Record Amount of Alcohol Accumulated in Warehouses of World's Largest Producers
The world's largest producers of strong alcohol have faced a sharp drop in demand, resulting in unsold liquor inventories worth about $22 billion accumulating in their warehouses. As the Financial Times writes, this is the highest level of stock in almost ten years.
Illustrative photo. Photo: Nasha Niva
Excess alcohol has accumulated at companies such as Diageo, Pernod Ricard, Campari, Brown Forman, and Rémy Cointreau. For example, French cognac producer Rémy Cointreau's inventory is estimated at approximately €1.8 billion — almost double the company's annual revenue and a sum close to its market capitalization.
Due to overflowing warehouses, companies are forced to cut production and even temporarily close factories. Japanese group Suntory, for example, has suspended operations at its main Jim Beam bourbon production plant in the US state of Kentucky for at least a year. Diageo has halted whiskey production at its facilities in Texas and Tennessee until summer.
To sell off inventories, producers are also lowering prices. For example, during the pandemic, a bottle of Hennessy cognac in the US cost up to $45, but now the price has dropped to approximately $35.
Analysts note that the problem arose after a sharp increase in production during the COVID-19 pandemic, when demand for alcohol grew significantly. However, in 2021-2022, it became clear that this growth would not be long-term, and demand began to fall.
Among the main reasons are inflation, reduced household incomes, and changes in social habits. More and more people are giving up strong alcohol in favor of a healthy lifestyle, including under the influence of the popularity of weight loss drugs like Ozempic.
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