How Will the Spirits Industry Weather 2025?

If you make or sell spirits, there’s 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. 

“It’s a minefield,” says Ricky Ramirez, owner of The Mothership in Milwaukee. “You’re walking through a desert right now.” Ramirez points to the dual tensions of his business’s specific, local needs and the impact of governmental actions well beyond his control—a dynamic that leaves him guessing as to the best path forward. “We’re tiptoeing based on both ends,” he says.

“It’s not necessarily about control, but you want to be in the driver’s seat.”
—Monique Huston, Winebow

Across the spirits industry, uncertainty is making it hard to do business. “It’s not necessarily about control, but you want to be in the driver’s seat,” says Monique Huston, vice president of wholesale spirits portfolio at Winebow. “You want to be able to make decisions—to 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.” Being in the middle of all that, with uncertainty at “every level,” makes her feel helpless to change the direction of things, she says.

Coming off a couple of tough years—sales of spirits in the U.S. declined 1.1 percent by value in 2024, according to the Distilled Spirits Council—the metrics for success have changed. “[Before 2024] good used to mean X percentage growth and now it might mean flat,” says Hannah Lowen, CEO of New Riff Distilling in Newport, Kentucky. 

It’s the same at the middle tier, too, according to Sam Filmus, president and managing director of spirits importer ImpEx Beverages. “Trends in 2024 were unfavorable for the industry globally,” he says. “We 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.” 

Huston is advising Winebow’s suppliers to “temper expectations” this year. “We 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,” she notes.

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. 

Demographic Changes in Drinking Habits

Among the concerns of the moment is the decline in spirits sales, which—outside of a couple of exceptions, like ready-to-drink beverages (RTDs)—have 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’s still early to determine the culprits, many on-premise operators believe a generational shift in consumption is underway.

“There is no doubt that people drink less now than they did,” says Kevin Beary, beverage director of several Chicago bars, including Three Dots and a Dash and the newly opened Gus’ Sip & Dip. “Guests do not drink in the same fashion that they did even five or eight years ago.” Whereas in years past a guest might come in and order three or more drinks, now, Beary says, “that rarely happens—maybe two.” 

Beary credits moderation for the downward trend. There’s also reluctance, especially among younger consumers, to spend $20 or more on a cocktail that they might not end up enjoying. “Cocktails have gotten so expensive in so many places,” he says, recalling how as a young drinker, trying a cocktail he might not like wasn’t a big financial risk. “If you made that same purchase in today’s market and it’s 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.” 

Beary opened Gus’ 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’ 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—and has been well-received. 

The $12 Cosmo at Gus’ Sip & Dip in Chicago | Photo by Lindsay Eberly

Huston also sees younger drinkers driving change in the way Winebow does business. “They’re very picky about what they drink,” 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. “This new kind of group of drinkers has very different values,” she explains. “They’re making decisions based on [those things]. These are conversations we didn’t even have 10 years ago.”

On top of that, Huston notes that many new bar directors and buyers are fairly young, 25 to 30—due, 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’s bar directors and buyers, and offer opportunities to brands.

The Threat of Tariffs

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 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 in return.

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.

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. “We’re trying to be a community-oriented cocktail bar,” he explains. “It’s [going to be] difficult for us” if rising cost of goods forces The Mothership to increase prices. And overall, he says, “if things become difficult for everyday Americans, that’s going to affect everyone,” including The Mothership’s customers.

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 in Scotland, worked out an agreement to split the added cost together, without passing it on to the consumer. 

In early January, Filmus dropped prices on 29 of ImpEx’s products, including several single malt scotches, ahead of potential tariffs. “We were motivated by what’s right for consumers, looking at the historic trends,” 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’t feel it as sharply.

The Mothership’s $14 Coconut Curry Painkiller | Photo courtesy of The Mothership

At Winebow, Huston brought in a number of agave spirits in January, before tariffs on Mexican goods were officially announced. “It made us feel like, okay, we can make a decision—we can do something,” she says. “If the tariffs really do happen, we’ll probably even feel a little better about it. And if for some reason they didn’t, we don’t feel particularly hurt by it.” Price rises will be inevitable. But “if I can stretch it another month, give people a little better value—we’re excited to not just react to it.”

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. “It trickles down to us,” she says. “We don’t 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.”

Whiskey Supply and Demand Mismatch

With its focus on American whiskey, New Riff has another issue to contend with: oversupply in the bourbon industry, something that’s quietly worrying many brand owners and distilleries. Lowen in particular is concerned about the pricing pressure such a dynamic creates. 

“Overproduction is the biggest threat to everybody,” she says. “I’m an optimist at heart, so I still believe there’s a place for a quality-made, fairly priced bourbon in the United States and the world, and that there’s space for a lot of them. But there’s not space for as many as there are right now.” Lowen adds that New Riff is already experiencing an inventory correction, a small facet of the total inventory correction happening in bourbon.

Be prepared for bankruptcies, lawsuits, and total collapse of some whiskey investment schemes, Huston warns. “There’s going to be something big—things that foster mistrust and highlight the lack of transparency,” she says. “That’s not going to be good for the category.” 

But there is a bright spot. And that’s savvy craft whiskey players, which Lance Winters, master distiller and proprietor of St. George Spirits in Alameda, California, characterizes as outliers. “We’re doing things that are different enough that I feel like we’re provided with a little bit of insulation,” he says. “I don’t think that we’ve reached market saturation yet with any of our products. And I think that’s probably a similar story for just about every true craft producer.”

Winters notes the runway exists for craft whiskies and spirits more broadly—much more than for the large conglomerates who answer to shareholders and quarterly growth reports. “Our goal has always been for people to drink better, not necessarily more,” he says. “We’re hitting that. And we can put more out because there are a lot of people that still don’t know our product.”

Middle-Tier Shakeups

The major issue that worries Winters is distributor consolidation. This trend has been ongoing for years but is now being compounded by mass layoffs at the two leaders, Southern Glazer’s Wine & Spirits and Republic National Distributing Company. St. George is in the process of changing distributors in several markets because the attrition of salespeople was driving down sales. 

Though its spirits are long established, St. George is still the kind of brand that requires in-person tasting and selling. Many of today’s buyers and bartenders, Winters notes, echoing Huston’s observations, started recently in hospitality, part of Covid-driven turnover. The distribution changes are already having a positive impact on sales.

Consolidation has a silver lining for smaller players like Winebow. Huston has been able to hire experienced salespeople who were laid off, taking advantage of their skills in face-to-face interactions. “Our brands need to be held and poured and tasted and seen,” she says. “Customers care about education. Those that are willing to get out there, actually do consultations and education, take the time and actually taste with people—whether that’s the brand or distributor—those folks are going to continue to thrive.”

The Way Forward

On top of all this, in January, then–Surgeon General Vivek Murthy recommended that alcohol carry a cancer warning. However, this development, in the immediate moment, doesn’t seem to worry many people in the industry. Instead, they’re seeking silver linings and looking for opportunities—or simply battening down the hatches. 

“We see [the next few years] as a storm,” Lowen says. “Our intention now is to make it through it. It’s a surviving-not-thriving model. We think we can do that but all our sales forecasts, which dictate our production forecast, have been scaled back.” 

In spite of the current climate, the value of going to a bar and enjoying a good drink will persist.

Like others in the business, Lowen believes that in spite of the current climate, the value of going to a bar and enjoying a good drink will persist. “I just don’t think that’s going to go away,” she says. “And I think what’s going to come out of this moment of difficulty are a smaller group of really strong brands that know themselves and their customers. There are going to be great spirits from authentic and passionate producers that are affordable.”

Winters says that no matter the circumstances, brands and businesses should keep focus on what makes them unique and appealing to consumers. “Have a valid viewpoint,” he says. “Be your own harshest critic.” 

And, he adds, an uncertain atmosphere shouldn’t change your core values. “This business has seen uncertainty for the last 42 years,” Winters says. “You cannot waste your time paying attention to that because if you do, you lose sight of your real goals.”

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