The Oklahoman

Ky. bourbon production grows

2.5M barrels filled in 2020, a new record

- Bruce Schreiner

FRANKFORT, Ky. – Kentucky’s bourbon industry is signaling that it’s increasing­ly bullish on its future after reaching new production heights despite the COVID-19 pandemic and trade disputes in key overseas markets.

Bluegrass State bourbon producers filled nearly 2.5 million barrels in 2020, setting a new production record, the Kentucky Distillers’ Associatio­n said Monday. It marked the third straight year that Kentucky distilleri­es filled more than 2 million barrels of bourbon.

And for the first time in the modern era of American whiskey, Kentucky has 10 million barrels of bourbon aging in distillery warehouses, it said. The state of 4.5 million people has more than 10.3 million barrels of maturing bourbon, according to the latest figures.

“Kentucky’s signature bourbon industry continues to invest in our commonweal­th at unpreceden­ted levels, despite global pandemic disruption­s, exorbitant taxes and ongoing trade wars,” said Eric Gregory, president of the distillers’ group. “This is truly a historic and landmark record.”

Massive inventorie­s are a bet on the future because most bourbons typically age four to eight years before reaching their market. Bourbon gets its flavor and golden brown color during aging. New production numbers are based on inventorie­s reported as of Jan. 1, 2021, submitted to the state for tax purposes.

Kentucky distillers are in the midst of a $5.1 billion capital investment campaign that includes expanding production facilities and warehousin­g to meet the global thirst for Kentucky bourbon.

Production has continued to rise despite some industry headwinds both at home and abroad.

Kentucky bourbon exports to the European Union and the United Kingdom – the state’s largest whiskey export market – have taken a hit from ongoing Trump-era tariff disputes. Overall American whiskey exports have declined by 37% to the EU and by 53% to the UK as a result, according to the Distilled Spirits Council of the United States.

American whiskey makers have been caught up in a trans-Atlantic trade dispute since mid-2018, when the EU imposed a 25% tariff on American whiskey and other U.S. products in response to then President Donald Trump’s decision to slap tariffs on European steel and aluminum.

The Kentucky distillers’ group has joined a coalition of 50 U.S. alcohol-related trade associatio­ns in pressing President Joe Biden’s administra­tion to secure the suspension of tariffs on American whiskey.

“Our industry is collateral damage in trade disputes that have nothing to do with bourbon,” Gregory said.

Meanwhile, Kentucky distillers are seeking relief from barrel taxes on aging whiskey.

Distillers will pay a record $33 million in aging barrel taxes in 2021, a production cost that distillers in other states don’t face, putting Kentucky producers at a competitiv­e disadvanta­ge, the distillers’ associatio­n said.

Most of the barrel tax revenue goes to local school districts. Under a plan floated by the distillers’ group, distillers would continue paying barrel taxes, to maintain the revenue for schools, and the state would refund distillers the equivalent amount from the General Fund, Gregory said. The distilling industry would commit to reinvestin­g the refunded money into its operations, he said.

“The bourbon industry is investing more than $5 billion in this state to increase production, build innovative tourism centers and create thousands of new jobs,” Gregory said. “But punitive barrel taxes are punishing this growth and harming our chances to land new distilleri­es.

Kentucky lawmakers passed a corporate income tax credit in 2014 to offset barrel taxes, but the escalating number of barrels – and therefore taxes – far outpaces the amount of credit that distillers can take, Gregory said. Some distillers now only realize 30% of the credit, he said.

Kentucky is home to 95% of the world’s bourbon production, the associatio­n said. The $8.6 billion bourbon industry generates more than 20,100 jobs with an annual payroll topping $1 billion, it said.

 ?? BRUCE SCHREINER/AP FILE ?? Kentucky’s bourbon industry has reached new production heights despite the COVID-19 pandemic and trade disputes in key European markets.
BRUCE SCHREINER/AP FILE Kentucky’s bourbon industry has reached new production heights despite the COVID-19 pandemic and trade disputes in key European markets.

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