Tanking Demand Kicks Off Bourbon Industry ‘Bloodbath’
A swift and sudden change in consumer preferences has left bourbon and other liquor distillers holding millions of barrels of aged spirits with a shrinking market of drinkers to consume them, threatening the $9 billion bourbon industry after years of rapid expansion, experts say.
A spate of bankruptcies and receiverships has befallen producers including House Spirits Distillery, Stoli Group, Luca Mariano and Garrard County Distilling, as the bourbon boom of the last 20 years snaps back to reality and the value of aged whiskeys craters.
Joseph C. Barsalona II of Pashman Stein Walder Hayden PC, who represents House Spirits in its Delaware Chapter 11 case, told Law360 it has a stalking horse bid for barrels of aged whiskey totaling about $4 million when those same barrels were valued at about $16 million in December 2024.
“It’s a bloodbath,” Barsalona said. “That’s insane, but that is where we are in the market.”
The bourbon industry’s growth over the past two decades has left producers particularly vulnerable to such a dramatic shift in consumer habits, Gary H. Leibowitz of Cole Schotz PC told Law360. He represents Garrard County Distilling, the Kentucky-based maker of All Nations bourbon, in its state court receivership proceedings commenced in April.
Startup costs for distillers include the construction of stills and rickhouses — special-purpose buildings that store barrels of spirits for aging — as well as the sourcing of ingredients for the liquor, the distillation process, and storage and manpower costs. For bourbon, the barrels must age for a minimum of two years, but most sit for at least four years, all while the producer must pay taxes on those aging barrels as they are dormant on racks until ready for bottling.
“I don’t think anybody was ready for the change in consumer preference away from bourbon, even if there was output rising faster than consumption,” Leibowitz said. “That quick shift in the market did catch everybody by surprise.”
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As the law continues to evolve on these matters, please note that this article is current as of date and time of publication and may not reflect subsequent developments. The content and interpretation of the issues addressed herein is subject to change. Cole Schotz P.C. disclaims any and all liability with respect to actions taken or not taken based on any or all of the contents of this publication to the fullest extent permitted by law. This is for general informational purposes and does not constitute legal advice or create an attorney-client relationship. Do not act or refrain from acting upon the information contained in this publication without obtaining legal, financial and tax advice. For further information, please do not hesitate to reach out to your firm contact or to any of the attorneys listed in this publication. No aspect of this advertisement has been approved by the highest court in any state.
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