Recovery will happen in drinks. But will it be the one we expect?

Consumers are becoming more deliberate about whether they drink, and yet, paradoxically, remain surprisingly spontaneous about what they drink.

One question keeps coming up in our client meetings: has the drinks industry reached the ‘bottom’ and could it start to bounce back? Depending on the category and one's starting point, the past few years have been a tough ride. Our view is that recovery will happen, but it won’t look like previous upward cycles.

Some of today’s volume pressures are clearly economic. Higher living costs and shrinking disposable incomes have made drinking occasions more expensive, particularly out of home. Some of this could reverse as economic conditions improve.

The bigger question is: how much of the decline is part of a culture or cycle that will eventually turn? And, how much reflects permanent changes in how, when and why people drink?

What is actually changing?

The industry now knows far more about its consumers than it did a generation ago: who drinks what, how repertoires overlap, how the same shopper trades up and down by occasion. What we have less clarity about are the relative strengths of underlying forces driving the declining volumes across so many markets and categories.

One important distinction is between participation and frequency. In many established markets, alcohol remains part of the lives of a substantial proportion of adults, even as how much and how often they drink come under pressure. Occasions are becoming more planned and choices more intentional.

The popular industry trope blames younger consumers in their 20s and 30s. In fact the phenomenon is far more widespread. In wine, whose core high-frequency audience already skews older, the biggest effect on volumes probably comes from older consumers trimming a few drinks here and there each week. According to data published by IWSR, around half of all monthly+ wine drinkers in mature European markets (including the UK) are over 55 versus between 10 and 14% share for those under 30, so roughly a 4:1 ratio. Over 55s are also significantly more likely to drink wine 2+ times a week, under 30s more likely to drink once or twice a month.

A small change in behaviour among a large group of established, frequent drinkers moves volumes far more than a bigger change among a smaller group of younger ones.

This changes how we think about recovery. If people are drinking less because they cannot afford to go out, some of those occasions could return. If they are becoming more selective about when they drink, or deciding that alcohol is not part of the choice set for some occasions, a better economy will not bring those volumes back.

So perhaps the real question is not who is drinking less, but which occasions are disappearing, which are changing and which new ones are emerging.

Why context matters more than ever

Understanding consumers and their motivations remains paramount. Knowing the behavioural, attitudinal and socio-demographic segments they occupy is part of that, but on its own it is no longer enough.

We need to pay more attention to the context in which behaviour takes place and to the situational factors that affect choice at the point of purchase and consumption. This is central to the work of the Ehrenberg-Bass Institute for Marketing Science, particularly Byron Sharp and Jenny Romaniuk, whose work on category entry points (CEPs) and mental availability has reshaped marketing strategy over the past 20 years.

Put simply, CEPs are the cues or 'doorways' that bring a category or brand to mind in a buying situation: when and where people are, who they are with, what they are doing, how they feel and what they want from the occasion. Brands grow by being mentally available across many of these cues, and physically available when the moment arrives.

In drinks, CEPs and occasions overlap heavily, but they are not the same thing. An occasion tells us when and where consumption happens. CEPs also capture the motivations, needs and associations that make a category or brand relevant.

The distinction matters because choice is remarkably, er, fluid. In accompanied purchasing research in bars, we have observed people changing their choice of drink at least twice between walking in and ordering. Companions, what others in the establishment are drinking at that moment, what looks good on the back bar or menu, and what the bartender talks up, all play a role.

Set this against the trend towards planned, intentional drinking and a striking pattern emerges. Consumers are becoming more deliberate about whether and when to drink, while remaining highly responsive to their surroundings when deciding what to drink.

The decision to have a drinking occasion is increasingly considered. The choice of category and brand within it can still be surprisingly spontaneous.

The changing competitive landscape

Three shifts stand out as we look towards 2027.

First, occasions themselves are changing.

Younger drinkers are changing when, where, why and with whom they drink. The CEPs that matter will shift, and so will which categories and brands are best placed to be chosen.

Our recent research suggests younger drinkers can have narrow repertoires within an occasion: it's a beer moment, or an Aperol moment, but not both. Their overall repertoires are not narrow. Rather, their choices are strongly shaped by the social setting and what feels appropriate within it.

Out-of-home occasions have been under pressure in mature markets, not least from on-trade inflation and squeezed incomes. Yet many of those that remain are evolving: starting earlier, lasting longer and spreading across a wider variety of locations. (Source: https://www.businessinsider.com/daycap-drinking-gen-z-prefers-intentional-daytime-alcohol-2026-3)

Second, the competitive set is expanding.

Zero-alcohol beer and ready-to-drink canned mixed drinks have been around for decades, but they have grown from niche to mainstream, with far more depth and choice, and play a growing role in younger drinkers' lives.

They do not simply compete for established occasions. They can make new kinds of occasion possible, or offer an alternative when consumers want something different from their usual drink.

A wine brand is not just competing with other wine brands. Depending on the occasion, it may be up against beer, cocktails, RTDs, no-alcohol alternatives or the decision not to drink at all. And a category that loses relevance in one occasion may find opportunity in another.

Third, the way consumers discover and choose drinks is changing.

Social media has already changed how consumers gain awareness of, and confidence in, drinks categories. AI is now emerging as a further influence on discovery, consideration and choice.

What we know here is still limited. Early research suggests AI recommendations can shape what consumers consider, but how reliably this translates into purchase is not yet clear.

Trust is also an issue. AI systems make mistakes, draw on incomplete or biased information, and favour brands that are more visible in the data they use.

For brands, this adds a new dimension to mental availability. Being familiar and relevant in the consumer's mind may no longer be enough. Brands also need to be findable, understandable and credible within the digital systems consumers use to choose.

None of these shifts operates in isolation. Changing occasions, new categories and new sources of influence interact, making the competitive landscape more complex even as overall consumption falls.

What this means for drinks businesses in 2027

We see three implications.

1. Stop assuming volume recovery is inevitable.

Some lost consumption will return as economic conditions improve. Some will not. A strategy built on waiting for consumers to return to old habits will disappoint.

The question to ask: which of our lost occasions have been temporarily suppressed, and which have changed for good?

2. Map occasions and motivations, not just demographics.

Knowing who drinks wine, beer or spirits tells you little about why they choose a category on a given occasion, or why they stop. We need to measure the occasions, motivations and CEPs that actually drive choice, track how they are shifting, and use that to decide where brands still belong, where they are losing ground and where new openings exist.

The question to ask: in which occasions is our brand still the obvious choice, and where have we dropped off the list?

3. Compete for the occasion, not the category

Consumers do not think in the category boundaries the industry uses to organise itself. They want something that fits the moment, whether wine, beer, a cocktail, an RTD or something without alcohol. And within that moment, choice is shaped by companions, the menu, the bartender, social feeds and, increasingly, AI.

The question to ask: what are consumers choosing instead of us, and what tipped the decision?

So, will the industry bounce back?

There will be some recovery as economic pressures ease, though timing and extent will differ significantly by market and category.

But we are increasingly unconvinced that the industry should expect a return to the consumption patterns of the past. The more useful questions are which parts of the industry will recover, which will keep contracting and where new growth will come from.

For some categories and brands, the challenge will be to win back lost occasions. For others, it will be to find a more relevant role in occasions that are changing. And for some, it will mean accepting that the market they built their business around is structurally smaller than it was.

The industry has become very good at understanding who its consumers are. The next challenge is to understand the changing role of drinks in their lives: why they decide to drink at all, and what tips the choice once they do.