The Financial Times has reported that a sharp demand for premium spirits has left the world's alcohol producers with record stockpiles of Whisky, Cognac and Tequila. With the surge in home drinking due to the Covid pandemic, producers increased their output, which is now biting them in the bum with consumers cutting back due to a squeeze on their spending.
Scotch whisky is facing a sharp downturn in production as it adapts to tough market conditions around the world. Tariffs for export to the USA, introduced under the Trump administration and adding 10% to importers' costs, have hit sales in the industry's biggest export market. There is also weakening demand in other markets. Shipments to China have fallen, moving it from the fifth biggest market to the tenth biggest, with the first half of 2025 showing a 1% increase in the value of exports, to £2.5bn, while volumes were down nearly 4%.
Cognac sales have been especially hard hit. Exports have collapsed over the last few years. The rapid expansion of sales in Tequila has stopped, especially surging U.S. demand, leaving Mexico with vast inventories with no choice but to lower prices in many cases.
Diageo, Pernod Ricard, Campari, Brown-Forman and Rémy Cointreau are collectively holding about $22 billion of maturing spirits, the highest inventory levels in more than a decade. With the concern that a prolonged downturn will impact profits and growth plans. Analysts warn that cutting production carries its own risks, as spirits often take years to mature. Reducing output now could leave companies short of supply if demand unexpectedly rebounds later in the decade.
