Yahoo Finance

Key Takeaways

• Young American adults are consuming less alcohol than prior generations, and beverage-company executives have different ideas about what's driving the change.

• Many young people are holding back because of economic pressure, said Lawson Whiting, CEO of Brown-Forman, at an event this week.

• New attitudes toward alcohol may be playing a bigger roles, said Bill Shufelt, CEO of the nonalcoholic beer company, Athletic Brewery.

Is drinking on the rocks?

American young adults are consuming less alcohol than prior generations, and beverage-company executives have different ideas about what's driving it: tough-but-temporary economic conditions or more enduring cultural change. Either way, they say, the industry is seeing shifts in buying behavior.

A Gallup survey released last year, for example, reported a higher likelihood that young adults will note health risks associated with alcohol—and drink less of it. Americans’ perceptions of alcohol have changed more significantly than the industry realizes, said Bill Shufelt, CEO of nonalcoholic beer company Athletic Brewery, at a UBS conference this week in Manhattan.

Nearly half of Americans have indicated on surveys that they want to drink less, Shufelt said, and that desire is particularly widely held among millennials and Gen Z, who he said are better-educated on health issues and have more alcohol-free options to choose from.

Half of millennials and 60% of Gen Z refrained from drinking for a week or more over a six month period in 2024, according to surveys conducted by global insights and data firm IWSR.

“These are probably big, big generational headwinds in perception out there that I think are just in the very early innings,” Shufelt said. “That message has not gotten through from consumers back up the chain yet.”

Morgan Stanley analysts earlier this month downgraded shares of Brown-Forman (BF.A; BF.B), which makes Jack Daniels, saying in a note that "we don't expect the US spirits category to return to its historical 4%+ growth rate amid structural pressure from demographics (Gen Z drinking less), health/wellness/ moderation trends (including GLP-1 impact), and cannabis."

For Some Younger Americans, It May Be More About the Money

Some of the reasons for changing tastes may be more transitory, Shufelt said, citing economic pressure and rising alcohol prices. He said legacy alcohol companies can still reach people, and alcohol—“a 5,000-year-old trend"—isn’t on the brink of becoming irrelevant.

Alcohol spending has fallen among younger Americans, said Lawson Whiting, CEO of Brown-Forman, at the UBS event. Health concerns aren't the main reason this demographic is holding back, he said.