Lexington’s Bourbon Industry

For more than 200 years, Kentucky’s legendary distilleries have crafted the world’s finest bourbons and Lexington is at the heart of the Bourbon Trail. In fact, whiskies are Kentucky’s 9th largest export at $295 million in 2016. To understand the economic significance of the bourbon industry, the Urban Studies Institute at the University of Louisville recently released a report titled “The Economic and Fiscal Impacts of the Distilling Industry in Kentucky” for the Kentucky Distillers’ Association.

The report estimates that about one third of the nation’s bourbon industry employment, payroll, and production workers are located in Kentucky. There are around 4,300 direct jobs in the bourbon industry at distillery production sites and corporate offices, and another 15,000 to 17,500 jobs supported by the bourbon industry with nearly $800 million in payroll.

Employment and average annual wages have increased nearly every year since 2001. In fact, the average annual wage has nearly doubled, rising from $53,000 in 2001 to over $95,000 in 2015 (most recent year for which data is available).

There are more than 50 distilleries in Kentucky, a threefold increase since the Urban Institute’s 2009 study on the bourbon industry. This is largely due to the increasing presence of craft distilleries. In fact, the Craft Spirits Data Project estimates that there are 35 craft distilleries in Kentucky (as of August 2016). Last year, distilling production and consumption contributed $190 million in tax revenue to Kentucky state and local governments.

Lexington is at the heart of Kentucky’s bourbon industry. There are 11 distilleries located in the Bluegrass Region, including Alltech’s Lexington Brewing and Distilling Company in Lexington, Buffalo Trace and Castle & Key in Frankfort, and Woodford Reserve in Versailles, with the James E. Pepper brand of the Georgetown Trading Co. opening soon in the Distillery District near downtown Lexington.

The Kentucky Distillers’ Association conducted a survey of its members and found that capital projects from 2010 to 2015 totaled $485 million and anticipated capital projects for 2016 to 2021 are around $620 million. These investments provide tax revenue for state and local jurisdictions and indicate a strong future for the bourbon industry in Kentucky.

To support the growing bourbon industry, the University of Kentucky has begun offering courses in Distillation, Wine, and Brewing Studies within the College of Agriculture, Food, and Environment. These courses will help provide a local workforce, continued research, and innovation to help the uniquely Kentucky bourbon industry thrive. Furthermore, there are more than 70 wineries in Kentucky and the number of craft breweries and cideries are increasing every year.

Economic Contributions of Toyota

Last month, Toyota Motor Manufacturing Kentucky, Inc. (TMMK) announced a $1.33 billion investment in its Georgetown operations to increase manufacturing flexibility and decrease model changeover times. The investment will improve equipment and add new technology in multiple manufacturing areas to prepare TMMK for the Toyota New Global Architecture (TNGA), a global vehicle platform for multiple configurations and powertrains. TNGA is a new way of designing, engineering, and manufacturing vehicles that will create a flexible production environment allowing quick response to demand while preserving Toyota’s values of exceptional quality and safety. Furthermore, TMMK will be the first vehicle assembly facility in North America to adopt TNGA.

Toyota Motor Manufacturing Kentucky, Inc. (TMMK) in Georgetown, KY, is Toyota’s largest manufacturing plant in the world, producing 550,000 vehicles and 600,000 engines annually at its 1,300-acre campus featuring over 8.1 million square feet of work space. TMMK produces four cylinder and V-6 engines, Camry, Avalon, Camry Hybrid, Avalon Hybrid, and the first U.S.-assembled Lexus.

In fact, Toyota produced more than 2 million vehicles in North America in 2016, and nearly one-fourth were made in Georgetown. Looking back even further, Toyota has produced more than 30 million vehicles since 1986 in North America, and one-third were made in Georgetown.

Additionally, there are over 100 parts and commodities suppliers for Toyota located in Kentucky, and a total of more than 350 suppliers in the U.S.

The Kentucky Cabinet for Economic Development estimates that there are over 9,500 people employed by Toyota across the state (as of May 8, 2017), excluding Erlanger. Toyota plans to close its operations at the Erlanger Engineering Laboratory Building, which it will then donate to Boone County Schools for a STEAM-focused education center, the Ignite Institute – an innovative, tuition-free school for students grades 9-12 with a focus on biomedical sciences, advanced manufacturing, pre-engineering, logistics/IT/coding, and building trades, with the opportunity to earn an associate’s degree.

Toyota’s involvement in the Bluegrass Region goes beyond employment and dollars invested in infrastructure. Several years ago, Toyota created the Advanced Manufacturing Technician (AMT) Program in collaboration with the Bluegrass Community & Technical College to craft a homegrown workforce with soft skills as well as technical knowledge. Today, the program has grown into a new,  $24 million, 78,000 square foot Advanced Manufacturing Center in Georgetown, KY, with over 60 students enrolled in the most recent semester. Through an apprenticeship-based curriculum, the AMT program combines learning with hands-on experience in an immersive environment. Students learn the knowledge and skills required to be advanced manufacturing technicians and apply those concepts while working part-time for actual manufacturers in the region, such as Toyota.

According to a study by the Center for Automotive Research, Toyota has operations in 19 states around the country and that 70 percent of Toyota vehicles sold in the United States were also built in the United States. Toyota employs over 135,900 people in manufacturing, supporting operations, and dealerships, with another 108,400 intermediate jobs that supply Toyota and 225,800 induced jobs created by the spending of these direct and indirect employees. This brings Toyota’s total American employment impact to 470,000 jobs.

Want to learn more about advanced manufacturing in Lexington and the Bluegrass Region? Click here!

 

Foreign Direct Investment in the Bluegrass Region

Following our recent ranking as #7 Top Small American City of the Future 2017/18 for FDI Strategy by fDi Intelligence (read more here) let’s look at the presence of foreign direct investment in the Bluegrass Region.

According to the Cabinet for Economic Development, there are over 480 foreign-owned facilities in Kentucky employing nearly 106,000 Kentuckians. The eight counties of the Bluegrass Region are home to 21% of the FDI facilities in Kentucky and 23% of the employees – that’s 99 facilities with ownership from 18 different countries providing full time employment to over 23,900 people (as of April 4, 2017).

In Lexington, there are 34 facilities with ownership from 14 countries, employing nearly 6,600 people full time. China is the largest FDI employer with 2,128 jobs (or 33% of Lexington’s FDI employment), followed by Japan with 1,210 jobs (or 18%).

In the Bluegrass Region, Japan is the largest FDI employer, with nearly 16,000 employees, or 67% of the FDI workforce and 60% of the foreign-owned facilities. Not surprisingly, 60% of the Japanese FDI workforce is in Scott County, followed by 14% in Madison County.

Germany is the second largest employer, with nearly 2,500 employees (10% of the FDI workforce), 95% of which work in Fayette, Franklin, and Woodford County.

Half of the foreign-owned facilities are located in Fayette (34%) and Scott County (18%). Around 41% of the FDI workforce is in Scott County alone, with 27% in Fayette County, 11% in Madison County, 8% in Franklin County, and the rest spread throughout Bourbon, Clark, Jessamine, and Woodford County.

The majority of foreign-owned facilities employ less than 100 people (54%) and a just over one third employ less than 50 people (38%) and around one third employ between 100 and 500 people (37%). However, several Japanese-owned facilities are major employers in our region, including around 8,200 employees at three Toyota facilities in Scott County and 1,449 employees at two Hitachi facilities in Madison County.

Check back next week for highlights from the Center for Automotive Research’s report on the economic impact of Toyota in Kentucky. 

Want to learn more about foreign direct investment in the Bluegrass Region? Check out the Bluegrass Economic Advancement Movement (BEAM) Global Trade and Investment Plan.

Lexington Ranks 7th Best City for Attracting Foreign Investment

The economic development team here at Commerce Lexington is always working to attract companies to the region and to help existing companies grow. In fact, we regularly meet with 160 businesses each year that fall into our strategic targets. International companies are a large part of that effort, and we’re proud to announce that Lexington has ranked #7 Top Small American City of the Future 2017/18 for FDI Strategy by fDi Intelligence!

The fDi Intelligence team collected data for over 420 locations under five categories:

  • Economic Potential – including factors such as population, population growth, GDP, unemployment, patents, outward FDI (a domestic firm expanding operations to a foreign country), inward FDI (a foreign company investing in or purchasing a local company), FDI in research and development, and FDI in advanced manufacturing.
  • Business Friendliness – including factors such as advanced manufacturing companies, hi-tech companies, knowledge-based sector companies, jobs created by inward and outward FDI, and expansion projects.
  • Human Capital and Lifestyle – including factors such as institutions of higher education, literacy, physicians, and life expectancy.
  • Cost Effectiveness – including factors such as average annual salaries for a variety of skill levels, annual rent per office and industrial space, and other costs associated with establishing a business.
  • Connectivity – including factors such as internet speed, airports and international destinations, and proximity of ports.

A sixth strategy, FDI Strategy, was qualitative in nature. Over 70 locations discussed their strategy for promoting FDI. Commerce Lexington submitted an application on behalf of Lexington, highlighting our commitment to establishing and maintaining relationships with companies and investments in our community.

One example is the Lexington-based biotech company Allylix. This company, founded in 2002, develops terpene products and their derivatives for the flavor and fragrance, food ingredient, pharmaceutical, agricultural, and biofuels markets. In 2014, Allylix was acquired by Swiss-based Evolva. Since the acquisition, Commerce Lexington has established strong relationships with the Evolva leadership team and meets with them as part of our existing business retention and expansion program.

Another is Coldstream Laboratories. Over the past decade, Commerce Lexington has maintained a strong relationship with Coldstream Laboratories, a specialty pharmaceutical contract manufacturer that spun out from the University of Kentucky. In January 2015, Coldstream Laboratories was acquired by India-based Piramal Enterprises. As with other mergers and acquisitions, our team met with the new owners as soon as possible to make them aware of how we may assist them. Over the last two years, Commerce Lexington has cultivated that relationship with the company as they have grown. Out team partnered with the Kentucky Cabinet for Economic Development on an expansion project for Piramal. The company announced in February of 2016 that they would invest $10 million and add 40 new jobs to the Lexington operation.

Foreign direct investment (FDI) has long been an important part of the economic growth of the region, due to the presence of major corporations such as Lexmark (China), Toyota (Japan), Webasto (Germany), Sumitomo Electric Wiring Systems (Japan), and many others.

Kentucky is home to hundreds of international companies with operations around the state, and the Bluegrass Region has particularly benefited from foreign direct investment. According to the Kentucky Cabinet for Economic Development, there are 484 foreign-owned facilities employed nearly 106,000 people in Kentucky (as of April 4, 2017). The eight counties of the Bluegrass are home to 21% of these facilities (that’s 99 facilities) and 23% of the employees (nearly 24,000 people).

Check back next week for more about international companies in Lexington and the Bluegrass Region.

For more Bluegrass Rankings, click here