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Highlight Summary:
- Changing Consumer Preferences: Younger generations are shifting away from alcohol, prioritizing health-conscious, low-alcohol options, and non-alcoholic experiences. The proportion of 18-24-year-olds abstaining from alcohol has risen significantly, contributing to a decline in overall liquor sales.
- Economic Pressures Impacting Sales: Higher cost-of-living and inflation have led consumers to limit discretionary spending, including on alcohol. As a result, both independent and large liquor retailers are seeing lower sales, with consumers opting for cheaper options.
- Challenges for Major Liquor Retailers: Companies like Endeavour Group (ASX:EDV) and Coles (ASX:COL) are facing reduced earnings in their liquor divisions, with forecasts indicating a difficult year ahead for the industry. Consumers are spending less on premium alcohol, which is impacting both independent and large-scale retailers.
The Australian liquor industry is experiencing a significant downturn as evolving consumer preferences and broader economic pressures dampen alcohol sales. Andrew Crompton, owner of Act of Wine in Melbourne, has felt the effects of a declining market, with sales decreasing over the past 18 months. Operating his store alone, Crompton notes that younger generations are increasingly choosing low-alcohol and non-alcoholic alternatives, a trend further fueled by the cost-of-living crisis.
Data from the Australian Institute of Health and Welfare highlights a long-term shift, with 23% of 18-24-year-olds now abstaining from alcohol, up from 13.1% in 2007. This reflects a broader cultural shift, as young people increasingly prioritize spending on essentials and experiences over alcohol.
Liquor sales are also down due to economic pressures, with consumers cutting back on discretionary purchases. Both independent retailers and large chains like Endeavour Group (ASX:EDV) and Coles (ASX:COL) are seeing the impact. In August, Endeavour Group flagged weaker market conditions, and Coles reported a 6.5% decline in earnings from its liquor division, reflecting a broader trend of reduced spending on alcohol.
This decline in alcohol consumption and sales points to a challenging year ahead for the liquor industry, as shifting consumer habits and economic pressures combine to create a tough environment for retailers.
