There have been some conflicting reports over the past year or two, but overall spirits corporations have been facing some tough times as sales have subsided from the heights reached during the worst times of the pandemic. And according to recent reports from corporate earnings calls, that is starting to extend even to the priciest spirits, a sector that was thought possibly to be immune to shifting consumer preferences.
Of course it’s worth putting all of this into some perspective. A downward trend for a multi-billion dollar corporation like LVMH is not good for shareholders, but it’s not like the board members are going to be moving into smaller mansions anytime soon. And the sales spike during the worst period of the pandemic came when people couldn’t go out to bars and restaurants, had a bit more disposable income because of that, and were looking for ways to self sooth by splurging on some high-end bottles. Still, according to a recent CNN article, companies like Remy Cointreau, Pernod Ricard, Proximo Spirits, and Anheuser-Busch have all reported declines in sales, equaling a downward shift of 3 percent over the first seven months of 2024.
According to CNN, the only alcohol category that continued to do well this year, relatively speaking, was the RTD sector which increased by 2 percent. “As the spirits industry continues to recalibrate following the extraordinary sales boost during the pandemic, inflation and high interest rates are slowing the growth of the spirits sector,” Lisa Hawkins, chief of communications for the Distilled Spirits Council of the United States, told CNN. This comes at a particularly bad time given the election of Donald Trump to a second nonconsecutive term as president. As we reported recently, there is a real chance that Trump will follow through on his threats to reimpose tariffs on imports from the E.U. and China, which could lead to the return of retaliatory tariffs on American whiskey. This had a devastating impact on the industry the first time around, especially on smaller craft distilleries, something that will be even worse if the tariff jumps to 50 percent next year–which is a distinct possibility.
Still, at least one company is hedging its bets on consumers’ continued thirst for expensive, luxury bottles. Drinks company Diageo just announced that it was launching Diageo Luxury Group, “a new division dedicated to elevating the best in luxury spirits and experiences across its portfolio.” This new venture will focus on spirits priced at $100 and higher (much higher in many instances). According to the announcement, the “luxury international spirits” category is worth $12.7 billion and is the fastest growing sector since 2020, but this is based on a 2023 report from global drinks data and analytics provider IWSR.
I traveled to Kentucky recently and heard anecdotally from people in the bourbon industry that while the American whiskey market is indeed softening, leading to major distilleries like MGP scaling back whiskey production, the luxury market is still showing signs of growth. However, if these recent reports continue to hold true, that tide could be shifting and we could see people really moving away from expensive bottles. The reality is that collectors who are flush with cash are still likely to shell out big bucks for exorbitantly priced bottles of Macallan at auction. The good news is that there are exceptional bottles of booze being made right now at all price points.
