Young people worldwide are drinking less often and creating shifts within the alcohol sector.
In Australia, drinking infrequently is growing long-term. According to the National Drug Strategy Household Survey 2022-2023, one in five 18-24 year olds are drinking less than once a month, a significant increase from 13.6% in 2001.
The number of people aged between 18 and 24 who have never had a full glass of alcohol has also grown since 2001, doubling from 7.5% to 16.3%.
However, it is rare for young drinkers to want to stop drinking altogether, with 40% of drinkers wanting to drink less compared to 6.5% who want to stop altogether in a recent survey.
So, why are young people drinking less and what does it mean for the alcohol economy?
Why have young people started drinking less?
Founder of the Drinks Network, Hayden Wood, tells Azzet that young people are drinking less for both cultural and financial reasons.
Culturally, he said, the priorities for Gen Z and Millennials have shifted.
“The six o'clock swill or going out with your mates and drinking till five in the morning, those things aren't really high priorities in their social scene, and that's why drinking at large is lower,” he says.
However, Wood said young people’s spendable income being impacted by the rising cost of living is also turning them away from alcohol.
“That is why they're looking at alcohol as a luxury good, and therefore it's questionable whether they buy or not,” he says.
A big reason why alcohol is becoming a luxury item is due to the rise in taxes on alcohol.
Every February and August, the excise goes up in line with inflation, and the tax is dependent on the type of alcohol and alcohol content.
Wood said the taxes are in place as the alcohol market is designed to decrease in the same way tobacco is.
“It's specifically manipulated by excise tax and spirits in particular, which just went up the other day to $105 per pure litre of alcohol, which represents around about $32 per bottle,” he says.
“The average 700 mil bottle is taxed by about 40% which is the second highest in the world.”
In a bid to win over voters in the Australian election earlier this year, Labor leader and current Prime Minister announced a freeze on the draught beer excise for two years.
“Freezing the excise on draught beer is a common-sense measure that is good for beer drinkers, good for brewers and good for pubs,” Albanese said.
However, following this announcement, Spirits & Cocktails Australia CEO Greg Holland called the move “discriminatory in every sense”.
“The tax on spirits is already three times higher than it is on beer. Freezing draught beer excise alone is discriminatory in every sense – it favours beer drinkers over spirit drinkers, brewers over distillers, and pubs over bars,” he said.
How has the market shifted?
Despite the cost of living and younger people on average drinking less, the Australian alcohol market is still on the rise.
According to IBIS world, the Australian alcohol market was worth A$27.2 billion in 2024 and is expected to rise to A$41.2 billion by 2034.
Wood said the independent brands are rising at a faster rate than mainstream brands.
“Mainstream is making less and less per case than ever,” he says.
Wineries and the wine industry are also losing out to the recent boom in distillers across the country, according to Wood.
“We now have seven, almost 700 distillers in Australia, where before Covid, two years before Covid, we had probably about 130, so during Covid, we had this explosion of distillers,” he says.
“Through that period, wineries have had to reconsider what they do.”
He also says that spirits are still holding up, despite obstacles in their way.
“Spirits are still strong, but affected by three things: independent intervention with innovation, and they're affected by the tax taxation, the price pushes them up,” Wood says.
According to LittleBig marketing, premium spirits grew by 7% compared to 2% for mainstream spirits, and craft beer now makes up 10% of all beer sales.
Another high riser, and the fastest riser among under-35-year-olds.
In Australia, low and non-alcoholic drinks make up 9% of the total market. In 2023, global sales of non-alcoholic booze came to nearly A$32 billion, doubling from 2018.
The market for non-alcoholic drinks grew around 20% in 2023 compared to 8% for alcoholic drinks, and doesn’t face taxes in Australia.
“Brewers and distillers and wineries to be able to de-alkalise their products and meet a market where you can buy a full pack of beer for A$12-A$14, which probably looks just like the normal craft beer and doesn't have any alcohol in it and tastes similar,” Woods says.
