"It's a good time in the whiskey industry, and our future prospects look really good," said Jeff Arnett, master distiller at the distillery.
"We don't want to find ourselves without any additional throttle, if we need it. This will basically secure that we've got the ability to give Jack Daniel's to all of those who want Jack Daniel's for years to come."
The new production facility will have access to the same source of cave spring water as the existing distillery.
"It's going to ensure that every drop of Jack Daniel's is made here in Lynchburg from the same water source," Arnett said.
Jack Daniel's sales have soared in the past decade, as the venerable brand has spread to more countries.
The brand has seen 21 consecutive years of volume growth, and its global net sales rose by 9 per cent in the past year. Since 2004, global case sales have risen from about 7.7 million to nearly 11 million last year.
The brand is sold in more than 160 countries. The US still ranks as its largest market and the brand's domestic sales grew in 2012.
But overseas markets now represent slightly more than half of overall sales. Its largest international markets include the UK, Germany and Australia, where the brand's premixed cocktails are popular. Emerging markets such as Russia, China, Turkey and Brazil have become key contributors to global sales.
In neighbouring Kentucky, the bourbon industry is in the midst of its largest expansion since prohibition to meet growing demand.
In the past two years, Kentucky's bourbon makers have invested nearly US$300 million in new and expanded production facilities, warehouses, visitors' centres, bottling lines and more. Kentucky produces 95 per cent of the world's bourbon.
Jack Daniel's is the flagship brand for Brown-Forman, whose other brands include Southern Comfort, Finlandia, Korbel and el Jimador. The Jack Daniel's brand line-up includes the mainstay Jack Daniel's Old No 7 Tennessee Whiskey, Gentleman Jack, Jack Daniel's Single Barrel and Jack Daniel's Tennessee Honey.
The expansion will give more room to roll out new products, part of a key industrywide trend as spirits makers introduce new flavour combinations.
The 147-year-old distillery and its employees, along with Lynchburg, have been the focus of Jack Daniel's folksy advertising for years. Black-and-white labelled bottles of the charcoal mellowed sippin' whiskey list Lynchburg's population as 361, but the town and county really have about 6400.
Tennessee Governor Bill Haslam called Jack Daniel's a "global ambassador" for the state.
"Jack Daniel's is one of our most historic exports, and it helps us in our efforts to bring new Tennessee products to the world marketplace," he said.
The expansion will add about 90 fulltime jobs in the next five years, the company said. The distillery currently employs about 435 workers.
Telegraph Group Ltd
