Don’t Call Them Micro: New American Distillers Go Big

Any American of retirement age who has worked in beverage alcohol for most or all of his or her career has never experienced American whiskey, the pride and joy of the American distilled spirits industry, healthy and growing like it is today. For most of our working lives, American whiskey was quiescent. It sold. A few companies did well with it. Most didn’t. Nothing seemed to move the needle. The customers kept getting older and many feared that when the last bourbon drinker went to that great brass rail in the sky, that would be it.

It wasn’t always so dismal. Bourbons, ryes, and blends sold as fast as distilleries could make them coming out of the privations of World War II in the mid-1940s. They were still going strong when we were in high school. Almost two million barrels were filled in 1967 and there were more than eight-and-a-half million in aging inventory. By the time we finished college and went to work, the bottom had fallen out. The industry was on its way to losing half of its volume and scrambling to find something else to sell. Peach schnapps, anyone?

As bourbon sales finally began to improve with the new century, the major distillers ramped up production only modestly. Most had plenty of unused capacity, they just added shifts and days. They finally started to increase capacity in about 2008. Most have been through several rounds of expansion since then. Virtually everyone is operating at capacity now and scrambling to grow. Because demand for older whiskey is increasing, new warehouse construction has been especially brisk. Companies such as Vendome (stills), Buzick (construction), and Independent Stave (barrels) have never been busier. The Kentucky and Tennessee governments have helped with tax incentives.

A rendition of Luxco’s future distillery in Bardstown, Ky. Plans for the scenic property also include event space and a distillery tasting room.

Stepping into the Big League

Now something new is happening. People are building distilleries who have never had them before. They are virtually all in Kentucky. And they are big. Not as big as the current majors, but in the same ballpark, and much bigger than the hundreds of craft distilleries that have been started over the last decade.

Why now?

Because several non-distiller producers (NDPs; whiskey brand owners that don’t own a distillery, but rather source their whiskey from other distilleries) are being forced by circumstances to drop the ‘non.’

Most big distillers are happy to make whiskey for others when they have excess capacity, but house brands always come first. Today, most of the majors are barely able to make enough for their own needs. Long-term contracts are being honored but not renewed and no new contracts are being issued. As a result, the biggest NDPs are building distilleries, big distilleries, and independents with neither brands nor contracts are building distilleries to service the smaller NDPs, expected new entrants, and the growing export business.

Big and Building Bigger

These include Diageo’s new distillery for Bulleit in Shelby County and Brown-Forman’s for Old Forester in downtown Louisville.

Diageo is a distiller, of course, but it has been an NDP for bourbon purposes since it sold Bernheim to Heaven Hill in 1999. George Dickel is their only U.S. whiskey distillery. The Bulleit brand has been going gangbusters but Four Roses stopped producing it for Diageo in
2014, so Diageo is building a new distillery for Bulleit that will begin production later this year.

Louisville-based Brown-Forman already has two Kentucky distilleries, plus Jack Daniel’s in Tennessee, but Old Forester is the company’s flagship and the new distillery will give Brown-Forman a revived presence on downtown Louisville’s Whiskey Row (i.e., Main Street), where the company began 146 years ago. It is expected to open in late 2017.

Major NDPs building distilleries include Terressentia, Michter’s, and Luxco. Independents include New Riff and the Bardstown Bourbon Company (BBC).

A bourbon distillery’s capacity depends on several factors, but the most important one is the diameter of its column still. Most new distilleries start modestly and ramp up to their still capacity by adding fermenters at the front end and warehouses on the back end.

Construction progresses at Bardstown Bourbon Company. (Photo by Kristina Krug)


Terressentia, for example, which is refurbishing the Medley distillery in Owensboro (renamed O.Z. Tyler after Terressentia’s founder), has retired that plant’s functional 48” still and replaced it with a new one of 54” diameter, giving them a theoretical capacity of five million proof gallons per year, but their current fermenter and warehouse capacity means they won’t do more than about two million at first. (A proof gallon represents one gallon of 100 proof spirit.) They are spending $25 million to get that far.

Terressentia has something they call the TerrePURE process. “It’s an all-natural filtration process, using energy and oxygen to remove unwanted minor alcohols,” just like a barrel does, says Terressentia CEO Earl Hewlette. For the last several years they have done a good business selling bulk whiskey so treated to NDPs who bottle it as bottom-shelf store brands. They will have a TerrePURE processor at O.Z. Tyler but also intend to age whiskey conventionally. They currently have room for 120,000 barrels in Owensboro.

“We’re interested in creating and launching our own brands,” says Hewlette, “but we need to get some control over the supply chain.” They expect to start producing later this year. Ron Call has been hired as master distiller. Call used to make rum at Cruzan, but before that he made bourbon in his native Kentucky, at Jim Beam where his father also worked, and where his grandfather was a moonshiner. Call is 64 but he is bringing his son Jacob along with him to O.Z. Tyler.

Unlike Terressentia, Michter’s has a strong existing brand in the super-premium segment and Luxco has a stable of them in all price categories. What both need is a source of supply for those brands and future growth, one that they control. In other words, they need distilleries.


Michter’s, a historic distillery name from Pennsylvania, is a New York company that opened a new distillery in Shively, Kentucky in August of 2015. They bought an existing building but everything in it is new. There were many distilleries in that Louisville suburb during the industry’s post-Prohibition boom years. Diageo’s Stitzel-Weller and the Brown-Forman distillery are nearby. So is what remains of the Yellowstone and Frankfort distilleries, and the mammoth plant once operated by Seagram.

Michter’s had a contract distilling program with an undisclosed Kentucky distillery for about ten years and also bought bulk whiskey on the open market. Their column is 32” in diameter, so their theoretical capacity is more than a million proof gallons, but their fermenters limit them to 500,000 and they are already producing at that level just six months in. “Now all Michter’s distillation is done on equipment we own,” says Michter’s president Joe Magliocco. “If we add more fermenters and go to more shifts, we can increase the capacity.”


Luxco has been active in the bourbon business for half a century. The St. Louis-based rectifier and bottler has a mostly regional business but their bourbons are national names, albeit minor ones. They include Ezra Brooks, Rebel Yell, Yellowstone, Bellows, David Nicholson 1843, and Bourbon Supreme. Over the years, Luxco has acquired whiskey from all of the usual suspects but never has owned a distillery.

Last year, Luxco bought half of Limestone Branch, a small distillery in Lebanon that is taking over production of Yellowstone. Luxco expects to open their own distillery in Bardstown later this year. It will have a 36” column with an annual capacity of 1.5 million proof gallons. Warehouse capacity will be 140,000 barrels. The site includes a historic home, built in 1806, that will be integrated into the visitor experience. “We’re excited,” says Luxco president David Bratcher. “The trend now is to finely selected, higher-end products. I’m going to do this right. What makes us different is we have brands. I can put the distillery to work right away.”

They also have a bourbon inventory of about 75,000 barrels, now lodging at the distilleries where they were produced.

Bardstown Bourbon Company

Not far from the Luxco site as the crow flies, the Bardstown Bourbon Company is putting final touches on its distillery, which will open this year. It too has a 36” diameter column and can produce 1.5 million proof gallons. “We expect to be producing at that level on day one,” says company president David Mandell. Most of that volume is expected to come from contracts with non-distiller producers.

“Our collaborative distilling program gives us an interesting place in the market,” says Mandell. BBC took the unusual step of hiring its master distiller before it put a shovel in the ground. He is Steve Nally, former master distiller at Maker’s Mark for twelve years and a member of the Kentucky Bourbon Hall of Fame. “Young distillers are anxious to learn from Steve,” says Mandell.

Instead of the typical contract distilling model, where the producing distillery is ‘undisclosed,’ BBC wants its distillery to be a place where customers can celebrate and champion. It is designed for tourism and events. If a customer wants an on-site home place for their brand, they can have it. The site is 100 acres, some of which will be cultivated for farm-to-table products. “It will be a Napa Valley-type experience that will celebrate the local farming community,” says Mandell. The unique BBC model even includes financing through an affiliated bank.

New Riff owner Ken Lews (Photo by Fred Minnick)

New Riff

There isn’t a farm anywhere near Newport’s New Riff distillery, which sits on the Ohio River looking at downtown Cincinnati. It is definitely in an urban environment. Since Ohio is a control state with high prices for beverage alcohol, many Buckeyes shop across the river. For 30 years, The Party Source has been one of their favorite destinations. That’s why owner Ken Lewis decided several years ago to sell the store to its employees and build a distillery next to it. (He is prohibited from owning both.) He figured a distillery in Kentucky but also in the middle of the huge Cincinnati metro had great potential.

New Riff started production in August of 2014. It has a 24” column in a glass tower, visible from outside. They opened with four 5,600-gallon fermenters, with space for two more. The business took off so well that those two were added in December of 2015. New Riff’s capacity now is about 450,000 proof gallons per year. They are producing whiskey for themselves and others. They also have a 500-gallon pot still for gin and brandy, and are building an aging warehouse at another location. “We want New Riff to be one of the great small distilleries in the world,” says Lewis.


Diageo is cagey about the size of its column still at Bulleit, calling that information proprietary, but it will produce all of the whiskey for the Bulleit brand at the new distillery near Shelbyville, according to executive vice president, Diageo North America Guy Smith. At 270 acres, the site gives them plenty of room to expand as needed. Planned warehouse capacity is 330,000 barrels.

Bulleit will be strictly a production facility, no tourism is anticipated. That role will continue to be played by the historic Stitzel-Weller distillery, which showcases Bulleit and other Diageo American whiskeys, such as the Orphan Barrel collection and I.W. Harper bourbon.

“This size distillery strikes a nice balance,” says Smith. “It’s big enough to meet projected demand for Bulleit and possibly some of our other American whiskey brands without overestimating how much and how long the category will continue to grow.”


With two column stills at its Shively distillery, 60” and 48”, Brown-Forman isn’t building Old Forester for capacity reasons, but it will have a 24” column and should be able to produce about 100,000 cases of Old Forester per year. That is a much grander scale than the demonstration distilleries Heaven Hill and Beam-Suntory now operate in downtown Louisville. It is expected to open before the end of 2017.

“We wanted to do something in downtown Louisville and things began to happen with Old Forester, so it became a great opportunity,” says Campbell Brown, president of Old Forester and a fifth-generation descendant of company founder George Garvin Brown. “It’s so neat to be able to return to a building that our ancestors worked in.” The building on Main Street will showcase the entire production process, including maturation and bottling. It will have its own cooperage, since Brown-Forman is the only American whiskey company that also makes barrels.

Building Bourbon’s Future

There is no official name for this new class of distilleries. One suggestion, borrowed from college sports, is ‘mid-majors.’ Willet in Bardstown, which resumed distilling three years ago, probably qualifies. Wilderness Trail, in Danville, is getting close. Maybe Ray Jamieson will finally pull the trigger on his project, Jamieson distillery, in Western Kentucky. The distillery has been a work in progress for a number of years. It appears to be virtually complete, but Ray hasn’t fired it up and there’s been no word on when he will.

They aren’t all in Kentucky either. Driftless Glen in Baraboo, Wisconsin has an 18” column and a 500-gallon pot still. They are making about 100,000 proof gallons per year. A new still for vodka and gin is being added. Kirby, Wyoming is home to Wyoming Whiskey. They too have an 18” column still and are filling approximately 20 barrels a week.

Will all of this new production capacity be enough? Or possibly too much? With 1.3 million barrels filled in 2014, and 5.7 million in storage, current production still lags behind the industry’s 1967 high water mark. Back then, the business was almost 100 percent domestic. Today, nearly half of the American whiskey produced is exported and development of the Chinese and Indian markets has barely begun. There are no sure things in any business but, right now, bourbon looks like a pretty good bet.

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