Describing the surge in popularity of bourbon over the past two decades as a “boom” implies there may also be a “bust” somewhere on the horizon. At this point in time, that seems highly unlikely.
Last year, Kentucky distillers filled more than 1.7 million barrels of bourbon — nearly four times greater than 1999’s total. Production in the Bluegrass State accounts for 95 percent of the world’s bourbon supply and is the highest it’s been since 1972, according to data from the Kentucky Distillers Association (KDA).
While notable troughs have followed previous peaks (see 1999 and 1972), this time the landscape has changed.
During the 1970s, distillers sat on millions of barrels of inventory just as consumer preferences turned to lighter, un-aged spirits like tequila and vodka. In contrast, bourbon’s recent growth has come during a time of unprecedented competition — whether from other whiskey subcategories (such as rye) or other distilled spirits (gin). Far from slowing down, last year’s mammoth production coincided with record bourbon sales, which have only continued in 2020. Data from global insight firms predicts sales will carry on growing for at least the next five years.
Who’s fueling this demand and how has bourbon built such a strong consumer base during the last 20 years? VinePair reached out to leading bourbon producers, trade associations, and trend forecasters to find out.
Tracking the Bourbon Boom
Before we explore how bourbon arrived at its current era of success, let’s take stock of exactly where the subcategory stands in terms of sales.
Nielsen data shows that off-premise dollar sales grew 12.9 percent in 2019, reaching a total $1.78 billion. Bourbon was the third fastest-growing spirit last year (fourth if you also count prepared cocktails), behind only tequila and rye whiskey. Meanwhile, only vodka and blended whiskey recorded greater off-premise dollar sales totals than bourbon in 2019.
According to global data firm IWSR, bourbon represents 8.7 percent of the total spirits volume in the U.S. Looking back over the past five years, IWSR reports a compound annual growth rate of 7.9 percent for volume sales and 11.4 percent for dollar sales. IWSR predicts continued growth over the next five years, at a rate of at least 5 percent for both volume and value.
Tracking Bourbon’s Rise
Eric Gregory, president of the KDA, says the combination of four key factors have fueled “unparalleled growth” in the bourbon industry in recent decades.
First came the introduction of small-batch and single-barrel expressions in the late ‘80s and early ‘90s, which kicked off a premiumization trend and helped boost bourbon’s reputation as a high-quality spirit. “We can look at the rise of those and chart the progress of bourbon,” Gregory says.
The emergence of a global export market followed shortly after in the mid-‘90s. “Once we signed the NAFTA agreement and the EU agreement, and finally got on a level playing field with Scotch whisky and other global whiskeys, we started sending more overseas,” Gregory says.
Christine LoCascio, chief of public policy for the Distilled Spirits Council (DISCUS) and an international trade expert, agrees on the role these agreements have played. “We have data that shows exports to countries with whom we have free trade agreements grow at a more rapid pace than those where we don’t,” she says.
Not only do these agreements boost exports, they also ensure trading partners respect the concept of “distinctive product recognition,” LoCascio says. This has protected bourbon’s international reputation, as any bottle sold in foreign markets where the U.S. has a trade agreement must comply with America’s legal definition of the spirit.
Third came the rise in cocktail culture at the turn of the century, and the rediscovery of classic bourbon cocktails like the Old Fashioned. Gregory calls it the “’Mad Men’ effect.” “Bartenders learned that not only are small-batch or single-barrel bourbons great on their own, they also make fantastic cocktails as well,” he says.
Finally, there’s bourbon tourism to consider. Inspired by the success of California wine country, the KDA founded the Kentucky Bourbon Trail in 1999. While it launched with less than 10 distilleries, all located within an hour’s drive of each other, bourbon tourists can now visit 38 distilleries across the state as part of the Kentucky Bourbon Trail and the Kentucky Bourbon Trail Craft Tour. A record 1.4 million tourists made visits in 2018.
“People, especially younger drinkers, crave authenticity,” Gregory says. The ability to visit a distillery and put your finger in a mash tub, taste whiskey from the barrel, and see the spirit being bottled provides that experience. “We’ve grown a whole legion of bourbon ambassadors [because of] our Kentucky Bourbon Trail distillery visits,” he says.
Susan Wahl, vice president of American whiskies at Heaven Hill Brands, agrees that tourism has driven interest and says bourbon satisfies consumers’ craving for authenticity. Wahl also agrees on the importance of small-batch and single-barrel releases in the early 2000s. But more recently, she says, distillers have been innovating in different ways, using new techniques such as barrel-finishing.
“It allows us to drive deeper into the nuances in the whiskey and pull certain flavors out in a way that you wouldn’t otherwise be able to,” she explains. Importantly, during a period of continued strong demand, barrel finishing has “shortened the innovation timeline,” she says.
While not technically bourbon, Wahl says another important innovation in recent years that’s aided bourbon sales is flavored whiskey. This assertion rings true with analysis from global data insight firms.
“Bourbon, especially higher-end brands, began taking off around 2010, … roughly the same time flavored bourbon brands like Wild Turkey American Honey and Jim Beam Red Stag were making names for themselves in the market,” says Adam Rogers, IWSR’s North American research director. Rogers says flavored bourbon brands have acted as a “bridge product” for consumers to enter the bourbon subcategory. Those newfound bourbon drinkers remain to this day, many trading up to purchase higher-end products, like small-batch and single-barrel releases.
Who’s Driving Bourbon Growth?
Just as bourbon has grown via various product innovations, the demographic of drinkers has also evolved in recent years. Somewhat unsurprisingly, bourbon still skews significantly toward male drinkers over female, but more women are exploring the subcategory through higher-end cocktails, Rogers says.
What does come as more of a surprise is the average age of bourbon drinkers. IWSR data shows the 25-to-54-year-old range holds the largest percentage of bourbon consumers. If bourbon once had a reputation as an “old man’s” drink, that is certainly no longer true.
Age is just one aspect of a fairly dramatic shift in key bourbon demographics. According to data from consumer insights firm MRI-Simmons, while white males make up 78 percent of bourbon drinkers in the U.S., consumption among non-white drinkers has increased across the board. Since 2013, the number of Black or African-Americans who drink bourbon is up 22 percent, while the number of Asians who drink bourbon is up 36 percent.
Bourbon has also increasingly found a home among wealthier drinkers. Consumption by adults with a household income between $150,000 and $250,000 has jumped 46 percent since 2013, according to MRI-Simmons. At the $250,000 to $500,000 range, it’s increased 78 percent.
Bourbon Sales During the Global Pandemic
It’s no secret that liquor sales have thrived during the coronavirus pandemic, and bourbon is no different. Thirty-three weeks into 2020, and off premise sales of bourbon have already reached $1.34 billion, according to Nielsen data. That’s a 29.7 percent rise compared with the same period last year.
The main beneficiaries of this trend have been larger distillers like Heaven Hill. While the company has seen “huge” sales growth across its portfolio, its core brands like Elijah Craig Small Batch, Evan Williams, and Larceny have seen the most notable increases in recent years and during the pandemic, says Heaven Hill’s Wahl.
During the last three to five years, Elijah Craig experienced consistent growth of between 30 and 40 percent. Sales have been growing “more intensely” through the pandemic, Wahl says. Meanwhile, Evan Williams Black Label, one of four expressions that make up the Evan Williams brand, is now a 2.2 million-case brand, following years of continued growth.
“Even brands that were flat before are seeing growth in this environment,” Wahl says.
Kris Comstock, senior marketing director at Buffalo Trace, notes that volume sales of the company’s overall portfolio have doubled in the past five years. During the pandemic, sales have continued to grow “in line with pre-Covid-19 rates,” he says. Buffalo Trace is in the midst of a $1.2 billion distillery expansion to continue increasing production.
Current or Future Threats to Bourbon?
One issue that has impacted the bourbon industry more significantly than the pandemic is the 25 percent tariffs imposed on American whiskey by the EU in 2018. While it’s difficult to pinpoint the precise impact on bourbon alone, DISCUS’s LoCascio says, “Between June 2018 and June 2020, American whiskey exports declined from $757 million to $462 million.”
This amounts to a 39 percent decline in just two years, the long-term implications of which, LoCascio says, could be significant, not least because those tariffs are set to increase to 50 percent in spring 2021 unless an agreement can be reached between the U.S. and EU.
But the EU tariffs are not the only factor at play. In 2019, the U.S. enforced its own tariffs on EU imports, including Scotch whisky. So while the export market is currently less attractive for bourbon producers, they do find themselves at an advantage on home soil. Heaven Hill’s Wahl confirms that the company’s sales have been affected by the EU tariffs, but not to the same extent as other bourbon producers who place a greater focus on the export market.
“We’ve definitely been impacted somewhat, but we have been able to make up those sales on the domestic side of the business,” she says.
From a domestic standpoint, bourbon producers appear well placed to continue thriving. While rye whiskey outpaced bourbon in terms of growth last year, that subcategory remains 10 times smaller than bourbon when it comes to dollar sales. What’s more, many of the leading rye whiskey brands are owned by the same companies that dominate bourbon production.
“Bourbon consumers are experimental and are willing to try any type of U.S. whiskey, whether it’s rye, single-malt, or a higher-end blended version,” says IWSR’s Rogers. “Shares teeter modestly between each U.S. whiskey sub-segment but bourbon is not showing any signs of slowing down or losing any of its lion’s share.”