How Are Consumers’ Alcohol Preferences Actually Changing?

August 23, 2018 In Latest News

Getting a grasp on consumer preferences and trends in the beverage alcohol industry isn’t easy due to evolving tastes, aging consumers and seemingly contradictory information. Not only do different generations of consumers have different preferences for beer, wine and spirits, the popularity of each category across all generations is shifting as well.

Different surveys and reports often come to different conclusions because of how the questions are phrased or how the audience is selected. In recent weeks, there have been news reports claiming that beer is (still) most popular with American drinkers, vs. wine and spirits, but other reports claim that distilled spirits have taken over as the preferred category for alcohol consumers.

One of these two studies showed that 42% of Americans prefer beer over wine (34%) and liquor (19%), while the equally-recent study from another source showed that 39% prefer liquor while 32% preferred beer and 25% preferred wine.

Why the differences? Diving into the details, it turns out that there are some logical conclusions. First off, the second survey chose to combine the percentages of people who preferred mixed drinks (28%) with those who preferred liquor straight (11%), unlike the first survey. The phrasing of the questions is also telling: the second survey asked about Americans’ preferences for alcoholic drinks, while the first survey asked which they most often consume.

Looking beyond the specific numbers and more so at the majority opinions can be eye-opening.

Here, we’ll break down top findings, overall trends and paths forward from recent studies, focusing on beer, wine and liquor among target generations. And we’ll even make predictions for how these preferences will continue to change and evolve over time.

Finding 1: People still consume beer more frequently than wine, liquor or cocktails.

Some studies claim that beer still reigns supreme while others lament the fall of the hoppy staple. Looking at the data across each study, the answer is clear: beer is still popular, but is losing some market share to wine and spirits as consumer tastes evolve.

While the percentages differ among studies, beer is the top choice across them all. Across age groups, the surveys show that men are more likely to drink beer. Adult males, specifically, are most likely to say that beer is their go-to alcoholic beverage.

But millennials are changing traditional beer consumption, along with everything else. They are moving away from light American lagers (like those from Budweiser, Miller and Coors) and toward Mexican imports, like Corona, Pacifico and Sol. They are also continuing to explore new styles of craft beers from smaller, independent craft breweries, especially trendy IPAs (like hazy, New England styles) and flavorful sours and goses.

At the same time, they are stepping out of their comfort zone more frequently, trying out new wines and drinking premium spirits and craft cocktails more than they used to.

By looking at the results of a third, additional report, we can get closer to a firm conclusion: according to BW166’s Total Beverage Alcohol Report, over the last 12 months ending in July 2018, consumer expenditures on Beverage Alcohol are up 4.70% over the last twelve months to $248 Billion (although servings are flat).

They continue:

“This is driven by declines in beer consumption offset by growth in wines and spirits. As a point of reference, 15 years ago Beer represented 60% of all servings of Beverage Alcohol.  Today it is less than 48%.“

This conclusion agrees with the overarching message recent reports have been driving towards: beer consumption is going down, while wine and spirits consumption is going up, and this is leading to an increase in dollar sales despite a shrinking total volume across all categories.

Beer consumption is going down, while wine and spirits consumption is going up, and this is leading to an increase in dollar sales despite a shrinking total volume across all categories. Click To Tweet

Overall, more than half of Americans across generations are choosing to drink more at home. Millennials represent the largest chunk of at-home drinkers (28%) because they prefer a more relaxing, more personal, more affordable experience, and it helps them control their intake. That said, when they do go out, younger drinkers are choosing to spend more and opting for craft and imported beers over light American styles.

What to watch for in the future: Beer volumes will continue to decline, and the total spend in beverage alcohol will continue to rise as long as the amount of spirits and wine consumption makes up for declining beer volumes — which we think it will.

Finding 2: Millennials are changing the wine industry—in ways we don’t yet totally understand.

While some studies say that millennials are already the largest group of consumers drinking wine, others say that they will soon be the largest group and others still say that millennials aren’t drinking enough wine. This generation is driving shifts in each category of beverage alcohol, which means that each of these statements could be a little bit correct.

Millennials, as we defined in our post on best practices for generational marketing, are adults born between 1980 and 1996. They make up the largest piece of our population and thus are the largest group of consumers that are of drinking age. However, a new survey from OnePoll on behalf of Jordan Winery showed that Americans reach their “wine awakening” around 29 years old.

Thinking about these results in tandem, you can see that, for the wine industry, millennials are still a growing base of consumers. The youngest millennials will be 29 (and reach perhaps their fullest wine-buying and wine-drinking potential) in 2025.

Many studies have shown that these drinkers are more adventurous in their tastes. They tend to explore different varietals and categories rather than sticking to one go-to brand or type of wine. This exploratory nature and drive to try something new causes a more rapid change of flavor trends in the market. For example, millennials drove the current rosé trend, starting with wine and venturing into other more experimental categories, like rosé ciders and gins.

Millennials tend to explore different varietals and categories rather than sticking to one go-to brand or type of wine. This exploratory nature and drive to try something new causes a more rapid change of flavor trends in the market. Click To Tweet

This generation is also driving questions in the wine industry about the premium wine market (that is, bottles over $20). Currently, studies show that Generation X is driving this premium market, willing to spend upward of $70 on wine each month—and hoping to spend more.

While millennials are more adventurous in their wine choices (according to the same study), they are less able to spend on premium wines.

And the growing income gap packaged with later-in-life marriages and children could keep millennials from reaching premium wine-status for many years. This gap could undercut the market as these to-be parents choose between a $30 bottle of wine and diapers.

For the same money-motivated reasons, wine drinkers (especially millennials) are opting to drink at home. A study from L.E.K. Consulting shows that 80% of overall wine consumption is done at home: great news for independent retailers and e-commerce sellers.

What to watch for in the future: We predict that overall wine consumption and consumer expenditures on wine will rise over the next decade, due to a decreased perceived barrier to entry imposed by things like wine scores and traditional corks, and declining beer consumption. We also predict that even though millenials will not spend as much per capita on wine as baby boomers in coming years, the US wine market will stay strong because the number of millenials drinking wines will increase, as long as premium price points (over $20) become more popular than the sub $10 price category that is most popular today.

Finding 3: Craft and premium spirits join craft cocktails in the growth of the liquor industry.

Craft cocktails boomed a few years ago and continue to find a place in the market. From 2015 to 2017, Mintel found that the number of cocktails on menus increased 15%. With them, cocktails have reinvigorated the distilling industry, which had a long recovery from Prohibition. From 2016 to 2017, the number of craft distilleries (those producing 750,000 gallons or less removed from bond annually) jumped 26%.

Similar to the boom in craft beer, craft liquor from independently-owned, low-volume distilleries is doing very well, especially in local markets. In New York State, for example, distilleries can sell and serve liquor in-house if their products are made with ingredients from in-state farms.

This trend is similar across many states. It means that consumers are coming into distilleries for new experiences and leaving with a taste of the spirits—alone and in expertly-crafted cocktails—as well as a new loyalty to an independent brand. For millennial consumers, experience is everything. When they feel a deep connection with a brand, they will seek out and opt for it whenever they can.

Craft distilleries are running with this trait, offering small and engaging tours (usually with samples) that are educational, personal and Instagram-friendly. High-quality craft cocktails also offer this individualized experience for millennial consumers. Watching a bartender shake a house-recipe gimlet feels more personal than cracking open a beer or pouring a glass of wine.

Tequila and American whiskey are leading the growth of high-end and premium spirits (that is, spirits that are $30+ per 750ml). While vodka still remains the number-one spirit in America—a spot it took from whiskey in 1976—whiskey, especially bourbon, is holding steady in the American market and craft tequila (with its sister liquor mezcal) is seeing a creeping growth. Premium and 100% agave tequilas grew to nearly 54% of imports for the liquor in 2017, and nearly every category of premium liquor has seen gains in the last year.

These premium spirits are also driving an increase in revenue for bars: Mintel found that young adults are going out for fewer drinks, but opting to spend on more expensive and interesting cocktails.

Premium spirits are also driving an increase in revenue for bars: Mintel found that young adults are going out for fewer drinks, but opting to spend on more expensive and interesting cocktails. Click To Tweet

What to watch for in the future: We predict that whiskey will stay as a leading category in the next few years, taking increasing market share from vodka but never eclipsing total vodka sales. We predict that liquor will continue to take market share away from wine and beer, with increasing volumes consumed in conjunction with rising sales due to premiumization.

 


 

Studies will continue to roll out, and will often contradict each other. What’s most important for your store is following your customers’ preferences. While watching market trends and following industry reports is important, your customers drive the most value for you.

While watching market trends and following industry reports is important, your customers drive the most value for you. Click To Tweet

Keep track of what products and categories shoppers are buying, and how this changes over time. Also keep in mind the important trend of where and when Americans consume alcohol. Can you notice any patterns in occasion-based drinking among your customers? Track how their habits change: for example, are they coming into the store less and ordering more from your e-commerce arm? And how do the baskets of your e-commerce customers differ from in-store shoppers?

It’s important to cater to consumer trends by offering the products they want at prices that appeal to them. This shouldn’t deter you from offering a wide range of products across different categories. By retailing products that consumers want across categories at competitive prices, you can grow your business across a wider base of consumers.

Keep track of trends to make sure you’re not missing out on items that your competitors are selling, that are taking off in other markets or that are doing extremely well in your store. This will help you offer that wide range of competitive merchandise and attract a broad group of consumers. Continuously make adjustments to your strategies to stay ahead of your competitors, and see how your profits improve.