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The Bourbon Economy Bounces Back

Move over vodka. Bourbon, long considered a "southern drink" is growing in popularity globally.

Bottles are filled with Woodford Reserve bourbon whiskey on the production line at the company's distillery in Versailles, Kentucky.
John Sommers II | Bloomberg | Getty Images
Bottles are filled with Woodford Reserve bourbon whiskey on the production line at the company's distillery in Versailles, Kentucky.

Bourbon now accounts for 70 percent of the $1.1 billion in spirits the U.S. exports annually, according to the Distilled Spirits Council of the United States. Citigroup estimates that sales could double over the next seven years.

Why the renaissance? A lot of credit goes to the development of high end "small batch" bourbons made by Jim Beam and Brown Forman , as well as the popularity of cocktails and the addition of new flavor-infused bourbons that are bringing in non-traditional whiskey fans.

When master distiller Chris Morris at Woodford Reserve first came to work for Brown Forman 36 years ago, bourbon "wasn't cool anymore." That's changed. Since Woodford Reserve launched in 1996, sales of the expensive liquor have grown double digits every year.

"Flavor has returned," Morris says. "Bourbon was discovered to be full of flavor."

"I'll tell you, bourbon is on fire," says Kevin Smith, who heads up bourbon distillery operations for Jim Beam. The company is investing in a "multi-million dollar, multi-year" expansion of its facility in Clermont, Kentucky, to create a new visitors center.

Tourism along the Bourbon Trail brought in estimated 450,000 last year. "We're trying to build a site so we can accommodate upwards of 200,000 visitors, so we're really excited."

Bourbon, to be specific, is whiskey made from at least 51 percent corn, aged in new, charred oak barrels. Ninety-five percent of it comes from Kentucky, and a study by the University of Louisville says the industry contributes nearly $2 billion to the Bluegrass State's economy.

The business employs about 9,000 people in the state, and to help create more jobs, Kentucky just agreed to provide $2.35 million in tax breaks toCampari, which plans to invest $44 million expanding its Wild Turkey operations. Those tax breaks are based on benchmarks, like the number of new jobs created.

"We don't just write checks for folks," Gov. Steven Beshear tells CNBC. "If you don't perform, you don't get anything."

Still, the Governor would like to revise and ease a barrel tax which penalizes only bourbon.

At the Brown Forman cooperage in Louisville, 300 employees build and char 2,500 new oak barrels a day. That's up more than 50 percent in a decade, according to General Manager Greg Roshkowski.

Each one of those barrels is taxed to help schools, and while the Gov. Beshear says he doesn't want to short-change education, he wants to find a way to ease the tax burden on this homegrown enterprise.

"The better off they are," the Governor says of the Bourbon industry, "the better off Kentucky is."

Questions? Comments? Email us at consumernation@cnbc.com.

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