Irish whiskey is undergoing a market correction, a temporary blip, a ‘little pause'

Irish Times

16-05-2025

In 2010, there were just four working distilleries in Ireland. As of late 2024, that number had stretched to more than 50. Now, as many as 90 per cent of those whiskey distilleries have paused or reduced production.
The past six months have seen the receivership of Waterford Distillery, Killarney Brewing and Distilling Company enter examinership, and Blackwater Distillery needing a rescue plan approved to stay afloat.
Even among the giants, Pernod Ricard's Irish Distillers have paused production at the famous Midleton Distillery for several months; Great Northern Distillery is curtailing production by 70 per cent, and a number of stills at Tullamore Dew have gone quiet.
It's not a problem that began on 'Liberation Day': this perfect storm of market conditions has been created over many years.
READ MORE
Depending on who you ask, Irish whiskey is either undergoing a market correction or a temporary blip, but everyone agrees that it is the small producers that are going to feel the most pain.
'Based on what we have heard from interaction with our membership, about 90 per cent of distilleries have decided to either pause or cut back on production,' said Eoin Ó Cáthain, director of the Irish Whiskey Association, the Ibec group that represents the sector in the Republic.
While it is common for distilleries to temporarily pause production for operational reasons, the flood of announcements that stills are being shut down is in response to the 'challenging' circumstances facing the market, he said.
'The lack of certainty in our biggest export market is quite challenging. The fact that we face a 10 per cent tariff at the moment is like the Sword of Damocles hanging over us,' he says.
But the issues in the market are not solely about tariffs. Some industry experts say the problems began to take hold two years ago, and only now are the symptoms becoming visible.
You can't just move whiskey around the world – it is incredibly regulated, mostly because of the taxes that are applied
Powerscourt Distillery, the Co Wicklow-based company behind the Fercullen whiskey brand, is one of many brands whose stills went cold this year, initially 'for reasons of practicality'.
The distillery paused its annual 300,000-litre production in January to carry out a planned renovation but opted not to restart production following the completion of the works, in response to market conditions. With more than one million litres of alcohol maturing – the equivalent of 3.5 million bottles of whiskey – and the expectation of resuming production in June, Powerscourt is willing to ride out this period.
'There was a surge in production by a lot of companies post-Covid,' said its head of brand John Cashman, explaining that distilleries reacted to an initial 'surge of interest in alcohol again'.
Distillers thought 'everyone was going to go crazy and go out drinking, but that hasn't materialised', he said. In the aftermath of the pandemic, consumer behaviour changed, and the absence of the big bump in consumption that producers had expected resulted in an 'oversupply and overstocking' of product in all markets.
'There isn't room for everyone – that's for certain – but I don't think that is the root cause of the oversupply,' Mr Cashman said. 'All the major multinational [brands'] sales are down, and people are trying to attribute it to Trump or attribute it to individual factors, but it's not. It's like a perfect storm.'
Mr Cashman said the whiskey market is 'cyclical' and the future is 'still bright'.
'This is just a little pause in demand, like there is every 10 or 15 years in every industry,' he said.
He forecast a period of consolidation in the Irish whiskey market, 'and those who will survive are the ones with a good route to market, a good product, a good story and a good brand'.
Whiskey industry veteran and the founder of Great Northern Distillery, John Teeling believes the whiskey market is undergoing a correction.
One of Ireland's largest distilleries, Great Northern has cut back production by 70 per cent, with private label customers slashing their orders too, but Mr Teeling said he is 'less concerned than most'.
'Before you start to order coffins for the industry,' he said, 'it goes from undersupply to oversupply constantly. Industries like this always have corrections, and the correction started at the end of 2023, with higher interest rates in the US and consumers beginning to pull back.'
Retailers, he explained, stocked up expecting the level of consumption that was present immediately after Covid to continue. When it didn't, orders back along the chain to producers began to dry up in 2024.
These market conditions were exacerbated by the uncertainty around US tariffs and, after an anticipatory surge in stock, demand has dried up.
'People are overstocked because they were distilling in 2023 and 2024 in expectation of the market being strong in three and four years' time, and now they are finding themselves overstocked, and their stock is costing them more money,' said Mr Teeling
Dingle Distillery made the decision to temporarily cut production by 60 per cent in March following eight years of 'full-scale' production. Its managing director, Elliot Hughes, put part of the blame on 'the current uncertainty'.
Based on what we have heard from interaction with our membership, about 90 per cent of distilleries have decided to either pause or cut back on production
'We've stockpiled a good bit of product over the past few years, so we are comfortable that we can reduce production for a period of time and then get back to full strength after that,' he said.
The decision came as a way of 'saving cash for the rainy day fund' he added, with the expectation that the company will 'have to take hits on margins due to tariffs in the US'.
Mr Hughes rejected the idea that the sharp growth in producers had led to the oversaturation of the market, stressing the importance of retaining smaller-scale distilleries in the market.
'It's really important that we don't conflate volume with the numbers of distilleries. A lot of people are jumping to the notion that we have too many distilleries, or too many brands, I don't think we do,' he said.
But he conceded that the Irish industry has grown too quickly in recent years. 'There is definitely an oversupply of product. The backstop for a lot of distilleries was that they would be able to sell whatever product they produced, and that's what seems to have disappeared.'
'What has made people more concerned, is that the security that people thought they had, is not as secure as it was, because of the oversupply.'
Mr Hughes said his distillery is going to wait and see how the 'next four, five, or six months play out' before making a decision about going back to full production.
For many in the industry, the news of Waterford Distillery's receivership in November 2024 came as a shock. Backed up by 20 employees, Mark Reynier – the industry veteran who built back scotch brand Bruichladdich – began to produce Waterford Whisky in the old Guinness brewery in Waterford city.
But unlike with his revival of Bruichladdich, when Mr Reynier said he got a 'perfect run at it', 'everything but the kitchen sink has got in the way' of Waterford Distillery, he told the Waterford News & Star at the time.
Interest rates were one part of the downfall of the distillery, Mr Reynier said, pointing to a 21-fold increase in interest rates during market conditions which he labelled the 'international destocking era'.
'The very policy of laying down that stock became a millstone,' Mr Renier said in the immediate aftermath of the receivership, noting that 'the cost of the interest that we were paying outweighed the revenue' they were able to generate as they built up a 'war chest' of whiskey.
Fellow Waterford-based Blackwater Distillery was the next to encounter financial difficulties, seeking protection from its creditors through the small company's administrative rescue process (Scarp). Nearly 95 per cent of the company's unsecured debt was written off, more than €500,000, in an effort to stabilise the whiskey and gin distillery.
The business's co-founder, Peter Mulryan, explained that the business became 'weighed down by the burden of debt' as it tried to trade its way out of trouble, eventually that was no longer possible. 'Every month, more and more was going out the door to service debt, and it got to a point where it became unsustainable,' he said.
Both founders pointed to the same issue, the long production delay built into the distillation and maturation of Irish whiskey. While Blackwater has been handed a new lease of life by the Scarp process, Waterford Whisky is still in the balance.
'Whiskey is a fabulous industry, but we have to recognise that it is a long game,' said Pat Rigney, founder of the Shed Distillery, whose still continues to operate.
The build-up period in the production of Irish whiskey, which requires you to keep the product sitting in a cask for a minimum of three years and usually longer, is the biggest problem for small distilleries trying to survive this period.
At the same time, the costs of production rose dramatically. The cost of the American oak barrels on which the Irish industry relies increased from around €100 in 2022 to around €285 in late 2024.
'If you take somebody like us, we would buy 100,000 barrels a year, which meant we were spending $28.5 million on barrels just to go into inventory for three years,' Mr Teeling explained.
Coinciding with that increase, the cost of malt, a key ingredient, more than doubled, and energy costs at Great Northern went from €4 million per annum to more than €12 million.
The economic shocks caused by US tariffs came during a time when demand had softened, production costs had skyrocketed and interest rates were high, Rigney explained.
Figures from the Distilled Spirits Council of the United States show that 4.8 million nine-litre cases of Irish Whiskey were sold in the US in 2024, generating $1.2 billion (€1.07 billion) in revenue. With one case typically holding 12 bottles, that would equate to sales of nearly 60 million bottles of Irish whiskey in the US each year.
This volume, for many distilleries, can be the single largest market for their product. It is understood that North American exports often make up as much as 40 per cent of revenue for many emerging Irish distilleries. Some 30 per cent of the sector's product sales were to the US last year, Ibec told The Irish Times last month.
A lot of people are jumping to the notion that we have too many distilleries, or too many brands, I don't think we do
'At the moment, it is a very challenging environment in the biggest market that we have,' said IWA's Eoin Ó Catháin, noting that the industry has had to deal with 'some very significant economic headwinds'.
In reaction to the trade chaos, distilleries across the country are pivoting to other emerging markets, but settling into new markets can take 'up to ten years' to build up reliable business connections, Mr Teeling said.
Building up in any new market poses real challenges, said June O'Connell, the founder of Skellig Six18 Distillery. 'You can't just move whiskey around the world – it is incredibly regulated, mostly because of the taxes that are applied,' she said.
She explained that establishing relationships in international markets is time-consuming and expensive, 'You are paying an importer, you are paying warehousing costs, you're paying costs to the distributor. There are a lot of people in the pricing tree. It is much easier said than done.'
Despite all this, there is still optimism and plenty of distillers talking of 'industry resilience' and 'new market opportunities'.
'The gin industry went through a similar reset four or five years ago with significant fallout. Thankfully, Drumshanbo Gunpowder Irish Gin exited bigger, bolder and stronger,' Mr Rigney said.
'Whiskey, whether it is Irish, American or Scotch, is going through it now, and I'm sure that on the other side those that survive will be stronger brands – and also bigger and bolder.'