No- and low-alcohol drinks outperform a declining UK alcohol market

The total beverage alcohol market in the UK is expected to see volume and value declines of -1% CAGR over the next 5 years, although it is still set to remain the world’s third most valuable beverage alcohol market for standard-and-above price bands, according to the latest data and forecasts from IWSR.

Total beverage alcohol (TBA) volumes in the UK declined by -2% between 2022 and 2023, capping a period of recent decline for the industry (2018-2023 volumes falling at a CAGR of -1%). Growth rates of the no- and low-alcohol segment outperformed the overall UK TBA market, partly driven by the ongoing consumer trend for moderation as well as excise duty changes. The overall no/low-alcohol segment showed volume growth of 47%, 2022 to 2023, with forecast volume CAGR of +19%, 2023 to 2028. The no/low-alcohol segment is expected to add incremental value of £0.8bn by 2028.

Low-alcohol volume sales almost doubled in 2023 and IWSR expects considerable growth over the next few years, particularly driven by low-alcohol beer. Many beer and wine brands are lowering their alcohol content (ABV) to take advantage of the UK’s new excise duty regime, although this is poised to bring renewed challenges for wine in particular when more changes are introduced during 2025.

“Whether reflected by reining in grocery spend, reducing the frequency of on-trade visits or switching to longer drinks, seeking out better value was the overwhelming priority for increasingly cash-strapped UK drinkers in 2023,” says Patrick Fisher, IWSR Senior Market Analyst.

“Rising prices and the cost-of-living crisis have reduced disposable incomes for discretionary spending and, coupled with the enduring trend of moderation, as well as closures and reduced opening hours in the on-trade, this is having lasting effects on consumer behaviour. The upper end of the market remains more insulated, while mainstream-and-below retail sales became more dependent on promotions.”

In the near term, industry hopes are pinned on better summer weather, and the likely consumption boost brought by two major sporting events: UEFA Euro 2024 and the Paris Olympics. However, this is unlikely to have a lasting impact.

Whilst further volume declines are expected in most categories over the forecast period, higher prices should drive some value gains in the shorter-term.

Longer term, both beer and wine are expected to revert to their established pattern of gradual volume decline, with growth in beer focused on premium world lager, stout and non-alcoholic beers, and higher-ABV red wines losing share within still wine.

Overall, spirits are expected to register modest single-digit declines over the forecast period, but gin will continue to incur heavier losses. Of the bigger spirits categories, rum is expected to register long-term growth, albeit modest and focused in spiced and flavoured variants. Agave-based spirits will also grow off a smaller base.

IWSR’s analysis of the UK beverage alcohol market also shows:

Gin drags down spirits volumes

Spirits were hardest-hit last year as volumes fell by -5%. IWSR forecasts show -1% volume CAGR 2023-2028 for spirits in the years ahead. Gin suffered the steepest declines: volumes plummeted by -14%, as it lost shelf-space to other categories, including tequila.

Agave bucked the negative trend with a +4% volume increase in 2023 although growth is slowing: category volumes rose at a CAGR of +13% between 2018 and 2023, but are forecast to move up at a CAGR of only +2% between 2023 and 2028. On-trade occasions are shifting from high-tempo venues to all-day drinking occasions, and consumption of tequila is also moving from shots to cocktails and sipping.

Most other spirits categories experienced volume falls as consumers increasingly switched to better-value long drinks, such as beer and wine. Outside agave, a few other categories also registered growth, such as Bourbon, cream liqueurs, coffee liqueurs and spirit aperitifs, helped by the enduring popularity of cocktails.

English sparkling wine and Crémant a bright spot

Wine’s long-term volume decline worsened in 2023 when volumes fell by -4%, and the category is expected to shrink further, with an anticipated 2023-2028 CAGR of -3%. Consumption of sparkling wine – until now a reliable growth driver – was down -5% last year, thanks largely to declines of -11% and -6% for Champagne and Prosecco respectively. However, English sparkling wine and Crémant experienced continued growth.

Premium beer segment sees growth

Beer saw a modest volume fall of -2% in 2023, with slow declines expected to continue in the years ahead, and most growth opportunities centred on premium-and-above lager and stout. Beer also remains the key driver of the ongoing growth in no-alcohol products in the UK.

RTDs buck the trend

The only major category expected to increase consumption between 2023 and 2028 is RTDs, which capped a strong period of growth with a +2% increase in volumes last year. Premium cocktails are gaining traction, and canned RTDs are now being joined in the marketplace by a wider range of bottled ready-to-serve cocktails and spirit-derived liqueurs.

Excise duty changes prompt NPD

Wine will face renewed challenges in 2025, when further revisions to the UK’s excise duty regime are due to be enacted. Changes to date have brought in a tiered system, where products are taxed according to their alcohol content; in February 2025, the current single duty paid on wines of 11.5-14.5% ABV – the vast majority of the category – is set to be replaced by up to 30 different payable amounts.

This is likely to lead to price increases for up to three quarters of still wines, as well as a more complex trading landscape for smaller businesses in particular. However, the changes are subject to intensive lobbying by the industry – and may be amended as a result of the imminent General Election.

The duty changes introduced to date have also fostered increased amounts of NPD, and many existing beer and wine brands have lowered their ABVs to take advantage of lower tax rates. Activity has been particularly pronounced among low-alcohol beers and so-called “mid-strength” (typically 7-8.5% ABV) wines. Within spirits, there have been a variety of recent launches of lower ABV “spirit drinks”, mainly from established brands.

No-alcohol innovation expands beyond gin-alternatives

There is a proliferation of no-alcohol products on the market, especially in zero-proof variants of well-known parent brands. Whilst most earlier non-alcohol spirits were clear gin-style alternatives, there are now more dark spirits no-alcohol alternatives and also some no-alcohol tequila alternatives coming to market. The latest Bevtrac consumer data from IWSR shows year-on-year increases in the no-alcohol drinker population in the UK. The no-alcohol market grew +17% in 2023, and is expected to grow at a +4% volume CAGR, 2023-2028. Volumes of no-alcohol spirits now comfortably surpass those of tequila in the UK.