Healthy lifestyle? Global demand for alcohol is shrinking, while producers don’t know what to do with stockpiled spirits

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, the Financial Times writes.

Five of the biggest listed alcohol producers — Diageo, Pernod Ricard, Campari, Brown Forman and Rémy Cointreau — are sitting on $22bn worth of aging spirits, the highest level of inventory in more than a decade, according to their financial reports.

The pile-up of stock is exacerbating drinks makers’ debt burdens and threatening to lead to a price war.

Volatility is challenging for manufacturers of aging spirits, which have to forecast demand years in advance.

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

Among the reasons cited for falling consumption are higher prices, economic pressures, trade barriers, and changing health trends.

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 a greater focus on health and wellbeing generally.

The publication notes, however, that cutting production at this stage is risky, because if demand recovers in the coming years, companies could face a shortage of stock.