The State of the Spirits Industry 2026: Navigating Distribution, Gen-Z Drinking, and M&A

All right, thanks everyone for joining us today. I hope you’re having a great first day at BCB. It’s good to be back, and thank you to everyone for participating in Park Street University. We’re going to talk about the state of spirits in 2026. As Emmett mentioned, my name is Sarah, and I’m the Director of Supplier Development at Park Street—overseeing Park Street University, our educational content, trade marketing, standard marketing, and business development.

Having been with Park Street for nearly twelve years, I’ve spoken to thousands of brands on all things regarding the U.S. route to market, making operational changes, entering the market, and scaling. Today, I’m excited to share some of the latest insights with you all. We’re going to talk specifically about navigating the “new normal” in the spirits industry in 2026.

Our session will cover:

• Gen Z moderation and the low-and-no movement

• The U.S. dietary guidelines and alcohol

• Distributor consolidation and emerging paths forward

• Current M&A activity

• Strategic takeaways for your brand

If you’d like to follow along or save these slides, you can scan the QR code on screen—we publish everything for free during and after the show.

Gen Z Moderation & The Low/No Movement

The narrative we hear time and time again regarding Gen Z is that they are the “sober generation” and that the low-and-no movement is the next dominant force in the industry. As with anything, when you dive into the specifics, it proves to be much more nuanced. While it is fair to say that Gen Z behaves differently than prior generations like Millennials and Gen X, they are in fact drinking—it’s just different than what we’ve seen previously.

• 70% of U.S. Gen Z reported consuming alcohol in the first half of 2025—a notable uptick from the 46% calculated in 2023.

• Demographic Context: Gen Z currently spans ages 14 to 29. For the U.S. Legal Drinking Age (LDA) of 21, only about half of the generation is currently able to drink. These are emerging behaviors, and a large section of the population is still coming of age.

• Pandemic Impact: LDA Gen Z spent many of their formative years during the COVID-19 pandemic, which understandably shaped their choices, preferences, and social habits.

Gen Z isn’t abandoning alcohol; they are redefining it. They drink on fewer occasions and across different formats—like the rise of brunch culture or festival settings like Coachella. When they do drink, they choose higher quality and make more intentional choices. Brand authenticity and storytelling are more important to this generation than ever before.

The low-and-no category is undeniable, standing at nearly $6 billion annually as of 2025 data, with a projected 4.7% CAGR through 2035. While still a relatively small share of the total beverage alcohol pie, capturing a slice of it is highly relevant. Ultimately, we view low-and-no as supplementing alcohol rather than completely replacing it.

The shift is about format and occasion, not absolute abstinence. Subcategories like flavored spirits, RTDs, and lower-ABV options are among the fastest-growing because Gen Z gravitates toward them. Furthermore, Gen Z actually outperforms other demographic cohorts in their frequency of visits to the on-premise, putting a premium on real, in-person social experiences.

U.S. Dietary Guidelines & Moderation

Looking at dietary guidelines: in 2023, the WHO declared there was “no safe level” of alcohol consumption, shifting away from two decades of messaging centered around “harmful use.” While fear-mongering headlines tend to dominate mainstream media, we’ve recently seen a positive counter-narrative emerge. Publications like GQ and mainstream news outlets have published opinion pieces highlighting the vital role alcohol plays in social health.

There were initial industry concerns regarding what the updated Dietary Guidelines for Americans would look like, especially following the strong Surgeon General’s warnings issued toward the end of the prior administration. However, the latest guidance is less absolute than feared: rather than imposing rigid daily drink limits, it simply encourages consuming less overall.

The spirits industry has always advocated for responsible drinking, and there is a critical distinction between moderate, social drinking and heavy or harmful use. In fact, the National Academies of Sciences recently reaffirmed the benefits of alcohol on social health. Following years of pandemic-related social isolation, anxiety, and depression, alcohol—when consumed responsibly—can play a meaningful role in fostering social connections, friendship, and community.

Distributor Consolidation & Emerging Paths Forward

Significant shifts have hit the U.S. distribution tier recently, marked by consolidation, headcount cuts, and structural realignments:

• RNDC’s Withdrawal & Reyes’ Expansion: One of the biggest industry headlines was RNDC—formerly the second-largest wine and spirits distributor—quickly pulling out of California and collapsing as a major distribution force. They closed a deal selling operations across 11 markets to Reyes Beverage Group. Historically a beer distributor, Reyes expanded its footprint to 15 states plus Washington, D.C., now covering 52% of the U.S. legal drinking age population.

• Breakthru Beverage Cuts: Breakthru cut hundreds of jobs over the past year, particularly roles focused on craft spirits, emerging brands, and entrepreneurial portfolios.

• Southern Glazer’s Growth: As the largest U.S. distributor, Southern Glazer’s further expanded its national footprint by acquiring Claire Rose (Long Island) and Eagle Rock (Colorado).

Interestingly, while distributor consolidation was historically a response to consolidation at the supplier tier, we are now seeing the inverse. Major strategic suppliers are re-evaluating mega-mergers—such as the recent bidding activity between Sazerac and Pernod Ricard over Brown-Forman.

For independent brands, these disruptions create fresh opportunities:

• Beer/Wine Distributors Entering Spirits: Partners like Reyes moving into spirits present opportunities to negotiate fresh terms, utilize new sales forces, and penetrate markets differently.

• Clearing Distribution Models: Platforms like Park Street allow brands to utilize a clearing distribution model to bridge market gaps, test proof-of-concept, and invest capital directly into dedicated sales and marketing. Operators using this model report 20% to 30% growth in the on- and off-premise by maintaining direct control over channel relationships.

Strategic M&A Activity

While overall M&A activity has slowed from its previous frenzy, strategic buyers remain highly active for brands that align with Gen Z preferences, RTD formats, celebrity backing, and low/no offerings:

Major strategics recognize that agile entrepreneurs are far better at authentic brand building than internal R&D departments. As a result, acquisitions are happening much earlier in a brand’s lifecycle, particularly for those capturing the Gen Z consumer.

Strategic Takeaways for Your Brand

When navigating U.S. distribution, keep these core regulatory and structural realities in mind:

1. Control vs. Open States: Roughly 18 U.S. states operate as control markets where the state board controls spirit listings. Products must hit strict performance metrics or risk getting delisted—after which relisting is nearly impossible. Major open markets like New York, California, and Florida offer freer commercial access.

2. Franchise vs. Non-Franchise States: In franchise markets (e.g., Georgia, Tennessee), franchise laws protect the distributor, making it extremely difficult to terminate a distribution contract once signed. Evaluate these legal layers carefully before entering.

3. Right-Sizing Your Distributor: Mega-distributors manage thousands of SKUs, making it difficult for a startup brand to get its fair share of mind. Working with regional independents or clearing platforms allows you to be a “big fish in a small pond,” gather real-time market feedback, and build a proof-of-concept.

There is no single silver bullet or one-size-fits-all strategy. Highly accessible entry points—such as RTDs, flavored spirits, and lower-ABV options—act as effective “on-ramps” that bring new legal-drinking-age consumers into the spirits category. Focus on building an authentic brand, finding the right distribution fit, and staying agile.

Thank you so much for having me!