UK: No- and low-alcohol drinks outperform a declining UK alcohol market
The total beverage alcohol market in the UK is expected to see volume and value declines of -1% CAGR over the next 5 years, although it is still set to remain the world’s third most valuable beverage alcohol market for standard-and-above price bands, according to the latest data and forecasts from IWSR.
Total beverage alcohol (TBA) volumes in the UK declined by -2% between 2022 and 2023, capping a period of recent decline for the industry (2018-2023 volumes falling at a CAGR of -1%). Growth rates of the no- and low-alcohol segment outperformed the overall UK TBA market, partly driven by the ongoing consumer trend for moderation as well as excise duty changes. The overall no/low-alcohol segment showed volume growth of 47%, 2022 to 2023, with forecast volume CAGR of +19%, 2023 to 2028. The no/low-alcohol segment is expected to add incremental value of £0.8bn by 2028.
Low-alcohol volume sales almost doubled in 2023 and IWSR expects considerable growth over the next few years, particularly driven by low-alcohol beer. Many beer and wine brands are lowering their alcohol content (ABV) to take advantage of the UK’s new excise duty regime, although this is poised to bring renewed challenges for wine in particular when more changes are introduced during 2025.
“Whether reflected by reining in grocery spend, reducing the frequency of on-trade visits or switching to longer drinks, seeking out better value was the overwhelming priority for increasingly cash-strapped UK drinkers in 2023,” says Patrick Fisher, IWSR Senior Market Analyst.
“Rising prices and the cost-of-living crisis have reduced disposable incomes for discretionary spending and, coupled with the enduring trend of moderation, as well as closures and reduced opening hours in the on-trade, this is having lasting effects on consumer behaviour. The upper end of the market remains more insulated, while mainstream-and-below retail sales became more dependent on promotions.”
In the near term, industry hopes are pinned on better summer weather, and the likely consumption boost brought by two major sporting events: UEFA Euro 2024 and the Paris Olympics. However, this is unlikely to have a lasting impact.
Whilst further volume declines are expected in most categories over the forecast period, higher prices should drive some value gains in the shorter-term.
Longer term, both beer and wine are expected to revert to their established pattern of gradual volume decline, with growth in beer focused on premium world lager, stout and non-alcoholic beers, and higher-ABV red wines losing share within still wine.
Overall, spirits are expected to register modest single-digit declines over the forecast period, but gin will continue to incur heavier losses. Of the bigger spirits categories, rum is expected to register long-term growth, albeit modest and focused in spiced and flavoured variants. Agave-based spirits will also grow off a smaller base.
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