Alcohol companies have had fewer reasons to say “cheers” in recent years.
Volumes have been falling, and the entire business model is undergoing a structural shakeup as younger people drink less.
The downturn has been driven by a mix of structural and cyclical forces.
Younger consumers are drinking less, inflation has squeezed discretionary spending, and shifting attitudes toward health and socialising are reshaping demand across beer, wine, and spirits.
People drinking lesser
There has been a notable shift in drinking patterns as younger people are increasingly drinking less alcohol.
Cultural changes, inflation, and affordability issues are all eating into alcohol consumption.
It’s no coincidence that since 2021, alcoholic drinks companies have had a tough time of it as sales of alcoholic beverages have slowed due to the changing drinking habits of a younger cohort of consumers. Whether it be your traditional brewing companies like Heineken and Carlsberg to the likes of Diageo who make the famous Guinness and Johnnie Walker whisky brands the share price performance has been poor.
According to research by the National Institute on Drug Abuse, rates of lifetime, past-year, and past-month alcohol consumption among young people have been declining since around 2000.
Experts also corroborate the decline of alcohol drinking among younger people.
Stephan Kemper, Chief Investment Strategist at BNP Paribas SA, said roughly 36% of Gen Z identify as non-drinkers. He noted that people who do not begin drinking in early adulthood are unlikely to take up the habit later in life.
Millennials, meanwhile, are approaching their peak consumption years, but Kemper argued that the broader decline in alcohol consumption reflects a deeper generational shift rather than a temporary slowdown.
“We are at the beginning of a generational trend which could well accelerate from current levels.”
Inflation and affordability are hitting alcohol purchases
Inflation and affordability have put a dent in people’s wallets, which has led to cutting down on discretionary spending.
This has affected drinking as consumers pulled their purse strings.
Inflation clearly doesn’t help (falling alcohol consumption), by encouraging households to reduce outside activities: eating at home instead of outside, drinking at home instead of a bar. This is where beverage consumption is the highest… yet, since the pandemic, the downtrending social spectrum, combined with the cost-of-living crisis, hurts.
Recent US inflation data increased to 4.2% in May, a three-year high.
US consumer sentiment also remained low in recent months due to the US-Iran conflict, which affected gas prices, though the latest data showed improvement in the sentiment.
In the May data, consumer confidence decreased for younger and older customers.
Change in perspective towards alcohol
The decline has also been due to a changing perception of young people towards alcohol drinking.
As more people become health-conscious, their view towards alcohol drinking becomes less favourable.
Ipek Ozkardeskaya said the shift away from alcohol is increasingly cultural rather than purely economic.
She argued that younger consumers are placing greater emphasis on health, fitness, and personal image, while spending more time online and socializing differently than previous generations.
“We see that the idea of ‘you must drink to have fun’ has been totally scrapped.”
Usage of smart products that track health has also contributed to people drinking less.
Amanda Wick, Principal at Incite Consulting, pointed out that health wearables and biometric feedback have affected drinking habits “by making alcohol’s effects immediately visible rather than abstract.”
Grand View Research data shows that the global wearable medical device market was valued at $54.0 billion in 2025 and is expected to expand rapidly over the coming years.
The market is projected to grow to $68.1 billion in 2026 and reach $330.5 billion by 2033, representing a compound annual growth rate (CAGR) of 29.5% during the forecast period.
Wick said the personal usage of the WHOOP Band showed the detrimental impact of alcohol usage.
In 2026, researchers analyzed data from 30,000 new WHOOP users over 72 weeks and found that self-reported alcohol consumption declined significantly after users began tracking their health metrics. Drinking days fell from 23.0% of days to 17.2% of days—a roughly 25% relative reduction—and reported alcohol volume also declined.
Oura, a company that makes rings that track sleep and activity, has reportedly sold 5.5 million rings in total.
IDC data shows the company was the third most popular wearable brand in terms of unit volume in the US in the first quarter of this year, behind Apple and Google.
Stephan Kemper said the growing use of GLP-1 weight-loss drugs could become another headwind for alcohol consumption.
He noted that these medications appear to reduce a range of addictive behaviours, while the high-calorie content of beer and wine may make them less appealing to consumers focused on weight management.
“While the impact of Ozempic and similar drugs on alcohol consumption is still difficult to isolate precisely, the direction is clear,” Kemper said, adding that the effect is likely to become more pronounced as prescription rates rise.
According to a Morgan Stanley note, the global market for weight loss and obesity could grow to $190 billion by 2035 from $79 billion in 2025.
As more people become proactive in taking care of themselves, it will result in less alcohol drinking.
Slowing volume and sales
Major beer and spirit companies have been struggling with either falling volumes or stock slowdown.
The Johnnie Walker whisky maker, Diageo, has seen its stock fall by over 19% since last year.
Anheuser-Busch InBev, the world’s largest brewer, fared much better in the last year, with a 13% gain in stock price.
However, over the last 5 years, the company’s US depository shares have given only 7%returns.
The company’s struggles led to the replacement of CEO Debra Crew in 2025, with sales of the largest spirit maker in the world declining during her tenure.
The company appointed Dave Lewis as CEO to turn the company around.
In its latest results, the company posted a 0.3% organic sales growth, helped by strong demand in the UK and Ireland and stocking up in Latin American countries ahead of the World Cup.
Diageo’s North American sales have declined 9.4% in its third quarter results.
Anheuser-Busch InBev also saw its North American volume fall by 3.1%, though sales grew in the region grew by 0.9%.
The company posted volume growth of 0.8% in its latest quarter, increasing for the first time since 2023.
The growth has been supported by higher prices, while demand for alcoholic beverages has weakened across several markets.
In 2025, the brewer’s total sales volume fell 2.3% from a year earlier, including a 2.6% decline in beer volumes.
How have alcohol companies adapted?
With these challenges, alcohol companies have pivoted to low alcohol drinks. They have also relied on premiumization to combat falling volumes.
Beverage companies are forced to adopt towards 'NoLo-Land' (No/Low Alcohol). The major players have understood the structural shift and are acting on it, albeit with varying degrees of commitment.
Kemper also noted that some companies are adopting the premiumization strategy as a buffer, with higher prices and values per unit sold, which can shield the bottom line.
Anheuser-Busch InBev has rolled out products such as Budweiser Zero, Corona Cero, and Michelob Ultra Zero, while also rolling out alcohol-free versions of Stella Artois and other core labels.
Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said companies are “streamlining their portfolios by disposing of lower-margin, lower-growth brands. Not only should this help shore up balance sheets and boost margins, but it also means they can allocate more of their advertising budgets to stronger brands to drive better pricing power and offset volume weakness.”
AB InBev Global Chief Marketing Officer Marcel Marcondes said during the company’s first quarter results that the company has sharpened its brand strategy, reducing the number of actively marketed labels in each market from around 15 to 20 brands three years ago to a smaller group of three to five “megabrands.”
The selection is based on a combination of sales volumes and growth potential.
These flagship brands now account for about 70% of AB InBev’s marketing spend, up from 50% in 2021, and contribute roughly 60% of the company’s total sales.
Michael Hewson said, “Carlsberg now generates a good deal of revenue from soft drinks and its non-alcoholic range of beers, with its recent acquisition of Britvic helping to push that up to around 30% of group sales.”
Hewson said Diageo has also expanded its range of alcohol-free products, including 0% versions of Guinness, Tanqueray, and Gordon’s Gin, as it adapts to changing consumer preferences.
Are the changes enough to stage a turnaround?
Analysts cautioned that premiumization may become harder to sustain if consumers remain under financial pressure.
Kemper said higher prices have so far helped offset declining volumes and preserve profitability.
However, he warned that the industry’s position would become more challenging if both pricing power and volumes weakened at the same time.
Ozkardeskaya said investors largely recognize weak volume growth in developed markets but still expect premiumization and emerging-market demand to support earnings.
She added that those assumptions could come under pressure if inflation remains elevated.
IWSR data indicate that while several mature markets faced pressure, some emerging economies continued to post growth in total beverage alcohol (TBA) consumption.
South Africa recorded year-over-year increases of 4% in volume and 12% in value between 2024 and 2025.
India also delivered solid growth, with beverage alcohol volumes rising 4% and value increasing 5% over the same period.
Valuations across the sector have already fallen sharply.
Kemper noted that alcohol companies have lost more than $800 billion in market value in recent years, leaving beverage stocks’ valuation discount to the broader market at a 15-year high.
“While we agree with this argument to a certain degree, we still think that the headwinds could persist as the structural nature of the change might not be fully embraced yet.”
World Cup to boost beer sales in the near term
There are near-term tailwinds for these companies, with the World Cup expected to boost beer consumption.
Jefferies said in a note that “After five successive years of volatility, beer should be better in 2026”.
With this edition having more games than the previous one, there are more opportunities for nights out and watch parties, which would increase sales.
According to Jefferies’ estimates, one billion extra pints would be consumed globally, providing a 0.3% lift for the beer category.
Bernstein also posted a similar view earlier in the year, saying marquee football tournaments increase beer consumption in the host nation by 1.3% above the normal trend.
Budweiser-maker Anheuser-Busch is expected to be the biggest beneficiary, according to Jefferies, due to its role as the tournament sponsor and strong exposure in the host nations.
Heineken is also expected to benefit from its exposure to Latin America and Europe.
A structural shift with no easy fix
For alcohol companies, the challenge is no longer just cyclical weakness but adapting to a market that is changing structurally.
Younger consumers are drinking less, health-conscious behaviour is becoming mainstream, and inflation continues to pressure discretionary spending.
Companies have responded with premium products, no- and low-alcohol offerings, and portfolio reshuffles, but analysts say those measures may only partly offset the decline in volumes.
Near-term events such as the World Cup could provide a temporary boost to beer sales, yet the broader question remains whether the industry can build sustainable growth in a world where drinking is becoming less central to social life.
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