The past century has seen fluctuations in alcohol consumption. But it’s maintained a steady decline since the mid-2000s, with figures from the WHO showing a drop of 0.5 litres per capita, since 2010.
And with a significant shift in attitudes towards alcohol, particularly amongst younger generations, this trend shows no signs of abating.
So why are consumers drinking less, and how is the beverage industry adapting to not just survive, but thrive?
Why are consumers drinking less alcohol?
The shift away from alcohol can be attributed to a whole host of societal changes. But the most powerful force is undoubtedly the rise of the health and wellness trend. Emerging in the mid-2010s, this trend gained major traction during the global pandemic and its power has only increased from there.
“COVID-19 has made people more health conscious and willing to change their lifestyles to stay well,” says Douglas Broom, senior writer on Forum Agenda for the World Economic Forum.
Furthermore, what might have been considered entertainment to Boomers and Gen X, is proving less appealing to Millennials and Gen Z. Where once, many might have gone to a pub or bar after work, now gyms and fitness classes are proving popular, resulting in a boom in gym culture.
“The current largest consumer demographic is under 50, and this group is drinking less alcohol overall,” says Brian Rosen, founder and managing partner of InvestBev.
Another reason for consumers to cut their alcohol consumption is cost. The cost of alcoholic beverages has risen over the past decade making it, for some, a luxury product.
According to Eurostat, a division of the European Commission, the cost of alcohol has risen by more than 95% since 2000. While the price rises may be unavoidable for manufacturers, facing increasing production costs, it is making alcoholic beverages less accessible for consumers.
Finally, choice is proving a major factor in encouraging consumers away from alcohol. There’s a whole range of beverage options available, from smoothies and shakes to coffees and kombuchas.
“Alcohol free options are better than ever,” says Freya Twigden, founder of kombucha brand Fix8 Kombucha and Fibe Prebiotic Soda. “We historically didn’t have the choice of something interesting or tasty if we weren’t drinking alcohol, now we truly do.”
How is industry adapting to declining alcohol consumption?
While on the surface, a decline in alcohol consumption might appear bad news for the beverage industry, it’s actually opened the door for a wave of innovation and market growth.
Why? Because the decline, fuelled primarily by the growing health and wellness trend, has led to the launch of a whole range of alcohol-free alternatives, with everything from protein shakes to alcohol-free spirits, proving popular.
And for those who enjoy the flavour of beer, there’s a fast-growing non-alcoholic beer industry, which is proving hugely popular with consumers. So much so that the non-alcoholic market is now valued at $36.8bn, according to Statista, and it’s projected to grow at a CAGR of 4.74% over the next five years.
What’s more, we’ve seen the rise of brands entirely dedicated to non-alcoholic drinks, with Three Spirit, CleanCo and Pentire just a few of the many newcomers to the industry.
Meanwhile, for those looking to cut down, not cut out, there are also low-alcohol options, such as Carl Jung’s low alcohol wine range and St Austell’s low-alcohol ales.
But, while alcohol consumption is declining, it is still a major market. So what changes are taking place within alcohol consumption?
“Initially, wine dominated the scene, with tequila beginning to rise in popularity,” says InvestBev’s Rosen. “However, wine is now in decline, while tequila, brown spirits, cannabis-infused beverages, and ‘better-for-you’ options have gained significant traction with consumers.”
What can brands do to successfully adapt to the decline in alcohol consumption?
It appears that some beverage brands have adapted to the decline in alcohol consumption better than others. So, what’s their secret?
“The brands that are capturing market share are those offering unique, innovative, and health-conscious products,” says Rosen. “These brands have succeeded by aligning with current consumer trends.”
Moreover, certain drinks appear immune to trends, proving popular regardless.
“Premium, handcrafted, aged alcohol will always have a place in the market because of its quality and uniqueness,” says Rosen.
It’s also increasingly important to stay relevant and exciting to the consumer. As variety increases, consumers can pick their favourites and avoid those less appealing.
“Brands that lack personality, a strong identity, or distinct appeal will struggle,” says Rosen.
Paying close attention to changing trends will also help brands to avoid getting left behind by ever-changing consumer behaviour.
“Brands are already adapting to the changing market by creating products that align with consumer demand,” says Rosen. “Social media and the easy access to information has played a big role in this. Brands now have the ability to track trends and understand consumer preferences without relying on expensive consulting reports.”
Despite the challenges faced by the beverage industry, the outlook is extremely positive, resulting in a projected revenue CAGR of 10.05% over the next five years, according to Statista.
“The beverage industry is incredibly resilient and largely unaffected by broader economic or political changes,” says Rosen. “People drink when they’re happy, people drink when they’re sad. It’s a category that is here to stay.”
