Bourbon is an iconic American spirit that requires strict oversight at every stage in its production. From raw ingredient sourcing to taxation, it’s no wonder this beloved whiskey has earned a reputation as one of the most highly regulated products around!
With these steep regulations in place, it’s no wonder why many distilleries face challenges in accurately monitoring their quantities. Industrial scales provide a weighing solution for bourbon distilleries, though, so they can have complete control of their supply. These scales are essential for improving the accuracy of bourbon inventory tracking and ensuring compliance with government regulations.
Industrial scales can enable distilleries to accurately measure their inventory, which is critical for maintaining product quality. In this article, we’ll discuss the bourbon distilling industry in Kentucky, highlight the challenges the industry faces, and explain how bourbon inventory weighing solutions can help.
The Bourbon Distilling Industry in Kentucky
Kentucky produces and distributes 95% of the bourbon sold in the world, with distilleries scattered throughout the state. In fact, companies in Kentucky also bottle, package, and ship many different kinds of spirits.
As a result of this booming industry, the state has seen a significant economic boost. Distilleries create jobs, contribute to local economies, and pay millions of dollars in taxes each year. Almost all distillers export their products outside Kentucky and the country, which makes distilled spirits a major export industry for the state.
High bourbon sales in Kentucky also result in a better standard of living for many of the state’s citizens. The sales of distilled spirits support the wages, salaries, and benefits of workers who are part of the state’s distilling industry. The financial circulation doesn’t end there, though. Employees can spend their income in the regional economy, generating even more jobs and income in other industries.
In Kentucky, the distilling industry encompasses 22,540 jobs with an annual payroll of $1.23 billion, producing $8.94 billion of economic output. These numbers show the importance of bourbon distilleries to Kentucky’s economy.
Kentucky’s bourbon also attracts tourists. People from all over the world come to visit the state’s many distilleries. On Bourbon trails and tours, among other activities, tourists spend money and contribute to the local economy. Bourbon has a significant effect on various aspects of the state’s economy and plays an integral role in its success.
Bourbon Inventory—The Challenges faced by the Industry
The bourbon industry follows a very specific process when making their whiskey. It all starts with grain milling, which is the process of separating the starch from the rest of the kernel and converting it into something that can be fermented.
The next step is fermentation, where yeast is added to convert the sugars in the grains into alcohol. Distillation follows: This is the process of separating the alcohol from the other components.
The next step is maturation, which involves aging the whiskey in charred oak barrels.
Last but not least, bottling occurs when the whiskey is poured into bottles and labeled for sale.
Every distillery has its own unique process, though, so it’s essential to find the right custom weighing solutions for bourbon — allowing them to keep a close eye on their output and stay in full compliance with tax laws. Kentucky has the best distilleries in the USA, but strict laws and regulations on the production and sale of bourbon make producing it a challenge.
High tax rates
Currently, distilleries are the highest-taxed industry in the Kentucky Commonwealth. Distilling consumption and production generates $286 million in state and local tax revenue. Additionally, Kentucky distillers pay $1.8 billion in federal taxes — more than any other state — in part because Kentucky has the 5th highest bourbon and spirits rate in the USA: 21%. Beer is taxed at 8%, and wine is taxed at 3%.
For every bottle of spirits in Kentucky, there are seven different taxes:
- Aging barrel tax (local): This tax is assessed on each barrel of aging whiskey. The rate varies by jurisdiction.
- Aging barrel tax (state): There is also a state-level tax on each barrel of aging whiskey. The rate is $0.05 per $100 value.
- Case tax (state): The case tax is assessed for each case of finished whiskey. The rate is $0.50 per case.
- State excise tax: The state excise tax refers to the tax on each gallon of whiskey. The rate is $1.92 per gallon.
- Federal excise tax: The federal excise tax is assessed based on each gallon of whiskey. The proof is the determining factor for the rate. The rate is $13.50 per gallon.
- State wholesale tax: This tax refers to the tax on the sale of each bottle of whiskey from the distiller to the wholesaler. The rate is 11% and was raised in 2005.
- State sales tax: This tax is applied to the sale of each bottle of whiskey. The rate is 6% and was added in 2009.
The variety of taxes makes it imperative for distilleries to know how much whiskey is being produced and sold to ensure that all taxes are paid.
Government regulations similarly make it challenging for distilleries to accurately monitor their bourbon inventory.
Unfortunately, having inefficient manual processes can even lead to inaccurate data, resulting in discrepancies in taxes and penalties. If, for example, the taxes are not accurately assessed, the distiller is liable for any overpayment. These penalties can be costly and cause financial strain.
Impact of COVID-19
COVID-19 challenged the bourbon industry. Following the closure of restaurants and bars, the primary source of on-premise sales plummeted 44%, though this was at least partially offset when the off-premise sales at liquor stores increased 18% as people stayed at home.
The former trend has continued into 2021 as many establishments continue to operate under limited capacity or remain closed.
The pandemic has also affected the bourbon industry’s workforce. As discussed, bourbon-making is a complex process with many steps requiring specialized skills and knowledge. Due to the closure of establishments, distilleries had to adjust their production processes, resulting in layoffs or reduced work hours.
Moreover, the shortage of essential materials like glass, barrels, and malted barley caused a delay in production, further exacerbating the industry’s workforce challenges.
Shortages lead to an increase in the price of these materials, limited availability, and decreased quality. These factors can make it challenging for distilleries to keep up with increasing demand and remain competitive.
Competition from other states and spirits
Kentucky is not the only whiskey-producing state in the USA. Other states, such as Florida, South Carolina, and Illinois, are also producing high-quality whiskeys. Additionally, other spirits like vodka and tequila have become increasingly popular with today’s drinkers.
For Kentucky locals, bourbon is ingrained in the culture; therefore, it is unlikely that other spirits will replace bourbon as the preferred choice anytime soon. However, for tourists and residents of other states, it can be a different story. Additionally, due to high tax rates and strict government regulations, it can be truly difficult for Kentucky distilleries to remain competitive.
Tennessee, for instance, imposes no state income tax and no barrel tax on aging spirits. The state’s spirits tax rate is also 70% lower than Kentucky, creating an attractive environment for distilleries and businesses. Tennessee currently has 104 distilleries, and this number is growing every year.
Intense competition could see Kentucky losing its 95% market share. This, in turn, may result in the loss of jobs, capital investment, tourism, and tax revenue for the state.
When demand for bourbon increases outside the state, Kentucky distilleries must be able to compete with other states to remain relevant. They need innovative strategies and alliances with other businesses to remain competitive. A proactive approach that identifies technological opportunities and invests in industrial solutions can help.
A Custom Weighing Solution Will Keep the Bourbon Flowing
The challenge for distilleries is to accurately measure and track their liquor inventory. This is critical to ensure that the amount of bourbon produced matches the amount taxed by the government.
Many distilleries rely on manual processes, such as counting barrels with a ruler or even weighing individual bottles — both of which are time-consuming and prone to human error.
Modernizing the whiskey industry with technology is essential for improving accuracy and efficiency when managing inventory. When used correctly, this technology leads to improved compliance, minimized tax liabilities, and increased profit margins.
That’s why a custom weighing solution is essential for distilleries. The right solution can help them quickly and accurately measure their bourbon inventory, save time, reduce costs, and ensure compliance with the law.
The bourbon-making process involves measuring and tracking a variety of ingredients and materials, including grains, water, yeast, and oak barrels, and on top of that, distilleries must also accurately track the amount of whiskey produced and sold. A tax is levied based on the amount of whiskey produced, so it is important that distilleries have an accurate measurement system to ensure compliance.
Industrial scales can help bridge the gap between manual processes and accurate measurement. Scales are available in a variety of sizes and capacities, including bench scales, counting scales, precision scales, and floor scales. Heavy-duty scales can handle large barrels, while smaller precision scales are ideal for measuring ingredients like grains or yeast.
The benefits of industrial scales can be seen in the way Rice Lake saves time using a truck scale with a 720i™ programmable weight indicator and LaserLight2™ remote display to help produce and track bourbon.
The use of a custom weighing solution has enabled Rice Lake to reduce production time from days to just hours. By accurately measuring inventory and easily tracking the amount of whiskey produced, Rice Lake is able to comply with state laws and remain competitive in an ever-changing market.
As you can see, by having the right weighing equipment in place, distilleries can quickly and accurately track their bourbon inventory. A custom weighing solution like American Scale’s can provide reliable data that is accurate and precise. This ensures proper measurements.
Investing in a custom weighing solution can help distilleries streamline their operations and improve efficiency while ensuring they remain compliant with the law. It also helps them stay competitive in today’s market by saving time and money.
Change Your Weighing Process and Secure Your Bourbon’s Future
Bourbon is the equivalent of liquid gold for American distillers.
It’s strictly regulated and heavily taxed, but it packs a powerful punch in taste and popularity. Its increasing prominence around the country shows that distilleries must remain competitive and innovative to stay successful.
The right weighing solution can help distilleries increase efficiency, reduce costs, and remain compliant with the law. Investing in such a custom weighing system will ensure accuracy, streamline operations and guarantee that bourbon remains an American staple for years to come. With the right equipment in place, Kentucky distillers won’t have to worry about losing their competitive edge in the market and can ensure the liquor they produce is of the highest quality.
American Scale can help create the perfect custom weighing solution for your distillery. With offices in Louisville (KY), Bowling Green (KY), and Evansville (IN), American Scale is dedicated to helping businesses like yours find the right equipment for their needs.
Monitoring supply can be a daunting task, but American Scale will provide you with the tools and expertise to get it done right.
Along with equipment sales, American Scale provides service and calibration as well, including scheduled scale maintenance to ensure that your scales are always compliant and in the best position for successful, uninterrupted liquor production.At American Scale we believe your bourbon inventory process should be more efficient, accurate, and profitable. Contact American Scale today to learn how our team of experts can enhance your distillery’s processes with a custom weighing solution.