Global beverage alcohol is projected to deliver over $21.6 billion to the global economy by the end of 2023, with premium plus segments and no/low alcohol representing bright spots, according to a report from the IWSR Drinks Market Analysis. But future global volume growth will be subdued for the industry, at 1% per year from 2022 to 2027, with value growth forecasted at 2%. Here are five factors shaping the industry’s outlook.
Premiumization to Add Value to Some Segments, But Slower Growth Rates
Brands operating in premium-and-above price tiers for beer, spirits and wines all outperformed their standard and below counterparts in 2022, and analysts expect the trend will continue. But increased cost of living is leading to some trading down, most evident in parts of Africa, Latin America and Europe. Based on a consumer survey conducted by the data company, taking advantage of promotions on a regular brand is the most popular money-saving strategy for consumers, with less support for down-trading to a cheaper brand or own-label, in some markets.
“We see a slowing in the rate of premiumization but not a complete halt,” said Emily Neill, COO of market research for the IWSR.
The shift up the price ladder has been a growth driver for the industry, accelerated by the pandemic in many countries. While premium and super premium above segments are still very much in growth, a more challenging economic environment with high inflation is slowing that trend.
“Consumers are spending less on alcohol alongside non-alcoholic beverages as well,” Neill said.
But for some categories, premium and above products are still driving growth. Staying in and drinking has a strong pull in most markets, and treating oneself at-home and exploration online are both reinforcing overall premiumization trends. Premiumization in whisky will be a key growth driver for the overall spirits category; the premium plus whisky segment contributed most growth to the whisky category in the U.S last year, and will continue on an upward trend (4%).
Tequila to Boost Other Agave Spirits
Heightened consumer awareness of tequila and mezcal is projected to boost agave alternatives as well – volumes of raicilla, bacanora, and sotol collectively increased by nearly 40% in the U.S. in 2022, and will continue to climb. Tequila will make the most volume impact of agave spirits, and is projected to overtake vodka this year to become the industry leader by value, with overall category volume growth of 13% from 2021 to 2022. That volume growth was driven by performance in the U.S. (12%), and is expected to continue at 9% annually until 2027.
Momentum Shifts for RTDs
After years of double-digit numbers, RTD growth has slowed, declining sharply in the U.S. Globally, RTDs grew 2% by volume in 2022, compared to historical growth of 20% annually from 2018 to 2021. In the U.S cocktails, hard tea, and flavored alcoholic beverages collectively grew 14% from 2021 to 2022, but were unable to offset the 10% volume decline in hard seltzers. The global RTD category is expected to grow by 3% annually over the next four years.
“We’re seeing in the States sort of shift to more premium and more sophisticated ready-to-drink products and spirits-based and even zero-sugar offerings sort of expected to continue to grow the category into the longer term,” Neill said.
Momentum Continues for No-Alc
Globally, the no-alcohol category grew 8% in 2022, and will continue at 7% growth annually until 2027. By then the rising category is expected to command 2% volume share of the total global beverage alcohol market. Performance in 2022 was boosted by no-alcohol beer, which grew 8% in volume in 2022, and no-alcohol spirits, which grew almost 22% in volume off a small base. In all key markets, around half of all alcohol drinkers say they are intending to moderate their consumption.
Beer Outperforms in Key Markets
Outside the U.S., beer’s outlook is positive with global beer volumes growing 3% in 2022, buoyed by strong performance in India, Vietnam, Mexico, and China. But the category is expected to continue to grow at just under 1% annually over the next four years. The two largest global beer markets, China and the U.S., will hold back overall growth, particularly due to volume declines at the lower-price tier of products. Like spirits however, the premium plus beer market is a driver for the category and is expected to grow by 3% (vs 5% decline for standard-and-below).