The post-pandemic party seems to be over for major alcohol companies, with some of the world’s biggest spirits and beer brands reporting a decline in sales.
The surge in alcohol consumption that occurred when people stayed home during the Covid-19 pandemic has waned, bringing challenges to the industry.
Sales for top alcohol producers, including Remy Cointreau, Absolut vodka maker Pernod Ricard, Jose Cuervo tequila manufacturer Proximo Spirits, and beer giant Anheuser-Busch, have dropped significantly. Consumers have pushed back against rising prices, leading to lower sales volumes across the board.
Data from IWSR, a drinks analysis firm, shows a 3 percent drop in overall alcohol volumes for the first seven months of 2024, a decline greater than initially expected. Key categories such as tequila, American whiskey, beer, and wine all took hits. The only segment to see a small uptick was canned cocktails, which grew by 2percent.
“The spirits industry is experiencing a slowdown as it recalibrates after the sales spike during the pandemic. Inflation and high interest rates are curbing growth,” said Lisa Hawkins, chief of communications for the Distilled Spirits Council of the United States.
Stock Woes and De-Stocking Challenges
With demand falling, spirits companies are now dealing with surplus inventory, especially in the U.S. market. Remy Cointreau, for example, has seen its stock price drop by 50% this year. The company has slashed its financial outlook, predicting another year of significant sales declines.
“This performance reflects continued de-stocking in the United States, driven by weaker demand and below our expectations,” said Remy Cointreau’s Chief Financial Officer, Luca Marotta, during a recent earnings call. The company reported a dramatic 22.8% sales decline in the U.S., with its cognac brands suffering the most.
Pernod Ricard echoed similar struggles, reporting a 10% drop in U.S. sales in the most recent quarter. Hélène de Tissot, Pernod Ricard’s financial officer, attributed the slump to retailers’ tight stock management and intense competition in promotions.
Industry experts describe the current slowdown as a “normalization,” with alcohol sales gradually returning to pre-Covid levels. Inflation and shrinking consumer spending have also affected alcohol companies’ earnings.
Marten Lodewijks, president of IWSR’s U.S. division, explained, “Consumers have reduced spending on spirits due to higher costs per bottle, opting instead for beer and ready-to-drink canned cocktails that are less expensive.” The industry is still coming down from the post-pandemic growth surge, he added.
Rise of Budget-Friendly Options
Amid economic uncertainty, consumers are turning to cheaper alternatives, boosting sales of private-label alcohol brands. One standout has been Aldi, a discount retailer that offers a variety of spirits, ready-to-drink beverages, wines, and seasonal beers. Aldi’s private-label alcohol lineup has seen double-digit growth, defying industry-wide declines.
“For us, it’s been a completely different story,” said Arlin Zajmi, Aldi’s director of national buying for adult beverages. “Private labels have become increasingly popular over the last decade, with customers recognizing the value in quality and affordability.”
Aldi’s rapid U.S. expansion has also fueled a 100% increase in beer sales, with more than a quarter of American households now shopping at the chain, double the number from six years ago. The retailer’s malt-based seltzers, priced lower than competitors like White Claw, have also contributed to its success.
“Aldi’s expansion came just as shoppers became more price-sensitive, making their $8 or $9 six-packs appealing compared to craft beers priced at $12 or more in traditional grocery stores,” said Bryan Roth, editor of the alcohol beverage newsletter Sightlines+.
