Attitudes About Drinking Are Changing. What Does That Mean for the Booze Business?

Is drinking on the rocks?

American young adults are consuming less alcohol than prior generations, and beverage-company executives have different ideas about what’s driving it: tough-but-temporary economic conditions or more enduring cultural change. Either way, they say, the industry is seeing shifts in buying behavior.

A Gallup survey released last year, for example, reported a higher likelihood that young adults will note health risks associated with alcohol—and drink less of it. Americans’ perceptions of alcohol have changed more significantly than the industry realizes, said Bill Shufelt, CEO of nonalcoholic beer company Athletic Brewery, at a UBS conference this week in Manhattan.

Nearly half of Americans have indicated on surveys that they want to drink less, Shufelt said, and that desire is particularly widely held among millennials and Gen Z, who he said are better-educated on health issues and have more alcohol-free options to choose from.

Half of millennials and 60% of Gen Z refrained from drinking for a week or more over a six month period in 2024, according to surveys conducted by global insights and data firm IWSR.

“These are probably big, big generational headwinds in perception out there that I think are just in the very early innings,” Shufelt said. “That message has not gotten through from consumers back up the chain yet.”

Morgan Stanley analysts earlier this month downgraded shares of Brown-Forman (BF.A; BF.B), which makes Jack Daniels, saying in a note that “we don’t expect the US spirits category to return to its historical 4%+ growth rate amid structural pressure from demographics (Gen Z drinking less), health/wellness/ moderation trends (including GLP-1 impact), and cannabis.”

For Some Younger Americans, It May Be More About the Money

Some of the reasons for changing tastes may be more transitory, Shufelt said, citing economic pressure and rising alcohol prices. He said legacy alcohol companies can still reach people, and alcohol—“a 5,000-year-old trend”—isn’t on the brink of becoming irrelevant.

Alcohol spending has fallen among younger Americans, said Lawson Whiting, CEO of Brown-Forman, at the UBS event. Health concerns aren’t the main reason this demographic is holding back, he said.

“If you’re 21, 22, 23 years old and you’re just coming out of college or whatever it might be, you’re pocket book is in serious strain,” Whiting said. Many consumers, he said, are cost-conscious and have been buying smaller quantities of alcohol as a way to save.

Michel Doukeris, CEO of Anheuser-Busch InBev (BUD), the company behind Budweiser and Michelob Ultra, said the shift could be anomaly caused by COVID-19. He said his 22-year-old daughter attended part of college on Zoom, and consequently, asked him for advance about how to handle her first work happy hour.

“COVID was a very disruptive event that caught a generation between 17, 18-years old that today is [of] legal drinking age, but they’re not everybody,” said Doukeris at the UBS event. As people approach their mid-20s, he said, “we see a normalization of some behaviors.”