FT: Drinks makers left with lake of unsold spirits as demand drops

Photo: FT

Alcohol producers halt production and cut prices to shift bottles piling up in warehouses. A historic downturn in demand for Scotch, whiskey, cognac and tequila has left drinks makers sitting on a lake of unsold spirits, forcing them to mothball distilleries and slash prices to shift bottles piling up in warehouses. Five of the biggest listed alcohol producers — Diageo, Pernod Ricard, Campari, Brown Forman and Rémy Cointreau — are sitting on $22bn worth of ageing spirits, the highest level of inventory in more than a decade, according to their financial reports, ‘Financial Times’ reports.

In the most extreme case, French cognac maker Rémy’s €1.8bn of maturing inventory is now almost double its annual revenues and close to its entire market capitalisation. The pile-up of stock is exacerbating drinks makers’ debt burdens and threatening to lead to a price war.“The build-up of inventories is unprecedented,” said Bernstein analyst Trevor Stirling, adding that among the companies to disclose the information, current stockpiles had surpassed those amassed in the wake of the financial crisis.

Diageo’s maturing inventories as a share of annual revenues have jumped from 34 per cent in its 2022 financial year to 43 per cent in 2025. The value of the FTSE 100 group’s ageing stock, predominantly American whiskey and Scotch, had reached $8.6bn as of June last year.

Casks of ageing spirits began to pile up after companies reacted to a Covid-19 pandemic-era boom in drinking by dramatically increasing production.

“In 2021 and 2022 everyone lost the run of themselves and thought [demand] would go on like that forever,” said Stirling.

Soaring inflation ultimately brought the industry back down to earth. A global squeeze on disposable incomes over the past few years has sapped demand for spirits, triggering a series of profit warnings, leadership changes and a shareholder exodus from the sector’s largest names.

Investors have been debating the extent to which the downturn is being driven by more profound societal changes. Some argue that moderating alcohol consumption is primarily linked to the rapid adoption of weight-loss drugs such as Wegovy and Ozempic, allied to a greater focus on health and wellbeing generally.

Sales of the French brandy have been hit particularly hard in the downturn, with exports falling 72 per cent year on year in February 2025, according to the Bureau National Interprofessionnel du Cognac (BNIC), a trade body.

At Rémy Cointreau’s half-year trading update in November, where it reported a 7.6 per cent drop in organic cognac revenues, chief executive Franck Marilly suggested that elevated supplies of eau de vie meant prices would have to fall.

“We’re in a different world,” Marilly said. During the pandemic LVMH’s Hennessy cognac was priced as high as $45 a bottle in the US but has since been reduced to as low as $35.

In the US, meanwhile, sales of spirits from Don Julio tequila to Jameson Irish whiskey are going from bad to worse. Total spirits sales fell by 3.4 per cent in the four weeks to the end of December, compared with a 2.4 per cent drop over the previous four weeks, according to data from NielsenIQ.

Manufacturers have halted production while they try to sell off existing vintages. Japanese drinks group Suntory has closed its main distillery for Jim Beam bourbon, based in Kentucky, for at least a year. Diageo, meanwhile, has halted whiskey production at its Texas and Tennessee facilities until the summer.

read more in our Telegram-channel https://t.me/The_International_Affairs