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.
In the most extreme case, French cognac maker Rémy’s €1.8bn ($2.1bn) of maturing inventory is now almost double its annual revenues and close to its entire market capitalisation.
The pileup 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 global 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 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.
Volatility is challenging for manufacturers of ageing spirits, which have to forecast demand years in advance.
Cognac makers, for example, must decide how many litres of eau-de-vie, the grape-based spirit which is aged to make cognac, to pour into casks for two, four, 10 or 12 years in the future — the main cognac age profiles.
Sales of the French brandy have been hit particularly hard in the downturn, with exports down 72 per cent year on year in February 2025, according to the Bureau National Interprofessionnel du Cognac (BNIC), a trade body.
China imposed a 34.9 per cent duty on European cognac last year, amid trade tensions with the EU, but exempted Pernod Ricard, LVMH and Rémy Cointreau if they agreed to sell at a minimum price.
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.
The tequila boom of the past decade — fuelled by new brands fronted by the likes of George Clooney, Dwayne ‘The Rock’ Johnson and Kendall Jenner — led producers including Diageo and Brown Forman to spend millions of dollars adding new production capacity.
But as soon as the new facilities were up and running, demand slumped. The FT previously reported that in December 2024 Mexico was sitting on more than half a billion litres of tequila in inventory, almost as much as its annual production.
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 Nielsen.
Analysts said producers had so far resisted the kind of deep discounting that gripped the industry during previous spirits “lakes”, such as the so-called whisky loch of the 1980s. But the heavy investments made into production and storage are weighing heavy on company balance sheets.
Diageo’s leverage is currently 3.4 times its adjusted earnings before interest, tax, depreciation and amortisation, well ahead of its target of less than three times. Pernod’s leverage is 3.3 times earnings, significantly above its historical level of 2.5 to 2.9 times.
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.
Jefferies analyst Edward Mundy said cutting production of ageing spirits was a risky game, as it could leave producers short of stock in five or even ten year’s time, when demand for a particular brand or category might have reignited.
“If you cut inventory during a downturn, you have huge problems when you’re trying to satisfy demand in the future,” said Mundy, adding that the spirits boom and bust of the past five years was near impossible to predict.
“Ultimately there’s an element of human judgment,” he said. “[But] you just don’t know what demand will look like in five years’ time.”