Global stockpiling of concentrated beverages: $22 billion worth of goods stuck at major manufacturers

The stockpiling is due to a demand correction following the pandemic. Many producers increased production in response to the surge in consumption during the Covid period, but inflation and rising living costs have significantly dampened demand. In addition, the drinking habits of younger consumers in several markets are changing, which could further dampen volumes.

Cognac is particularly vulnerable, and the situation is also exacerbated by trade policy factors: the tariff measures in the Chinese market have significantly worsened the prospects for European brandy and cognac producers, and Rémy Cointreau is particularly exposed amid the market downturn, as a significant part of its revenues come from cognacs.

The oversupply has already triggered reactions on the production side: several players are trying to reduce inventory levels by temporarily cutting production. An example of this is that Suntory has suspended production in Kentucky related to Jim Beam for at least a year.

According to market participants, the key question for the coming period is to what extent inventory reduction will force price promotions and portfolio cleaning, and how long it will take to restore balance in matured products, where capacity decisions already have an effect over several years.