North America adjusts to challenging market conditions
There’s a serious recalibration occurring in North America, but what does this spell for the future of the spirits industry?
*This feature was originally published in the December 2025 issue of The Spirits Business magazine.
After years of Covid-19 pandemic distortion, the North American spirits market is entering reset mode. The surge in home-bar stocking, distributor overbuying, and rapid brand proliferation is now giving way to leaner inventories, tighter portfolios, and more guarded consumers.
In the US, Canada and Mexico, producers are recalibrating – whether by restructuring distribution, navigating trade headwinds or tapping into emerging opportunities in fast-rising categories.
The result is a region in recalibration. RTDs continue to steal occasions from traditional spirits in the US, while Canadian producers are balancing steady domestic demand with disrupted export prospects. Trade frictions – and the looming renegotiation of the US-Mexico-Canada deal (USMCA) – are adding further uncertainty, forcing brands to rethink how they plan and prioritise growth across borders. The question is whether the region can convert this reset into a foundation for more sustainable, collaborative, export-savvy growth. For producers on the ground, that shift is already becoming clear.
“Even as competition intensifies, we continue to see real strength in premium American whiskey,” says Kate Latts, co-president of Heaven Hill Brands, a family-owned whiskey company. “Elijah Craig and Old Fitzgerald are both benefitting from what consumers value most right now: authenticity, proven craft, and a clear sense of where a whiskey comes from. Those fundamentals still matter, even as the category matures.
“At the same time, we’re all operating in a more measured environment. After several years of outsized growth during the pandemic, the industry is stabilising. Consumers are still premiumising, but they’re doing it with more intention in the accessible premium space, with brands that they know and trust to be authentic and of good quality, which reinforces our belief in building brands patiently and consistently.”
During the pandemic, there was a surge in demand for spirits with consumers stocking up, resulting in elevated inventory levels among wholesalers and retailers. But many large drinks firms noted continued destocking in the US in the last year, including Pernod Ricard and Brown-Forman. Both firms have recently reshuffled their distribution in the US. Brown-Forman changed distributors in 14 markets from 1 August, including three of the company’s largest footprint markets: New York, Texas and California.
Distribution shake-up
Explaining the major distribution shake-up, Michael Masick, executive vice-president and president of Americas at Brown-Forman, notes several factors, including the “opportunity to clear out the clutter and refocus our partners on our brands”, and ensure that Brown-Forman’s brands sat within “complementary portfolios”. Meanwhile, in September, Pernod Ricard USA established two commercial divisions, RTD and Gem, as part of its new route-to-market strategy.
The RTD division will see Pernod Ricard move distribution in eight states to beer-focused distributors, with the majority managed by Reyes Beverage Group, alongside Crown Crescent (which operates in Arizona and Louisiana). Paul Basford, chief commercial officer of Pernod Ricard USA, explained that the beer distributors “bring scale” alongside their delivery network in the grocery channel.
Basford says the decision to move its smaller, incubation brands into the Gem division was a way of “future-proofing the business”, and help the brands grow through a different, more dedicated approach.
Latts notes that many consumers are still in possession of fully stocked home bars after the pandemic. “We’ve seen an explosion of new brands entering the market, and in many cases retailers brought in more than was sustainable,” she says. “What we’re seeing now is a natural period of rightsizing as the industry recalibrates to a more balanced, long-term footing.
“We view this less as a disruption and more as the market finding its new level after several unusual years. Retailer and distributor inventories should settle over the next year, and we expect a more normalised environment to emerge as that happens.”
She adds that the company will “continue to invest in capacity, ageing whiskey, and brand-building so that when the environment stabilises, we’re positioned for sustained, quality-led growth”.
Southern Glazer’s, the biggest wine and spirits distributor in the US, notes that “peak destocking” occurred around May, according to Zack Poelma, senior vice-president of commercial intelligence. But inventory-to-sales ratios remained high, he notes, suggesting distributors were holding significantly more stock relative to sell-through, putting pressure on suppliers and forcing more disciplined purchasing.
Two categories that were previously over-inventoried, vodka and whisky, are now “starting to track more closely to what the sell-out is”, Poelma says. He explains that while the destocking trend in the US is now relatively stable, retailers have likely recalibrated to a permanently lower inventory baseline.
Paul Mathew, founder of UK-based alcohol-free brand Everleaf, describes the US as an enormous, complex market, saying it is like entering “another Europe”, where each state operates almost like its own country. Because non-alcoholic brands aren’t part of the three-tier system, Everleaf can ship nationally, but this also brings unique challenges – including bottles freezing during winter deliveries in northern states.
Everleaf initially entered the US through non-alcoholic-only distributors, but this limited its reach, especially given the brand’s strong on-trade focus. Securing placement with nationwide on-trade distributors has “changed everything”, helping the brand grow largely through word of mouth, especially among people familiar with Everleaf from the UK.
Setbacks in Canada
One major hurdle for brands operating in the region is the trade tensions with the rest of the world, as well as the current US-Canada trade war that has resulted in the removal of American spirits from many Canadian provinces. In March, Brown-Forman CEO Lawson Whiting said Canadian provinces taking US liquor off store shelves was “worse than a tariff”. The results speak for themselves: US spirits sales in Canada plunged by 68% in April 2025, according to data from the Distilled Spirits Council of the US (Discus). Exports of US spirits to Canada in the second quarter of 2025 plummeted by 85% to US$9.6 million, falling below the US$10m mark for the first time.
“One of the biggest frustrations has been in Canada, where we were seeing tremendous growth for Elijah Craig, only to have that trajectory hampered by recent tariff issues,” Latts explains. “It’s been a setback after such strong momentum, which makes the progress we’re seeing elsewhere internationally all the more important as we navigate these challenges.” Latts has noticed increased interest in higher-end offerings in Canada, anchored by Elijah Craig and supported by Evan Williams.
Mexico has emerged as an exciting growth opportunity for spirits – and not just agave-based ones. During Brown-Forman’s Investor Day, Masick highlighted Mexico as “a market where the American whiskey category is developing, as is our Jack Daniel’s brand”.
Explaining the market, he said: “Mexico is a unique emerging market. It’s one of the few multi-category premium-plus spirits markets in the emerging world. It’s Tequila, it’s whisky and it’s RTDs. It’s climbing the ranks quickly in premium-plus spirits, now number eight. It’s a huge RTD business. It’s now the number-seven RTD market globally.”
Alongside its Tequila-based New Mix RTD, Masick notes that whisky in Mexico has been growing. “If you look at the total category, it’s a very consistent growth driver, up by 4% over the last 10 years. But if you look within that, American whiskey has been the growth driver of the category. We’ve been growing 2.5 times faster. Within American whiskey, that is almost entirely driven by Jack Daniel’s, which is 80% of the American whiskey category in Mexico.”
Latts makes a similar point, calling Mexico an “incredibly dynamic spirits market, driven by the booming Tequila category, but what’s especially noteworthy is the rising curiosity about American whiskey”.
She points out that Elijah Craig and Evan Williams are “both performing well, and we’re seeing real, sustained interest, particularly in Mexico City and other major urban centres, where consumers are exploring beyond Tequila and looking for established, credible whiskey brands. The category is still early in its development there, which gives us room to shape how American whiskey shows up and grows.”
Craft spirits in disarray
The current landscape for spirits might be tough for the big players but it’s considerably worse for craft distilleries, which are facing their toughest year yet. The American Craft Spirits Association (ACSA) recently released its Craft Spirits Data Project report, which revealed there are 2,282 active craft distillers.
ACSA chief executive Margie AS Lehrman, clarifies that due to a change in methodology with last year’s report, it could not accurately reveal how many closed, but it is likely a double-digit figure. Explaining the difficulty in calculating closures, she says: “When distilleries close, the last thing that’s on their mind is to tell the TTB [US Alcohol and Tobacco Tax and Trade Bureau], so TTB itself does not have an accurate reporting.”
Several distilleries have closed permanently in the past year, including Montana Distillery, Forge & Foundry in Minnesota, and 52 Eighty Distilling in Colorado.
The report also noted a craft spirits volume drop of 6.1% to 12.7m nine litre cases in 2024 and a value decrease of 3.3% to US$7.58 billion. The main challenge facing craft spirits is the lack of market access, Lehrman warns. “If you can’t get the product in front of the consumers, you’re not going to make sales.” She also notes that wholesalers are under pressure from large brands: “It’s less likely for a wholesaler to pick up a new brand. We’re competing in a truly unfair playing field.”
One major win for craft distillers occurred in October when California granted a one-year extension for the direct-to-consumer (DTC) spirits shipping bill, which was due to expire at the end of 2025. It also grants out-of-state distilleries the ability to ship into California by obtaining a permit. Lehrman’s priority is to ensure that DTC spirits shipping in California, the state with the largest number of craft distillers, is made permanent.
Craft distilleries are also facing shrinking orders and late payments, Lehrman says.
She hears from members that there are “a lot of micro-aggressive tactics” from distributors, meaning that small brands fear losing those relationships.
Many distilleries reinvested aggressively during the boom period of the late 2010s and pandemic-era spikes. “During the really good years, there was lots of reinvestment… perhaps there was some over expansion, believing that the marketplace was going to continue to grow.”
Access to capital has tightened for small distilleries. “To get any kind of additional funding at this point has become increasingly difficult in the craft space,” Lehrman adds.
Legal cannabis is increasingly competing with alcohol, particularly among younger consumers, who seek alternatives to booze. Lehrman acknowledges, this and believes that cannabis products should be regulated like alcohol to ensure a level playing field.
While distilleries are facing many hardships, it has also fuelled innovation, as Lehrman points out: “Distillers are being forced to be much more creative, and have their own ethos and DNA associated with their bottle.”
North America’s spirits sector may be feeling unsettled, but the evidence indicates there is enough talent across the market to ensure its long-term relevance. If brands can remain agile, creative and willing to weather the storm, the region’s recalibration could be just the reset North America needed.
Industry insights
How is your brand navigating a US gin category that has become increasingly competitive and slower-growing compared with other spirits?
Adam von Gootkin – founder, Highclere Castle Spirits
“Category segments are even more important that the categories themselves. While gin volume is stable (or slightly down), premium-plus gin is the third- largest category gaining market share up 12% since 2020. While many brands are pulling back due to trends, we intend to be more aggressive than ever through strengthening our distributor partnerships, investing in new market opportunities, and, most importantly, focusing on the gin consumer daily – at the bar, in the store, and on social media.”
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