The global alcohol beverage industry faced challenges and opportunities last year, but beverage alcohol remained to be one of the most resilient types of consumer goods amid the disruptive global pandemic.
Last year, we have covered how the wine industry was dampened by global shipment delays, rising shipment costs and container shortages. Rising energy costs, soaring inflation and Brexit were other major issues making headlines for months. For instance, inflation reached a 40-year-high in the US last November.
In Europe, the UK faced recruitment challenges in the hospitality sector due to a lack of European Union workers, and some EU countries faced all-time high energy bills due to reduced gas supply and unusually colder temperatures.
On the other hand, the wine industry was also blessed by new and exciting opportunities with the maturing ecommerce market and diversifying drinking preferences emerging in the stay-at-home period.
While some of the previous trends may prevail, IWSR Drinks Market Analysis has summed up eight key trends for 2022 and presented a simple outlook of the alcohol market landscape.
1. Non-traditional luxury categories
IWSR finds that 39% of urban, affluent Chinese alcohol drinkers had spent over RMB 500 (US$79) on a bottle of alcohol to drink at home in the first half of 2021.
The increasing levels of wealth and new drinkers will foster category growth especially in Asia and the US, according to the analysis’ estimate.
The new drinkers emerging during the stay-at-home period may disrupt the current international status spirits landscape by diversifying the segments or giving attention to niche status categories. For instance, agave-based spirits, Irish whiskey, US whiskey and Japanese whisky all registered significant popularity in 2020.
2. Substituters vs Blenders
Moderate drinking is gradually accepted as a lifestyle and societal norm, leading new opportunities to the no and low alcohol market. Last year, IWSR research shows no- or low-alcohol consumption has seen a slight volume consumption increase in 10 countries and is forecast to grow by 31% in 2024.
IWSR has identified the majority of no orlow consumers as two categories – the ‘Substituters’ who just consume no/low for certain occasions, and the ‘Blenders’ who switch between no/low and full-strength on the same occasion.
Its consumer research shows that 40% of no/low consumers in the UK are ‘Substituters’, in which Gen Z and millennials are more likely to substitute than Boomers.
The no or low alcohol trend is also enhanced by the alcohol-free products produced with new technologies. They often claim to offer mood-enhancing or functional benefits with ingredients such as CBD, nootropics and adaptogens, and are seen as alternatives to enjoy in drinking occasions.
3. Intersections of ecommerce and offline purchasing
IWSR previously forecasted that by 2025, e-commerce will represent about 6% of all off-trade beverage alcohol volumes across 16 key markets, compared to less than 2% in 2018.
As the alcohol beverage ecommerce develops, the increasing number of retailers and business models is blurring the distinctions between different ecommerce channels, and even between online and offline purchasing.
For example, it is common to see omnichannel retailers partner with on-demand services for faster delivery, or marketplaces establish networks of physical stores to cater consumer’s needs. Brand owners need to understand the consumption patterns and adapt to the fast-changing logistics landscape with flexibility.
4. More conscious and picky consumers
Under lockdown measures or work-from-home policies, consumers are spending more time at home, which means the premium consumption may shift from the on-trade to the home-premise.
As their experiences have been shaped by the experiences, such as at-home cocktail-making and subscription services, from the last two years, they may become more conscious of higher prices and aware of poorer quality products in bars, pubs and restaurants.
5. Early signs of premiumisation in RTD category
Some ready-to-drink (RTD) launches have a higher representation than premium-and-above products in 2020, which suggests RTD’s trend towards premiumisation.
IWSR believes this will appeal to spirits and wine brand owners, as most of the value growth in the spirits and wine categories has come from the premium-and-above segment over the past decade.
Apart from deciding on flavours when purchasing RTD, consumers are increasingly focusing on the alcohol base, as well as the cocktail types. They tend to consider spirits-based products as being of higher quality. As such, spirits-based RTDs have dominated most key markets except for Mexico and the US.
6. Diversification as category lines blur
With easy access and wide range choices from online, consumers are frequently changing their beverage options. IWSR research finds that consumers are showing strong interest in trying craft beer, hard seltzers, wine and Japanese whisky.
This has altered the alcohol beverage industry landscape as drinks companies are exploring new categories or even softening their existing core brands. Some even started selling products that fit a particular consumption group.
Such strategies can widen their portfolio and increase their competitiveness, as well as allowing them to use small-scale investments to explore new products and occasions.
7. Commitments to sustainable practices
With the heightened concerns towards climate change following the end of COP26 last year, consumers are paying more attention to drink companies’ commitment to sustainable practices.
IWSR’s consumer research shows, 48% of the US alcohol drinkers say their purchase decisions are positively influenced by a company’s sustainability or environmental initiatives, as well as 72% Brazilian alcohol drinkers and 70% of affluent Chinese alcohol drinkers.
Amid unstable global supply chains and soaring prices, more consumers reported they wanted to support and contribute to the local economy. To respond to consumers’ concerns, companies may consider implementing long term plans to emphasise sustainability, quality and community values.
8. Prevailing external pressures
The aforementioned global issues are likely to continue in 2022, which include rising packaging costs, container capacity, inflationary pressures and environmental change. IWSR suggests some companies may need to adjust their near-term strategies to adapt to this economic environment.
Companies should also carefully assess purchasing spikes in the past two years, as their company performance may return to pre-pandemic level when international travel resumes.