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Millennial fallout threatens premiumisation

Published:  13 December, 2022

A major shift in premiumisation trends is about to occur, new analysis from the IWSR has concluded, as millennials and those who enjoyed greater discretionary spend during the pandemic feel the strain of a new period of economic instability and stagnation.

According to the IWSR, millennials played a key role in alcoholic premiumisation trends at the height of the Covid-19 pandemic, leading the global consumption bounce-back in 2021 in key markets such as the UK, US, France, Germany and Brazil, on the back of higher levels of disposable income and embracing more sophisticated at-home drinking occasions.

However, this trend is now likely to be reversed by economic instability, the IWSR said, as younger consumers become less secure with their finances and employment prospects in the years ahead.

Instead, “those with financial stability – typically consumers with lower levels of debt and secure employment – will provide increasing opportunities for premium-and-above spirits and wine brand owners”, in the years to come.

This shift in buying behaviours from bounce-back hedonism to moderation and greater at-home drinking is part of a broader sea change taking place within the industry and the wider economy at the moment.

Last week, Harpers reported that premiumisation across wines and spirits continues to be felt in markets as consumers globally lean into little luxuries. However, as we enter a “much higher inflation environment”, there is a notable shift occurring – and premiumisation trends could come under strain as consumers look to “drink less to save more”, the notable difference here being that consumers are cutting back 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,” added Emily Neill, chief research officer at the IWSR.

In 2023, it seems that at-home drinking and moderation trends will continue to grow in importance as households look to cut their net spending.

“The post-Covid on-premise recovery has been patchy in many locations, with hospitality hotspots thriving, but other venues struggling to cope with lower customer numbers and rising costs,” the IWSR said in its latest assessment.

“Previously driven mostly by health and wellness concerns, moderation in alcohol consumption is now increasingly being spurred by economic worries and a need to cut back. Consumers are choosing to cut down rather than down-trade in many markets.”