Kentucky's $9B whiskey industry in crisis as Gen Z drinkers shun bourbon, tariffs take toll
Three prominent Kentucky distilleries have collapsed into bankruptcy over the past eight months, marking a dramatic downturn for an industry that generates $9 billion annually for the state.
LMD Holdings, which operates Luca Mariano Distillery, owes more than $25 million to creditors, while Garrard County Distilling faces nearly $26 million in debts.
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Kentucky Owl, owned by international spirits company Stoli Group, has also filed for bankruptcy protection with millions in outstanding obligations.
4 Bottling lines stand idle at Kentucky distilleries as the state's $9 billion whiskey industry faces widespread shutdowns.
Chance – stock.adobe.com
The financial devastation extends far beyond individual companies. More than 23,000 workers across Kentucky's whiskey region depend on the industry for their livelihoods, with combined wages totaling $1.6 billion.
Even established giants like Brown-Forman have eliminated hundreds of positions, while major producer Diageo has temporarily halted operations at Kentucky facilities.
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The crisis stems from a dangerous combination of overproduction and rapidly shifting consumer preferences. During the bourbon boom of the 2000s, distilleries dramatically expanded production and investment, creating what industry experts now recognize as an unsustainable bubble.
Kentucky currently stores over 14.3 million aging barrels of whiskey — more than two barrels for every person living in the state.
This massive inventory buildup coincided with a sharp decline in demand.
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American whiskey sales dropped 1.8% in 2024 to $5.2 billion, according to industry data.
4 Gen Z drinkers toast with lighter beverages, signaling a cultural turn away from high-proof spirits.
Koldo_Studio – stock.adobe.com
The problem has been made worse by younger drinkers, particularly those in Gen Z who are abandoning traditional high-proof bourbon in favor of ready-to-drink canned cocktails and lighter alcoholic beverages like hard seltzers.
Social media platforms, especially TikTok, have accelerated this trend by promoting sweeter, lower-alcohol drinks as fashionable alternatives to whiskey. These viral trends have fundamentally changed how young adults view alcohol consumption, dealing a significant blow to bourbon's cultural appeal.
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Alcohol use among young Americans has declined sharply over the past two decades, with the share of adults under 35 who drink falling from 72% in the early 2000s to 62% today.
Binge drinking and underage drinking have dropped significantly, with Gen Z consuming 20% less alcohol per capita than Millennials did at the same age.
Experts attribute the shift to growing health awareness, changing social norms, the rise of alcohol alternatives and economic or cultural forces shaping how younger generations view drinking.
International trade disputes have created additional headaches for Kentucky producers who rely heavily on export markets.
Canada, which purchases $40 million worth of Kentucky bourbon annually, imposed retaliatory tariffs earlier this year in response to President Donald Trump's levies on Canadian imports.
4 Historic distilleries across Kentucky, once booming, now struggle under the weight of overproduction and debt.
Reagan – stock.adobe.com
Trump's tariffs prompted Ontario retailers to remove American spirits from their shelves entirely. Michter's distillery alone lost $115,000 in cancelled Canadian orders.
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The European Union presents an even larger threat, with plans to implement a 50% tariff on American whiskey that have been delayed several times in order to allow for trade negotiations to run their course.
In 2020, the bloc imposed a 35% tariff on American whiskey, causing exports to drop precipitously.
The financial pressure has exposed how many distilleries expanded too aggressively during the boom years, taking on risky debt loads that became impossible to manage as market conditions deteriorated.
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Both startup operations and long-established companies have found themselves vulnerable to the sudden downturn.
Industry leaders are now calling for major changes to help distilleries survive what they describe as a perfect storm of challenges.
Proposed solutions include greater emphasis on sustainable production methods, expanded bourbon tourism experiences and development of ready-to-drink products that appeal to younger consumers.
The crisis extends beyond distillery walls, threatening grain farmers who supply raw materials, tourism businesses that depend on bourbon trail visitors, and entire communities built around whiskey production.
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4 Aging barrels sit untouched, highlighting the deep inventory glut distilleries can't move fast enough.
Jason Busa – stock.adobe.com
Without significant changes in consumer behavior or resolution of trade disputes, Kentucky's signature industry faces a period of painful shrinkage.
Industry analysts warn that conditions could deteriorate further if drinking trends continue moving away from traditional spirits and if international trade conflicts escalate.
The state's bourbon heritage, built over centuries, now confronts an uncertain future that will require dramatic adaptation to survive.
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