The US beverage alcohol market has continued its downward trend in 2024, with volumes shrinking faster than anticipated. According to new data from IWSR's US Navigator, total beverage alcohol (TBA) volumes fell by -2.8% in the first seven months of 2024, surpassing the predicted -1.9% decline.
This downturn reflects a difficult trading environment as consumers grapple with higher prices and economic pressures. However, a successful second half of the year could potentially mitigate these losses, according to IWSR President Marten Lodewijks.
Insights from the IWSR US Navigator
Launched by IWSR, US Navigator tracks monthly beverage alcohol consumption by price tier across all US states, providing detailed insights since 2019. While the 2023 decline in US beverage alcohol volumes was recorded at -2.6%, the forecast for 2024 had projected a moderated loss of -1.9%. Instead, the market saw a more significant -2.8% decline in TBA volumes from January to July.
The data shows that, with the exception of ready-to-drink (RTD) beverages, which saw a +2% growth, all major categories have shrunk:
According to Lodewijks, the expected recovery failed to materialize due to continued economic challenges, although an improvement in consumer sentiment among affluent Millennials has been observed. However, this hasn't translated into increased spending or consumption, especially among lower-income consumers.
State-Level Performance and Consumer Behavior
The national decline has played out differently across states. In New York, for example, spirits volumes fell by only -1.5% compared to the national -3% average, while wine and RTD volumes experienced sharper declines, falling by -5% and -6.5%, respectively. New York’s robust cocktail culture and higher disposable incomes may have shielded its spirits category from larger drops.
Elsewhere, beer volumes showed consistent declines across most states, but places like Florida, Texas, and Pennsylvania recorded more moderate losses (less than -2%). RTDs exhibited a mixed performance, with strong growth in states like Louisiana (+16%) and South Dakota (+14%), despite declines in states such as Florida and New York.
Wine has continued to struggle nationwide, with only New Mexico posting a relatively small decline of under -2%, while other regions, such as Washington DC and Maryland, shed more than 5% of their wine volumes.
Seasonality and Consumer Trends
Seasonal trends remain largely unchanged, with RTDs and beer peaking in the summer months, while spirits and wine typically see higher consumption around December. Notably, the IWSR observed that RTDs peaked in June, a month or two earlier than beer, which traditionally peaks in July and August.
The ongoing momentum of Dry January has also influenced the market. Across all categories, consumption significantly dropped in January and February, with each successive year's dip becoming steeper as moderation gains traction among consumers.
Key Category Trends
Tequila Softens While Premiumisation Persists
Tequila volumes dropped by -1% during the first half of 2024, driven by a decline in ultra-premium (-8%) and standard (-3%) categories. However, premium (+6%) and super-premium (+4%) tequilas saw gains, indicating that premiumisation is still present in the tequila market, particularly in prestige tequilas priced over USD 100, which grew by more than +6%.
Regional contrasts are evident. In states like California and New York, where disposable incomes are higher, super-premium tequila volumes grew by +10% and +5%, respectively. Conversely, in states like Texas and Florida, there was double-digit growth in premium-priced tequila, reflecting a trend of trading down among consumers.
American Whiskey Declines in Core Markets
American whiskey volumes fell by -2%, but the biggest losses came from key markets such as California, Florida, Michigan, and Texas, where declines were driven by weakness in premium price tiers. States like New York, Pennsylvania, and Tennessee saw little to no decline, and New York even maintained robust premium growth.
Widespread downtrading is evident across whiskey categories, as shown by consumer research from IWSR Bevtrac, highlighting the impact of economic pressures on luxury spirit sales.
Spirit-Based RTDs Continue to Drive Growth
RTDs, particularly spirit-based ones, are proving to be a bright spot in the US alcohol market. Spirit-based RTDs grew by +11% in the first seven months of 2024, accounting for over 16% of the RTD category's volume. Meanwhile, malt-based RTDs stagnated, and wine-based RTDs declined by -2%.
While certain states saw significant malt-based RTD growth, such as Texas and Pennsylvania, the majority of RTD category energy now lies in spirit-based variants.
The Outlook for the Remainder of 2024
Despite the challenges faced by the US beverage alcohol market in the first half of 2024, the second half offers an opportunity to mitigate some of the losses. However, this will depend on how successfully producers can navigate consumer behavior changes, price sensitivity, and economic pressures.
The resilience of certain segments, such as premium tequila and spirit-based RTDs, may help buoy the market, but other categories like wine and beer may continue to struggle, particularly given the broader trend towards moderation and Dry January momentum. The evolving consumer landscape will be critical in determining how the remainder of 2024 plays out for the beverage alcohol industry.
Source: IWSR