By Victor Owencho
The global alcohol industry is facing a $22 billion inventory backlog as five major alcohol producers including Diageo, Pernod Ricard, Campari, Brown Forman, and Rémy Cointreau are collectively sitting on $22 billion worth of unsold aging spirits, the highest inventory level in over a decade, according to recent financial reports.
The glut is a dramatic reversal from pandemic-era boom times, when producers significantly ramped up production to meet surging demand. Now, distilleries are being mothballed and prices slashed as companies struggle to move bottles accumulating in warehouses.
French cognac maker Rémy Cointreau faces the most severe situation, with €1.8 billion in maturing inventory, nearly double its annual revenues and close to its entire market capitalization. The company reported a 7.6 percent drop in organic cognac revenues at its November half-year update. “We’re in a different world,” said CEO Franck Marilly, acknowledging that elevated eau de vie supplies would necessitate price reductions.
Diageo, the FTSE 100 spirits giant, has seen its maturing inventories jump from 34 percent of annual revenues in fiscal 2022 to 43 percent in 2025. The company’s aging stock—predominantly American whiskey and Scotch—reached $8.6 billion as of June 2024. “The build-up of inventories is unprecedented,” said Bernstein analyst Trevor Stirling, noting that current stockpiles exceed those accumulated during the 2008 financial crisis.
The inventory crisis stems from a pandemic-era miscalculation. Between 2021 and 2022, producers dramatically increased production in response to booming at-home drinking trends during COVID-19 lockdowns. “Everyone lost the run of themselves and thought [demand] would go on like that forever,” Stirling explained. However, soaring inflation and squeezed disposable incomes subsequently crushed demand for premium spirits, triggering profit warnings, leadership changes, and investor flight from major industry players.
Cognac exports plummeted 72 percent year-on-year in February 2025, according to the Bureau National Interprofessionnel du Cognac (BNIC). The decline was exacerbated by China’s imposition of a 34.9 percent duty on European cognac amid EU trade tensions, though Pernod Ricard, LVMH, and Rémy Cointreau received exemptions contingent on maintaining minimum pricing. Premium cognac prices have fallen sharply, with LVMH’s Hennessy dropping from $45 per bottle in the US during the pandemic to as low as $35.
The tequila category experienced a similar trajectory. Celebrity-backed brands from George Clooney, Dwayne Johnson, and Kendall Jenner fueled a production expansion, prompting Diageo and Brown Forman to invest millions in new facilities. As new capacity came online, demand collapsed. Mexico was holding over 500 million liters of tequila inventory in December 2024—nearly equivalent to annual production, according to previous reporting.
American spirits sales continue declining. Total spirits sales fell 3.4 percent in the four weeks ending December 2024, worse than the 2.4 percent decline in the preceding four-week period, Nielsen data shows. Categories from Don Julio tequila to Jameson Irish whiskey all faced headwinds.
Excessive inventory is straining balance sheets. Diageo’s leverage stands at 3.4 times adjusted EBITDA, exceeding its target of under 3 times. Pernod Ricard’s leverage reached 3.3 times earnings, well above its historical range of 2.5 to 2.9 times.
Manufacturers have suspended operations to clear existing stock. Suntory closed its main Jim Beam bourbon distillery in Kentucky for at least one year, while Diageo halted whiskey production at Texas and Tennessee facilities until summer 2025.
Volatility poses unique challenges for aging spirits producers, who must forecast demand years in advance. Cognac makers, for instance, must decide today how much eau de vie to age for 2, 4, 10, or 12 years. “If you cut inventory during a downturn, you have huge problems when you’re trying to satisfy demand in the future,” said Jefferies analyst Edward Mundy, warning that production cuts risk future shortages if demand rebounds. However, Mundy acknowledged the near-impossibility of accurate long-term forecasting: “You just don’t know what demand will look like in five years’ time.”
Industry observers debate whether the downturn reflects temporary economic pressures or deeper societal shifts. Some analysts point to moderating alcohol consumption driven by weight-loss drugs like Wegovy and Ozempic, combined with increased health consciousness among younger consumers. While producers have largely avoided the deep discounting that characterized previous industry crises—such as the 1980s “whisky loch”—analysts warn that mounting financial pressure may force more aggressive price competition.
The spirits industry faces a critical test as producers balance short-term inventory pressures against long-term production needs in an increasingly uncertain market.
