Bourbon maker Jim Beam has said that it plans to halt production at its flagship distillery in Kentucky for all of 2026. The distillery will stay closed while the firm takes “the opportunity to invest in site enhancements,” it said in a statement.The brand, which is owned by Japanese drinks giant Suntory Global Spirits, has also stated: “We are always assessing production levels to best meet consumer demand and recently met with our team to discuss our volumes for 2026.”The development has come at a time when the global bourbon market is drying up, following more than 20 years of expansion. Before Jim Beam’s announcement, several other distilleries had decided to scale back their production this year. For instance, in January, Jack Daniel’s parent company closed a barrel-making plant in Kentucky. In July, LMD Holdings filed for Chapter 11 bankruptcy, just one month after opening the Luca Mariano Distillery in Danville, Kentucky.Here is a look at what made Kentucky bourbon so popular, and the factors that led to its downfall.The originThe roots of bourbon go back to the 18th Century, with Virginia enacting the Corn Patch and Cabin Rights Act in 1776. The law offered 400 acres to any settlers who built cabins and planted corn in Virginia’s then-territory of Kentucky. This attracted immigrants from Germany, Scotland and the north of Ireland, who brought with them the knowledge of how to distil whiskey.As corn was the dominant grain in the Kentucky region — unlike in Pennsylvania and Maryland, where rye was more prominent — the settlers created a distinctive style of corn-based whiskey around the 1780s. The whiskey became popular after the American Revolution (1775-1783) ended, with imports of rum — the most prominent drink in the American colonies — from Great Britain dramatically reduced.By the time Kentucky became a separate state in 1792, more than 500 distilleries were operating in the region. The state’s whiskey industry thrived, as distillers were able to take advantage of numerous navigable waterways and send their product to big cities for sale.Story continues below this adBy the 1820s, Kentucky’s whiskey began to be called “bourbon” in newspaper advertisements. However, it remains unclear how the drink got its name. Some historians suggest that the moniker was inspired by Kentucky’s Bourbon County, which occupied a large part of central Kentucky, and local distillers stamped its name as the county of origin on whiskey barrels transported around the United States.The riseDespite a booming industry in Kentucky, bourbon was not associated with American culture for the longest time. This changed after the end of World War II, which led to a huge increase in bourbon consumption and exports. In 1964, Congress passed a law, recognising the drink as a “distinctive product of the United States”, and stating that bourbon must be produced within the US from at least 51% corn. Notably, that year, the US had consumed around 77 million gallons of bourbon.But as the 20th Century ushered in, bourbon sales went down. That’s because the drink failed to captivate the imagination of the younger generation. Marten Lodewijks, the US president of IWSR, which collects alcoholic beverage data and provides industry analysis, told the BBC, “You often see these kind of generational shifts were people don’t want to drink what their parents drink.”The drop in sales did not last for long, though. After the 2008 financial meltdown, bourbon was rediscovered, primarily due to its good price point — bar tenders began to buy it in bulk to prepare their cocktails. Also, television shows like Mad Men sparked nostalgia for the drink. This led to a sort of renaissance of bourbon.Story continues below this adAlso in Explained | The story of Scotch whiskyBetween 2011 and 2020, bourbon sales globally increased by 7%, which is more than three times the growth of the decade prior, according to IWSR data.Even during the pandemic, the drink’s popularity did not take a huge dent. People stuck at home with spare cash and time collected and bought bourbon bottles through auctions and online via informal (and often illegal) markets, according to a report by The New York Times.This propelled the distillers to expand their production by investing millions of dollars and launching new products. Currently, there are an estimated 16.1 million barrels of whiskey ageing across Kentucky.The fallThere are two major drivers of the current slump in bourbon sales. First is the falling consumption of alcohol across the world. A recent Bloomberg report revealed that consumption has sharply dipped in the past four years due to changing lifestyles, health awareness, and inflation. In August, Gallup published a survey, in which it was found that the percentage of US adults who say they consume alcohol had fallen to 54%, the lowest since the records began in 1939. Even those who continue to drink say they are drinking less, and say they are increasingly concerned about the health impacts of alcohol.Story continues below this adThere has been a drop in consumption among younger people as well. A 2024 study by the University of Michigan found that in 2024, 42% of 12th graders reported using alcohol in the past 12 months, a substantial drop from 75% in 1997. Among 10th graders, the percentage fell to 26% from 65% in 1997.As a result, the world’s biggest liquor makers are suffering. The Bloomberg report said shares of Diageo, Pernod Ricard, Remy Cointreau and Brown-Forman have tumbled by as much as 75%, wiping out nearly $830 billion in market value. Bourbon sales specifically slowed down to just 2% between 2021 and 2024, according to IWSR data.The situation has been exacerbated by the US President Donald Trump’s tariffs. For instance, as a retaliatory move, Canadian provinces, which control alcohol sales, have entirely stopped the sale of American alcoholic beverages in what was once among the industry’s biggest export markets. Canada accounts for about 10% of Kentucky’s $9 billion whiskey and bourbon business.Also, Trump’s unpredictable approach to tariff policy has created uncertainty, which has stopped companies from entering into new markets such as South Asia, sub-Saharan Africa and Southeast Asia. American whiskey distillers had once hoped to sell millions of bottles a year in these regions.Story continues below this adSome experts believe that Jim Beam’s decision to halt production is just a start, and eventually, more shutdowns can take place. Fred Minnick, a whiskey expert, told the NYT, “It’s a sad day for bourbon, to be honest with you… For this to happen is a real punch in the gut.”