Whiskey groups like MGP Ingredients, Lofted Spirits and Whiskey House of Kentucky are struggling to respond to a dramatic drop in demand that has left them holding excess inventory built up during boom times, which in turn is costing more to warehouse and insure, said two sector advisers and an industry consultant.

Distributor Breakthru Beverage Group, meanwhile, is contending with the declining value of its whiskey inventory that is used as collateral on its ABL revolving credit facility, said two additional sector advisers. One of these advisers noted that whiskey repricing pain is widespread across distributors that rely on ABL borrowing.

MGP’s inventory jumped nearly 20% over the past two years even as revenue has been in free fall, dropping 36% between 2023 and 2025 and again falling in the first half of 2026, according to filings.

The Kentucky Distillers’ Association reported last year that there was an all-time-high of 16.1 million aging barrels of bourbon in the state. Bulk aged whiskey prices are down across the board and, in some categories, have declined by as much as 70% from peak pricing, according to Novo Advisors.

Younger consumers have been turning to alcohol alternatives, while older generations are consuming fewer alcoholic beverages, the two sector advisers said. Demand for US spirits took another hit last year when several Canadian provinces halted imports to protest the Trump administration.

Producers have responded by cutting back on production, but it will take time for the market to work through excess inventory, the first sector adviser said.

MGP, a producer of branded and distilled spirits along with food ingredients, temporarily idled distilling operations at two facilities earlier this year. Management has told investors it is “actively evaluating all available levers to operate more efficiently” amid a “challenging” outlook for the industry.

Whiskey House of Kentucky has also taken steps to address excess inventory, including reducing its workforce by roughly 30%, according to industry publication The Spirits Business. The Elizabethtown-based company is currently operating at about 60% of capacity. Major branded groups have likewise slowed production.

The decision to curtail production makes strategic sense when it costs USD 450 to USD 600 to produce a new barrel of whiskey, the same price for a four-year old barrel, a fifth adviser said.

With declining sales and EBITDA, MGP’s net leverage ratio has jumped to 3.5x, and it recently amended its credit agreement with Wells Fargo Bank that included exercising an option to boost the maximum leverage ratio to 4.5x.

The issuer’s USD 201m 1.875% convertible notes due 2041 last traded at 99, according to MarketAxess. Shares are down 45% year-to-date giving the company a USD 285m market cap.

Contract distiller Lofted Spirits reached a deal this summer to extend the maturity on a USD 50m second lien term loan by two years to August 2030 and upped the spread by 200bps to SOFR+ 975bps, according to Markit. A BDC managed by Churchill Asset Management marked the loan at 95 as of 30 June, according to Debtwire’s BDC database.

Pritzker Private Capital acquired Bardstown Bourbon in 2022 and combined it with Green River Distilling Co, later rebranding under the name Lofted Spirits. The investor had bad timing with the acquisition because it purchased Green River just ahead of the peak of the whiskey market at the tail end of 2023, the first sector adviser said.

Producers are also contending with the fallout from the organized wind down of the second largest domestic alcohol distributor Republic National Distributing Company over the past year.

MGP has said it began transitioning its retail routes in 10 markets prior to RNDC’s July bankruptcy but acknowledged that routes are not complete for some markets and is working to find new partnerships.

RNDC started shutting down and selling off its operations on a state-by-state basis ahead of filing for bankruptcy with a plan to liquidate its remaining assets. Proceeds from the sales have gone to paying down the company’s USD 1.5bn revolving credit facility.

In filings, RNDC attributed its demise to poor market timing as it ramped up inventory during the COVID-19 pandemic to respond to elevated at-home consumption only to be caught flat footed when demand rapidly dropped in 2022 even as costs soared.

This led to a “mismatch” between RNDC’s obligations to suppliers and economic reality, leaving suppliers to exit and creating an “insurmountable” problem for RNDC, according to CRO John Castellano.

While Breakthru Beverage is backed by the wealthy Wirtz family that owns the NHL’s Chicago Blackhawks team, the third and fourth sector advisers said they are closely monitoring the company due to questions on the valuation of its inventory.

In February, the company reportedly completed a strategic review that led to several hundred job cuts. The review came months after it extended the maturity on its USD 1.7bn revolving credit facility agented by JPMorgan to 2030, according to Debtwire data.

Breakthru says it has more than USD 8.6bn in annual sales and operates in 16 markets in the US and Canada, distributing a portfolio of spirits, wine, beer and non-alcoholic brands.

MGP Ingredient, Breakthru Beverage, Lofted Spirits and Whiskey House didn’t respond to requests for comment.