Bankruptcies hit US spirit makers as Americans drink and spend less

A wave of U.S. distillery and brewery bankruptcies in 2025 — including A.M. Scott Distillery (Chapter 11 filed Dec. 22), earlier filings by Luca Mariano/LMD Holdings, Devils River, JJ Pfister, House Spirits, Boston Harbor and Lee Spirits — reflects weakening domestic demand and export losses. Gallup data show only 54% of U.S. adults now drink (down from 58% in 2024 and 62% in 2023) and average weekly consumption at 2.8 drinks, while DISCUS reports a 9% year‑over‑year decline in spirit exports in Q2 2025 with Canadian shipments down ~85% to under $10m. Retail sales trends underscore pressure on incumbents: NIQ data show H1 2025 dollar sales down 3.1% for beer, 5.9% for wine and 2.8% for spirits, even as ready‑to‑drink and non‑alcoholic segments expand; major producers are cutting production (Jim Beam pausing Clermont operations Jan 2026) and smaller operators are restructuring or exiting.

Analysis

Market structure: Large, diversified beverage multinationals (Diageo DEO, Brown‑Forman BF‑B, Constellation STZ) and global beer incumbents will gain shelf share and pricing power as independents consolidate; small craft distilleries and regional brewers are primary losers because fixed costs and aging inventory cycles amplify demand shocks. NIQ/retail data showing spirits down ~2.8% and beer down ~3.1% through mid‑2025 implies a structural demand contraction in the low single digits that favors scale and cash-rich balance sheets over niche operators.

Risk assessment: Tail risks include tariff escalation (US↔Canada) that could crater exports (an 85% drop to Canada already observed) and sudden excise tax hikes or stricter advertising/regulatory constraints; a shallow US recession would deepen cuts to discretionary drinking frequency within 3–9 months. Hidden dependencies: aged inventory cycles (bourbon/whiskey) mean current shutdowns (Jim Beam Jan‑2026 pause) can produce a supply shortfall 12–36 months out, creating asymmetric upside for survivors; key catalysts are tariff resolution, holiday promos (near term), and Q1 2026 production plans.

Trade implications: Tactical long positions in large-cap beverage names with aged stock and strong FCF (BF‑B, DEO, STZ) for 6–12 month horizons, and selective shorts in public small-cap craft brewers (Boston Beer SAM) or hospitality operators exposed to regional dining/retail. Options: use defined‑risk bullish call spreads on DEO/BF‑B (3–9 month expiries) and bearish put spreads on SAM sized to cap downside to 0.5–1% portfolio risk; rotate 3–6% from small-cap consumer discretionary into consumer staples ETF XLP or ML large‑cap beverage winners.

Contrarian angles: The market may be overpricing permanent demand loss; historical parallels show temporary consumption dips followed by premiumization and price recovery (post‑2009/2014); shutdowns and bankruptcies create scarcity in aged bourbon barrels that can lift pricing and margins 12–36 months out for survivors. If tariffs are reversed or travel/tourism rebounds, exporters and premium US spirits could outperform rapidly — consider staging buys into such catalysts rather than indiscriminate broad shorts.

Key Decisions for Investors

• Establish a 2–3% long position in Brown‑Forman (NYSE: BF‑B) sized to portfolio risk within 2 weeks, target +8–15% price appreciation over 6–12 months if aged‑stock pricing improves; set a hard stop at -8%.
• Initiate a 2% long in Diageo (NYSE: DEO) paired with a 1.5% short in Boston Beer (NYSE: SAM) within 4 weeks to play scale vs craft; aim for a 15% relative spread outperformance over 6 months and cut if spread narrows by 6% within 60 days.
• Buy a 3–6 month defined‑risk bullish call spread on DEO or BF‑B sized to 0.5% portfolio risk (sell higher strike to fund) and concurrently buy a 3‑month put spread on SAM sized to 0.5% risk; target >2x payoff if SAM falls >25% or DEO/BF‑B rises >12%.
• Reduce small‑cap beverage/hospitality exposure by 40–60% immediately and reallocate 3–5% into consumer staples ETF XLP (or equivalent large‑cap beverage winners) to lower volatility; reassess positions after Q1 2026 production announcements and any US‑Canada tariff developments within 30–60 days.