As 2023 draws to a close, we analyse some of the biggest drinks trends of the year through data.
From the debate over Cognac’s prospects, to non-alcoholic beer’s growth in the UK, to what the dip in world wine production means and, finally, how inflation has impacted consumer confidence this year.
Go deeper with GlobalData
Cognac continues to plummet in US – but big players argue its cyclical
Cognac was thrown into the spotlight again this month as Campari scooped Beam Suntory’s Courvoisier in a deal that could be worth up to $1.32bn – its largest-ever acquisition.
Cognac markets in the US and China have come under pressure in recent quarters. Demand has slumped in the US while, in China, a depressed real estate sector and stuttering economic growth are hitting spending on high-end consumer goods.
So Campari’s acquisition may have raised some eyebrows – but its CEO insisted he remained “bullish” about the category’s potential.
Speaking to analysts following the announcement, Bob Kunze-Concewitz said: “We’re pretty bullish on the long-term perspective of the Cognac category. If we weren’t, we wouldn’t be spending €1.2bn to make an acquisition.
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By GlobalData“We think that what is happening in the US currently is not structural and, really, cyclical. And if you look at the progression of the category in recent months, it’s starting to normalise.”
In the days that followed, analysts at investment firm Stifel dubbed the move “bold and supported by solid rationale”.
They touted the brand’s “strong premiumisation opportunities” and potential to boost Campari’s “under-penetrated” presence in the US.
They noted, however, that ‘bear’ investors believe Cognac’s “crisis” might be more structural – with many predicting it could be correlated to the rising popularity of Tequila in the US.
Bernstein analysts sang from a similar sheet, saying: “Feedback came back loud and clear: Campari is down 5% for the simple reason that staples investors generally do not like large-scale M&A.
“In Courvoisier, Campari are acquiring the number four global house/brand. The long-term opportunity is to sprinkle some Campari stardust on the marketing to benefit from the structural strong price and mix story, plus volume growth in China, eastern Asia and eastern Europe.
“We also note that Campari is stuffed with Cognac expertise. However, things are going to get worse before they get better.”
Sales of brandy and Cognac fell every month this year compared to 2022 in the US’s control states.
While the data groups Cognac with brandy, the National Alcohol Beverage Control Association (NABCA) points out the decline has been led by Cognac – for example in May, sales of nine-litre cases of brandy and Cognac were down 7.7% year on year but Cognac alone was down 16.9%.
2023 wine production dip could bring “equilibrium” to market
Wine production hit a 60-year low in 2023 amid “extreme climatic conditions”, according to initial estimates from the International Organisation of Vine and Wine (OIV).
Following four years of relatively stable world production, 2023 harvest volumes saw “significant declines” in key nations across both hemispheres, leading to a total estimated production of between 241.7mhl and 246.6mhl.
This would make it the smallest production since 1961’s 214mhl and a 7% drop on 2022. Speaking to Just Drinks over the course of this year, producers spoke of the quality, if not quantity, of grapes.
It comes amid declining consumption and high inventories in the wake of the pandemic and inflation, leading the OIV to suggest this year’s smaller harvest could help balance supply and demand.
In Australia, inventory pressure led to the imposition of yield caps this year to reduce the oversupply of stocks. The country has suffered with hefty supplies following the cessation of trade with China – with hopes it could reopen following negotiation movement between the two countries in 2023.
OIV head of statistics Giorgio Delgrosso said: “In a context where global consumption is declining and stocks are high in many regions of the world, the expected low production could bring equilibrium to the world market.”
EU production is estimated to fall by 7% to 150mhl in 2023, led by drops in Italy and Spain, down 12% and 14% respectively compared to 2022.
The US, meanwhile, is expected to see a 12% increase in wine production compared to 2022, taking its total volume to 25.2mhl.
In the Southern Hemisphere, New Zealand was the only country with a positive five-year average. Australia, Argentina, Chile, South Africa and Brazil were all “heavily affected by adverse weather conditions” in 2023 and volumes were down “significantly” in all major South American wine-producing nations.
Uruguay’s harvest volumes were down 34% on 2022, Brazil 30% lower, Australia recorded a 24% reduction while South African production dropped 10%.
UK unstoppable in low-and no-alcohol beer category
The UK low- and no-alcohol beer market is set to continue its strong growth trajectory over the next five years and producers say the category must next tackle the on-premise.
Speaking to Just Drinks in November, Rob Fink, founder of UK specialist Big Drop Brewing Co., said getting on draught was “essential” to growing the category.
He said: “Alcohol-free beer is succeeding because it’s easy for people to incorporate into their consumption habits.
“That’s why I think that alcohol-free on draught is so essential to continuing to drive and even exponentially increasing consumer appetite for it. We all know how important the British pub is to our national culture and the pint as an institution. If you could have a pint of great tasting beer that happens to be alcohol-free I think that’s just a whole new gateway – an opening up of the market.”
Both the 0.0% abv and 0.0 – 0.5% segments are set to boom between now and 2027, according to research from GlobalData, Just Drinks’ parent – with the former anticipated to reach a market value of $460m by 2027 with a CAGR of 16.86%, compared to $150m in 2022 with a CAGR of 52.6%.
For those beers containing up to 0.5% abv, the market is expected to grow from a lower base of $120m in 2022 to $220m by 2027 – a slower pace of growth than the 0.0% abv category but still reaching just under 200% category growth.
“Low-and-no is a UK business success story,” says Laura Willoughby, co-founder of London’s non-alcoholic bar and shop Club Soda. “It started here and we will see more UK brands make an appearance across the globe [in 2024].”
This year the UK government began a public consultation to review the threshold for labelling a beverage as “alcohol-free”.
The consultation will call for feedback on a proposal to raise the threshold for an “alcohol-free” drink to an abv of 0.5%, hoping to make alternatives to alcoholic drinks more widely available and popular.
Currently, “alcohol-free” drinks in the UK must have an abv of 0.05% or less. Meanwhile, “low-alcohol” refers to any product with 1.2% abv or below.
The proposed 0.5% abv threshold is in line with other countries, including the US, Denmark, Germany, Australia, Sweden, Portugal and Belgium.
Inflation hampers consumer confidence when it comes to alcohol
Inflation has continued to shift the needle on consumer shopping habits in 2023 – whether that be trading down or stopping purchasing certain items altogether.
More than 50% of those who have cut back on their grocery shopping said they have stopped buying alcohol altogether this year, according to a survey by GlobalData.
Of the total, 28% – 5,951 people – said they had cut back grocery spending to make savings in Q3 compared to Q2.
Of those who bought alcohol and were cutting back on overall spend, 58% – 856 people – said they had stopped buying alcoholic beverages altogether to consume at home because they were too expensive.
A further 33% had traded down in the alcohol they bought, either by buying private label and cheaper brands, trading down within their usual brand’s range, or swapping to a cheaper supermarket.
Only 9% of people had stuck with the brands they previously bought and were cutting down on quantities or regularity of purchases.
For non-alcoholic beverages, meanwhile, fewer people cut back altogether but more traded down.
Nearly a fifth, 19%, said they had stopped buying soft drinks altogether. The full survey can be found on GlobalData’s Intelligence Centre.
It comes as grocery inflation has begun to slow in economies including the UK and the US.
In November, US food and soft drinks prices extended an easing trend from last year’s historical highs, climbing 2.9%, compared to 3.3% in the 12 months through October and 3.7% in September.
Today (20 December), UK grocery inflation broke below the 10% barrier last month for the first time since June 2022.
Both the CPI and CPIH measures published by the Office for National Statistics (ONS) eased to 9.2% for food and soft drinks in the 12 months to November, cooling for an eighth month in a row. The rates were down from 10.1% in October.
The pace of inflation for food and non-alcoholic beverages in November was the least since May 2022 in terms of the CPIH, which reached a peak of 19.2% in March this year, the highest in more than 45 years.
