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Global alcoholic drinks value growth significantly outpaces volume growth

08 June 2022 By Jessica Mason

Global beverage alcohol value grew by +12% last year to reach US$1.17 trillion, according to new data from IWSR Drinks Market Analysis.

Here, the drinks business has taken a deep dive into the findings and the trends that are guiding alcoholic drinks consumption globally, revealing categories to watch as well as the markets leading the charge.

The alcoholic drinks sector, which had been making up for Covid-driven value losses of -4% in 2020, saw total alcohol volume grow by +3% in 2021, after losses of -6% the year prior.

The data, which reinforces alcohol’s resilience and status as an affordable luxury, examined the industry from across 160 countries throughout the world.

IWSR forecasts compound annual volume growth of just above +1% for total beverage alcohol over the next five years, as Covid restrictions continue to ease.

IWSR CEO Mark Meek said: “Our latest data shows encouraging signs for the continued recovery of beverage alcohol. The market rebounded far more quickly than expected and, in value terms, 2021 is now above 2019. Premiumisation continues unabated; beverage alcohol ecommerce also continues to grow, although at a more moderate rate; and the trend towards moderation continues, with no/low-alcohol products seeing ongoing growth from a relatively low base. Despite the industry’s current and future challenges – ongoing supply-chain disruptions, inflation, war in Ukraine, travel retail’s slow return to pre-2019 levels, and China’s zero-Covid policy – beverage alcohol is in a strong position.”

According to the findings, the global beverage alcohol market is expected to surpass 2019 volumes within the next two years.

The data also showed that, while beer, cider and international spirits have not yet reached 2019 volumes, they have all met or surpassed 2019 levels in value terms.

Wine has also surpassed 2019 value levels, though overall global category volumes are expected to continue on a downward trajectory.

In terms of the growth markets for beer, the category rebounded strongly in several major markets once Covid restrictions ended. According to the IWSR, the beer category is forecast to add significant value to total beverage alcohol over the next five years, especially in Asia-Pacific and Africa, which combined will add close to US$20 billion to the beer category by 2026. Ongoing volume growth will be seen in Brazil; the strong rebound in Mexico and Colombia that began last year will continue; and there will be some recovery in China., which looks promising for breweries within the sector.

The outlook for the spirits category is ultimately positive. Total spirits volume grew +3% in 2021, and value increased by +15%. This growth was driven primarily by consumers continuing to treat themselves to higher-end products, while also becoming more comfortable with making cocktails at home during pandemic lockdowns – a learned behaviour that, IWSR believes consumers can quickly pivot to when inflation hits. IWSR additionally forecast that spirits volume will grow by +5% and value by +15% (2021–26).

The data revealed that total whisky, which commands about a quarter of all global spirits volume (excluding national spirits such as baijiu, soju, and shochu), is expected to post volume growth of +23% and value growth of +29% over the next five years.

IWSR analysts predicted that growth will continue in whisky’s largest global markets – India and the US. The whisky category in India will see volume growth of +23% (2021–26). In the US, by the end of this year, whisky will be bigger than vodka by volume – for the first time in almost two decades.

Added to this, global volume growth will also continue in almost all other spirits sub-categories over the next five years, including gin (+24%), Cognac (+23%) and rum (+13).

Addressing whether the growth in agave-based spirits was likely to plateau, the data showed that last year saw higher than expected growth in agave-based spirits, which is forecast to deliver significant global value increases 2021–26, at +67%.

In the US – the world’s most valuable market for agave-based spirits – the IWSR highlighted how the category will become larger by dollar value than US whiskey by the end of this year.

In the UK, the category’s most valuable market in Europe, the analysis showed that agave-based spirits are forecast to grow by more than +88% in value 2021– 26, albeit from a relatively low base.

In terms of underpinning what is driving growth in the wine category, the data gave nods to trends for quality over quantity, admitting that despite global still wine volumes being down -2% last year, value was up by +5%, as the ‘less but better’ trend continues to underlie the trajectory of the still wine category.

Noteworthy gains in wine were identified in the data across the sparkling category as consumers returned to celebratory occasions in full force with the lifting of Covid restrictions. For instance, Champagne posted volume growth of +24% last year, and other sparkling wines were up +7.5%.

However, over the next five years, the global wine category is forecast to continue on its trajectory of long-term volume decline (-1%, 2021–26), but will see value gains of +5%.

The IWSR reminded that premiumisation continues unabated for spirits and wines in the premium-and above price tier. Premium-plus spirits (priced US$22.50+) are forecast to grow by more than +50% in value in the Americas 2021–26; over +40% in Africa and the Middle East; over +20% in Europe, and just under +20% in Asia-Pacific.

It is worth noting that the way will be led by the east and the single largest driver of beverage alcohol value over the next five years is set to be the growth of premium-and-above national spirits in Asia-Pacific.

Globally, wine in the premium-and-above price band (US$10+) grew by +12% in value last year, and is forecast to increase in value by +16% 2021–26 showing there is still room at the top.

As drinking rituals adapted during the pandemic, RTDs have been a stand-out category for at-home consumption, increasing in volume by +14% in 2021 – on top of +26% growth in 2020. By volume, the category is now about a third of the size of the global spirits category, as well as the global wine category so this is definitely one to watch. Globally, RTD products are expected to grow by +44% in volume and +51% in value over the next five years, the findings revealed.

Category growth will continue in the world’s largest RTD markets, the US and Japan. In Japan, the RTD category is expected to expand in volume by more than +30% over the next five years, driven particularly by flavoured alcoholic beverages (FABs). In the US, propelled by the popularity of hard seltzers, the RTD category saw continued volume growth at +15% last year; RTD value growth (+22% last year) will begin to outpace volume growth in the US, as the category matures and higher priced spirit-based RTDs gain traction in the market. Interestingly, at a lower growth rate than in previous years, hard seltzer volumes in the US are expected to overtake those of still wine within the next two years.

As the growth in the no/low-alcohol category has been eyed across the globe, it is prudent to note where the gains will be for the sector.

IWSR highlighted how the no/low-alcohol category grew by over +10% last year, and will continue to grow over the next five years, albeit from a relatively low base.

Notably, growth last year came from the no-alcohol spirits segment in the UK: volume increased by over +80% in 2021, after tripling in size in 2020. Indeed, looking forward, no-alcohol beer will add the most volume to the global no/low segment over the next five years and this is the area to watch.

Consumer trends driving future consumption which looked to be largely generationally-specific once are now being seen across generations where virtuous and conscientious consumption lead the way.

IWSR reminded how Millennials led the global consumption bounce-back last year, being the generation least affected by the pandemic’s restrictions; these consumers (now aged 25–40) are more adventurous than older generations, and with their significant spending power and focus on ‘less but better,’ they tend to purchase more premium products. Additionally, Millennials, and in some cases Gen Zs, are amongst the highest spenders on wine in markets such as Australia, Sweden, the US, and the UK. However, IWSR warns that it remains to been seen if this trend continues, with governments withdrawing Covid support packages and a probable increase in unemployment rates in many markets.

The underlying consumer trends that continue to provide tailwinds for the global beverage alcohol market include: ‘better for me’ consumer drivers, such as moderation, ingredient quality and functional benefits; ‘better for the world’ values, including sustainability and social equality; and online interaction, both via ecommerce and social media, as well as new ways to engage through NFTs and the metaverse.

For instance, global alcohol ecommerce continued to grow last year (+16% in value 2020–2021), although this was at a slower rate than in 2020 (+45% in value 2019–2020).

Meek explained: “Challenges remain, including whether bars and restaurants will continue to attract consumers who have grown comfortable with ecommerce and at-home consumption; whether consumers will accept price increases on their preferred brands; and whether inflation and supply-chain issues will lead to consumers down-trading and gravitating towards local rather than imported products.”

He added: “We’re living in an age of uncertainty, and these are uncharted waters for the industry. However, as we have seen in previous crises, this is a very resilient industry sector.”

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