As shared in the Circana and Five Growth Pty Ltd presentation, the current landscape of the Australian retail liquor market is undergoing significant changes, driven by an array of socio-economic factors, with the cost of living crisis taking centre stage. As consumers grapple with financial pressures, their purchasing behaviour in the liquor market has shifted noticeably.
Shifting consumer behaviour
The cost-of-living crisis has emerged as the primary driver of purchase restraint among consumers. This economic pressure has made shoppers more value-conscious, leading to a noticeable increase in their reliance on discounts and promotions. As a result, the proportion of households buying liquor, the frequency of their purchases and the size of their baskets have all seen declines. The Circana Shopper Panel surveys highlight that a growing number of consumers are intentionally buying less alcohol as they look for ways to stretch their budgets.
Moderation and abstention
The trend towards moderation and abstention is evident across various age groups, with a significant impact on the overall consumption patterns. The Circana data indicates that the number of liquor consumption occasions is down, albeit more moderately than in previous years. This decline is particularly marked among younger consumers, who are increasingly prioritising their physical and mental health. Understanding these shifts in consumer attitudes is crucial for industry stakeholders aiming to navigate the challenging market environment.
Purchase restraint and value-led pragmatism
The cost-of-living crisis has not only led to reduced alcohol consumption but also shifted the focus of the remaining consumption towards more affordable options. Consumers are increasingly seeking value for their money, often opting for mid-strength and low-carb beers, which are perceived as healthier and more cost-effective. Similarly, tequila, with its premium positioning, presents a high-value growth opportunity that the industry can capitalise on.
Impact on sales and market dynamics
The impact of the cost-of-living crisis on the liquor market is evident in subdued sales figures. Despite marginal growth in overall sales, the volume losses have been significant, with seven out of the last eight quarters recording declines. Retail liquor sales gains have slowed to below 1%, reflecting the industry's struggle with sluggish demand.* This trend is paralleled globally, with similar challenges observed in markets such as Western Europe and the United States.
Future outlook
Looking ahead, the liquor market is poised for significant transformations. The rise of health-conscious consumers will continue to drive demand for low-carb and mid-strength beers, while the premiumisation of tequila and other spirits offers lucrative opportunities. Additionally, the growing interest in sugar-free options and innovative flavours like peach and lemon will shape product development and marketing strategies. As the industry adapts to these evolving trends, embracing innovation and consumer-centric approaches will be key to thriving in the future landscape.
In conclusion, the cost of living crisis is reshaping the Australian retail liquor market, compelling consumers to become more value-conscious and health-oriented. Industry stakeholders must understand and respond to these changes, leveraging insights to drive growth and innovation in a challenging economic environment. The Circana and Five Growth Pty Ltd presentation offers a comprehensive analysis of these trends, providing valuable guidance for navigating the market dynamics in the years to come.
As the Australian retail liquor market faces unprecedented challenges—from rising costs and shifting consumer preferences to the growing demand for healthier, low-carb, and sugar-free options—the industry stands at a pivotal moment. Reach out to your Circana representative to find out more on how we can help you and your business respond to these evolving market dynamics.
Circana is a Gold Partner of the Drinks Association.
*Source: Circana MarketEdge Retail Liquor Weighted, MAT To 02/02/25