Here's Why Alcohol Companies Face A Sobering Reality | Here's Why

Added: 2026-05-27

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[00:00:08]>> [music] >> I'm Caroline Hepker, and this is Here's Why, where we take one big story [music] and explain it in just a few minutes with our experts here at Bloomberg.

[00:00:18]>> [music] >> We're hearing more and more about young people not drinking as much. This idea of like, uh, you know, Dry January actually lasting the entire year. We're in a a backdrop right now where alcohol companies and spirits makers in particular have been facing, you know, weakening demand from consumers who aren't drinking as much or they're switching to less expensive, uh, spirits. Now, we know that the alcohol market has been challenged recently because people are kind of, you know, teetotaling. They're pushing off some of these alcoholic drinks. For years, the world's biggest alcohol companies were raising a glass to steady growth.

[00:00:51]Drinking was embedded in social life in many parts of the world. Beer, wine, and spirit sales looked resilient, and investors treated the industry as a reliable bet. But now, consumers are pulling back. People are drinking less frequently and in lower quantity. Health warnings are mounting and becoming stricter. Younger drinkers are changing habits, and the companies behind some of the world's biggest alcohol brands are scrambling [music] to adjust. So, here's why alcohol companies face a sobering reality.

[00:01:25]>> [music] >> Jennifer Creery covers retail and consumer goods for Bloomberg, and she joins me now. Good to see you, Jenny.

[00:01:33]How fast is alcohol consumption falling globally? What's driving the shift in drinking habits? Drinking has been falling for quite some time now. So, if we look at per capita consumption, alcohol volumes have been declining for about a decade. If we look at the more recent figures, um, if we look at a kind of a compound annual rates, uh, it's been declining 2% uh, and this this is measured in terms of servings. So it gets a bit technical, but this is between 2019 and 2025.

[00:02:03]All of that is to say we tend to think of the pullback in drinking as a post-COVID phenomenon and while there is some truth to that, there's also a bit of nuance. So obviously during the pandemic a consumption rose. It rose 2.3% from 2020 to 2021. Essentially people drank more while isolated and bored at home and then there was a contraction afterwards.

[00:02:25]But it wasn't simply because people suddenly got healthier after the pandemic. It was in the context of this multi-decade decline in drinking. Okay, that's interesting. Younger consumers then are sometimes called the sober generation.

[00:02:40]How is that also reshaping the industry?

[00:02:43]Is it a story about global youth?

[00:02:46]So the idea that Gen Z doesn't drink is a bit of an exaggeration. So Gen Z, so these are people aged between 14 and 27 or in this case from the legal drinking age to 27. Research tells us that they're they're more mindful about drinking. So it points to a growing divide between generations and a different kind of generational thinking and approach to drinking. So one survey we we looked at showed that only about 32% of Gen Z drinkers say they drink every week. This is versus 45% of older cohorts. And another survey showed us that about 53% of Gen Z drinkers said they engaged in intermittent absences.

[00:03:22]So what does this mean? Well, yes, younger consumers tend to moderate, but when they do drink it will be for an occasion. So they'll save it for a special event or they'll do something like for example zebra striping. So this is when you switch between alcoholic drinks and non-alcoholic drinks. And they're also, you know, less loyal to single beverage categories. So there's a greater willingness to explore different flavors and varieties such as RTDs. So these are ready-to-drink often times in your canned cocktails, beverages like, you know, BuzzBallz, things like that.

[00:03:51]So that there's a different approach to drinking nowadays. Really interesting from a country, of course, well known for its pub associations for alcopops.

[00:04:00]It's all kind of transforming, isn't it, over the years?

[00:04:04]So, how are major drinks companies trying to adapt then to a world where people may simply consume less alcohol?

[00:04:12]There are a couple ways, right? So, if you if you look at, you know, the share price of all of these drinks companies, I mean, they're clearly under pressure at the moment. There was this big spike during the pandemic, and now they're now they're declining. And so, obviously, you know, companies are finding ways to remedy that. And that could be through immediate measures like restructuring, cutting costs, uh you know, laying off staff. For example, Heineken plans to cut cut 7% of its global workforce uh of about 87,000 people over 2 years. And this is mostly in Europe. In the US, you know, it's the same thing. So, in in Kentucky, Brown-Forman, uh the maker of Jack Daniel's whiskey, has also announced a plan to reduce its head count worldwide by 12%. And then you have some companies that are trying to kind of downsize operations. So, Jim Beam, the bourbon maker, which is owned by Suntory, the Japanese alcohol giant, is pausing production in one of its main distilleries in Kentucky to basically ride out this storm. So, there are a lot of immediate kind of stopgap measures.

[00:05:08]You're also seeing an uptick in consolidation discussions. So, for example, Pernod Ricard and Brown-Forman entered discussions over a potential merger. Those discussions broke down.

[00:05:18]Brown-Forman is also in discussions with Sazerac, but Sazerac's latest bid was rejected by Brown-Forman, so that might not go ahead. But, there's definitely more more talk and interest over consolidation. So, that's very interesting, isn't it? It's actually It's actually a global story is effectively what you're saying. So, I wonder then also how important health concerns are globally when it comes to this sort of consumer behavior. I mean, I was was about the mocktail that I was offered recently in a London restaurant, £12.50 for quite a sugary drink, and it did make me wonder, is this also being driven by margins for the sale of non-alcoholic beverages?

[00:06:01]There's definitely a discussion around wellness and moderation, and that's very much been driven by consumers. And we we talked before about Gen Z and Gen Z's kind of different approach to drinking.

[00:06:13]This is particularly pronounced in markets like the US, Europe, developed markets. And that's led to a particular uptick in low and no-alcohol beverages.

[00:06:24]So, consumption by servings of non-alcoholic beer, wine, spirits, and cider, as well as RTDs, grew at a compound annual rate of 8% from 2019 to 2024. So, that's, you know, considerable growth. There are some sort of market-specific factors, as well. So, China, for example, there's kind of great discussion over health and wellness, but it's also being influenced by government actions like cracking down on extravagance. And so, that's gifting of expensive spirits like baijiu, which is the country's national spirit. So, it's kind of more complex than simply, you know, people are trying to be healthier. There are also other factors at play.

[00:07:00]And does the industry then think that any of this is temporary? If you look at the different companies, the different countries, different types of alcohol that are all under pressure, do businesses think that it's temporary? I mean, that's the million-billion-dollar question, really, is, you know, is this cyclical? I.e., is it going to just, you know, blow over, or is it structural?

[00:07:22]I.e., is it here to stay? I mean, if you look at the measures that companies are taking now, it it's sort of in the short term that they're going to have to find a way to address these issues, whether or not they're temporary or long term, because, ultimately, you know, it's having very real, tangible implications for these companies.

[00:07:40]You know, a lot of a lot of people have been saying, you know, is this alcohol's big tobacco moment? Is this something that's here to stay?

[00:07:48]The thing is, you know, the the headwinds that they're facing, the drinks industry, it is a lot more different than tobacco industry. It's kind of well of course they're subject to regulatory challenges, you know, it's alcohol is still very popular among consumers and it's not so much a case that across-the-board consumption is falling. We're seeing areas of growth.

[00:08:07]So, for example, in emerging markets, so in Latin America and India in particular, they're they're bright spots for a lot of these drinks companies. Um so, they they are seeing areas of growth. The question is whether or not they can adapt to meet meet those needs.

[00:08:21]Yeah, it's going to be fascinating to see how that progresses and such a big change, isn't it, for the drinks industry, as you say. Jennifer, lovely to see you. Thank you for speaking to me. That is Bloomberg's Jennifer Creery who covers retail and consumer goods talking us through the latest on the drinks industry. Now, for more explanations [music] like this one from our team of 3,000 journalists and analysts around the world, go to [music] bloomberg.com/explainers.

[00:08:49]I'm Kailey Heaphy. This is Hayes Why.

[00:08:52]We'll be back with more [music] next week. Thanks for listening.