What Can Bourbon Distillers Learn From the Last Big Bust?
The bourbon industry is looking at some tough times right now. Sales are down, supply is way up, and distilleries are facing bankruptcy, lawsuits, and even closure. Words like “glut” and “bust,” which describe worst-case scenarios, are being bandied about. And it’s all taking place amid a backdrop of general economic anxiety, heightened by the continued unpredictability of tariffs and counter-tariffs.
No one can predict exactly what the future holds, but lessons from the past can offer insight into this moment and the ones to follow. There was a bourbon bust in living memory — one that started in the mid-20th century and took decades to recover from. What happened back then, and are the same conditions in place for it to occur again?
A Clear Enemy
To understand the previous bourbon bust, we have to go back to the 1950s. During World War II, distillers couldn’t keep up with demand for whiskey because of grain rationing. A few years later, with the United States engaged in combat in Korea, the head of one of the country’s biggest whiskey companies, Lewis Rosenstiel of Schenley Industries, wagered that the war would expand and rationing would happen again. To counteract what he saw as the likelihood of whiskey shortages, he ramped up production to create a surplus.
But the Korean War came to an end relatively quickly, and all the whiskey that Rosenstiel’s distilleries had laid down — nearly 70 percent of the country’s total stocks, according to “Bourbon Empire: The Past and Future of America’s Whiskey” by Reid Mitenbuler — was suddenly in need of a home. To buy some time, Rosenstiel pushed Congress to pass legislation that raised the bonding period — the time that whiskey could sit in barrel without tax being paid — from eight to 20 years.
“It was good for bourbon,” Mitenbuler wrote. “Many master distillers today claim that their favorite bourbons typically fall within the range of six to twelve years. …. The [Forand] Bill gave them more time to mature whiskey without having to pay taxes on spirits that would eventually evaporate.” The extra age also helped bourbon compete better on the global stage with Scotch, which had built its sterling reputation partly on “older-is-better” messaging.
But there was still so much extra bourbon to sell, and in the late 1950s and 1960s distillers began competing fiercely on price. Things might have turned out fine, except for one major thing that no one saw coming.
Per Mitenbuler, the clear spirit registered sales of barely 40,000 cases in 1950, but by 1955, it was up to 4.4 million. In 1967, vodka sales surpassed gin. Nine years later, vodka overtook whiskey. And it wasn’t that spirits sales across the board were going up; whiskey sales were, in fact, falling just as vodka rose. The biggest consumer demographic was younger drinkers — the baby boomer generation, which rejected what their parents drank.
“Bourbon became a symbol of patriarchy and the Establishment,” according to Mitenbuler. “Vodka, on the other hand, hailed from a country that was America’s mysterious enemy — drinking it was an act of subversive defiance. With its absence of any distinctive character, vodka was also a blank canvas the young generation could use to reimagine itself.”
Misguided Moves
Whiskey distillers observed the growing preference for a spirit that was lower-proof and flavorless and reacted by trying to make their product fit the trend. In 1971, at the industry’s urging, Congress changed spirits regulations to allow for a new category called light whiskey — described by Time Magazine as “whiskey-flavored vodka.” Distillers went hard on the style, laying down more than 200 million gallons in anticipation of success.
But light whiskey flopped. So distillers tried another tack: dilution, a trend that had already been in play for a couple of decades to help bourbon — which was typically bottled at 100 proof — better compete with 80-proof Scotches and Canadian whiskies. In the 1960s and 70s, more and more whiskey distilleries began offering 86- and 80-proof bottlings, sometimes alongside the traditional 100-proof bourbon and sometimes as a replacement for it.
“He always would tell me, I can make ’em five or 10 million more this year, but six years down the road we won’t be making anything. I think he learned that lesson seeing brand after brand die out when they really started cheapening their whiskey down.”
Although the lower-proof whiskeys sold somewhat, history shows that dilution was a mistake. “It contributed to the [industry’s] decline,” says writer and historian Michael Veach. “When you bottle at 80 proof versus 100 proof, that’s 20 percent more bottles that you have to sell.” He adds that in this period, the industry was “hurting itself, cheapening that reputation of bourbon by lowering the prices trying to sell it — practically giving it away, which made bourbon become a low-quality product in most people’s eyes.”
Eddie Russell, who began working at Wild Turkey in 1981, agrees. “[Diluting] hurt the whole industry,” he says. Jimmy Russell, Eddie’s father and the master distiller at Wild Turkey in that era, saw the trend as harmful in the long term. Though he acquiesced to creating a lower-proof version of Wild Turkey’s flagship bourbon, he insisted that the brand keep making 101 as well.
“Jimmy was one of those that didn’t believe in [fixing] the problem right now. He always would tell me, I can make ’em five or 10 million more this year, but six years down the road we won’t be making anything,” Russell recalls. “I think he learned that lesson seeing brand after brand die out when they really started cheapening their whiskey down. Jimmy said, I’m not changing 101. And believe me, that was a battle I saw him fight from 1981 probably up to the early 2000s.”
Throughout the 1970s, distilleries closed and brands disappeared as the primary bourbon-drinking demographic of older men aged and began to die. Veach recalls a story told by Maker’s Mark founder Bill Samuels, who was with a fellow distiller — possibly Pappy Van Winkle — when they saw a funeral procession pass by. The other distiller commented, “Well, there goes another one of our customers.”
Big in Japan
By 1980, Kentucky distilleries were making less than 1 million barrels of bourbon per year, but sitting on five times that amount in maturing inventory. Wild Turkey was better off than most, having just been acquired by multinational conglomerate Pernod Ricard, which Russell says was helping the brand get some international traction — notably in Japan.
“It taught us some lessons about doing some more high-end products to get people more excited about the brand.”
“Japan was a savior for us,” Russell recalls. By the late 1980s and 1990s, “I think they were taking about a couple hundred cases of the 500,000 to 600,000 total cases we were doing. They definitely helped us survive a very weak time here in the U.S.”
Thanks to an established fan base for mature Scotch, the Japanese market was primed to embrace older American whiskey — and there was plenty of it. In addition to Wild Turkey, many brands that were floundering or even discontinued in the U.S., including Four Roses and I.W. Harper, became well respected and sought-after in the Land of the Rising Sun. The 1980s also saw upstart bottlers like Julian Van Winkle, Marci Palatella, and Even Kulsveen using extra-mature bourbon acquired from struggling or closed distilleries to create new brands specifically for Japan. Many of these are now the stuff of legends, netting thousands of dollars at auction: names like Boone’s Knoll, Old Grommes, and Cock of the Walk.
Besides merely making up case sales, Russell says the Japanese market offered an example of a possible future for bourbon stateside. Limited-release and more expensive offerings, which were not prevalent at all in the United States, sold extremely well there.
“It taught us some lessons about doing some more high-end products to get people more excited about the brand,” Russell says, recalling that as he advanced in his career at the distillery, “[I realized] we really need to do this in the U.S. Maybe that’ll help keep the interest. Jimmy doing Rare Breed and Kentucky Spirit; Booker doing Booker’s; Elmer Lee doing his single barrels: Those things were the start, and I think we learned all that stuff from Japan.”
The American Renaissance
As the new millennium dawned, Japan was in the midst of a financial crisis that cramped consumer spending, but things were finally starting to turn around in the domestic market. The cocktail renaissance and other cultural factors drove a surge of interest in whiskey, particularly among the children of the baby boomers who had turned away from it decades before.
“They learned a lot in those bad years. They won’t make the same mistakes twice.”
“What really saved our whole industry was the younger generation, mainly bartenders,” Russell says, noting that the internet and shared knowledge helped drive rising interest in bourbon. “For my first 20 years, the only question you ever got was what’s the difference between Scotch and Irish and bourbon whiskey. Or they would just say American whiskey because they thought it was all the same.” But the new generation was much more interested in details about bourbon’s production, history, and flavor.
That consumer curiosity poured itself into blogs, forums, magazine articles, and tourism, all of which helped support a comeback in Kentucky. Bourbon production began rising steadily starting in 2000 and inventory now sits at a record high of 14.3 million barrels. Up until recently, the industry was riding high on its 21st-century success, the troubles of the previous era seemingly forgotten.
But the new challenges that have arisen could spell hardship in the years ahead. Jimmy and Eddie Russell aside, many — perhaps most — people in leadership at bourbon distilleries today have known nothing but positive growth. Looking to the past for lessons, and warnings, may not be part of their strategy.
Veach, however, thinks the industry is better positioned to weather current conditions than it was back in the 1970s. “They learned a lot in those bad years. They won’t make the same mistakes twice,” he says. Still, even he sees ominous signs, such as declining tourism from overseas visitors spooked by the Trump administration’s unfriendly climate, and the very real threat of counter-tariffs imposed in retaliation for those levied stateside.
“There is hope out there. We get rid of these tariffs, we have a chance of regrowing the overseas market and bourbon taking off again,” Veach says. “I don’t ever see it going into double-digit growth like the early 2000s and 2010s, but I see growth happening again.”
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