What Is the State of American Whiskey as We Begin 2025?

There is plenty to talk about.

The outgoing U.S. Surgeon General has proposed cancer warnings for liquor labels. The new administration has proposed tariffs that could disrupt alcohol imports and exports. Popular weight loss drugs seem to also depress the appetite for alcohol. Legal cannabis is growing as an alternative intoxicant.

American whiskey sales declined in 2023 for the first time in more than 20 years, and 2024 was even worse. Headlines in the trade and popular press say the bourbon boom is over.

But the sky is not falling.

About 20 years ago, demand for bourbon began to exceed supply. After more than 30 years of excess capacity, the industry suddenly had none to spare. To support their own brands, several distillers declined to renew contracts with non-distiller producers, who had to find other sources or, in some cases, become distillers themselves.

As domestic sales grew, so did exports. Existing distilleries expanded and new distilleries were built. Some like Diageo, Michter’s, and Lux Row shifted from buying whiskey for their brands to making it themselves in their own new distilleries. Other new plants came online to serve a contract distilling market that seemed inexhaustible. Money was suddenly available for all sorts of distillery projects. An independent bottler infrastructure that had never existed in America as it does in Britain began to develop. Where once only one American distillery posted significant tourist numbers, now there are dozens. Bourbon and rye have a status, domestically and internationally, they never had before.

There is no glut now and one is not inevitable if the industry takes this opportunity to correct. “When you're up to your ass in alligators,” the saying goes, “the first thing to do is stop draining the swamp.”

The major brand distillers will adjust their production according to their own needs, as they always have. They are, for the most part, vertically integrated, self-contained entities. That’s Brown-Forman, Suntory, Sazerac, Heaven Hill, Wild Turkey, and Four Roses. Because they make what they sell and sell only what they make, they have very little exposure to the contract distilling market.

Likewise, most craft distilleries are not exposed. Like the big guys, if they sell only what they make and make everything they sell, the oversupply problem doesn’t affect them either.

But there is, at the moment, too much whiskey in the rest of the market. Can history tell us what to do next?

Not really. The word “cyclical” trips easily off the tongue, but the American distilled spirits business has never been normal. A pattern must repeat at least twice to be considered a cycle and that’s never happened with beverage alcohol in the U.S.

The last bourbon boom, the period from the end of WWII until the late 1960s, occurred because the industry was shut down from 1920 to 1933, and significantly hobbled from 1942 to 1945. Inventories had to be rebuilt from scratch. In the 1970s, whiskey sales collapsed, but people didn’t stop drinking, they just stopped drinking whiskey. The industry assumed it was temporary, a brief downturn, so they kept filling the warehouses. There had never been too much whiskey in living memory. The last time there was an oversupply problem was in the 19^th century. The solution then was the Whiskey Trust, a near-monopoly that kept prices high by limiting competition. The legality of that solution was questionable then and is fully prohibited now.

In the 1970s, when the expected turnaround failed to materialize and warehouses became full, most distilleries either closed or went dark for extended periods. Heaven Hill was the only American whiskey distillery that distilled in every six-month “season” during the 1970s and ’80s. Distilleries that were still technically open would be dark for 18 months, distilled for three, then go dark again. Producers sold 10 year old whiskey in their standard expressions just to be rid of it. The industry consolidated and diversified. Whiskey companies became distilled spirits companies, and many became part of diversified conglomerates. The remaining distilleries had enough excess capacity to supply the modest demand for bulk whiskey and contract distilling services.

Whiskey enthusiasts of a certain age remember the glut fondly. It helped American whiskey gain a foothold in Asia, which helped revive interest here at home. The industry that came back in the 21^st century is very different from the one that collapsed in the 20^th. It is less centralized and more flexible, although many aspects need reform, especially the creaky distribution system.

The flow of capital driving much of the overinvestment in new capacity and warehouse-filling is bound to slow. Producers may want to retrench in other ways too. The flow of limited editions, new styles, experiments, finishes, and flavorings has become a torrent. To most American drinkers, and even more so to the rest of the world, American whiskey is bourbon and rye, well-made and fully aged, every bottle as good as they can make it, and every bottle the same as the last. Bill Samuels never wanted to create Maker’s Mark line extensions. He believed in making one bourbon as best he could and just selling that. Most of his peers felt the same way.

Marketers should remind consumers, here and elsewhere, why they fell in love with bourbon and rye in the first place. We drink them because we like them. We like their sweetness and easy-drinking character, generally unpretentious personalities, and affordable prices. The boom may have abated, but American whiskey is here to stay.