Alcohol marketers face sobering times as moderation trend grows

Beyond Dry January, booze brands aim to appeal to younger generations that are drinking less

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Credit: Illustration by Tam Nguyen/Ad Age

Lindsay Flegge normally goes out for drinks four times a week. "Margaritas are my favorite," says the 30-year-old suburban Indianapolis resident. But she hasn't had the tequila cocktail, or a drop of any other kind of alcohol, all month. "It's basically just to give my body a rest. I think we all know it's not good to be drinking alcohol all the time," she says.

Flegge is one of countless people partaking in Dry January, a one-month post-holiday abstinence movement that quietly began seven years ago in the U.K. This year the trend reached a tipping point in the U.S., spreading via word of mouth and mainstream media coverage.

While Dry January only lasts 31 days, there are signs that a more sweeping and permanent moderation movement is taking root among millennials. The generational shift is forcing bars, restaurants and alcohol brands to adapt. More low- and no-alcohol products are in development, and some, like Heineken's new no-alcohol 0.0 beer, are already hitting store shelves. Drinking establishments, meanwhile, are adding fancier non-alcoholic cocktails, or mocktails, to their menus as they look to keep their drink revenues flowing.

The moderation movement is "absolutely impacting beverage alcohol sales," says David Henkes, a senior principal at Technomic, a market research firm covering restaurants. "It's a huge issue for the industry."

The numbers tell the story: In 2018 alcohol sales at drinking establishments, including restaurants and bars, grew 2.5 percent. That trailed the cumulative food and beverage growth of 3.1 percent, according to Technomic, showing that consumers are ramping up their eating habits faster than their drinking. Moreover, the total beer industry remains in decline. Trade publication Beer Marketer's Insights estimates that U.S. beer shipments fell at least 1 percent last year, including at grocery stores and bars, and are now 8 million barrels below the industry's 2008 peak.

"Entry-level drinkers are drinking less," says Beer Marketer's publisher Benj Steinman. "It's a real 'watch-out' for the future."

A variety of factors are at play, but the top reason cited by experts is that younger people are simply more conscious about what they're putting in their bodies.

"Older generations were ignorant, young drinkers today are not," says Kit Yarrow, a consumer psychologist who studies younger generations. "This more educated and informed generation knows the perils of drinking and driving; the health issues associated with alcohol; and the calories associated with drinking." She also cites the "forever-nature that social media has brought to the drunken faux pas." The only thing Gen Xers and boomers had to avoid was leaving a drunken phone message.

Another factor is cannabis, which looms as a potential long-term threat to alcohol marketers, prompting several of them, including Molson Coors and Anheuser-Busch InBev, to partner with marijuana companies on research and development for cannabis-infused drinks.

The impact

But the immediate task for alcohol marketers is to fill their product pipelines with lower-calorie and no- and low-alcohol options as they try to stay relevant with the entry-level drinkers that have long been their key growth engine. Anheuser-Busch InBev, the world's largest brewer, has a goal of ensuring that low- or no-alcohol beer products comprise at least 20 percent of its global beer volume by 2025, up from 8 percent today. In the U.S. the brewer recently began testing alcohol-free Budweiser, rolling it out in Michigan and Ohio. The brewer is also moving into other drink categories; in 2017 it acquired organic energy drink maker Hiball.

While no-alcohol beers remain niche offerings, the marketing dollars are beginning to flow. Heineken is backing the recent U.S. launch of Heineken 0.0 with a $50 million budget that includes TV ads showing people drinking the brew in situations that are historically off limits for beer ads, like behind the wheel and at work.

U.S. alcohol executives also have their eyes on Europe, where the moderation trend has been in play for a while. Dry January was created in 2012 by an organization called Alcohol Change U.K., formerly known as Alcohol Concern, that advocates for policies to stop the harmful effects of drinking.

By 2013, well-known Brits like then-Telegraph columnist Peter Oborne were participating, and spreading the word. He's no teetotaler.

"I like alcohol, and feel certain that its influence on the human race has been almost entirely for the better. People who drink tend to be happier, more relaxed, and much more humane and compassionate," he wrote in a December 2012 column in which he pledged his Dry January participation. But while he wrote that he was terrified by Dry January, and was especially dreading going to parties, "I am looking forward to waking up in the morning and not feeling fuzzy-headed and slightly ill, with pains around the kidneys." Last year, Alcohol Change U.K. reported that 4 million people participated in Dry January across the country. Alcohol Change now promotes a Dry January app, podcast and blog.

Stats on U.S. Dry January participation were not readily available, but judging by social media mentions and mainstream media coverage (and that a small percentage of the Ad Age newsroom is partaking for the first time), the trend is growing fast, and getting tons of positive press. Bustle recently ran a story entitled "5 Ways Dry January Changes Your Brain," in which it notes that "alcohol, even in mild amounts, can cause serious disruption to REM sleep."

There are other, non-chemical benefits, too. Flegge, a food blogger and licensed mental health therapist who recently returned to school to get her PhD, says she's saving $100 a week since Dry January began. "Your tab can run really high if you're drinking alcohol," she says. She plans to extend Dry January into February, "until there is a major event when I want to be drinking. I kind of like it."

The rise of the mocktail

If others follow her, that's not good news for bars and restaurants. To replace the lost booze dollars, more establishments are adding fancier mocktails to the menu. Technomic, which tracks menu activity, reports that the number of mocktail items jumped 13 percent in the first half of 2018 compared with the same period in 2016. In the fourth quarter of 2018, additions included the Blood Orange Berry-Ade at TGI Fridays, made from an alcohol-free blend of strawberry, blood orange juice and agave sour mix, according to Technomic.

(Clockwise from l.) Guinness Pure Brew, Gordon's Ultra low-alchohol Gin & Tonic, Seedlip non-alchoholic spirits
(Clockwise from l.) Guinness Pure Brew, Gordon's Ultra low-alchohol Gin & Tonic, Seedlip non-alchoholic spirits Credit: Guiness, Gordon's, Seedlip

The Kitchen, a regional restaurant group co-founded by Kimbal Musk (Elon Musk's brother), features a Zero Proof section of the cocktail menu where offerings include the CosNOpolitan, made from cranberry juice, lime, orange bitters and soda.

Spirits marketers are also keeping an eye on the behavioral shifts. "The 'Let's go out for a drink' thing has been replaced by 'Let's meet up for nibbles of food,'" says Ed Pilkington, North American chief marketing and innovation officer at global liquor giant Diageo. "People still want to drink [but] increasingly are choosing quality over quantity."

That explains why more expensive, premium alcohol brands have been outperforming cheap booze and beer, a trend that Pilkington says works in Diageo's favor. The company upped its premiumization strategy late last year by selling 19 lower-end brands, including Seagram's VO Canadian whisky and Goldschlager cinnamon schnapps, to U.S.-based Sazerac for $550 million. "People would rather go and have a couple of real high-quality cocktails and that is it," Pilkington says.

Diageo, like other alcohol marketers, is experimenting with zero- and very-low alcohol options. For instance, the company is considering bringing its Guinness Pure Brew—which only has a trace of alcohol at just 0.5 percent alcohol by volume—to the U.S. after debuting it in Europe a year ago, Pilkington says. Also in Europe, Diageo last summer launched Gordon's Ultra Low Alcohol Gin & Tonic, a pre-mixed drink that is just 0.5 percent ABV and 68 calories per serving. While there are not immediate plans to bring that here, U.S. drinkers can buy bottles of Seedlip, billed as the "world's first distilled non-alcoholic spirits brand." Diageo holds an ownership stake in the brand, which produces beverages made from herbs, spices, peels and barks that are designed to be mixed with tonic and soda, like a gin.

Counting the calories

The wellness movement is also driving the popularity of so-called spiked seltzers, which tend to have lower calories than traditional flavored malt beverages. AB InBev is dedicating one of its Super Bowl ads to Bon & Viv Spiked Seltzer, a flavored malt beverage brand that is being repositioned with fewer calories and no sugar. MillerCoors, meanwhile, is plotting robust marketing support for its new Cape Line Sparkling Cocktails, which boast no artificial flavors.

Cape Line drinks have 4.5 percent alcohol-by-volume, at 120 calories each. The typical light beer has 110 calories and 4.2 percent ABV. Cape Line's alcohol content is down from the higher-alcohol flavored malt beverages that had been flooding the market in prior years, like AB InBev's Lime-A-Rita brand, which debuted in 2012 at 8 percent ABV and 220 calories. Sofia Colucci, VP of innovations at MillerCoors, points out that every percentage point of alcohol-by-volume adds about 20 to 25 calories to a drink. "So to reduce calories, you naturally have to bring down your ABV," Colucci says. "And consumers are OK with that."

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