A 75th Birthday Party With a Dark Cloud Overhead: Black Velvet Whisky and the Canada-U.S. Trade War
There are not many ways to celebrate a 75th anniversary in the whisky business that feel genuinely earned. Decades of grain, water, oak, and patience stack up behind every milestone, and the Lethbridge, Alberta distillery that produces Black Velvet Canadian Whisky has more than its share of all four. But when Heaven Hill Brands gathered at the southern Alberta facility earlier this month to mark the occasion, the mood carried an unmistakable undertone of anxiety. The most recent round of tariffs has created "unsettling turbulence" for the business, said Claude Bilodeau, vice-president and general manager of Black Velvet Distilling Company, which is owned by Kentucky-based Heaven Hill Brands. The phrase landed with weight because the numbers behind it are not abstract. They are, in fact, existential.
The Supply Chain Nobody Talks About
American whiskey drinkers who reach for a handle of Black Velvet at the local package store probably do not spend much time thinking about where the liquid inside came from, let alone the geopolitical friction that now threatens its journey south. The truth is that Black Velvet's supply chain is a textbook case of deep North American economic integration — one that the current trade war is pulling apart at the seams.
The Lethbridge facility makes about 10 million litres of whisky a year, but it's bottled in the United States and 95 per cent of the Lethbridge-produced alcohol ends up being sold south of the border. That is a staggering concentration of market exposure. The whisky crosses the border in bulk, imported and bottled by Black Velvet Import Co. in Bardstown, Kentucky — the same deeply bourbon-saturated city where Heaven Hill operates its bottling operations for much of its Kentucky portfolio. The arrangement made perfect sense for decades: low-cost production in Alberta, finishing and distribution infrastructure in the American heartland, and a massive, loyal U.S. consumer base hungry for affordable, smooth Canadian blends. Now that formula is under serious stress.
The Tariff That Changed Everything
The trigger was not subtle. The United States' new 50 per cent tariffs on billions of Canadian exports, including alcohol, came into effect August 22. In response, the federal government announced dollar-for-dollar counter-tariffs on $27.6 billion worth of U.S. goods. The tit-for-tat dynamic is now fully operational, and the spirits industry sits directly in the crossfire.
For Black Velvet, the 50 percent tariff represents a direct cost assault on its primary revenue stream. Technically speaking, a few products will be immune to the blanket import ban because they're manufactured in Canada but bottled in the United States, such as the Canadian blended whisky Black Velvet, which is owned by Kentucky's Heaven Hill. That quirk of the supply chain — bulk whisky shipped south before bottling — may offer some measure of insulation from the most severe import restrictions. But a 50 percent tariff on the liquid itself, applied at the point of crossing the border, still dramatically changes the economics of every liter that flows out of Lethbridge.
The broader Canadian spirits industry is reeling. Spirits Canada, the country's national spirits trade association, said approximately 93 per cent of Canadian spirits exports went to the United States in 2025, and it estimates that American demand supports 48 per cent of Canadian spirits production. That is not a trade relationship — that is a dependency. And Black Velvet, with 95 percent of its production heading south, represents perhaps the sharpest possible expression of that dependency within a single brand.
Seventy-Five Years of History on the Line
From "Black Label" to a Continent-Wide Brand
The Black Velvet story does not start in Lethbridge. The brand was created by Heublein in 1951 and originally distilled at the Schenley distillery in Valleyfield, Quebec. In 1973, production moved to the newly-constructed Palliser Distillery in Lethbridge, Alberta. Black Velvet whisky, originally called "Black Label" when it first came out of the barrel in 1951, has since 1973 been made at the Lethbridge distillery, where Black Velvet Canadian Whisky and Golden Wedding Canadian Whisky are currently produced.
The name itself has a colorful origin. After the original distiller, Jack Napier, sampled it, he changed the name to reflect its signature velvet taste and smoothness. The liquid inside is built on a mash bill of rye, barley, and corn, matured in bourbon casks. It is a classic Canadian blend — approachable, light-bodied, and engineered for volume. Black Velvet's three expressions sell approximately 2 million cases annually, primarily in the United States.
The brand's history reads like a corporate acquisition chronicle. Constellation Brands acquired Black Velvet in 1999 from Diageo, two years after Grand Metropolitan and Guinness merged to form the drinks giant. Then, in August 2019, Heaven Hill made its move. Heaven Hill Brands agreed to acquire Black Velvet, the second-largest selling Canadian Whisky brand, from Constellation Brands. The deal was valued by Constellation at $266 million USD in cash, and includes the Black Velvet Distillery in Lethbridge, Alberta along with its existing stocks of maturing whisky and several smaller Canadian Whisky brands.
Why Heaven Hill Wanted It
The strategic rationale behind that $266 million deal was straightforward: Heaven Hill needed a serious foothold in Canadian whisky. Black Velvet fills an important gap in Heaven Hill's broad distilled spirits portfolio by substantially expanding sales activities in the imported whisky category and fits perfectly with its portfolio of high-volume, quality brands like Evan Williams Bourbon, Burnett's Vodka, Deep Eddy Vodka, Admiral Nelson's Rums, and Christian Brothers Brandies. In other words, Black Velvet was never a prestige play — it was a volume play, bolting a two-million-case Canadian brand onto a Kentucky company already expert at selling affordable, broadly distributed spirits at scale.
Heaven Hill also committed real capital to the Lethbridge facility after the deal closed. The facility, built in 1973, was designed to be a fully integrated site covering the entire production process from grain to glass on a single 50-acre piece of land. Claude Bilodeau expressed his gratitude for the investment Heaven Hill has made in the business, saying, "There are some things that you just don't see or think of every day where the site needed some love and Heaven Hill has provided that. They're injecting the capital into the site that it needed in a time when the world is in turmoil and we are so appreciative of that." That investment now looks like a gamble on a relationship — the Canada-U.S. trade relationship — that has since fractured badly.
The Future of the Lethbridge Distillery
A Candid Admission About Uncertainty
In moments of genuine corporate crisis, executives tend to retreat into PR language. Bilodeau did not entirely do that. Asked if tariffs would stop Heaven Hill from making whisky in Lethbridge, Bilodeau replied the company has "no idea what the future holds." "It's certainly our hope that it doesn't," he said. That kind of unscripted candor from a sitting vice-president and general manager signals that the situation is being taken seriously at the highest levels, and that the options on the table are genuinely uncomfortable.
The distillery's workforce and the surrounding Lethbridge economy have real skin in this game. The distillery has around 60 employees. That number may not sound large by industrial standards, but in a mid-sized Alberta city, a facility producing 10 million litres of whisky annually — with the supply chain, trucking, and grain farming that feeds it — has an economic footprint that extends far beyond the headcount on the payroll.
The Pivot to Canada: Better Late Than Never?
With 95 percent of production historically flowing south, Black Velvet has effectively been absent from its home country's retail market. That is now changing out of necessity rather than strategy. By late October or early November, Bilodeau hopes a small bottling line will be added to the Lethbridge distillery, to serve the Canadian market out of the facility. "The majority of our market right now is the United States, but we are anxious to get active again in Canada," said Bilodeau.
It is a notable pivot, but the math is hard. The United States is the deepest spirits market in the world, and Canada — population 40 million versus 335 million — cannot absorb anything close to the volume that American consumers have provided. Even a successful Canadian relaunch would represent a fraction of the revenue now at risk. The bottling line addition is more of a strategic hedge than a solution: proof that Lethbridge can function without being entirely dependent on American infrastructure, and a signal to the Canadian market that the brand is still alive and operating domestically.
Industry-Wide Wreckage on Both Sides of the Border
American Bourbon Taking the Hit Up North
The damage from this trade war runs in both directions, and American producers are not escaping unscathed. The retaliatory removals of U.S. spirits from Canadian provincial shelves have gutted once-reliable export revenues. The parent company of American alcohol producers — such as Jack Daniel's whisky and Woodford Reserve bourbon — says sales to Canada dropped 62 per cent during the latest fiscal quarter compared to a year ago, as American alcohol remains off the shelves in many provinces.
A year after Canadian provinces yanked American whiskey from store shelves, U.S. spirits exports have collapsed by nearly 70 per cent, gutting what had been one of the industry's most important overseas markets. In 2025, Canada slid from the second-largest destination for American spirits to sixth, as exports declined two-thirds to $89 million. Before the dispute, the market had generated roughly $250 million annually for American distillers.
Despite the lifting of some tariffs, most Canadian provinces continue to shut American alcohol out of retail stores. That lingering shelf exclusion is not a technical tariff measure — it is a consumer sentiment and government policy decision that has proven stubbornly resistant to trade negotiation. The anger in Canada runs deep, and provincial governments have had little political incentive to roll back restrictions that play well with a public that has grown increasingly hostile to American economic pressure.
Spirits Canada Sounds the Alarm
About half of the $2 billion in spirits produced in Canada every year is sold to the U.S., says Cal Bricker, president and CEO of Spirits Canada. That figure puts the Black Velvet situation in its proper industry context. This is not an isolated story about one distillery in southern Alberta — it is a representative case for an entire national industry whose business model was built on the assumption of open, tariff-free trade across the world's longest undefended border.
"The North American spirits sector is deeply integrated," said Cal Bricker, president and CEO of Spirits Canada. The organization has warned that distillers could face canceled orders and growing inventory if the tariff takes effect. Canceled orders and swelling barrel warehouses are not just accounting problems — they are cash flow crises for distilleries that have already spent money on grain, labor, utilities, and aging inventory. Whisky is not a product you can simply stop making and restart at will. The supply chain runs on years-long cycles.
Crown Royal: A Cautionary Tale Next Door
Black Velvet is not the only Canadian whisky brand navigating existential uncertainty. The industry's broader distress is illustrated by what has happened to Diageo's Crown Royal operation. The makers of Crown Royal whisky have entered into an agreement to sell their former bottling facility in Amherstburg, Ontario. That plant closure, announced earlier this year, was one of the more visible signs that the trade war is forcing multinational spirits companies to reconfigure Canadian infrastructure they once considered permanent. "We sell more Crown Royal in Texas than we do in all of Canada" — a line that speaks volumes about how thoroughly American consumers drive Canadian whisky economics, and how catastrophically exposed these brands are when that relationship is disrupted.
What This Means for American Whiskey Drinkers
The Shelf Is Already Changing
For U.S. consumers, a lot of Canadian alcohol brands could simply vanish from store shelves in short order after new import restrictions take effect on September 29, 2026. Major brands could simply disappear, ranging from iconic Canadian whiskeys such as Crown Royal, Canadian Club, or Lot No. 40, to Canadian beer brands like Molson, Labatt, or Moosehead. Black Velvet's unique supply chain structure — where the bulk liquid crosses the border before bottling in Bardstown — may offer some protection against the most severe shelf-clearing scenarios. But a 50 percent tariff on the inbound bulk product will still either compress margins dramatically or push retail prices higher. Both outcomes hurt the brand's core value proposition: affordable, accessible Canadian whisky for everyday drinkers.
The Affordable Blended Whisky Market at Risk
Black Velvet's strength has always been value. The average U.S. retail price sits around $9 per 750ml. That is the kind of price point that anchors the bottom shelf at every liquor store in America and fills the well at thousands of bars and restaurants. It is the whisky that does not demand a conversation — it just works. If tariffs force that price meaningfully higher, consumers will drift toward domestic alternatives: Kentucky straight bourbons, Tennessee whiskey, or American blends that carry no import burden whatsoever. The irony is that a trade policy designed to protect American manufacturing could inadvertently hand domestic distillers a competitive windfall while gutting the Canadian brands that have operated as partners in a shared continental spirits economy for decades.
A Question of Identity for Heaven Hill
For Heaven Hill specifically, the stakes around Black Velvet are significant. The Kentucky company paid $266 million for an asset that derives virtually all of its value from cross-border trade. If that trade is strangled by tariffs, the strategic logic of the acquisition unravels fast. Heaven Hill built Black Velvet into a key pillar of its imported whisky business precisely because Canadian whisky enjoyed tariff-free access to American consumers. That era may be ending. The company now faces a choice between absorbing margin pain to maintain price competitiveness, passing costs on to consumers and risking volume losses, or restructuring the supply chain in ways that could fundamentally alter the product and the brand.
Historical Parallels: Whisky and Trade Wars Have Met Before
The spirits industry has a long memory for trade disputes. American bourbon faced European Union retaliatory tariffs as recently as 2021, following the Steel and Aluminum tariff fights of 2018, and the experience nearly crippled some small Kentucky distillers who had painstakingly built export markets. The difference now is scale and proximity. The Canada-U.S. relationship is not a distant export market — it is a deeply integrated production and distribution ecosystem where distilleries on both sides of the border have spent decades calibrating their operations to seamless cross-border commerce. Unwinding that integration, even partially, creates disruptions that take years to repair even after the tariffs themselves are lifted.
There is also a lesson in the Scotch whisky industry's experience navigating repeated American tariff threats over decades. Scottish distillers learned to aggressively diversify export markets — Asia, Latin America, Africa — precisely because over-dependence on any single national market created catastrophic vulnerability. Canadian whisky, by Spirits Canada's own admission, never made that pivot. The American market is difficult for Canadian distillers to replace. Importers can change the brands they emphasize, but they cannot move production to avoid the tariff while preserving the category's identity. Canadian whisky, like bourbon, is a geographically defined product. You cannot make it in Mexico to dodge a tariff and still call it Canadian.
What Happens Next
The timeline tightening around this situation is not comfortable. New U.S. import restrictions on Canadian goods are slated to take effect September 29, 2026 — weeks away. Bilodeau's plan to add a Canadian bottling line by late October or November is a constructive step, but it will take time to build meaningful Canadian domestic sales from a brand that has spent decades almost entirely oriented toward the American market. Meanwhile, 10 million litres of whisky continue aging in Lethbridge warehouses, and the economic logic that justified every one of those barrels has shifted dramatically.
Spirits Canada has warned that distillers could face canceled orders and growing inventory if the tariff takes effect. For a distillery operating at the scale Black Velvet does, growing inventory without a functioning export market is not just a business problem — it is an existential one. Whisky does not stop aging because the trade environment turned hostile. The barrels keep maturing, the costs keep accumulating, and the revenue has to come from somewhere.
What Bilodeau and Heaven Hill are navigating right now is not merely a policy problem to be solved at the federal level. It is a fundamental stress test of a business model that assumed the future would look like the past — that the 49th parallel would remain a formality rather than a trade barrier. Whether this chapter ends with a negotiated resolution that reopens the border to Canadian spirits, a prolonged standoff that forces structural changes throughout the industry, or something more damaging still, the Black Velvet distillery in Lethbridge stands as one of the clearest illustrations of how deeply the North American spirits economy is intertwined — and how much is at stake when politicians decide to use trade as a weapon.
Seventy-five years of Black Velvet is worth celebrating. What the next 75 look like depends, in no small part, on decisions being made in Washington and Ottawa — not in the grain fields of southern Alberta.
