Toby Howell

things like scotch, whiskey, cognac, tequila, and more.

But while you may have been clamoring for a taste in high school, that is not the case anymore.

The inventory buildup dates back to some poor decisions made to dramatically ramp up production during the COVID-era drinking boom, assuming that demand for a stiff drink would remain stiff indefinitely.

But right as production facilities came online, inflation started to squeeze people's wallets,

a broader focus on health and wellness emerged and consumption started to wane.

By December 2024, Mexico was sitting on over 500 million liters of tequila in inventory, basically an entire year's worth of production.

And the producer, Remy Contreau, is sitting on over $2 billion worth of maturing inventory, nearly double its annual revenue and close to its entire market cap.

Neil, there's a lot of talk in the industry as to whether this is cyclical and demand will come back around.

or structural and people will never drink as much as they used to.

Fitting to have this conversation during dry January.

And aging spirits in general are a uniquely difficult type of inventory to manage because you have to decide years in advance how much spirit you want to create because cognac makers, for example, they have to allocate spirits into casts that are intended for two, four, 10, or 12 years of aging.

Imagine having to make a decision now about what demand will be like in 12 years.

It's very difficult and they clearly miscalculated

you know, six years ago at the beginning of COVID.

And now they are facing the consequences of that.

So that is why this industry is so difficult to manage from an inventory perspective.

One type of drink that is bucking the trend, though, that I want to shout out is stouts.

Guinness mainly is having a moment.

It's had...

A little bit of a pop culture moment from the Netflix series House of Guinness and also just TikTok trends of people trying to split the G. Stouts were so dead in the water.