There is this thing that happens when you take a sip of bourbon. That warm feeling you get is often referred to as The Kentucky Hug. It’s a feeling that Kentucky has been feeling for more than 200 years now. According to the newly released 74 page ‘Economic and Fiscal Impacts of the Distilling Industry in Kentucky’ that hug is now warmer and broader than ever before.
The Kentucky Distillers’ Association – KDA along with its member distilleries have been gathering this biennial report along with Emeritus Professor of Economics at University of Louisville Dr. Paul Coomes since 2009. This is the sixth report since then that charts the growth and challenges facing Bourbon and distilled spirits.
The report reminds me of the famous Maya Angelou quote that says, “I’ve learned that people will forget what you said, people will forget what you did, but people will never forget how you made them feel.” It’s one thing for Kentucky Distillers to claim that Kentucky Bourbon does great things for the state. Having this report for more than 20 years continues to reaffirm the story that bourbon generates jobs, revenue, and investment in the state. In fact, distilling industry has the highest job spin-off factor among the top 20 Kentucky manufacturers by employees; for every distilling job, three more are created. Add it all up and The Kentucky Hug has a lasting impact across the state and across the entire country.
Bourbon, Kentucky’s Signature Industry, Pours $9 Billion into State’s Economy
Kentucky Bourbon is expanding its status as a premier signature industry, now pouring $9 billion into the Bluegrass economy every year and generating more than 22,500 jobs with $1.23 billion in payroll, Gov. Andy Beshear and legislative leaders announced.
Distilling also contributes more than $285 million in local and state tax revenue and is in the middle of a massive $5.2 billion capital investment spree that is creating more good-paying jobs and opportunities for supply chain partners, farmers, communities and tourism than ever before.
“We all know that Kentucky crafts 95% of the world’s Bourbon, and 100% of the Bourbon worth drinking,” Gov. Beshear said. “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.
“Now is not only the time for bourbon, it’s the time for Kentucky. And if we have the courage to be what bourbon is, bold, then there is nothing that we can’t accomplish. Kentucky has arrived, no longer a fly over state, but the destination and often times the destination to enjoy a really good bourbon.
“I’m thrilled Team Kentucky is part of this growth and am glad to help move it forward for the decades to come,” Gov. Beshear said.
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Kentucky Distillers’ Association 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.
That has included promoting Kentucky as the gold standard for distilling, research and responsibility; expanding the popular 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.
“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. due to the booming craft movement. That has slashed Kentucky’s share of distilleries nationwide from 24% to 6%, and jobs from 43% to 30%. Ten states have more licensed distillery operations than Kentucky. Ten states have more licensed distillery operations than Kentucky. Kentucky is tied with North Carolina for 11th highest among all U.S. states. Here are the top states.
Highlights of the 2021 Kentucky Bourbon Economic and Fiscal Impact Study
- $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 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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Key Legislation that Changed the Distillery Visitor Center Experience in Kentucky
Over the last five years Kentucky Distillers in working with state legislatures have eliminated many Prohibition era laws that have allowed bourbon tourism to flourish. Here are some of the highlights that have contributed to the states ever expanding bourbon tourism experiences.
- Sample Size Increase – Distilleries can now provide up to 1.75 ounces of free samples of distilled spirits per visitor per day. This went up from 1 ounce. SB11
- Cocktails or Mixed Drinks – Distilleries are now allowed to sell cocktails or mixed drinks at the distillery. This was never an option before. SB11
- Souvenir Package Sales Increase – Distilleries and can sell up to 4.5 liters or six 750 ml bottles per day at the distillery. This went up from 3 liters. SB11
- Sale of Spirits at Fairs and Festivals – Allows distillers to sell their spirits at fairs and festivals in wet counties. HB100
- Sale of Vintage Distilled Spirits – Allows licensed retailers to purchase vintage unopened spirits from private individuals and resell them by the drink or by the package. HB100
- Direct to Consumer Shipment – This is the newest law that allows distilleries to ship spirits directly to consumers. It’s currently only available in eight states and D.C. HB400.
KDA Praises Government Leaders for ‘Getting Out of the Way’
Gregory praised legislative leaders for revolutionizing Kentucky’s archaic alcohol laws and in many cases, “just getting government out of the way so our business can flourish.”
In the Senate, Gregory thanked Senate President Robert Stivers, Senate Majority Leader Damon Thayer, Senate Licensing & Occupations Chairman John Schickel and Senate Democratic Leader Morgan McGarvey for their bold leadership in advancing reforms.
Sen. Stivers created the Bourbon Barrel Reinvestment Tax Credit in 2014 to offset the discriminatory tax that distillers pay on aging barrels. Gregory said the credit stimulated barrel production leading to now-record inventories.
Sens. Thayer and McGarvey in 2020 championed landmark legislation to make Kentucky a model for direct-to-consumer spirits shipping around the country. In 2016, Sen. Schickel’s historic Senate Bill 11 authorized cocktail sales at distilleries and led to a surge of robust, immersive tourism experiences and record attendance.
Stivers, one of the longest serving senate presidents in the country, said, “We’ve seen first-hand how simply removing a tax or an outdated law leads to more high-quality jobs and record investment levels in our signature spirit. We also understand other states are watching Kentucky and desperately want what is unique to the Commonwealth.
“Make no mistake, though, the only place to experience the authenticity of Bourbon is right here in Kentucky and we must maintain our distilling dominance. For all of these reasons, I strongly encourage my fellow members of the Senate to do our part to keep this momentum flowing.”
In the House, Gregory applauded Speaker David Osborne, Majority Whip Chad McCoy, House Licensing & Occupations Chairman Adam Koenig and House Democratic Leader Joni Jenkins for their outstanding support.
Rep. Osborne’s pro-business tenure has paved the way for multiple reforms and protections, including Rep. McCoy’s “vintage spirits” bill in 2017 to boost hospitality and tourism and Rep. Koenig’s repeated success with direct shipping legislation (2020 and 2021). Rep. Jenkins has helped pass many Bourbon-related bills in an overwhelmingly bipartisan fashion.
Speaker Osborne said, “Kentucky has everything a distiller needs to grow and thrive, but we have some work to do in modernizing our tax code. Too often our laws restrict the free market when they could be spurring economic growth in all sectors. We are committed to this work and look forward to working with KDA and other stakeholders.
“It might take years to age a great Bourbon, but we can’t wait to leverage this momentum. We must continue to press forward, build on the tremendous growth announced today, and attract more jobs and investment for the benefit of all Kentuckians.”
Ashli Watts, President & CEO of the Kentucky Chamber of Commerce, echoed legislative leaders, 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.
Tax reform is one of the Chamber’s top priorities this legislative session, and Watts said that includes final relief from the discriminatory barrel tax. Kentucky remains the only place in the world that taxes aging barrels of spirits, making it harder to lure new distilleries to the state.
Even with the 2014 tax credit, the escalating number of barrels – and therefore taxes – now far 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 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.”
You can view the full 2021 “Economic and Fiscal Impacts of the Distilling Industry in Kentucky” report here.
Watch the Entire Presentation Here
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MML&K Government Solutions Chris Nolan, CEO Kentucky Chamber of Commerce Ashli R. Watts, Averitt Construction Todd Harrett, MML&K Government Solutions Sara Osborne, KDA Senior Director Adam Johnson, KDA Director of Marketing Amanda Ryan, Heaven Hill Distilleries General Counsel Jessica Pendergrass, KDA President Eric Gregory, Maker’s Mark Distillery Chairman Emeritus Bill Samuels, Jr., VP of Beam Suntory and Chair of KDA Board of Directors Kevin Smith, KDA Director of Public Affairs Colleen Thomas, Brown-Forman Master Distiller Chris Morris, MB Roland Distillery Founder Paul Tomaszewski, Brown-Forman Director of State and Local Public Affairs Les Fugate, U of L Economist Paul Coomes, KDA Director of Industry Responsibility & Sustainability Sara Barnes, KDA Director of Governmental & Regulatory Affairs Jack Mazurak, Jeptha Creed Distillery Founder Joyce Nethery, and KDA Director of Member Services Annie Franklin (Left to Right).