Jones Featured in Bloomberg Law’s Article “Distilleries Navigate Solvency Issues Following Covid Sales Boom"

Partner Greg Jones was featured in Bloomberg Law’s article, “Distilleries Navigate Solvency Issues Following Covid Sales Boom,” which explores the growing financial distress facing the alcoholic beverage industry after years of rapid expansion driven by pandemic-era consumption.

The alcoholic beverage industry is facing growing financial distress as declining consumer demand, shifting preferences, and market saturation collide with rising costs and regulatory challenges. While the Covid-19 pandemic drove a temporary boom in alcohol sales and spirits tourism, consumption has since fallen sharply, with a recent Gallup poll showing alcohol use at a record low among U.S. adults.

Craft distillers, particularly newer whiskey and bourbon producers, have been hit hardest. Many expanded rapidly during the pandemic and are now burdened with aging inventory, constrained cash flow, and overstated barrel valuations. As a result, an increasing number are turning to restructurings, receiverships, Article 9 foreclosures, and bankruptcy proceedings. High-profile cases, including Uncle Nearest Inc., illustrate how liquidity pressures and asset valuation disputes are reshaping the industry.

Barrel aging presents a unique challenge, as bourbon can take seven years or more before reaching market. With demand softening, unfinished product continues to depreciate while tying up capital. Oversupply in the barrel market has further weakened recovery prospects for distressed producers.

At the same time, tighter lending conditions are limiting access to capital. “Lenders are less willing to take on risk in the current market, and challenges around barrel valuation are making it particularly difficult for distilleries to recover,” said Greg Jones, a bankruptcy partner at Stradling.

Additional pressures, including excise taxes, state-specific barrel taxes, delayed licensing approvals, and tariffs, are compounding the strain. As alcohol producers adapt to changing consumer behavior and economic uncertainty, industry professionals expect continued consolidation and an increase in restructurings across the sector.