The bourbon bubble has burst

Tight budgets and health concerns have slowed U.S.
bourbon sales. (Photo by Thomas Park, Unsplash)

After years of sales growth and production expansion, bourbon distillers and barrel cooperages have seen their businesses shrink as Americans tighten their purse strings, explore sober-curious lifestyles or choose hangover-free options like cannabis and THC beverages, reports Laura Cooper of The Wall Street Journal. "The Trump administration’s trade wars have dented U.S. alcohol exports."

Bourbon's renewed popularity began around 2010, as craft cocktail designers used it as an elevated staple, followed by the pandemic lockdowns, when "Americans heavily stocked their bar carts … with bourbon and other spirits," Cooper explains. "But after peaking in 2022 at 31.2 million nine-liter cases, consumption of American whiskey — including bourbon, Tennessee whiskey, rye and single malts — has slowed."

In Kentucky, where 95% of the world's bourbon is made, the spirit's sinking sales are leading to closed stills, employee layoffs and labor-hour reductions. The state is "awash" with unsold bourbon, Cooper reports. "Kentucky is sitting on roughly 16.1 million barrels of bourbon — the equivalent of around 300 million cases. That’s the largest reserve ever, enough to last as much as 10 years."

Because U.S. law requires bourbon to be aged in new, charred barrels of oak, the bourbon boom became a barrel boom. At its zenith in 2023 and 2024, distillers were "paying upward of $285 per barrel. Since then, prices have dropped significantly, industry players say," Cooper adds. Some large spirit companies have announced plans to sell their cooperages because barrel production isn't needed.

Since bourbon distillers can only use a barrel for bourbon once, when barrels are emptied, they are "often resold to distillers in Scotland or Ireland, where they can find a second act storing scotch, rum or other spirits, over a lifespan of some 80 years," Cooper explains. Used barrels that would have fetched "more than $200 at the end of 2024, now go for around $50, as liquor demand has also plummeted."