The business of selling booze is under pressure

America’s relationship with alcohol has often straddled a perplexing dichotomy between total abstinence and unbridled excess.

George Washington supposedly plied voters in the first ever US election with gallons of alcohol, before later denouncing booze as “the ruin of half the workmen in this Country,” and 13 years of Prohibition gave rise to illegal bootleggers, lavish parties, and speakeasies. More recently, alcohol’s anchorage in American culture means that drinks brands sponsor athletic teams, and you can sit and have a beer in some Starbucks, Burger Kings, or Target stores (if you really want to).

But in recent years the business of selling alcohol has started to stumble.

Last call

On January 3, US Surgeon General Vivek Murthy called for risk warnings to be included on alcoholic beverages, similar to those on cigarette packets, after new research linked alcohol use to ~100,000 cases of cancer and ~20,000 deaths each year in the US alone. Shares of several major alcohol brands, such as Jack Daniel’s parent company Brown-Forman, dipped — but for the most part, the reaction to the news was muted, perhaps because major Western alcohol companies have had a miserable few years even before that.

Government-issued health warnings aside, the startling medical data collected on alcoholism in the US over the last decade is sobering enough. As reported by The New York Times at the end of last year, alcohol-related deaths surged by as much as 25% in 2020, more people turning to booze to assuage the stresses of the Covid-19 pandemic, with evidence that those habits have continued postpandemic for some.

Indeed, a paper published in The Lancet found that the number of Americans who were “heavy drinkers” (consuming more than 4 to 5 drinks per day, or 8 to 15 drinks per week) increased to 6.3% in 2022 from 5.1% in 2018, which is the equivalent of 16.3 million adults in the US. But while heavy drinkers may not have ditched the bottle in droves, more people are evaluating their relationship with drinking, particularly in the wake of changes to cannabis legalization, which has seen many drinkers switch one vice for another.

Sober curiosity

In recent years, it’s become increasingly common for people to take a more dry approach to the first of 12 months that await them. While the concept of a no-drinking year-beginning dates back to 1942, when the Finnish government launched a “Sober January” initiative in their war effort against the Soviet Union, the modern phenomenon of “Dry January” was formalized in 2013 as part of a campaign by Alcohol Change UK encouraging people to remain sober for the entire month.

Just a decade later, in 2023, at least 175,000 people had officially signed up to Dry January on the Alcohol Change UK website… though the actual participation figure is likely much higher, as the movement has gained traction on social media and caught on in the US and other countries.

According to Google Trends data, worldwide searches for “dry January” hit an all-time high just last year, and seem likely to continue rising. Even “damp January” — an adaptation of the trend where participants cut back on booze rather than cutting it out entirely — has seen some uplift of late, as well as so-called “zebra striping,” where one alternates between alcoholic and nonalcoholic drinks.

Dry spelling

One study published in 2019 found that alcohol consumption increased by 70% globally between 1990 and 2017, but social attitudes have shifted in the time since. A Gallup poll from last summer found that 45% of respondents believed that moderate drinking (defined as one or two drinks daily) is harmful — greater than the 43% who thought it made no difference, and a stark increase from the responses recorded in the early 2000s.

The cohort of society most aware of the dangers of booze? Young people. In the same survey, 65% of 18- to 34-year-olds said they thought moderate drinking is harmful, and 41% of this demographic reported not consuming alcohol at all. That headline-making announcement from America’s top doctor follows hundreds of viral podcasts and TikToks on the subject of how dangerous alcohol is, or — maybe even more terrifying for the hustle-culture generation — that it makes you less productive.

Beyond health scares, this perspective shift is owed to a handful of other social factors. Generally, teenagers and younger people just don’t take risks like they used to: over two-thirds of US teens don’t drink, smoke, or use marijuana. There’s even early evidence that weight-loss drugs like Ozempic and Wegovy are impacting alcohol-purchasing habits because users crave drinking far less… with one veteran trader dumping Diageo stock for that exact reason.

Highs and no’s

To summarize:

• The top doctor in the US wants more public warnings on alcohol.

• Younger people don’t think drinking is cool like they used to.

• Other vices are increasingly legal and available.

• Weight-loss drugs might suppress demand further.

So, what do you do if you’re the chief exec of a big alcohol company? The answer probably won’t be lost on anyone doing Dry January, who may have already tried one of the growing number of nonalcoholic alternatives.

Indeed, the latest data from Euromonitor, reported by The Economist earlier this week, estimated that global sales of nonalcoholic drinks amounted to almost $20 billion in 2023 — up 20% from the year prior. That demand has seen some no/low startups skyrocket. Athletic Brewing Company, a nonalcoholic-craft-beer manufacturer founded in 2017, was valued at $800 million last summer, and celebrities like F1 driver Lewis Hamilton and actress Blake Lively have launched their own nonalcoholic beverage brands in recent years.

Not missing an opportunity to cash in, legacy alcohol brands are jumping to peddle nonalcoholic versions of their most beloved products: Diageo recently doubled its production of Guinness 0.0 after volume sales increased by almost 50% between 2023-24; 0% versions of Heineken and Corona now sponsor major sports events; and LVMH-owned Moët Hennessy recently invested in alcohol-free “Champagne.”

Though global booze sales are nowhere near collapsing, reaching $1.8 trillion in 2023, per The Economist, alcohol brands are addressing the extremes of the deepening alcohol divide by making products for both sides. (It also doesn’t hurt that lower-taxed nonalcoholic drinks tend to be more profitable.) Still, a happy symptom of this polarization are the moderate consumers in the center.

Indeed, according to NielsenIQ, over 93% of Americans who buy nonalcoholic drinks still buy alcoholic beverages as well... like, for example, those of you making it through Dry Jan. with the help of 0% beer, only to reward yourself with the stiffest drink you can fathom on Feb. 1.