Study Finds Bourbon Pours Billions Into Kentucky’s Economy

| January 25, 2022

Kentucky bourbon has long been the commonwealth’s signature industry, and recent studies have found that $9 billion pours into the Bluegrass State’s economy every year.

In turn, that generates more than 22,500 jobs with $1.23 billion in payroll, according to Kentucky Gov. Andy Beshear and legislative leaders, in a recent announcement.

Distilling also contributes more than $285 million in local and state tax revenue and is on the way to $5.2 billion in capital investment creating more jobs and opportunities for supply chain partners, farmers, communities and tourism than ever before.

Michter's whiskey

Whiskey aging at Michter’s in Kentucky (image copyright The Whiskey Wash)

“We all know that Kentucky crafts 95 percent of the world’s bourbon,” Gov. Beshear said in a prepared statement. “But today’s news proves that our signature spirit is so much more, and the growth is simply staggering. Distilleries, jobs, wages, revenue and investment are up triple digits across the board in the last 12 years. In turn, this amber wave has spurred more corn production, barrel cooperages and other supply-side manufacturers that are sustaining families and adding vibrancy to local communities.”

The good economic news comes from the biennial report conducted by economist Paul Coomes and commissioned by the non-profit Kentucky Distillers’ Association trade group. This is the sixth report since 2009 that charts growth and challenges facing bourbon and distilled spirits.

KDA President Eric Gregory said the study highlights how the industry has effectively transformed itself into a global and economic powerhouse over the past 12 years. “Leadership, partnership and a focused mission on working together and growing the pie,” he said.

Gregory explained that growth has included promoting Kentucky as the gold standard for distilling, research and responsibility; expanding the Kentucky Bourbon Trail tourism attraction; welcoming and mentoring craft distillers as the next generation; and working with elected officials to modernize alcohol laws and remove barriers to growth.

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“We’re thrilled that bourbon is at an all-time high since the glorious Repeal of Prohibition, but we can’t let success or complacency curtail this strong momentum,” he said. “We have more jobs and distilleries than ever before, but we also have more competition from all 50 states.”

The study notes there are now more than 2,200 distilleries in the U.S. as the craft whiskey industry booms. The report shows that nationwide growth has slashed Kentucky’s share of distilleries across the country from 24% to 6%, and jobs from 43% to 30%. Ten states have more licensed distillery operations than Kentucky.

“Bourbon is a great investment for Kentucky, and this study proves that,” Gregory said. “But more than 2,000 distilleries have made the decision not to locate in Kentucky, despite our rich traditions and ready-made infrastructure. It’s critical that distillers, partners and elected officials continue to work together to eliminate artificial and unnecessary barriers to growth. Doing so will attract more distillers and investment to the Commonwealth. Our economic future is in our hands.”

The study’s major highlights include:

  • $9 billion in economic output every year.
  • More than 22,500 jobs, up 83% in last 20 years.
  • $1.23 billion in payroll, up 250% in last 20 years.
  • Average salary of $101,567 – the first time that amount has exceeded $100,000.
  • KDA distillers bought 17 million bushels of corn in 2020, with 75% coming from Kentucky farmers.
  • Corn production has tripled in many Kentucky counties where distillers are located.
  • All-time record of 10.3 million aging barrels of bourbon, the first time over 10 million.
  • Bourbon production – number of barrels filled each year – is up 435% since 1999.
  • Kentucky distillers filled a record 2.4 million barrels in 2020.
  • $5.2 billion in capital projects completed or planned by 2025, including more than $100 million to build or expand Kentucky Bourbon Trail experiences.
  • Investments between 2021-2025 will create 4,565 new jobs, $258 million in payroll and $29 million in tax revenue.
  • Distilling has the highest job spin-off factor among top 20 Kentucky manufacturers by employees; for every distilling job, three more are created.
  • Value of distillers’ real and tangible property has quadrupled in the last 12 years to $1.49 billion.
  • Kentucky continues to tax distilling higher than all other large industries in the Commonwealth.
  • Distilling production and consumption generates $286 million in local and state tax revenue annually. That’s $179 million more tax revenue a year versus 12 years ago.
  • Kentucky has the fifth-highest Bourbon and spirits tax rate in the country, and the state’s distillers by far pay more in federal alcohol tax – $1.8 billion – than any other state
  • The KDA’s Kentucky Bourbon Trail and Kentucky Bourbon Trail Craft Tour experiences continue their rapid rebound from COVID and closures, up 160% in total attendance from last year and just down slightly from pre-pandemic record in 2019.
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Ashli Watts, President & CEO of the Kentucky Chamber of Commerce, echoed legislative leaders by noting that distilling’s high spin-off factor leads to a stronger economy. “It’s clearer than ever that bourbon is a great investment for the future of Kentucky,” she said.

And tax reform is one of the Chamber’s top priorities this legislative session, as Watts said that includes final relief from the “discriminatory” barrel tax. Kentucky is the sole place in the world that taxes aging barrels of spirits, which industry leaders fear might make it harder to lure new distilleries to the state.

Even with the 2014 tax credit, the escalating number of barrels – and therefore taxes – outpaces the amount of credit that distillers can take. Some large distillers now realize only 30% of the credit.

By law, distillers are required to reinvest that credit back into their Kentucky facilities. Watts encouraged the state’s legislature to make the credit refundable or transferrable, which would lead to more investment, more distillers in Kentucky, and more jobs.

“With so many beneficiaries of bourbon’s success, why would we keep barrel taxes in place and leave additional growth on the table?” she said. “One sure way to encourage job creation and investment is to eliminate the burdensome barrel tax that shackles distilling’s growth.”

Kevin Smith, Chairman of the KDA’s Board of Directors and Vice President of Bourbon Affairs at Beam Suntory, thanked the state’s leadership for their commitment to the distilling industry.

“We are grateful that lawmakers and the governor recognize the vital role our industry plays in jobs, revenue and tourism. And we look forward to working with them to continue this record momentum for generations of Kentuckians to come,” Smith said. “Working together, we are stronger. We are focused on the future and focused on creating a strong foundation that ensures Kentucky’s rightful place as the one, true and authentic home of bourbon.”

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You can view the full 2021 report here.

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Gary Carter

Gary Carter has been at the helm of metro newspapers, magazines, and television news programs as well as a radio host and marketing manager. He is a writer/editor/photographer/designer by trade, with more than 30 years experience in the publishing and marketing field. Gary enjoys working to build something great, whether...