Alcohol's retreat: why younger drinkers are opting for wellness

The clinking of cocktail glasses is fading, replaced by the fizz of electrolytes. Kylie Jenner’s pivot of her canned cocktail brand, Sprinter, into the electrolyte drink K2o is not just a Business decision; it's a stark signal of a broader cultural recalibration. Younger consumers are increasingly trading alcohol for functional beverages, leaving established alcohol giants scrambling to adapt.

The numbers don't lie: a flatlining industry

Spiros Malandrakis, global insights manager at Euromonitor International, bluntly describes the state of the alcohol industry as “suspended animation.” Global consumption is showing signs of stagnation, with a meager 0.6% growth projected for 2024, and only 23% of consumers now imbibing weekly. This isn’t just a minor dip; it’s a fundamental shift driven by economic pressures and a growing obsession with health and longevity.

Even luxury brands are feeling the heat. During LVMH’s recent earnings call, CEO Jean-Jacques Guiony admitted to a market “not particularly well-positioned,” with declines across categories like tequila and whiskey. The only bright spot? Ready-to-drink beverages, specifically the small, low-priced cans.

The rise of the functional soda and the low-no revolution

While established brands grapple with these challenges, a new wave of companies is capitalizing on the changing landscape. Poppi’s $400 million valuation and Olipop’s $500 million in sales underscore the booming functional beverage market—prebiotic sodas, fiber-packed drinks, and non-alcoholic alternatives are resonating with a generation prioritizing wellness.

Premiumization's limits and the pursuit of authenticity

For years, premiumization—pushing consumers toward higher-end spirits—was the industry's favored response. But even that strategy is showing cracks. “The idea that you drink less, but better, is reaching its limits in this economy,” says Malandrakis. The shift towards polarization means that while some will continue to indulge in luxury spirits, a larger segment will trade down or across categories.

Patrón tequila embodies a different approach, doubling down on authenticity and craftsmanship. Roberto Ramirez Laverde, global SVP of Patrón, notes a growing emphasis on label scrutiny, with over eight in ten US consumers reading labels before purchasing. “Patrón is one of the few brands that still makes tequila by hand, with just three simple ingredients—agave, water, and time.” Their 100-proof Patrón 100 tequila, handcrafted in small batches, exemplifies this commitment to purity and quality, catering to connoisseurs who demand the “purest expression” of blue agave.

Beyond the buzz: mindful consumption and experiential formats

Gabriella Lamb, co-founder of mid-strength wine brand 6Percent, observes a move toward more intentional drinking. “Social connection isn’t going anywhere, and neither is the focus on wellness. What’s changing is the idea that you have to choose one or the other.” The rise of mid-strength options—sales of which are up 41% month-on-month for Ocado Retail—reflects this shift, with consumers seamlessly integrating full-strength, mid-strength, and alcohol-free options into their social lives.

Experiential formats are also proving successful. 6Percent’s Sip & Potter events, which combine pottery making with wine tasting, sold out quickly, demonstrating the appeal of mindful, creative, and connected experiences. Restaurants like Legado in Shoreditch are experimenting with cocktail flights of just three sips, encouraging exploration and control.

The new luxury: cultural credibility and brand partnerships

Julie Bramham, global managing director of Diageo’s Luxury Group, highlights the importance of cultural credibility. Brands are forging collaborations and partnerships to resonate with younger consumers, blurring the lines between heritage and contemporary culture. Johnnie Walker’s collaboration with fashion designer Olivier Rousteing and Belvedere Vodka's presence at London Fashion Week exemplify this trend.

A generational shift: from optimization to spontaneous indulgence

Perhaps the most fascinating development is a potential shift away from the relentless self-optimization that has defined much of Gen Z’s identity. Euromonitor’s Malandrakis suggests a move towards “nihilistic indulgence,” a reaction to economic uncertainty and burnout from constant connectivity. He postulates that alcohol, in moderation, may offer a path beyond the digital realm, fostering genuine conversation and connection. As one industry executive put it, “The real luxury now isn’t about what you consume, but about how you connect.”