Generational Consumption Changes Are Redefining Risk in Alcoholic-Beverage Makers

Declining alcohol consumption among younger age groups is reshaping the financial outlook of the nation’s breweries, wineries, and distilleries, and the suppliers that serve them. For risk management professionals, it is essential to understand how this slow-but-steady erosion in alcohol consumption impacts borrower resilience, revenue predictability, and collateral values.

Recent data from Gallup shows that Millennials and Gen Z are upending long-standing trends in  alcohol consumption in the U.S. Their preference for moderation, wellness, and value is fueling a multiyear decline in beer, wine, and spirits consumption. In fact, the percentage of Millennials and Gen Z who consume alcohol is down 10% and 9%, respectively, since 2023.

Furthermore, Gallup found that the overall U.S. drinking rate is at a new low amid rising concerns over the health consequences of alcohol. Each year from 1997 to 2023, at least 60% of Americans reported drinking alcohol, data showed. In 2022, that share was at 67%; in August 2025 it hit 54%, the lowest rate, by one percentage point, in the survey’s nearly 90-year history.

Across beverage categories, traditional alcohol consumption is contracting as younger adults drink less, and in some cases, abstain entirely. Post-pandemic lifestyle changes, the growth of the “sober-curious” movement, and health-oriented behavioral shifts are accelerating this trend.

• Beer consumption is at its lowest level in more than a generation, with 2024 off-premise value dropping 0.7% and volume decreasing by 2.9% year over year. Wine consumption has also been declining for years.
• Total U.S. wine volume fell 3% in 2023 after a 2% drop in 2022, a trend expected to continue as Millennial and Gen Z drinkers further reduce participation rates.
• Distilled spirits, which enjoyed years of rapid growth, are now experiencing a slowdown marked by falling production, static prices and weakening export demand.

Demographics are another key contributor to these declines. The U.S. drinking-age population has been shrinking since 2015, and participation rates among younger cohorts are falling faster than for the overall population. For example, while 58% of consumers over age 65 prefer wine to other alcoholic beverages, younger consumers’ preference for wine is nearly 30 points lower, signaling a generational shift with long-term implications for alcohol categories reliant on legacy consumption habits.

Breweries: Declining demand and a saturated craft market

Current conditions

High beverage inventories totaling $30.8 billion in July, up 6.6% year over year, reflect softening demand across the market. For breweries, weakening consumption is reducing the need for core inputs, especially hops. Even top-producing regions like Yakima, Wash., have seen hops acreage fall from 40,000 to less than 32,000 acres, signaling contraction across the supply chain.

Key trends affecting brewery risk

• Consumption and market share declines: Beer is no longer the dominant U.S. alcoholic beverage. Younger consumers are increasingly choosing spirits, canned cocktails, or non-alcoholic alternatives.
• Craft market saturation: The number of craft breweries has more than doubled from 4,803 in 2015 to 9,796 in 2024, creating intense competition and thinning margins as overall category demand slips.
• Rise of non-alcoholic beer: It’s worth noting that non-alcoholic (NA) beer volume rose 175% between 2019 and 2024. Experts predict NA beer will become the world’s second-largest beer segment by end-of-year 2025, creating both opportunities and cannibalization for traditional brewers.

Forecast

Breweries’ sales are projected to grow by just 1.97% annually through 2029, well below the pace of the broader economy, suggesting continued stagnation for lower-growth or highly leveraged operators.

Wineries: An aging customer base and persistent volume declines

Current conditions

Wineries in the U.S. are grappling with persistent demand erosion, price pressure, and structural oversupply. In 2024, high-end wineries (top quartile) saw revenue grow 22%, while the bottom quartile saw a 16% decline, revealing widening performance disparities within the industry. Winery layoffs and closures underscore operators’ difficulty adapting to an oversupplied and demand-challenged market.

Wine producer prices have remained flat year over year, while retail prices per liter have been falling since mid-2021, limiting wineries’ ability to offset cost pressures with pricing power.

Key trends affecting winery risk

• Ongoing volume declines:S. wine volume fell 3% in 2023, continuing a multiyear downtrend driven by demographic shifts and weakening engagement among Millennials and Gen Z.
• “Premium-ization” continues … with limits: Wine-drinkers are trading up to higher-value wines ($15 to $30 per bottle). Meanwhile, the under-$15 category shows little momentum due to a perceived lack of quality.
• Demographic challenges: With younger cohorts drinking less wine and fewer Americans turning the legal drinking age, the traditional wine consumer base is aging out, raising concerns about long-term demand erosion.

Forecast

Despite headwinds, wine industry sales are projected to grow at a 4.37% compounded annual rate from 2025 to 2029, bolstered by premium-ization and export opportunities. This growth may not benefit smaller or mid-tier producers equally, however.

Distilleries: Production slowdown and tariff-driven export weakness

Current conditions

The nation’s distilleries are seeing declining production levels as well. U.S. whiskey production fell 28% year over year, reaching its lowest point since 2019 due to high inventories and tariff-related export disruptions. This includes a 70% year-over-year drop in April for spirits designated for export.

Producer prices also dropped 2.1% year over year in August, reflecting weak demand and softening sales after post-pandemic surges subsided.

Key trends affecting distillery risk

• Growth slowdown across core spirits: Vodka, whiskey, rum, and brandy/cognac categories are expected to bottom out at around a negative4.56% growth rate by year-end 2025, with only slight stabilization in 2026…although still in negative territory.
• Premium-ization moderating: After years of strong growth in high-end spirits, premiumization slowed significantly in 2022 and 2023, though some categories (e.g., tequila/mezcal) remain resilient.
• Flavor innovation persists: Flavored spirits continue to attract younger drinkers, but interest has not been strong enough to fully counteract broader consumption declines.

Forecast

Distillery sales are expected to grow 5.83% annually from 2025–2029, but volatility in exports, tariffs, and shifting consumer preferences may expose lenders to uneven performance across operators.

Industry risk considerations for lenders and credit professionals

As consumer drinking habits shift, alcoholic beverage producers face heightened risks across operations, pricing, supply chains, and revenue reliability. Key underwriting and risk considerations include:

Inventory management: Elevated inventories across alcoholic beverages—up 6.6% year over year—can tie up working capital and signal slowing sell-through rates, pressuring liquidity for producers and distributors.

Sensitivity to demographic trends: Borrowers overly reliant on young-adult consumers may experience disproportionate volatility as these cohorts continue to reduce overall alcohol consumption.

Pricing power and margin compression: Stagnant or falling producer prices (especially in wine and spirits) reduce borrowers’ ability to absorb rising costs.

Market saturation in craft segments: Breweries and distilleries that entered during the boom years now face fierce competition, slowing growth, and limited differentiation.

Export exposure: Tariff-related disruptions and geopolitical tensions add meaningful unpredictability for distillers with sizable international sales.

Where alcoholic beverage operators see opportunity

Despite headwinds, alcoholic beverage producers across categories are innovating around changing preferences:

• Non-alcoholic beverages: Rapid growth in NA beer and zero-proof spirits
• Premium and super-premium tiers: Continued demand among older Millennials and affluent consumers
• Health-aligned marketing: Lower-calorie, additive-free, or sustainably produced beverages
• Diversified tasting and on-premise experiences: Wineries and distilleries focusing on experiential revenue to offset falling volume

Lenders should look for borrowers who demonstrate strategic flexibility, strong brand positioning, and capital discipline in adapting to this evolving alcoholic beverage demand landscape.

About Amy Short

Amy Short is the director of research at Vertical IQ, a leading provider of Industry Intelligence that empowers financial professionals to understand borrower risk and opportunity with confidence. Vertical IQ partners with RMA through eMentor, supporting credit and lending professionals with actionable, industry-specific insights.

To learn more about Vertical IQ, visit www.verticaliq.com or contact [email protected].