Gen Z Drives Alcohol Innovation

Gen Z consumers are leading the charge in the beverage alcohol market, propelling innovation in flavor, packaging, and product formats, according to a newly released report by data insights firm Circana. The State of the CPG Beverage Alcohol Industry report explores factors driving demand and identifies key growth opportunities in the beverage alcohol market.

RTD cocktails and hard seltzers hold broad appeal, according to the report. Despite a slight softening in sales, the findings suggest that these offerings remain popular across different age groups and household income cohorts. The RTD category has more than tripled since 2018, reaching $10.3 billion in sales in 2023, according to Circana.

Variety packs stand out as the top-selling RTD format, outselling single-flavor packs, according to the report. To meet evolving consumer demands, brands are innovating with crossover products, with an increasing number of nonalcohol brands venturing into the beverage alcohol space. RTD cocktails that resonate with Gen Z consumers often feature higher alcohol-by-volume content, are made by recognizable brands, and have packaging suitable for diverse occasions.

“Today’s beverage alcohol consumers prioritize convenience and desire innovative experiences,” said Scott Scanlon, EVP of Alcoholic Beverages at Circana, in a statement. “Exciting flavor profiles will remain a key driver of innovation in this space. Brands that want to remain competitive should explore opportunities to elevate their offerings, incorporating premium ingredients and packaging.”

In the wine category, Gen Z consumers tend to prefer sparkling wines and those with fruity or sweet notes. In the beer category, the generation prefers a variety of beer options, including flavored alternatives, Mexican imports, and economy brands.

The report found that, among all food and beverage categories, beverage alcohol has experienced the least inflation in recent years. This stability presents an opportunity for beverage marketers to emphasize value, enhance in-store experiences, and increase engagement through store apps and social media channels, according to the report.

To capitalize on holidays and everyday celebrations, Circana advises marketers to remind consumers of alcohol’s role during these occasions. The use of high-quality ingredients, unique flavor profiles, and innovative packaging is key.