IWSR Report: U.S. Alcohol Market Set to Regain Footing After ‘Reset Year’
Although last year’s domestic alcohol sales were pretty grim, most are referring to 2023 as a reset year for the U.S. alcohol industry.
According to data and analytics company IWSR, the nation’s total beverage alcohol volumes (TBA) decreased by 3 percent overall due to myriad factors including inflation and economic hardships on consumers, an increased focus on moderation and health consciousness, and imbalanced inventories. Consequently, this marks the first year in nearly 30 years that the industry saw a slip in spirits, beer, and wine sales.
It may come as no surprise that the pandemic played a heavy hand in this downturn, particularly on the inventory front. According to the IWSR, inventory levels skyrocketed between December 2019 and December 2023 due to a jump in consumer demand during the height of the pandemic, and then further bolstered by supply chain disruptions. IWSR predicts that excess inventory will likely have a continued effect on the market over the next few years.
“High inventory levels are expected to persist into 2024 and potentially beyond, with normalization now not expected until 2025 or early 2026,” says president of the US division at IWSR Marten Lodewijks.
Still, it’s not all doom and gloom for the beverage alcohol industry at large. In 2023, TBA volume increased by one percent globally, and IWSR expects that the U.S. will be a major player in growth within the world’s “mature alcohol markets” down the line, pushing nearly $8 billion in incremental gains come 2028.
The future of the U.S. beverage industry simply looks different, especially with some younger consumers reaching for low-alcohol or energy beverages or abstaining completely. That said, the RTD market proved an outlier in 2023’s slump, showing a period of strong gains, according to IWSR data. Meanwhile, though not produced domestically, agave spirits, Mexican lagers, and Prosecco have maintained steady growth on the US market.
Read on for the full category-by-category breakdown of IWSR’s insights.
Agave Spirits Are Soaring While Other Spirits Slip
The IWSR predicts that it’ll take some time for the U.S. spirits market to recover from the harsh blow it took in 2023. While the category experienced a 2 percent decline last year, it’s only expected to increase by 1 percent between now and 2028.
Cognac and Scotch appear to be suffering the most, mainly due to their typically high price points. Malt Scotch volumes tanked by 12 percent in 2023, and Cognac’s by a whopping 17 percent. The data suggests that growth in both segments will remain relatively flat in the coming years. “IWSR’s most recent Bevtrac consumer data shows that the US Cognac consumer profile is reverting to its pre-pandemic state, rebalancing towards higher-income individuals,” says IWSR chief operating officer of consumer research Richard Halstead.
On the bright side, domestically-produced whiskey — which experienced a 1 percent volume decline in 2023 — is expected to enjoy a small boom between now and 2028 at a volume compound annual growth rate (CAGR) of 2 percent. IWSR attributes this forecast to continued demand in the bourbon and rye markets.
Tequila, though, is crushing it, and is expected to continue doing so with the help of premium-and-above expressions. The agave spirits category as a whole saw a 4 percent volume increase in 2023, and shows signs of a CAGR of 6 percent over the next four years.
Prosecco and Savvy B Show Promise in a Slowing Wine Market
Without sugar-coating it, 2023 was a rough year for wine in the US. Overall wine volumes dropped by 4 percent, with sparkling wine segments also shrinking by 3 percent. Although IWSR anticipates a 1 percent CAGR decline through 2028, the analytics company expects sparkling wine — and spritzes — to be the industry’s saving grace.
“Prosecco remains a bright spot within the wine industry through its affordability, as well as offering the opportunity to trade up to more premium expressions,” says IWSR research director for North America Adam Rogers. “The segment also benefits from its use in the trending spritz cocktail.
At large, the younger generation’s health-conscious tendencies are proving a strong indicator for particular growth segments in wine. “Low-alcohol wines with ‘better for you’ attributes continue to enter the market, gaining traction and consumer interest,” Rogers says. “From a varietal perspective, Sauvignon Blanc brands are performing the strongest currently, thanks to their refreshment and food pairing attributes.”
Premium Beer or Bust
The U.S. beer market wasn’t doing so hot before 2023, and volumes dipped by another 3 percent over the course of the year. IWSR believes that this trend will continue to play out, expecting a CAGR of -2 percent through 2028. However, premium and craft offerings will likely remain the primary value driver in the category, so the folks at New Belgium and the purveyors of fancy IPAs should be OK. Rogers attributes the decline to “a continued migration from beer into newer categories such as RTDs, not to mention increased moderation in general.”
Cocktails, Hard Teas, and RTDs
Speaking of RTDs, it appears that convenience is still king. In 2023, the category saw a volume bump of 1 percent, and the IWSR predicts that it will continue to expand at a CAGR of 3 percent between now and 2028.
At the same time, hard tea, cocktails, and flavored alcoholic beverages (FABs) are sitting pretty with “significant growth” according to IWSR insights, as many emerging brands are flooding into the segments with hopes of getting their piece of the pie.
Booze-Free Beverages Are Going Strong
Considering the dips across the wine, beer, and spirits segments, it’s unsurprising that alcohol-free offerings have taken off. In 2023 alone, NA beer volumes shot up by 19 percent, and NA spirits surged by a jaw-dropping 38 percent in the U.S., which is now the category’s third-largest global market. IWSR data suggests that both segments will tally up double-digit growth through 2028, while NA wine is expected to grow on a smaller scale.
According to IWSR Bevtrac consumer data, the number of consumers that are buying NA products in the US doubled from 6 percent in late 2023 to 13 percent in less than a year. It may be too soon to tell if this booze-free boom is indeed just a trend, but its effects on the industry at large are far from insignificant.
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