A new report by the Financial Times has revealed Diageo, Pernod Ricard, Campari, Brown Forman and Rémy Cointreau are sitting on $22 billion “lake of unsold spirits” as demand drops.
The spirits make up the highest level of inventory in more than a decade according to their financial reports. In the most extreme case, French cognac maker Rémy has more than $3 billion of maturing inventory, which is “now almost double its annual revenues and close to its entire market capitalisation”.
Drinks companies dramatically increased production during the pandemic-era drinking boom and casks of ageing spirits have been piling up now demand has subsided and cost-of-living pressures have risen.
“In 2021 and 2022 everyone lost the run of themselves and thought [demand] would go on like that forever,” said Bernstein analyst Trevor Stirling.
The rapid uptake in Ozempic-style drugs has exacerbated the issue, as they are reported to decrease desire to drink.
In response, drinks companies have halted production as they try to clear their reserves. The main distillery for Jim Beam bourbon, based in Kentucky, recently closed for at least a year, while Diageo has temporarily halted whiskey production at its its Balcones and George Dickel distilleries.
Even whisky tourism has taken a hit. Diageo has confirmed that it is proposing to close down the visitor centre at its Clynelish Distillery, in Brora. A multi-million-dollar revamp of the centre to improve its visitor experience was only completed four years ago.
A Diageo spokesperson told the Northern Times: “Diageo has made a significant investment of more than £185 million in our distillery visitor centres across Scotland, transforming and enhancing the Scotch whisky experience for visitors and supporting the communities in which we operate.
“Following a recent review, we have proposed changes to our visitor centre operations, which regretfully, includes a proposal to close the visitor centre at Clynelish.
“We are currently engaging with and supporting colleagues as part of this process. We can confirm that these proposals are unrelated to distillery operations, where production will continue.”