Millennials are dragging down beer sales — but Gen Z marks a ‘turning point’ that will cause an even bigger problem for the industry

  • Generation Z is the first generation to prefer other types of alcoholic drinks to beer, according to a new report.
  • The generation is also drinking less alcohol in general – in part because it doesn’t think drinking is “cool” anymore.
  • Millennials kicked off beer’s downward spiral.

While millennials have been blamed for beer’s downward spirals, it seems that the next generation may be even worse news for the industry.

A report from Berenberg Research found that members of Generation Z preferred spirits (like vodka or gin) and wine to beer.

“Generation Z marks a turning point, being the first generation to prefer spirits to beer,” analysts led by Javier Gonzalez Lastra wrote in the report.

While the exact year dividing Gen Z from millennials can be murky, Berenberg surveyed more than 6,000 people ages 16 to 22 across the US to determine the generation’s approach to drinking.

beer draught full hands

Michael Dalder/Reuters

Like millennials, the younger generation seems to appreciate the perceived quality of other options while seeing beer – especially from some bigger brands – as inauthentic and unappealing.

Beer companies have also historically focused advertising to white men. This strategy is now backfiring, as women of all races, as well as black and Hispanic men, are now drinking more alcohol compared with earlier generations. As a result, beer-industry giants are scrambling to win over customers they historically ignored.

At the same time, Gen Z overall is drinking less alcohol than the generations before it.

Berenberg found that respondents in their teens and early 20s were drinking over 20% less per capita than millennials did at the same age. And 64% of Gen Z respondents said that they expected to drink alcohol less frequently when they grew older than today’s older generations do.

Gen Z respondents said they drank less because of health and hangover-related concerns as well as because of worries about being judged by friends or parents, according to Berenberg analysts. Plus, 16- to 22-year-olds apparently just don’t think drinking is that cool anymore.

“Twenty years of anti-drug, anti-smoking and anti-alcohol education has done its job: it is no longer ‘uncool’ to not drink or take drugs,” Berenberg analysts wrote in a beverage-industry report published in September.

While that may be good news for Gen Z’s long-term health, it’s bad news for the beer industry.

Beer penetration fell 1 percentage point in the US market from 2016 to 2017, while both wine and spirits were unmoved, according to Nielsen data. Beer already lost 10% of market share to wine and hard liquor from 2006 to 2016.