Nascent revival of on-trade a bright spot for beverage alcohol

After years of disruption, the on-trade channel is showing signs of revival in key countries, such as China, Germany, Italy, Mexico, the UK and the US, driving a long-awaited note of optimism for the global beverage alcohol market. Propensity to go out over-indexes for American Millennials in particular; as their circumstances start to improve, Scotch, liqueurs and sparkling wine are the biggest beneficiaries.

Latest data from IWSR’s Bevtrac Wave 2 2024, a longitudinal tracker of consumer behaviour for total beverage alcohol (TBA) across 15 key markets (Australia, Brazil, Canada, China, France, Germany, India, Italy, Japan, Mexico, South Africa, Spain, Taiwan, UK, US), shows a year-on-year rise in on-trade consumption incidence on the most recent drinking occasion in some markets. Moderation is evident in both the on- and off-trade, however, consumers continue to drink more when they are out.

Ivana Mitic, Senior Insights Manager for Bevtrac at IWSR, comments, “The on-trade is a key driver of growth, and its slowdown, driven by price increases and changes in consumer behaviour, has hampered TBA as a whole. IWSR’s latest Bevtrac data shows a growing revival in the on-trade for some markets, offering a much-needed boost for the industry. As consumers return to bars and restaurants, we see a renewed focus on premium experiences and diversified offerings, laying the groundwork for future growth.”

Recovery of the total beverage alcohol market continues at a cautious pace. Uncertainty among consumers, and the continued rise of moderation, has temporarily disconnected the link between rebounding real incomes and beverage alcohol volumes and spend. Consumer confidence, however, is slowly recovering in the US, Europe and Latin America, and is generally stable elsewhere. IWSR market data shows that overall TBA volumes have also registered H1 2024 growth in select developing markets, such as India, Brazil, Mexico and South Africa.

“The global beverage alcohol market is experiencing a period of profound change. Moderation is becoming ingrained in consumer habits, while no-alcohol offerings and premium categories are gaining traction,” notes Mitic.

“Understanding these shifts and the impact to behaviour in the on- and off-trade is essential for adapting in an increasingly competitive market.”

Other key findings from the IWSR Bevtrac Wave 2 2024 report include:

Economic strains tighten alcohol budgets; emerging markets are a bright spot

While improving household incomes in regions like North America and Europe have not yet translated into increased alcohol spending, emerging markets such as India (+4% volume change, H1 2024 vs ‘23), Brazil (+4%) and South Africa (+5%) are showing robust H1 2024 volume growth.

Growth in India is supported by a confident urban middle class and a younger LDA  cohort that continues to trial new categories. Brazil and South Africa are benefiting from improving economic sentiment and a growing appetite for on-trade occasions.

Consumers opt to reduce consumption rather than abstain entirely

Moderation sentiment is evident in all markets apart from China and India; consumers in European markets are consistently most likely to claim they are cutting back on alcohol.

The rate of TBA non-consumption across the 15 key markets has been easing since April 2023, especially in the US, China and India. In terms of moderation behaviours, Drinkers are reducing rather than abstaining. Temporarily stopping drinking for a period of time remains a popular strategy, with the majority of consumers in India, South Africa and Latin America claiming to do so.

There has also been a shift from away from heavy drinking as Light Drinkers – those with low frequency and/or intensity – become the biggest group in terms of consumption levels in Europe, North America and APAC.

No-alcohol momentum grows

Trial rates for no-alcohol products continue to rise: over a quarter of TBA drinkers have consumed no-alcohol in the past six months.

Consumption per person of no-alcohol products is on the rise across North America, India and China. Participation in North America has doubled compared to a year ago, aligning with strong volume growth in IWSR market data. Germany and Spain show the highest penetration rates for no-alcohol products (40%), while in the US, no-alcohol spirits are gaining traction.

Despite the momentum, the category remains price-sensitive. Recalled spend on no-alcohol products is trending negative, suggesting increased competition and down-trading among consumers.

Premiumisation persists amid challenges

Higher-income consumers continue to show resilience, even as economic pressures mount.

Premium-and-above categories, particularly single malt Scotch and Cognac, are experiencing growth in India, for example, with typical spend per bottle increasing by over 20% year-on-year.