The total beverage alcohol market in the UK is expected to see volume and value declines of -1% CAGR over the next five years, according to new figures from the IWSR.

Volumes in the UK declined by -2% between 2022 and 2023, capping a period of recent decline for the industry (2018-2023 volumes falling at a CAGR of -1%), IWSR data revealed. However, the figures showed that growth rates of the no and low alcohol segment outperformed the overall UK market, “partly driven by the ongoing consumer trend for moderation as well as excise duty changes”.

The overall no/low segment showed a volume lift of 47% from 2022 to 2023, with forecast volume CAGR of +19%, 2023 to 2028. The IWSR noted that the no/low-alcohol segment is expected to add incremental value of £0.8 billion by 2028.

Low alcohol volume sales almost doubled in 2023 and IWSR said it “expects considerable growth over the next few years, particularly driven by low alcohol beer”, adding that many beer and wine brands are lowering their alcohol content to take advantage of the duty regime.

The data firm also noted that this measure is set to bring renewed challenges for wine when the temporary duty easement comes to an end next year.

“This is likely to lead to price increases for up to three quarters of still wines, as well as a more complex trading landscape for smaller businesses in particular,” the IWSR said. However, the data firm also highlighted that changes are subject to intensive lobbying by the industry – and may be amended as a result of the imminent General Election.

“Whether reflected by reining in grocery spend, reducing the frequency of on-trade visits or switching to longer drinks, seeking out better value was the overwhelming priority for increasingly cash-strapped UK drinkers in 2023,” said Patrick Fisher, IWSR senior market analyst. “Rising prices and the cost-of-living crisis have reduced disposable incomes for discretionary spending and, coupled with the enduring trend of moderation, as well as closures and reduced opening hours in the on-trade, this is having lasting effects on consumer behaviour. The upper end of the market remains more insulated, while mainstream-and-below retail sales became more dependent on promotions.”

The IWSR figures showed the UK is still set to remain the world’s third most valuable beverage alcohol market for standard-and-above price bands.

As the UEFA Euro 2024 tournament starts, the IWSR highlighted industry hopes, pinned on better summer weather, and the likely consumption boost brought by both the football and the Paris Olympics.

“However, this is unlikely to have a lasting impact,” the report said. “Whilst further volume declines are expected in most categories over the forecast period, higher prices should drive some value gains in the shorter-term.

“Longer term, both beer and wine are expected to revert to their established pattern of gradual volume decline, with growth in beer focused on premium world lager, stout and non-alcoholic beers, and higher-abv red wines losing share within still wine.”

Overall, the IWSR noted that spirits are expected to register “modest single-digit declines” over the forecast period, but gin will continue to see heavier losses. Of the bigger spirits categories, rum is expected to register long-term growth, “albeit modest and focused in spiced and flavoured variants”. Agave-based spirits will also grow off a smaller base, the IWSR said.

Digging into the categories and the IWSR found that spirits were hardest hit last year as volumes fell by -5%. IWSR forecasts show -1% volume CAGR 2023-2028 for spirits in the years ahead. Gin saw the biggest declines: volumes dropped by -14%, as it lost shelf space to other categories, including tequila.

To that end, agave spirits bucked the negative trend with a +4% volume increase in 2023 although growth is slowing: category volumes rose at a CAGR of +13% between 2018 and 2023, but are forecast to move up at a CAGR of +2% between 2023 and 2028.

Turning to wine and the IWSR noted that wine’s long-term volume decline worsened in 2023 when volumes fell by -4%. The category is expected to shrink further, with an anticipated 2023-2028 CAGR of -3%. Consumption of sparkling wine, which the IWSR said was until now a reliable growth driver, was down -5% last year, driven largely by declines of -11% and -6% for Champagne and Prosecco, respectively. However, English sparkling wine and crémant experienced continued growth.

Beer saw a modest volume fall of -2% in 2023, with slow declines expected to continue in the years ahead. Meanwhile, the research company said that the only major category expected to increase consumption between 2023 and 2028 is RTDs, which capped a strong period of growth with a +2% increase in volumes last year. “Premium cocktails are gaining traction, and canned RTDs are now being joined in the marketplace by a wider range of bottled ready-to-serve cocktails and spirit-derived liqueurs,” IWSR noted.

In low and no, the IWSR pointed to spirits innovation beyond gin alternatives. “There are now more dark spirits no alcohol alternatives and also some no-alcohol tequila alternatives coming to market,” the report said. The latest Bevtrac consumer data from IWSR showed year-on-year increases in the no-alcohol drinker population in the UK. The no alcohol market grew +17% in 2023, and is expected to grow at a +4% volume CAGR, 2023-2028.

“Volumes of no alcohol spirits now comfortably surpass those of tequila in the UK,” the IWSR said.