Beverages: ‘Another tough year’ for alcohol, but growth spots remain

Why it is the topic trending:

• Performance Review of a Major Consumer Market: The beverage alcohol market is a significant part of the global economy, and its performance in 2024, along with forecasts for the future, is of interest to industry professionals, investors, and consumers.

• Shift in Consumer Spending Habits: The article highlights changes in consumer alcohol preferences, including moderation trends and shifts between different categories (spirits, wine, beer, RTDs), reflecting broader shifts in spending habits.

• Impact of Economic Factors: The analysis discusses the influence of macroeconomic conditions, such as inflation, GDP growth, and disposable incomes, on alcohol consumption, connecting it to wider economic trends.

• Potential Trade War Implications: The article touches upon the looming threat of a trade war and its potential to dramatically alter alcohol choices in 2025, making it a timely and relevant topic.

• Growth Areas and Declining Sectors: Identifying specific categories like premium beer, agave spirits, and wine that experienced growth alongside declining sectors like super-premium spirits and traditional wine provides valuable insights for businesses in this industry.

Overview:

According to preliminary IWSR data, the total global beverage alcohol market declined by 1% in 2024 (excluding national spirits), falling short of forecasted expectations due to underperformance in key markets like the US, China, India, and Europe. This means that total beverage alcohol volumes are now 2% lower than pre-pandemic levels in 2019. While most categories saw declines, there were bright spots in premium beer, agave-based spirits, Indian whisky, prosecco, and the no-alcohol spirits sector. The article explores the factors behind these trends, including economic pressures, shifting consumer preferences, and the potential impact of a looming trade war in 2025.

Detailed findings:

• Overall Volume Decline: Total beverage alcohol volumes decreased by 1% in 2024 compared to 2023 and are 2% lower than in 2019.

• Category Performance: Spirits (excluding national spirits) and RTDs were the only categories to experience growth since 2019. Beer volumes are down 2%, and wine has declined significantly by 21% over the same period.

• Key Market Underperformance: The top 20 markets collectively missed their forecast by 1-2% in 2024, with the US, China, India, and Europe all performing below expectations.

• China's Downturn: On-trade closures and economic weakness led to a 4% decline in China's TBA volumes, impacting global beer, cognac, and scotch markets.

• Emerging vs. Mature Markets: Emerging economies like Brazil, South Africa, India, and Mexico showed growth, while mature markets like the US and China experienced declines.

• Economic Impact: Soft GDP growth and high living costs negatively affected disposable incomes in developed markets, impacting alcohol consumption.

• Bright Spots: Premium beer sales were buoyant in developing markets, and the RTD category continued to grow. Agave spirits and Indian whisky performed well, with single malt whisky seeing gains in India. Prosecco also saw increased consumption.

• Moderation Trend: The trend of consumers moderating alcohol consumption benefited the no-alcohol spirits category, which saw strong growth, though it still represents a small share of the overall spirits market.

• Stalling Premiumisation: The trend of premiumisation softened in 2024, with consumers seeking better value, leading to a decline in super-premium-plus spirits volumes (excluding national products). Beer was an exception, with premium segments growing. Wine's decline was less pronounced in premium segments.

• Spirits Market: Total spirits volumes declined by 3% across the top 20 markets (skewed by national spirits). Excluding national spirits, the decline was less than 1%, with growth localized to entry-level Indian whisky and value gin in the Philippines. Super-premium-and-above spirits saw the largest volume decline.

• Wine Market: Wine volumes fell by 4% across the top 20 markets, with significant drops in the US, UK, France, and Germany. Spain showed some growth in the value segment due to competitive pricing. Prosecco consumption increased due to its attractive price point and popularity in early evening spritzes.

• Beer Market: Beer volumes dipped by 1%, mainly due to China's downturn, but saw growth in Brazil, Mexico, and improved performance in Europe. Premium beer segments gained share.

• RTD Market: RTDs grew by 2% overall across the top 20 markets, with most markets expanding except Australia, China, India, and the UK.

The growth spots in the alcohol market in 2024 were:

• Premium Beer: Specifically in some developing markets.

• Agave-based Spirits: Continued to expand globally, despite losing some momentum in the US and Mexico.

• Indian Whisky: Performed well, with the single malt segment experiencing significant growth in India.

• Prosecco: Global consumption increased, benefiting from its attractive price point and its role in early evening spritzes.   

• RTDs (Ready-to-Drink): Experienced overall volume gains across most of the top 20 markets (with exceptions like Australia, China, India, and the UK).

• No-Alcohol Spirits: Continued to see strong growth across the top 20 markets.   

• Beer in Key Markets: Saw a return to growth in Brazil and Mexico, as well as an improved performance in Europe.

• Wine in Spain: Competitive pricing led to growth in the value end of the Spanish wine market, particularly for still wines.   

• International Spirits in Specific Markets: India, Russia, the Philippines, Japan, and Thailand recorded an increase in international spirits volumes.  

The outlook for growth spots in the alcohol market for 2025 is more cautious and less clearly defined:

• Unpredictable Outlook due to Potential Trade War: The article states that "2025 looks set to bring choppier waters, with the sector on the front line of a trade war." 1  The threat of tit-for-tat tariffs could cause "dramatic shifts in alcohol choices," making specific growth spots unpredictable. 

• Continued Opportunities in No-Alcohol and Lighter Alternatives: The article notes that the moderation trend continues, suggesting that the no-alcohol spirits category and potentially other lighter alternatives will likely see continued growth.

Key Takeaway:

The global beverage alcohol market experienced a slight decline in 2024, falling short of expectations due to economic pressures and shifting consumer preferences. While premium beer, agave spirits, Indian whisky, and prosecco showed growth, the trend of premiumisation has softened, and the looming threat of a trade war in 2025 adds further uncertainty to the market outlook.

Main Trend: Consumer Caution and Shifting Preferences in the Alcohol Market

Description of the trend (please name it): The "Cautious Consumption Shift" trend describes the evolving landscape of the beverage alcohol market in 2024, characterized by overall volume decline, a moderation in premium spending, and a noticeable shift in consumer preferences towards certain categories like value-oriented options, premium beer in developing markets, and growth in RTDs and no-alcohol alternatives amidst economic pressures and changing lifestyle choices.

What is consumer motivation: Consumer motivations driving these trends include:

• Economic Constraints: Persistent high living costs and soft GDP growth are impacting disposable incomes, leading consumers to be more cautious with their spending on non-essential goods like alcohol and seek value options.

• Health and Wellness Trends: Growing awareness of health and wellness is driving moderation in alcohol consumption and increased interest in no-alcohol alternatives.

• Evolving Social Norms: Changing social norms and drinking occasions are influencing category preferences, such as the rise of prosecco for early evening consumption and the continued appeal of RTDs.

• Preference for Specific Product Attributes: Consumer preferences for certain product characteristics like flavor profiles (e.g., agave spirits, Indian whisky) and convenience (e.g., RTDs) continue to shape market dynamics.

What is driving trend: The key drivers of this trend are:

• Macroeconomic Conditions: Inflation, GDP growth, and living costs have a direct impact on consumer spending power and their willingness to purchase alcohol, particularly premium options.

• Increased Health Consciousness: Growing public awareness of the health impacts of alcohol consumption is contributing to the moderation trend and the rise of no-alcohol alternatives.

• Innovation and Product Development: The introduction of new and appealing products in categories like RTDs and no-alcohol spirits is attracting consumers and driving category growth.

• Shifting Social Occasions: Changes in when and how people socialize are influencing the types of alcohol they choose to consume.

What is motivation beyond the trend (for people to consume alcohol): Beyond these specific trends, people consume alcohol for:

• Socialization and Celebration: Alcohol often plays a role in social gatherings and celebrations.

• Relaxation and Stress Relief: Some individuals use alcohol to unwind and de-stress.

• Taste and Enjoyment: Many people enjoy the taste and variety of alcoholic beverages.

• Cultural and Traditional Practices: Alcohol consumption is embedded in many cultures and traditions.

Description of consumers article is referring to (what is their age? What is their gender? What is their income? What is their lifestyle):

The article provides a broad overview of global trends across the top 20 markets, encompassing a wide range of consumers. However, some specific insights can be inferred:

• Age: Gen Z's interest in RTDs and moderation aligns with the trends mentioned. Older consumers might be more entrenched in traditional categories like wine, though they are also subject to economic pressures and health considerations.

• Gender: While not explicitly stated, both men and women are likely part of the consumption trends observed across different categories.

• Income: The softening of premiumisation suggests that consumers across income levels are becoming more price-conscious due to economic pressures. However, premium beer still sees growth in developing markets, indicating disposable income in those regions.

• Lifestyle: Consumers with a greater focus on health and wellness are likely driving the no-alcohol spirits trend. Those seeking convenience and variety might be drawn to RTDs.

Conclusions:

The alcohol market in 2024 faced challenges due to economic headwinds and evolving consumer preferences. While overall volumes declined, certain categories and markets showed resilience and growth. The softening of premiumisation and the potential impact of a trade war in 2025 suggest continued volatility and the need for the industry to adapt to changing consumer behaviors and economic realities.

Implications for brands (alcohol producers, retailers, hospitality industry):

• Alcohol Producers: Need to be agile and responsive to shifting consumer preferences, investing in growth categories like premium beer in developing markets, agave spirits, Indian whisky, prosecco, RTDs, and no-alcohol alternatives. They should also be mindful of value-conscious consumers.

• Retailers: Should adjust their inventory to reflect these changing demands, ensuring a good selection of products in the growing categories and potentially adjusting shelf space for declining segments.

• Hospitality Industry: Bars and restaurants should cater to the moderation trend by offering a wider range of appealing no-alcohol and low-alcohol options. They should also be mindful of price sensitivity and potentially offer value-driven promotions.

Implication for society:

• Potential for Healthier Consumption Patterns: The moderation trend and the growth of no-alcohol options could lead to healthier alcohol consumption patterns in society.

• Economic Impact of Trade Wars: The threat of a trade war highlights the potential for geopolitical events to significantly impact consumer choices and market dynamics.

Implications for consumers:

• Wider Variety of Choices: Consumers will likely continue to see a wider variety of alcoholic and non-alcoholic beverages available.

• Potential for Price Increases: The threat of tariffs and ongoing economic pressures could lead to price increases in some alcohol categories.

Implication for Future:

• Continued Market Volatility: The alcohol market is likely to remain volatile in 2025 due to economic uncertainty and the potential for trade wars.

• Further Growth of Moderation and No-Alcohol Segment: The trend towards moderation and the demand for no-alcohol alternatives are expected to continue.

• Importance of Emerging Markets: Developing economies will likely play an increasingly significant role in global alcohol market growth.

Consumer Trend (name, detailed description):

• Trend Name: Value-Driven Moderation

• Detailed Description: This trend describes consumers becoming more value-conscious in their alcohol purchases due to economic pressures while simultaneously embracing moderation and exploring lower-alcohol or no-alcohol alternatives for health and lifestyle reasons.

Consumer Sub Trend (name, detailed description - within "Value-Driven Moderation"):

• Sub Trend Name: "Occasion-Specific Alcohol Choices"

• Detailed Description: Consumers are increasingly making more deliberate choices about the type of alcohol they consume based on the specific occasion, opting for premium options for special events but choosing more affordable or lighter alternatives for everyday consumption or early evening social gatherings.

Big Social Trend (name, detailed description):

• Big Social Trend Name: "The Mindful Drinking Movement"

• Detailed Description: A growing societal trend characterized by a more conscious and intentional approach to alcohol consumption, with individuals actively moderating their intake, seeking healthier alternatives, and being more aware of the social and personal impacts of their drinking habits.

Worldwide Social Trend (name, detailed description):

• Worldwide Social Trend Name: "Global Shift Towards Diverse Beverage Portfolios"

• Detailed Description: Across the globe, consumers are increasingly diversifying their beverage choices, moving beyond traditional categories and exploring a wider range of alcoholic and non-alcoholic options, including RTDs, craft beverages, and no-alcohol alternatives.

Social Drive (name, detailed description):

• Social Drive Name: Balancing Enjoyment with Responsibility

• Detailed Description: The underlying social drive is the desire to balance the enjoyment and social aspects of alcohol consumption with a growing sense of personal and social responsibility regarding health, well-being, and financial prudence.

Learnings for brands (alcohol producers, retailers, hospitality industry) to use in 2025 (bullets, detailed description)):

• Cater to Value Seekers: Offer a range of price points and highlight value-for-money options to attract budget-conscious consumers.

• Embrace Moderation: Expand offerings of low-alcohol and no-alcohol beverages to meet the growing demand for mindful drinking.

• Highlight Premium Experiences in Growth Categories: Focus on the premium segments within categories like beer, agave, and Indian whisky where growth persists.

• Innovate with RTD Formulations: Continue to innovate within the RTD category, exploring new flavors, formats, and collaborations.

• Monitor Trade Policy Developments: Stay informed about potential tariffs and trade wars and their potential impact on supply chains and pricing.

Strategy Recommendations for brands (alcohol producers, retailers, hospitality industry) to follow in 2025 (bullets, detail description)):

• Alcohol Producers:

  • Invest in R&D for innovative no-alcohol and low-alcohol products that mimic the taste and experience of full-strength beverages.

  • Develop flexible supply chains to adapt to potential tariff changes and market disruptions.

  • Focus marketing efforts on the unique attributes and value propositions of their products across different price tiers.

• Retailers:

  • Optimize shelf space to reflect the growing demand for RTDs, no-alcohol options, and premium beer in developing markets.

  • Offer promotions and discounts on value-oriented options to attract price-sensitive consumers.

  • Train staff to educate consumers about the variety of alcohol and non-alcohol choices available.

• Hospitality Industry:

  • Create appealing and sophisticated non-alcoholic cocktail menus to cater to the moderation trend.

  • Offer happy hour deals and value-driven specials to attract customers during economically sensitive times.

  • Curate their beverage selections to include a diverse range of options in growing categories like agave and prosecco.

Final sentence (key concept) describing main trend from article (which is a summary of all trends specified):

The global alcohol market in 2024 experienced a slight downturn marked by cautious consumer spending, a moderation trend, and shifting preferences towards value options, premium beer in developing markets, and growth in the RTD and no-alcohol sectors, setting the stage for an unpredictable 2025 potentially impacted by trade wars.

What brands & companies (alcohol producers, retailers, hospitality industry) should do in 2025 to benefit from trend and how to do it:

Alcohol producers, retailers, and the hospitality industry should strategically navigate the "Cautious Consumption Shift" in 2025 by:

• Diversifying Product Portfolios to Cater to Value and Moderation: Brands should invest in offering a wider range of products that appeal to both price-conscious consumers seeking value and those embracing moderation with lower-alcohol and no-alcohol options. This includes developing quality alternatives in the non-alcoholic spirits and RTD categories and highlighting value-driven choices within traditional alcohol segments.

• Maintaining Agility in Supply Chains and Pricing Strategies: Given the potential for trade wars and continued economic uncertainty, companies need to build agile and flexible supply chains that can adapt to changing tariff landscapes and market disruptions. They should also adopt dynamic pricing strategies that allow them to respond effectively to shifts in consumer demand and economic pressures.

• Enhancing the Consumer Experience with Education and Value Communication: All industry players should focus on educating consumers about the diverse range of alcoholic and non-alcoholic options available, clearly communicating the value proposition of their products across different price points and categories. This can be achieved through informative marketing campaigns, well-trained staff in retail and hospitality settings, and engaging online content that resonates with evolving consumer preferences and lifestyle choices.

Final Note:

• Core Trend: Value-Conscious and Health-Aware Alcohol Consumption

• Core Strategy: Diversification, Agility, and Enhanced Value Communication

• Core Industry Trend: Navigating Economic Headwinds and Evolving Consumer Preferences

• Core Consumer Motivation: Balancing Affordability with Health and Lifestyle Choices

Core Trend Detailed (name, detailed summary of the Core Trend):

• Name: Value-Conscious and Health-Aware Alcohol Consumption

• Detailed Summary of the Core Trend: The core trend of Value-Conscious and Health-Aware Alcohol Consumption defines the current evolution of the global beverage alcohol market. Consumers in 2024 demonstrated a clear inclination towards more prudent spending on alcohol due to prevailing economic pressures, leading to a softening of the premiumisation trend and a greater demand for value-oriented options. Simultaneously, a growing emphasis on health and wellness is driving a significant moderation trend, with individuals increasingly seeking out lower-alcohol or entirely non-alcoholic alternatives. This dual focus on value and health is reshaping the landscape, creating growth opportunities in categories like premium beer within developing economies (where value perception differs), the ready-to-drink (RTD) sector known for its convenience and variety, and the rapidly expanding no-alcohol spirits segment. This trend underscores a more thoughtful and discerning consumer base that carefully considers both their budgets and their well-being when making choices about alcohol consumption.

Source: https://drinks-intel.com/cross-category/another-tough-year-for-alcohol-in-2024-but-growth-spots-remain-category-intel/