Top trends in beverage alcohol
Volume growth in the global beverage alcohol market is expected to slow to just +1% per annum over 2022-2027, according to the latest analysis from IWSR. But step back from the overall figure and there’s plenty of opportunities for growth. Here’s the top trends driving the market forward.
Premiumization
Premiumization’s been a long-running trend in both alcohol and soft drinks. Consumers want quality over quantity, particularly as they seek to moderate their alcohol intake.
New flavors, new serves and increasingly extravagant cocktails all play into this desire for top level treats.
But how has economic uncertainty and cost-of-living challenges affected this? Beverage giants continue to keep their faith in premiumization strategies and are reaping the rewards accordingly.
Research does suggest that the premiumization trend has been softening. But it’s still thriving in many markets and categories and for the main part remains resilient.
Craft and artisanal
As part of the premiumization trend, craft continues to resonate with consumers. While craft beer may no longer be experiencing the heady growth rates of the past, it’s still performing better than the mass beer category.
Spirits is perhaps the category where craft and artisanal products are really shining, while wine-making has always been an art form in itself.
For winemakers, brewers and distillers, finding the balance between art and science has always been a key part of their business – something that will only become more relevant as AI and new tech emerges onto the scene.
Sustainability
Sustainability is at the top of the agenda in most food and beverage categories.
In alcohol, glass packaging is increasingly in the firing line: it’s heavy to transport (thus associated with increased emissions) and needs a lot of energy to produce and recycle. Brands are increasingly exploring alternative packaging formats – from paper bottles to bag-in-box and aluminum bottles – the question is how willing consumers are to abandon the traditional glass format and embrace new options.
Australia's wine industry has set out a plan of how it can reduce carbon emissions by more than 40% by 2030 by looking comprehensively at the main areas - and setting out a blueprint for carbon reduction.
For those that do keep with glass, there are plenty of initiatives to improve the packaging format such as lightweighting.
Sourcing of ingredients is another key area alcohol brands need to consider: with big brewers such as Carlsberg and Heineken looking at regenerative agriculture for their raw ingredients and other projects looking at FairTrade initiatives.
And brewers, distillers and winemakers are always pushing forward to see how they can cut energy use and water wastage in their operations: with many striving for carbon neutral production facilities.
But sustainability is never easy. Craft brewer BrewDog has recently given up on its carbon negative claim: over the controversial use of offsets and their cost.
RTD alcohol
The RTD alcohol category is expected to grow by +12% in volume between 2022 and 2027, hitting $40bn by 2027 across 10 key markets (which account for 83% of global volume), according to new data from IWSR Drinks Market Analysis.
However, the category is now showing inevitable signs of maturity. Innovation has slowed from its 2021 peak: in 2021 more than 3,000 new RTD products were launched, but in the first half of 2023, that slowed to just over 1,000.
Winning innovations will be ones that follow the key trends: such as premiumization and flavor exploration.
E-commerce
Compared to the rest of the food industry, alcohol ecommerce was slow to take off. The pandemic changed all that: opening up new opportunities and channels for sales online.
That’s now moderating: but expect to see growth remain steady.
What’s particularly interesting is the evolution of the category. Drizly’s closure earlier this year shook up the US e-commerce industry: and it will be telling to see how the platform’s sales are redistributed (or, indeed, if consumers simply abandon the channel in favor of the more experiential bricks-and-mortar shopping experience). E-commerce also comes with its challenges: such as ensuring underage drinkers can't buy drinks.
Another important part of e-commerce isn’t even about the sales. It’s about being a source of information, influence and engagement for consumers – remember, most consumers are going to do their research online.
Creating experiences
Standing out on a crowded shelf has always been hard. Now, brands are seeking to offer consumers experiences that excite and engage.
The alcohol industry has been ahead of the curve here. Craft brewers have found success with taprooms, tastings and meal pairings: making craft beer not just a beverage but an experience and accounting for an important chunk of their profits. That’s now being found across the alcohol industry: whether it be with distillery or wine tours.
Diageo spent £150m on a new Johnnie Walker tourist experience in Edinburgh. And, as it recently launched a Johnnie Walker Blue Label bottle using generative AI, it confirmed that experiences are a top trend: ‘Consumers are increasingly searching for unique experiences and products that signal belonging, status and personality… going beyond the most up-to-date cultural movements and seeking things that feel entirely original’.
The popularity of cocktails also demonstrates the experience and art people want from their drinks: going from an at-home entertainment during the pandemic to an increasingly extravagant art form in bars and restaurants.
Health and wellbeing
Consumers are increasingly well-versed in the dangers of alcohol harm. The first repercussion of this is they’re looking to drink less, but better – as evidenced in the premium and craft trends.
And it’s also spurring forward the alcohol-free and low-alcohol category: a sector that continues to gather momentum across global markets. It’s not all plain-sailing – the category is still plagued by perceptions of inferiority by many drinkers in the mass markets – but the quality and reputation is improving.
And so, too, is the choice: with an abundance of new launches pushing innovation forward and making sure there’s something for every drinker.
The question, now, is how to push the category forward. It's not just about having a good product: it's about growing the category in bricks-and-mortar stores; highlighting drinks as a pairing for food or for special occasions; or working out how the category can co-exist alongside alcohol and become a truly mass market proposition.
The key to all this? The category is no longer simply appealing to drivers or pregnant women: brands must understand the myriad types of alcohol-free consumers and the complex reasons they turn to the alcohol-free category.
Elsewhere, governments and public health officials are increasingly putting the alcohol industry under scrutiny - Canada's health authority last year made headlines with its recommendation that consumers should not drink more than two drinks a week - while the industry is also doing its part to increase information for consumers. Expect increased regulations, policies and initiatives: whether that's laws such as minimum unit pricing, health warnings on bottles, or a move towards calorie and nutrition labeling on bottles.
Category blurring
Kombucha meets hard kombucha. Lemonade meets hard lemonade. Seltzer meets hard seltzer. Espresso martini blends coffee and alcohol. You don’t have to look very far to see how categories are colliding.
Then there’s also big-name collisions between the soft drink and alcohol worlds: Coca-Cola and Jack Daniels; Coca-Cola and Constellation Brands; PepsiCo and Boston Beer Company on Hard Mtn Dew.
Everything meets in the middle with the rise of low- and no-alcohol category: alcohol companies are launching alcohol-free versions while soft drinks companies elevate their offers in the hope of getting a cut of the alcohol alternative market.
Expect categories to keep blurring - and the alcohol industry to keep evolving.
