Working Toward a Larger Kentucky DtC Spirits Channel – And Beyond

Kentucky just entered its third year of DtC alcohol shipping, opening doors for wineries, breweries and distilleries to expand their product reach. The change was especially welcomed by the Kentucky Distillers’ Association (KDA), which helped craft and guide the landmark DtC bill in 2020 that established these permissions.

Founded in 1880, the KDA is the first and only non-profit trade association that promotes and protects the Bourbon legacy in Kentucky. The “promote” part centers around The Kentucky Bourbon Trail®, while the “protect” part encompasses the legislative side, as KDA Vice President of State Relations Adam Johnson described to Sovos ShipCompliant.

The Kentucky Bourbon Trail® is a “road-trip style experience for Bourbon lovers to go behind the scenes” at the state’s signature distilleries. On the legislative side, KDA advocates to expand options to help both Bourbon consumers and spirits producers.

“So much of what we have done has been driven by tourism,” Johnson said. “It comes down to making your guests happy.”

It started with distillery visitors wanting to enjoy a cocktail – but they couldn’t. Enter SB 11 in 2016, which raised the daily per-person free sample limit to 1.75 ounces and allowed distilleries to operate restaurants and serve cocktails, among other benefits. During the COVID-19 pandemic, “take-home cocktails” were a boon to restaurants, bars and others in the hospitality industry. With SB 67 in 2021, take-home beverages became a permanent option.

Another part of meeting consumer expectations was DtC shipping, which allows distilleries to responsibly and safely ship orders to consumers in Kentucky and reciprocal states. As well, it gives visitors the option to ship home bottles from the distillery they toured. That’s why a key effort for the KDA is to help other states craft and pass similar legislation.

“There’s more work to be done, to be sure we are expanding the options for states to ship to,” Johnson explained. “We want to make sure it’s done the right way: making sure the taxes are accounted for, not shipping to minors. Everyone is doing this to make sure it’s done the right way.”

Working toward the greater good

When it comes to Bourbon, it’s hard to think of a state with a richer history than Kentucky. And with the Kentucky Bourbon Trail® and Kentucky Bourbon Trail Craft Tour®, more people can learn about that history. In 2022, the two Kentucky Bourbon Trails surpassed 2.1 million visits combined, a new record according to Johnson. After launching a campaign to book tours in advance, the booking window is now 40 days out, he said, whereas it used to be seven days or fewer.

“Kentucky is a destination for Bourbon lovers,” Johnson said. “It’s a bucket-list item. We’re catering to the crowd and working to offer new experiences and things to do.”

However, there is still more work to be done. One key target for the KDA currently is to phase out the state’s barrel tax. As the only location globally to tax aging spirits, the law is turning away startup distilleries from Kentucky and forcing the business case for the Bluegrass State’s existing distilleries to age millions of barrels tax-free in neighboring states, Johnson explained.

“When you’re eager to get into Bourbon and spirits production, Kentucky is the major league. We offer the key resources and suppliers, from corn and barrels to nation-leading DtC, shipping and distribution systems and an incredible tourism stream. Phasing out the state’s punitive barrel tax only makes sense.”

Helping to expand DtC spirits shipping is also on KDA’s agenda. At any given time, Johnson is sharing advice and takeaways with guild leaders in a half-dozen states nationwide seeking to responsibly expand their DtC alcohol shipping permissions.

“Part of my job is helping state guilds with what we went through on our own DtC bill; the compromises made and how it can be a model for other states to use,” Johnson said, adding that it’s important to ensure DtC shipping is done responsibly and legally.

“Every state we can help to further that effort is going to make the whole category stronger,” he explained. “That’s our goal: to help as many states as possible. And the consumer will only benefit.”

Kentucky Bourbon – and Bourbon as a whole – may be a massive industry. But it’s also a very small, familiar industry, according to Johnson. And that’s the secret to Kentucky’s success: everyone is helpful.

“Our membership strength is that our people help each other,” Johnson said. For example, when a consumer finishes a tour or visit at one distillery, they will be recommended another – competing – distillery to go to next.

“It goes back to the people really caring about the category. What’s good for the industry is good for the brand.”