Alcoholic Drinks: Half-Year Update H1 2023

Delivery

This report comes in PPT.

Key Findings

Resilient but not recession-proof

While the alcohol industry has been successfully navigating the state of permacrisis and proving resilient and agile, the unprecedented inflationary pressures and the subsequent slowing down of economies appear to be finally taking a toll. Post-pandemic recovery is not going into reverse, but performance is becoming increasingly subdued and momentum diminished in the short to medium term. Growth prospects have been downgraded.

Lessons from the 2008-2009 recession

  Drawing direct parallels with the recession of 2008-2009 would be unwise, since the macroeconomic challenges are now very different. Unemployment remains relatively low and excessive debt levels are not the focus. Instead, persistent inflation and stagnation are. However, consumers’ discretionary incomes are suffering in a similar way, with categories like cognac and champagne already appearing to be high-profile casualties facing declines.  

Riding the inflationary wave, price rises and the allure of discounting

The vast majority of key alcoholic drinks categories witnessed significant – in many cases double-digit – price rises during the course of 2023. The momentum of hospitality reopening, the consumer focus on “revenge conviviality” and the pandemic era savings and support schemes allowed for consumers to be able to accept this, but price elasticity now appears to be reaching its limits, prices are peaking and the first signs of discounting are appearing.

Premiumisation; The first cracks appear

While the premiumisation narrative appeared impervious to the blunt force of severe inflationary forces earlier in 2023, aspirational consumption seems currently to be losing steam as the cost of living crisis takes its inevitable toll. Since macroeconomic and geopolitical volatility is expected to continue in the short term, high-end offerings will remain under pressure, and a degree of trading down and across should be expected.