Original release date April 15, 2024: Markets are suggesting that spirits consumption will return to historical growth levels post-pandemic, but our Head of European Consumer Staples Research disagrees.----- Transcript -----Welcome to Thoughts on the Market. I’m Sarah Simon, Head of the European Consumer Staples team. Along with my colleagues bringing you a variety of perspectives, today I'll talk about a surprising trend in the global spirits market.It's Monday, April 15, at 2pm in London. We all remember vividly the COVID-19 period when we spent much more on goods than services, particularly on goods that could be delivered to our homes. Not surprisingly, spirits consumption experienced a super-cycle during the pandemic. But as the world returned to normal, the demand for spirits has dropped off. The market believes that after a period of normalization, the US spirits market will return to mid-single-digit growth in line with history; but we think that’s too optimistic.Changes in demographics and consumer behavior make it much more likely that the US market will grow only modestly from here. There are several key challenges to the volume of US alcohol consumption in the coming years. Sobriety and moderation of alcohol intake are two rising trends. In addition, there’s the increased use of GLP-1 anti-obesity drugs, which appear to quell users' appetite for alcoholic beverages. And finally, there’s stiffer regulation, including the lowering of alcohol limits for driving.A slew of recent survey data points to consumer intention to reduce alcohol intake. A February 2023 IWSR survey reported that 50 per cent of US drinkers are moderating their consumption. Meanwhile, a January 2024 NCSolutions survey reported that 41 per cent of respondents are trying to drink less, an increase of 7 percentage points from the prior year. And importantly, this intention was most concentrated among younger drinkers, with 61 per cent of Gen Z planning to drink less in 2024, up from 40 per cent in the prior year's survey. Meanwhile, 49 per cent of Millennials had a similar intention, up 26 per cent year on year.Why is all this happening? And why now? Perhaps the increasingly vocal commentary by public bodies linking alcohol to cancer is really hitting home. Last November, the World Health Organization stated that "the higher the amount of alcohol consumed, the higher the risk of developing cancer" but also that "half of all alcohol-attributable cancers in the WHO European Region are caused by ‘light’ and ‘moderate’ alcohol consumption. A recent Gallup survey of Americans indicated that young adults are particularly concerned that moderate drinking is unhealthy, with 52 per cent holding this view, up from 34 per cent five years ago. Another explanation for the increased prevalence of non-drinking among the youngest group of drinkers may be demographic makeup: the proportion of non-White 18- to 34-year-olds has nearly doubled over the past two decades.And equally, the cost of alcohol, which saw steep price increases in the last couple of years, seems to be a reason for increased moderation. Spending on alcohol stepped up materially over the COVID-19 period when there were more limited opportunities for spending. With life returning to normal post pandemic, consumers have other – more attractive or more pressing – opportunities for expenditure.Thanks for listening. If you enjoy Thoughts on the Market, please take a moment to rate and review us wherever you listen to podcasts. It helps more people to find the show.

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