Original release date April 15, 2024: Markets are suggesting that
spirits consumption will return to historical growth levels
post-pandemic, but our Head of European Consumer Staples Research
disagrees.
----- Transcript -----
Welcome to Thoughts on the Market. I’m Sarah Simon, Head of the
European Consumer Staples team. Along with my colleagues bringing
you a variety of perspectives, today I'll talk about a surprising
trend in the global spirits market.
It's Monday, April 15, at 2pm in London.
We all remember vividly the COVID-19 period when we spent much
more on goods than services, particularly on goods that could be
delivered to our homes. Not surprisingly, spirits consumption
experienced a super-cycle during the pandemic. But as the world
returned to normal, the demand for spirits has dropped off. The
market believes that after a period of normalization, the US
spirits market will return to mid-single-digit growth in line
with history; but we think that’s too optimistic.
Changes in demographics and consumer behavior make it much more
likely that the US market will grow only modestly from here.
There are several key challenges to the volume of US alcohol
consumption in the coming years. Sobriety and moderation of
alcohol intake are two rising trends. In addition, there’s the
increased use of GLP-1 anti-obesity drugs, which appear to quell
users' appetite for alcoholic beverages. And finally, there’s
stiffer regulation, including the lowering of alcohol limits for
driving.
A slew of recent survey data points to consumer intention to
reduce alcohol intake. A February 2023 IWSR survey reported that
50 per cent of US drinkers are moderating their consumption.
Meanwhile, a January 2024 NCSolutions survey reported that 41 per
cent of respondents are trying to drink less, an increase of 7
percentage points from the prior year. And importantly, this
intention was most concentrated among younger drinkers, with 61
per cent of Gen Z planning to drink less in 2024, up from 40 per
cent in the prior year's survey. Meanwhile, 49 per cent of
Millennials had a similar intention, up 26 per cent year on year.
Why is all this happening? And why now? Perhaps the increasingly
vocal commentary by public bodies linking alcohol to cancer is
really hitting home. Last November, the World Health Organization
stated that "the higher the amount of alcohol consumed, the
higher the risk of developing cancer" but also that "half of all
alcohol-attributable cancers in the WHO European Region are
caused by ‘light’ and ‘moderate’ alcohol consumption. A
recent Gallup survey of Americans indicated that young adults are
particularly concerned that moderate drinking is unhealthy, with
52 per cent holding this view, up from 34 per cent five years
ago.
Another explanation for the increased prevalence of non-drinking
among the youngest group of drinkers may be demographic makeup:
the proportion of non-White 18- to 34-year-olds has nearly
doubled over the past two decades.
And equally, the cost of alcohol, which saw steep price increases
in the last couple of years, seems to be a reason for increased
moderation. Spending on alcohol stepped up materially over the
COVID-19 period when there were more limited opportunities for
spending. With life returning to normal post pandemic, consumers
have other – more attractive or more pressing – opportunities for
expenditure.
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