By Nicholas P. Brown and Emma Rumney
BARDSTOWN, KY, April 7 (Reuters) – Like many whiskey distilleries, Heaven Hill Brands is pulling back bourbon production this year due to declining demand. But as American spirit faces a turbulent market in 2025, the Kentucky company has built a new $200 million distillery in the heart of bourbon country, adding 155,000 barrels of capacity.
Famous for brands like Evan Williams and Elijah Craig, Heaven Hill exemplifies an industry that is simultaneously struggling and growing. Local cooperatives are drowning in piles of unused barrels, distilleries are cutting production and some are laying off workers. But tourists are still clamoring for factory tours, and whiskey makers have planned at least $1.45 billion in expansion projects between now and 2030, according to research led by University of Kentucky economist Michael Clark.
Drinking consumption is falling from pandemic-era highs as the cost of living rises and some younger consumers drink less. Tariffs and inflation increased input costs and punctured bubbling demand abroad. And now, the effects of the Iran war threaten to increase energy costs.
But Reuters’ more than 20 interviews with distillers, suppliers, business owners, voters and politicians over the past month found that the effects of the crisis have not been uniform, and the roots of bourbon’s problems are hotly debated in this Republican stronghold.
Kentucky Governor Andy Beshear believes tariffs are a significant negative. The Democrat and potential 2028 presidential candidate said in an exclusive interview that tariffs not only make ingredients more expensive but also complicate bourbon producers’ efforts to reach critical new markets abroad.
Distillers downplay the politics and instead blame cyclical factors such as inflation and the difficulty of predicting demand years in advance as their whiskeys age. “The number of (claims) we’ve been entitled to for 90 years, I say jokingly, is zero,” says Heaven Hill Chief Executive Max Shapira, adding that current tariffs “really aren’t very effective.”
A spokesman for Heaven Hill said bourbon production will be lower this year than last year as the company “ramps up production” after a decade of rapid growth, but declined to give an exact figure.
As midterm elections approach in November, the struggle to control the narrative of the bourbon industry’s struggles demonstrates how complex America’s economic realities are and demonstrates the enduring strength of U.S. President Donald Trump’s grip on America’s rural South.
A year ago, Trump’s “liberation day” tariffs were set, which are no longer in effect. Kentucky whiskey exports are down 15% in 2025, according to U.S. Census data. This comes at a time when overseas demand has never fully recovered, in addition to a 26 percent drop in the president’s tariffs in 2018, according to the Clark-led study commissioned by the Kentucky Distillers Association (KDA).
Greg Hughes, CEO of Suntory Global Spirits, which owns Jim Beam, says this is temporary. Inflation and falling demand in developed countries, rather than tariffs, were the main drivers of the headwinds pushing Jim Beam to reduce bourbon production this year, Hughes said in an interview. “The industry will get through this” and “will be absolutely fine,” he said, pointing to expected growth in new markets such as Latin America.
LOCAL BUSINESSES ARE EXTENDING TARIFFS
Behind the scenes, Beshear emphasized that whiskey producers are afraid. The governor said nurturing the new markets Hughes alluded to would be difficult amid tariff uncertainty, adding that industry leaders had privately complained to him about “how these tariffs are hitting them hard, they shouldn’t have to go through this a second time.”
However, in Kentucky, which Trump visited last month to announce his economic policies, Republicans have supermajorities in both state legislatures. That’s unlikely to change in the November election, as Democrats have no opponents in nearly half of Republican-controlled districts in both chambers, according to state election filings.
Trump won the state by at least 25 percentage points in each of the last three presidential elections.
In Bardstown—a decrepit colonial brick enclave where public trash cans are made from whiskey barrels—bourbon bolsters the local economy. “If we don’t have a bourbon industry, we don’t have a business,” says Jeane Noland, owner of the Cozy Cottage gift shop.
But local entrepreneurs say business is mostly good and don’t blame Trump for the broader struggles.
Susanna Buscemi, part owner of Volstead Bourbon Lounge in Bardstown, does her best to keep politics out of her bar. “We’re all about having a good time and drinking here,” he says.
While he acknowledges that tariffs have increased the cost of certain whiskies, he says they are “a good thing for consumers”.
ROM THAT SAVES?
Although Trump’s Independence Day tariffs were struck down by the US Supreme Court in February, Trump has vowed to replace them and, in the meantime, imposed a new tariff around the world. Democratic governors, including Beshear, filed a lawsuit saying the new tariffs were illegal.
As uncertainty grows, other policy challenges emerge. Trump’s attacks on Iran have caused energy prices to rise and raised concerns that inputs such as corn fertilizer, the main ingredient in bourbon, could become expensive or scarce.
“We’re worried about getting ready to plant this year’s corn crop, and will farmers have enough fertilizer? … And if so, at what price?” said Heaven Hill’s Shapira.
As rising costs of living leave limited disposable income, aging baby boomers are being replaced by health-conscious or cash-strapped Gen Z consumers who don’t drink as much. The emergence of weight loss pills and marijuana drinks is also having an impact.
Kentucky produces approximately 95% of the world’s bourbon. “And the rest is fake,” Beshear joked. According to Clark’s research, the bourbon industry supports 24,000 jobs in Kentucky; Almost a third of these are direct distillery roles, with the remainder split between suppliers and service providers.
According to Clark, according to the most recent data available, business at the distillery was down 1.7% year-over-year as of last September. Almost a third of the distilleries Clark surveyed reported cutting jobs; however, many reported that they also increased their headcount.
Clark found that barrel inventories in Kentucky are at a record high of 16.1 million barrels, up 57% from 2020.
Distillers say this isn’t a problem; Whiskey gains value as it ages, so there’s no need to rush through old stock. Still, they had to adapt. Brown-Forman, which owns brands such as Woodford Reserve, laid off 12% of its workforce in 2025 and announced merger talks with French drinks giant Pernod Ricard in March.
Lofted Spirits, among the largest distillers of American whiskey, laid off workers last year but declined to say how many. The company makes most of its money distilling for other brands as a contractor, CEO Mark Erwin said, so declining orders have forced it to cut bourbon production “by at least half.”
Finding himself with empty fermenters, Erwin decided to turn fully to the Caribbean spirit: rum, a liquor that didn’t need to age as long and could reach the market faster. Erwin expects rum to account for nearly half of the company’s production this year. “I don’t mind doing it,” he says. “This is a good job.”
TARIFF FLUCTUATIONS
David Meier, owner of tiny Glenns Creek Distilling in Frankfort, says bottle costs have increased by about 25 cents per bottle because of the tariffs — an increase of about 15% — but so far he hasn’t passed that cost on to consumers.
Heaven Hill says only 10% of its revenues come from exports. Hughes likewise said most of Suntory’s American whiskeys are sold domestically, and even Canada, which made headlines early last year when states pulled American whiskeys from shelves, represents less than 1% of bourbon sales.
Such distillers say reports of bourbon’s demise have been greatly exaggerated. Still, some suppliers are struggling.
Canton Wood Products, a Lebanon, KY-based barrel maker, sold about 7,000 barrels last year, a decline of about 50% from 2022, said Melody Pruitt, vice president of operations. Tariffs compounded the blow by increasing the cost of oak imported from France and Japan, resulting in the layoff of 8 of the company’s 38 employees; Pruitt says the move devastated him. “Their livelihood depends on coming to work every day, just like mine,” he said.
CEO Brad Boswell said Independent Stave Company, the industry’s largest barrel supplier, whose customers include major manufacturers such as Brown-Forman, is in better shape.
He added that his company has cut production but continues to invest in growth in a much larger industry than it was a decade ago.
Overall, Clark, the economist, says Kentucky distilleries are still planning $1.45 billion in new buildings, machinery and other expansions over the next five years — on top of $2.1 billion in expansions already completed since 2020 — betting that demand will return as economic pressures ease and major overseas markets like India develop.
But he warned that tariff uncertainty “could have a chilling effect” on such growth.
“Given the level of uncertainty, distillers may choose to postpone some of their planned investments,” he said.
TOURISM CONTINUES
Liquor producers point to tourism as one reason for the rise. The 2.7 million visits to Kentucky’s Bourbon Trail last year are nearly flat from 2024, according to the KDA trade association.
Visitors can bottle their own bourbon at Jim Beam’s distillery, taste 130-year-old whiskey at $1,800 an ounce at Lofted, and peek into Heaven Hill’s spaceship-like fermenters humming as they produce thousands of gallons of mash.
Tourism is the main reason why many small brands remain stable, making most of their money from on-site sales. Glenns Creek’s $1.5 million in revenue in 2025 is about the same as in 2024 and higher than in 2023, Meier said.
Chicago-based residential designer Bill Peterson, who comes to the area twice a year, told Reuters he dropped at least $1,000 in bottles of whiskey on a Sunday last month.
“I will remain an incredible bourbon guy,” Peterson said.
(Reporting by Nicholas P. Brown and Emma Rumney; Editing by Anna Driver)
