For more than a decade, premiumisation functioned as the global spirits industry’s closest thing to a universal growth formula: trade consumers up, expand margins, repeat. The latest results from the sector’s leading groups suggest that formula is starting to break down.
Premiumisation has not ended – it has lost its monopoly. It is fragmenting into something far more selective: category-specific, geography-specific, price-tier-specific.
Three signals stand out. Cognac – long the poster child of ultra-premium spirits – faces sustained pressure, with major producers reporting softer demand and inventory headwinds. Ready-to-drink formats, meanwhile, show clear resilience. And select emerging markets, such as India, continue to premiumise at pace.
The pattern is clear: premiumisation is no longer automatic or universal. It is becoming selective.
Category Divergence: Premiumisation Becomes Selective
The clearest evidence lies in category splits. Recent earnings reports across the sector point to the sharpest ceiling in ultra-premium segments. Cognac illustrates this most starkly. LVMH Wines & Spirits (full-year 2025) declined 5% organically, with Hennessy weighed by weaker local demand in China and U.S. tariffs. Pernod Ricard’s Martell (H1 FY2025–26) suffered heavy declines in China, though emerging markets like South Africa and Nigeria provided partial offsets. Rémy Cointreau’s Cognac division (9M FY2025–26) posted a 4.3% organic decline, though the third quarter rebounded +3.2% on solid Americas momentum.
Accessible premium and occasion-driven formats, by contrast, demonstrate resilience. Tequila at accessible price points holds ground: Campari’s Espolòn (FY 2025) grew +3% organically, with Reposado up +8% and RTD extensions accelerating in markets like Australia. Ready-to-drink emerges as a clear growth vector: Diageo’s spirits RTD portfolio (H1 FY2026) rose 17% organically, driven by Smirnoff, while Brown-Forman’s New Mix posted +34% organic growth in emerging markets such as Mexico.
The divide appears increasingly structural rather than cyclical – suggesting that premiumisation itself is splitting into distinct growth paths: one for status-driven ultra-premium, another for accessible and occasion-led formats.
Geography Fragmentation: Growth Is Moving
Regional divergence reinforces the selectivity. Mature markets appear to be entering a consolidation phase after a decade of aggressive premium trade-up. Several producers reported pressure in the U.S., where softer disposable income and competition from more affordable alternatives are beginning to weigh on volumes and mix. Pernod Ricard saw organic sales fall 15% in the US during the first half of FY2025–26, reflecting weakness in key mature markets, while Brown-Forman posted a modest -1% organic decline (with U.S. net sales down 8% reported). China corrections are sharper still: Diageo’s Chinese white spirits dragged group performance, Pernod Ricard reported -28% organic, LVMH Hennessy was impacted by duties and sentiment, and Rémy Cointreau’s APAC region saw a slight decline (underlying almost stable excluding Chinese New Year calendar effects).
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Emerging markets tell the opposite story. India sustains premium momentum: Pernod Ricard +4% organic (+8% excluding a divested local brand), with premium expressions on Jameson, Ballantine’s and Absolut driving trade-up. Africa and Latin America/Caribbean show strength: Diageo highlighted robust growth offsetting North America weakness; Pernod Ricard noted gains in South Africa (Martell) and Nigeria; Campari’s emerging markets contributed positively through aperitifs and agave.
The geographic map is redrawing: traditional powerhouses face inventory and demand normalisation, while select emerging regions continue to premiumise.
The Inventory Hangover: Supply Built for Another World
A common thread beneath these divergences is supply-demand mismatch rooted in the post-pandemic era. Accelerated consumption during lockdowns prompted capacity expansions and inventory build-up, particularly in aged categories like Cognac and Scotch where supply cannot easily be adjusted. Demand normalised faster than supply chains could respond.
Distributor destocking amplified the effect: Pernod Ricard cited inventory adjustments in the U.S. and China; Brown-Forman noted net distributor inventory increases in the U.S. (+2%) and emerging markets (+5%), yet depletions lagged shipments in several lines. The result is persistent pressure on price/mix and margins, particularly in aged categories where holding periods lengthen and channels prioritise clearance.
Strategic Reset: Adapting to a More Selective Premium Market
Responses across the industry are converging around three priorities: portfolio discipline (through targeted divestments and rationalisation), cost and supply-chain efficiency, and a more selective approach to marketing investment – shifting A&P from broad growth driver to focused defence of core equity.
Leading groups are streamlining non-core assets, accelerating cost programmes, and prioritising fewer, bigger marketing bets. Financial flexibility is rising in priority, with balance-sheet discipline and accelerated cost programmes becoming more visible across the sector.
The emerging playbook is clear. Premiumisation no longer guarantees growth. Execution does. Companies must answer four questions: which price tier (accessible vs ultra), which category (occasion-driven vs status), which geography (emerging vs mature), which occasion (moderation/convenience vs gifting/status).
Premiumisation once served as the industry’s universal growth engine. That engine still runs – but it no longer powers every market or category. In the fragmented landscape now emerging, execution – not assumption – will separate the winners from the rest.
