Boom and Bust, Rinse and Repeat

Except for Australian wine (and Shiraz in particular), few alcohol products have suffered as many slings and arrows of outrageous fortune as bourbon. The reasons are understandable. It takes between four and ten years for bourbon to mature in cask, and much can happen during that time: stocks can rise and fall, pandemics can come and go, consumer tastes can change. Financial success requires an uncanny ability to time the market.

A similar situation exists with wine, where new vines won’t produce anything drinkable for three years, but bourbon is the wine business on steroids. As a distiller recently observed, there is no here and now for bourbon—there is only the future.

When I was writing Iconic Spirits: An Intoxicating History, I spent three days in Bardstown, the spiritual center of Kentucky bourbon, as a guest of Heaven Hill distillery. Founded two years after Repeal by Ed Shapira and his brothers, Heaven Hill is one of the largest family-owned distilleries in the world, and they were kind enough to let me poke into different aspects of their huge operation. Among other brands, they produce Elijah Craig, Evan Williams, Old Fitgerald, Rittenhouse Rye, Bernheim Original, Henry McKenna, Larceny, and the Heritage Collection named for their late master distiller, Parker Beam. Over the years, they’ve also done contract distilling for countless other brands (what would be called custom crush in the wine trade). At one point I interviewed Max Shapira, the current president.

“If you look at the history of the industry, we’ve shot ourselves in the foot so many times that we’re lucky to be here,” he told me. “Prohibition put us out of business, and the Depression followed that. World War II shut us down again. When the Korean War hit, we were so afraid of being shut down for a third time that we produced a ton of excess inventory. All that bourbon was released just as vodka was hitting the market, and retail prices fell through the floor. A lot of analysts thought it was the end of the American whiskey business.

“Over the last ten or fifteen years, we’ve started to realize how unusual and unique our product really is. In Japan people were looking for something different. The appreciation of bourbon in Japan came back to us and rubbed off. Then the cocktail culture made us realize how great those old drinks really were…bourbon typifies the American entrepreneurial spirit.”

The Japanese influence he referred to created the single barrel and small batch trend. Gifting is an important part of Japanese business culture. Word began to filter back to the distilleries that their clients were looking for a bourbon equivalent of high-end Cognac or single malt Scotch. Kentucky distillers had always known that there were barrels in their warehouses far superior to others, but they never isolated them, preferring to blend everything together into a homogenized product. The first single barrel bourbon, Blanton’s, was released in 1984 and gave rise to a flood of special bottles.

When I spoke with Shapira, bourbon was in the midst of a nearly unprecedented boom, sparked by the cocktail culture and revived interest in pre-Prohibition libations. The market intensified during Covid, as people stayed home and indulged their inner mixologist. Consumers competed avidly for the best and rarest releases. New brands and craft distilleries sprouted up like mushrooms in a damp forest.

Some of those craftsmen were barely distillers at all. Yes, they made vodka, but a startup doesn’t have access to whiskey that has been aging in barrels for four years or more. They found their solution in MGP (Midwestern Grain Ingredients, Inc.) of Lawrenceburg, Indiana. MGP operated out of the old Ross & Squib Distillery, founded in 1847 and owned by Seagram’s before being purchased by MGP. They sold distilled and aged spirits to 50 different labels, in addition to making their own brands, and functioned as the perfect solution for creating an instant craft distillery. Some of their clients got carried away: Templeton Rye marketed themselves as Al Capone’s favorite whiskey during Prohibition and claimed to have a secret recipe passed down through generations. They ended up defending three class-action lawsuits and added “Distilled in Indiana” to their label.

Once again, sadly, the boom didn’t last. Covid ended, and people went to bars again. Many in the well-heeled Boomer generation were forced to stop drinking by their doctors, and Gen Z doesn’t seem to be taking their place; the Surgeon General wants cancer warnings on alcohol bottles, cannabis is readily available, and a wave of neo-Prohibition is sweeping the land. The craft cocktail is gradually being replaced by the mocktail.

As of this writing, things are grim but not yet catastrophic. Sales of U.S. whiskey declined in 2023 for the first time in 20 years, and the drop got worse last year. even Jack Daniel’s is down 3% (and if people are drinking less Jack Daniel’s, the world is definitely coming to an end). Corporate owner Brown-Forman, which also makes Woodford Reserve and Old Forester, is closing its Louisville cooperage facility and laying off 12% of its workforce. The pace of craft distillery closures is accelerating: MGP reports that more of them are struggling to buy whiskey, and the company plans to cut back on production and put away fewer barrels to age. Estimates are that the bourbon industry is making roughly three times the amount of whiskey that they’re selling.

While we don’t know if this is a crash or just a correction, the most likely outcome is that bourbon will come back and the entire cycle will be repeated. It’s America’s native spirit, and as resilient as the country itself.