Eric Gregory became president of the Kentucky Distillers’ Association in 2008. A veteran communicator with more than 35 years experience in governmental affairs, marketing, journalism and strategic public relations, he was previously governmental affairs manager at East Kentucky Power Cooperative and vice president of public affairs for Preston-Osborne, a Lexington public relations, marketing and research firm. A graduate of the University of Kentucky, Gregory began his career as an award-winning journalist for the Lexington Herald-Leader. He also served as a reporter and editor at the Honolulu Advertiser, and has been nominated twice for the Pulitzer Prize. Gregory is a native of Henderson, Ky. He and his wife, Ellen, live in Midway, Ky., and have three children and two dogs. The Gregorys are avid preservationists and have received state and national accolades for restoration of five historic homes.
Mark Green: Kentucky has 100 distilleries now. It’s a big number compared to not many years ago. Can you put that in perspective?
Eric Gregory: It’s tremendous growth. To put it in context, 2009 was the first time the KDA retained Dr. Paul Coomes, then of UofL, to do an economic impact study on what distilling means to Kentucky. We had 19 distilling establishments owned by eight companies at the time.
Those eight companies were in three to four counties within “the amber triangle”—Lexington, Louisville, Bardstown. We had a workforce of about 8,000. We were a $3 billion industry for the commonwealth and our payroll was just a couple hundred million dollars.
Now there are 42 counties, our payroll has gone above $1.6 billion and 23,000 people owe their paycheck to the bourbon industry. Capital investment has gone through the roof. We didn’t even measure capital investment in the 2009 study because there wasn’t any.
We are now on a $5.4 billion building spree and a lot of that is going towards tourism. Bourbon these days is not just a drink: It is jobs and investment and tax revenue and tourism.
Now, 100 distilleries is fantastic, but we’re only 12th in the country in the number of distilleries. We have the volume: 95% of it. But 12 other states all have 200 to 300 distilleries. There are over 3,000 distilleries across all 50 states. Most of them are small craft distilleries, but that’s why we’ve been pressing the legislature to make changes on everything from taxes to tourism, because if one of these other distilleries gets on a roll and becomes the next Maker’s Mark, that 95% goes to 90% and 85%. Then they’re off to the races, and we’re looking up at them instead of down. We have to maintain that status as the one true source of bourbon.
MG: Kentucky now has 100 distilleries. Are we on our way to 200?
EG: There are about 20 more that are recently announced, just starting construction or just have their license. What we’re seeing now is distilleries locating in other parts of the state than your traditional distilling counties—you’re seeing them come to Garrard County, Pike County, Henderson.
If we could figure out a way to break the Eastern Kentucky wall for distilling, that is a tremendous opportunity to get jobs and investment in that vital area of Kentucky. We want to work with the local communities on that.
From a production standpoint, in two to three years we have close to another million barrels coming online with new distilleries.
MG: So, Kentucky maintains a giant share of the bourbon market and volume with only a small percentage of the overall number of distilleries?
EG: Oh yeah! There is a reason the pioneer distillers moved to Kentucky and stayed. They realized Kentucky was the sweet spot for making bourbon. We have the pure limestone water that filters out the minerals that affect taste. We have four distinct climate seasons—very cold winters, very hot summers and everything in between—that helps the aging process. We have an abundance of corn and we have a lot of white oak for making barrels.
States like Texas are trying to use ‘heat cycling’—heating or air conditioning—to try to replicate our climate. But it’s hard to compete with Mother Nature. The other states that produce the most—not as much as we do but still are heavy in whiskey—are Indiana and Tennessee. Tennessee has about 3 million barrels of whiskey aging. We’re now at 13.3 million barrels, of which 12.6 million are bourbon.
MG: Kentucky is very tradition focused, but what innovations are catching your eye?
EG: Angel’s Envy has finishes in different kinds of wine casks, sherry casks. Rabbit Hole is coming out with different techniques. Maker’s Mark 46 has seared French oak staves that completely change the form, the taste. The flavored whiskeys are hot; they’re very good in cocktails. And you see a lot more ready-to-drink cocktails coming online.
Even the traditional distilleries are all coming out with different expressions, whether it’s barrel proof, cask strength, or bottled-in-bond. It’s trying to appeal to different consumer tastes, which are always changing.
MG: Two-plus decades into the bourbon boom, companies are making further big investments. How are they forecasting that this boom and customer demand will continue for years and they will get a return?
EG: They feel customers are still going to be there for bourbon. There’s always a little bit of a crystal ball when you look at forecasting whiskey because you can’t make it overnight like you can vodka, rum, gin or other clear spirits. A lot is based on trends and a lot of it today is based on international market growth. That’s why we were so anxious with the tariffs that we might lose new consumers for a generation. If a younger drinker goes into their local pub in London and suddenly the bourbon they were drinking is higher priced, do they go back to what they were drinking, which is most likely Scotch? The last time trends changed, what did it take to regain that consumer?
We have barely scratched the surface on the international marketing of Kentucky bourbon. Exports are about 500 million barrels a year, and we were on a pretty significant growth trajectory before we got caught up in the retaliatory tariffs on steel. We’re building that back, but there are places where Scotch just owns markets. If we could just get a few more percentage points in India we’d probably run dry as a state.
A lot of the growth you’re seeing today from a production standpoint is centered around exports, trying to switch whiskey drinkers around the world to bourbon. That’s not an easy challenge; Scotch has a several-hundred-years head start. Many of our distilleries here in Kentucky, their parent companies make Scotch whiskey. Demand is high right now. From a domestic demand standpoint, we’ve taken care of that. The growth areas for the future of Kentucky at the moment are all international.
MG: What are the primary competitive issues Kentucky distillers face?
EG: Americans are spending more money on tequila right now than whiskeys. Right now, we’re not sure if it’s just a trend or a fad because every celebrity out there has a tequila brand and a few of them have gin and brandy brands.
As far as production and the attraction of distilleries, it’s mostly about taxes and other prohibitions on the Kentucky law books that have been around forever. We have the tradition, the history, and the tourism infrastructure with the Kentucky Bourbon Trail tour. We have Vendome (Copper and Brass Works) making the world’s best still. We have everything you need here to be a successful distillery, yet they’re choosing to build in Texas.
Kentucky’s tax climate has not been welcoming to distillers for generations. We tried to resolve that last year through House Bill 5, which will slowly phase out the barrel tax over the next 20 years. The No. 1 reason cited for not locating a distillery in Kentucky is the barrel tax; Kentucky is the only place in the world that taxes aging barrels of spirits and has for decades. We’ve seen distilleries move to bordering states where they get to take advantage of our climate and infrastructure without having to pay the taxes. We’re very pleased the General Assembly understands this now and took action last year to eliminate that tax over the next 20 years in the fairest way possible to all.
MG: Distilleries are producing 2.7 million barrels a year of bourbon. As production grows, is there enough white oak for those barrels?
EG: It takes 80 years to grow a stave. To that end, sustainability is a top priority for all distillers. White oak sustainability, corn sustainability. We’re very fortunate we have great partners—Independent Stave Co., which builds the majority of the barrels used in the bourbon industry, the University of Kentucky and the James B. Beam Institute, and a lot of other partners who are working with us on making sure we have enough white oak. And the distilleries themselves have been working for a long time to replenish the supply.
We’ve been working with UK on the White Oak Project, which is funded by the state. Maker’s Mark has had a big part in trying to figure out how to have a faster-growing stave tree that’s not susceptible to insects or rot or damage because some forecasts say that in the next 30 to 40 years we could see a shortage of white oak.
Frankly, it doesn’t have to be white oak (to make bourbon); it just has to be new, charred oak. If other supplies are available, I think distillers would be interested in looking at any type of oak to see what would work. The reason everybody used white oak is it’s a very dense hardwood and doesn’t leak.
MG: How big can Kentucky bourbon and distilling get? Is there a ceiling anywhere in sight?
EG: We often talk of how big we could have been if we hadn’t had the tax liability over decades. One thing that holds us back, especially after COVID, is the supply chain—everything from glass to barrels to corks. We discovered during COVID that without the supply chain, we’re severely impacted. We had people who had pallets of glass sitting on the West Coast and just could not get them here to Kentucky.
But I think we have a very high ceiling for Kentucky bourbon. There are a lot of challenges that come with that, and a lot of that includes sustainability. And not ju
st environmental sustainability; workforce sustainability for the past few years has been another top priority.
We have worked with the Kentucky Chamber of Commerce on a talent pipeline management program to recruit people to work in the industry. As fast as we’re growing, that’s difficult right now. It’s going to be more difficult when the Ford battery plants come online with its 5,000 workers. And other industries are coming to Kentucky, which is fantastic for Kentucky but it shrinks the job pool even more for everybody. We need everything from trades people and machine operators to tour guides to accountants, marketing, production. There are 150 different jobs where you can work at a distillery without ever touching the whiskey itself.
An even bigger challenge is we typically don’t start recruiting people until they’re 21. By that point, Toyota, GE or Ford have already gotten a few years on us. That’s something the chamber is helping us with. We’re looking at how we can start talking to high school students about careers in the distilling industry while being responsible in the way we approach them.
We’re trying do a better job when it comes to DEI (diversity, equity and inclusion) initiatives. We have barely scratched the surface on women in the industry, Latinos; we have very few LGBTQIA. We’re working on attracting more underrepresented minority groups. If we don’t, then we’re going to be out of touch.
