Jim Beam shuts down iconic Kentucky distillery for at least a year amid market downturn

A whiskey sour for the distilled spirits industry. 

Consumers are souring on drinking alcohol.

Claudia Coffey knows Kentucky bourbon country as well as anyone. She's a podcaster and bourbon insider.

"Bourbon is Kentucky, right? We love horse racing in Kentucky. We love bourbon in Kentucky. It's the reason that 2.7 million people come to visit the Commonwealth every single year," said Coffey. "It's some of the biggest news to come out of Kentucky in quite some time, and this is one of the most iconic brands in bourbon."

Americans are imbibing less - down 6% from just two years ago. And more than 16 million barrels of Kentucky spirits - including bourbon and rye - are aging in warehouses across the state. Distillers are paying taxes on those barrels while they age.

It's an issue of supply and demand. But the problem is not exclusive to Jim Beam.

"It's not a question of who's shutting down production," said Charlie Prince, who runs the Drammers Whiskey Club. "It's a question of who is admitting it." 

However, observers say tariffs and the trade war with Canada hit Jim Beam especially hard.

"Ten percent of Kentucky bourbon sales were going to Canada, and that has dropped to almost zero," said Prince. "In Canada, that has been taken on as a kind of a national mission for Canadians, saying, 'Let's buy Canadian' and push back against the politics they don't like coming from the U.S. And, so, you see stores just pulling all American products and banning them in some provinces. So, that's definitely a political response."

"Thousands of Kentuckians power the bourbon industry. We will all feel the impact of this," declared Rep. Morgan McGarvey, D-Ky. "It's hard to overstate just how devastating Trump's tariffs are for America's signature spirit."

But one industry observer believes that tariffs are a single ingredient in a complex economic cocktail. Jessica Spector is a professor at Yale who studies the history and culture of liquor and spirits.

"Anybody that tells you that they have an explanation, 'Oh, it's tariffs,' or 'Oh, it's post-pandemic retraction,' is giving you a too simplistic explanation," said Spector. "It's unclear what impact the tariffs are having and will have in the future. People have argued over tariffs for a long time. As long as there has been trade, there have been arguments over tariffs. It's unclear whether the tariffs are sort of the coup de gras to an industry that was already suffering."

"They also jogged more and did a lot more cocaine because that was seen as more health conscious. So, it gets really complicated when you break things down generationally," said Spector.

"Tariffs are going to be part of the policy landscape," United States Trade Representative Jamieson Greer said Fox. "We know they're successful."

But the tariffs may also evaporate.

"Canada is one of our closest allies. I think it would be hard to find Canada engaging in unfair trade practices because we have what used to be called the NAFTA agreement, between Canada, the United States and Mexico to bring down all the trade barriers between the countries," said University of California law professor John Yoo.

"Canada will immediately benefit, and you'll be able to find your choice of American bourbons on Canadian store shelves," said Yoo.

In fact, Yoo believes the Supreme Court could issue its ruling sooner rather than later - especially if it nixes the tariffs. That's because of all the duties and fees that might be levied on products for months - and then reversed.

Now here's a little tidbit you probably won't learn any place else.

Roam any distillery in Scotland, be it Dalwhinnie in the Highlands, Glen Scotia in Campbeltown, GlenGrant in Speyside or Bowmore on Islay, and you will find distillers aging Scotch in Jim Beam barrels. 

The barrels may partially impart a vanilla flavor into the expression, stemming from "vanillans" in the wood.

That said, demand for Scotch is down like bourbon. So, some of these may even out.

So, it's possible that, down the road, Scotch distillers may age some of their expressions in barrels that once contained something else - other than Kentucky bourbon. And that's where the flavor profile will evolve.