2026-07-14
Tariffs, weaker consumer confidence and a major shake-up in distribution are putting new pressure on the U.S. spirits business, forcing producers to raise some prices, rethink supply chains and lean harder on smaller formats, promotions and ready-to-drink products to hold on to drinkers.
The strain is showing across the market. The Distilled Spirits Council of the United States said in a February economic briefing that consumer sentiment had fallen to historic lows as inflation continued to squeeze discretionary spending. Its 2025 data showed U.S. spirits revenue fell 2.2% to $36.4 billion even as volumes rose 1.9% to 318.1 million nine-liter cases, a sign that consumers were still buying but were shifting where and how they spent.
That volume growth was driven largely by ready-to-drink cocktails and premixed beverages, which rose 17.1% and moved ahead of vodka as the largest spirits category by volume in the country, according to Discus. By contrast, vodka, Tequila and mezcal, American whiskey, and cordials were flat or down in volume.
Industry executives describe a market where affordability has become central. Chris Swonger, president and chief executive of Discus, said low consumer confidence was the starting point for many of the industry’s problems, compounded by tariff uncertainty and major changes in the distributor landscape. Spiros Malandrakis, global insight manager for alcoholic drinks at Euromonitor International, said the long-running assumption that spirits consumers would keep trading up to more premium bottles had reached its limits.
Large suppliers are already reporting weaker results in the United States. Pernod Ricard, owner of Absolut Vodka and Malibu, reported a 12% sales decline in the U.S. in its fiscal third quarter covering January through March 2026, and a 14% drop for the first nine months through March. On an earnings call, Hélène de Tissot, the company’s executive vice president for finance and technology, described the U.S. market as soft and tied current weakness mainly to affordability pressures.
To respond, Pernod Ricard has been pushing smaller pack sizes and targeted promotions on key brands. Heaven Hill Brands, whose labels include Evan Williams, said it was also seeing growth in smaller sizes even within premium products. Matt Blevins, the company’s chief marketing officer, said rising cocktail prices in bars had changed behavior in many markets, with drinks now reaching $20 to $30 and making consumers more selective about when they go out and what they order.
That shift matters beyond spirits alone because tariff volatility and changes in distribution can alter costs, shelf prices and product availability across beverage alcohol. For suppliers of liquor, beer and wine alike, those disruptions can affect which brands remain viable in a portfolio and how broadly they can be sold.
Some companies say tariffs have directly forced price increases. Robert Cullins, global chief commercial officer of Illva Saronno, said the company behind Disaronno, Tia Maria and Sagamore Spirit could not absorb all of the added costs and had to pass some of them on to consumers. He said that combination of softer demand and higher retail prices hurt volume, revenue and margins.
Trade tensions have also affected where products can be sold. Cullins said Sagamore was off shelves in Canada amid the dispute between the two countries. He also said Tia Maria briefly benefited when Kahlúa was removed from shelves in most Canadian provinces because it was made in the United States, though Pernod Ricard later shifted Kahlúa production to Canada and returned it to stores.
There may be some relief ahead. Cullins said producers now have a process to seek reimbursement for tariffs already paid after an initial tariff measure was ruled illegal by the Supreme Court, though he cautioned that recovering those funds would take time. Discus has also continued to push for a return to zero tariffs.
Not every category has been hit in the same way. Tequila remains exempt from tariffs under the United States-Mexico-Canada Agreement, according to Josh Irving, chief executive and co-founder of I & A Agave Spirits, which makes Socorro Tequila. He said tariff threats can still create short-term disruption but that the exemption allows longer-term planning.
Others say the tariff period has exposed weaknesses in logistics that many importers had ignored when costs were lower and trade flows were more stable. Jeff Diego, chief executive of Helmsman Imports, said brands that came out ahead were often those that used the disruption to review freight routes, glass sourcing, closures and warehouse placement rather than simply trying to avoid tariffs.
At the same time, producers have been dealing with one of the biggest distribution disruptions in years after Republic National Distributing Company exited California last summer and moved to leave other markets as well. Reyes Beverage Group took over many former RNDC brands in California and assumed operations in 11 markets including Texas and Arizona. RNDC also agreed to transfer its business in 17 control states to Martignetti Companies, while its operations in Oregon, Washington and Alaska were set to be sold to Columbia Distributing.
Cullins said that upheaval had shaken what had long been the most stable part of the three-tier system: wholesalers. Illva Saronno is now working with Reyes in 11 markets while discussing additional partnerships elsewhere. He said such changes inevitably bring disruption for suppliers trying to maintain continuity with distributors and sales teams.
Pernod Ricard has also reshaped its route to market over the past year. The company recently shifted distribution of its mainline spirits and RTD portfolio in Maryland and Washington, D.C., to Reyes Beverage Group, while Southern Glazer’s Wine & Spirits now handles 37 states for the French group. Paul Basford, chief commercial officer of Pernod Ricard’s U.S. business, said the transition had caused little disruption since it began last summer.
The company also split its U.S. portfolio into separate divisions last year, including one focused on emerging brands and another dedicated to RTDs. Basford said some emerging labels were showing early gains as they became more widely available in bars and restaurants. He pointed to Malibu Pink as one example helping return Malibu to growth in Nielsen data after a long weak stretch.
Innovation has become one of the main tools suppliers are using to revive interest as overall consumption slows. Pernod Ricard has introduced products including Kahlúa Dunkin Swirl and Absolut Tabasco in the U.S., while Illva Saronno is focusing on classic serves such as the Godfather and Amaretto Sour for Disaronno and looking at lighter or lower-alcohol opportunities tied to spritz-style drinking occasions. The company is also trying to benefit from continued demand for Espresso Martinis through Tia Maria.
Even within weaker segments there are pockets of resilience. Cullins said Sagamore had performed well despite broader declines in American whiskey. Jose Sedano, commercial director at Glenrinnes Distillery, said tariffs had not changed his company’s planning for the U.S., where it sees room for growth for Eight Lands Organic Vodka and Gin. He added that lower U.S. spirits duties for craft brands compared with some overseas markets partly offset existing 10% tariffs.
Executives remain divided over whether current weakness is temporary or marks a deeper structural change in drinking habits. Swonger said he hoped conditions were cyclical rather than permanent. Cullins expressed optimism that younger consumers who are entering alcohol through RTDs may eventually move into broader spirits categories as they age.
For now, however, many producers are planning around uncertainty rather than waiting for it to pass. In a market where shoppers are trading down, bars are facing resistance to high cocktail prices and distributors are being reshuffled state by state, spirits companies are adjusting sourcing, pricing and brand strategy at the same time just to protect share in one of their most important markets.