Having a drink or two is quite common in virtually every demographic. They are more popular than coffee or even bottled water. The total value of just the US portion of the alcoholic beverage industry is about $200 billion per year.
Alcoholic beverages are the second largest beverage consumed in the United States. More than 9 billion gallons are consumed annually, comprising 19% of total adult beverage consumption.
Alcoholic beverages might be popular now, but certain trends in the industry may help them to surge to the #1 position for adult beverage consumption in the coming years. From a focus on puritanism to the uniqueness of the craft industry, alcohol is ready to make a major move upward. Here’s why.
How Millennials Are Hacking Alcohol
- According to Euromonitor, one of the most popular trends in the alcoholic beverage industry is personalization.
- Product offerings that help people make their own accurate cocktails at home, create their own craft brews, or take advantage of local craft brewing businesses offers the chance for experimentation that could offer a surge in sales across multiple categories for the industry.
- Exotic flavors are also a component of the personalization trend. Tobacco, matcha, carrot, and cucumber are just a few of the recent experiments companies have made in the industry. And let’s not forget about the pizza flavored beer from Mamma Mia!
- New marketing and advertising campaigns, from video game includes to social media interaction, will also help Millennials [and all other age/generational demographics] to learn more about how alcoholic beverages are made and why certain processes provide flavor advantage. The expected result is a surge in sales.
- Beer looks to take advantage of these changes the most. It dominates the alcoholic beverage industry in a volume share basis, making up 87% of the total number of alcoholic beverages adults consume in the US.
- This means craft beer and macro-brewing will continue to battle each other for market share. Although the preference for individualized experiences is tempting to many consumers, so is the lower overall cost of macro-brewing.
- U.S. beverage alcohol dollar sales are more evenly split with off-premise accounting for 53% and on-premise for 47%. Both channels growing by 1% on an annualized basis.
- The desire for customization has allowed for a stunning level of new brand introductions. From 2010-2012, brand introductions went up from 40 per year to 178 per year.
Millennials are pushing for alcoholic beverages that meet their flavor preferences. They are willing to experiment and this has led to a surge in new business opportunities for the industry. Other age demographics have also embraced the idea of having a wider variety of products from which to choose. In the US industry, this means there has been a massive increase in the number of beers that are available right now. The attitude is maybe best summarized by what the Goose Island Beer Company says. “We don’t have to be the only beer you drink. We just want to be the best beer you drink.”
How the Artisanal Movement Brings New Life to the Industry
- There are over 7,300+ local wineries, 2,100+ craft breweries, and 400+ craft distilleries in the US alcoholic beverage market today.
- This helped to change a declining trend, making 2012 the first year beer sales volume increased [by 0.5% to reach 2.8 billion 2.25-gallon cases] after 3 consecutive years of 1-2% declines.
- Craft beer grew by 9.8% with imports up 1.2% and declines in all others, even though light beer dominates sales volume at 52% of the market share.
- The top 25 beer brands account for 83% of category volume, but most are in decline.
- Wine sales volume increased by 1.9% to reach a record level of 318.4 million 9-liter cases in 2012, marking 10 consecutive years of growth.
- Domestic table wine dominates at 72% of consumption in the US alcoholic beverage industry.
- Imports for Spain increased 45% for wine, with Chile at 38% and Argentina at 37%, leading the growth in this sector.
- Spirit sales also achieved 10 consecutive years of growth in 2012, with vodka the #1 preference amongst US consumers.
- Vodka, Tequila and Irish whiskey are the fastest growing categories in the spirits category within this industry.
People are preferring a specific drink, but they’re willing to experiment some with that drink. 10% of American consumers might prefer domestic whiskey, but that is also fueling growth within the bourbon market. It’s also why you’re seeing explosive growth with artisanal beer. Different flavors are enticing more sales through experimentation. If a new flavor is enjoyed, then it is being added to the alcoholic beverages a consumer is already purchasing. To take advantage of this trend, look for more new flavor combinations, expanded spirits offerings, and more local wine production.
Can Healthy Alcohol Really Become a Reality?
- Anti-alcoholic rhetoric regarding the health of these beverages may have a negative impact on the industry in the next 5 years.
- The promotion of alcoholic abstinence as a lifestyle choice is already present in certain conservative religious groups who see these beverages as a gateway to addiction or drunkenness.
- To counter these issues and avoid the possibility of punitive taxation for “unhealthy” products, look for the alcoholic beverage industry to expand caloric labeling and nutritional facts on product labels for products sold through retail outlets.
- Look for new product designs to help counter these negative trends as well. Kopparberg out of Sweden, has invented frozen cider pouches. Environmentally friendly containers, co-op advertising/marketing opportunities, and a greater emphasis on product safety through brand messaging will also be more prevalent within the industry.
- A lessening of regulations for other products, most notably marijuana, may also cause a negative impact for the alcoholic beverage industry. In Colorado, annual sales have started to exceed $1 billion for marijuana – funds that may have been directed originally to alcohol.
- The legalization of marijuana, however, also offers the alcoholic beverage industry a unique opportunity for growth. Look for products that include cannabis infusions, flavors, and fortification to bridge the gap between these two products.
Although there are certain areas of the alcoholic beverage industry that face uncertain times, there is an opportunity that can be found here as well. The companies that are willing to take on the biggest risks are the ones who will likely see their fortunes rise in the next decade. This will also likely cause a scramble to minimize the health impacts of alcohol while expanding the variety that is available to consumers. The one variable here is taxation: in Washington State, there is a sales tax of up to 20.5% on alcoholic beverages, which has put a damper on overall sales.
Global Trends Appear to be a Little Less Encouraging
- In 2015, alcohol sales volume fell for the the first time since Euromonitor started keeping track of global sales records in 2001.
- According to CNN, you would probably need to go back to the Asian financial crisis of the late 1990s to discoverer the last drop in worldwide alcoholic beverage consumption.
- While sales in dollar terms rose by about 2% in 2015, the overall volume of alcohol consumed dropped by 0.7%.
- As reported by NCADD, alcohol consumption in North America was able to achieve a 2.3% increase in consumption while Western Europe consumption saw stable sales.
- China, which is the largest consumer of alcohol on the planet by wide margin, saw total consumption drop by 3.5% last year as its economy slowed. This would be equal to the nations of Portugal and Chile stopping all alcohol consumption.
- Consumption in Brazil and eastern Europe fell by 2.5% and 4.9% respectively. Political fighting and economic slumps are believed to be hurting the industry in these markets.
- Premium English gin, Irish whiskey, Japanese whisky and dark beer have seen a surge in popularity globally, while the worst performing beverages in the industry are rum and vodka.
- The upward movement appears to be in mature markets that have Millennial demographics interested in alcoholic beverages. Markets without this influence are seeing declines.
What does this mean for an industry that exceeds $1 trillion in total sales with billions of liters consumed by people around the world? It means that sales are good, but people are looking for better products and premium experiences. Consumers are willing to pay a little more for something they prefer instead of settling on cheap products that may not taste great, but still give them the benefits of consuming alcohol that they want to receive. The industry is changing. Those that can evolve are going to thrive, assuming political or economic influences that could negatively affect the industry can be held at bay. Those that do not are going to fight with each other to survive.