Alcohol Market Situation

Current Trends

Premiumization:
From both a global and local perspective, changing demographics and increasing consumer focus on health are negatively impacting alcohol consumption (see the table below). In many countries, alcohol consumption remains either stagnant or declining.

However, this does not necessarily lead to lower sales for companies. Instead, higher prices are driving revenue growth (see the table below), particularly in developed and industrialized nations. Meanwhile, in developing countries, market saturation in alcohol consumption has been observed in recent years.

When analyzing major global players such as AB InBev, Heineken, Diageo, Pernod Ricard, and Constellation Brands, we see similar trends unfolding in different ways. For instance, all these companies generate a significant portion of their sales from a few best-selling products, which are aggressively supported by marketing campaigns.

A Commercial Director at an Alcohol-Producing Company:
These types of campaigns have proven to be highly effective in a sector where brand awareness tends to be relatively low. For example, in markets like Azerbaijan—where numerous local and foreign alcohol brands compete for limited retail shelf space—competition is largely price-driven. Therefore, a well-crafted branding strategy that considers consumer preferences and needs can encourage customers to “trade up” to premium brands.

In terms of competition, local alcohol producers possess the financial resources and internal expertise to develop marketing strategies that drive growth and provide a competitive advantage, especially in private label production.

Consumer Trends:
On average, consumers do not necessarily want to drink more—they want to drink “better.” Both global and local alcohol producers must adapt to a new reality that demands closer consumer engagement.

Health Awareness:
Health-related concerns present a growing challenge for alcohol producers. However, brands emphasizing consumer well-being can gain significant market share.

This trend is particularly strong among older demographics, Millennials, and Gen Z consumers who prioritize health-conscious choices. As a result, the demand for No- and Low-Alcoholic Beverages (NLAABs) is expanding. Some industry players, such as AB InBev, expect that by 2025, NLAABs will account for one-quarter of total beer sales.

Thus, modern consumers not only want to drink “better” but also drink healthier.

Shifts in Purchasing Behavior:
Since the onset of COVID-19, alcohol sales via e-commerce have surged, with some regions experiencing annual sales growth of over 100%.

However, despite this rise, alcohol’s share of online retail sales remains relatively low compared to other product categories in both global and local markets. According to the Millionaire’s Club research, global e-commerce sales of alcohol increased by 45% in 2020 compared to 2019.

In Azerbaijan, the e-commerce penetration rate in 2020 was 33%—significantly lower than the 70%+ rates observed in developed markets. This indicates an opportunity for alcohol producers to expand their distribution channels, leading to increased sales and profitability.

To leverage this opportunity, companies must invest in: