Global alcohol giants halt production due to falling demand

A sharp decline in demand for whiskey, cognac and tequila has led to the accumulation of record stocks of unsold alcohol among the world's largest producers, the Financial Times reports .

 

According to the publication, the unprecedented decline in the consumption of hard alcohol is forcing international companies to conserve production capacity and reduce prices in order to reduce the volume of products accumulated in warehouses.

 

The combined value of unsold inventory at the world's five largest alcohol concerns — Diageo, Pernod Ricard, Campari, Brown-Forman and Remy Cointreau — is around $22 billion, the highest figure in the last ten years.

 

The publication made such estimates based on the financial statements of the companies. In particular, the inventories of the French cognac producer Remy Cointreau have increased to 1.8 billion euros, which is almost twice the company's annual revenue and almost equal to its market capitalization.

 

The accumulation of large volumes of unsold products increases the debt burden of producers and creates risks of a price war in the strong alcohol market, the publication notes.

 

Bernstein analyst Trevor Stirling says the inventory build-up is unprecedented, and that companies that do disclose their data have already seen unsold alcohol levels surpass levels seen during the financial crisis.

 

At the same time, investors are debating whether the decline is temporary. Some experts attribute the decline in alcohol consumption to profound social changes, in particular, the popularization of weight loss drugs such as Wegovy and Ozempic, as well as the growing attention of consumers to a healthy lifestyle.

 

The decline in alcohol consumption and the reduction in ethanol consumption by the biofuel industry due to the increased use of electric vehicles will continue the trend of reducing the consumption of "energy" agricultural crops in the next 3-5 years.