Diageo Brands Will Build New Distillery on Bourbon Trail

An architectural rendering shows what Diageo's planned distillery in Shelby County would look like. The site would have a 100-acre buffer to maintain the surrounding landscape. COURTESY OF DIAGEO NORTH AMERICA

An architectural rendering shows what Diageo’s planned distillery in Shelby County would look like. The site would have a 100-acre buffer to maintain the surrounding landscape. COURTESY OF DIAGEO NORTH AMERICA

Global liquor giant Diageo PLC announced plans to build a new distillery in Shelby County Kentucky amid a global boom in American whiskey sales.

The U.K.-based company called the $115 million project about 30 miles east of Louisville a significant investment in the state’s growing bourbon industry. It still needs approval from local government officials, but Diageo hopes to complete the project by the end of 2016.

A variety of current and future Diageo bourbon and whiskey brands would be distilled at the facility, with a production capacity of 750,000 9-liter cases per year.

“Diageo has a long tradition within the craft of whiskey-making, and we look forward to bringing this artisanship to the new distillery,”

said Diageo North America President Larry Schwartz.

According to a news release, Diageo (pronounced dee-AH-gee-O) will buy 300 acres on Benson Pike in Shelby County near Bagdad and break ground in coming months.

Finalization of the plans is subject to approval by local government.

The announcement comes as bourbon, most of which is made in Kentucky, continues to boom. It is currently the fastest growing category of spirits in the United States, enjoying double-digit expansion in the past year. Worldwide, demand for premium bourbons and new flavored whiskies continues to rise as well.

Until now, Diageo has had no active distillery in Kentucky, although the company owns the historic Stitzel-Weller plant in Louisville, which is being turned into a $2 million tourist attraction.

With the Shelby County distillery, which the company says it hopes to have operating by late 2016, Diageo will begin making its own bourbon; until now, the company has marketed bourbon distilled by others, including the popular Bulleit brand and “Orphan Barrel” series.

The company was reluctant to say outright that Bulleit, which is widely rumored to be made at Four Roses Distillery in Lawrenceburg, will move to the new distillery.

“Diageo is constructing the facility with flexibility and growth in mind and will distill a number of current and future Diageo bourbons and North American whiskey brands,”

Diageo’s North American executive vice president, Guy Smith, said in a statement.

The project will represent a significant investment in Kentucky’s growing bourbon industry. The company expects that the construction project will provide about 30 jobs in whiskey distillation and maturation.

Also Thursday, the Kentucky Economic Development Finance Authority gave preliminary approval for $4 million in tax incentives for Diageo’s project, including $2.5 million in performance-based corporate income tax credits and wage assessments. The company also is eligible for an additional $1.5 million in Kentucky sales and use taxes on construction costs, building fixtures, equipment used in research and development and electronic processing equipment.

According to KEDFA’s report, Diageo will spend $2 million on the land, $94.3 million on the distillery, $12.4 million on equipment, and $6.3 million on other start-up costs.

The jobs created will have an average hourly wage of $29 including benefits.

Larry Schwartz, president of Diageo North America, said in a statement, “This proposed investment in Shelby County, in the heart of Kentucky bourbon country, will cement our commitment to expanding our share of the American whiskey category.” Diageo’s North American headquarters is in Norwalk, Conn.

“Distilled spirits remain a marquee industry in the commonwealth,” Gov. Steve Beshear said in a statement, “and Diageo’s new distillery will ensure that even more Kentucky bourbon is enjoyed around the globe.”

Local leaders also hailed the news of the major investment.

Shelby County Judge-Executive Rob Rothenburger said,

 

“The Shelby County Fiscal Court is very excited that Diageo is proposing to expand its worldwide distillation operations by building a state-of-the-art distillery in Shelby County. We look forward to a great partnership with Diageo, and we welcome them to the community.”

Diageo will have an open house to discuss the plans for the proposed Shelby County distillery, answer questions and hear from the public. The event is scheduled for 2 to 7 p.m. June 10 at the Shelbyville Country Club, 47 Smithfield Road.

A public hearing will be at 6:30 p.m. June 17 at the Stratton Community Center, 215 Washington Street in Shelbyville.

Diageo announced in February that it will open a visitors center at its legendary Stitzel-Weller Distillery in Louisville. Diageo has said that it hopes that the visitors center will be included on the Kentucky Bourbon Trail tour, the popular tourism project of the Kentucky Distillers’ Association.

Besides Bulleit bourbon and Bulleit Rye, Diageo’s North American whiskey portfolio includes George Dickel, which is made in Tennessee, and the Crown Royal and Seven Crown brands. Diageo is the world’s leading premium drinks company and also owns Johnny Walker, J&B and Buchanan’s scotches; Bushmills Irish whiskey; Smirnoff, Cîroc and Ketel One vodkas; Baileys liqueur; Captain Morgan rum; Tanqueray gin; Guinness beer; and Beaulieu Vineyard and Sterling Vineyards wines.

Diageo’s brands include Johnnie Walker, Smirnoff, Guinness, Bulleit Bourbon and George Dickel Tennessee Whisky. Global rival Brown-Forman Corp., maker of Jack Daniel’s Tennessee Whiskey, is headquartered in Louisville.

In the U.S., sales volume for bourbon and Tennessee whiskeys has grown 26 percent over the past decade, according to the Distilled Spirits Council, an industry group. Exports of U.S. whiskeys have grown to roughly $1 billion last year, more than double what it was a decade ago.

State and local officials expressed enthusiasm about the project, which is expected to create about 30 jobs for whiskey distillation and maturation.

“Distilled spirits remain a marquee industry in the commonwealth, and Diageo’s new distillery will ensure that even more Kentucky bourbon is enjoyed around the globe,” said Gov. Steve Beshear.

State Sen. Paul Hornback, who represents the district, said it would be a “fantastic investment” for the community.

“We are thankful for the positive economic impact this will bring and are proud that bourbon, a signature industry of Kentucky, will now be made right here in Shelby County,” Hornback said.

The proposed 300-acre distillery site would also include six barrel storage warehouses. Barrel storage has become a legal issue for Diageo in neighboring Tennessee, where the company has sued the state to halt the enforcement of a law requiring whiskey made there to be stored in-state.

Dickel said it stores all of its Tennessee Whisky at its distillery near Tullahoma, about 60 miles south of Nashville. But other products made there are stored at a company-owned distillery in Kentucky. The federal lawsuit claims that state law violates interstate commerce rights under the U.S. Constitution.

If the law isn’t tossed out, the company said it would have to decide whether to expand storage capacity in Tennessee or reduce production of spirits other than George Dickel Tennessee Whisky at the distillery, which would likely lead to job cuts there.

Diageo spokeswoman Kristen Crofoot said Thursday’s announcement was unrelated to the Tennessee litigation.

“Those warehouses will be for the product we make there,”

she said of the new facility.

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