Curious to know what the future of alcoholic drinks will look like? With M-Venture we empower people to enjoy the best nights of their lives. We are always on the search for new and exciting ways to innovate. Over the last weeks we visited many conferences, trade fairs and talked with inspiring movers and shakers from the industry.
After gathering a lot of exciting insights, we compiled a list of the top 3 macro trends to watch in the spirits world in 2020:
RTD spirits remain highly coveted
It is almost impossible to walk around one of the big fairs like Bar Convent or Angua without overhearing someone talk about the increasing popularity of ready-to-drink (RTD) options. To give you an idea of just how popular they are: According to Nielsen data, the sales of malt-based cocktail variants for example have grown by 597%, and hard seltzer RTDs grew by 193% in 2019.
This might seem surprising as RTDs are actually no novelty. So how come that their popularity continues to rise, with a CAGR estimated at +3,1%? The reason is simple: While price is usually the most established purchase driver across the CPG space, convenience often comes second. Consumers love delicious products, but they also love easy solutions and having peace of mind. Spirit-based RTDs tap perfectly into these preferences. They offer authentic tasting premixes that can be enjoyed on the spot. Our outlook for 2020: RTDs will maintain their growth trajectory and continue to contribute to shaping alcohol businesses globally.
Premiumization: A broad geographic reach
Next to RTDs one of the most talked about topic currently in the alcoholic beverage industry is premiumization. As the consumers’ appetite for premium brands remains strong, this trend is set to continue in 2020.
Affluent consumers around the world are drinking less, but better. They demand high quality products, authentic stories and an exciting brand experience. Spirit companies react to this shifting demand by implementing various brand upscaling strategies and by creating premium products. According to Euromonitor, the shift from pure volume sales to value sales is prevalent in matured markets as well as emerging ones – with China leading the list. Thanks to its size and popularity of its local spirit, Baijiu, China dominates global premium spirit sales both in terms of volume and value, Euromonitor reports. Despite only being one 10th the size of the Chinese premium spirits market, the US also offers a great opportunity for growth thanks to a broader range of categories, seeing growth in premium spirits (Euromonitor).
With a CAGR of +10.43%, we don’t need to look into a crystal ball to anticipate that high-end brands will continue to drive much of the growth of the spirits market in 2020.
Alternatives to alcohol
As history shows, the spirt industry is not particularly known for being stagnant. Significant changes and new trends emerge every year and 2020 will be no exception. People, especially in the Western world, are becoming more educated and conscious about their health. Despite the rising consumer trends driven by convenience and premiumization, there is a shift in attitudes, beliefs and practices towards drinking alcohol in general. Consumers are increasingly interested in sobriety and non-alcoholic alternatives that align with their optimized lifestyles. The World Health Organization, highlighted in 2019 that 57% of the world population aged over 15 had not consumed alcohol in the previous 12 months. A survey conducted by Nielsen stated “opting for a healthier lifestyle” as the number one reason for drinking less alcohol. This global shift in consumers’ approaches towards alcohol presents both risk and great opportunity to the spirits industry, which has always been playing a dominant role in social, political and economic life.
Most of the startups currently on the market focus on the creation of non-alcoholic products with “original flavors”, meaning their drinks have aroma profiles based on botanical extracts. Going for a mimicking effect of the actual spirit is harder and requires more financial resources. This is a niche that provides spirit companies around the world with a great market opportunity to play an active role in shaping the non-alcoholic segment, and in setting the course for the future.