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Don Julio Tequila Maker Diageo Is Running Low on Booze That Takes Years to Make
Owner of Crown Royal whisky faces shortages resulting from high demand and supply constraints during the pandemic
LONDON—The world’s largest spirits maker is running low on some of its products.
Diageo PLC said soaring pandemic demand is depleting stocks of Crown Royal whisky, Lagavulin Scotch and Don Julio tequila. These bestselling brands can take months or years to age before hitting liquor-store shelves, making it hard to quickly increase production.
Diageo said it also hasn’t had enough bottles to package up Bulleit bourbon to meet demand. It is separately grappling with higher costs for aluminum and cereals that go into the booze-making process. Shipping and energy bills have climbed.
“The constraint is simply on being able to meet very high demand,” said Chief Financial Officer Lavanya Chandrashekar, on a call with reporters after releasing half-year results that showed higher sales. Manufacturers across industries and regions have faced constraints. Pandemic-induced shortages and price jumps have occurred at times for basic commodities like toilet paper and lumber and for bigger ticket items like hot tubs and used cars.
Liquor companies like Diageo are in a particularly difficult bind since many of their brands rely on barrel aging—a process used to mature spirits like whiskey and some types of tequila before they can be sold. That makes it hard to meet sudden surges in demand, like the ones that liquor makers have faced amid the pandemic. While bars and restaurants have been closed off and on for the last two years, in the U.S. spirit sales at groceries, liquor stores and online have ballooned.
The pandemic has whipsawed the drinks industry in other ways, triggering changes in drinkers’ behavior and regulations over how alcohol is sold. Home drinking increased, driving consumers to buy their booze at groceries and liquor stores, which were deemed essential services in many locales. Some states loosened laws on takeout booze orders from restaurants and online alcohol sales.
Many drinkers also started splurging on more expensive brands. Executives have said consumers who couldn’t spend on concerts, travel or watching live sports instead bought upscale spirits to drink at home. Tequila has been a big seller—with Americans experimenting drinking it at home in more ways, including on the rocks, with soda and in cocktails apart from margaritas.
There are huge supply-chain constraints in the U.S. impacting sales of Crown Royal and other liquors.
Diageo makes Crown Royal whisky by blending various whiskies aged in new or reused unavailable charred oak barrels. .
The shortage of bespoke glass bottles to package Bulleit bourbon hit Diageo’s market share of the U.S. whiskey category
Diageo said it has also been mitigating the impact of inflationary costs of production by raising prices on some brands in the U.S., Nigeria and Turkey.
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