Opinion

Drinks companies are concerned about an abstemious youth as pubs fill up.

Anyone who has walked past a London pub or a Manhattan bar recently knows that conviviality is back. Office workers may be wary about returning their desks but, once they struggle in, their natural next stop seems to be after work socialising.

August and September sales at UK pub chain Mitchells & Butlers are ahead of the same period two years ago, as are seated diner numbers in Germany and Ireland, says reservations site OpenTable. Heineken’s sales in the Americas, Middle East and Africa are back to 2019 levels. “The human desire to meet over a beer or a drink in a bar or a restaurant is universal at all times,” the brewer’s chief executive Dolf van den Brink said last week.

Reopening brings both an opportunity and a challenge for the drinks industry, which is seeking to settle down after a pandemic-induced rollercoaster ride. Worldwide sales by volume fell 6 per cent last year and are not expected to recover for several more.

But premium producers thrived as homebound consumers took up cocktail mixing, alcohol infused baking and trying top-shelf tequilas and high-end beers. The trend was particularly pronounced among Americans, who already tended to drink more at home than out of it. Unlike the rest of the world, their total alcohol consumption rose last year.

Now the onus is on drinks groups such as Diageo and Pernod Ricard, which recently reported strong results, to keep sales up even though customers have other things to spend their money on.

“Drink better, not more” has become the industry rallying cry. The slogan not only encourages consumers to continue trading up but also resonates with regulators keen to reduce the social problems associated with binge and problem drinking. It also makes a virtue of the fact that per capita consumption has been coming down for years in some of the hardest drinking countries.

Line chart of Annual alcohol consumption per capita (litres) showing Drinking habits are converging

Selling lower volumes of more expensive products boosts margins, and the ageing process used to create top-shelf products means that commodity price rises do not immediately flow through to customers.

Japan’s Suntory is taking the trend to the extreme with a whisky that retails for $60,000 a bottle. At Diageo, the super premium category that includes Casamigos tequila (founded by actor George Clooney) and the deluxe versions of Johnnie Walker whisky grew 35 per cent. They accounted for almost half of net sales growth in the year ending in June.

Focusing on quality also creates room for the industry to address one of the biggest threats to its long-term profitability: Gen Z and millennial customers are far less attracted to alcohol than older generations.

More than 56 per cent of 18- to 24-year-olds think consuming one or two drinks a day is “harmful”, compared to 31 per cent of those aged 65 and over, according to a new Jefferies survey of 4,000 consumers in eight big markets. Young people were the only age cohort where “harmful” responses outweighed a more benign view.

Young alcohol sceptics aren’t morally opposed to drinking or particularly attached to online rather than in person socialising, Jefferies found. Rather they disliked hangovers and worried about alcohol’s impact on their mental health — and their wallets.

Bar chart of Reasons for drinking less alcohol showing Young people worry more about money, hangovers and mental health

In preparation for this looming issue, the drinks companies have been putting research and advertising clout behind low and no-alcohol adult drinks for several years.

Much of the effort is focused on revamped versions of their big name brands, including Tanqueray 0.0, Ballantine’s Light and Brooklyn Special Effects lager. Heineken even switched its sponsorship of Europa league football from Amstel Light to Heineken 0.0.

The established groups have also been piling into boutique offerings that emphasise botanical flavours: Pernod bought a majority stake in Ceder’s alcohol free spirits in January, and Diageo did the same with Seedlip last month.

Global sales of no/low alcohol are forecast to grow by 34 per cent between now and 2025, compared to around 6 per cent for the total alcohol market, says IWSR. While non-alcoholic beer currently makes up the bulk of the market, fake spirits are expected to rise fastest.

That’s fine by the drinks makers — as long as their products are the ones doing the growing. Low and no-alcohol drinks are often priced in similar ranges to their boozy counterparts to preserve their upscale image. But they carry far lower taxes. That means more of each sale goes back to the producer.

In their most optimistic moments, the alcohol groups imagine that “no alc” products will form a beachhead into new drinking opportunities. Why drink a Coke at your desk with your sandwich when you can have a non-alcoholic beer for half the calories? The three-martini luncheon could rise again.

For that to work, however, these tipples need to be more than a pale substitute for the abstemious. So I made a run to the supermarket — all in the name of research. Heineken 0.0 is a definite improvement on the foul non-alcohol beers that were available when I was pregnant, but I confess that I was not fully won over by either it or the Tanqueray 0.0 and tonic.

Turns out I am in it at least partly for the booze. But maybe I’m just old.

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hello, I am Flora Khan and i work journalist in allnewshouse website i work in other sites like forbes and washington post with 5 years in experience.

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