Morgan Stanley’s Head of European Consumer Staples, Sarah Simon,
discusses why aging populations, wellness trends and Gen Z’s
moderation are putting pressure on the long-term outlook for
alcoholic beverages.
Read more insights from Morgan Stanley.
----- Transcript -----
Welcome to Thoughts on the Market. I’m Sarah Simon, Head of the
European Consumer Staples team. Today’s topic: Is America
sobering up? Recent trends point to a national decline in alcohol
use.
It's Wednesday, April 23rd, at 2pm in London.
Picture this: It's Friday night, and you're at a bar with
friends. The drinks menu offers many options. A cold beer or
glass of wine, sure. But how about a Phony Negroni. And your
friends nod approvingly.
This isn't just a passing trend – we believe it's a structural
shift that's set to reshape the beverage industry.
Overall alcohol consumption in volume terms has been relatively
flat over the last decade in the U.S. - with spirits growing mid
single digits in value terms and beer growing low single digits.
But both categories are currently declining. The big debate is
whether it’s cyclical or structural. We acknowledge that the
consumer is under pressure right now, but we equally see long
term structural pressures that are starting to play out. There
are three key factors behind this trend: increased moderation by
younger drinkers, an ageing population, and then broader health
and wellness trends.
So let’s talk first about Gen Z – those born between 1997 and
2012. They're drinking notably less than previous generations of
the same age. In fact, today’s 18-34 year-olds drink 30 per cent
less than the same age group 20 years ago. And we think it’s
pretty unlikely they will catch up as they get older. This isn't
a temporary blip caused by the after-effects of COVID-19
lockdowns or economic pressures. It's a long-term trend that
predates both of these factors. And importantly this isn’t the
case of abstinence – as in the case of tobacco – but moderation.
Younger generations are simply drinking less alcohol and
allocating more of their beverage spending towards soft
drinks.
Secondly, developed market populations are ageing. If we look at
population data, we see it’s today’s 45-55 year old age group
that drinks the most alcohol; and has exhibited the highest
growth in consumption and spending over the last 20 years.
However, over the next 20 years, this cohort is likely to cut
back on drinking due to physiological reasons as they age. The
body simply becomes less able to metabolize alcohol, and there’s
much higher usage of prescription medication in the over 65 age
group.
And in just the same way that this cohort was growing faster than
the population overall over the last 20 years – because of the
higher birth rate in the late 60s and 70s – in future, the aging
of these GenX-ers will drive outsized growth in the number of
people aged over 75, who consume much less alcohol. And so, the
result is a disproportionate impact on overall alcohol
consumption. And on top of this, there’s increased adoption of
GLP-1 weight loss drugs that we’ve talked about previously. And
increasingly negative perceptions of the health implications of
alcohol – as the broader health and wellness trend takes
hold.
On the flip side, there's also a growing acceptance of
non-alcoholic beverages, driven by better products and broader
distribution. We expect low- and zero-alcohol alternatives to
gain a larger share of the market as a result. And we think beer
looks particularly well-positioned; it already accounts for about
85 per cent of the non-alcoholic market overall. And this year in
the U.S., non-alcoholic beer has nearly doubled its share of U.S.
beer retail sales, compared to where it was in 2021. Now it’s
still small, but the growth rate in the well over 20 per cent
range, suggests that share gain will continue.
Meanwhile, we’re seeing more mocktails on menus and zero-alcohol
beer on draft in pubs. All of this is further contributing to
less stigma associated with not drinking alcohol. And all these
trends add up to one conclusion, we think: earnings pressures on
alcohol makers are not simply cyclical but structural. They have
been underway even prior to COVID. And looking to the future, we
think they’re here to stay.
So now, many more people can say cheers to
that.
Thanks for listening. If you enjoy Thoughts on the Market, please
take a moment to rate and review us wherever you listen to
podcasts. And tell your friends about us too.
Kommentare (0)
Melde dich an, um einen Kommentar zu schreiben.