| ALCOHOL INDUSTRY |
| The US alcohol industry is experiencing its biggest hangover in decades, with no cure in sight. After enjoying a boom during the pandemic’s stay-at-home cocktail craze, major spirits and beer companies are now feeling the pinch, with consumers opting for generic products and younger Americans embracing moderation. Brewed trouble: For the first time in nearly 30 years, the US adult beverage sector encountered a challenging “reset year” in 2023, with a 3% decline in total sales and consumption volumes. This sobering trend has intensified in 2024, with volumes falling another 2.8% in the first seven months, well beyond analysts’ expectations of a 1.9% drop. Amid the downturn, customers are turning to private-label offerings like Aldi’s and exploring premium agave spirits and non-alcoholic alternatives, putting pressure on major distillers and luxury brands. Major US alcohol firms such as Brown-Forman ($BF.B), Boston Beer Company ($SAM), and Constellation Brands ($STZ) have faced demand issues, with their stocks declining by 27%, 7.7%, and 2.8%, respectively, over the past year. On Dec. 2, Stoli Group USA filed for Chapter 11 bankruptcy protection, citing the “decline and softening of demand for alcohol and spirits products post-COVID” throughout 2023 and 2024. Shaken by Tariffs, Stirred by CostsIf the declining desire to drink wasn’t enough, matters could worsen due to proposed tariffs. A 25% tariff on imports from Canada and Mexico, plus other rumored duties, could weigh on America’s $10.5B alcohol import market. Importers may pass these costs to already price-sensitive shoppers for goods with legal origin restrictions, like tequila and scotch. Wells Fargo’s Chris Carey believes Constellation Brands, an importer of popular beers like Modelo and Corona, could see a 16% rise in costs, potentially requiring a 4.5% price hike to maintain margins. The Distilled Spirits Council warns that these tariffs could trigger a domino effect of retaliatory measures from trading partners, similar to the 20% drop in US whiskey exports to the EU between 2018 and 2021. Dry spell ahead: While the industry’s short-term outlook remains tough, experts at IWSR forecast a moderate recovery starting in 2025 — with India, China, and the US contributing an additional $30B in incremental value by 2028. However, some businesses aren’t waiting to see what happens — they’re already stockpiling inventory and diversifying supply chains. Others, like New Jersey’s Meximodo restaurant, have tripled their tequila orders to hedge against potential price hikes. With ongoing economic pressures and high inventory levels, IWSR’s Marten Lodewijks warned, “Normalization is not expected until 2025 or 2026.” The Average Joe |
America’s Spirits Industry Hits a Dry Spell
