There are many reasons why bourbon is so expensive. We need to take into account the raw materials, aging process, taxes, marketing, retail mark-up, and labor costs – amongst other things.

Raw Costs

One of the biggest costs in bourbon production is the charred oak barrel, which can only be used to make bourbon once, and only once. This would be fine if the barrel only cost a few dollars, but this isn’t the case. In fact, one of these barrels costs roughly $250. The barrel can be sold to be used for other spirits, but the sale price fluctuates.

Along with the barrel, there is the grain itself. This cost includes buying the grain, mashing, fermenting, and then distilling the grain. The raw materials can generally be found at the following prices:

• Corn – 750lb for $375
• Rye – 250lb for $115
• Malted barley – 50lb for $30
• Yeast – $50

Labor

Bourbon doesn’t just make itself. The distiller and their staff need to collect a wage. This adds another few hundred dollars to the cost per barrel. Oh, and then there are costs for electricity, water, and fuel.

Aging

As the bourbon ages in the oak barrels, precious liquid is lost due to evaporation. In fact, distillers frequently lose 10% of liquid during the first year of aging, and then 4% more every following year.

Taxes

Just like all of us, distillers have many taxes to pay. However, it is even more complicated than our tax forms. The tax rate varies from state to state. For example, there is no bourbon tax in Wyoming, but distillers in Washington have to pay $31.48 per “proof gallon”. The average bourbon tax in USA is $5.56 per proof gallon, which roughly translates to $0.96 per bottle of bourbon.

There is also the federal tax to contend with. This tax costs the distillers roughly $13.50 per proof gallon, which adds a few more dollars to the final sale price.

But that’s not all… there are also ad valorem taxes, with the main one being a tax on the value increase of an aging barrel. The tax isn’t a huge amount, but it adds up over time. Finally, distillers are face with yet another tax on every box of bourbon sent out of their distillery. Only two things are certain in life: death and taxes.

Promotion

So, you’ve got your finished bourbon, and it’s delicious! However, how will anyone know how delicious the bourbon is, if they have never heard of it? To make profit, distillers need to promote their product to customers and retailers.

Endorsements, TV adverts, promotional events, and print ads all cost money. These promotion methods can be extremely effective, but they can cost tons of money to create and maintain.

The top shelf bourbons may seem unfairly expensive, but they have usually spent far more on advertising when compared to the cheaper bourbon whiskies. Just think, how much did it cost Jim Bean to hire Mila Kunis for their adverting campaign? Although we think it was definitely worth it.

Retail

Along with the distillery, the retailer needs to make some profit. Their sale price needs to cover their costs, facilities, and staff. The price varies from state to state, but retail stores tend to add a 20% mark-up.