Kentucky whiskey bankruptcies: Spirit of Struggle

Kentucky whiskey bankruptcies: Spirit of Struggle

The Kentucky whiskey industry, particularly the bourbon sector, is facing economic challenges, leading to bankruptcies and closures among some distilleries. Here's a summary of the situation:

Bankruptcies and closures

• Luca Mariano Distillery: LMD Holdings, the parent company of Luca Mariano Distillery, based in Danville, filed for Chapter 11 bankruptcy in Michigan. They have stated that the filing is intended to "maximize the value of the assets for all stakeholders" and are looking to emerge successfully with the support of employees, customers, and creditors.

• Garrard County Distilling Co.: This $250 million facility, which began production in early 2024, went into receivership and shut down due to mounting debt.

• Kentucky Owl: Stoli Group USA, along with its Kentucky Owl whiskey brand, filed for bankruptcy in late 2023, citing weak demand and a cyberattack that disrupted operations.

Contributing factors

• Falling demand: Overall US whiskey sales have experienced a decline, and sales of brands like Wild Turkey have also seen a slump.

• Shifting consumer preferences: Younger generations, particularly Gen Z, are reportedly opting for alternative beverages like low-ABV options (hard seltzers) and non-alcoholic options, instead of whiskey.

• Mounting debt: Rapid expansion in the bourbon industry, fueled by optimistic growth projections, has left some distilleries with substantial debt.

• Inflation: Cost-strained consumers are spending less on premium alcoholic beverages.

• Trade uncertainties and tariffs: Potential tariffs on American liquor in export markets and ongoing trade tensions, such as those with Canada, can significantly impact sales for Kentucky distillers who rely heavily on international markets.

Broader industry context

• The Kentucky Distillers' Association estimates the state's bourbon and whiskey industry to be worth around $9 billion.

• The overall American spirits and wine industry is facing job cuts and efforts to remain profitable. Brown-Forman, the parent company of Jack Daniel's, announced job cuts and the closure of a barrel-making plant in Louisville.

While the bourbon industry faces headwinds, experts emphasize the need for adaptation and strategic pivots to navigate this evolving market.