Liquor industry struggles grow with another Chapter 7 filing

Liquor industry struggles grow with another Chapter 7 filing

Daniel Kline

Mon, August 24, 2026 at 12:33 AM GMT+3 4 min read

While the actual decline is relatively small, even a slight drop in overall liquor sales can have a devastating impact on the industry.

"Active U.S. craft distillers dropped from 3,069 in August 2024 to 2,282 in August 2025. Seven hundred and eighty-seven fewer operations in a single year," according to The American Craft Spirits Association.

The number of active craft distillers has fallen sharply, and overall spirits sales have also declined. DISCUS CEO Chris Swonger, however, wants to put a positive spin on the decline.

"While total U.S. spirits sales edged down 2.2% in 2025, the spirits industry remains resilient, driven by innovative products that continue to spark consumer interest," he said in a press release.

"Against a challenging backdrop of weakening consumer confidence and persistent economic pressures, American adults continue to choose distilled spirits, with ready-to-drink cocktails standing out as a clear favorite."

That's one way to look at it, but the industry has been losing players, and now another distillery has filed for Chapter 7 bankruptcy.

Blue Spirits Distilling filed Chapter 7 bankruptcy

While many distilleries have filed Chapter 11 bankruptcy in an effort to restructure operations, Blue Spirits Distilling moved right to a Chapter 7 Bankruptcy. That means its assets will be liquidated, but exactly how that will happen remains a question.

The formal filing was made on June 11, according to court documents on Pacer Monitor, but the process remains unresolved.

"The Chelan-Douglas Regional Port Authority is waiting for the bankruptcy process to determine what happens next at the former Blue Spirits Distilling operation in the Cashmere Mill District, where the doors are locked, and company property remains inside the Port-owned facility," NCW News reported.

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Although the company was based in Washington state and operated a now-closed tasting room there, its products were sold regionally. The distilleries' financial woes go back a few years.

"In 2022, commissioners approved a temporary rent deferral for Blue Spirits at the Mill District after the company reported financial challenges. At the time, Blue Spirits had made substantial investments in improvements to the Port-owned property as one of the original anchor tenants," according to NCW News.

Blue Spirits Distilling Chapter 7 at a glance

• Blue Spirits Distilling LLC filed for Chapter 7 bankruptcy on June 11, 2026, in the U.S. Bankruptcy Court for the Eastern District of Washington.

• The case is No. 26-01182 and is assigned to Judge Frederick P. Corbit.

• The filing is a liquidation case, not a restructuring. Because Blue Spirits filed under Chapter 7, a trustee was appointed to administer the company's assets. Matthew J. Anderton is the Chapter 7 trustee.

• Blue Spirits reported between $10 million and $50 million in assets and $1 million to $10 million in liabilities. The petition listed between one and 49 creditors.

• The company operated under several names, including Coral Cay Distilling, Blue Spirits Brewery, Blue Spirits Winery, Grains and Spirits LLC, and Chelan Spirits.

• Blue Spirits had been operating locations in the Washington communities of Leavenworth and Cashmere before the bankruptcy. A local newspaper reported that the company operated both locations until June, when the business shut down.

  • Sources: Bankruptcy Observer, Inforuptcy

Blue Spirits Distillery held the Tommy Bahama license

Blue Spirits wasn't just a small Washington craft distiller. It held exclusive distribution rights for Tommy Bahama Spirits and was trying to build a nationwide distribution operation for the brand before its business relationship with Luctor and Sazerac collapsed.

A federal court document says Blue Spirits sought a nationwide distributor in 2020 and ultimately partnered with Luctor International, which had access to Sazerac's distribution network.

That deal, which included Blue Spirits delivering over $500,000 in product to Luctor, fell apart in 2020, when Blue Spirits sued Luctor International.

"Plaintiff, Blue Spirits Distilling, brings this action against defendants Luctor International, L.L.C., d/b/a 375 Park Avenue Spirits ("Luctor"), Buffalo Trace Distillery, Inc., Sazerac Distillers, L.L.C., and Sazerac Company, Inc. seeking compensatory and punitive damages for alleged breaches of contract, various species of fraud, unjust enrichment, quantum meruit, conversion, and tortious interference with a prospective advantage," according to court documents.

The judge denied Blue Spirits' motion.

The Tommy Bahama dispute does not appear to have been resolved before Blue Spirits filed Chapter 7, based on public court records.

ALSO READ: Beloved rum, bourbon, vodka brand files Chapter 7 bankruptcy

This story was originally published by TheStreet on Aug 23, 2026, where it first appeared in the Retail section. Add TheStreet as a Preferred Source by clicking here.