POSTED ON Jan 21, 2025

BLOGS
Shifting Landscapes: A 2025 Market Outlook for the Wine and Spirits Industry

Shifting Landscapes: A 2025 Market Outlook for the Wine and Spirits Industry

Blog

This blog is also available on Substack. Follow along there for addition insights into the artisanal spirits sector and supply chain technology.

Note from Rob

Greetings and Happy New Year! When I started covering the beverage alcohol industry, innovation meant a new flavor variant or package design. Today, as we look ahead to 2025, the landscape has transformed dramatically. The industry stands at what I believe is its most dynamic inflection point in modern history.

While some view current challenges as existential threats, I see them as catalysts for remarkable innovation and evolution. After countless conversations with industry leaders, distillers, winemakers, and emerging players in adjacent categories, three trends particularly excite me about the industry's future:

The renaissance in non-alcoholic beverages has evolved from simple alternatives to sophisticated drinks that rival traditional spirits in complexity and experience. The craftsmanship I've witnessed in this space - from botanical blending to innovative extraction methods - is pushing the boundaries of beverage innovation beyond what anyone imagined possible five years ago.

Second, the intersection of technology and tradition is creating extraordinary possibilities in personalization. From AI-powered taste matching to smart production systems that can adjust to individual preferences, we're seeing the emergence of a more intimate relationship between producers and consumers. The ability to create products that precisely match consumer preferences while maintaining artisanal quality is revolutionizing how we think about scale and customization.

Finally, the emergence of functional beverages that bridge traditional categories excites me enormously. Whether it's adaptogenic cocktails, nootropic wines, or cannabis-infused alternatives, these products represent not just new revenue streams but entirely new ways of thinking about social drinking.

These developments point to an industry that's not just adapting to change but actively embracing it to create new possibilities. Looking forward to exploring this shifting landscape with you all in the year to come!

Market Overview: A Time of Strategic Adaptation

The total beverage alcohol landscape has experienced significant shifts, with off-premise (package stores, grocery, etc.) alcohol sales reaching $112 billion in 2024, marking a slight decrease of 0.8% compared to 2023. However, this overall figure masks dramatic variations across segments and reveals emerging opportunities in specific categories.

Spirits Segment: Premiumization and Innovation

The spirits category presents a complex picture, with traditional segments showing mixed performance while new categories surge ahead. Excluding RTDs, spirits have seen a modest decline, with dollars down 1.1% and volume down 2.3%. However, several bright spots emerge:

Tequila continues its remarkable trajectory, with the segment seeing strong growth even as it matures. After explosive growth between 2019-2023 (from 20 million to over 30 million 9-liter cases), the category is transitioning to more sustainable single-digit volume growth. This evolution suggests a maturing market focused on premiumization rather than pure volume expansion.

Vodka demonstrates resilience through value growth despite flat volumes. While volume projections hover around 337.4 million 9-liter cases for 2025, the category's global value is expected to reach approximately US$82.6 billion, up from US$79.4 billion in 2024. This trend underscores the success of premiumization strategies in maintaining category relevance.

Wine Segment: Challenges and Opportunities

The wine category faces its own set of challenges, showing the steepest declines among major categories with value down 3.5% and volume down 5.3%. However, this broad trend masks important nuances:

Premium wines, particularly those priced between $15-25, continue to resonate with consumers, defying overall category trends. This suggests a clear consumer preference for quality over quantity, with buyers willing to spend more per bottle while potentially reducing their total purchase volume.

Organic wine emerges as a significant growth opportunity, with global sales valued at $12.4 billion in 2024 and projected to grow at a CAGR of 10.7% through 2032. This trajectory reflects growing consumer interest in sustainable and environmentally conscious products.

The RTD Revolution

Ready-to-drink beverages have emerged as a dominant force, exceeding $13 billion in off-premise sales and capturing a 12% share of total alcohol dollar sales. This success is driven by several factors:

  • Innovation in spirits-based RTDs and flavored malt beverages (FMBs)
  • Consumer preference for convenience and portion control
  • Success of wine RTDs in specialized formats like Tetra packs
  • Cross-category appeal to both traditional alcohol consumers and newer market entrants

The Cannabis Beverage Opportunity

A notable emerging trend is the rapid growth of THC and hemp-derived beverages, projected to grow at 17% annually over the next decade. This segment represents a significant opportunity for several reasons:

  • Appeal to health-conscious consumers seeking alternatives to traditional alcohol
  • Reduced next-day effects compared to traditional alcoholic beverages
  • Potential for cross-state production and distribution for hemp-derived products
  • Attractive gross margins drawing investor interest

The segment could potentially capture 5-10% of the overall beverage market, particularly if federal legalization occurs. Major alcohol companies are closely monitoring this space, with some already making strategic investments in cannabis beverage companies.

Health Concerns and Industry Response

In a significant development, the U.S. Surgeon General issued a landmark advisory labeling alcohol as the third leading preventable cause of cancer in the United States, after tobacco and obesity. This declaration, while concerning, has prompted varied industry responses:

  • Industry resilience despite health warnings
  • Continued focus on premium products and quality
  • Shift towards healthier alternatives and moderation
  • Development of new product categories addressing health concerns

The advisory's impact appears less dramatic than initially feared, with the industry demonstrating adaptability through innovation and market repositioning rather than experiencing immediate dramatic decline.

Consumer Behavior Evolution

Recent Gallup polling reveals significant shifts in drinking patterns:

  • Overall alcohol consumption has declined from 67% of adults in 2022 to 58% in 2024
  • Increased interest in premium products among those who continue to drink
  • Growing preference for "better-for-you" options
  • Impact of weight loss medications like Ozempic affecting drinking patterns

These changes aren't necessarily reducing overall beverage consumption but rather redistributing it across different categories, including non-alcoholic alternatives and cannabis-infused beverages.

The No/Low-Alcohol Phenomenon

Perhaps the most significant trend reshaping the industry is the explosive growth of no/low-alcohol beverages. This category is approaching $1 billion in U.S. sales ($823 million, representing 0.7% of total alcohol sales) and shows no signs of slowing. Key insights include:

  • Projected 4% volume CAGR through 2028 across major markets
  • No-alcohol products driving majority of growth at 7% volume CAGR
  • Strong holiday season performance, particularly during traditional celebration periods
  • Over 93% of non-alcohol buyers also purchase traditional alcohol products, indicating complementary rather than cannibalistic consumption

Technological Innovation and Sustainability

The industry is witnessing unprecedented technological integration across all aspects of production and distribution:

Artificial Intelligence Applications:

  • Smart consumer targeting through data analytics
  • AI-assisted product development and quality control
  • Automated marketing outreach and personalization
  • Virtual tasting experiences and personalized recommendations

Sustainability Initiatives:

  • Implementation of regenerative organic practices
  • Development of closed-loop production systems
  • Carbon footprint reduction across supply chains
  • Innovative packaging solutions to reduce environmental impact

Regulatory and Market Challenges

The industry faces several significant regulatory challenges that could reshape market dynamics:

Tariff Impacts:

  • Potential new tariffs threatening both imports and exports
  • Projected 13-16% decline in imports and 18-22% decrease in exports if new tariffs are enacted
  • Disproportionate impact on large and commercial producers and brands who lack inventory buffer capacity

ESG Compliance:

  • Implementation of EU's corporate sustainability directive
  • Enhanced climate-related disclosure requirements
  • Growing importance of ESG metrics in accessing capital
  • Impact on international market access and competitiveness

Looking Ahead: Strategic Implications

As the industry navigates these changes, several strategic imperatives emerge:

Investment in Technology and Innovation

  • Embrace AI and automation while maintaining craft authenticity
  • Develop direct-to-consumer capabilities
  • Invest in sustainable production methods

Market Adaptation

  • Focus on premium and super-premium segments
  • Develop no/low-alcohol alternatives
  • Expand RTD portfolios with premium offerings

Supply Chain Resilience

  • Diversify supplier networks
  • Invest in inventory management systems
  • Develop alternative sourcing strategies

Product Quality and Premiumization

  • Focus on craftsmanship and quality over mass production
  • Develop thoughtful, distinctive products that justify premium pricing
  • Invest in product innovation that addresses health concerns
  • Create authentic experiences that resonate with conscious consumers

Alternative Category Development

  • Expand into cannabis beverages where legally permitted
  • Develop sophisticated non-alcoholic alternatives
  • Create products that align with wellness trends
  • Focus on functional benefits beyond traditional alcohol properties

Conclusion

The wine and spirits industry stands at a pivotal moment where traditional practices meet innovative solutions. Success in 2025 and beyond will require careful navigation of changing consumer preferences, technological advancement, and regulatory requirements. Companies that can balance innovation with tradition, sustainability with profitability, and global reach with local authenticity will be best positioned to thrive in this evolving landscape.

The future belongs to those who can adapt to these changing dynamics while maintaining the core qualities that have always defined excellence in the industry: quality, craftsmanship, and authentic consumer connections.

How is your organization preparing for these industry shifts? Reach out with your thoughts and experiences, and let's continue this important conversation about the future of our industry.

This blog is also available on Substack. Follow along there for addition insights into the artisanal spirits sector and supply chain technology.

Note from Rob

Greetings and Happy New Year! When I started covering the beverage alcohol industry, innovation meant a new flavor variant or package design. Today, as we look ahead to 2025, the landscape has transformed dramatically. The industry stands at what I believe is its most dynamic inflection point in modern history.

While some view current challenges as existential threats, I see them as catalysts for remarkable innovation and evolution. After countless conversations with industry leaders, distillers, winemakers, and emerging players in adjacent categories, three trends particularly excite me about the industry's future:

The renaissance in non-alcoholic beverages has evolved from simple alternatives to sophisticated drinks that rival traditional spirits in complexity and experience. The craftsmanship I've witnessed in this space - from botanical blending to innovative extraction methods - is pushing the boundaries of beverage innovation beyond what anyone imagined possible five years ago.

Second, the intersection of technology and tradition is creating extraordinary possibilities in personalization. From AI-powered taste matching to smart production systems that can adjust to individual preferences, we're seeing the emergence of a more intimate relationship between producers and consumers. The ability to create products that precisely match consumer preferences while maintaining artisanal quality is revolutionizing how we think about scale and customization.

Finally, the emergence of functional beverages that bridge traditional categories excites me enormously. Whether it's adaptogenic cocktails, nootropic wines, or cannabis-infused alternatives, these products represent not just new revenue streams but entirely new ways of thinking about social drinking.

These developments point to an industry that's not just adapting to change but actively embracing it to create new possibilities. Looking forward to exploring this shifting landscape with you all in the year to come!

Market Overview: A Time of Strategic Adaptation

The total beverage alcohol landscape has experienced significant shifts, with off-premise (package stores, grocery, etc.) alcohol sales reaching $112 billion in 2024, marking a slight decrease of 0.8% compared to 2023. However, this overall figure masks dramatic variations across segments and reveals emerging opportunities in specific categories.

Spirits Segment: Premiumization and Innovation

The spirits category presents a complex picture, with traditional segments showing mixed performance while new categories surge ahead. Excluding RTDs, spirits have seen a modest decline, with dollars down 1.1% and volume down 2.3%. However, several bright spots emerge:

Tequila continues its remarkable trajectory, with the segment seeing strong growth even as it matures. After explosive growth between 2019-2023 (from 20 million to over 30 million 9-liter cases), the category is transitioning to more sustainable single-digit volume growth. This evolution suggests a maturing market focused on premiumization rather than pure volume expansion.

Vodka demonstrates resilience through value growth despite flat volumes. While volume projections hover around 337.4 million 9-liter cases for 2025, the category's global value is expected to reach approximately US$82.6 billion, up from US$79.4 billion in 2024. This trend underscores the success of premiumization strategies in maintaining category relevance.

Wine Segment: Challenges and Opportunities

The wine category faces its own set of challenges, showing the steepest declines among major categories with value down 3.5% and volume down 5.3%. However, this broad trend masks important nuances:

Premium wines, particularly those priced between $15-25, continue to resonate with consumers, defying overall category trends. This suggests a clear consumer preference for quality over quantity, with buyers willing to spend more per bottle while potentially reducing their total purchase volume.

Organic wine emerges as a significant growth opportunity, with global sales valued at $12.4 billion in 2024 and projected to grow at a CAGR of 10.7% through 2032. This trajectory reflects growing consumer interest in sustainable and environmentally conscious products.

The RTD Revolution

Ready-to-drink beverages have emerged as a dominant force, exceeding $13 billion in off-premise sales and capturing a 12% share of total alcohol dollar sales. This success is driven by several factors:

  • Innovation in spirits-based RTDs and flavored malt beverages (FMBs)
  • Consumer preference for convenience and portion control
  • Success of wine RTDs in specialized formats like Tetra packs
  • Cross-category appeal to both traditional alcohol consumers and newer market entrants

The Cannabis Beverage Opportunity

A notable emerging trend is the rapid growth of THC and hemp-derived beverages, projected to grow at 17% annually over the next decade. This segment represents a significant opportunity for several reasons:

  • Appeal to health-conscious consumers seeking alternatives to traditional alcohol
  • Reduced next-day effects compared to traditional alcoholic beverages
  • Potential for cross-state production and distribution for hemp-derived products
  • Attractive gross margins drawing investor interest

The segment could potentially capture 5-10% of the overall beverage market, particularly if federal legalization occurs. Major alcohol companies are closely monitoring this space, with some already making strategic investments in cannabis beverage companies.

Health Concerns and Industry Response

In a significant development, the U.S. Surgeon General issued a landmark advisory labeling alcohol as the third leading preventable cause of cancer in the United States, after tobacco and obesity. This declaration, while concerning, has prompted varied industry responses:

  • Industry resilience despite health warnings
  • Continued focus on premium products and quality
  • Shift towards healthier alternatives and moderation
  • Development of new product categories addressing health concerns

The advisory's impact appears less dramatic than initially feared, with the industry demonstrating adaptability through innovation and market repositioning rather than experiencing immediate dramatic decline.

Consumer Behavior Evolution

Recent Gallup polling reveals significant shifts in drinking patterns:

  • Overall alcohol consumption has declined from 67% of adults in 2022 to 58% in 2024
  • Increased interest in premium products among those who continue to drink
  • Growing preference for "better-for-you" options
  • Impact of weight loss medications like Ozempic affecting drinking patterns

These changes aren't necessarily reducing overall beverage consumption but rather redistributing it across different categories, including non-alcoholic alternatives and cannabis-infused beverages.

The No/Low-Alcohol Phenomenon

Perhaps the most significant trend reshaping the industry is the explosive growth of no/low-alcohol beverages. This category is approaching $1 billion in U.S. sales ($823 million, representing 0.7% of total alcohol sales) and shows no signs of slowing. Key insights include:

  • Projected 4% volume CAGR through 2028 across major markets
  • No-alcohol products driving majority of growth at 7% volume CAGR
  • Strong holiday season performance, particularly during traditional celebration periods
  • Over 93% of non-alcohol buyers also purchase traditional alcohol products, indicating complementary rather than cannibalistic consumption

Technological Innovation and Sustainability

The industry is witnessing unprecedented technological integration across all aspects of production and distribution:

Artificial Intelligence Applications:

  • Smart consumer targeting through data analytics
  • AI-assisted product development and quality control
  • Automated marketing outreach and personalization
  • Virtual tasting experiences and personalized recommendations

Sustainability Initiatives:

  • Implementation of regenerative organic practices
  • Development of closed-loop production systems
  • Carbon footprint reduction across supply chains
  • Innovative packaging solutions to reduce environmental impact

Regulatory and Market Challenges

The industry faces several significant regulatory challenges that could reshape market dynamics:

Tariff Impacts:

  • Potential new tariffs threatening both imports and exports
  • Projected 13-16% decline in imports and 18-22% decrease in exports if new tariffs are enacted
  • Disproportionate impact on large and commercial producers and brands who lack inventory buffer capacity

ESG Compliance:

  • Implementation of EU's corporate sustainability directive
  • Enhanced climate-related disclosure requirements
  • Growing importance of ESG metrics in accessing capital
  • Impact on international market access and competitiveness

Looking Ahead: Strategic Implications

As the industry navigates these changes, several strategic imperatives emerge:

Investment in Technology and Innovation

  • Embrace AI and automation while maintaining craft authenticity
  • Develop direct-to-consumer capabilities
  • Invest in sustainable production methods

Market Adaptation

  • Focus on premium and super-premium segments
  • Develop no/low-alcohol alternatives
  • Expand RTD portfolios with premium offerings

Supply Chain Resilience

  • Diversify supplier networks
  • Invest in inventory management systems
  • Develop alternative sourcing strategies

Product Quality and Premiumization

  • Focus on craftsmanship and quality over mass production
  • Develop thoughtful, distinctive products that justify premium pricing
  • Invest in product innovation that addresses health concerns
  • Create authentic experiences that resonate with conscious consumers

Alternative Category Development

  • Expand into cannabis beverages where legally permitted
  • Develop sophisticated non-alcoholic alternatives
  • Create products that align with wellness trends
  • Focus on functional benefits beyond traditional alcohol properties

Conclusion

The wine and spirits industry stands at a pivotal moment where traditional practices meet innovative solutions. Success in 2025 and beyond will require careful navigation of changing consumer preferences, technological advancement, and regulatory requirements. Companies that can balance innovation with tradition, sustainability with profitability, and global reach with local authenticity will be best positioned to thrive in this evolving landscape.

The future belongs to those who can adapt to these changing dynamics while maintaining the core qualities that have always defined excellence in the industry: quality, craftsmanship, and authentic consumer connections.

How is your organization preparing for these industry shifts? Reach out with your thoughts and experiences, and let's continue this important conversation about the future of our industry.