An architect's rendering of Diageo's proposed distillery in Shelby County, Kentucky. Image courtesy Diageo.

May 29, 2014 – Diageo plans to solve its Bourbon supply issues by spending $115 million to build a new whiskey distillery in Shelby County, Kentucky east of Shelbyville. The plan announced today will result in a new distillery capable of producing 1.8 million proof gallons of spirit a year for what the company described in a news release as “current and future Diageo bourbon and North American Whiskey brands.” In the release, Diageo North America President Larry Schwartz said the project will cement the company’s future in the North American whiskey market.

“The distillery will build on our presence in Kentucky and we are committed to being a productive member of the local community.  We are very thankful for the support we have received thus far from state and local officials and look forward to a long and fruitful working relationship.”

Diageo has agreed to purchase 300 acres of land on Benson Pike east of Shelbyville, approximately halfway between Louisville and Lexington. Construction could begin by the end of this year, with the distillery to begin production by the end of 2016. The distillery must still receive state and local governmental approval, but in the news release, Shelby County Judge-Executive Rob Rothenburger praised the project as a welcome investment.

“The Shelby County Fiscal Court is very excited that Diageo is proposing to expand its worldwide distillation operations by building a state-of-the-art distillery in Shelby County.  We look forward to a great partnership with Diageo and we welcome them to the community.”

Rothenburger was out of town and unavailable for interviews this week, according to an aide. Company officials will hold an open house for community members on June 10 at the Shelbyville Country Club to discuss the project’s impact on the community. A public hearing is scheduled for June 17 in Shelbyville. The site will also include six warehouses for maturing whiskey, with approximately 100 acres of land to serve as a buffer zone around the distillery and warehouses. While the Diageo news release pledged that the distillery will be designed with environmental protection in mind, the company faces a class-action lawsuit in a Louisville federal court along with other whisky producers over allegations that mold problems on homes near their facilities has been caused by alcohol vapors coming from maturation warehouses.

Diageo’s investment appears to answer the long-term question of a source for Bulleit Bourbon, which had been distilled at Four Roses Distillery in Lawrenceburg under a long-term supply contract that was to end in March. As reported here in September, Four Roses had notified Diageo that it would exercise its right to terminate the contract, citing the need to use the distilling capacity for its own whiskies. Four Roses and Diageo executives have declined to comment on the contract since then, with the only statements from Diageo during that time suggesting that a solution was being developed. Bulleit is Diageo’s primary Bourbon brand, along with the Orphan Barrel line of vintage whiskies introduced this year. Those whiskies were distilled at the old and new Bernheim distilleries in Louisville, but Diageo has not owned a working distillery in Kentucky since it sold the current Bernheim Distillery to Heaven Hill in 1999.

The announcement may also quash speculation for now about plans to revive the Stitzel-Weller Distillery in Louisville, which has been closed since 1992. Diageo is expanding the current Bulleit Experience visitor attraction at the distillery, which opened as a training facility in 2011, and plans to add it to the Kentucky Bourbon Trail in the near future. Company sources have confirmed that plans were being developed to reopen the distillery, which faces a number of environmental and safety issues that would add to the cost of reviving it. Diageo’s news release did not address whether the new distillery will have a tourism element. However, it should be noted that while the city of Shelbyville is “wet” (meaning liquor sales are allowed), the rest of Shelby County is “dry” with no liquor sales or tastings allowed at present. The distillery is located in the “dry” part of the county, meaning that any on-site visitor attraction would not be allowed to offer tastings or sell whiskey without a change in the law.

This story will be updated with more details. As of now, Diageo has declined to make company executives available for interviews, saying that there “are a number of steps in the process that have to be cleared” first.

Editor’s note: This story was updated to include an architect’s rendering of the proposed distillery supplied by Diageo, along with information on Shelby County’s “dry” status and Judge-Executive Rob Rothenburger’s unavailability for interviews.

Links: Diageo | Bulleit