Kentucky currently produces 95 percent of the world’s bourbon, that could potentially change.
“The odds that we will lose that monopoly concerns me as a Kentuckian,” said Samuels. “We’ve got a signature industry other states would die to have, but we have regulations and laws that were designed by the Baptists and Woman’s Christian Temperance Union to hold us back. It’s been a slow trek to get them changed. I’m just afraid the industry is going to creep away from us in time.”
“Kentucky’s legislature really needs to do something to make it more friendly to the industry as a whole,” said Veach. “Politicians should be worried. If Kentucky loses its reputation, then we’re not going to be the Napa Valley of Bourbon.”
Samuels said there was still so much potential for all the distilleries along the Kentucky Bourbon Trail in terms of tourism and revenue. Last month, he noted, the Maker’s Mark Distillery had 26,000 visitors who spent an average of $80 per person.
Under the leadership of his son, Rob Samuels, the distillery has added a restaurant, is looking at the possibility of adding a $14 million inn and has offered notable experiences, like the current Dale Chihuly exhibit.
“The Bourbon Trail won’t be exactly like Sonoma or Napa, but it has the chance since we all get along so well and since we’re all so dedicated to make it the best experience in the whiskey industry,” Samuels said. “It has a chance to compete at that level, as far as bringing in tourists, butts to beds and revenue to the state of Kentucky. It’s all intertwined. But it has to be the only Bourbon Trail in the world.”