Distilleries across Kentucky are not only thriving but multiplying and as a result, other Kentucky industries are thriving right along with them.
From the hospitality industry—which serves meals, offers lodging and fills bourbon glasses—to the construction industry that does its best to keep pace with plans for new and larger distilleries, the ripple reaches from border to border.
Another sector that is very much tied to the bourbon boom is legal services.
In 2022, bourbon distilling in Kentucky saw more than $2.1 billion in new investments and approximately 700 new jobs. Gov. Andy Beshear took note of the flow of projects in December as he helped Buffalo Trace Distillery celebrate the filling of its 8-millionth barrel. That distillery alone has increased its production by 50% and is in the midst of a $1.2 billion expansion that includes 14 new rickhouses, an expanded visitors center, 12 new fermenters and other production equipment, much of which is already in place.
The Kentucky Distillers’ Association’s most recent economic impact study, released in January 2022, showed there were 95 operating distilleries in the commonwealth with several more in the process of opening—five times as many as in the KDA’s first such study in 2009. In all, bourbon is a nearly $9 billion industry in Kentucky that has created more than 22,500 jobs.
With this massive impact, be it from expansions at large, established distilleries like Buffalo Trace or from a rising tide of craft distilleries like Wilderness Trail and MB Roland, comes the need for legal services. Add in the distilleries that are in the process of being built, such as Western Kentucky Distilling Co.’s $30 million facility in Beaver Dam, and there is an urgent need for legal assistance ranging from corporate services to consulting to help navigating what is a highly regulated industry.
At least some of this growth can be traced to the evolving changes in the state’s laws, says Steve Amato, the hospitality department chair at Lexington-based McBrayer PLLC. For example, a major change happened in 2016 in the form of Senate Bill 11, which saw Kentucky soften some leftover Prohibition-era laws that restricted distilleries’ (and other alcohol-based companies, like breweries) on-premise sales abilities. Lifting limits on packaged liquor retail sales and on-premise sample drinks boosts tourism by making distilleries more attractive as destinations. That, in turn, fuels an increase in bourbon production, boosts retail sales and encourages the formation of new distilleries.
Amato says a new distillery will need a variety of legal advice regarding site location, leasing and land-use services, permits and zoning, taxation services and more. And once established, distilleries may require advice on employment and economic development in addition to financial and lending advice for growth.
Another McBrayer attorney, Keeana Sajadi Boarman, deals with the corporate side of the practice, advising on corporate and tax structure plus normal ongoing needs that all businesses have–and McBrayer has plenty of distilleries as clients who utilize such services. The distilleries the firm has worked with include all types and sizes, such as Bardstown Bourbon Co., Fresh Bourbon, Kentucky Whiskey House and Tyler Wood Distilling Co.
“It is a pretty broad scope of work that these businesses need,” Boarman said. “It’s a really interesting field and it’s spinning off a lot of great legal work.”
Growing with bourbon
While the notion of distilling and aging bourbon to extract flavors from oak barrels may be romantic to a bourbon enthusiast or aspiring distiller, essentially a distillery is a manufacturing business.
“Anytime you’re dealing with manufacturing, you’ve got a plethora of legal issues,” said Mitchel Denham, a partner with DBL Law, which services multiple clients in the spirits industry.
Denham says DBL has seen growth, adding at least five new lawyers in recent years. And while there are no lawyers or staff dedicated exclusively to the distilling industry, he said, there is plenty of distillery-related work to go around. For instance, Denham often works with distillers on regulatory issues, such as dealings with the Alcoholic Beverage Commission, licensing or employment issues. Sometimes, he says, it may be as simple as helping set up corporate structures to help ensure a distillery can become a profitable business—something that isn’t exclusive to bourbon, but is needed nevertheless.
“The industry has seen exponential growth in the last decade,” he said. “That has caused them to need help from quality law firms.”
Marjorie A. Farris is the chair for Stites & Harbison, one of the oldest law firms in the country, tracing its origins to 1832. To her knowledge, the firm has been working with bourbon brands dating at least to the 1950s, she said. So, rather than growing as a result of the surging bourbon industry, she said, the firm has “grown alongside the industry.”
“Stites has had a long-standing history with the bourbon industry,” she said. “It’s always been part of what we do.”
And while that history and the experience is an obvious advantage, she is quick to point out that the industry is ever-changing, from new trends to rapid growth to the changing regulations that govern spirits. She has seen Stites & Harbison offer legal services to distilleries in the areas of regulatory issues, protection of intellectual property, licensing and contracting issues, corporate structure, acquisitions, environmental issues, employment, and litigation and dispute resolution. What, if anything, has changed with the recent bourbon boom from where the industry was decades ago?
“It’s more volume than anything else,” said Farris, who has been with the firm for 28 years.
Regulatory change broadens sales
Dinsmore & Shohl, a national legal firm with offices in 29 cities including three in Kentucky, has a team dedicated to the alcohol industry. Partner Evan Buckley has worked extensively with craft breweries and the Kentucky Guild of Brewers, but also has plenty of experience in the distilled spirits industry in recent years. Much like Farris, he notes that growth is feeding the need for ever-expanding legal needs by the industry. He said his firm has consistently added paralegals to the team to help keep up with demand and to manage knowledge of the industry—simply because it is so highly-regulated and constantly shifting.
Noting the evolving nature of spirits regulations, Buckley said, “It’s not an industry you just dabble in. It doesn’t consume somebody, necessarily, but it’s something you need to be up to date with.”
And like Farris, Buckley doesn’t see the upward shift slowing anytime soon. For example, he said, recent changes in Kentucky spirits regulations now allow retailers and bars to sell private-label bourbons they can co-brand—often just in the form of adding an extra label or sticker to the bottles as an exclusive barrel pick. This has helped increase the surge of involvement at all levels of the three-tier system, he said. It also keeps Dinsmore & Shohl’s beer, wine and spirits team pretty busy.
“The climate in Kentucky is positive for the industry at large,” Buckley said, “and it has kind of fostered growth.”
Lawyers who work in this particular area of the law seem to think the growth will continue.
“We have added to our stable of lawyers and other support staff to support the work that we do because, frankly, the volume drives it,” Amato said, saying McBrayer recently added a partner in its Louisville office who has extensive experience in alcoholic beverage law, while other lawyers have been hired in recent years to help with the volume, even if they are not focused solely on the distilling business. “They do other work too, but the explosion of the spirits aspect of the business is driving that.”
“There’s a lot of opportunity, a lot of people getting into the space,” DBL’s Denham said. “And there’s a need for quality legal and strategic advice for companies of all sizes. I think it’s a very exciting time for my clients who have seen a lot of growth and with new brands and existing brands, because the demand across the world has exploded.”
Farris agrees, saying she doesn’t see the bourbon balloon popping anytime soon: “People have been asking that question for the last three, four, five years. The economy is still showing there is a high demand for the product.”
“There are just so many different ways to get involved in the industry right now,” Boarman said. “It’s very exciting.”
Creativity drives ongoing growth
Dentons, a global firm with a large Kentucky presence, has done work to create and expand distilleries on the Kentucky Bourbon Trail and assisted with the introduction of several bourbon brands.
“We have decades of experience helping bourbon industry clients in a wide variety of areas, including regulatory matters, tax planning strategies, economic incentives and intellectual property matters,” said partner Jeff McKenzie, who leads Dentons’ Beverage Alcohol practice in the United States. “We work with distilleries to help achieve growth through mergers and acquisitions, joint ventures, product introductions and business formations. We also have broad experience advising on corporate governance, distribution and franchising matters.”
The global pandemic focused consumer attention on premium products and accelerated the growth of home-delivery beverage alcohol, cocktails-to-go and private gatherings featuring amateur mixologists, McKenzie said. He, too, sees further growth in the sector in the near term and probably beyond.
“As retail operations have re-opened, consumer demand has continued to drive regulatory changes and further product innovations. Pundits have questioned the virility of the bourbon phenomenon for several years, but the creativity in mash bills, bourbon finishes and other production methods continues to fuel the tremendous growth of ‘America’s Spirit’ and Kentucky’s favorite beverage,” McKenzie said. “The demand for bourbon will continue to grow as bourbon distilleries expand local production and global promotion of their products.”
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