Global beverage alcohol market volume growth slows

By Rachel Arthur

- Last updated on GMT


Related tags Alcohol Wine Beer spirits

Volume growth in the global beverage alcohol market is expected to slow to +1% per annum over 2022-2027, according to the latest analysis from IWSR. India, Mexico and Brazil are expected to take over from the US and China as volume growth drivers.

In fact, India and Mexico together accounted for more than half of all volume growth in 2022.

US and China will, however, remain ‘significant value drivers’ despite expected volume declines from 2022-2027: with the US total beverage alcohol market to grow by $12bn and China’s by $

The market is projected to deliver over $21.6bn to the global economy by the end of 2023: but faces a challenging political and economic landscape.

“As geopolitical and economic turbulence impacts the market, alcohol drinkers are shifting their consumption behaviors,” notes Mark Meek, CEO, IWSR Drinks Market Analysis. “The key trends that have underpinned the industry, such as premiumization, will evolve as consumers respond to the increased cost of living crisis.

“The industry will, however, still deliver pockets of significant value growth. The pandemic also accelerated the rise of trends such as the at-home occasion and moderation; these behaviors are now here to stay.”

‘Twin-tracked premiumisation’

As consumer behaviors shift, IWSR notes that a twin-tracked premiumization trend is evident.

“In most mature markets, premiumization looks to be embedded into consumer purchasing behaviors, and will continue to add value in most price tiers, albeit at slower growth rates,” notes Meek. “In developing markets, consumers are continuing to trade up as incomes rise.”

Premium-and-above prices bands for beer, spirits and wines all outperformed their standard-and below counterparts in 2022, and this trend will continue. Consumers in India, China and the US show a higher recalled-spend than other key markets, with much of this driven by younger adults between the legal drinking age and 39.

Premium segments in the global travel retail channel will continue to regain market share as the channel increasingly embraces the role of a high-end product showcase. The return of Chinese travellers will provide a significant boost, especially for more premium priced products.

However, the increased cost of living is leading to some downtrading, particularly in the standard and lower price tiers. This is most evident in parts of Africa, Latin America and Europe.

Evolving drivers of premiumization: the home-premise

In most markets, increased costs of going out have pushed consumers to stay in and entertain at home.

"In the UK, for example, a third of alcohol drinkers say they would rather treat themselves to a better-quality drink at home than go out.​ We expect a relative shift in treating oneself to higher priced products from on-premise outlets to at-home consumption, a behavior learnt during the pandemic," says IWSR.

"China is an outlier, with the relieving of lockdown restrictions resulting in a significant increase in going-out sentiment."

Beer growth in premium

Global beer volumes grew +3% in 2022, buoyed by strong performance in markets including India (+38%), Vietnam (+17%), Mexico (+7%) and China (despite lockdowns), among others.

Moving forward, beer is expected to continue to grow at just under +1% volume CAGR, 2022-2027.

That's because the two largest global beer markets, China and the US, will hold back overall growth – particularly due to volume declines at the lower-price tier of products.

However, the premium+ beer segment will outperform  standard-and-below in both countries. In the US, the premium+ beer market is expected to grow by +3% volume CAGR 2022-2027. That's against a -5% decline for standard-and-below.

In China, premium+ beer will grow by +6% volume CAGR 2022-2027 vs 0% for lower price tiers.

Wine in decline

While still wine benefited from a pandemic boost, the category has returned to a structural decline and still wine lost volume in all top 10 markets last year.

In fact, global wine volumes were down -5% in 2021-2022, and growth is expected to remain flat over the next five years, predicts IWSR.

The value picture is more positive however, with growth in the premium-and-above segments (+2% volume CAGR, 2022-2027), as well as a more buoyant outlook for sparkling (+2% volume CAGR, 2022-2027).

Lower price tiers for wine will suffer as younger adult wine consumers increasingly enjoy alternative alcohol options and drink higher-quality wines less frequently. That will lead to around -1% volume declines in the global standard-and-below wine segment (CAGR, 2022-2027).

Premiumization in whisky drives spirits forward

Globally, spirits declined -2% in volume consumption in 2022, largely due to low-priced baijiu in China.

However, excluding national spirits (which includes spirits such as baijiu, soju, arrack and shochu), the global spirits category grew +5% in volume, 2021-2022, particularly driven by whisky (+8% volume growth, 2021-2022), but also categories including rum (+9%) and brandy (+6%).

Cognac saw a 10% volume loss globally, due to declines in its two key markets of the US and China.

Despite the noise around its growth over the last years, gin is now in long term decline in its key UK market, and has also lost momentum in many of its previous growth markets such as Brazil, South Africa and Australia. Instead, future gin growth will be driven by countries such as the Philippines and Nigeria.

Premiumization in whisky will be a key growth driver for the overall spirits category: the premium+ whisky segment is forecast to grow by +4% volume CAGR, 2022-2027. In India there is significant up-trading, both within Indian whisky and into Scotch and other whiskies: sales of premium Indian whisky in India will have grown six-fold between 2019 and 2027.

In the US, whisky’s ability to achieve volume growth of +2% even after significant 2021 volume gains reflects continued consumer demand. Premium-and-above segments contributed most growth to the whisky category in the US  last year, and will continue on an upward trend (+4% volume CAGR, 2022-2027).

Agave spirits continue to drive sales

Tequila - and other agave alternatives - are expected to remain in vogue. The agave-based spirits category enjoyed +13% growth in 2021-2022: thanks to +12% growth in the US. 

That growth in the US will continue to drive the category forward (growth in the US is expected at around +9% volume CAGR 2022-2027.) In this market, tequila is set to overtake vodka in 2023 to become the industry leader by value in the US.

"Tequila will remain a high-profile affordable luxury thanks to the number of celebrities directly involved with brand offerings, although there are early signs of a slow-down in the premiumization trend," notes IWSR.

Growing interest in the category will boost agave alternatives​ as well – volumes of raicilla, bacanora, and sotol collectively increased by nearly 40% in the US in 2022, and will continue to grow.

E-commerce: Growing or slowing?

Having boomed during the pandemic, alcohol ecommerce sales are expected to moderate over the next five years. But it's still a key channel to watch: set to reach nearly $40bn by 2026 across key markets.

Changing trends in RTDs

RTDs had enjoyed +20% volume growth over the last few years (+20% volume CAGR 2018-2021). 

But in 2022, RTDs grew +2%. The key US market decelerated sharply, with 10% volume decline in hard seltzers.

Looking forward, the global RTD category is expected to grow by +3% volume CAGR, 2022-2027. Top sources of future RTD growth are FABs in Japan, as well as cocktails, long drinks, FABs and hard tea in the US.

"RTDs are in a constant state of evolution in the US due to changing consumer demand and interest," notes IWSR.

"After years of light-flavored and lower-ABV offerings, there has been increased demand for full flavor and  higher-ABV options. Innovation in zero-sugar offerings, demand for premium RTD products, a focus on spirits-based offerings, and increased distribution in the on-trade, will provide growth in the US."

Alcohol-free set to take 2% volume share of beverage alcohol

Globally, the no-alcohol category grew +8% in 2022, and will continue on a growth trajectory of +7% volume CAGR, 2022-2027. By 2027, it is expected to command 2% volume share of the total global beverage alcohol market.

Performance in 2022 was boosted by no-alcohol beer, which grew 8% in volume in 2022, and no-alcohol spirits, which grew almost 22% in volume (off a small base).

Related news