This decade looks to be a less comfortable period for producers of alcoholic drinks, which could be felt as though the earth is shaking under their feet (e.g., slower growth to drop in sales, declining share value). Over the past few years, the consumption of alcoholic beverages (beers, spirits, wines) is decreasing, especially among younger consumers (Gens Y & Z). Changes in tendency and modes of consumption seem to have hit roots during the coronavirus pandemic, yet the phenomenon has become more independent since 2023, fueled by new or modified drivers. One of its expressions is an increase in interest and demand for low- or no-alcohol drinks that would taste like familiar alcoholic drinks (mainly beers and spirits) and serve as substitute for them.

The challenges from changes in consumer attitudes and behaviour affect a range of producers of different types of alcoholic beverages. They do not treat this shift as a fleeting trend but as a more stable and substantive phenomenon that may only strengthen in coming years. As the signs started earlier (during the first decade of the 21st century), companies in the industry probably were not completely caught by surprise, yet they apparently had to intensify and hurry up their R&D preparations in the past five years. This post will focus on the story of one of the major producers, the British company Diageo which specialises in spirits and beers. In the broader sense, Diageo is competing with producers across the wide range of alcoholic beverages. Furthermore, the brands of those companies compete internally (i.e., among a company’s own brands) and externally (i.e., with brands of other companies). Into this rather crowded competition enters the new category of non-alcoholic (NA) simile drinks (also known as low-alcohol, alcohol-free or zero-alcohol beverages).

Diageo was founded in its contemporary business form in 1997; however, it owns brands that have origins going back to the 18th and 19th centuries, primarily Guinness (stout beer) and Johnnie Walker (whiskey). Diageo was established through a merger between beer brewer Guinness and food producer Grand Metropolitan (owner of brands such as Burger King,  Häagen Dazs, and Pilsbury). Yet in 2000 Diageo already disengaged from its food arm to concentrate on spirits as well as Guinness beer. The company holds eight categories: beer, Scotch whiskey, other whiskey, vodka, gin, rum, and liquors, plus low or no alcohol drinks (though NA drinks are split between the designated category and other categories). It sells, according to Diageo’s official website, over 200 brands in total in over 180 countries (also see [1]).

Among its brands, the better known and prestigious brands include (with type, founding year): Guinness (stout, 1759); Johnnie Walker (Scotch whiskey, 1820); Crown Royal (other whiskey, 1939); Tanqueray (gin, 1830); Smirnoff (vodka, 1864); Baileys (liquor, 1974); Don Julio (tequila, 1942); Gordon’s (gin, 1769); Captain Morgan (rum, 1982). There are 13 brands in Diageo’s portfolio with over $1bn sales revenue– the standout brands by performance in fiscal year 2025 (ending 30th June) were Don Julio and Crown Royal. (Brand Explorer, History of Diageo, and [1] — see following notes; brands also have their own websites).

• Of the eight categories, six are actually sub-categories of (alcoholic) spirits.
• Seedlip is shown alone in the category of ‘low or no alcohol’ as a brand that is solely non-alcoholic. However, there are ‘sub-brands’ of non-alcoholic drinks that are the NA (“0.0%”) versions of the original alcoholic drinks: Gordon’s 0.0, Tanqueray 0.0, and Guinness 0.0 — they are included on the pages of the respective categories next to their alcohol-based brands of origin.
• In September 2024 Diageo acquired Ritual, a brand of non-alcoholic alternatives (‘Zero Proof’) to gin, whiskey, tequila, and aperitifs designed for cocktails. It was formally announced by former CEO Debra Crew in a press conference in February 2025 ([2], [3]). Yet, Ritual could not be traced among the brands on the pages of the Brand Explorer by the end of August 2025.
• Port Ellen (Scotch whiskey) was revived by Diageo in 2024 after more than four decades of closure of its distillery (Diagoe, News & Media, 19 March 2024, also in [1]), but the brand does not appear yet among the brands of Scotch whiskey by the end of August 2025.
• Crew left office in July 2025. Nik Jhangiani (CFO) is replacing her as interim CEO.

According to research conducted by Gallup and cited by Fortune [4], younger consumers (generations Y & Z) are drinking less than their parents did. Among Americans in ages 18-34 the proportion of ever drinking alcohol dropped from 72% to 62% since 2000. Gallup conducts follow-up studies on drinking habits (as of 2024), and Fortune compares results from three ‘points’ in time (2001-2003, 2011-2013, 2021-2023) and between three age groups in the US. It can be seen that among the young consumers of 2001-2003 in ages 18-34, almost half drank alcohol in the past week, but among the young ones in that age group of ten years later and twenty years later these proportions drop to around 40%. Conversely, fewer among those in ages 55 and above in 2001-2003 drank alcohol in the past week (about 30%) compared with the same age group as of ten years and twenty years later (~38%-40%).

A closer look suggests that consumers carry over their drinking habits as they get older (mainly the X and Y generations), but it seems that their drinking habits have subdued somewhat over the years. However, it is a ‘mixed’ result. There seems to be a counter force that stimulates drinking alcohol and may be attributed to the turbulent past two decades with repeated crises and tensions. Thus, for instance, the proportion of drinking alcohol in the past week in the 35-54 age group in 2021-2023 reaches ~48%. Similar patterns are reflected partially in statistics on the average number of alcoholic drinks consumed in the past week, where the differences suggest milder changes over time.

Alternative reasons or drivers can be counted for explaining the decrease in consumption of alcoholic drinks. First, the Corona pandemic forced people to stay at home during long periods of time in the early 2020s and prevented them from going out to pubs, bars and restaurants, hence pressing down the consumption of alcohol, with effects lingering after the pandemic. However, the impact of the pandemic is said to be more versatile by changing consumer habits more broadly — it could be reflected in increasing consumption of alcohol at home, and perhaps even more profoundly by changing the ways people consume alcoholic beverages and create new uses [1]. Second, the change downwards has been attributed to greater health-consciousness (e.g., liver malfunction), especially among the younger consumers, heightened also by wariness of cancer risks (following a recent warning by the US Surgeon General) [4]. Third, increased inflation, as developed following the pandemic (2021-2023), hurts sales by sending consumers to alternative drinks [1]. It affects living costs overall, and the prices of alcoholic drinks in particular. Former CEO of Diageo Debra Crew described the situation, amid declines in sales of brands such as Johnnie Walker and Casamigos (tequila), as a “volatile operating environment as consumers grapple with higher prices across the board” [3].

The fourth driver, most notable, concerns culture and lifestyle that influence and re-shape consumer preferences. Diageo recognised that young people consume less alcohol but nonetheless want to indulge [1]. In an article on drinking habits (Quirk’s Media, [5]), Jonathan Dore suggests that “younger consumers are redefining indulgence”. He posits that “most people drink to unwind, celebrate, or connect with others”, and advises that research needs to capture those behaviours and how they re-form. Henceforth, the consumers are looking for new experiences that involve alternative means of lower or non-alcoholic drinks to gain similar benefits, and while weighing wellness against indulgence. Dore writes of a fast change in the cultural conservation about drinking. The decline in sales and acknowledgement of shifting behaviours apparently led producers to creating new quasi-alcoholic drinks.

• Dore refers to research by the firm he cofounded (Reach3 Insights) and to research conducted by Diageo (see Marketing Dive next). Dore recommends applying less structured interviewing techniques in favour of conversational research, that is by conducting more open exchanges with consumers (e.g., on their views, perceptions and expectations), that feel more natural and can help to capture deeper and more real-time insights. [5]
• Marketing Dive [6] reported on in-house research by Diageo wherein the company discovered five consumer trends: (1) neo-hedonism (e.g., indulgence via alternative products); (2) betterment brands (e.g., sustainability, ethics); (3) conscious well-being; (4) expanding reality (connecting with brands); and (5) collective belonging (socialising). The methodology utilised by Diageo is based on analysis of online conversations (with Diageo’s AI-powered Foresight platform).

In a positive nod, Diageo reported an organic net sales growth of 1.7% in fiscal year (FY) 2025 (ended 30 June); however, overall net sales were practically stagnant compared with FY 2024, showing a slight decline (-0.1%). The total net sales in FY 2025 amounted to $20.245bn (USD), gaining an operating profit of $4.33bn (a decline of 27.8% compared with FY 2024). Diageo can be justified in highlighting its organic growth rate (pertaining to internal resources or assets), even if just 1.7%, as it reflects a positive return on the marketing of its existing brands and products. During the years 2019-2021 the share value of Diageo (DGE at London Stock Exchange) fluctuated within the band of £25 to £35 (GBP); from the end of 2021 and during 2022 and 2023, towards the close of the coronavirus pandemic, the share price even climbed and reached new heights (moved in the range from £30 and up to £40). However, that good spell dispersed in 2024, when the share value again declined to a level around £25, and in 2025 (January to August) it dropped further to around £20. [FT.com Market Data.] The past twenty months have given Diageo a clear indication that it no longer has spare time. Its management needed to signal optimism through the positive organic growth rate.

The results were expectedly improved by the growth in sales of its non-alcoholic beverages as opposed to declines in sales of some of its traditional alcoholic drinks (although the share of NA drinks out of total sales, not disclosed, is likely to be still minor). The popularity and profitability of the non-alcoholic spirits of Diageo is outperforming its traditional alcoholic drinks (as briefed by former CEO Crew [2]; ISWR estimates that sales of NA drinks in the US grew 30% between 2023-2024, wherein growth in NA sales exceeds growth rates of alcoholic drinks in the US and in other countries, and it is expected to continue over the next few years).

Diageo has been watching carefully after changes in consumer behaviour. It identified changes related not only to young consumers stepping back from drinking alcohol, and it has already taken steps in different directions. Prathana Prakash (Fortune, [1]), describes three types of actions that have helped Diageo to thrive (worldwide) in the past few years. First, the company is ‘not confined‘: it remains attentive, for example, to the changes in drinking habits of young consumers or differences in preferences between regions; in particular, it identified increased popularity of cocktails — yet, due to the withdrawal from alcohol, it has also given rise to mocktails, cocktails that use alcohol-free versions of spirits (read more in Diageo Bar Academy on Alcohol-Free Drinks). Second, Diageo is ‘reading the room‘ and confronts new challenges: it noticed, for example, that consumers were creating their own drinks at home and were making new uses of liquors, such as adding Baileys to cakes; one of the more critical challenges (not only for Diageo) is creating non-alcoholic drinks that are flavoured like their familiar origins (e.g., Guinness 0.0). Third, Diageo is ‘living and brewing history’: meaning that the company is employing recent technologies to create new beverage options & solutions while respecting traditions; it involves engagement in learning consumer preferences and personalisation, AI-based online research for studying trends (e.g., see [6]), and developing solutions for improved sustainability in production. [1] Since late 2024 these efforts of Diageo are cast by shadow, and it is yet to be seen how those kinds of actions help the company and its brands overcome recent challenges and thrive again.

• In an interview with Rodney Williams, president of Diageo, (at the BRITE ’23 conference of Columbia Business School), Williams talked about challenges of innovation, sustainability (“it needs to be anchored in the business priority”), social issues, and adaptability to preferences of younger generations. He noted how the insights they could learn from observing behaviours of consumers at home (e.g., how they use and connect with brands) were different from what is found in interviews. Williams also referred to the impact of the pandemic on drinking in public places versus at home. He refers to NA drinks, particularly the development of Guinness 0.0, during the Q&A session.

A crucial issue challenging producers of beers and spirits for some time is creating non-alcoholic drinks that are appealing to consumers, especially by reminding them vividly enough the taste of the original alcoholic drinks used as their inspiration. In the case of beers, the segment of NA beer is growing, and it is no longer considered a niche. Non-alcoholic beers have existed before our days, but they had various deficiencies with the appeal of their taste and similarity in flavour to the familiar drinks. Therefore, the focus of the challenge in more recent years was on taste and feel. The beer maker AB InBev (based in the US and Belgium, AB stands for Anheuser-Busch) has researched this problem since 2010; in its Global Innovation and Technology Center (GITECH) engineers have worked “to create a formula for zero-alcohol beers whose taste is virtually indistinguishable from alcoholic versions” [4]. It took AB InBev until 2020 to introduce Budweiser Zero whereas Heineken launched its first NA beer already in 2017. AB InBev has been working to retain the flavour, aroma and scent of their beers in NA versions of more of their beer brands (e.g., Corona) [4]. The zero-alcohol version of Guinness, Guinness 0.0, was launched by Diageo in October 2020 (presented as “the Guinness with everything except alcohol“). While the NA beers still make a tiny fraction of the market, their sales grew ten times as fast as those of alcoholic beers since 2018 [4].

The industry of alcoholic drinks is in a transition period as the dispositions, preferences and behaviours of consumers are evolving and re-forming. The younger generations of the late 20th century and early 21st century no longer approach drinking alcohol as do former generations. Drinking wine, spirit or beer beverages is apparently not seen as ‘cool’ or ‘prestigious’ as before. However, consumers continue to enjoy drinking alcoholic beverages, though more moderately, while the occasions for drinking (e.g., daytime or evening; pub/bar, restaurant, office or at home) and types of drinks (e.g., cocktails) change; and when consumers want to retain the experience and feeling without having the alcohol, they turn to their non-alcoholic simile versions.

Amid those changes, Diageo is in a hard spot these days with salient challenges to overcome in order to create and offer appealing and satisfying options in the new scene of drinking habits while socialising, celebrating or unwinding. But Diageo is evidently not complacent and is continually studying the market landscape and looking for new and different avenues to develop the right answers and to ensure its longevity. While it seems that the company needs to act faster in coming months, it should also be acknowledged that this could require an effort for the long run.

Ron Ventura, Ph.D. (Marketing)

References:

[1] “Diagio in Bloom“, Prathana Prakash, Fortune (Europe), February/March 2025, pp. 35-39

[2] “Diageo Non-Alcoholic Spirits Are Up by 56%, Outperforming Its Alcoholic Brands”, Robb Report (Jonah Flicker), 6 February 2025 (ISWR is a provider of data on global drinks.)

[3] “Diageo Acquires Non-Alcoholic Spirits Brand Ritual“, Food Dive (Chris Casey), 30 September 2024

[4] “Young People Are Drinking Less Alcohol. Can CEO Michel Doukeris Persuade to Keep Drinking AB InBev’s Beers?”, Vivienne Walt, Fortune (Europe), February/March 2025, pp. 6-9

[5] “Understanding Consumer Behaviors: The Forces Reshaping Drinking Habits“, Jonathan Dore (contributor), Quirk’s Media, 3 June 2025 (Dore is executive VP & founding partner at Reach3 Insights.)

[6] “Diageo Finds Young Consumers Want to Drink in Moderation“, Sara Karlovitch, Marketing Dive, 10 January 2025