After the party, comes the hangover. With the great pandemic drinking binge officially ending in 2025, dealmakers are left to ponder the headaches of alcoholic beverage M&A.

Since mid-2020, when COVID-19 began to transform drinking habits and sector dynamics, the industry has been on what Maria Pearman, food and beverage practice leader at GHJ, called “a wild ride.”

Last year, the first free of pandemic-era influences, served as a sector-wide sobering up, she said.

“2025 represented a meaningful reset for beverage alcohol M&A,” said Pearson. “Operating performance could be evaluated without the benefit of COVID-era distortions, exposing softer demand across many core categories,” Pearman said. “At the same time, input-cost pressure and tariff volatility added uncertainty to forward projections.”

Pearman said the market clearly favored buyers: valuation multiples compressed, diligence became more rigorous, and deal structures increasingly relied on earn-outs and performance contingencies.

“In this environment, even fundamentally strong brands often chose to delay sale processes or recalibrate valuation expectations, waiting for greater macro stability and clearer category momentum,” she said.

Mergermarket data shows dealmaking activity in the North American alcoholic beverage sector sank to an 11-year low last year, with 39 deals, down from the pandemic-era high of 70 transactions in 2021. The decline in North America mirrors Europe’s.

Political hangover

Politics and shifting trade policies remain obstacles. The sector faces several external economic shocks, including Canada’s boycott of US spirits, which drove exports north of the border down 85% in 2Q25, noted Iván Marchena, senior economist at Just2Trade.

Suntory’s Jim Beam is the poster child for the supply-demand imbalance. The brand is pausing whiskey distillation at its main Clermont, Kentucky, campus for all of 2026 due to industry-wide bourbon oversupply, sluggish demand, and trade tariff pressures.

“The Jim Beam inventory situation is emblematic of a broader issue: demand forecasts made during the post-pandemic surge simply didn’t materialize,” Pearman said. The result is excess aged inventory across whiskey and agave-based spirits, and breweries carrying more finished goods than they can profitably sell. Compounding the issue, margins are being squeezed by higher prices for glass, aluminum, agave, and grains.

Consumption, in any case, has trended lower for several years, and investors now broadly accept that this is a structural shift rather than a temporary slowdown, said Andrius Budnikas, co-founder and chief product officer at Gainify.

The result has been strategic resets and, in some cases, distressed sales.

Reyes Beverage Group’s pending purchase of assets from Republic National Distributing Company shows the impact of the inventory glut in the wine and spirit segments, noted Will Liebmann, director of Dykema’s corporate finance practice.

Who’s buying?

Strategics remain active but cautious, paring their lineups and prioritizing bolt-ons they can plug into existing distribution networks, Pearman said.

Several sector giants have pruned portfolios: AB InBev has shed a large portion of its craft beer and “beyond-beer” brands since 2023 to focus on high-volume products like Bud Light, Michelob Ultra, and spirits-based drinks.

Constellation Brands has doubled down on core premium beer, while selling off lower-margin wine brands such as Woodbridge and Meiomi wines to focus on high-end products.

Pernod Ricard divested its Mumm Napa sparkling wines business in December as part of a focus on premium spirits and champagnes.

“The message is clear: focus beats breadth,” said Ben Tannenbaum, a beverage industry analyst who produces the alcohol-focused online series Proof Points.

Financial sponsors, meanwhile, are extending hold periods and taking a more hands-on approach to operations, said Pearman. Logical targets are founder-led brands that have proven demand but need balance-sheet relief or distribution optimization, she said.

“CVC Capital Partners, L Catterton, and NM Capital are driving sector M&A, with all looking to capitalize on regionally focused niche brands,” Marchena said.

Ready to drink

Bright spots heading into 2026 include ready-to-drink (RTD) spirits-based beverages, low- and no-alcohol products, “natural” wines (minimal additives like sulfites), and select spirits such as tequila, said David Parker, CEO of Benchmark Wine Group.

AB InBev’s pending USD 490m purchase of an 85% stake in popular RTD brand BeatBox, announced in December, illustrates the desirability of the segment, said Liebmann.

The industry has shifted from owning a category to owning specific drinking behaviors, Tennenbaum said. RTDs grew 20% year-over-year in 2025 and now represent USD 13.9bn in sales, or 12.5% of the total alcoholic beverage market. Hard seltzer, by contrast, declined 7.4%, “showing how quickly maturation happens once the novelty wears off,” he said.

Cheers to real estate

Real estate could also factor into 2026 deals, said Clyde Christian Anderson, CEO and founder of retail real estate platform GrowthFactor.

“I’m watching craft distilleries with terrible financials but great real estate portfolios,” Anderson said. One Texas client had seven underused tasting rooms during COVID, and “those sites are now worth more than the distillery operations.” Strategic buyers pay two or three times more for brands that come with retail-ready real estate versus distribution-only brands, he said.

Despite tariff uncertainty, consumption trends and inventory overhang, the sector remains attractive for two main reasons, said Liebmann.

First is the so-called ‘buy-versus-build’ strategy – it’s often easier to buy a successful brand than create one from scratch, he said. Second, valuations are dropping in most categories and PE firms have plenty of dry powder. “There is still a good amount of interest and deal-making going on.”