If you make or sell spirits, there\u2019s no shortage of things to worry about right now. Proposed warning labels on alcohol. Tariffs. An oversupply of whiskey. Declining sales. Distillers, importers, distributors, and bar and restaurant owners are all contending with a complex set of circumstances, the sum of which is adding up to a challenging period of indefinite length.\u00a0<\/p>\n
\u201cIt\u2019s a minefield,\u201d says Ricky Ramirez, owner of The Mothership<\/a> in Milwaukee. \u201cYou\u2019re walking through a desert right now.\u201d Ramirez points to the dual tensions of his business\u2019s specific, local needs and the impact of governmental actions well beyond his control\u2014a dynamic that leaves him guessing as to the best path forward. \u201cWe\u2019re tiptoeing based on both ends,\u201d he says.<\/p>\n \u201cIt\u2019s not necessarily about control, but you want to be in the driver\u2019s seat.\u201d Across the spirits industry, uncertainty is making it hard to do business. \u201cIt\u2019s not necessarily about control, but you want to be in the driver\u2019s seat,\u201d says Monique Huston, vice president of wholesale spirits portfolio at Winebow. \u201cYou want to be able to make decisions\u2014to do things that, on the one end, are impactful and positive for your supplier partners and the industry, and then also for your sales consultants and end customers.\u201d Being in the middle of all that, with uncertainty at \u201cevery level,\u201d makes her feel helpless to change the direction of things, she says.<\/p>\n Coming off a couple of tough years\u2014sales of spirits in the U.S. declined 1.1 percent by value in 2024, according to the Distilled Spirits Council<\/a>\u2014the metrics for success have changed. \u201c[Before 2024] good used to mean X percentage growth and now it might mean flat,\u201d says Hannah Lowen, CEO of New Riff Distilling<\/a> in Newport, Kentucky.\u00a0<\/p>\n It\u2019s the same at the middle tier, too, according to Sam Filmus, president and managing director of spirits importer ImpEx Beverages. \u201cTrends in 2024 were unfavorable for the industry globally,\u201d he says. \u201cWe were up 0.4 percent overall, which, when you see people going down like 30 percent compared to previous years, we take as positive news.\u201d\u00a0<\/p>\n Huston is advising Winebow\u2019s suppliers to \u201ctemper expectations\u201d this year. \u201cWe can say to people that if you were up 2 percent last year, you did great, even if your goal was to be up 20 percent,\u201d she notes.<\/p>\n Although impacts from the numerous challenges vary according to the type and size of business, people at all levels of the industry are braced for a rough ride. Their responses are individualized and run the gamut from proactive to holding on tight. But many, despite the bleak outlook, believe there are still opportunities to seize.\u00a0<\/p>\n Among the concerns of the moment is the decline in spirits sales, which\u2014outside of a couple of exceptions, like ready-to-drink beverages (RTDs)\u2014have been on a downward trend over the last few years. Fingers are being pointed at many causes, from the rise in recreational cannabis and use of GLP-1 agonists like Ozempic, which suppress the desire to drink alcohol, to growing interest in sobriety and moderation. Although it\u2019s still early to determine the culprits, many on-premise operators believe a generational shift in consumption is underway.<\/p>\n \u201cThere is no doubt that people drink less now than they did,\u201d says Kevin Beary, beverage director of several Chicago bars, including Three Dots and a Dash<\/a> and the newly opened Gus\u2019 Sip & Dip<\/a>. \u201cGuests do not drink in the same fashion that they did even five or eight years ago.\u201d Whereas in years past a guest might come in and order three or more drinks, now, Beary says, \u201cthat rarely happens\u2014maybe two.\u201d\u00a0<\/p>\n Beary credits moderation for the downward trend. There\u2019s also reluctance, especially among younger consumers, to spend $20 or more on a cocktail that they might not end up enjoying. \u201cCocktails have gotten so expensive in so many places,\u201d he says, recalling how as a young drinker, trying a cocktail he might not like wasn\u2019t a big financial risk. \u201cIf you made that same purchase in today\u2019s market and it\u2019s a $25 cocktail, I think it could really be off-putting for you to continue drinking cocktails, when that barrier to entry has gotten so high.\u201d\u00a0<\/p>\n Beary opened Gus\u2019 Sip & Dip in part as a response to this behavior. The bar prices all its drinks at $12, which encourages trial and multi-drink orders. But it has required a major retooling of the usual bar model to keep costs down. Gus\u2019 limits the number of spirits to a single selection in almost every category, eschewing a backbar and buying in bulk to get discounts. The model requires volume to work. So far, it has\u2014and has been well-received.\u00a0<\/p>\n Huston also sees younger drinkers driving change in the way Winebow does business. \u201cThey\u2019re very picky about what they drink,\u201d she says, explaining that brand loyalty is largely absent. Instead, young consumers are looking at who owns or makes a spirit, what their values are, and how they communicate that. \u201cThis new kind of group of drinkers has very different values,\u201d she explains. \u201cThey\u2019re making decisions based on [those things]. These are conversations we didn\u2019t even have 10 years ago.\u201d<\/p>\n On top of that, Huston notes that many new bar directors and buyers are fairly young, 25 to 30\u2014due, at least in part, to a large number of hospitality veterans exiting the sector during the pandemic. Winebow is trying to help its spirits brands connect to the new generation. The company recently surveyed suppliers about holidays they want to participate in, like Black History Month or Pride, as well as promotions relating to issues like kosher status and sustainability. Those things, Huston says, matter to today\u2019s bar directors and buyers, and offer opportunities to brands.<\/p>\n Also high on the list of worries for the industry: tariffs that will raise the cost of goods. Since being ordered on February 1, tariffs of 25 percent on Mexican and Canadian imports and 10 percent on Chinese imports have been threatened, paused, and tweaked, with the final target still unclear and the market in upheaval. Similarly, retaliatory tariffs of up to 50 percent<\/a> from the European Union on American whiskey are set to take effect April 1, with Trump threatening a 200% tariff on EU wine and spirits<\/a> in return.<\/p>\n Bars like The Mothership have to consider how and whether to raise drink prices if, for example, the cost for agave spirits and imported citrus leaps 25 percent.<\/p>\n<\/blockquote>\n Bars like The Mothership have to consider how and whether to raise drink prices if, for example, the cost for agave spirits and imported citrus leaps 25 percent. Cocktails range from $9 to $14, and Ramirez notes that this is considered pricy in Milwaukee. \u201cWe\u2019re trying to be a community-oriented cocktail bar,\u201d he explains. \u201cIt\u2019s [going to be] difficult for us\u201d if rising cost of goods forces The Mothership to increase prices. And overall, he says, \u201cif things become difficult for everyday Americans, that\u2019s going to affect everyone,\u201d including The Mothership\u2019s customers.<\/p>\n Importers and distributors like ImpEx and Winebow already have experience in how tariffs impacted their businesses during the first Trump administration. Back then, Filmus and one of his key suppliers, Kilchoman Distillery<\/a> in Scotland, worked out an agreement to split the added cost together, without passing it on to the consumer.\u00a0<\/p>\n In early January, Filmus dropped prices on 29 of ImpEx\u2019s products, including several single malt scotches, ahead of potential tariffs. \u201cWe were motivated by what\u2019s right for consumers, looking at the historic trends,\u201d Filmus says, noting that ImpEx made the decision independent of its suppliers and is absorbing the lower margins. If tariffs come in and force the company to raise prices, he says, consumers won\u2019t feel it as sharply.<\/p>\n At Winebow, Huston brought in a number of agave spirits in January, before tariffs on Mexican goods were officially announced. \u201cIt made us feel like, okay, we can make a decision\u2014we can do something,\u201d she says. \u201cIf the tariffs really do happen, we\u2019ll probably even feel a little better about it. And if for some reason they didn\u2019t, we don\u2019t feel particularly hurt by it.\u201d Price rises will be inevitable. But \u201cif I can stretch it another month, give people a little better value\u2014we\u2019re excited to not just react to it.\u201d<\/p>\n On the opposite side, retaliatory tariffs could impact distillers. The big players, with robust international presence, are most exposed, but even smaller ones are likely to feel some pain. New Riff focuses on the domestic market (with limited exports) and recently expanded distribution to all 50 states. But Lowen says that global trends can still hurt the little guy. \u201cIt trickles down to us,\u201d she says. \u201cWe don\u2019t need a huge slice of the pie to be successful. But added inventory stateside can add pressure that chips away at the slice we need to succeed.\u201d<\/p>\n\n
\u2014Monique Huston, Winebow<\/p>\n<\/blockquote>\nDemographic Changes in Drinking Habits<\/h4>\n
The Threat of Tariffs<\/h4>\n
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Whiskey Supply and Demand Mismatch<\/h4>\n