Main points
- The global market for hard alcohol is experiencing a decline in demand, which has led to record inventories at leading producers such as Diageo and Remy Cointreau.
- Companies are cutting production and lowering prices to reduce excess inventory, with analysts warning of the risk of a price war.
Demand for alcohol has fallen / Photo Pixabay
A sharp drop in hard alcohol consumption has led to record inventories of unsold products at the world's largest producers. Companies are forced to reduce production and review pricing policies to unload warehouses.
Has the demand for hard alcohol fallen sharply?
The global spirits market is experiencing an unprecedented decline in demand for whiskey, cognac and tequila, the Financial Times reports. This has led to a sharp increase in inventories at leading international concerns.
According to the publication's estimates, the combined value of unsold alcohol at the five largest companies in the industry – Diageo, Pernod Ricard, Campari, Brown-Forman and Remy Cointreau – is around $22 billion, the highest figure in more than a decade.
Pay attention! Companies are already conserving some of their production capacity and cutting prices in an attempt to reduce excess production. In particular, the inventories of French cognac producer Remy Cointreau are estimated at 1.8 billion euros – almost double its annual revenue and almost equal to the company's market capitalization.
Analysts warn that the accumulation of such volumes of alcohol increases the debt burden and increases the risk of a price war in the market. According to Bernstein analyst Trevor Stirling, the current level of inventories has already exceeded the figures recorded during the global financial crisis.
Important! At the same time, investors do not have a common opinion on the duration of the recession. Some experts associate the decline in consumption with long-term social changes – the popularization of weight loss drugs and increased attention to a healthy lifestyle.
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