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In 1997, people in Switzerland drank an average of 9 litres of pure alcohol per year. Approximately 20 years later, this number has dropped 15%: Swiss residents drank only 7.7 litres last year. One might think that this drop in consumption, which is also seen throughout Europe, would affect the industry. Not at all! For leader of the spirit industry Diageo, and second‑in‑command Pernod Ricard, as well as ABInBev, Carlsberg and Heineken (global leaders for beer), profits are flowing.
What is the cause of such a boom? “Alcohol consumption tends to be decreasing consistently in Western countries, but increasing worldwide,” said Virginie Roumage, food and beverage analyst at Bryan, Garnier & Co. “Middle‑income markets, such as China and India, are driving growth. And they are more than making up for the decline in volume seen in Europe and the United States.”
Indeed, alcohol consumption in the Western Pacific region, which includes India, China and Vietnam, has more than doubled since the early 1990s. In India especially, alcoholic drinks are becoming increasingly popular. While Indians drank an annual average of 2.4 litres of alcohol per person in 2005, they drank 5.7 litres in 2016, according to the latest report from the World Health Organization (WHO).
“There is a correlation between increased buying power and alcohol consumption in emerging countries”
Virginie Roumage, food and beverage analyst at Bryan, Garnier & Co.
“Studies show that there is a real correlation between increased buying power and alcohol consumption in emerging countries,” said Roumage. “So growth outlooks are positive and stable.” While the industry is propelled by emerging markets, alcoholic beverage giants aren’t turning their backs on Europe and the United States, since they are still the two main markets. With 9.8 litres of alcohol consumed per person, per year, Europe remains the region of the world with the highest consumption. But the health context is much different.
“In Europe and the United States, people are very much aware of their health,” said Moshmi Kamdar, analyst at Union Bancaire Privée (UBP). “People drink less, smoke less, exercise more and want to eat healthier food.” Alcohol giants were ready to tackle this challenge: most brands developed low‑calorie, less alcoholic, premium, organic, vegan and local beverages in order to target this clientele that cares greatly about their health and the environment.
“These innovations are used by industry heavyweights to drive up prices,” said Kamdar. “All the players in the industry are taking part in this premiumisation.” As a result, alcohol consumption dropped significantly in Europe and the United States, but the industry continues to grow in value. “And this trend will continue,” said the UBP analyst. “People in the West drink less, but they want to drink better.”
In both emerging markets and Western countries, the revenue for alcohol giants seems to be stable for many years to come. “These companies are a safe bet,” said Kamdar. “In periods of crisis, this visibility comes at a price, however: shares are expensive. They are known as defensive assets.”
THE VARIOUS ALCOHOL MARKETS
With a market share of nearly 45%, spirits (whiskey, gin, vodka and others) are the most popular alcoholic beverages in the world in terms of litres of pure alcohol consumed. Their consumption increases each year in both volume and value.
As the second most consumed alcohol in the world, with a market share of around 40% in pure alcohol absorbed, beer is sluggish in terms of volume sold. However, brands are stepping up their game: in the last five years, the global beer market has increased in value by 20%.
The market share of wine (red, white, rosé, champagne) as part of global alcohol consumption is in free fall. It went from 35% in the early 1960s to less than 15% today, in terms of pure alcohol consumed. Red wine, primarily drunk in Western countries, has fallen sharply. Nevertheless, while quantity has decreased, value has increased... According to the International Wine and Spirit Research (IWSR), global revenue for wine is expected to reach $224.5 billion in 2023, compared to $215.8 billion in 2018.
With a market share of around 1% , premixed drinks, such as cocktails, remain on the margins. But growth is strong in this segment. The consumption of pre‑mixed drinks increased 5% globally in 2018, according to the IWSR, sustained by the boom in ready‑to‑drink cans in the United States and Japan, the two largest markets for this segment.