Bourbon Distilleries Are Closing Left and Right. What Happens to the Whiskey?
After decades of unprecedented growth, America’s bourbon boom has started to cool off. While the complete demise of American whiskey may be overblown, there’s a clear oversupply of bourbon, and aging inventories have tripled since 2012. In simple economic terms, supply has finally (and significantly) outpaced demand.
Amid the downturn, some of the nation’s biggest producers have announced slowdowns in production. Other well-funded upstarts have shuttered entirely. That includes Kentucky’s Garrard County Distilling, an operation once estimated to cost $250 million to build, including a 50,000-square-foot distillery and 24 planned warehouses. For smaller, craft operations — many of which operate on the margins of profitability — even a relatively minor drop in demand can mean the end of the road.
“I know of probably around 50 craft distilleries that went under in 2025,” says Rebecca Harris, president and master distiller at Virginia’s Catoctin Creek Distilling. “That includes people that have either moved to co-packing entirely, or they’ve dropped facilities when they previously had more than one. And I know a bunch of them who are holding on by their fingernails.”
And though distilleries share similarities with other business closures — from layoffs to managing creditors — there’s uniquely challenging inventory to deal with: barrels of aging whiskey.
“They’re a little bit of a problematic asset because they can only be sold to someone who has the license to hold them,” says Will Schragis, managing partner at WellSpun Consulting. “Barrels are in-bond, so they’re non-tax paid. There are only certain licensees and other companies that can acquire them.”
“I have Google alerts out for when distilleries close across the country.”
What remains from these shuttered producers — sometimes called “ghost distilleries” — are aging and evaporating spirits, and each barrel represents a debt to the U.S. government. With a relatively small pool of legal buyers, what’s an asset holder to do?
The next steps depend on the number of barrels on hand, in addition to their pedigree and the distiller’s reputation. In today’s market, there are five generally recognized options. Read on to discover where the bourbon boom’s supply of “ghost whiskey” might end up, and what that means for the industry at large.
Option 1: Hold On to the Barrels
This first option is the simplest, and generally most applicable to small producers: sit and wait. (And certainly don’t remove the spirits from the bonded premises, which could trigger federal excise tax.) That means losing even more whiskey to natural evaporation. But with a lack of better immediate options — and a crowded barrel market — some former operators choose to sit on what little stock remains.
“When you think about it, of the roughly 2,000 or so distilleries that are out there right now, probably 95 percent of them make less than 1,000 9-liter cases a year,” says Harris, who has also served as president, board member, and chair for government affairs at the American Craft Spirits Association.
For small producers especially, keeping barrels on hand is a viable — albeit temporary — solution while they attend to winding down other business affairs.
Option 2: Sell Barrels to an Independent Bottler (or Non-Distilling Producer)
Another viable option is selling to an independent bottler or other non-distilling producer.
“There are lots of good distilleries winding down out there that probably do reach out to the independent bottlers they know of who might be interested in getting ahold of some of their remaining products,” Harris says.
By selling to an independent bottler, shuttered distilleries can realize some value from their leftover inventory — and give fans one final chance to appreciate the fruits of their labor.
As more distilleries close, Adam Polonski, co-founder of independent bottler Lost Lantern, has seen barrels get sold off to brokers. “But a lot of the smaller places don’t really have those kinds of contacts in the first place,” he says. “And they end up posting on a whiskey forum, ‘I have a bunch of whiskey, I’m closing, I don’t know what to do with it.’ That’s actually how we encountered the first ghost distillery that we worked with, which was Rich Grain Distilling in Canton, Miss. I saw a post on the American Distilling Institute forms from the owner.”
After Rich Grain closed in 2020, most of its remaining barrels continued to age on-site. Polonski tried the whiskey and was hooked. But for startup Lost Lantern, investing in the release carried some risk.
“They were making an authentic Mississippi bourbon with Mississippi grains and had given a solid go of it, but then Covid had knocked them out. ” Polonski says. “We were a little hesitant about putting out a release from a ghost distillery that people generally didn’t know unless they were in Mississippi.”
In 2023, Lost Lantern acquired Rich Grain’s 40 remaining barrels, which were ultimately used to produce Mississippi Memory, a 140-proof bottling that became a hit.
“It was a place that nobody had ever heard of, but people ended up being really, really excited about their whiskey,” Polonski says. “That release was the most successful whiskey that we did that year. People just love the idea of, ‘Here’s a whiskey that I could never try before and can probably never try again.’ They get to try a unique, one-of-a-kind flavor profile that really can’t be replicated.”
Inspired by Mississippi Memory’s success, Lost Lantern has since acquired ghost whiskey from two other distilleries. And Polonski is always on the lookout for more. “I have Google alerts out for when distilleries close across the country,” he says.
Option 3: Sell Barrels (or the Entire Brand) to Another Distillery
For producers hoping to offload barrels, fellow distillers can be an ideal customer base. In some cases, an outside party or existing distiller may seek to acquire all of a shuttered brand’s assets, including facilities, trademarks, and barrels.
“In 2024, we sold a business that had about 1,200 barrels of bourbon aging,” says Kris Bohm, head of Distillery Now Consulting. “We sold those 1,200 barrels and the actual IP of the business to another operating distillery so that they could basically take over the operating business as it was.”
Perhaps a more frequent outcome is when an out-of-business producer offloads barrels to an industry compatriot. Fellow producers may not want the labels, but they could potentially make use of the juice.
For blenders, though, the value proposition isn’t as simple as getting hands on more aged whiskey. No matter the style or expression, each distillery produces distinct flavors. And figuring out how to use this outside whiskey can be quite the puzzle. Can it be blended into existing products? Or does it necessitate taking things in a new direction?
For Schragis, who has over a decade of blending experience, the first step in tackling the challenge is gathering as much information as possible: Was the whiskey made from a classic run? Was it a custom run? What was the barrel entry proof? Was it stored palletized or ricked? Was it temperature controlled? Was it ever topped up?
The whiskey’s geographic origin can also carry weight, even beyond flavor and terroir. For a certain type of distiller, ghost whiskey from nearby can fast track production while preserving local flavor.
“One thing we’ve noticed is newer distilleries in a given state buying whiskey from an older distillery in that state that went out of business,” Polonski says. (Fortunately for such brands, bourbon is now made in every U.S. state.)
“We recently encountered a distillery called Day’s Defile in Idaho,” Polonski says. “They acquired the remaining bourbon from a distillery in Boise that closed a number of years ago, then they sat on it for at least another four years. So most of their whiskey is seven to 10 years old now.” This allowed the brand to start with another distillery’s whiskey while still staying true to its craft, Idaho core.
Option 4: Sell to Barrel Brokers
Among distillers closing up shop, there’s a certain appeal to selling leftovers to specific producers or bottlers. At least then, they generally know where their products end up. But a far more common outcome is that barrels end up in the hands of brokers, who essentially run a commodities market for aging spirits.
“The vast majority of barrels I see end up going through third parties,” Bohm says. “There are a lot of great barrel brokerages in Kentucky and Indiana and beyond. Hundreds of thousands of barrels get shifted around on the market annually, and most of it happens through those third-party brokerages. A small percentage of it, though, often goes through a business-to-business sale.”
Most industry experts we spoke with agreed: Brokerages manage the bulk of barrel transactions in the U.S., including whiskey from closed distilleries. Industry consultant and distiller Jason Barrett estimates the North American barrel market is in the range of 250,000 to 350,000 casks per year. For those with barrels to offload, brokerages are by far the most efficient avenue.
“Usually whatever company that is dealing with the receivership or bankruptcy or whatever it is, will try to sell that asset not for the most money possible, but for the most ease possible,” Schragis adds.
Among brokers, pricing whiskey from out-of-business distilleries can be a tricky process. With major contract distillers, the value of barrels can be triangulated based on source, age, and market data. Pricing barrels from small producers is much less precise.
“When it comes to a barrel of craft spirits, it gets a little trickier because craft distilleries are working with unique grains or different mash bills or smaller barrels,” says Bohm, who frequently manages such sales. “There’s not an apples-to-apples comparison that can go on there. When it comes to pricing, what I do is a little bit more market research, talking to some of my peers who are craft distillers, to get a general pulse in the market at the time.”
For Bohm, pricing often factors in additional risk to the buyer, especially if the whiskey comes from a lesser-known source. “Who’s willing to write a big check to buy a warehouse full of barrels, especially if the barrels are coming from a craft distillery that doesn’t have a 30-year reputation of making great whiskey?” he says. “Most of the time they end up selling under market rate. Not a lot under market, but enough to where the reduction in cost offsets the risk to the new buyer.”
Option 5: Destroy the Whiskey
American whiskey history is peppered with distillers that abandoned operations mid-stride. That’s tougher in the digital age, where barrels, ownership, and the owners themselves are easier to track — and follow up on.
“Distilleries are federally bonded,” Barrett emphasizes. “They have an agreement with the government, they owe tax on that barrel. The minute that that barrel is created, you have a debt to the government that must be paid. So you can’t just walk away.”
For those left with barrels and nowhere else to turn, one option remains. The whiskey can be destroyed. But even that is much easier said than done.
“There is a lot of paperwork that has to be done because you need to prove to the government that you don’t owe them that $13.50 a gallon in tax,” Barrett says. “Most operations are not prepared to take that on. But there are certified destruction sites where they bring in barrels with big video cameras from all the angles. And they prove to the government that that whiskey was made unfit for human consumption. They usually also then recover some of that ethanol; it doesn’t tend to get poured down the drain. So there is still a minor recovery value.”
The Legacy of Ghost Whiskey
Most ghost barrels are destined for blends, brokers, or destruction. Long term, few whiskeys from closed distilleries register as anything more than blips. But if history is any indication, some ghosts may be destined for stardom — decades after their final barrels are filled.
“When it comes to a barrel of craft spirits, it gets a little trickier because craft distilleries are working with unique grains or different mash bills or smaller barrels. There’s not an apples-to-apples comparison that can go on there.”
Ghost whiskey is by definition a limited good, and supply drops with each and every sip. Attach the right backstory, and what remains becomes valuable to collectors who want a taste of history — especially as it grows increasingly rare. There’s a pull to drinking something that can never be made again.
For Polonski, it’s reminiscent of an artist who becomes famous only after death.
“When Port Ellen closed in Scotland 40 years ago, it didn’t close because it was a cult-favorite distillery. It closed because they didn’t have any need for that whiskey. There wasn’t enough demand for it. And it became a cult distillery because of the periodic releases of it from Diageo and from independent bottles over the years,” Polonski recalls. “I think that’s even true with Stitzel-Weller and other big Kentucky distillers that have closed. They become famous in their afterlife, not when they were around.”
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