LAWRENCEBURG, Ky.– Alcohol may not be single-handedly saving state and local budgets from the red, but it is certainly helping.
Consider Kentucky. Coal mines in parts of the state are struggling to stay open, but here among the gently rolling hills of horse country, bourbon is booming.
At the Wild Turkey plant, a new bourbon distillery is rising, the first built from the ground up here since Prohibition. Visits to the company’s tasting room, where guests can sip bourbon and gaze into a gorgeous valley, have doubled in the past few years.
The company paid more than $778,000 in real estate and property taxes to Anderson County this year, twice what it paid in 2010, making it the biggest taxpayer by far.
“We’re lucky to have them,” said Brian Stivers, the property valuation administrator for the county. “Without their expansions we would have probably had to raise the tax rate.”
While Kentucky has enjoyed a special upswing from bourbon, across the country, changing consumer tastes and changes to state regulatory and tax policies have created a bull market in booze-related businesses.
“In human history,” said Garrett C. Peck, a historian who has written several books on alcohol and Prohibition, “there has never been a better time to be a drinker.”
From Colorado to southwestern Michigan to the District of Columbia, craft beer continues to expand. Distilleries, benefiting from changes in regulation, are growing in nearly every state. The farming of hops, once largely a small crop limited to a few Western states, is also on the rise.
Spirits revenue nationwide – from all alcohol except beer and wine – increased to more than $60 billion last year from roughly half that in 2000, according to the Distilled Spirits Council. Exports of spirits, much of it whiskey, have increased to nearly $1.5 billion from $531 million over that same time.
The growth of many segments of the alcohol business reflects consuming trends that have dominated the marketplace for the past several years. A fixation on local products, a nostalgia for American traditional food ways and a lust for upscale everything – from a $5 cup of coffee to $10-a-pound organic chicken – have reached single-barrel $100-a-bottle bourbon.
Further, the resurgence of classic cocktails has fueled the whiskey industry, which for decades was all but dormant, with bourbon filling the shot glasses of older men in front of “Monday Night Football” and not much else. And alcohol is generally highly taxed.
“A key factor is the growing interest in American whiskey,” said Frank Coleman, a spokesman for the Distilled Spirits Council. “Then obviously you have all these ancillary economic impacts,” he said, such as sales of bottles, corn used to make bourbon, and tourism.
No state has benefited quite like Kentucky. State officials believe the bourbon industry has increased its payrolls here 77 percent over the past two years, to about 15,400 jobs. The Kentucky Bourbon Trail, a collection of distilleries along a scenic route, draws thousands of visitors annually, and many companies have added production capacity.
Distilleries like Woodford Reserve offer museumlike experiences to tourists streaming through. They get to watch vats of yeast bubble and workmen roll barrels full of fresh whiskey in roughly the same manner as their predecessors centuries ago. And, of course, they get to taste bourbon.
In downtown Louisville, Whiskey Row, once home to offices and warehouses for distillery owners and distributors that were all but shuttered during Prohibition, is coming alive again. Evan Williams, another whiskey producer, has opened the first interactive exhibit along the Row, where visitors can watch a mildly hagiographic video about the life of Williams and sip bourbon in one of a few cool period-era saloons and lounges.
The parent company of Woodford Reserve will invest $30 million in Whiskey Row for a new distillery for Old Forester, the nation’s first bottled bourbon.
Among the state’s moves were the virtual elimination of taxes and fees that were preventing expansion and permitting some state parks to sell alcohol.
“The bourbon industry is such a boon for us,” Gov. Steven L. Beshear said. “The effect that it has on other sectors in creating jobs is very important to us.”
Other states have enjoyed the spoils of craft beer. Some 10.6 million barrels of it were produced in the first six months of 2014, up from about 4.9 million for the same period in 2010, according to Bart Watson, the chief economist at the Brewers Association.
The craft beer industry has also benefited from changes in laws in several states. This year, for instance, Minnesota passed an omnibus liquor bill that permitted craft distillers to open what are essentially taprooms on their premises.
In states with numerous microbrewing businesses, like Colorado, thousands of jobs have been added over the past five years as the businesses have multiplied.
“In 2012, craft brewing contributed $33.9 billion to the U.S. economy and more than 360,000 jobs total,” Watson said. “This in an industry that didn’t exist 40 years ago.”
Even hops farmers are benefiting, largely because craft beers use more and different varieties of hops in production. More than 72 million pounds of hops have been produced this year, a 26 percent increase in just under the last decade, according to the Department of Agriculture.
All of this can be a boon to state and local governments struggling to get back in the black. Nine states increased excise taxes on alcohol to help fill budget holes between 2005 and 2011.
Further, alcohol revenues are far less volatile than other state tax revenues. Between 2005 and 2013, annual total state tax revenues fluctuated between 9 percent growth and 9 percent decline, while state alcohol tax revenues rose steadily between 1 percent and 5 percent, according to an analysis by the Tax Policy Center.
“This has been an amazing thing for our community,” Edward Russell, the associate distiller at Wild Turkey, said as he walked through the company’s modern, mechanized bottling facility. His father has worked here for 54 years, probably never dreaming of the boom that has modernized and expanded the operation.
“It used to be my consumer was an older male Southern gentleman until this mixology started,” Russell said. “It’s like we all just woke up and decided we were going to be American again.”