This year marked the start of a rebound for the American whiskey category, as the UK and EU’s tariffs on the sector were removed, aiding its recovery after the effects of the Covid-19 pandemic.

The US and EU suspended the EU’s 25% retaliatory tariff on American whiskeys for two years from 1 January 2022, and the UK’s 25% retaliatory tariff on American whiskey was lifted on 1 June 2022.

Between January and July 2022, American whiskey exports rose by 22%, compared with the same period last year, according to data from the Distilled Spirits Council of the US.

The top five export markets for American whiskeys during this period were: the EU, Japan, Australia, the UK and Canada.

The country’s single malt producers are also set to benefit from new proposed guidelines for the category after the US government’s Alcohol and Tobacco Tax and Trade Bureau (TTB) published its proposed standards in August 2022. The guidelines are expected to come into force by the end of this year.

Dawn Davies, head buyer of UK retailer The Whisky Exchange, has noticed growing interest in American whiskey made outside of Kentucky and Tennessee. “We’re seeing more whiskeys and Bourbons from around the US. There’s a big push for American single malt.” She also said consumers are after a more “classic style”, and are showing less interest in flavoured whiskeys.

One ongoing challenge for Kentucky distillers has been the high taxes on barrels. The state remains the only place in the world that taxes ageing barrels of spirits, according to trade body the Kentucky Distillers’ Association (KDA). Barrel taxes for Kentucky’s Bourbon industry hit its highest in history at US$40 million, with the number of Bourbon barrels in the state reaching 11.4 million in January 2022. Kentucky distillers are said to be paying nearly US$7m more in barrel taxes this year than last year. As a result of the tax, the KDA’s president, Eric Gregory, has noticed a “proliferation of Bourbon distilleries outside of Kentucky”.

However, investment remains ripe in the sector. Over the past few months, Bulleit owner Diageo acquired Texas-based single malt maker Balcones Distilling, and Jim Beam owner Beam Suntory revealed plans to invest US$400m in a distillery expansion in Kentucky.

Meanwhile, Italy’s Campari Group recently took a 70% stake in Kentucky’s Wilderness Trail Distillery for US$420m, and a 15% stake in banana-flavoured Bourbon Howler Head. Campari Group’s CEO, Bob Kunze-Concewitz, said American whiskey was poised to become the firm’s “second major leg after the apéritif portfolio”.

Kunze-Concewitz said: “American whiskey is a very exciting category; it’s 15% of the value of the US market. And the US is the largest profit pool in our industry. It’s growing very strongly; the overall category is growing at 7%. But if you look at super-premium, it’s growing at 17%.

“We also believe that in the mid to long term, it’s a category destined to grow internationally.”

Brands to watch in 2023

Angel’s Envy

This year saw the Bacardi-owned Kentucky Bourbon and rye whiskey brand complete a major US$8.2m distillery expansion and hire a new master distiller, Owen Martin, of Stranahan’s Colorado Whiskey, to spearhead its cask-finishing programme. We expect to see more innovative releases from the distillery in the year ahead, while its tourism offering will likely attract more drinkers to the brand.

Balcones

Besides Bulleit, Diageo’s American whiskey portfolio has lagged behind its competitors in recent years. That looks set to change with the addition of Texas-based Balcones, a pioneer in the American single malt category. With Diageo’s backing and the imminent guidelines for single malt, the brand is poised to expand its presence in the US and worldwide.

Rabbit Hole

Following Pernod Ricard’s American whiskey acquisition spree in 2019, Kentucky distiller Rabbit Hole is part of the firm’s new dedicated American whiskey division. According to Nielsen figures, Rabbit Hole is one of the fastest-growing super-premium American whiskey brands in the US. The brand entered the UK in 2022, its first market in Europe, and we foresee more attention on Rabbit Hole in the year ahead.