Bourbon Industry in Largest Expansion Since End of Prohibition

PHOTO: Aging barrels sit at the Heaven Hill Distillery in Bardstown, Kentucky on June 27, 2012.

On the 50th anniversary of Congress's declaration that bourbon was "America's native spirit," Kentucky is producing the most bourbon since 1970. The last time production reached these levels, distillers like Jim Beam ended up distributing older aged Bourbon than what bottle labels indicated. And yes, it gets better with age.

"We had such a supply that we gave away a little bit of age," said Fred Noe, seventh generation Beam Master Distiller and Jim Beam's great-grandson, recalling the 1970s.

Kentucky distilleries, which produce about 95 percent of the nation's bourbon, filled 1.2 million barrels of it last year, the most in more than 40 years, according to the Kentucky Distillers' Association trade group in an announcement last month about annual production levels.

PHOTO: Bottles of bourbon are on display in a case at the Heaven Hill Bourbon Heritage Center in Bardstown, Ky. on April 8, 2009.
Ed Reinke/AP Photo
PHOTO: Bottles of bourbon are on display in a case at the Heaven Hill Bourbon Heritage Center in Bardstown, Ky. on April 8, 2009.

"We're in the largest expansion mode since the end of prohibition," said Eric Gregory, president of the Kentucky Distillers' Association, explaining that the group's members have spent about $500 million to add bottling lines, storage warehouses and jobs in the last few years.

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In the 1970s, Noe, 57, said that Jim Beam White, the company's bourbon whiskey that's aged four years, actually held bourbon that was aged longer than that.

"The bourbon we bottled was actually older than four years old," he said. "You’re looking into a crystal ball of bourbon. What you make today you sell years from now. It’s kind of a crap shoot on production. Sometimes you hit the point and sometimes you don’t."

According to the Kentucky Distillers' Association, the number of Kentucky bourbon makers is expected to double next year to 40 licensed operating distillers. At 20 members presently, the Kentucky Distillers' Association is at its post-1947 peak. Kentucky Peerless Distilling Company is one of the newest producers expected to get its license by next year when it opens up shop in Louisville.

For those not familiar with bourbon whiskey, it ages in barrels and doesn't continue aging in bottles, explained Gregory. Bourbon is first clear before it's poured into a barrel. And the longer it sits in a barrel, the longer it will extract oak and sugars, Gregory said.

"The trend these days is extra-aged," Gregory said, adding that some of these limited-edition or craft bottles can sell for several hundred dollars.

In general, if bourbon is under four years old, distillers have to state the age on the bottle, Gregory said. "If there's no age on the bottle label, you know it's at least four years old."

Noe said that his company bottles bourbon according to its orders, so it continues to age in barrels. "We don’t bottle ahead. We try to bottle to our orders. We keep a small inventory for our shipping department. We’ll keep it until there are orders in our system."

Noe said it's a great time to be in the bourbon business, as more small craft distilleries enter the market and tourists visit the so-called "Kentucky Bourbon Trail." Demand is growing not only domestically but from China, India and all over Europe, Noe said.

"People are finding Bourbon is versatile, very tasty and they love to come to Kentucky to see how we make it," Noe said.

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