Kentucky’s bourbon industry finds itself in a paradoxical state, with distillers like Heaven Hill Brands simultaneously scaling back production due to lagging demand while investing heavily in expansion. Despite a tumultuous market in 2025, the company, famed for brands such as Evan Williams and Elijah Craig, completed a new $200 million distillery, adding 155,000 barrels of capacity in the heart of bourbon country.
This reflects an industry in “whiplash,” grappling with both struggles and growth. While local cooperages face backlogs of unused barrels, distillers cut output and some lay off staff, tourists continue to flock to plant tours. Research by University of Kentucky economist Michael Clark indicates that whiskey makers have committed at least $1.45 billion to expansion projects by 2030.
The downturn follows steep pandemic-era highs in liquor consumption, now falling as the cost of living soars and younger consumers opt to drink less. Tariffs and inflation have driven up input costs and dampened overseas demand, with potential fallout from the Iran war threatening to further increase energy expenses.
The causes of bourbon’s troubles are hotly debated in this Republican stronghold, Reuters found through more than 20 interviews. Kentucky Governor Andy Beshear, a Democrat and potential 2028 presidential candidate, believes tariffs are a key headwind, making supplies more expensive and complicating access to crucial new international markets.
However, distillers often downplay political factors, attributing issues to cyclical elements like inflation and the inherent difficulty of forecasting demand years in advance for ageing spirits. Max Shapira, Heaven Hill Executive Chairman, quipped that the company has “gotten (demand) right over 90 years… zero” times, adding that current tariffs “really aren’t very impactful.”
A Heaven Hill spokeswoman confirmed lower bourbon output this year to “pace production” after a decade of booming growth.
As midterm elections approach in November, the differing narratives highlight the complexity of America’s economic realities and the enduring influence of Donald Trump in the rural South. Donald Trump’s now-defunct “liberation day” tariffs, set a year ago, saw Kentucky whiskey exports fall 15 per cent in 2025. This compounded a 26 per cent drop from his 2018 tariffs, from which overseas demand never fully recovered, according to Clark’s research for the Kentucky Distillers’ Association (KDA).
Greg Hughes, CEO of Jim Beam owner Suntory Global Spirits, views the situation as temporary, blaming inflation and falling demand in developed countries rather than tariffs for Jim Beam’s production cuts. He stated, “The industry will get through this,” and “be absolutely fine,” anticipating growth in emerging markets like Latin America.
Yet, Governor Beshear insists that privately, whiskey makers are apprehensive. He noted that cultivating new markets is challenging amid tariff uncertainty, with industry leaders complaining to him about “how these tariffs have hit them hard, how they shouldn’t have to be going through it a second time.”
Despite this, Kentucky remains a Republican stronghold, with super-majorities in both state legislative houses, unlikely to change in November. Donald Trump won the state by at least 25 percentage points in the last three presidential elections. In Bardstown, where bourbon underpins the local economy, business owners like Jeane Noland of Cozy Cottage acknowledge its vital role but largely do not blame Trump for broader struggles. Susanna Buscemi, co-owner of Volstead Bourbon Lounge, tries to keep politics out, stating, “In here, we’re about having a good time and drinking,” and surprisingly suggests tariffs are “a good thing for consumers” despite increasing costs.
Although Donald Trump’s “Liberation Day” tariffs were struck down by the US Supreme Court in February, he has vowed to replace them, imposing a new worldwide tariff that Democratic governors, including Beshear, are challenging as illegal. This uncertainty, coupled with Trump’s actions against Iran driving up energy prices, raises concerns about the cost and availability of corn, bourbon’s primary ingredient. Max Shapira of Heaven Hill voiced worries about farmers having “enough fertilizer? … And if so, at what price?”
Rising living costs have also squeezed disposable incomes, while health-conscious or cash-strapped Gen-Z consumers are drinking less than previous generations. The rise of weight loss drugs and cannabis drinks further impacts consumption.
Kentucky produces approximately 95 per cent of the world’s bourbon, supporting 24,000 jobs in the state. However, distillery jobs fell 1.7 per cent year-over-year as of last September, with nearly a third of distillers surveyed by Clark reporting job cuts, though many also added headcount.
Barrel inventories are at a record high of 16.1 million aging in Kentucky, a 57 per cent increase since 2020. While distillers argue whiskey gains value with age, adjustments have been necessary. Brown-Forman, owner of Woodford Reserve, cut 12 per cent of its workforce in 2025 and is in merger talks. Lofted Spirits laid off workers last year, reducing bourbon output by “at least half,” prompting CEO Mark Erwin to pivot to rum, a quicker-to-market spirit, which he expects to account for nearly half his company’s output this year. “I don’t mind making it,” he said. “It’s good business.”
Tariffs also ripple down to smaller producers. David Meier, owner of Glenns Creek Distilling, noted a 15 per cent increase in bottle costs due to tariffs, which he has not yet passed on. Larger distillers like Heaven Hill and Suntory report that exports constitute a small portion of their revenue, with most sales domestic.
However, suppliers are feeling the pinch. Canton Wood Products, a barrel maker, saw sales halve last year, leading to eight layoffs, a move Vice President Melody Pruitt described as gutting. Independent Stave Company, a major supplier, has fared better, cutting production but still investing for growth.
Overall, Kentucky distillers are planning $1.45 billion in new expansions, betting on a return to demand as economic pressures ease and overseas markets like India develop. Yet, Clark warned that tariff uncertainty “could have a cooling effect,” potentially causing distillers to “postpone some of their planned investments.”
Tourism remains a robust area, with 2.7 million visits to Kentucky’s Bourbon Trail last year, roughly flat with 2024. This stability is crucial for smaller brands relying on on-site sales. Bill Peterson, a Chicago-based designer, exemplifies the enduring appeal, stating, “I’m gonna stay a diehard bourbon guy,” after spending over $1,000 on whiskey bottles in a single day.
