According to the latest analysis by IWSR, the annual growth rate of the global alcoholic beverage market is expected to slow down to +1% between 2022-2027. India, Mexico and Brazil are expected to replace the United States and China as the driving forces behind sales growth.
However, although sales are expected to decline from 2022 to 2027, the United States and China will remain "important drivers." The total alcoholic beverage market in the United States will grow by US$12 billion, and that in China will grow by US$4.1 billion.
The market is expected to bring more than $21.6 billion to the global economy by the end of 2023, but will still face a challenging political and economic environment.
IWSR noted: “Drinkers are changing their consumption behavior as geopolitical and economic turbulence impacts the market. Key trends underpinning the industry, such as premiumisation, will continue as consumers respond to the growing cost of living crisis. Evolution.”
"However, the industry will still deliver significant value growth. The pandemic has also accelerated the rise of trends such as stay-at-home and moderation, behaviors that are already here to stay."
As consumer behavior changes, the trend of premiumization is emerging.
IWSR noted: “In most mature markets, premiumization appears to have become integrated into consumer purchasing behavior and will continue to add value to products at most price points, albeit at a slower pace. In developing markets, as incomes rise increases and consumers continue to spend.”
Premium and above price ranges for beer, spirits and wine all outperformed standard price ranges in 2022, and this trend is set to continue. Consumer spending in India, China and the United States is higher than in other major markets, with much of it driven by younger people aged between the legal drinking age and 39.
As global travel retail channels increasingly embrace the role of premium product showcase, the premium segment will continue to regain market share. The return of Chinese tourists will bring a huge boost, especially for high-end products.
However, rising costs of living have led to a drop in some deals, particularly in the standard and lower price tiers. This is most evident in parts of Africa, Latin America and Europe.
Global beer sales grew by 3% in 2022, driven by strong performance in markets such as India (+38%), Vietnam (+17%), Mexico (+7%) and China (despite lockdowns).
Looking ahead, beer is expected to continue growing at a compound annual growth rate of just under 1%. That's because the world's two largest beer markets - China and the United States - will dampen overall growth, especially due to lower sales of lower-end products.
However, in both countries, the premium+beer market will outperform standard and below levels. In the United States, the premium beer market is expected to grow at a CAGR of 3% during 2022-2027. That compares with a 5% drop for standard and below.
In China, the compound annual growth rate of high-end beer will reach 6% from 2022 to 2027, while the compound annual growth rate of low-end beer is 0%.
While wine is still benefiting from a boost from the pandemic, the category has returned to structural decline, with wine sales falling in all of the top ten markets last year.
In fact, IWSR predicts that global wine production will decline by 5% in 2021-2022, and is expected to maintain steady growth over the next five years.
However, its value outlook is more optimistic (CAGR 2022-2027) as the premium and above segment grows (CAGR 2022-2027: 2%).
Lower-priced wines will suffer as young adult wine consumers increasingly prefer other alcohol options and drink higher-quality wines less frequently. This will result in a volume decline of approximately 1% (CAGR, 2022-2027) in the global standard and below wine market.
Globally, spirits consumption fell by 2% in 2022, mainly due to low-priced baijiu in China.
However, excluding spirits such as baijiu and soju, sales of the global spirits category will increase by 5% in 2021-2022, especially whiskey (sales volume increased by 8% in 2021-2022), and rum (increased by 9%) and brandy (up 6%), among other categories.
Cognac sales fell 10% globally due to declines in the two main markets of the United States and China.
Despite gin's much-heralded growth over the past few years, over the longer term gin is in decline in its main UK market and has lost momentum in many 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.
The premiumization of whiskey will become a key growth driver for the entire spirits category: the premium + whiskey segment is expected to grow at a CAGR of 4% from 2022 to 2027. In India, whether it is Indian whiskey, Scotch whiskey and other whiskeys, there is a clear upward trend: from 2019 to 2027, sales of high-end Indian whiskey in India will increase six times.
In the U.S., whiskey was still able to post 2% volume growth even after a significant volume increase in 2021, reflecting continued consumer demand. Last year, high-end and above whiskeys contributed the most to the growth of the U.S. whiskey category and will continue to maintain an upward trend (CAGR +4% from 2022 to 2027).
Tequila and other agave alternatives are expected to continue to grow in popularity. The agave spirits category will grow 13% in 2021-2022, thanks to 12% growth in the United States.
Growth in the US will continue to drive tequila (US CAGR expected to be approximately +9% 2022-2027). In this market, tequila will overtake vodka in 2023 to become the most valuable industry in the United States.
“Despite early signs that premiumization trends are slowing, tequila will remain a high-profile affordable luxury product thanks to the number of celebrities directly involved in brand product launches,” IWSR noted.
Rising interest in agave will also drive the development of agave alternatives – production of raicilla, baccanola and sotol combined increased by nearly 40% in 2022 and will continue to grow.
