On Friday, CNBC investment pundit and former hedge fund manager Jim Cramer turned his gaze – briefly – on beverage alcohol. Having advised viewers to steer clear of drinks company stocks earlier in the year, was he about to change his mind? Nope.

Citing a number of factors, including the moderation trend among Gen Z consumers and suggestions that GLP-1 weight loss medication might lead people to drink less, Cramer said: “I’m too concerned about the long-term challenges to pound the table on any of these names, especially Brown-Forman or Diageo.”

However, he added: “But I’m also open to the idea that we’ve simply gotten too negative on the group … If we see some signs that younger people are drinking more or the GLP-1s aren’t having as much of an effect or impact on alcohol, then I’ll happily change my mind on both Brown-Forman and Diageo.”

That’s quite an adept bit of fence-sitting, but you can hardly blame Cramer for being downbeat about alcohol’s prospects heading into 2025. And falling consumption among Gen Z and the impact of weight loss drugs aren’t the only major challenges facing the industry right now. Continued economic fragility in a host of major markets – and the threat of punitive tariffs as global trade wars escalate – pose an even more serious and immediate threat to growth.

Agave at an inflection point

Tequila and mezcal sales remain a much-needed bright spot amid the gloom of the stuttering spirits market in the US, but the fat double-digit gains of yesteryear have moderated into softer consumption increases during 2023 and 2024.

Inevitably, that increases competition in the category, meaning that not everyone’s a winner in Tequila right now. Witness Brown-Forman’s recently-announced second-quarter results and a 17% revenue decline for its Tequila brands, including Herradura and El Jimador.

If US Tequila sales are plateauing, the threat of President-elect Trump to impose a blanket 25% import tariff on Mexican imports could well send the category into reverse. In that scenario, internationalising Tequila’s appeal in high-potential markets such as the UK, Australia, Japan and Spain becomes even more important.

Scotch’s pricing conundrum

For a while, it seemed that the secondary market for rare Scotch whisky was unstoppable, but the events of the past two years have firmly put that theory to bed. According to investment bank Noble & Co, the market for bottles of Scotch priced above £1,000 ($1,277) declined 34% by volume and 40% by value in the year to 1 October. The words “bubble” and “burst” are being bandied around.

Of course, these playthings of the rich are only one small part of a multi-billion pound industry with global reach but bear with me. One of the reasons for this downturn, beyond the current macroeconomic climate, is the pricing policies of distillers.

Historically, high-end whisky was undervalued. The classic example is the first release of Black Bowmore, sold as cheaply as £80 on its launch in 1993, but now changing hands for five-figure sums. There are countless other examples from the 1990s and 2000s, and even the early 2010s.

People are being more careful with their money now – and spending even £30-40 on a bottle of Scotch is not a decision they take lightly.

But drinks companies aren’t stupid. Since around 2015 – and especially since 2020 – release prices have been hiked to the point where large numbers of people simply can’t afford the whiskies, or don’t want to. This doesn’t just make selling these products more difficult – it builds resentment among a previously loyal consumer base.

My concern is that this pricing philosophy, and the negative reaction to it, has spread further down the pricing ladder into the premium tiers where volumes are much higher – and the impact of non-participation has far more serious consequences. People are being more careful with their money now – and spending even £30-40 on a bottle of Scotch is not a decision they take lightly.

Cognac: no place to go?

Two recent news reports serve to illustrate the severe challenges facing Cognac at the end of 2024. Firstly, LVMH’s plans to bottle Hennessy in China and thus circumnavigate the “anti-dumping” tariffs threatened by Beijing – plans that were abandoned following protests and strike action.

Secondly, unconfirmed stories that makers of Cognac (and Champagne) have been bumping up their shipments into the US in anticipation of more tariffs being imposed by President-elect Trump when he takes office in January. Building up inventories at a time when your industry has recently been greatly hit by destocking doesn’t look like a great business plan, but times are getting a little desperate.

There are other markets that Cognac could target for growth, but it’s hard to see how any or all of them can plug the yawning gaps left by China and the US. It says much about the low expectations permeating the region that Rémy Cointreau CEO Eric Vallat recently labelled the company’s second quarter performance, during which US sales of Rémy Martin plunged by 12%, as “encouraging”.

The ebbing tide of globalisation

One of the most important drivers of the long-term growth trajectory of beverage alcohol has been the ease of access to global markets. Free trade agreements, tariffs lowered or removed, red tape eliminated – all of these have helped to create a global footprint for high-volume categories, such as Scotch whisky. When one market declined, another could reasonably be expected to take its place.

Ongoing trade rows have the potential to make life very difficult indeed for multinational spirits businesses in 2025 and beyond.

The mood music has darkened of late. A second term for President Trump, and the return of Tariff Man, is only one manifestation of this. Ongoing trade rows between the US and the EU over steel, aluminium and aerospace subsidies, and between the EU and China over electric vehicles, all have the potential to make life very difficult indeed for multinational spirits businesses in 2025 and beyond.

The fear here is that these tit-for-tat moves begin to gain some sort of momentum, with each tariff imposition provoking reactive moves from those affected. And, when governments are deciding where to impose tariffs, products of provenance such as Scotch, Cognac, Bourbon and Tequila are tempting and obvious targets.

Of course, we still don’t know what will actually happen. Trump may listen to economic reason and water down his threats (he’s got previous for this, after all), and the EU and China may pull back from the brink (although I wouldn’t hold my breath on that one).

But the direction of travel is troubling. Local bottling may provide a partial solution – although the Hennessy/China experience shows it’s not without its challenges – and companies will likely be encouraged to invest in local production geared to local audiences.

Pernod Ricard has already released the first whisky from its The Chuan distillery in China, and Diageo opened its own US$120m plant, the YunTuo malt distillery in Yunnan Province, in November. As globalisation begins to ebb, might these largely domestic ventures be a sign of things to come?