Diageo, a major drinks company, is set to dramatically cut its production of Scotch, North American whiskey, and Tequila by approximately two-thirds in the current fiscal year. This decision comes as the company addresses concerns about oversupply and weakening demand, particularly in the USA.
Ewan Andrew, Diageo's President Global Supply Chain & Procurement, stated that the company has scaled back production and distillation to minimum requirements for future blend and growth support. Diageo's maturing stocks are currently valued at $8.5bn, with Scotch whisky accounting for around two-thirds of this total.
The production cuts follow a period where Diageo paused operations at its Teaninich and Roseisle malt distilleries last year, and reduced output at its Cameronbridge grain distillery, leading to eight job cuts and worker strikes. Other Scotch producers, such as Ian Macleod Distillers, have also lowered production, while LVMH and Brown Forman have implemented intermittent pauses at some of their distilleries.
The broader industry faces an oversupply issue, notably in American whiskey, with Kentucky warehouses holding 16.2m barrels at the start of the year, up from less than 6m a decade ago. This surge is partly attributed to speculative investment, which has also impacted the Irish whiskey market.