Gen Z Is Driving Innovation in Alcoholic Beverages

Circana: Younger drinkers prioritize convenience and novelty in the beverage alcohol category.
Young people having fun together drinking cocktails, wine and beer at happy hour

CHICAGO — A growing appetite for variety in flavor profiles, packaging and product formats in alcoholic beverages is being led by Generation Z consumers aged 21-26, according to "The State of the CPG Beverage Alcohol Industry," a new report from Circana.

"Today's beverage alcohol consumers prioritize convenience and desire innovative experiences," said Scott Scanlon, executive vice president of alcoholic beverages at Circana. "Exciting flavor profiles will remain a key driver of innovation in this space. Brands that want to remain competitive should explore opportunities to elevate their offerings, incorporating premium ingredients and packaging."

[Read more: Consumers' Definition of Value Expands Beyond Price]

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One category that continues to hold broad appeal is ready-to-drink (RTD) cocktails and hard seltzers, the report found. Despite a slight softening in sales, these offerings remain widely popular across different age groups and household income cohorts, with the category more than tripling since 2018. Variety packs also remain the top-selling RTD format, outselling single-flavor packs. 

In response to market pressure, brands are innovating with crossover products, with an increasing number of nonalcohol brands venturing into the alcohol space. RTD cocktails that resonate with Gen Z consumers often feature higher alcohol-by-volume content, are made by recognizable brands and have packaging suitable for diverse occasions.

The report stated that consumers have begun to shift from value to premium options in both the beer and wine categories, with Gen Z consumers preferring sparkling wines and those with fruity or sweet notes. In the beer category, sales remain robust, particularly in the convenience channel. 

[Read more: Beverages, Grab & Go Expected to Drive Sales in 2024]

​​Among all food and beverage departments, beverage alcohol has experienced the least inflation in recent years.

"The State of the CPG Beverage Alcohol Industry" report explores factors driving demand and identifies key growth opportunities in the beverage alcohol market. The full report can be found here.

Chicago-based Circana advises on the complexity of consumer behavior and provides clarity that helps almost 7,000 leading brands and retailers take action and unlock business growth. 

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