People are drinking less. How alcohol producers are dealing with this

The five largest publicly traded producers - Diageo, Pernod Ricard, Campari, Brown-Forman and Rémy Cointreau - have combined stocks of aged spirits at $22 billion, the highest level in 10 years, the Financial Times wrote .

For France's Rémy, mature cognac stocks total $2.1 billion, almost double its annual revenue and approaching the company's entire market capitalization. Diageo's matured stocks as a share of annual revenues rose from 34% in fiscal 2022 to 43% in 2025.

NielsenIQ writes in its latest report on the U.S. spirits market that categories that depend on aging (such as whiskey) - increased risks of overstocking.

According to the forecast of the analytical agency International Wine and Spirits Record (IWSR), the global alcohol market will see zero growth in 2026. In November, it worsened the forecast for 2025 and now assumes that at the end of last year the global alcohol market in monetary terms will decline by 0.7% (the previous forecast assumed a decline of 0.5%). The strongest - by 1.3% and 2.4% - will fall in sales of spirits and wine, respectively.

Alcohol producers are also facing high levels of leverage and management turnover and are struggling to adapt to a state of market uncertainty, Bloomberg writes.

One reason the market has been in such a state is that people are drinking less, Sarah Simon, an analyst at Morgan Stanley, told Bloomberg. She calls it a "structural change."

This trend has not been observed for the first year. Between 2013 and 2023, alcohol consumption fell in most OECD countries, The Economist wrote in January 2026. The French are drinking about half as much as they did in the 1970s, while Americans and Canadians have also started drinking less. In the UK, per capita wine consumption has fallen 14% since 2000. In China, which was a major source of growth in the market 10 years ago, wine consumption has fallen sharply.

According to Nielsen, U.S. retail alcohol sales in 2025 will decline 3.4% to $110 billion due to widespread declines in physical sales across all major categories. Based on Gallup research from last August, the percentage of U.S. adults who report drinking alcohol has fallen to 54%, the lowest in 90 years of data.

In addition to the general decline in global consumer demand and the rising cost of living, there are more specific reasons for the decline in alcohol consumption. Bloomberg, for example, writes that in the U.S., alcohol is being replaced by more affordable drugs as legislation on cannabis and other substances softens. About 51% of respondents in a September 2025 Bloomberg Intelligence survey said they now replace alcohol with cannabis at least once a week.

Another reason is the widespread availability of GLP-1-based drugs such as Vegovy and Ozempic, which reduce cravings for alcohol. This has also affected demand for alcohol, Bloomberg and the FT point out.

Another unexpected reason for the decline may be the loneliness epidemic. The tradition of shared meals with drinking alcohol is a thing of the past, and people are increasingly living and eating alone. In 2023, nearly a quarter of American adults ate alone during the day, up from 17% in 2003. Among people under 30, that share nearly doubled. The same trend is likely to continue in many countries around the world, Jan Emmanuel De Neve, one of the editors of the World Happiness Report, tells The Economist.

But if you look at drinking trends across generations, they are different.

"For 30 years, baby boomers have been the primary driver of the alcoholic beverage category in the United States. Long-term trends show that those over 65 end up drinking less often and less at a time than younger people," John Moramarco, managing partner at research firm bw166, tells Bloomberg.

Proven harm from alcohol consumption has largely undermined demand among Generation X as well, Bloomberg writes.

At first glance, it would seem that among Millennials and Zoomers, with their enthusiasm for healthy living and wellness practices, alcohol should have become unfashionable too. But the data doesn't support that, Richard Halstead, operations director for consumer market research at IWSR, told The Guardian. The IWSR and Bevtrac survey of 15 global markets found that the proportion of Generation Z adults who reported drinking alcohol in the past six months rose from 66% in March 2023 to 73% in March 2025. Over the same period, this proportion increased from 46% to 70% in the US, from 66% to 76% in the UK, and from 61% to 83% in Australia.

One of the reasons is the maturation of this group. Its members are gradually getting a job, their earnings are growing, and they can afford a cocktail in a bar or a bottle of wine.

Members of Generation Z are more likely to drink in bars and restaurants, Halstead says.

Further market growth will depend on the renewed purchasing power of Generation X and millennials, as well as manufacturers adapting to the consumer behavior of zoomers.

After the COVID-19 pandemic and lockdowns, there was a spike in alcohol consumption. According to IWSR, the global alcohol market grew 12% to $1.17 trillion in 2021, offsetting the 4% decline in 2020 caused by COVID-19. And companies responded to this growth by increasing production. But once the new capacity came online, demand fell.

Barrels of aged spirits were accumulating. The price of hard liquor began to fall. For example, during the pandemic, a bottle of Hennessy from LVMH cost up to $45 in the United States; since then, its price has dropped to $35.

The FT quoted analysts as saying that so far producers have resisted the massive discounts they have resorted to during previous periods of overproduction - for example, during the oversupply of whisky on the market in the 1980s. As a result, the impressive investment in production and storage has weighed heavily on companies' balance sheets. Diageo, for example, has a debt-to-EBITDA ratio of 3.4 times, well above its target of less than 3. Pernod Ricard has a ratio of 3.3, noticeably above its historical target of 2.5-2.9.

What directions are alcohol producers forced to explore?

Analysts say the Ready to Drink segment, ready-to-drink beverages, is growing. NielsenIQ calls this category "the most reliable driver of growth," and in the U.S. it now accounts for more than 12% of the total market in monetary terms.

In the UK, supermarket chain Waitrose & Partners reported that sales of rosé wine in cans rose 41% last year compared to 2024. Sales of sparkling wine in cans grew by 65%, Bloomberg points out.

Retailers are devoting shelves to the Ready to Drink category, reducing the assortment of traditional alcohol. For example, at Target, the area for cocktails in cans has grown by 20%, Morgan Stanley analysts wrote in a note on January 25. They don't rule out that this segment will start gradually replacing classic alcohol.

Soft drinks are another dynamic category, with NielsenIQ predicting that soft drinks will become part of more alcoholic beverage companies' portfolios. It's already happening.

Last year Diageo acquired Chicago-based Ritual Zero Proof Non-Alcoholic Spirits, and Moët Hennessy, a division of LVMH, bought a stake in French Bloom, a maker of non-alcoholic sparkling wine, in 2024.

In February 2025, Carlsberg introduced non-alcoholic cider, and at festivals in Europe it sells six-packs of beer, half alcoholic and half non-alcoholic. Campari launched sales of its non-alcoholic Spritz Crodino in the US in May 2025.

On the European market you can find a non-alcoholic martini, Spritz, a Negroni kit, also called Nogroni, or a Three Spirit Livener blend - with lemongrass berries, pomegranate and cayenne pepper. Most often such blends are used to create non-alcoholic cocktails.

In addition to the usual non-alcoholic wines and beer, low-alcohol gin and tequila are appearing. For example, the Quarter Proof brand produces tequila-flavored drinks with an alcohol content of 15%. However, non-alcoholic and low-alcohol drinks are not cheaper than their prototypes, and sometimes even more expensive. For example, Lyre's Pink London Spirit, "imitating" gin, will cost €23, and the classic Beefeater costs about €20.

Over the past 12 months, Diageo shares are down nearly 13% in New York and 22% in London, Pernod Ricard is down nearly 24%, Campari is down 18.2%, Rémy Cointreau is down 14.8% and Brown-Forman is down 5.8%.

In the U.S., "the prospects for a return to historical trends in the beer, wine and spirits segments are not great," wrote JPMorgan analyst Drew Levin. According to the bank's analyst team, most investors are more inclined to believe that changes in the alcohol market are "more likely to be structural."

Investment banks are responding to changes in the industry by revising estimates and forecasts for the major players.

For example, BNP Paribas downgraded Brown-Forman from neutral to "below market" on January 16, and cut its target price by 12% to $24.

Morgan Stanley on Jan. 12 left an "below market" rating for Rémy Cointreau's securities and maintained its €37 target price, but worsened its financial outlook for the company for fiscal 2026.

January 25, the bank lowered the target for Diageo securities from 15.3 to 14.95 pounds, leaving the rating "below market" unchanged. The bank's forecast for sales in fiscal 2026 is more pessimistic than Diageo's own expectations: minus 2.7% against a result of about zero or "slightly negative". The company's U.S. profits in the first half of the year will decline by a double-digit percentage, Morgan Stanley forecasts.

BNP Paribas downgraded Pernod Ricard from neutral to "below market" in January and cut its target price by 10% for the common stock and ADR to €67 and $15.7, respectively.

Morgan Stanley's Sarah Simon believes that although the situation is unlikely to return to business as usual, it will result in low- and non-alcoholic alternatives taking a larger share of the market. Goldman Sachs believes that 2026 could be a particularly good year for beer producers, thanks to the World Cup and the 250th anniversary of the United States, among other things.

This article was AI-translated and verified by a human editor