Europe boasts some of the world's most famous spirits, from French Cognac to Scottish and Irish whiskey, but changing consumer tastes and a rise in cocktails and low- and no-alcohol options are reshaping the industry under pressure from economic challenges.
Producers in France, one of the world's largest producers and exporters of alcoholic beverages, sounded the alarm in June, predicting a 13% drop in spirits exports in volume and 12% drop in value in 2023 as inflation squeezed consumer spending.
Cognac has been the hardest hit drink, with exports falling more than 21 percent last year, and producers are bracing for further difficulties after China launched an anti-dumping investigation in January that could result in tariffs on Cognac exports.
But inflationary pressures are not the only factor behind the decline in spending. A longer-term trend toward moderation is also at play.
“People are drinking less,” Emily Neal, chief operating officer at global beverage information provider IWSR, said in an interview with Euraactive. She noted that the trend is driven not only by economic hardship, but also by a growing focus on health and lifestyle choices.
Neal noted that moderation, often associated with millennials (those born between 1981 and 1996) and Gen Z (those born between 1997 and 2012), is spreading across all age groups. “Moderation is also spreading geographically, not just in mature markets like the US and Western Europe, but also in Asia and Latin America,” he added.
Despite these changes, the drinks industry isn't panicking: Trendy low-alcohol drinks like spritzers and the rise of non-alcoholic gin and beer are creating new business opportunities.
The top 10 markets for non- and low-alcoholic beverages include European countries such as France, Germany, Spain and the UK, as well as Australia, Brazil, Canada, Japan, South Africa and the US. Together, these markets account for 70% of global sales.
In these regions, consumption of non-alcoholic or low-alcoholic beverages will increase by 5% in 2023, giving the market a value of over €11 billion, with a forecast of 6% growth between 2023 and 2027.
Sales of zero-alcohol beer are growing fastest in Europe, where EU production is expected to grow by 13.5% in 2023, while traditional beer is expected to fall by 5%, according to Eurostat data released in August.
Globally, sales of non-alcoholic beer grew by a third last year in an otherwise “flat beer market”, Neal said.
“Companies have solved the taste problem,” Neal noted, highlighting how investments in food technology have greatly improved non-alcoholic products over the past few decades.
Despite these odds, Ulrich Adam, executive director of EU-based lobby group Spirits Europe, says the market for no- and low-alcohol drinks is growing strongly, but still represents a small proportion of overall sales.
“The no- and low-alcohol market looks promising but in absolute sales share terms it's still not large,” Adam said.
IWSR predicts that non-alcoholic drinks will account for around 4% of the total alcohol market by 2027 in the 10 largest markets.
Less is more
For Neal, changing consumption patterns are part of wider societal changes that are influencing how alcohol is consumed.
“Decades ago in the UK, many factory workers would go to the pub after work to unwind,” she explained, noting that the alcohol consumed was typically in large quantities, relatively cheap and not strong.
“It's more family-oriented now and more about food and experiences,” she added.
Both Adam and Neil agree that this change is due to a trend towards “premiumisation” of alcoholic drinks – a growing preference for higher-end products such as craft beer, single malt whiskey and premium sparkling wine.
Adam also points out that younger consumers are turning to established global brands, unlike their parents' generation, who often favoured locally made alcoholic drinks.
This trend has allowed international companies to expand in new markets, despite a slight decline in overall consumption.
“Spirits is well positioned to grow as values rise even if markets stagnate or volumes decline,” Adam said.
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In France, consumption of versatile spirits such as gin and other liqueurs used in cocktails has avoided a downward trend and is expected to grow slightly in the first months of 2024, according to the French Spirits Federation (FFS). In particular, consumption of the Italian cocktail “spritz” increased by 17.2%.
Changing tastes among younger consumers are also driven by the influence of social media, with Gen Z and millennials not only looking for great tasting, low alcohol drinks, but also drinks that look great on Instagram.
This explains the boom in colorful, visually stunning cocktails like the Spritz, whose distinctive, gaudy orange colour can be seen on terraces across much of Europe during the summer.
“It's cute, it's orange and it's great for social media,” Neal said.
This cocktail craze has also fueled a niche market for ready-to-drink drinks, with pre-mixed products like tequila beer and canned versions of classic drinks like the piña colada gaining popularity.
Adam noted that European companies are also embracing this market: “We're seeing a growing range of ready-to-drink mixed drinks with 5% to 10% alcohol content,” he said.
According to IWSR, this trend is expected to become even more pronounced in the future as Gen Z consumers are less interested in traditional bulk alcoholic beverage categories such as beer and wine, instead gravitating towards ready-to-drink drinks, white spirit-based cocktails, liqueurs and aperitifs.
“They drink less, but the quality is good,” Adam said.
*Maria Simone Arboreas contributed to this article
(Edited by Angelo Di Mambro and Rajnish Singh)
