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Most prospective global alcoholic beverage markets

8 July 2021 by Ambrosia Magazine

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While the western world are the biggest markets, Asia Pacific is catching on. A report.

The global alcoholic beverages market reached a value of US$ 1,587 billion in 2020. The global alcoholic-beverages market is expected to grow from $515.2 billion in 2019 to $528.5 billion in 2020 at a compound annual growth rate (CAGR) of 2.6%. The low growth is mainly due to economic slowdown across countries owing to the Covid-19 outbreak and the measures to contain it. The market is then expected to recover and grow at a CAGR of 7% from 2021 and reach $647.7 billion in 2023.

Asia Pacific was the largest region in the global alcoholic beverages market, accounting for 42% of the market in 2020. North America was the second largest region accounting for 24% of the global market. Middle East was the smallest region in the global alcoholic beverages market.

World population is growing and is expected to reach 10 billion by 2050. Increase in population creates more demand for alcoholic beverages. Crop production, farming activities and trade volumes will have to increase in order to meet increased population. Therefore, companies in this market are expected to benefit from rising demand for alcoholic beverages products due to rising population, during the forecast period.

The outbreak of the Coronavirus disease (Covid-19) has acted as a massive restraint on the alcoholic beverages market in 2020 as supply chains were disrupted due to trade restrictions and consumption declined due to lockdowns imposed by governments globally. Covid-19 is an infectious disease with flu-like symptoms including fever, cough, and difficulty in breathing. The virus was first identified in 2019 in Wuhan, Hubei province of the People’s Republic of China and spread globally including Western Europe, North America and Asia. Food and beverage manufacturers depend on supply of raw materials from domestic and international suppliers. As many governments restricted the movement of goods across countries and locally, manufacturers had to halt production due to lack of raw materials. Also, restrictions on trade of non-essential goods and fear of contamination through manufacturing facilities contributed to the decline. The outbreak is expected to continue to have a negative impact on businesses throughout 2020 and into 2021. However, it is expected that the alcoholic beverages market will recover from the shock across the forecast period as it is a ‘black swan’ event and not related to ongoing or fundamental weaknesses in the market or the global economy.

Alcoholic beverage manufacturers are now offering ready-to-mix hybrid beverages to cater to changing consumer tastes and preferences. Hybrid beverages are a blend of alcoholic drinks from multiple beverage categories. They are prepared by using unique flavour combinations, ingredients and production methods from multiple drinks. For example, producing spirits or beers in a wine barrel to give them a distinct taste. Hybrid beverages are particularly evident in the spirit category, with products such as beer mixed with rum and tea mixed with vodka. Some of the popular hybrid beverages in the market include Malibu Red (rum and tequila), Kahlua Midnight (rum and Kahlua) and Absolut Tune (vodka and sparkling wine).

Major global alcoholic beverages markets are Australia, Brazil, China, France, Germany, India, Indonesia, Japan, Russia, South Korea, UK and USA.

The important regions in the global alcoholic beverages markets are Asia-Pacific, Western Europe, Eastern Europe, North America, South America, Middle East and Africa.

The market is driven by the increase in global young-adult demographic, coupled with high disposable income and consumer demand for premium/super-premium products. On a global level, beer drives the market for alcoholic beverages. Asia-Pacific is expected to dominate the global market during the forecast period. Growth in online retailing has been observed. For instance, Drizly, an alcohol E-commerce platform has experienced the growth of online alcohol delivery revenue.

Premiumisation driving the Alcoholic Beverage Market
The growing demand for premium alcoholic beverages is considered to be one of the primary drivers for this market. Efforts by alcoholic beverage manufacturers for strengthening distribution channels and extension of purchase channels, such as online stores, and convenience stores, is also contributing substantially to the growth of the global alcoholic beverages market. Millennials consumers, particularly are running premium alcoholic beverage market. Product innovation and economic growth are drawing the consumers to go for expensive alcoholic beverages. New product launches and innovations in alcoholic drinks are favouring the growth of the industry. Companies are launching innovative products because of the changing consumer preferences. Consumers are paying a huge amount for low-calorie and superior ingredients.

Europe dominates the Global Alcoholic Beverages Market
Beer is the most consumed alcoholic drink across the globe and contains around 4-7% of alcohol. Craft beer has gained popularity among a large section of the consumers in the North America regions. The growing popularity of craft beer among the consumers, especially the younger generation, is considered as the major factor of growth. However, Europe recorded the highest market share as there has been increasing in the sales of red blends, sparkling, and rose wines, with a special demand for premium wines, owing to a surge in the spending pattern of per bottle.

Alcoholic beverages industry is considered to be a consolidated market with few companies holding maximum market share. Product launches, followed by new mergers and acquisitions, are the most preferred strategy in the global alcoholic beverage market.

The demand for alcoholic drinks is growing at a faster rate in emerging countries, like India, China, Indonesia, and Singapore. This is driving the demand for alcoholic drinks industry. The growing demand for premium alcoholic beverages is considered to be one of the primary drivers for this market. Efforts by alcoholic beverage manufacturers for strengthening distribution channels and extension of purchase channels, such as online stores, and convenience stores, is also contributing substantially to the growth of the global alcoholic beverages market. New product launches and innovations in alcoholic drinks are favouring the growth of the industry. Companies are launching innovative products because of the changing consumer preferences. The increase in health concerns among the consumers has resulted in customers to switch to low-calorie alcoholic drinks, which has compelled vendors to introduce a variety of pre-mixed cocktails with low-calorie levels in the market.

Growing demand for non-alcoholic beverages like energy drink, RTD tea and coffee etc., owing to health concerns, is expected to restrict the market growth in future.

The major opportunity in this market is making alcoholic drinks healthier like naturally sweetened, herb infused, glutenfree alcoholic drinks. It will experience high demand from consumers in the coming years.

Beer leading the Alcoholic Beverage Sector
Alcoholic drinks can be segmented into three categories – beer, wine, and spirits (whiskey, vodka, rum etc.). Beer is the most consumed alcoholic drink across the globe and contains around 4-7% of alcohol. Wine is the second largest segment after beer and has 6-20% of alcohol in it and spirits contain 40-80% of alcohol. Increasing demand for craft beer is also driving the beer sales. Distilled Spirits is the top investment pocket in the alcoholic beverages market, attributed to boom in premium/super premium whiskey consumption, and the demand shift from beer.

The report is further segmented based on geography (North America, Asia-Pacific, South America, Africa) with further country wise segmentation. Europe is the largest market for alcoholic beverages. Europe has the highest per capita consumption of alcohol led by France and is followed by Germany, Italy, UK, and others. Beer represented a 40.1% share of all alcohol sales value in Germany, France, Italy, Spain, the UK, and the Netherlands. North America and Europe are the matured markets with minimal increase in market size. The spirits industry within the NAFTA (The North American Free Trade Agreement) countries had a total market value of USD 98,829.7 million in 2015. The Mexico was the fastest growing country in this region. Asia- Pacific market is growing at a rapid rate because of its increasing population and increased demand for premium and super premium alcohol. China is one of the leading markets in Asia-Pacific followed by India.

Geographically, the market is segmented into North America, South America, Europe, Asia Pacific, and RoW.

The alcoholic beverage market in Europe is one of the largest in the world. Western Europe represented a market value of approximately 330 billion USD in 2015 and is expected to increase by 350 billion USD.

The value of the Eastern European market amounted to approximately 84 billion USD in 2017; this is expected to rise to nearly 95 billion USD in 2020.

The global alcoholic beverage market is expected to witness considerable growth. The demand is strongly driven by the significant rise in demand for alcoholic beverages from the millennial population across the world.

One of the primary drivers for the growth of this industry is the concept of alcohol consumption which has penetrated into the culture among the people of developing countries. Moreover, the strengthened distribution network adopted by alcohol manufacturers and increasing purchasing power in developing economies such as Brazil and India are boosting the growth in the industry.

The Asia Pacific region is expected to be the fastest-growing industry and making manufacturers focus on increasing penetrating in the region. According to the latest European health report from the World Health Organization, people in the European Union consume more alcohol than in any other part of the world, drinking an average of 8.71 litres of pure alcohol, per person a year. Countries such as Austria, Lithuania, and France are estimated to consume a significant share of the world alcohol produce, followed by the other member states from the union.

The growth in the global alcoholic beverage market is expected to be initially moderate but is expected to grow stronger with increasing consumer base for alcohol consumption especially among youth generation in the forecasted period. Availability of substitutes such as non-alcoholic beverages and energy drinks pose a significant threat to the industry. Health and wellness awareness has started to shape the consumption habits of the consumer. Consumers now are more informed than before, and the increased awareness regarding the ill effects of alcoholic beverages may pose a threat to the industry.

Heineken over the years had its marketing campaigns focused on creating awareness for responsible alcohol consumption. The company sells its flagship brand and brews beverages such as Desperados Beer, a unique tequila flavored beer; Sol, a Mexican beer which is the part of Heineken portfolio since the acquisition of FEMSA and Strongbow Apple Ciders, a proposition with the unisex drink.

Some of these players are involved in making huge investments in marketing and advertisement strategies to ensure their customer loyalty. Carlsberg Group sells the company’s flagship brand, Carlsberg Beer, and brews other brands such as Kronenbourg, Tuborg, Russian beer Baltika, Belgian Grimbergen abbey beers, and more than 500 local beers.

Moreover, the company has exponentially stepped up its marketing budget by over 500% as it seeks to tap new regional alcoholic beverage markets and ensure its market share in the UK. Carlsberg has sponsored key global sporting events such as Euro 2016 and is associated with the English Football team as a part of its marketing strategy.

However, regulation in countries such as India, do not allow advertisement of alcoholic beverages over the national television, but private channels often permit alcohol companies to advertise indirectly using surrogate products under the brand name.

The alcoholic beverages market is projected to register a CAGR of 3.4% during the forecast period, 2021-2026.

With the onset of Covid-19, the alcoholic beverages market was severely impacted, mostly due to the closure of specialty shops, bars, pubs, and restaurants. During the mid-2020, the ease in lockdown measures had led retailers to gain confidence, while a steep increase in prices was observed in some countries mostly due to government regulations and taxes, thus minimally affecting the market studied.

Also, the demand for hard drinks such as whiskey and gin had soared up during the pandemic, while products such as beer witnessed growth in terms of volume. In-house consumption, along with the stocking of brands, has been one of the propelling factors for the market to sustain during the pandemic.

Over the medium term, the market is likely to be driven by the increase in the global young-adult demographic, coupled with high disposable income and consumer demand for premium/super-premium products.

Consumers around the world today have more sophisticated palates compared to a decade ago. They are constantly looking to explore unique, high-quality alcoholic beverages. The inclusion of natural ingredients in alcoholic beverages improves their functionality, and such products are gathering a lot of attention from consumers.

The increase in health awareness among people, promoting the inclusion of functional and natural ingredients, provides greater opportunity for the premium alcohol market. There have been humongous sales coming in from the foodservice industry over the recent past, with considerable sales coming from premium alcoholic beverages, especially premium wine and whiskey.

According to the Distilled Spirits Council, American rye in the spirits market recorded an increase of 15.9% to 1.1 million 9-litre cases in 2018 in the United States. This has led to the growth in demand for premium and super-premium whiskey in 9-litre cases.

There is increasing popularity of low-alcohol beers and ciders, which is attributed to a growing awareness of alcohol unit consumption and the customers’ willingness to try new variants in the United States. This shift in trend is witnessed in the demand for low-alcohol drinks by volume in the country, where the sales of off-licenses and supermarkets have soared to a high record.

Craft beer, craft spirits, and Japanese spirits are the fastest-growing segments owing to the consumer perception of craft spirits as premium quality and the concept of mindful drinking in the country.

The US wine market is being catered by more than 10,000 wineries across the country, where California held the highest share, i.e., more than 85%, followed by Washington, Oregon, New York, Texas, and Virginia. The American consumers are becoming more attracted to wines with descriptors, no taste additives, gluten-free, low carb, vegan-friendly, sulfite-free, low calorie, low alcohol, light, lighter, organic, paleo-friendly, etc. This is attributable to the rising focus on healthy food and beverages that is sweeping across the nation.

 

This report was contributed by knowledge partner: