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The era of economic moderation is here, as inflation finally bites

Published:  07 December, 2022

Premiumisation was an ongoing trend in wines and spirits during the first half of 2022 as consumers leaned into little luxuries, new data has revealed. However, as we teeter on the brink of global recession, it is increasingly clear that consumers are holding back on their drinks purchases – a trend that could be particularly acute in the UK, where both intensifying economic gloom and rising inflation is threatening to ‘derail premiumisation’.

According to newly released data from the IWSR, the first half of 2022 saw value growth of beverage alcohol reach historic highs in the world’s biggest and most influential markets, with growth driven by a combination of post-pandemic pent-up demand, ongoing premiumisation trends and inflationary price pressures.

However, as Emily Neill, chief research officer at the IWSR, notes, we are in a “much more difficult economic and consumer environment now than we were, even at the beginning of the year. The IMF is forecasting that over 2022 and 2023, at least a third of the world’s GDP will be in recession. In the first half of the year, we were really yet to see the impact of this more difficult environment and the impact of high inflation.”

As we head into 2023, economic moderation will become a key feature of drinking habits, the IWSR predicts. This means that consumers are increasingly opting to moderate their drinking, though for wealth reasons, not health.

“So rather than drinking a cheap product, people are choosing to drink less frequently, but keep quality levels the same,” Neill said.

It’s a subtle, but notable difference. The IWSR’s assessment might sound very much like the ‘less but better’ drinking trends of the past 10 years. The reality however, is that many consumers will be staying at home and making sacrifices in order to afford the brands they love this winter – hardly the trading up narrative that dominated in pre-pandemic years.

As consumers ‘economise through moderation’, the IWSR noted that around half of the adult drinkers surveyed across 17 of the world’s key markets agree with the statement “I am more interested in moderating my alcohol consumption generally”, with only around one in five saying they disagree. This number rises considerably among younger consumers of legal drinking age.

There is also widespread evidence of more careful shopping behaviours. While some are choosing to drink less to save more, many consumers are waiting for their favourite brands to be on promotion before buying, and – in some markets – switch retailers to get better prices. In most markets, between a third and 40% of consumers say they will wait for their favourite brand to be discounted before buying.

Plenty more strategies are being employed to make budgets go further amidst economic uncertainty. Moderation is a key driver, with selective trading up within certain beverage categories and value-seeking shopping strategies within preferred brands, also forming part of the picture.

A longer, more in depth version of this article is available in the year’s final issue of Harpers, out online and in print from tomorrow (8 December), where we will be looking at the impact of economic uncertainty on specific alcohol categories.