Update
Beverage market buzz: Oversupply and excess production capacity create pressure for change
Shifting demand and rising production costs are leaving alcoholic beverage producers in the US with excess supply and underutilized production capacity. These stresses are creating pressure on brand owners and will ultimately force structural changes in the industry.
The American whiskey market is struggling. Recent high-profile defaults among American whiskey companies point to the challenge of declining demand, excess supply, and excess production capacity. This could create serious challenges for the industry, but we believe it is unlikely to spiral out of control.
US beer consumption has been declining for years, leaving brewers with excess capacity. Left unchecked, this could lead to a vicious cycle of rising fixed costs per unit, which would force increased consumer prices. This, in turn, would lead to further volume declines. Brewers are exploring creative ways to avoid this trap.
Declining wine consumption is fueling increased pressure for consolidation in the US market. The latest figures from SipSource indicate that wine consumption in the US is now in its fourth consecutive year of decline. The impact is being felt across the entire value chain and is creating pressure for consolidation.
China’s new quality regulations will drive consolidation in the Baijiu industry. New quality regulations for “sauce-aroma Baijiu” will increase production costs and reduce volumes. These new regulations will disproportionately impact smaller distillers, and are expected to accelerate consolidation in the industry.