Alcohol consumption is under pressure
Global alcohol consumption is under pressure, with intake levels in several developed markets in long-term decline. More worryingly for the drinks industry, recent studies and data point to younger generations shunning alcohol. Health and vainness are more important than alcohol for millennials. ‘One for the road’ is quickly becoming ‘None for the road’.
Healthier choices on the menu
With health and moderation cited as key factors for reduced consumption, a flurry of industry activity is underway to meet changing consumer needs. From an increase in self-regulation (labelling) to the launch of healthier products (alcohol-free is firmly on the table). Although still at an early stage, new products / categories stand to create disruption for the established players.
Drinking less……but drinking better
In a world of lower alcohol consumption, premiumisation is a ray of light for the industry. Growth of premium+ segments is comfortably outstripping lower-priced segments, in both beer and spirits. With higher price-points and higher margins, premiumisation can be very lucrative and will become increasingly crucial for growth in mature markets (and important for growth in EMs too).
The beer industry is most at risk
While all industry players stand to lose from reduced consumption, the brewers are most at risk in the developed world. Alongside the natural maturing of beer markets, shrinking consumer pools and a history of share of throat losses, health awareness is an added negative. Within the industry, one would be best backing those who have proved they can premiumise (ABInBev).
Long-term opportunities for the distillers
The distillers, with ‘lighter’ spirits options and greater room for creativity, have an edge in the context of the changing landscape in developed markets (and have more natural volume growth tailwinds in any case). Premiumisation is also crucial here though. Remy screens well, with not a great deal to choose between Diageo and Pernod (it’ll come down to execution).