Booze | December 12, 2022 12:04 pm

What Recession? Kentucky Bourbon Brands Are Spending Millions on Expansion.

In an uncertain economy, drinks giants like Sazerac and Pernod Ricard are dropping nine-figure tabs on new distilleries and increased production

Inside a bourbon aging warehouse. New plans means hundreds of millions of dollars has been poured into expanded distilleries and warehouses in Kentucky this year.
Coming soon-ish: New warehouses, cooperages and distillers throughout Kentucky
iStock / Getty Images Plus

We already mentioned that whiskey seems impervious to inflation. And it seems to buck any talk of a possible recession, too, as multiple whiskey (and whiskey-adjacent) brands have announced multi-million dollar expansions and new projects in the last few weeks alone.

Recently, The Sazerac Company announced plans to invest $600 million to build 20 barrel warehouses and expand Robinson Stave and Cumberland Cooperage in London, KY. It’s the largest distilled spirits-related investment in Kentucky’s history, according to the Governor’s office. Besides additional aging and storage, this project will also expand the production capacity for the barrels used to store the whiskies.

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“This is a significant investment in Kentucky by Sazerac as our signature bourbon industry continues to grow at an incredible rate,” Gov. Andy Beshear said in a statement. “I am so glad to see this job creation in Southeastern Kentucky, as well as the growth of a company that has invested so much in the commonwealth over the past 25 years. Thank you to the leaders at Sazerac for further deepening their roots in the Bluegrass State.” The governor’s office also noted that bourbon was a nearly $9 billion “signature industry” in Kentucky, generating more than 22,500 jobs with an annual payroll exceeding $1.23 billion.

Those numbers could get bigger. Just last week Kentucky Bourbon Distillers LTD (aka Willett Distillery) announced a $93 million investment in Washington County to build warehouses and additional production facilities. And Pernod Ricard announced the construction of a $250 million carbon-neutral distillery in Marion County, KY, for its Jefferson’s Bourbon brand. And Buffalo Trace had its own $1.2 billion expansion announcement a few months back.

According to Just Drinks, in the fiscal year to the end of June, Pernod Ricard reported a 38% rise in sales of its U.S. whiskies, with Jefferson’s and Louisville’s Rabbit Hole at the forefront of growth. “We’re very bullish on the brand’s potential, and we’re committed to making our new Jefferson’s facility one of the most exemplary distilleries in the world in order to achieve it,” said Ann Mukherjee, Chairman and CEO, Pernod Ricard North America.

While this is great news for whiskey fans and Kentucky’s finances, this is a long-term bet. While some estimates suggest bourbon could be a $25 billion global industry by 2026, that relies on whiskey continuing its growth cycle. Plus, unlike many other spirits, whiskey needs years of aging — meaning even if these expansions and new distilleries get built in a few years, it’ll be long after 2026 until we see and taste new products. Also, drinking trends change: Tequila, for example, seems to be having a moment, and younger generations are embracing the NoLo (non- and low-ABV) category.

That said, the current economic numbers seem to be on bourbon’s side, and the whole whiskey industry will benefit from increased production of barrels. We’ll just have to wait 5-10 years to see if the investments were worth it.