How might Gen Z reshape beverage alcohol in the US?

IWSR analysis highlights three key ways in which Gen Z hold a different relationship with alcohol, and what it may mean for the industry in future


The emerging Gen Z demographic in the US is already enjoying a very different relationship with beverage alcohol to older age cohorts – embracing moderation, abstention and the exploration of new, non-traditional categories such as RTDs. If continued, these behaviours have the potential to shift the market landscape in the years ahead.

Gen Z consumers of legal drinking age in the US (defined by IWSR as those currently aged 21-26) are also key drivers of economic moderation, since they are likely to be disproportionately affected by cost-of-living pressures and student loan payments. They are less likely to have savings or be high earners, and are more exposed to short-term changes in living costs.

However, they are also more inclined to spend more when they can afford to, displaying more hedonistic spending patterns and behaviours – driven both by social needs and peer pressure to keep up with the latest trends, and by the reassurance that higher prices convey to those who are relatively inexperienced in an FMCG category.

IWSR does advise a note of caution: “The US legal drinking age means that, for now, Gen Z is very underrepresented in the US beverage alcohol market,” notes Richard Halstead, COO Consumer Research, IWSR. “Added to this, three of the past four years have been under the cloud of the pandemic, and this group, coming of age during that time, would have been particularly impacted.”

“The fact that most in this age cohort have only been able to drink alcohol for a short period of time means that we are still searching for clues as to how they will behave when the whole cohort is present in market,” comments Marten Lodewijks, Director of Consulting – North America, IWSR.

He adds: “So they are not redefining the US beverage alcohol market – yet. But this should not stop us from identifying some of the ways in which they might do so in future.”

IWSR has identified three key ways in which Gen Z might reshape beverage alcohol in the US:

1: Moderation as default setting

In stark contrast to many earlier generations of younger legal drinking age consumers in the US, for LDA Gen Z, moderation is increasingly a default setting. It is a lifestyle choice, but also in some cases an economic or social necessity. If social activities revolve around other beverages (or non-drinking occasions altogether) there is less requirement to choose alcohol.

Along with Millennials, they are driving no- and low-alcohol growth, with some 75% of Gen Z consumers in the US moderating their alcohol consumption, compared to an average of 64% across 10 key no/low-alcohol markets.

New entrants to no/low-alcohol – spearheaded by younger age cohorts – are purchasing more frequently than more experienced consumers; this age segment also tends to consume these products more intensively and in a wider variety of settings, from home to wellness occasions, in the on-trade and at festivals and sporting events.

With relatively few abstainers drinking no-alcohol products, no- and low-alcohol is used largely as a moderation tool – and one that is used tactically by Gen Z consumers, either switching between full-strength and no/low on the same occasion (blenders), or consuming no/low for a specific purpose across a whole occasion (substituters).

“The popularity of no/low for Gen Z of legal drinking age is partly dictated by the need state of wanting to remain in control, as well as heightened concerns over health and wellness,” says Susie Goldspink, Head of No- and Low-Alcohol Insights, IWSR.

“LDA Gen Z consumers are also more aware of the existence of no- and low-beverages, thanks to their greater presence in social media, in the on-premise, at social events and via word of mouth.”

2: Experimentation

LDA Gen Z consumers in the US are particularly keen to explore non-core, non-traditional categories, moving away from mainstream beer and wine, and into ‘newer’ segments such as RTDs.

Younger age groups are also key drivers of the continued growth of agave spirits. Within RTDs, for example, agave’s growing popularity as an RTD base is being driven by Gen Z preferences: Tequila is the favourite RTD base for 60% of Gen Z consumers in the US, versus 41% of all RTD drinkers in the US.

“This is partly due to the classic generational urge to do something different from your parents,” explains Halstead. “That might mean trendy craft beer, RTDs, innovative cocktails that didn’t exist, or had been forgotten, a generation ago – or categories that were deeply unfashionable in the past, such as spirit aperitifs.

“It’s important to add that young people are inherently quite conservative when it comes to beverages, in that they crave reassurance that they’re not being conned or made to look foolish. But they are very quick to latch onto a new trend if it resonates with them and their peers.”

3: Intellectual curiosity

Gen Z is the first generation that has grown up with constant access to information and media via smartphones and the internet, which transforms the relationship between consumer and brand.

“For this age cohort, ignorance is really no excuse any more, because the information they need is literally at their fingertips,” says Halstead. “This intellectual curiosity extends beyond the merely factual to the ways in which categories and products project their image on social media and in the digital space.

“In turn, this influences how the individual, as a form of ‘proto-influencer’, can position themselves within their peer group as potentially the first person to see or report on a new trend, product or digital campaign – always assuming, of course, that it meets the reassurance criteria that are so important to Gen Z consumers.”

What this means for brand owners

Given their relatively small share of the beverage alcohol drinking population, Gen Z adults of legal drinking age are not yet numerous enough to move the needle of beverage alcohol volume and value in a substantial way.

However, it is increasingly clear that their behaviour is notably different from the equivalent twentysomethings of 10 or 15 years ago: the need for more control, greater regard for health and wellbeing, acute care over how their choices are perceived by peers, and the fact that they could be recorded and posted on social media within seconds. Such traits are likely to grow in importance as more of this age group reach legal drinking age.

Within categories that are already reliant on this cohort, such as no-and low-alcohol beverages, and RTDs, brand owners have been highlighting the wellness benefits of products and pushing marketing messages via social channels.

For categories where the Gen Z influence is less impactful, such as in beer, wine and long-established spirits categories such as whisky and gin, brand owners have a longer lead time to adjust their business models. However, for many this transition will be painful, and lengthy: Gen Z’s behaviour today suggests a future of lower alcohol volumes and less adherence to traditional categories; more short-lived trends stoked by social media and experience-driven experimentation.

You may also be interested in reading:

Moderation: is it generational or universal?
Significant negative shift seen in alcohol spending behaviour amid signs that it may be temporary
No-alcohol share of overall alcohol market expected to grow to nearly 4% by 2027

The above analysis reflects IWSR data from the 2023 data release. For more in-depth data and current analysis, please get in touch.

CATEGORY: All  |  MARKET: All, North America  |  TREND: All, Moderation  |