Gen Z shifts towards low & no alcohol amid declining disposable income
In the midst of declining disposable incomes and economic uncertainty, Generation Z is driving a significant shift in the beverage market. New research indicates that while overall alcohol sales have decreased, the no & low alcohol segment is experiencing impressive growth. This trend signals the need for a clear category vision that aligns with the evolving preferences of Gen Z, a demographic acutely feeling the pinch of high interest rates and economic challenges.
According to the latest data from IWSR, total beverage alcohol volumes in the UK dropped by 2% between 2022 and 2023. In stark contrast, the no & low alcohol segment saw a 47% increase in volume over the same period. This segment is projected to continue its upward trajectory with a compound annual growth rate (CAGR) of 19% from 2023 to 2028.
Patrick Finlay, MD of The Category Management Company, highlights the transformation occurring in grocery store aisles: “Whilst the grocery market struggles for volume growth, you just need to walk up the beers, wines and spirits aisle to witness an impressive display of ‘trend-bucking’; with innovation, space and range in the low & zero alcohol sector of the category exploding.”
Finlay attributes this rapid growth to a strategic approach by retailers and suppliers, who have systematically identified and capitalised on emerging trends: “Having insight (and foresight) will always pay dividends. A clear category vision, an evidence-based understanding of where long-term growth will come from, alongside a plan to activate, sets categories, suppliers and brands apart from the herd.”
Amid this backdrop, Gen Z faces significant financial challenges. A recent survey of 2,000 consumers conducted by RSM UK reveals that 84% of Gen Z are concerned about high interest rates affecting their future spending, with 82% worried about the housing market. Nearly a third of Gen Z respondents report having no disposable income left after essential expenses, and almost a quarter have only up to 20% of their income remaining at month’s end.
Robyn Duffy, senior analyst at RSM UK, notes the impact of economic pressures on Gen Z's spending behaviour: “The decision to hold interest rate at 5.25% is a blow to consumers and the housing market. Gen Z in particular are suffering on this front, with house purchases feeling further out of reach than ever, and the rental market seeing increasing competition as prospective tenants bid for accommodation in some parts of the country. This is all taking a hit on their willingness to spend.”
As Gen Z navigates economic challenges, their preference for low and no alcohol options highlights a broader trend towards mindful consumption, reshaping the beverage market in a time of financial uncertainty.
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