The Demise Of A Distillery - April 3, 2025

A Bourbon Startup Goes Bust

This week’s article is a case study of how bad decisions and poor timing can turn the entrepreneurial pursuit of a $10B market into a $250M hole in the ground.  

Thanks to a friend, I’ve recently become a fan of bourbon, and have spent some time becoming educated about this sector. Because of this newfound interest, I became intrigued when reading about the demise of a well-funded “start-up” in the bourbon industry. 

Garrard County Distilling Company was located in Lancaster, Kentucky, on a 210-acre site about 30 minutes south of Lexington.  This facility was launched by Atlanta-based Staghorn in 2024, as one of the largest independent distilleries in the state.

Garrard was a start-up in the truest sense of the word; a newly founded company making promises of a “better product”, for an industry that’s been in existence since the late 1700s. There were  84+ Bourbon distillers in the state of Kentucky alone, and another 30 in the state of Tennessee (Source - USA Spirits). Garrard raised over $250M in funding, in a combination of equity and debt. The company leadership prioritized building manufacturing operations with the capacity to produce 150,000 barrels of bourbon per year, making it one of the largest independent distilleries in Kentucky right from its start. This included a 50,000-square-foot distillery and 24 planned warehouses. It was built to scale fast and compete immediately…like many well-funded technology startups. This approach may work for startups in the technology sector, but even there the startup company has to convince customers that their product is better than what can be had from the existing suppliers who’ve been at it for a long time (in the case of whiskey spirits, for hundreds of years). 

In the consumer goods industry, buyers have many choices. In the case of bourbon, there are over 100 brands to choose from located inTennessee and Kentucky alone, and there are over 850 whiskey and bourbon distilleries across the United States. The overwhelming majority of bourbon sold nationally comes from a few major players: Beam Suntory, Brown-Forman, Heaven Hill, and Sazerac Company. These companies own popular brands with national reach, such as Jim Beam, Maker's Mark, Jack Daniel's, Old Forester, Evan Williams, and Buffalo Trace. These four top manufacturers control approximately 65% of the  total US production capacity.  (Source - ISBS World). All of this to say, Garrard was entering a crowded space.  

As a startup thesis, entering a crowded space never bothers me. But it does mean that the leadership team needed to focus their early efforts on developing a better product than what is available from this plethora of competitors, and the startup marketing has to be top-notch. By “marketing”, I mean the product brand, the company brand, and the stories being told about the product, the company and the team.  In addition, the support for the distribution and sales channel has to be second-to-none. Company leadership and the sales team cannot be in every potential customer meeting telling the story, so there needs to be first-rate support for those that are telling your story on your behalf.  These marketing efforts include talking points for the sales channel, sales collateral items, promotional items, among other things.  This is all “marketing” and it takes effort and investment.  

Research shows that Garrard did invest heavily in marketing, centered on a high-cost branding strategy using the "hatchet granny" temperance figure Carrie Nation, including branded merchandise and a, now controversial, "All Nations" whiskey line. So we can give some credit to company leadership for understanding the importance of marketing when entering a crowded space. 

Despite this, the company met with rapid failure, closing within 14 months of opening, due to lawsuits and financial issues. This leads to the conclusion that one of five things, or a combination of these things, caused Garrard to fail so quickly despite being so well funded:

1. Garrard was a branding play, as many businesses in the consumer goods space are. If the Garrard story didn’t resonate with the target customers - ie - the differentiating story was not understood, or did not connect with consumers, there would be no attachment and loyalty established with the Garrard brand. This would make it difficult to compete against the many well-established competitors. 

2. The product was terrible and didn’t live up to the promise of the marketing story. If the product doesn’t walk-the-walk, the marketing story ends up being just talk. 

3. The leadership team misspent their capital, spending too much, too soon, on their manufacturing infrastructure, before they had the sales order volume to justify that large investment. 

4. The leadership team underestimated how long it would take to establish their brand, and then how long it would take that brand to translate into sales.  Given that a portion of Garrard’s capital raised was in the form debt that incurred interest and had to be repaid at some point, the timeline for generating cash flow from meaningful sales turned out to be a lot longer than the timeline for servicing the debt. This is poor planning. This resulted in loan defaults, and when Garrard could not cure these defaults, the lenders pursued legal action, which ultimately resulted in Garrard’s demise. 

5. The leadership misread the state of their market, and relied on old data, in assessing their addressed market. 

What Mistakes Did Garrard Make?

Expanding on the fifth item above, the market data showed that company leadership had missed an important trend in the bourbon industry specifically, and in the whiskey/spirits industry more broadly, that was occurring prior to Garrard even being launched: the demand for spirits had peaked in 2022 and had fallen off significantly by 2024; younger drinkers had shifted to RTDs (RTDs = “Ready-To-Drink”),  and lighter drinks. Source - Distilled Spirits Council of the United States (DISCUS), in 2024 and 2025; also The Drinks Business, IWSR Drinks Market Analysis  supports that this trend was clearly identifiable before 2024. 

Management assumed the spirits boom would last forever, when in fact their market had cooled off even before they launched.  This was a failure not only on the part of company leadership, but also their equity investors and their debt holders, for not having assessed the planned addressed market correctly.  

Garrard ran into cash flow issues, which is remarkable when you consider they raised $250M in financing. We already discussed where they spent the money - on manufacturing infrastructure and marketing promotions, in advance of having their products ready and their brand established.  

So What Happened To Garrard? 

 This cash flow crunch meant that Garrard fell behind on paying its creditors, and it’s reported they fell behind in their tax remittances.  To make matters worse Garrard defaulted on its loans, to the tune of $29M. 

In the end Garrard was forced into bankruptcy by its creditors. And, even more remarkable is that all of this occurred within 12-15 months of Garrard opening! That’s how you create a $250M hole in the ground!

In the aftermath of its failure, the debt of Garrard was sold to a major player in the bourbon/whiskey industry, the Sazerac Company (who owns and markets the Buffalo Trace brand of bourbons).  As of today, Sazerac has not yet started operating Garrard. The distillery has been closed since April 2025.

Where Does The Industry Go From Here?

Industry experts indicate that overall whiskey volume growth is slowing in mature markets. There are some oversupply concerns for mid-tier suppliers, and not all craft distilleries will succeed. This means:

• More distillery failures will occur in the next few years

• Big brands will double down on premium releases + RTDs

• The industry will stabilize over time, but become more polarized by sub-segment: ie - premium, RTD, non-alcoholic, with some room for incumbents and traditional whiskey drinks. 

The failure of Garrard County Distilling Company is a case of poor strategy combined with great initial story-telling.  The founders/leadership team was able to sell a great story to their initial investors, raising a lot of money to launch the business.  But this was coupled with poor strategic choices on where to spend that capital, a failure to recognize a softening in their addressed market, and failure to build a brand quickly…something that was urgent given the terms of their financing.  What a waste of $250M.