Alcohol companies are swamped with aged spirits including cognac, bourbon, and Scotch whisky. Distillers’ warehouses are crammed with barrels of aging spirits laid down in better times that fewer people want to drink these days. The problem doesn’t only affect bourbon in the U.S.; there is a global glut of cognac, Irish whiskey, and Scotch whisky too.

Investors tempted by alcohol companies’ low stock-market valuations should look at their saturated balance sheets first. Maturing inventories show up as assets on distillers’ balance sheets until they are bottled and sold. Forecasts have been wildly off lately.

Major drinks companies invested heavily in stocks between 2021 and 2024 when the industry was booming. Then demand fell off a cliff. Sales at Rémy Cointreau, the owner of Louis XIII Cognac, have collapsed 40% since peaking in the company’s fiscal year that ended in March 2023.

Makers of spirits that don’t need aging like vodka also face lower demand, but they have been able to adjust production to the new reality. Some of the reasons for lower alcohol demand, such as tariffs, were out of the industry’s control. Canada pulled American-made drinks off the shelves as part of its trade war with the U.S. Similarly, President Trump’s tariffs on EU imports are hurting European distillers like Diageo and Rémy Cointreau that have high exposure to the U.S. market.

Demand for posh cognac also has collapsed in China where consumer sentiment is weak. But rapid changes in attitudes toward alcohol have also caught distillers off guard. Moderation is in fashion and the share of Americans who say they drink alcohol hit a record low of 54% in 2025, according to a Gallup poll.

The shift to sobriety is jarring considering alcohol consumption was so high during the pandemic. The tastes of the next generation of drinkers aren’t an ideal fit for distillers of aged spirits, either. Gen Z consumers are gravitating toward sweet, mixed beverages like ready-to-drink canned cocktails.

They drink earlier in the day and outside traditional settings like bars, favoring music festivals or picnics instead. They increasingly opt for low-alcohol drinks, or practice “zebra striping”: alternating between alcoholic and nonalcoholic drinks on nights out to limit overall intake. None of this plays to the strengths of fine cognac and whiskey, which is traditionally served neat.

However, distillers are experimenting with new formats like flavored spirits and RTDs that appeal to younger drinkers. Major alcohol companies have massive gluts on their balance sheets. Pernod Ricard, the maker of Jameson whiskey and Martell cognac, had maturing inventory worth €7.2 billion sitting in barrels in warehouses at the end of June, or $8.4 billion.

That is up 78% from levels at the end of 2019. Cognac giant Rémy Cointreau has €1.9 billion of inventory on its books, which is equivalent to three-quarters of the company’s entire market capitalization. The risk for investors is that the aged-spirits glut sparks a price war as alcohol companies try to unload the excess.

For now, the big names are scaling back production rather than cutting prices. Diageo is reducing the amount it distills by 50% over the next three years, while it works through an $8.5 billion backlog of aging inventory. Carrying that much stock is expensive, so the company is trimming its workforce and cutting costs elsewhere.

Rémy Cointreau is also reducing production. Pernod Ricard has said it will slow down production and focus on selling more affordable aged brands rather than its premium lines. Distillers are also releasing spirits earlier than usual and using creative marketing to move inventory faster.

But the glut won’t clear anytime soon, and the pressure on profit margins will only grow. For investors, the key question is whether these companies can adapt fast enough to avoid a painful reckoning.