Trends in the Alcoholic Beverage Industry - US and Europe

Premiumization grew significantly during the pandemic because consumers wanted to create ‘affordable luxury’ experiences in their own homes, and were willing to spend more on higher-quality products across all alcohol categories-- especially spirits – and there’s no sign of this inclination slowing.

Home-mixology trends on Instagram and TikTok spawned an excitement for cocktails, making high-end tequila ascendant for the first time in the US. It is expected that premium spirits will increase their share of the global market by as much as 13% by 2024, as younger consumers are drawn towards the rich heritage of spirits production and on-premise sees continued popularity for cocktails.

This trend towards premiumization is also expected in the sparkling wine category, where high-end bubbles are on an upward trajectory. Growth in Prosecco and Champagne is being driven by strong demand in the United States and the United Kingdom, where volumes grew 8% and 5%, respectively, in 2022.

Gen Z has been given the unique distinction of being “the least alcohol-consuming generation in history”, leading a trend towards moderation as part of a broad-based interest in health and wellness -- as well as fears of social media surveillance.

Manufacturers are taking heed, as the race to introduce new, lower alcohol content products is heating up, and on-premise venues also gear up to serve drinks that will appeal to those who are limiting or omitting alcohol. “Better-for-you” alcoholic alternatives have already seen a 20.1% increase in sales from 2021 to 2022, while low and no-alcohol offerings saw a 6% increase in that same time period. Increased investment by industry players is expected to push this market further outward.

According to research from IWSR, 48% of U.S. alcohol drinkers say they consider a company’s sustainability or environmental initiatives before purchasing alcohol, with 73% of Gen Z saying they are willing to spend more for a sustainable product.

Given the amounts of water, grain and energy needed to produce alcoholic beverages, consumers are seeking out brands that are working to reduce their overall carbon footprint. In addition to reducing the impact of packaging and production processes, brands are increasingly examining the impact of their raw ingredients and finding ways to recycle waste created from their products.

economic concerns on the horizon, this category is set to see even further growth and diversification.

It’s not just alcohol brands that are diving into this category: the popularity of hard seltzers and the growing trend towards non-alcoholic drinks is attracting investment from traditional soda brands as well.

These kinds of category-blurring “total beverage” companies will expand their market share with soda, energy drinks, and alcohol all under one marketing roof. But with lots of new products arriving on the market, RTD brands will need to innovate to earn their place on crowded shelves.

online alcohol sales experienced triple-digit growth. Over the coming years, growth rates for the alcohol e-commerce channel are set to moderate: new data from the IWSR predicts that alcohol e-commerce sales will grow 34% between 2021 and 2026, down from 43% in 2020.

Overall, the trajectory remains upward, and the channel is still a key growth contributor for the total beverage alcohol market. As evidence, there has been a flurry of investment in the e commerce channel in recent years with on-demand gaining ground in US and Europe. Brands are particularly looking to mine these platforms for valuable data insights into their target consumers.

For premium products in particular, brands need to communicate their values effectively, which for the most part revolve around showcasing their heritage and their efforts towards their broader community. Highlighting traditional practices, or brand sustainability initiatives may help consumers make the leap into higher-priced offerings and foster brand advocacy.

Gen Z in particular makes buying choices that reflect a desire for ethically ‘trustworthy’ drinks – but authenticity is the name of the game. Simply ‘greenwashing’ a marketing campaign can backfire badly, as 41% of consumers said they boycott brands they see as exploiting public sentiment.

Brand activations have become an important way to engage consumers, especially for the alcohol industry, as 75% of drinkers tend to repurchase a drink for home if they tried and liked it in a bar, restaurant or club. This ‘halo effect’ can be vital for brands who will need to create a lasting impression in an increasingly competitive landscape.

Research shows that people are much more open to experimentation on-premise: 41% of US consumers like to try new or different drinks brands when out, increasing to 47% for 21–24 year-olds. Similarly, 38% of European on-premise consumers are more open to trying new and different drinks, while 59% are more likely to trade up for a premium drink. It’s clear that the on-premise will be key for brand exploration.

Strong social media strategies are key for younger consumers to truly engage with abrand. For about one-third of those aged 18 to 34, posting about a new experience, drinkor meal is crucial for the event to feel ‘complete’. Considering that they’re willing to pay more to drink less, premium alcohol brands can’t afford to underestimate the power of a strong social initiative to capture the attention of Gen Z and Y.

Cocktails in particular are among the most shareable food and drink items, and brands are working with on-premise partners to design drinks that can be served in memorable, Instagrammable ways. Using technology to ‘surprise and delight’ on-premise consumers is an easy extension that can create brand ‘stickiness’: integrating drink personalization to a digital menu, for example, can provide a customized experience that stands out and encourages social media shares.

Technology research firm Gartner predicts that by 2026, 25% of people will spend at least one hour a day in the metaverse to work, shop, socialize or consume entertainment . Alcohol brands are now exploring web3 strategies including gamified content, virtual concerts, and non-fungible tokens (NFTs) to engage with this cohort of digitally savvy younger consumers that are typically difficult to reach via traditional advertising channels.

Drink labels can have a huge influence on buying decisions, as consumers are increasingly trying to understand ingredients and processes in a more meaningful way. Prior to the pandemic, QR codes were falling out of fashion, but brands expanded their applications over the past few years as a touch-free way to interface with consumers.

By scanning a QR code or Augmented Reality label on a bottle, potential shoppers can, for example, access a video showing a behind-the-scenes glimpse of how the product they’re considering is made. As sustainability initiatives in packaging are substituting glass for paper bottles or cans, the entire bottle can be a digitally-enabled surface for engagement!

Consumers are concerned about their financial situations leading into 2024 and will be looking for ways to keep costs down. Brands that meet consumers’ tighter budgets are more likely to see volume traction than their more premium counterparts.

Contests, promotions, digital sweepstakes and rewards initiatives are all ways in which brands can give these consumers a reason to keep buying their drinks of choice, all while providing highly targeted and actionable information to marketers for future engagement.