The Changing Landscape of Alcohol Consumption

Research shows consumer drinking habits are changing and the industry is responding. Meanwhile, staffing shortages and inflation are still impacting how people are getting their drinks and bars are looking for ways to respond as business makes a slow return to normal. Today we look at what consumers are drinking, and not drinking and some ways that bars and restaurants may be delivering drinks in the future.

What Consumers Are Drinking

The Rise of Zero Proof

The biggest impact on the alcohol market in the past few years has been the steady rise of zero proof options for wine, beer, and spirits. Improvements in production methods have lead to better tasting beverages that have arrived just in time to meet the needs of a new generation. The International Wine & Spirit Research (IWSR) research shows that zero-proof brands grew their share by 9% in 2022. Zero proof beverages are improving in variety and gaining shelf space as demand increases. Production has improved despite the supply chain disruptions of the past few years, and people are finding different occasions to consume these drinks. IWSR’s forecast shows that zero proof volume will maintain a 9% compound annual growth rate (CAGR) over the next four years.

Low alcohol beverages

Zero proof volume is growing, but low-alcohol beverages (defined as having an ABV of .05 and above) aren’t showing the same growth. IWSR research projects that market will have a 2% CAGR until 2026. Consumers favor beer and wine in this market segment, and there’s plenty of room for innovation, despite the fact that it is technically easier to produce than the zero proof option. The United States is the world’s leader in low-alcohol wine (most zero proof wine is considered by the experts to be nearly undrinkable), but other countries are gaining with new market entries. Low-alcohol beverages appeal to the masses because of their wide variety of flavors. Consumers can purchase low-alcohol drinks or mix up their own low ABV cocktails, many of which are indistinguishable from regular cocktails when it comes to taste.

More Zero Proof Options Lead to Fewer Alcohol Purchases

Research shows that increasing the number of zero proof options in grocery and big box stores takes a dent out of alcohol sales in general A University of Cambridge study finds as high as a 41% reduction in alcohol purchases when zero proof options are available. This research reflects what industry experts see in the market. Bill Daddi of market research leader Kantar Worldpanel says alcohol consumption has dipped, affecting all categories of wine, beer and spirits.

“We have seen a cut down in alcohol consumption both in and out of the home,” Daddi said. “Kantar’s latest data (June 2023) suggests total alcohol occasions are down 6% versus last year with most categories being impacted.”

This trend has led alcohol producers to think outside the box and create more inclusive beverages that satisfy the needs of today’s alcohol consumers, especially since the majority of people consuming zero proof or low-alcohol beverages are also drinking alcohol on occasion (according to the IWSR 78% of zero proof and low-alcohol consumers also drink full-strength alcohol and only 18% refrain from drinking alcohol altogether). Some people want to drink wine or beer but prefer zero-proof at least some of the time and the market is meeting their needs. For example traditional breweries are making zero proof beverages such as Lagunitas, whose Lagunitas IPNA is a nonalcoholic beer with citrus and melon aromas.

Healthy Beverages

Katy Perry and Master Distiller Morgan McLachlan photo credit Monroe Alvarez with adaptogen RTD

While health alone is far from the driving factor in the sale of zero proof beverages (meaning they are no longer just for pregnant women or people that can no longer consume alcohol) there is a general trend toward more health conscious options. It’s no wonder then that some beverage companies want to capitalize on this idea by infusing healthy ingredients into their drinks. The market for healthy beverages that are more “adult” is a place for experimentation and the development of brand new market segments.

For example, producers have considered adding nootropics also known as "smart drugs" to their drinks because of their supposed health benefits. Research shows nootropics can improve brain function by improving memory and focus. The IWSR says companies are also considering vitamin and adaptogen-infused drinks because of the shift in consumer behavior. Read how some celebrities are adding adaptogens to RTDs.

How Consumers are Purchasing On-Premise

While brewers and distillers are bringing new products to market to meet consumer demand, bars are adopting new technology to meet the needs of a changing marketplace and staffing and financial challenges. Automation is finally coming to the bar.

Self-Service Kiosks & Vending Machiness

Boxbar Freestanding Terminal at Aviva Studios, Manchester, UK

Self-service is growing in the food and beverage industry. Restaurants like McDonald’s have self-service kiosks where customers can order food and even pay for it immediately, decreasing wait time and increasing customer satisfaction. The self-service market will reach $21.4 billion by 2027 — a $9 billion increase from 2020 — so it’s no surprise more restaurants have adopted this model. The self-service concept may also trickle down to bars and taprooms.

Self-service stations and boozy vending machines could change how bars operate, especially when they get busy. Bartenders can only focus on so much at once, so self-service beer will alleviate pressure on these employees. Long lines or heavy crowds won’t deter thirsty consumers.

Reshad Hossenally, CEO and Co-founder, Boxbar Tech

Boxbar Tech, has produced the first full menu automated drinks machines and is based in London. According to CEO and co-founder Reshad Hossenally, “Beverage sales are key to the success and profitability of events and hospitality businesses, yet bar service is still defined by a dwindling pool of trained staff, excessive queuing, long wait times, throttled sales and frustrated customers. We see firsthand how much increasing the speed of service with automated self-service technology can improve queuing times, on average dropping by over 70% with our own partners. Simply put, fans enjoy a far better experience with automated self-service technology like Boxbar, whilst operators increase efficiencies and sales, reduce overheads and boost profitability.”

Drink Machines

Another way bars are making life easier for their employees is by introducing behind-the-bar drink machines. These systems resemble soda fountains. Even traditional pubs, bars, and breweries are beginning to adopt this technology.

One of the best examples on the market is the Suntory Toki Highball Machine. This system makes it easy to create cocktails through its precise proportions of chilled ingredients. Bartenders no longer have to measure or estimate when pouring, thus saving time when serving customers. Staff can even program the highball machine to introduce bitters and then add nothing more than garnishes speeding up the time to deliver drinks to waiting customers.

Kiosks and drink machines in the front of the bar and behind the bar may represent a win-win for customers and operators. While it may take time for the industry to get on board with these new options, meeting the customers where they are is the very definition of service, so it pays to get up to speed.