Introduction
Recent research by Bernstein analysts indicates that per capita alcohol consumption in the U.S. fell by approximately 3% in 2024, marking a 10% decline from its 2021 peak and reaching levels not seen since 1962. This trend has sparked debates among investors about whether the decline is structural—driven by shifting consumer preferences, the rise of GLP-1 weight-loss drugs, and the legalization of cannabis—or simply cyclical, resulting from current economic pressures.
Key Takeaways
Historical Decline:U.S. per capita alcohol consumption is at its lowest since 1962, with a 10% drop from 2021 levels.
Changing Consumer Habits:Among Gen-Z and young adults, alcohol consumption has shifted dramatically. Gallup data shows a decline in drinking prevalence among 18-34-year-olds from 72% in 2010 to 50% in 2024, though consumption among 21-22-year-olds has risen in the past two years.
Economic Pressures:Financial stress appears to be a significant driver, particularly among lower-income households and younger Americans, with many living at home and showing historically low consumer confidence.
Industry Impact:Companies like Brown-Forman and Diageo (LON: DGE) have reported increased sales of smaller pack sizes as consumers prioritize affordability.
Investment Outlook:Despite these challenges, Bernstein maintains an Outperform rating on major alcohol companies, suggesting that the current decline might be temporary and that demand could eventually normalize.
In-Depth Analysis
Structural vs. Cyclical Trends
Bernstein analysts are divided on whether the decline in alcohol consumption is a long-term structural change or a temporary effect of economic conditions:
Structural Drivers:
Changing Preferences: Younger generations are increasingly favoring healthier lifestyles, influenced by social media and shifting cultural norms.
Cannabis Legalization & Weight-Loss Drugs: The rise of GLP-1 medications and the expanding legality of cannabis provide alternatives to traditional alcohol consumption.
Cyclical Factors:
Financial Stress: With many young Americans facing economic pressures, reduced disposable income may lead to lower alcohol spending.
Affordability Concerns: Lower-income households have been forced to cut back on alcohol purchases, contributing to the overall decline.
Market Implications
While the decline in consumption poses challenges, there is also potential for recovery. Bernstein notes that despite long-term trends, the normalization of alcohol demand has been slower than expected. Key industry players continue to adapt by:
Innovating Product Offerings: Introducing smaller pack sizes to meet changing consumer demands.
Expanding Market Reach: Targeting niche segments and using digital marketing to connect with younger consumers.
Real-Time Data Insights
Investors seeking to monitor these trends and gauge the impact on the alcohol industry can access up-to-date data using these resources:
Commodities APITrack real-time commodity prices, including those for raw materials used in alcohol production, to understand cost pressures.
Sector Historical APIAnalyze historical performance data for the consumer staples sector, offering insights into how alcohol stocks have performed during past economic cycles.
Conclusion
The significant drop in U.S. alcohol consumption, as reported by Bernstein analysts, raises important questions for investors about the future of the industry. While there are clear structural shifts driven by changing consumer behaviors and alternatives like cannabis and weight-loss drugs, cyclical economic pressures also play a role. Major alcohol companies such as Brown-Forman and Diageo continue to adapt to these challenges, and Bernstein’s Outperform rating suggests that the industry may recover as economic conditions stabilize.
