Strong demand for ready-to-drink offerings and millennial consumer buying trends helped the global beverage alcohol market to bounce back from the previous year’s losses, according to a report by alcohol industry data company IWSR.
Global alcohol value grew by +12% to $1.17 trillion, recovering from pandemic-driven value losses of -4% in 2020. Total volume grew by +3% in 2021, up from -6% in the previous year.
IWSR predicts that spirits volume will grow by +5% and value by +15% between 2021 and 2026 as COVID-induced restrictions to bars, restaurants and public events are relaxed, though e-commerce is expected to remain a lasting trend as well as consumers have grown comfort in drinking at home.
Ready-To-Drink Continues To Stand-Out
As people found themselves consuming and socializing more at home over the last two years, alcohol sales have received a lift from the growing RTD category. RTD volume grew +14% in 2021, representing a slight deceleration from +25% in 2020 as some consumers returned to drinking and dining out.
Within that mix, hard seltzer continues to dominate U.S. consumers’ preferences with volumes expected to overtake still wine within the next two years.
RTDs represent about one-third of the whole global spirits category and are expected to grow by +44% in volume and +51% in value over the next five years, IWSR reports. Future category acceleration will most likely see value outpace volume as higher-priced, spirit-based beverages gain more ground in the U.S. market.
Agave-based drinks like tequila and mezcal continue to stand out in the spirits category, especially in the U.S. and the U.K. IWSR expects agave-based spirits will overtake U.S. whiskey in dollar value by the end of the year, and to increase +67% between 2021-2026. In the U.K., the segment could grow by more than +88% in value over the same period.
Millennials Are Fueling The Surge
Consumers aged 25-40 were the main driver of global alcohol sales, IWSR stated, as they were the least affected by pandemic restrictions and represent a big portion of the purchasing power in the market.
Millennials are also interpreting value differently by focusing on “less but better” alcoholic drinks: Premium-plus spirits (priced $22.50 or more) are forecast to grow by more than +50% in value in the Americas from 2021 to 2026.
The trend towards better-for-you products with functional ingredients and moderation continues to resonate with millennial and Gen-Z consumers. IWSR said the no/low-alcohol segment grew more than +10% last year. If the U.K. market – where no-alcohol spirits volume increased by over 80% in 2021 – is considered a bellwether, the category will expand in the U.S. in the next five years.
Yet, there is some trepidation about where consumer trends in the alcohol industry will go as uncertain economic conditions loom over the retail beverage market. The rise of at-home cocktail making during the pandemic and consumers’ comfort in treating themselves to higher-end products could be a boon to the alcohol industry during inflationary periods, however.
“Challenges remain, including whether bars and restaurants will continue to attract consumers who have grown comfortable with e-commerce and at-home consumption; whether consumers will accept price increases on their preferred brands; and whether inflation and supply-chain issues will lead to consumers down-trading and gravitating towards local rather than imported products,” IWSR CEO Mark Meek said.