Autumn Budget: Future impact on the alcoholic drinks industry
We’ve overlaid the key insights from the recent UK autumn budget announcement below. This follows last month’s publication of our future of the alcoholic drinks industry 2025 consumer report. We’ve outlined the likely impact on projected consumer and alcohol industry trends we’ll see through 2025 and beyond.
In a time of industry change, this article provides actionable insights for the alcoholic beverages market drawn from our community of over 80,000 UK consumers. Our guide supports alcohol industry participants in making better-informed decisions for future product development and marketing strategies.
Sustainability and localism
In the alcoholic beverage industry, support of smaller artisan producers, breweries and distilleries is set to continue. The government pledges to help smaller operators enter the on-trade market in the country. All this while maintaining small producer relief with reduced taxation on non-draft products.
Focused marketing messages on transparency, sustainability credentials and eco-friendly practices are likely to appeal to this conscientious consumer base. Consumers are showing increasing preferences for alcoholic drinks with local and eco-friendly production processes.
Premium at-home drinking
Middle-class consumers with disposable income increasingly choose to experience premium alcoholic drinks at home. They are largely driven by home entertainment preferences and perceived value for money VS the on-trade industry. Therefore, consumers are exploring different off-trade purchase channels. The announced tax increases will be felt most on higher alcohol by volume (ABV) products (still wine, sparkling wine and spirits), which will see increased retail prices.
Brands can embrace the desire for higher-quality products through brand premiumisation in their marketing messages and product offerings. They can create premium alcoholic beverages and experiences that are more resilient to price increases than low and mid-market products.
Ready-to-Drink (RTD) segment growth
The sustained growth of the RTD segment is set to continue. For the alcoholic drinks industry, research has shown that younger consumers are looking for convenience and increased social occasion use cases.
With typical ABVs for pre-mixed RTD cocktails between 4-9%, producers see less exposure to ABV-linked taxation increases. The canned format popularity of alcoholic drinks is set to continue and will likely see new brand entrants. With wine easement laws ending, lower ABV wines (11.5-12%) in RTD packaging will become an attractive and tax-efficient route. Boosting alcohol sales for the wine industry.
The budget provides an opportunity for RTD category participants to extend further into the on-trade. Creating draft-format alcoholic drinks below 8% ABV would allow producers to benefit from the government’s improved draft relief.
On-Trade premiumisation
Consumption of premium alcoholic drinks increased in pubs — which aligns with data showing an overall decrease in drinking frequency (fewer drinking occasions) and an increased desire for high-quality alcoholic beverages.
Duty increases, increased business rates and employer costs mean on-trade consumers are likely to see price increases across the board within the alcohol industry. Meaning a continuation of the preference for less frequent but higher-quality drinking experiences.
For brands, this presents new growth opportunities to position themselves as higher-status ‘special occasion’ drinks.
Economic pressures influencing alcohol consumption
The budget saw targeted increases on cheap alcohol from convenience stores to narrow the widening gap in affordability between on-trade and supermarket alcohol. With the rising cost of living, a growing number of consumers are becoming increasingly price-sensitive. This trend in off-trade retail sales and decreased consumer spending has had a significant economic impact on the premium alcoholic drinks market.
While the value-for-money and own-brand options increase in demand, the fiscal benefits for the consumer are likely to be smaller. Brands in this category should consider adding non-price-related differentiators to their offerings to increase alcohol sales and attract new customers.
In terms of consumer engagement and market dynamics, off-trade sales have seen a shift toward online purchases. Here, consumers are products but not retailers. This trend is set to increase within the alcoholic beverages market. Consumers are choosing to quickly compare across multiple online retailers and make price-driven purchases.
Mindful Drinking Movement
Key trends in the alcohol market have seen changes in consumer attitudes towards premium alcoholic drinks. These alcohol trends show that 41% of the population in the UK economy consumed alcohol at a reduced rate.
Some consumers are even abstaining from consuming alcoholic beverages due to health concerns., Ultimately, mindful drinking is at the fore. The budget’s increase in duty will add further economic benefit to consumers choosing low or no-alcohol alternatives.
An increasing number of the population of young adults are opting for non-alcoholic beverages like carbonated soft drinks, alcohol-free beer, and functional health drinks.
Alternative product types with low sugar and a lower alcohol content are poised to do well. New taxation rules incentivise the soft drinks industry to reduce product sugar content. There are also exemptions for alcoholic drinks below 1.2% in alcohol content.
Brands and industry leaders should consider product and marketing strategies that appeal to sober, curious, health-conscious consumers. Those with a substantial market share should be highlighting the health benefits or reduced negative impact. Then, using this data to cater to a mindful and sustainable drinking approach.
Consumer behaviour is shifting in the alcohol industry. The latest UK budget changes are set to accelerate consumers toward health-conscious, experience-driven and value-focused consumption. Brands that can adapt to these alcoholic beverage trends with flexible, responsive strategies will be best positioned to navigate the new landscape.
For further alcohol industry insights and guidance, please read our future of the alcoholic drinks industry 2025 consumer report. For support with personalised consumer insights to fuel your product development and marketing strategies, please contact us.
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