How Are Tariffs and Shifting Consumer Preferences Shaping the 2025 Whiskey and Bourbon Industry?

The U.S. whiskey and bourbon industry is facing multiple economic pressures that threaten its growth trajectory. From an oversupply of aging barrels to the imposition of tariffs and evolving consumer preferences, the landscape for bourbon producers is shifting rapidly.

Potential Barrel Oversupply

Kentucky is the heart of bourbon production in the United States. In late 2024, the Kentucky Distillers’ Association announced the state is now aging a record 14.3 million barrels of Bourbon. By comparison, in 2018, Kentucky had 7.5 million barrels aging, a 46-year high at the time.

This potential oversupply is partially the result of production increasing 600% since 2000. In 2024 alone, the industry filled 3.2 million barrels of bourbon. Most bourbon is aged between four and 12 years, meaning today’s production surge will affect future supply.

The industry has seen significant investment and expansion over the last decade. Some reports estimate that up to $5.4 billion has been invested over the last few years alone. Much of the recent growth in annual revenues can be attributed to rising demand for premium and super-premium varieties of bourbon. However, overall bourbon sales are slowing, and the industry now faces additional headwinds.

Tariffs

The tariffs imposed by the current U.S. administration have added another layer of uncertainty for the whiskey and bourbon industry. Europe is one the largest markets for whiskey and bourbon outside of the U.S. In April, the European Union (EU) announced a temporary pause on proposed tariffs on imported U.S. spirits. However, in May, the EU proposed new retaliatory tariffs against the US.

The on-again, off-again nature of this trade war causes more uncertainty for distillers. Canada, another major importer of U.S. whiskey and bourbon, has also implemented retaliatory tariffs. Many distillers have reported order cancellations from their Canadian customers. These developments threaten to undo years of export growth, potentially leading to an even greater surplus of whiskey and bourbon in the domestic market.

Shifting Consumer Preferences

Demographic shifts are also reshaping whiskey and bourbon consumption patterns. Younger generations, particularly Millennials and Gen Z, are increasingly embracing sobriety or reduced alcohol intake.

Additionally, alternatives to social drinking, such as recreational marijuana, are becoming more widely available in drinks marketed toward younger consumers.

Navigating the Future

While the whiskey and bourbon industry continue to grow in terms of revenue, that growth is fueled by demand for premium products. At the same time, the rate of growth is decreasing as the industry faces multiple converging headwinds. Some distillers, including Brown-Forman, which is the parent company of Jack Daniels among other well-known brands, are already reporting a year-over-year decrease in sales for the last quarter and are reducing guidance for upcoming quarters. Despite these challenges, distillers are adapting to remain competitive in the current market by diversifying their product offerings, experimenting with non-alcoholic spirits and enhancing tourism experiences to attract visitors. How whiskey and bourbon producers respond and adapt to challenges in the coming years will be pivotal for not only their businesses, but the future of the industry.

If you are struggling with these headwinds or the rapidly changing business environment in the bourbon or whiskey industry, we can help. Contact us today and our restructuring and turnaround professionals in Moore Colson’s Business and Financial Advisory Practice Area can work with you and your business to help adapt to these challenges.