Understanding the Decline in Alcohol Consumption and Strategies for Beverage Alcohol Companies to Thrive

The global beverage alcohol industry and its associated companies have experienced significant instability over the past few years, largely due to the COVID-19 pandemic and subsequent fallout. Challenges persist within the industry, primarily influenced by increased cost of goods due to logistics problems and rapidly shifting consumer preferences and the emergence of the 'sober curiosity' movement championed by celebrities such as Bella Hadid and Blake Lively. This cultural shift has motivated a considerable portion of the population to reduce their alcohol consumption overall. Consequently, there has been a decline in overall alcohol volume, but this has been partially balanced by a trend towards premiumisation, with consumers opting, instead, for more expensive, premium brands.

Drinking Trends from Around the World

Take Great Britain, for instance, a nation known for its drinking culture. Recent research conducted by Mintel on the lifestyle choices of Generation Z in Britain revealed a surprising trend: a substantial number of Gen Zers are moving away from alcohol consumption, both in social settings and at home, opting instead for sober socialising. This trend is not confined to Britain but is echoed across Europe and America.

In the United States, surveys by Gallup indicate that people aged 35 to 54 are the most likely to consume alcohol (70%), compared to Gen Z (60%) and Baby Boomers (52%). Another study from 2020 found that the proportion of college-aged Americans abstaining from alcohol has increased from 20% to 28% over the span of a decade.

Experts note that the decline in youth drinking is significant and widespread across most high-income European nations, as well as the US, Australia and New Zealand. During the lockdown, Gen Z Australians were more likely to reduce their alcohol consumption, with 44% reporting a decrease – more than twice the rate for any other generation. Rates of binge drinking among New Zealand's young populace have also declined by over half between 2001 and 2012 and have continued to decrease thereafter.

While we should all commend the decline in reckless binge drinking and more responsible consumption overall, it presents challenges for alcohol companies. According to IRI, European sales of beer, wines, and spirits experienced a €2.7 billion (4%) decline in 2022. Without finding effective strategies to premiumise and engage and appeal to Gen Z consumers, alcohol companies risk enduring years of dwindling sales. It begs the question: why is this happening? What is causing this decline around the world, especially among young people?

Understanding the Decline in Alcohol Consumption

While it is impossible to attribute the downturn to one single factor, it is evident that the ongoing cost-of-living crisis plays a significant role, alongside the growing preference for healthier lifestyles or LO/NO trends. Gen Zers have come of age in a unique social environment characterised by financial and societal concerns, leading them to adopt a more risk-averse approach in various aspects of their lives, including how much they spend and how much they drink.

The phenomenon of "mindful consumption" has emerged as a coping mechanism in response to these financial challenges. This involves a deliberate and conscientious approach to spending, wherein individuals carefully evaluate their purchasing decisions to determine whether they meet their values and financial priorities. In this context, food and beverage expenditures often come under scrutiny, as they represent discretionary expenses that can be adjusted to accommodate tighter budgets. This is supported by several different studies. Last year, a survey revealed that 50% of respondents are looking to cut down on their alcohol consumption during the year due to the ongoing cost-of-living crisis. A 2022 study in Europe found similar results, namely that economic shifts are influencing consumers' spending habits on alcoholic beverages.?

One observable trend is the shift towards reduced frequency of shopping trips. Rather than making impulsive or spontaneous purchases, Gen Z consumers are adopting a more strategic approach, consolidating their shopping trips to minimise transportation costs and maximise efficiency. This deliberate effort to streamline their consumption patterns reflects a conscious desire to exercise greater control over their expenditures. Closely tied with this is the fact Gen Zers are embracing the concept of "less is more" when it comes to purchasing food and beverages. This translates into buying smaller quantities or opting for more cost-effective alternatives, such as store-brand products and private labels.

In addition to scaling back on non-essential products, Gen Z consumers are also becoming more discerning in their purchasing decisions. They actively seek out promotions, discounts, and loyalty rewards to maximise the value of their purchases. This trend reflects a savvy consumer mindset, wherein individuals are increasingly vigilant about securing the best possible deals and stretching their purchasing power. This could possibly impact brand loyalty as they opt for cheaper alcoholic beverages. Recent data shows that 45% of consumers have resorted to drinking cheaper brands, with an additional 14% tempted to follow suit.

Moreover, the pandemic-induced shift towards remote work and social distancing measures has decreased social outings and dining experiences. As a result, Gen Z individuals are re-evaluating their consumption habits, opting for more home-based activities and reducing their reliance on hospitality services. This "rationalisation" of consumption in the hospitality sector contributes to the overall decline in alcohol consumption, as fewer opportunities for socialising outside the home translate into reduced demand for alcoholic beverages.?

In essence, the decline in alcohol consumption among Gen Z individuals can be attributed to a combination of economic, social, and behavioural factors. As they navigate the complexities of the modern world, Gen Z consumers are redefining their priorities and adopting more mindful and intentional consumption habits.

Strategies for Beverage Alcohol Companies to Thrive Amidst Recession

Alcohol companies facing declining demand may be tempted to cut all investment as a knee-jerk reaction. However, such a move would be short-sighted, missing out on opportunities for innovation and adaptation within the industry. Instead, a more prudent approach involves cutting back sensibly while simultaneously devising strategies to address the shifting landscape. These challenges can be particularly daunting without the necessary expertise. This is where working with experienced marketing consultancies becomes invaluable. By partnering with professionals like myself, businesses can gain access to a wealth of insights, market research, and strategic guidance tailored specifically to the evolving dynamics of the beverage alcohol industry.

My name is Corneliu Vilsan, and with over two decades of experience in General Management, Marketing, and Business Development roles across diverse sectors and geographies, along with five years as a consultant for medium and large-sized businesses and a successful author, I bring a unique blend of strategic thinking and practical know-how to the table. Unlike other consultants, I begin by conducting a comprehensive assessment of your business, identifying strengths, weaknesses, and areas ripe for improvement. This diagnosis serves as the foundation for developing targeted strategies to increase profitability, gain market share, and weather economic downturns.?

From portfolio management to innovation projects and competitive benchmarking to marketing effectiveness analysis, I offer a full suite of services designed to address your specific challenges. Whether it's exploring opportunities for international expansion, improved brand building or fine-tuning trade terms, my approach is centred on delivering tailor-made solutions that drive tangible results.?

Ultimately, in times of uncertainty, it's crucial for alcohol companies to embrace innovation and strategic thinking. By partnering with a seasoned consultant like myself, businesses can confidently navigate the complexities of the current landscape, emerging stronger and more resilient on the other side of the recession.

Book a free call with me today to explain how my proven methodology can improve your business profitability and build a premium portfolio of international brands.