Throughout the past year, we have all remained cautiously hopeful for a return to normalcy. This is evident in the beverage alcohol industry, where on- and off-premise sales continue to evolve post-pandemic, and consumers reach for the latest and greatest in products and alcohol trends.
Some parts of the industry saw a windfall in sales opportunities, while others are just now getting back on their feet. As the industry rides out the (hopefully) final phase of Covid-19, we explore some of the key trends across the entire alcohol industry in 2022.
Premiumization Gets Eco-conscious
One of the most dominant trends of the past year is premiumization. This is nothing new, of course. Premiumization “has been around for about 15 years and has had a massive influence on the industry,” says Mark Breene, CEO of Copalli USA. “Today, consumers are defining premium by what is in the bottle: they want to pay for quality ingredients É organic, no additives or preservatives. They are intrigued by terroir: where something is from, who made it and how.”
“This trend of moving from a focus on the outside of the bottle to the provenance of the liquid is going to continue,” Breene says. “Millennials and Gen Z are speaking with their pocketbooks, and what is important to them is that they are willing to pay for is what will define premium. Sustainable production choices, quality ingredients and responsible employment practices are important: they cost more and consumers are willing to pay.”
The premiumization trend dovetails nicely with the industry’s movement towards sustainability, and Breene is confident that both trends are not at odds with the thriftiness of younger generations.
Michael Giardina, VP Marketing Mixable Spirits (Hendrick’s Gin and Milagro Tequila) agrees that premiumization and Gen Z “fit seamlessly together. In fashion, people regularly mix premium and value brands, say a $20 t-shirt from Uniqlo with $300 limited-edition sneakers, for example. There is a role for both premium and value brands to play together in people’s lives.”
However, unlike Breene, he asserts that there might be some reluctance from this new wave of consumers where sustainability is concerned. “You might see a clash. Usually, brands built on value or convenience achieve those aims through aggressive cost controls throughout the supply chain, which oftentimes leads to a model that is misaligned with sustainable practices. I think that is another driver of premiumization. As consumers begin to face the reality of how value or convenience brands achieve those aims, they are opting to pay more for products that are made in ways that better align with their values.”
Bill Henderson, CEO of Laneta Tequila, acknowledges this tension. When asked if Gen Z and premiumization would clash, he asserts that “of course they would.”
“However,” he continues, “everyone strives to drink premium brands. For this generation that is younger, it is less about quantity and more about quality. The idea of better ingredients that are also produced in a responsible process, better for the environment, is a priority and a must for the younger generations who are more educated about our carbon footprint.”
Guy Brennan, founder of Procera Gin, maintains that sustainability and premiumization are closely tied: “When you are talking with younger consumers, you have to talk about sustainability. This element is becoming more closely tied to premiumization, and I think they are intricately linked as one is seen as justifying the other. It is also a core element that consumers are using to decide between more premium options.”
“The sustainability credentials say so much more than just pure quality alone,” Brennan adds. “They speak to the future of the brand, and what brand leadership feels is important for their product, as well as the world and the communities where they produce. That’s where shared values come into play — particularly with younger consumers. These consumers will pay more for brands that share their values and what is important to them.”
Diversity, Equity and Inclusion
Shared values are more important than ever to consumers, and one that has gained increasing traction is DEI, or diversity, equity and inclusion.
“A focus on DEI offers increased and much-needed representation on the ownership level within the spirits industry — which in turn will influence key practices, ranging from marketing and advertising direction to the broadening of flavor profiles and globally influenced offerings,” says Nicole Young, founder of Frisky Whiskey.
“I hope to see DEI and the initiatives that promote it multiply in the next year, and would personally love to see more spirits brands that spotlight foreign customs and ingredients brought to market,” she adds.
It’s an important goal that will not be easy to achieve.
“The whole purpose of diversifying the industry is to get those other perspectives, but the process is going to be messy,” says Chris Montana, cofounder and CEO of Du Nord Social Spirits, a microdistillery in the Twin Cities, MN. “It will lead to uncomfortable situations. But I hope that companies see the pains of adjusting to a multicultural workplace will eventually pay dividends.”
Montana is part of many DEI initiatives across the industry, such as the Step Up Foundation, and his distillery has worked with the Uncle Nearest and Jack Daniels Advancement Initiative.
“People always say, ‘Shouldn’t we just hire the best person for the job?’ And I always say, well yes, we do hire the best person for the job. But it’s our responsibility to make sure the pool of applicants is representative of who wants to be in the industry,” he explains. “DEI just makes good business sense. If you want a business that will be relevant in twenty years, you’ve got to recognize that this country is changing, and has changed, and the younger generation wants a product that reflects their values.”
According to Montana, diversity, equity and inclusion is something that is here to stay and is highly valued by younger consumers. It’s not just about promising diversity anymore, it’s about showing real action. DEI is nuanced enough to warrant its own issue, and that’s why it is the focus of Beverage Dynamics’ July/August issue supplement. Catch more about Du Nord and the important work they’re doing for the industry in that supplement.
The pandemic forced the industry into overdrive when it came to technologic innovation, which acted as a boon for retailers and consumers, and tech companies alike.
“The biggest barrier pre-pandemic was customer awareness that alcohol delivery is a legal and available option in many states,” says Cathy Lewenberg, chief operating officer at Drizly. “Now that more consumers are aware of alcohol ecommerce and on-demand delivery as an option, we anticipate more players to enter the space as consumers come to demand this service as they have from other categories, more local retailers to come online and greater investment across the three tiers that will only deepen.”
“E-commerce has an opportunity to impact every player within the beverage alcohol industry,” continues Lewenberg. “For distributors, retailers and brands, it has given them an incredible toolset and opportunity to reach their customers in new ways, because they are no longer limited to in-person visits and limited shelf space. Customers shop across channels, and they expect to be able to use digital tools and information for shopping — whether that is to actually make a purchase or to research and prepare for a trip into a store.”
“We’ve definitely entered a new stage in the digitation of the beverage industry,” agrees Monika Figura, director of customers success at City Hive. “First there were very few adopters, then the masses came online due to Covid and having a website was a must. Now that a significant percent of the industry is utilizing technology in their businesses, it’s an opportunity to grasp some of that early-adopter mentality and innovate in new and exciting ways. The most significant and important trend that City Hive has seen emerge is that retailers are digging into their data to understand what is working.”
City Hive monitors consumer data closely. In the crossover between alcohol and technology, data has become the name of the game.
“Historically, given the three-tiered system, brands did not have access to data,” says Devaraj Southworth, CEO and cofounder of Thirstie. “They did not have first-party insights into who is purchasing their products, how their products are being marketed to consumers, and what consumers like and dislike. Now, brands and retailers alike are able to access consumer data, to not only more effectively reach new customers, but the right type of customers and the opportunity to re-target them with new offerings and products.”
On-premise Perks Up
On-premise did not have the luxury of remaining fully open during the lockdowns, but the category has shown remarkable resilience as the industry slowly returns to pre-pandemic levels. To achieve this difficult task, bars and restaurants will also rely on ecommerce.
Justin Lavenue of The Roosevelt Room emphasizes the need to develop an online presence: “Now that restaurants around the country are open at full capacity, it’s more important than ever to digitally capture people’s attention. For bars (especially cocktail bars), this means taking the time to make everything you serve look as enticing as possible, so that guests are inclined to take photos of what they order and share them on their social media accounts, which then spreads the digital word-of-mouth about your establishment. It’s also important to be open to hosting social media influencers by welcoming them in for a complimentary experience at your establishment to help promote it, since they have a great amount of reach and, of course, influence.”
Social media remains a vital part of any establishment’s marketing repertoire.
“We are about to start putting a much larger influence on social media,” says Deke Dunne, head bartender and beverage director of DC’s Allegory Speakeasy Bar. “It is important to get people who are big on TikTok into your bars. If you really want to market after the younger Millennials and Gen Zers, then TikTok is the place to do it. Identify the big bar influencers in your area and trade them a comped bar experience for a TikTok and an Instagram Reel. Now, not every video goes viral, but if one does, you will be feeling the positive impact for months to come. Instagram is still huge, but TikTok is probably the most effective way to market to the younger generation.”
“With that being said,” he continues, “people have completely gone to sleep on Facebook. Facebook is still an incredible marketing tool for older Millennials and the generations before them. People might not see Facebook as the ‘cool’ option anymore, but a well-curated ad strategy can really target a lot of potential guests. It can really move the needle for you.”
And, as bars and restaurants expand their influence, they also expand their drink menu.
“I see on-premise headed towards more and more low- and no-ABV options,” says Dunne. “It really has just become a normal part of life. I also see places moving more and more towards transparency with their drinks regarding ABV. At Allegory, we started calculating the ABV for every drink. We noticed right away that a huge portion of our guests were making drinking decisions based on the alcohol content.
“We also put a beer-shot combo section onto our menu this go around, and instead of just offering one high-proof shot option, we paired each combo with a low-ABV shot,” Dunne adds. “For example, we offer a combo called the Ginot, short for Gin Shot. There, we pair a London Dry Gin shot with a dry-hopped IPA. We also offer as a secondary option a shot of Manzanilla sherry.”
As always, many off-premise trends will come as a result of on-premise experimentation and adaptability. “I think that on-premise has a massive effect on off-premise. If you look at the to-go boom during the pandemic, off-premise guests wanted high-quality cocktails because of their experiences at on-premise bars,” says Dunne. “I don’t see the RTD cocktail boom happening off-premise without all the amazing experiences guests had on-premise prepandemic.”
Craft Beer Comeback
Perhaps “comeback” isn’t the right word to use — craft beer hasn’t left. It flagged briefly as people were overwhelmed by IPA variations, but the category quickly bounced back as new innovations gained time in the limelight. Today, craft breweries continue to push the envelope when it comes to new products.
“We’re currently experimenting with our phantasm powder, an extraction made from sauvignon blanc grape skins,” says Dave Colt, co-founder and head brewer at Sun King Brewery. “They are incredibly rich in Thiol precursors, which when added correctly in the fermentation process will enhance strong tropical aromas and flavors that are often noted in IPAs. Specifically, the Thiol stabilizes and creates a natural haze from the hop derivatives.”
As American whiskey remains red hot, many brewers are experimenting with barrel aging, such as Shiner Bock. The brewery recently collaborated with fellow Texas mainstay Garrison Brothers Distillery to put out Shiner’s new 24-oz. Barrel-Aged Doppelbock.
This approach to brewing has the capability to affect the wider industry as well. “The innovation and gumption of craft beer has provided a roadmap in igniting creativity in other craft beverages including distilleries, cidery, kombucha and hard seltzers,” says Colt. It has also caught the attention of younger generations.
Colt suggests meeting the younger audience where they are: “It is more important than ever to connect with these generations on the social media platforms that they are interested in. We are always looking at new ways to create 10-second and 30-second videos, and fun, lifestyle-filled and image-centric posts to engage new consumers. We also look at social media giveaways for this audience, and are reaching out to ambassadors and influencers.”
American Whiskey (Continues to) Boom
“I believe there were a confluence of factors that gave rise to the American whiskey boom,” says Kaveh Zamanian, founder of Rabbit Hole Distillery. American Whiskey has been in the midst of a major renaissance the past decade or do, with no sign of slowing, even as tequila and mezcal edge into the spotlight. Zamanian credits pop culture and quality spirits for the longevity of whiskey’s incredible resurgence.
“Boardwalk Empire and Mad Men spurred a nostalgia for, and interest in, bourbon and American whiskey,” he says. “Cultural moments like these created a reason for spirits enthusiasts to revisit American whiskey. As pop culture began giving not-so-subtle nods to American whiskey, bartenders and mixologists began embracing American whiskey like never before in recent history. Not only did bartenders and mixologists become more knowledgeable about the category, but they were also at the forefront of experimentation, creating innovative cocktails that continued to fuel consumer interest in American whiskey.”
“Clear spirits ruled for a very long time,” he continues. “I believe that the spirits enthusiast was ‘thirsty’ for flavor and complexity. The consumer wanted an experience that would expand their palates, and American whiskey, aided by cultural moments and a supportive trade and media landscape, swooped in and delivered.”
The category keeps delivering and innovating. One style that’s finally getting defined for consumers and distillers alike is American single malt. While the practices that go into making single malt have been around for a while, it is only now being separated from other types of American whiskey thanks to the efforts of producers nationwide who are pushing for a legal definition.
“Over 200 American distillers are now producing American single malt under the proposed guidelines,” says Jason Parker, cofounder and president of Copperworks Distilling. Copperworks is a craft distillery pushing boundaries in the American single malt category after opening its doors in 2013, as craft distilling was beginning to take off.
At that time, a different distillery was already a titan on the scene, having gained popularity through the bourbon boom. Today, Woodford Reserve continues to experiment and drive American whiskey forward. “Our flavor constant is what leads our innovation,” says Chris Morris, master distiller of Woodford Reserve. “So, how do we make a whiskey that’s spicy? Well, let’s make a rye. Or one that’s fruity? Let’s make a wheat. Then, our Master’s Collection allows us to be even more creative, with unique recipes, barrels and finishes. All this knowing our core product is a balance of all these flavors.”
Which is all to say that American whiskey remains in an excellent spot.
“American whiskey is a strong driver of growth in the beverage alcohol industry and continued investment is being made to fuel that growth,” Zamanian concludes. “As a result, the trajectory of American whiskey will continue in the next year, as consumers revert back to pre-pandemic consumption patterns.”
Modern Wine Labels
As the younger generation reaches drinking age and begins to take shape as a consumer group, there has been real concern over the falling relevance of wine within this cohort. The wine market continues to search for ways to capture the imagination and attention of Gen Z and millennials. One area that has seen a huge shakeup is branding and labels.
“Much like other consumer products industries, branding and re-branding continues to play an important role in the beverage alcohol industry,” says Amanda Wygal, director of marketing at 14 Hands Winery. “There are many iconic wine brands that continue to innovate, update and re-invent to stay relevant with their existing consumers and to attract new ones. In addition, the pace of innovation continues to accelerate, and new brands have been successful breaking through with unique product offerings and that attract consumers.”
In the coming year, “Wine branding and product innovation will be as important as ever,” Wygal continues. “The wine aisle can be a daunting place to shop. With tons of brands and varietals to choose from, many consumers gravitate to familiar brands if they don’t have time to explore the aisle. In addition, with the pace of innovation in the beverage alcohol category, there is increasing competition for share of mind and cart which will make it even more important for wine brands to stand out with strong messages and differentiated product offerings in market.”