The alcohol industry has a problem that another round of discounts won't easily fix. Americans are drinking less, leaving wine and spirits producers with more inventory than they can sell. Wineries are cutting production, major brands are taking write-downs, and retailers are picking up premium bottles at prices that would have been difficult to imagine a few years ago.
Americans are drinking less
Only 54% of US adults say they drink alcohol, according to Gallup's August survey, matching last year's record low and down from 62% in 2023. The decline is particularly pronounced among younger Americans, with drinking among adults aged 18 to 34 falling from 59% in 2023 to 50% in 2025.
Health concerns appear to be playing a role, with 51% of adults now considering even one or two drinks a day harmful. But the picture isn't entirely bleak. IWSR data shows Gen Z drinking participation rising across 15 markets, suggesting the bigger challenge for producers may be how often people drink and how much they're willing to spend.
Producers are cutting back
The impact is already showing up in corporate earnings. Treasury Wine Estates expects an additional A$558.4M post-tax charge in fiscal 2026 as it writes down US assets and brands. Much of the excess inventory involves bulk wine, which the company plans to sell or reclassify while reducing grape intake and vineyard production.
Pernod Ricard is facing similar pressure in spirits. Organic revenue fell 3.9% in the year ended June 30, with US sales down 14% amid weaker demand and inventory adjustments.
China proved even more difficult, with sales declining 19% as demand for Martell cognac weakened. Outside those two markets, however, organic sales edged up 0.5%, helped by growth in India and Japan.
Retailers are getting the bargains
For shoppers, the industry's oversupply is turning into an unexpected opportunity. California produces roughly 80% of US wine, and wineries struggling to clear inventory are increasingly selling premium bottles through retailers' private-label programs.
Costco, Kroger, Aldi, and Grocery Outlet are among the chains benefiting. Wines that would normally sell for $45, $85, or even $150 under their original labels are appearing on shelves for less than $30, with some priced below $10.
Premium Wine Is Selling Under Store Labels
| Wine | Winery-label price | Store-label price | Seller |
|---|---|---|---|
| Napa cabernet sauvignon | $45 to $85 | $9.99 | Grocery Outlet |
| Napa cabernet | $149 | $29.99 | Navigator Wine Collection |
| Kirkland Signature Stags Leap Cabernet Sauvignon | $22.99 | $19.99 | Costco |
At Grocery Outlet, a Napa cabernet sauvignon that would typically retail for $45 to $85 is being sold under a private label for $9.99. Another Napa cabernet normally priced at $149 has appeared for $29.99, while Costco lowered the price of its Kirkland Signature Stags Leap Cabernet Sauvignon to $19.99.
The amount of wine being offered to retailers has also changed dramatically. Grocery Outlet once received bulk offers of 1K to 3K cases, compared with 20K to 200K cases today. Industry estimates suggest it could take another 12 to 24 months to work through the surplus.
What it means for alcohol stocks
The pressure on producers isn't necessarily bad news for everyone selling alcohol. Retailers with strong private-label programs have more negotiating power when wineries need to move inventory, allowing them to offer higher-end bottles at lower prices.
For Treasury Wine Estates and Pernod Ricard, the challenge is more difficult. Weaker demand and excess inventory can weigh on pricing and margins, particularly if consumers continue cutting back.
Constellation Brands offers a more mixed picture. Fiscal second-quarter revenue rose 6% to $2.63B, while its wine and spirits business returned to operating profitability.
Its beer business still showed signs of strain, though. Depletions fell 0.6%, with Corona Extra declining about 5% even as Pacifico grew roughly 19%.
For investors, the distinction is increasingly between companies that need to clear unsold inventory and retailers that can afford to wait for better deals. Alcohol consumption may eventually stabilize, but producers could be dealing with the financial consequences of today's surplus long after the discounts disappear.
