Diageo, Pernod Ricard, Campari, Brown Forman and Rémy Cointreau are the most important alcohol players on the stock exchange. They have accumulated the largest stocks of alcohol in over a decade. According to the Financial Times, there is a “sea of unsold alcohol” worth at least $22 billion in warehouses. In the most extreme case, the inventories accumulated by the French cognac producer Rémy (worth 1.8 billion euros) are now almost twice as high as the company's annual revenues. The debt of corporations is growing and the question arises how it may end. “This threatens to break out in a price war,” Trevor Stirling, an analyst at the global brokerage firm Bernstein, told the FT.
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World giants on the cusp. They stop the production of alcohol
This unusual situation in the popular industry is primarily the result of the alcohol boom during the COVID-19 pandemic, which encouraged producers to increase production. The number of customers for more expensive alcohols, such as cognac, whiskey and tequila, was growing, which was a substitute for luxury for many people stuck at home. But stocks of alcohol increased, their prices dropped, and the demand for alcohol gradually disappeared as the overall financial situation of potential buyers deteriorated.
Manufacturers responded to the “unprecedented” market situation with drastic decisions. Some have stopped production altogether in an attempt to sell existing vintages. As “FT” writes, the Japanese beverage group Suntory has closed its main Jim Beam whiskey distillery, based in Kentucky, for at least a year. Diageo has suspended whiskey production at its facilities in Texas and Tennessee until next summer.
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However, according to experts, this poses another threat to alcohol suppliers. Jefferies analyst Edward Mundy told the FT that limiting the production of maturing spirits is a risky game because demand for one type may suddenly recover only to find that there are no stocks and no production capacity.
