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McClatchy-Tribune  08/21/2014 5:02 PM ET
Ky. bourbon industry gets boon with $115 million Bulleit distillery [Lexington Herald-Leader :: ]

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Aug. 21--SHELBYVILLE -- Bulleit Bourbon, one of the fastest-growing brands, now has a home distillery.

Diageo officials broke ground Thursday on the $115 million Bulleit Distilling Co., named for the global spirits company's flagship bourbon.

"It seems like the world just can't get enough of Kentucky bourbon," Gov. Steve Beshear said. "We have more than 5 million barrels aging in Kentucky right now. ... It's exciting.

"The bourbon distilling business is a nearly $2 billion gross state product every year. It's more than doubled in importance in the 13 years; we exported in 2013 $383 million in distilled spirits. That is a full 21 percent of the U.S. total distilled spirits exported."

The new distillery will be a major investment in Kentucky's booming bourbon industry, with more to come, Diageo officials said.

Diageo plans for now for the distillery to make 1.8 million proof gallons (equal to about 750,000 9-liter cases) annually, and to age spirits in six barrel warehouses. The distillery, on 300 acres in Shelby County, will be operational by late 2016.

Eventually, the site is to have at least a dozen two-story aging warehouses and probably more distilling capacity.

Larry Schwartz, president of Diageo North America, said the distillery will make just Bulleit at first.

"We'll have plans to do some craft products, but right now, Bulleit is more than we can handle, which is a good thing," Schwartz said.

Besides Bulleit, Diageo has released the Orphan Barrel series of bourbons, and he said some bourbon made in Shelby County could go into other releases, possibly including an Orphan.

Primarily, though, the distillery will make Bulleit, both bourbon and rye. Bulleit rye is the top-selling rye in America, he said.

"We plan to take Bulleit around the world," Schwartz said. "That's something that we'll be concentrating on in the next couple of years. We'll be starting in Latin America, Europe, and then hopefully we'll get into Asia and Africa,"

Schwartz credited brand founder Tom Bulleit with creating the momentum that has carried the craft brand from 35,000 cases in sales just seven years ago to about 600,000 cases in sales today.

As brand ambassador, Bulleit has traveled the world promoting his namesake whiskey, recently returning from a month-long swing through Edinburgh, London, Seoul, Singapore and Jakarta.

Schwartz said that Diageo aims to expand the brand, including both the bourbon and rye, "short-term, to a million cases."

With more than 60 percent growth in the past year, Schwartz said, "if our plan works worldwide, (Bulleit) could be several million cases," which would necessitate increased distilling capacity.

"We'd love to invest more here," Schwartz said. "There is no indication it's slowing down even at these levels, so we're incredibly happy about it."

Eventually, Diageo hopes to open a visitors center and get on the Kentucky Bourbon Trail, but the distillery will be in a dry part of the county.

"It the law was to change, it would make it that much more attractive to have a visitors center," Schwartz said.

Building the environmentally sensitive complex will provide "a significant number of jobs" and, when finished, is expected to provide about 30 permanent jobs in whiskey distilling and maturation.

Tom Bulleit, a former Lexington lawyer, founded the brand more than 20 years ago. It was acquired by Diageo in 2001, but there has never been a Bulleit distillery. In fact, Diageo hasn't had an active distillery in Kentucky.

It has been an open secret in the industry that Four Roses in Lawrenceburg made most of the bourbon for Bulleit and MGP in Indiana made Bulleit Rye, which was added in 2011. Bulleit 10-year was added in 2013.

"When I walked away from my career as a lawyer to revive my great-great-grandfather's high-rye bourbon recipe, people thought I was crazy," Bulleit said in a statement. "Twenty-seven years into this entrepreneurial journey, it's humbling to know this amazing facility right here in Kentucky will bear my family's name. It's an honor I'm not sure I will ever fully be able to describe."

In May, 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 $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 planned to 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.

Diageo also announced in February that it planned to open a $2 million tourist center at the historic 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 owns Johnny Walker, J&B and Buchanan's scotches; Bushmills Irish whiskey; Smirnoff, Cîroc and Ketel One vodkas; Baileys Irish Cream liqueur; Captain Morgan rum; Tanqueray gin; Guinness beer; and Beaulieu Vineyard and Sterling Vineyards wines.

Janet Patton: (859) 231-3264. Twitter: @janetpattonhl.


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