Why?
Premiumisation is considered "all but dead" in the alcohol industry due to a convergence of several key factors highlighted in the SipSource report:
Shifting Consumer Lifestyles & Moderation: A significant change is that consumers are increasingly choosing to moderate or abstain from alcohol altogether. This shift in lifestyle preferences means that the overall demand for alcoholic beverages is decreasing, impacting all segments, including premium.
Rise of Value Consciousness: In the current economic climate, consumers are becoming more value-conscious. They are prioritizing affordability and are less inclined to "trade up" to expensive, premium alcohol. This is a direct reversal of the premiumisation trend, where consumers were previously willing to spend more for higher-end products.
Intensified Competition from Alternative Beverages: The alcohol industry is facing strong competition from a growing array of alternative adult beverages. Energy drinks, botanical-infused drinks, and hemp-derived products are increasingly capturing occasions where consumers might have traditionally chosen alcohol. These alternatives often appeal to health-conscious consumers or offer different functional benefits, further diluting the demand for premium alcohol.
Economic Pressures: Economic uncertainty and rising living costs are likely contributing to consumers tightening their budgets. Discretionary spending, which includes premium alcohol, is often the first area to be reduced when consumers are facing financial constraints.
In essence, the decline of premiumisation isn't necessarily about consumers disliking premium products, but rather a broader shift in priorities. Consumers are increasingly driven by health, value, and convenience, and are exploring a wider range of beverage options beyond traditional premium alcohol. This combination of factors has significantly weakened the premiumisation trend, making it appear "all but dead" in the current market landscape.
Why it is the topic trending:
Alcohol Industry Challenges: The alcohol industry is facing significant challenges, experiencing volume and revenue declines in the US market during 2024.
Shift Away from Premiumisation: A previously dominant trend of premiumisation in the alcohol industry is reported to be fading, raising concerns and requiring strategic adjustments.
Changing Consumer Behaviours: Consumer habits are shifting away from alcohol consumption, driven by moderation and abstinence trends, impacting the industry's performance.
Rise of Alternative Beverages: The alcohol sector faces increased competition from alternative adult beverages, such as energy drinks, botanical-infused drinks, and hemp-derived products.
Pre-mixed Cocktail Growth: Despite overall declines, spirits-based pre-mixed cocktails are a notable exception, showing growth and reshaping the spirits market and distribution channels.
Overview:
The Wine & Spirits Wholesalers of America (WSWA) SipSource Q4 2024 Industry Report reveals a challenging year for the US alcohol industry. Spirits and wine depletions and revenues have decreased, and the premiumisation trend is weakening. Changing consumer lifestyles, increased competition from alternative beverages, and shifts in distribution due to the rise of pre-mixed cocktails are key factors shaping the market. While the overall outlook is cautious, pre-mixed cocktails and convenience store sales represent bright spots. The industry is looking towards stabilisation in 2025 and adaptation to evolving consumer demands for future growth.
Detailed Findings:
Overall Alcohol Decline: Spirits depletions fell by 3.7% and revenue by 4.3% in 2024. Wine experienced a steeper decline, with a 7.2% volume drop and a 6.3% value drop.
Premiumisation Trend "All But Dead": The report indicates that the premiumisation trend, where consumers trade up to more expensive products, is largely over, except for a few categories.
Consumer Behaviour Shift: Consumers are increasingly moderating or abstaining from alcohol consumption, contributing to the industry decline.
Competition from Alternative Beverages: Energy drinks, botanical-infused drinks, and hemp-derived products are gaining popularity and competing with traditional alcohol for consumption occasions.
Spirits-Based Pre-mixed Cocktails Growth: This category is a significant exception to the overall decline, growing by 3.4% in volume and 3.5% in revenue in 2024. Pre-mixed cocktails now represent 14.2% of the total spirits market, up from 3.2% five years ago.
Convenience Store Channel Growth: Convenience stores are the fastest-growing retail channel for spirits-based RTDs, with volume up 14.1% and revenue up 12.4%, driven by legislative changes in some states.
On-Premise Resilience: The on-premise sector (bars and restaurants) showed resilience with a 7.5% volume growth, while off-premise (retail stores) grew by 2.8%.
Account Growth: The total number of accounts selling wine and spirits increased by 0.7% in 2024, with a significant 28.1% increase in convenience stores.
2025 Stabilisation Projection: SipSource projects stabilisation for the alcohol industry in 2025 if current trade policies remain unchanged, with renewed momentum expected in 2026.
Key Takeaway:
The alcohol industry is facing a challenging period marked by declining consumption and the end of the premiumisation trend. However, spirits-based pre-mixed cocktails are a growth area, particularly in convenience stores. The industry needs to adapt to changing consumer behaviours and increased competition from alternative beverages to achieve future stabilisation and growth.
Main Trend:
Trend Name: De-Premiumisation & Diversification
Description of the Trend (De-Premiumisation & Diversification):
"De-Premiumisation & Diversification" describes the main shift in the alcohol market away from premium products and towards a more diversified landscape. The decline of premiumisation indicates consumers are no longer consistently trading up to higher-priced alcoholic beverages. Simultaneously, diversification is evident in the rise of alternative beverages and the growing popularity of convenient, flavourful options like pre-mixed cocktails. This trend reflects a broader change in consumer preferences and consumption habits within the beverage market.
Consumer Motivation:
Value Consciousness: In a challenging economic climate, consumers are becoming more value-conscious and may be less willing to spend on premium alcohol.
Health and Wellness: Growing health consciousness drives moderation and abstinence trends, reducing overall alcohol consumption and potentially shifting preferences towards lower-priced or non-alcoholic options.
Convenience and Ready-to-Drink: Demand for convenient, ready-to-drink (RTD) options is increasing, as seen in the growth of pre-mixed cocktails, which offer ease of consumption and flavour variety.
Variety and Flavour Exploration: Consumers are seeking variety and flavour exploration, which is met by the wide range of pre-mixed cocktails and alternative beverages available.
Lifestyle Changes: Shifting lifestyles, including moderation and abstinence trends, are influencing beverage choices and reducing reliance on traditional premium alcohol.
What is driving the trend:
Economic Pressures: Economic uncertainty and cost of living increases may be influencing consumers to trade down or reduce spending on discretionary items like premium alcohol.
Health and Wellness Movement: The ongoing health and wellness movement is driving consumers to reduce alcohol intake and seek healthier beverage alternatives.
Rise of RTDs and Convenience Culture: The demand for convenience and ready-to-drink formats is growing across food and beverage categories, and pre-mixed cocktails perfectly fit this trend.
Increased Beverage Competition: The beverage market is becoming more crowded with diverse options, including non-alcoholic and alternative adult beverages, diluting the market share of traditional alcohol.
Changing Social Norms: Social norms around alcohol consumption are evolving, with moderation and abstinence becoming more accepted and even trendy, particularly among younger generations.
Motivation beyond the trend:
Beyond immediate drivers, the underlying motivation is a re-evaluation of the role of alcohol in consumers' lives. Consumers are increasingly prioritizing experiences, health, and value over status or traditional markers of premiumisation in their beverage choices. This reflects a broader societal shift towards mindful consumption and lifestyle balance.
Description of consumers article is referring to:
Age: Spans across age groups, as the trend impacts the overall alcohol market. However, younger generations (Gen Z, Millennials) are likely key drivers of moderation and the shift towards alternative beverages and convenience. Older generations (Gen X, Boomers) might be contributing to the decline in premiumisation due to value consciousness or changing health priorities.
Gender: Not explicitly specified, likely relevant across genders as health and value consciousness are broad consumer trends.
Income: Potentially more pronounced among middle-income consumers who are more sensitive to economic pressures and value for money. However, health and lifestyle trends impact consumers across income levels.
Lifestyle: Health-conscious individuals, value-seeking consumers, those prioritizing convenience and ready-to-go options, and those influenced by moderation and abstinence trends. Busy lifestyles and a desire for variety also play a role.
Conclusions:
The premiumisation trend in the alcohol industry is fading, replaced by a focus on value, convenience, and alternative beverage choices. Spirits-based pre-mixed cocktails are a notable growth exception, driven by convenience and flavour variety. The industry faces challenges due to declining consumption and increased competition, requiring adaptation and innovation to achieve future stability and growth.
Implications for brands:
Re-evaluate Premiumisation Strategies: Brands should reconsider heavy reliance on premiumisation and explore strategies that cater to value-conscious consumers.
Invest in Pre-mixed Cocktails: Capitalize on the growth of spirits-based pre-mixed cocktails by expanding product lines, flavour varieties, and distribution channels, particularly in convenience stores.
Focus on Convenience and RTD Formats: Develop and promote ready-to-drink formats that align with consumer demand for convenience and ease of consumption.
Explore Value-Oriented Products: Consider offering more accessible and value-priced options to appeal to budget-conscious consumers.
Monitor and Adapt to Moderation Trends: Acknowledge and adapt to the growing moderation and abstinence trends, potentially by exploring low-alcohol or non-alcoholic alternatives within their portfolios.
Diversify Beverage Offerings: Consider diversifying into adjacent beverage categories like botanical-infused drinks or hemp-derived products to capture consumers moving away from traditional alcohol.
Implication for society:
Potential Shift in Alcohol Consumption Norms: The decline in alcohol consumption and premiumisation may reflect a broader societal shift towards healthier lifestyles and changing attitudes towards alcohol.
Growth of Convenience Culture: The success of pre-mixed cocktails and convenience store sales highlights the increasing demand for convenience in consumer products.
Economic Impact on Alcohol Industry: The industry decline poses economic challenges for producers, wholesalers, and retailers, requiring adaptation and innovation to remain viable.
Implications for consumers:
More Value-Priced Options: Consumers may benefit from a greater availability of value-priced alcoholic beverages as brands shift away from premiumisation.
Increased Convenience and Variety: The growth of pre-mixed cocktails and RTDs offers consumers more convenient and diverse beverage choices.
Potential for Healthier Choices: The moderation trend and rise of alternative beverages may lead to a wider range of healthier and non-alcoholic beverage options becoming available.
Implication for Future:
Stabilisation and Adaptation: The alcohol industry is projected to stabilise in 2025, suggesting a period of adaptation and strategic realignment.
Continued Growth of RTDs: The pre-mixed cocktail category is likely to continue its growth trajectory, further reshaping the spirits market.
Innovation in Alternative Beverages: The market for alternative adult beverages will likely see continued innovation and expansion, posing ongoing competition to traditional alcohol.
Focus on Consumer Value and Convenience: Future success in the beverage market will depend on brands' ability to deliver value, convenience, and products that align with evolving consumer lifestyles and health priorities.
Consumer Trend:
Trend Name: "Value-Driven Convenience"
Detailed Description: Consumers are increasingly prioritizing value and convenience in their alcohol purchases. This trend moves away from aspirational premiumisation and towards practical, budget-conscious choices that fit seamlessly into their lifestyles. Ready-to-drink formats and accessible price points are key drivers of this trend.
Consumer Sub Trend:
Trend Name: "Moderation & Exploration"
Detailed Description: This sub-trend reflects the dual desires of consumers to moderate their alcohol consumption for health reasons while still exploring flavourful and interesting beverage options. This leads to interest in lower-alcohol options, alternative beverages, and diverse flavour profiles within convenient formats like pre-mixed cocktails.
Big Social Trend:
Trend Name: "Mindful Consumption"
Detailed Description: Society is increasingly embracing mindful consumption across various categories, including food and beverage. This trend emphasizes conscious and deliberate choices driven by health, value, and ethical considerations, leading to a re-evaluation of traditional consumption habits, including alcohol.
Worldwide Social Trend:
Trend Name: "Global Beverage Diversification"
Detailed Description: Globally, the beverage market is diversifying beyond traditional categories. Consumers worldwide are exploring a wider range of beverage options, including alternative adult beverages and convenient formats, leading to increased competition and evolving market dynamics for the alcohol industry.
Social Drive:
Trend Name: "Seeking Practicality & Balance"
Detailed Description: This social drive encapsulates the desire for practicality and balance in modern lifestyles. Consumers are seeking solutions that simplify their lives, offer good value, and align with their health and wellness goals. In the context of beverages, this translates to a preference for convenient, affordable, and potentially healthier options over traditional premium alcohol.
Learnings for brands to use in 2025:
Value Proposition is Key: Emphasize value for money and accessible price points in product development and marketing.
Convenience is Paramount: Prioritize ready-to-drink formats and easy-to-consume packaging.
Flavour Variety Attracts: Offer a wide range of flavours, particularly in pre-mixed cocktails, to cater to diverse consumer preferences.
Acknowledge Moderation: Recognize and potentially cater to the moderation trend with lower-alcohol or non-alcoholic options.
Convenience Retail Channel is Growing: Focus on expanding distribution and marketing efforts in convenience stores, especially for RTD products.
Strategy Recommendations for brands to follow in 2025:
Develop Value-Focused Product Lines: Create product lines specifically positioned for value-conscious consumers, offering quality at accessible price points.
Expand RTD and Pre-mixed Cocktail Offerings: Invest in innovation and marketing for ready-to-drink and pre-mixed cocktail formats, focusing on flavour variety and convenience.
Optimize Convenience Retail Strategy: Develop targeted strategies for the convenience store channel, recognizing its growing importance for RTD sales.
Explore Lower-Alcohol and Non-Alcoholic Options: Consider diversifying into lower-alcohol or non-alcoholic beverage alternatives to cater to moderation trends and expand market reach.
Communicate Value and Convenience Clearly: Marketing messages should emphasize the value proposition and convenience of products, appealing to practical consumer needs.
Final sentence (key concept) describing main trend from article:
"De-Premiumisation & Diversification" defines the evolving alcohol market in 2025, where brands must shift from premium-centric strategies to embrace value-driven, convenient, and diversified product offerings, particularly in the growing pre-mixed cocktail segment, to align with changing consumer behaviours and achieve market stability.
What brands & companies should do in 2025 to benefit from trend and how to do it:
Brands should fully embrace the "De-Premiumisation & Diversification" trend to navigate the challenging alcohol market in 2025 by:
Product Diversification & Value Engineering: Develop and promote value-oriented product lines, particularly in the growing RTD pre-mixed cocktail segment, while carefully managing costs and pricing to offer accessible options. How: Conduct value engineering to optimize production costs, explore efficient packaging and distribution methods, and create product lines with clear value propositions for budget-conscious consumers.
Convenience-Focused Marketing & Distribution: Prioritize marketing and distribution strategies that emphasize convenience and accessibility, particularly targeting the growing convenience store channel for RTD products. How: Develop marketing campaigns highlighting the ease and convenience of RTD formats, strengthen relationships with convenience store chains, and optimize supply chains for efficient distribution to these channels.
RTD Innovation & Flavour Expansion: Invest in continuous innovation within the pre-mixed cocktail category, focusing on flavour variety, unique flavour combinations, and exploring new beverage bases beyond traditional spirits to capture consumer interest and maintain market leadership in this growth segment. How: Dedicate resources to flavour R&D, monitor flavour trends and consumer preferences, and experiment with diverse and innovative cocktail recipes and formats to keep RTD offerings fresh and appealing.
Final Note:
Core Trend:
Name: De-Premiumisation & Diversification
Detailed Description: The alcohol market's shift away from premiumisation, characterized by declining consumption of premium spirits and wine, and a diversification towards value-driven, convenient options, especially pre-mixed cocktails and alternative beverages.
Core Strategy:
Name: Value & Convenience Focus
Detailed Description: Brands must strategically shift their focus towards offering value-oriented and convenient products, particularly in the ready-to-drink segment, while adapting to changing consumer preferences and diversifying their portfolios beyond traditional premium alcohol.
Core Industry Trend:
Name: RTD Cocktail Revolution
Detailed Description: The alcohol industry is experiencing a revolution driven by the rapid growth of ready-to-drink pre-mixed cocktails, which are reshaping distribution channels and becoming a dominant force in the spirits market.
Core Consumer Motivation:
Name: Practical Value & Easy Enjoyment
Detailed Description: Consumers are primarily motivated by practical value and easy enjoyment in their alcohol choices, seeking convenient, affordable, and flavourful options that fit their modern, fast-paced lifestyles, moving away from aspirational premiumisation.
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