Global liquor giant Diageo to produce Bulleit bourbon, rye whiskeys at new Kentucky distillery

Global liquor giant Diageo PLC will raise its stakes in the growing bourbon sector by making its Bulleit whiskeys at a new Kentucky distillery, where the company's ambitious plans for the brand had a top company executive talking about a potential expansion even before initial construction begins.

Executives of the London-based conglomerate joined state and local officials Thursday at a groundbreaking for the $115 million project in Shelby County. The company hopes to start production in late 2016. The distillery will churn out up to 750,000 9-liter cases per year.

Up to now, Diageo — whose brands include Johnnie Walker, Smirnoff, and Guinness — has been a small player in the bourbon sector.

Seven years ago, its Bulleit brand struggled with yearly case sales of about 35,000. Since then, annual sales of Bulleit bourbon and rye whiskeys have surged to about 600,000 cases, and the short-term goal is to reach 1 million cases, said Larry Schwartz, president of Diageo's North American operations.

"If our plan works worldwide, it could be several million cases," he told reporters.

By comparison, bourbon industry leader Jim Beam had case sales of nearly 3.5 million to distributors in 2013, according to the Beverage Information Group, an industry tracking group. The Evan Williams brand was next with case sales of 1.65 million, followed by Maker's Mark at 1.25 million.

Diageo plans to spread the Bulleit brand to more global markets, starting in Latin America and Europe and then into Asia and Africa, Schwartz said.

By comparison, bourbon industry leader Jim Beam had case sales of nearly 3.5 million to distributors in 2013, according to the Beverage Information Group, an industry tracking group.

Soon after officials ceremoniously scooped shovels of dirt on what's now a field, Schwartz talked Thursday about the potential for future expansion at the distillery — named The Bulleit Distilling Co. after the facility's flagship brand.

There's plenty of room for expansion on the company's property near Shelbyville, about 30 miles east of Louisville, he said.

"We'd love to invest more here," he said.

The company will build six warehouses to store the aging whiskey, but has mapped out space for another six warehouses.

Diageo announced plans to build the distillery in May, but provided specifics about its intentions on Thursday.

Schwartz said the distillery may also eventually produce craft whiskeys, which carry heftier prices.

"We're going to utilize this facility to the maximum," he said.

The distillery will employ about 30 people. Another future addition could be a visitors' center in a state where bourbon tourism is big business.

Diageo's investment comes amid booming times for Kentucky's bourbon makers.

Kentucky distillers have invested more than a half-billion dollars in expansions and startups since 2012, according to the Kentucky Distillers' Association. Last year, the state's distilleries filled 1.2 million barrels of bourbon — the most since 1970, the group said.

Inventory has topped 5 million barrels for the first time since 1977 in a state where aging bourbon barrels outnumber people, it said.

Production has surged by more than 150 percent in the past 15 years in Kentucky — home to 95 percent of the world's bourbon production.

"It seems like the world just can't get enough of Kentucky bourbon," Gov. Steve Beshear said at Thursday's event.

The Bulleit brand was started in 1987 by Tom Bulleit, who gave up practicing law to revive his family's old bourbon recipe.

His great-great-grandfather, Augustus Bulleit, was a tavern keeper who made whiskey in the pre-Civil War era, according to a website for the brand. Augustus Bulleit vanished while transporting his barrels of bourbon from Kentucky to New Orleans.

Bulleit Bourbon is distilled and aged in small batches. Diageo acquired the brand in 2001.

"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. "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."

Bulleit Bourbon is currently made at a non-Diageo distillery in Kentucky, using the Bulleit brand recipe.