As sales slow, barrel inventory hits new record. What it means for Kentucky bourbon
AI-generated summary reviewed by our newsroom.
- Kentucky held a record 16.1 million bourbon barrels on Jan. 1, 2025.
- Taxes on aging barrels will generate $75M in 2025, up 27% from 2024.
- Industry faces oversupply, falling production and export losses amid tariffs.
Kentucky bourbon makers are sitting more barrels of whiskey than ever: According to new data released by the Kentucky Distillers’ Association, the state had 16.1 million barrels of bourbon in warehouses, an all-time high.
There’s also another million or so other spirits, as well.
That’s as of Jan. 1, 2025, when the state’s 127 licensed distilleries submitted numbers to the Kentucky Department of Revenue for tax purposes.
According to the KDA, distillers will pay $75 million in taxes on aging barrels, up 27% from 2024 and up 163% in the last five years.
Barrel taxes are scheduled to begin “sunsetting” next year, starting with a 4% reduction, and will gradually phase out over the next 20 years. The tax break was passed by the Kentucky General Assembly in 2023 over the objections of local governments and school districts that rely on the tax revenue to support fire departments and other community services.
KDA President Eric Gregory said in a Wednesday news release the number of licensed beverage alcohol distilleries in Kentucky is also at record mark. Several new distilleries have been announced or are under construction, meaning more jobs and investment in the commonwealth, according to the news release.
However, Kentucky’s $9 billion bourbon industry is facing financial difficulties, including layoffs, bankruptcies, distillery closures and a glut of oversupply. U.S. whiskey production began slowing late last year.
The Treasury Department reported that from January to April, whiskey production had dropped nearly 28% compared to the same period in 2024, hitting the lowest level since 2019.
Demand has fallen, as well. Only 54% of Americans say they consume alcohol, the lowest level in 80 years, an August 2025 Gallup poll found. That’s left the spirits industry with massive overhang of nearly 1.5 billion proof gallons on hand, three times the level of inventory they had a decade ago, according to federal data.
According to Whiskey Decision, a newsletter for whiskey enthusiasts, bottling also has slowed down, but only by 8%.
“If these trends hold, 2025 sees 230 million gallons produced versus 80 million bottled,” according to Whiskey Decision. “Another 150 million into warehouse already stuffed from the boom years.”
Meanwhile, exports — which last year set a record at nearly $2.5 billion — have been crippled by President Donald Trump’s ongoing trade disputes that have already cost bourbon makers millions.
According to the Distilled Spirits Council of the U.S., a trade group, American whiskey exports are down 13% through the second quarter compared to the same period in 2024, a loss of about $40 million to American bourbon makers.
Canada has continued to boycott bourbon, and Brown-Forman has seen sales there drop by 60%, president and CEO Lawson Whiting recently said.
Other major bourbon-drinking markets, including the European Union, the United Kingdom and Japan, are also buying less, and new tariffs could be coming in some of those markets.
Last year, Kentucky exported $751 million in spirits, second only to Tennessee, which is the home of global giant Jack Daniel’s, though it’s owned by Louisville-based Brown-Forman.
In the KDA’s news release this week, Gregory reiterated the group’s call for a return to reciprocal, tariff-free trade that transformed Kentucky bourbon into a key export for the Bluegrass State.
“You’re not going to find a better model for reciprocal trade than Kentucky Bourbon,” he said. “Much of the expansion over the last decade has been geared towards global growth. Long-term planning for a product that won’t be ready for years is already tough enough. We need the certainty of tariff-free trade for America’s only native spirit to flourish.”
