Non-Alcoholic Drinks

Nielsen reports that sales of non-alcoholic beverages increased 33% for a total of $331 million in 2021. In recent times “non-alcoholic drink” are up by over 60% in 5 years.

This trend is expected to continue. IWSR reports that the total volume of no-alcohol and low-alcohol beverages hitting the global market is expected to grow 31% by 2024.

The non-alcoholic beverage trend is especially prevalent among Millennials (people who are 26 to 41 years old right now) and Gen Zers (people who are 10 to 25 years old right now).

Gen Z is drinking more than 20% less than other generations did at their age.

There’s even a movement for people who may have drunk alcohol in the past but don’t anymore: “sober curious”.

Those who are “sober curious” aren’t necessarily addicted to alcohol or feel the need to abstain for the rest of their lives. They are simply experimenting with living without alcohol.

A survey by Bacardi Global ranked flavored bitters, coconut water, coffee, and fermented mixers as the most popular ingredients that are piquing the interest of bartenders.

In the bitters category, Aperol and Campari have specifically soared in popularity. Bartenders say Aperol paired with Prosecco and club soda (an Aperol Spritz) is one drink of choice.

Hard coffee was popular in the 90s, and yet, it’s an emerging trend now, too. Between 2019 and 2020, hard coffee sales grew by 1,100%. The most popular preparation of 2022 was a mildly sweet, good-for-you cold brew.

The fermented drink market (alcoholic and nonalcoholic) is expected to have a CAGR of 6.2% through 2028. The hard kombucha market (an alcoholic, fermented beverage) is growing much faster with a CAGR of 42.4%.

The 2021 BevAlc report showed that more than half of respondents said cannabis-infused drinks have the industry’s highest growth potential.

Alcohol Brands Are Diversifying In an effort to capture more sales, many beverage brands are diversifying their product offerings.

In recent months we’ve seen non-alcoholic beverage producers enter the alcoholic market. As well as beer brewers are  launching spirits and hard seltzers.

In 1990, beer was responsible for 87% of the volume. In 2020, it was down to 72%. Dutch brewing company Heineken recently acquired Distell for $2.6 million, expanding their business to include wine, brandy, liqueur, and whisky offerings.

Even giant beverage companies like PepsiCo and Coca-Cola are diversifying. In 2021, PepsiCo announced it would partner with Boston Beer to launch Hard Mtn. Dew with 5% ABV. With none of Mountain Dew’s usual caffeine or sugar, the beverage hit shelves in early 2022.

Making hard seltzer required a few equipment additions in the brewery, but many of the processes were already in place. The $330 million deal brought five craft breweries, a collective known as CANarchy, under Monster’s belt.

Canned Cocktails Give Consumers A Step Up From Hard Seltzer. The ready-to-drink (RTD) cocktail market was already growing pre-pandemic, but it got a huge boost from COVID. Although the market still only accounts for about 3% of spirits volume in the US, it grew by 50% between 2019 and 2020. Data from Nielsen shows that sales of canned cocktails grew 126% in one year.

Experts say the RTD cocktail market, valued at $782 million in 2021, will surge through 2030. Many consumers love RTD cocktails for their simplicity and convenience — there’s no need to haul a dozen ingredients to the beach if you and your friends want cocktails.

Consumers who like to experiment with flavors, especially Millennials, are also leading this trend forward. From a Manhattan to an Old Fashioned to bourbon whiskey with honey, ginger, lemon, and apple juice, there’s a canned cocktail for everyone’s taste.

DTC Alcohol Sales See Significant Growth

When pandemic lockdowns went into place, many states loosened their laws regarding alcohol delivery. Laws vary, but only a few select states specifically outlaw alcohol delivery.

The Distilled Spirits Council of the United States is one organization fighting to get the laws surrounding DTC alcohol sales loosened even further. In 2021, they released a survey that found 80% of consumers believe distillers should be able to ship directly to customers. Their survey also showed that 45% of customers had already bought alcohol online for direct shipment.

In fact, Rabobank reports online alcohol sales reached $6.1 billion in 2021, growing 131% since 2019. Other estimates for online alcohol sales are a bit more conservative, but still report massive growth through 2025, more than doubling today’s market value.

Wine sales make up a large portion of that number. Wines Vines Analytics reports DTC wine shipping increased by 27% in 2020 with 8.39 cases of wine sent out to customers. Local alcohol delivery has become incredibly popular, as well.

 Eco-Friendly Packaging Offers Benefits To Producers And Consumers

In the 20th century, packaging alcohol in brown or green bottles was standard because the coating kept the beverage protected from UV rays.

In more modern times, a clear UV coating became available and clear bottles were used. Now, we are seeing a shift away from glass packaging altogether.

Consumers are demanding more convenient, sustainable, and environmentally friendly ways to carry their alcoholic beverages.

One estimate says a traditional glass bottle has a carbon footprint of 675 g CO2e/l while a wine pouch has a carbon footprint of only 96 g CO2e/l.

Alcohol pouches are one example of non-glass packaging options. This packaging is lightweight, portable, and resealable. It also has a lower carbon footprint and leaves less waste behind than typical packaging.

They’ve got more than 10,000 current members. Gone are the days of boxed wine having a stigma attached to it — bag-in-a-box solutions are also becoming popular.

This option offers sustainability and still provides the company with the ability to design attractive packaging via the outer box. At one UK grocery store, sales of boxed wine were up more than 40% post-pandemic.

Anheuser-Busch released Boxology Cocktails in 2021. The product is being piloted in the southern United States.

That wraps up our list of the most important alcohol industry trends to watch over the next 3 years. From low-alcohol options to canned cocktails, we expect to see producers rapidly adapting to the demands of consumers in the months to come. Those who haven’t already expanded their product offerings will most likely move in that direction soon.

The push for more sustainable packaging and on-demand delivery services may even change the way companies market to consumers. These types of changes aren’t set in stone yet, but local laws and consumer interest will play an important role in the future of the industry.

The trends that have previously shaped the global beverage alcohol marketplace will be transformed over the next five years as the world emerges from the Covid-19 pandemic and into a period of growing economic instability. The effects of these shifts will be wide-ranging, from the growing importance of the home premise occasion to a moderation trend increasingly driven by the need to cut household spending.

As the world enters a period of growing economic fragility, those with financial stability – typically consumers with lower levels of debt and secure employment – will provide increasing opportunities for premium-and-above spirits and wine brand owners.

This is a notable shift from the situation during the Covid-19 pandemic, when millennials led the global consumption bounce-back in 2021 in key markets such as the US, the UK, France, Germany and Brazil.

This phenomenon was driven by their higher levels of disposable income and embracing of more sophisticated home consumption occasions – but this trend is now likely to be reversed by economic instability, leaving younger consumers of legal drinking age with less secure finances and employment prospects in the years ahead.

In China, for example, IWSR consumer data shows that there has been a shift in the alcohol drinking population, with fewer 18−24s, possibly connected to 20% unemployment among graduates.

China’s leadership of the luxury spirits market will come under threat from the US in the next few years. The US status spirits market, spearheaded by high-end agave spirits, is forecast to add the most value to the status spirits category of any individual market over the next five years, bringing it almost level with China. Growth in the US luxury spirits market is a continuation of a longer-term pre-pandemic trend.

India is also poised to make strong spirits gains thanks to its booming economy; rising consumer incomes; market recovery and growth post-pandemic; and strong consumer confidence.

A number of key factors may dampen further spirits gains in China, such as a proposed government cut down on conspicuous consumption, falling consumption rates amongst younger LDA drinkers, and lower GDP expectations compared to the last 5 years. However, China has not yet experienced a proper post-Covid boom. When it does take place, it could help to counteract the impact of these headwinds in the short-term.

This outlook follows a period of strong growth for high-end spirits in China, boosted by ecommerce gains during Covid-affected 2020, as well as the establishment of Hainan as a key duty-free destination.

The most promising growth opportunities for beer in the coming years will be focused on India, Latin America, and Africa. IWSR expects global volumes to rise at a CAGR of +1% between 2021 and 2026, driven by Brazil, Mexico, South Africa, Colombia and India. Beer is also well-positioned to grow in a number of Southeast Asian markets.

In Brazil, growth has been driven by investments in the on-trade and ecommerce. In line with this trend, Brazil’s on-trade will contribute the highest volumes to the beer category across the top 20 beverage alcohol volume markets by 2026.

This follows long-term consumption declines of traditional beer in China and the US, and a global volume decline of nearly -7% in 2020, when the Covid-19 pandemic brought alcohol bans (South Africa and India), production stoppages (Mexico) and widespread on-trade closures.

The total wine category is in volume decline, in line with historical trends. However, Prosecco and Champagne continue to grow, and the high-end is gaining across all sparkling wine segments.

Pent-up demand to celebrate weddings, holiday gatherings and other personal milestones after the restrictions of the Covid-19 pandemic has helped to accelerate growth of sparkling wine in many markets. A change of attitude is also a key driver, with the drink moving away from exclusive association with formal events and special occasions, to one that can be enjoyed in more relaxed contexts and more frequently.

Premium-and-above Prosecco growth is driven by strong demand in the US and the UK, where volumes grew 8% and 5% respectively, in the first half of 2022 versus the first half of 2021; Champagne growth is centred on the US and Australia; and light aperitifs are growing in Spain thanks to growing daytime consumption.

Premiumisation drives growth of the RTD category

IWSR data shows that, globally, RTD value will rise at a CAGR of +7% between 2022 and 2026, outpacing a volume CAGR of +5%. This compares with a volume CAGR of +14%, 2016-2021. The value growth reflects the recent strong performance of premium-plus RTD products across key markets.

The shift to premium products ends a period of dramatic volume growth for RTDs, particularly for hard seltzers in the US, as volumes stabilise and other segments of the RTD category drive growth. In other markets like Japan and China, FABs continue to show positive momentum as well.

Premium-priced RTDs have grown faster than any other segment over the past two years, albeit on a smaller volume base, with new products increasingly launching at higher prices. This is driven by an increase in spirit-based offerings, higher ABVs and well-known premium brand extensions. RTDs are a clear trade-up from beer, with consumers paying roughly double for the same size serve of an RTD in some markets.

Pandemic lockdowns drove rapid alcohol ecommerce growth, prompted by a loosening of regulations, or a boost to existing ecommerce infrastructure, in many markets. As a result, alcohol ecommerce value grew by over 40% in 2020 alone – compared with value growth of 12% in 2019 and 16% in 2021, across 16 focus markets.

Over the coming years, growth rates for the alcohol ecommerce channel are set to moderate as the market enters a period of post-pandemic normalisation. However, the overall trajectory remains upward, with alcohol ecommerce expected to contribute an additional $10bn+ to the beverage alcohol sector between 2021 and 2026, to reach nearly $40bn by 2026, across focus markets.

Unlike in previous years, beer/cider/RTDs are projected to register the quickest growth over the next five years, and by 2026, these drinks are expected to account for nearly a quarter of online sales. While beer will see the largest volume shift to ecommerce by 2026 (vs 2021), spirits will contribute the most value. As a result, wine the most established category online, will see its share of ecommerce sales slip slightly over the coming years.

Home premise grows even stronger driven by economic concerns

Growing economic concerns are set to make the at-home occasion even more significant in the future, as shrinking disposable incomes force many people to cut back on visits to the on-trade.

The post-Covid on-premise recovery has been patchy in many locations, with hospitality hotspots thriving, but other venues struggling to cope with lower customer numbers and rising costs.

IWSR expects the on-trade recovery to be slower than previously expected, although pre-pandemic volumes will likely be regained by 2026, thanks in particular to strong gains for beer in Latin America.

The projected gains follow a period of reinvention for the home premise occasion, which grew increasingly sophisticated during Covid-19 lockdowns with the rise of home delivery platforms, TV streaming services, and consumer interest in mixology and at-home entertainment.

Previously driven mostly by health and wellness concerns, moderation in alcohol consumption is now increasingly being spurred by economic worries and a need to cut household spending. Consumers are choosing to cut down rather than down-trade in many markets.

 

Moderation – both as a lifestyle choice for health and wellness, as well as an economising strategy amidst rising inflation – is taking a number of forms, such as:

Reducing the number of occasions during which alcohol is consumed, either by substituting with a non-alcoholic beverage, such as a soft drink, or by simply exiting the consumption occasion (such as skipping the mid-week after-work drinks).

Reducing the number of alcoholic drinks on a given occasion, for example, by drinking less, or in some cases, by combining consumption of a full-strength alcoholic beverage with a no- or low-alcohol beverage during the same occasion.

About half of all adult drinkers of beverage alcohol surveyed as part of IWSR’s price sensitivity study across 17 focus markets in H2 2022, expressed interest in moderating their alcohol consumption. The trend is particularly strong in European markets where economic confidence is low, such as the UK and Germany.

The long-established trend of moderation as a health and wellness choice continues, especially amongst those on higher incomes in countries such as the US, Canada, Australia, and China. Germany remains the largest market for no- and low-alcohol products, however smaller markets, such as the US, Canada and Australia, will show more dynamic growth, with volume CAGRs 2022-2026 outpacing that of Germany.

For some consumer segments, such as millennials in select markets, previous interest in no- and low-alcohol products due to wellness concerns has now been combined with an economic imperative, amplifying the trend.