The hangover has finally arrived for spirits and beer companies, as the surge in sales boosted by Americans who stayed at home during the Covid-19 pandemic has ended.
Earnings from some of the world’s biggest alcohol makers — including Remy Cointreau, Absolut vodka maker Pernod Ricard, Jose Cuervo tequila producer Proximo Spirits and beer conglomerate Anheuser-Busch — have all recently reported declines in volumes or sales amid a push back from customers over higher prices.
Overall volumes fell 3% for the first seven months of 2024, which was more than forecasted, according to a report from drink analysis firm IWSR. All major categories were affected including tequila, American whiskey, beer and wine. The only bright spot was the canned cocktails category, which grew slightly at 2%.
“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.
Spirits companies have dealt with an excess of inventory, particularly in the United States, because of lower demand. That has forced Remy Cointreau, whose stock has fallen 50% for the year, to slash its full-year guidance and expects another year of double-digit declines in sales.
“This performance reflects the continued de-stocking in the United States on the back of a persistent weak depletion and more importantly, below our expectations,” said Luca Marotta, Remy Cointreau’s chief financial officer, on a recent earnings call, adding that US sales had a “very strong decline” of 22.8% with its cognac brands being its worst performers.
Pernod Ricard, which also makes Jameson and Kahula, also echoed that sentiment. US sales slumped 10% in its most recent quarter because retailers “continue to tightly manage their stock level and promotional intensity remains strong,” said Hélène de Tissot, the company’s financial officer, on a recent call.
The declines are a “normalization” within the industry, with alcohol sales nearing their pre-Covid levels, according to Marten Lodewijks, IWSR’s president for the US division. Inflation and customers cutting back on discretionary spending also hurt bottlers’ bottom lines.
“Consumers reduced their spending on spirits due to the generally higher out-of-pocket cost of a bottle of spirits and began to pivot more towards beer and (ready-to-drink canned cocktails) that cost less on a per-serve basis,” he told CNN. “The industry is still coming down from the incredible growth seen immediately post-pandemic.”
Shifting to private labels
Inflation-weary customers have shifted their shopping habits to unexpected places. Cheaper private labels have had a boon in sales, mirroring a larger trend of customers seeking more affordable options in all aspects of their life.
One private label that saw a jump in sales is Aldi, which sells malt-based cocktails, ready-to-drink beverages, wine and a popular assortment of seasonal beers at about 2,000 of its US stores.
Aldi’s lineup is growing double digits in sales, bucking the broader industry trends of declines, Arlin Zajmi, director of national buying for adult beverages, told CNN.
“For us, it’s been a completely different story,” Zajmi said. “This is really how much private labels have come up in the last 10 years. Customers have really seen the value proposition, which is the quality and price.”
Aldi’s rapid expansion has also helped its beer portfolio soar 100% in sales, with more than a quarter of US households shopping at the discount chain — twice as many compared to six years ago. Some of that is bolstered by the popularity of its malt-based seltzers, which cost less than name-brand competitors like White Claw.
Its expansion has “been timed exactly as shoppers are more price sensitive, so an $8 or $9 six-pack at Aldi might seem almost revolutionary after drinkers have become used to seeing prices for craft at $12 and above in large chain grocery stores,” Bryan Roth, editor of the alcohol beverage newsletter Sightlines+, told CNN.
