Diageo to Build New Whiskey Distillery in Kentucky

Spirits giant Diageo is taking a deeper plunge into bourbon and American whiskey production with plans for a new distillery in Kentucky.

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LOUISVILLE, Ky. (AP) — Spirits giant Diageo is taking a deeper plunge into bourbon and American whiskey production with plans for a new distillery in Kentucky.

The $130 million venture includes plans to build a distillery and warehousing on an approximately 144-acre site at Lebanon in Marion County, the company said Thursday. Diageo officials said the goal is to start production in 2021.

The company whose brand lineup includes Bulleit bourbon is hoping to increasingly tap into the popularity of American whiskeys.

"Bourbon and American whiskey are vibrant and growing categories and we are excited to expand Diageo's footprint in Kentucky to support our ambitions in this space," said Barry Becton, a senior executive at Diageo North America.

Global trade disputes, however, are threatening to dampen the good times for American whiskey makers. Those disputes have resulted in tariffs slapped on bourbon and other American whiskeys in some key overseas markets, including the European Union — where Kentucky spirits producers exported nearly $200 million of their products in 2017.

But in announcing its Kentucky expansion, Diageo pointed to forecasts for continued growth in the bourbon category in coming years. The Bulleit brand had double-digit growth in the U.S. in the past year, it said.

Diageo said the new Lebanon distillery — about 65 miles (105 kilometers) southeast of Louisville — will supplement its Kentucky operations at the historic Stitzel-Weller distillery in Louisville and the Bulleit distillery, which began operations in 2017 near Shelbyville.

The new distillery will be able to produce up to 10 million proof gallons per year — or 3.8 million 9-liter cases. The company said it plans to distill a variety of current and future bourbon and American whiskey brands at the new facility. The Shelbyville facility can produce up to 3 million proof gallons annually, or 1.1 million 9-liter cases, though there is room for Diageo to expand the plant.

The Lebanon distillery is expected to create 30 new full-time jobs, the company said.

The facility will be on the southern tier of the state's main bourbon production belt in central Kentucky.

Marion County officials cheered news of the new whiskey production venture coming to town.

"With Marion County's rich history in the bourbon industry, we are proud and humbled to add Diageo's name to this evolving legacy," said Lebanon Mayor Gary Crenshaw.

Kentucky economic development officials said Thursday that Diageo is in line for performance-based tax incentives of up to $4 million from the state as a result of the venture.

Kentucky distillers produce about 95 percent of the world's bourbon supply, according to the Kentucky Distillers' Association.

Last year, overall spirits production in Kentucky — mostly bourbon — surpassed 1.7 million barrels for just the second time since 1968, an increase of 129,000 barrels from 2016, the industry group said

Diageo's other bourbon and American whiskey brands include Blade & Bow, I.W. Harper, Cascade Blonde, Orphan Barrel and Seagram's 7 Crown, but not all its products in those categories will be produced at the new Kentucky distillery, it said.

American whiskeys account for just a fraction of Diageo's overall net sales. The company's most prominent brands include Johnnie Walker, Crown Royal, Smirnoff, Captain Morgan and Guinness.

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