New Distilleries in KY - General industry health?

[Cjen]

I've read these forums for a bit now, but this will be my first post. Wish me luck.

I've been intrigued by some of the threads around here discussing all of the history and change in ownership among a lot of the well known Kentucky distilleries. So I did a little research on the KY ABC site and it appears that the number of distilleries in the state has not changed much in the last decade (we are still hovering around 16), despite smaller craft distilleries springing up across the US in other states.

I know KY does not have a micro-distillery license, but licensing fees are really not that expensive in the state (probably cost $6,000 for all the state and local fees, including tasting licenses) nor does it appear especially difficult (relatively speaking) to start a new distillery in the state. So my question is, why have we not seen more start ups in this space yet?

I found a few smaller operations that looked like they were established in the last year or two (the party source, alltech's new lexington distillery, Limestone branch, Silver Trail, etc.), and even found one or two that may have closed down recently. But for some reason I thought there would be more 'churn' in the state, with distilleries opening and closing every few years. Where are these struggling little guys? Do they even exist?

How do you keep up to date with the new and struggling distilleries? Are there any hidden gems or ones we should probably find time to visit and sample sooner rather than later?

Obviously there is a lot involved with making a good bourbon (or any spirit really, bourbon just takes longer!), but it seems the "whiskey revolution" or "bourbon explosion" as some people like to call it is not being matched on the production side by truly new or innovative producers. Well, at least not in KY.

Thoughts?

[cowdery]

The major whiskey distilleries and the micro-distilleries are in two completely different spheres. They have almost no relationship to each other. There are about half a dozen micro-distilleries in Kentucky. There's a distillery being built in Hickman that is larger than a micro but much smaller than the majors. The micros are all new (last five years or so) the majors have all been around a long time. One reason for the stability of the majors is that they are all part of very large and diversified companies, diversified within the distilled spirits world, that is. There are no hidden gems, except perhaps among the emerging micro-distilleries, because every day is something new with them. Add in Tennessee and you have 99% of all the whiskey produced in the United States. The majors have been expanding and they have been doing new things, but you're unlikely to see a bunch of new players coming in. The cost of entry is simply too high, with the taxes, regulations, and cost to finance aging inventory. Whiskey is also a category where the mantra is "don't change anything," which is kind of the opposite of innovation.

[theglobalguy]

I'd have to imagine it's not just the financial aspect of aging inventory but the risk associated with explaining that to a bank/investor. Tough enough for small businesses to present a business plan with no profit for a year or two...imagine sitting across from a loan officer explaining it'll be 7-10 years before you "might" and it all depends on how well the product ages and what the market sustains at that later date.

I see situations like Alltech (new to that product, but as much a hobby of the founder as a profit expectation) as exciting, but don't expect too many folks in situations like that.