Last month, Kylie Jenner announced that she was pivoting her canned cocktail brand Sprinter into an electrolyte drink called K2o, joining a booming functional beverage market that’s seen prebiotic Poppi secure a $400 million valuation and fiber-packed Olipop rack up over $500 million in sales. The move is part of a broader recalibration facing drinking culture, one where younger consumers are shifting away from alcohol altogether. While this creates fertile ground for functional sodas, non-alcoholic beers and ready-to-drink wellness beverages, alcohol brands are facing a new reality.

“The general state of the [alcohol] industry is suspended animation,” says Spiros Malandrakis, global insights manager of alcoholic drinks at Euromonitor International. According to the market intelligence firm, global alcohol consumption is showing clear signs of stagnation, with industry growth flatlining at just 0.6% in 2024, while only 23% of consumers now drink on a weekly basis. Malandrakis points to a combination of global economic pressures and changing attitudes toward health and longevity as central to this shift.

Some of the industry’s biggest players are feeling the strain. During LVMH’s fourth-quarter earnings call in January, Jean-Jacques Guiony, president and CEO of Moët Hennessy, described a market in flux. “Demand is not particularly well-positioned today,” he said. “When you look, especially at the US, our main market, you can see that all categories are declining across the board — whether it’s tequila or whiskies. The only category that is growing is ready-to-drink, meaning the very low-priced small cans.”

While established wine and spirits groups contend with sluggish sales — Diageo’s fiscal 2025 net sales were down 0.1%, while operating profit fell 27.8% — a new generation of brands is capturing consumer attention through wellness-adjacent products, low and no-alcohol alternatives, premium positionings, and formats designed for younger drinkers. “[The drinks space] is an open field,” says Seyi Oduwole, foresight analyst at The Future Laboratory. “Everything is moving. There’s so much hybridization of products and so many companies doing different things to gain consumer loyalty.”

For maturer alcohol brands, the challenge is clear: they must find new ways of staying relevant with a generation that drinks alcohol differently to those before it. As traditional categories lose momentum, those breaking through are forging connections with consumers through the strategies shaping the industry’s next phase of growth.

Premiumization play

For the past few years, premiumization, in which brands push consumers toward more expensive, higher-end spirits, has been the industry’s main response to lower drinking levels and slowing sales. “The main driving force for alcoholic drinks, especially in the West, over the last couple of decades has been the idea that you drink less, but better,” says Malandrakis

“For many younger consumers, premium spirits are becoming less about quantity and more about quality, in the right setting and with the right product,” agrees Roberto Ramirez Laverde, global SVP of Patrón and agaves at Bacardi. He also points to a growing emphasis on scrutiny at the point of purchase. “We have seen in recent studies that more than eight in 10 US consumers read labels before deciding to buy a product, with almost two-thirds (63%) paying more attention to label information compared to five years ago.”

In this environment, provenance and production methods have become central to brand storytelling. “Patrón is one of the few brands that still makes tequila by hand, with just three simple ingredients — agave, water, and time,” Laverde adds, noting continued consumer demand for authenticity and origin. “Innovation remains important, but for Patrón, it starts with credibility and craftsmanship rather than chasing trends.”

This includes drinks aimed at connoisseurs. “For the trade and craft tequila connoisseurs, Patrón 100 is our newest innovation,” he says. “It is a 100-proof, small-batch expression handcrafted to deliver 100% of the blue agave character. It represents the purest expression of what we stand for, pushing the boundaries of what tequila can be for those who truly know the category.” Patrón has centered its marketing on the tequila’s 100% tahona production — a labor-intensive, centuries-old method rarely used at scale — alongside targeting bartenders and enthusiasts through activations such as its Let’s Roll tour, which brought together industry professionals at leading bars across the US to spotlight its craftsmanship.

Still, there are doubts over whether premiumization can play out indefinitely. While Malandrakis argues that the strategy is not disappearing, he believes success is becoming more fragmented under economic and cultural pressure. “This monolithic, one-dimensional approach of ‘Let’s make everything premium’ is reaching its limits in this economy,” he explains. Instead, Malandrakis expects to see polarization between consumers of varying wealth. “The idea is that some people will continue moving more and more premium — the people who can actually afford it — while larger socioeconomic strata will be forced into trading down, or trading across. There will be some consumers who continue going luxury and super-premium, but there are going to be fewer of them.”

The mindful pour

The rise of health optimization, driven by longevity and a broader wellness mindset, has reshaped the role of alcohol in both wellness culture and social life. In response, brands are reframing alcohol not as a category to cut out, but to integrate more consciously.

“Consumers still want to enjoy a drink and socialize, but they also want to feel good the next day and make their 8am Pilates or run club,” says Gabriella Lamb, co-founder of mid-strength wine brand 6Percent. “Social connection isn’t going anywhere and neither is the focus on wellness. What’s changing is the idea that you have to choose one or the other.”

She adds that moderation is becoming increasingly fluid rather than binary. “There has always been a sense that consumers have to sit in one camp or the other — you’re either drinking or you’re not. But what we’re seeing now is greater flexibility in how people drink,” explains Lamb. “They move between full-strength, mid-strength, and alcohol-free options within any one evening or social occasion. This is how people are moderating; it’s no longer about being on or off, but about becoming more intentional with how you drink.”

This shift is beginning to show up in purchasing behavior. Recent data from Ocado Retail points to rapid growth in the mid-strength alcohol category: in May, overall sales were up 41% month-on-month and 74% over the past two years. In response, the online supermarket has expanded its mid-strength wine range by more than 200% over the past year, and now offers the largest selection of mid-strength drinks of any UK grocery store.

Beyond retail, mid-strength and alcohol-free options are also on the rise across hospitality venues. Private members’ clubs such as Soho House have expanded their low and no-alcohol menus in recent years, by integrating spirits such as Quarter-Proof and Seedlip to create alternative cocktail options. The Future Laboratory’s Oduwole also points to Spanish restaurant Legado in Shoreditch as an example of innovation in drink formats and experiences. “Legado does a cocktail flight of three sips; it’s just one sip of each, but it allows people to also try new flavors and cocktails that they wouldn’t usually. It ties into both a sense of control, but also novelty and newness,” he explains. “These micro-serves are really good, especially for out-of-home experiences where hospitality, retailers, and venues want to create that sense of ‘we’ll try something different’.”

The shift can not only be seen where people have always drunk, but in the moments that are becoming increasingly core to people’s social calendars. “We’re seeing more community events forming around an activity followed by mid-strength or lower alcohol. For example, run clubs followed by drinks, Pilates and wine evenings, or wellness-focused social events that feel more balanced and intentional,” says Lamb. She points to experiential formats as particularly resonant. “We recently hosted a Sip & Potter event, where guests enjoyed pottery making alongside our 6Percent red and white mid-strength wines. The event completely sold out, and is a great example of how people seek moments centered on mindfulness, creativity, and connection while enjoying a glass of wine and staying present.”

Cultural credibility as the new exclusivity

Across the wider luxury landscape, alcohol brands are leaning on cultural credibility. “We are seeing younger consumers wanting to engage with brands that are culturally credible. This creates a more accessible luxury for them, through limited-edition collaborations and cultural partnerships,” says Julie Bramham, global managing director of Diageo’s Luxury Group, which includes Tanqueray, Ciroc, Don Julio, and more.

She points to initiatives such as the Johnnie Walker Vault, an exclusive experience that reframes heritage through contemporary creative access. “The Johnnie Walker Vault — hidden deep beneath the Johnnie Walker Experience in Edinburgh — holds, at any given time, a selection of 500 whiskies from our rare, aged, and ghost casks, personally curated and rotated,” Bramham explains. “From here, [master blender] Dr. Emma Walker blends bespoke whiskies that encapsulate special stories of people, places, and moments in time.”

Recent brand collaborations, Bramham adds, are designed to bridge tradition and modern cultural codes. “The partnership with fashion designer Olivier Rousteing — where the brand co-created several [whiskey] expressions from the Johnnie Walker Vault — aimed to appeal to luxury consumers who want heritage and tradition, in a way that feels fresh and aspirational,” he explains. More broadly, spirits brands are moving deeper into fashion. Belvedere Vodka was present across Fashion East’s 25th-anniversary show during London Fashion Week, providing drinks at both the runway presentation and the afterparty in partnership with Dazed. Johnnie Walker, meanwhile, has worked with stylist Law Roach, who co-developed a series of cocktails and co-hosted an event with Perfect Magazine.

It’s not just fashion. At 180-year-old Australian wine house Penfolds, cultural crossover is extending into other corners of the arts. The brand has entered a multi-year partnership with Australian musician and actor Troye Sivan, who was appointed global creative partner in March during Paris Fashion Week in March. The collaboration launched with a reimagining of Penfolds’s Bin 389 Cabernet Sauvignon Shiraz. One iteration features a 750ml bottle wrapped in tissue paper and accompanied by imagery taken from Sivan’s personal photography archive.

“Troye Sivan is our creative partner — he’s not our brand ambassador, he’s not the face of Penfolds, or our spokesperson. He’s taking over our packaging and reinterpreting it for the next generation of wine drinkers,” says Tom King, managing director of Penfolds. The partnership is also being staged through cultural moments designed for visibility. “Fashion week is a great moment where we connect with people across the world of culture. Troye is at that beautiful intersection of music, fashion, and design, so it felt like the right place for us to launch this partnership.”

Optimization gives way to excess

Gen Z has been widely characterized as one of the most sober-curious generations, more likely to prioritize gym sessions over late nights out, or macro-tracking over bar tabs. However, that long-standing narrative of restraint may be starting to shift.

“The concept I’ve been playing with is what I call ‘nihilistic indulgence’,” says Euromonitor’s Malandrakis. “The idea has emerged from looking at previous periods of major socioeconomic upheaval and from little signs that I’m seeing in adjacent industries, such as tobacco.”

He argues that younger consumers have spent years optimizing almost every aspect of life, from careers to personal branding, but that mindset is starting to fray under growing economic and social uncertainty. “They’ve been trying to optimize their personal branding, themselves, and the way they present all of that through their social media accounts,” Malandrakis says. “But the concept of hyper-optimizing oneself starts to make less sense when millennial and Gen Z consumers are not so certain about the safety of their jobs, when many feel they’re never going to have a pension, or that traditional safety nets are collapsing around them.”

In that context, behavior may move in the opposite direction. “In many cases, it could mean opting for higher-alcohol products rather than non-alcoholic alternatives. Why not make the most of the present?” he says, pointing to adjacent cultural signals, including a renewed visibility of smoking among younger demographics.

Beyond product choice, Malandrakis sees alcohol’s role becoming increasingly analogue. “Alcohol potentially offers moments that help us move beyond the digital realm,” he says. “As a focal point for conversations, it brings people together outside social media where everyone is essentially burned out.”

Over the past two years, Heineken has built campaigns around the idea that people are tired of digital interactions and crave real-world connection. Its #WorldsTogether initiative was created to “break down barriers and build mutual understanding, one conversation and one beer at a time”, according to the brand, while its more recent #SocialOffSocials and Group Chat Bar campaigns encourage consumers to leave group chats behind and socialize in-person. Meanwhile, Casamigos Tequila’s Anything Goes with My Casamigos campaign focuses on friendship and spontaneous social moments.

Malandrakis frames this pendulum swing as part of a broader cultural shift away from constant connectivity and screen-led lifestyles, which could also shape how alcohol is positioned and marketed. “In a world where everyone is discussing extreme political polarization, and where conversations around the loneliness epidemic are increasingly common, alcohol, again in moderation, has the potential to provide some answers,” he adds. “So I think the [marketing] messaging will increasingly focus on authenticity beyond the digital realm, bringing people together around the table, encouraging conversation, and helping address this all-encompassing loneliness epidemic.”