If Kombucha’s the New Tequila, What’s Next for Alcohol Brands?

Last month, Kylie Jenner announced that she was pivoting her canned cocktail brand Sprinter into an electrolyte drink called K2o, joining a booming functional beverage market that’s seen prebiotic Poppi secure a $400 million valuation and fiber-packed Olipop rack up over $500 million in sales. The move is part of a broader recalibration facing drinking culture, one where younger consumers are shifting away from alcohol altogether. While this creates fertile ground for functional sodas, non-alcoholic beers and ready-to-drink wellness beverages, alcohol brands are facing a new reality.

“The general state of the [alcohol] industry is suspended animation,” says Spiros Malandrakis, global insights manager of alcoholic drinks at Euromonitor International. According to the market intelligence firm, global alcohol consumption is showing clear signs of stagnation, with industry growth flatlining at just 0.6% in 2024, while only 23% of consumers now drink on a weekly basis. Malandrakis points to a combination of global economic pressures and changing attitudes toward health and longevity as central to this shift.

Some of the industry’s biggest players are feeling the strain. During LVMH’s fourth-quarter earnings call in January, Jean-Jacques Guiony, president and CEO of Moët Hennessy, described a market in flux. “Demand is not particularly well-positioned today,” he said. “When you look, especially at the US, our main market, you can see that all categories are declining across the board — whether it’s tequila or whiskies. The only category that is growing is ready-to-drink, meaning the very low-priced small cans.”

While established wine and spirits groups contend with sluggish sales — Diageo’s fiscal 2025 net sales were down 0.1%, while operating profit fell 27.8% — a new generation of brands is capturing consumer attention through wellness-adjacent products, low and no-alcohol alternatives, premium positionings, and formats designed for younger drinkers. “[The drinks space] is an open field,” says Seyi Oduwole, foresight analyst at The Future Laboratory. “Everything is moving. There’s so much hybridization of products and so many companies doing different things to gain consumer loyalty.”

For maturer alcohol brands, the challenge is clear: they must find new ways of staying relevant with a generation that drinks alcohol differently to those before it. As traditional categories lose momentum, those breaking through are forging connections with consumers through the strategies shaping the industry’s next phase of growth.

For the past few years, premiumization, in which brands push consumers toward more expensive, higher-end spirits, has been the industry’s main response to lower drinking levels and slowing sales. “The main driving force for alcoholic drinks, especially in the West, over the last couple of decades has been the idea that you drink less, but better,” says Malandrakis

“For many younger consumers, premium spirits are becoming less about quantity and more about quality, in the right setting and with the right product,” agrees Roberto Ramirez Laverde, global SVP of Patrón and agaves at Bacardi. He also points to a growing emphasis on scrutiny at the point of purchase. “We have seen in recent studies that more than eight in 10 US consumers read labels before deciding to buy a product, with almost two-thirds (63%) paying more attention to label information compared to five years ago.”

In this environment, provenance and production methods have become central to brand storytelling. “Patrón is one of the few brands that still makes tequila by hand, with just three simple ingredients — agave, water, and time,” Laverde adds, noting continued consumer demand for authenticity and origin. “Innovation remains important, but for Patrón, it starts with credibility and craftsmanship rather than chasing trends.”

This includes drinks aimed at connoisseurs. “For the trade and craft tequila connoisseurs, Patrón 100 is our newest innovation,” he says. “It is a 100-proof, small-batch expression handcrafted to deliver 100% of the blue agave character. It represents the purest expression of what we stand for, pushing the boundaries of what tequila can be for those who truly know the category.” Patrón has centered its marketing on the tequila’s 100% tahona production — a labor-intensive, centuries-old method rarely used at scale — alongside targeting bartenders and enthusiasts through activations such as its Let’s Roll tour, which brought together industry professionals at leading bars across the US to spotlight its craftsmanship.

Patrón margarita, part of their festival-themed ‘Music Sounds Better with Patrón’ campaign.

Still, there are doubts over whether premiumization can play out indefinitely. While Malandrakis argues that the strategy is not disappearing, he believes success is becoming more fragmented under economic and cultural pressure. “This monolithic, one-dimensional approach of ‘Let’s make everything premium’ is reaching its limits in this economy,” he explains. Instead, Malandrakis expects to see polarization between consumers of varying wealth. “The idea is that some people will continue moving more and more premium — the people who can actually afford it — while larger socioeconomic strata will be forced into trading down, or trading across. There will be some consumers who continue going luxury and super-premium, but there are going to be fewer of them.”

The rise of health optimization, driven by longevity and a broader wellness mindset, has reshaped the role of alcohol in both wellness culture and social life. In response, brands are reframing alcohol not as a category to cut out, but to integrate more consciously.

“Consumers still want to enjoy a drink and socialize, but they also want to feel good the next day and make their 8am Pilates or run club,” says Gabriella Lamb, co-founder of mid-strength wine brand 6Percent. “Social connection isn’t going anywhere and neither is the focus on wellness. What’s changing is the idea that you have to choose one or the other.”

In addition to Sip & Potter events, 6Percent have also hosted rosé bottle painting sessions.

She adds that moderation is becoming increasingly fluid rather than binary. “There has always been a sense that consumers have to sit in one camp or the other — you’re either drinking or you’re not. But what we’re seeing now is greater flexibility in how people drink,” explains Lamb. “They move between full-strength, mid-strength, and alcohol-free options within any one evening or social occasion. This is how people are moderating; it’s no longer about being on or off, but about becoming more intentional with how you drink.”

This shift is beginning to show up in purchasing behavior. Recent data from Ocado Retail points to rapid growth in the mid-strength alcohol category: in May, overall sales were up 41% month-on-month and 74% over the past two years. In response, the online supermarket has expanded its mid-strength wine range by more than 200% over the past year, and now offers the largest selection of mid-strength drinks of any UK grocery store.

Beyond retail, mid-strength and alcohol-free options are also on the rise across hospitality venues. Private members’ clubs such as Soho House have expanded their low and no-alcohol menus in recent years, by integrating spirits such as Quarter-Proof and Seedlip to create alternative cocktail options. The Future Laboratory’s Oduwole also points to Spanish restaurant Legado in Shoreditch as an example of innovation in drink formats and experiences. “Legado does a cocktail flight of three sips; it’s just one sip of each, but it allows people to also try new flavors and cocktails that they wouldn’t usually. It ties into both a sense of control, but also novelty and newness,” he explains. “These micro-serves are really good, especially for out-of-home experiences where hospitality, retailers, and venues want to create that sense of ‘we’ll try something different’.”

The shift can not only be seen where people have always drunk, but in the moments that are becoming increasingly core to people’s social calendars. “We’re seeing more community events forming around an activity followed by mid-strength or lower alcohol. For example, run clubs followed by drinks, Pilates and wine evenings, or wellness-focused social events that feel more balanced and intentional,” says Lamb. She points to experiential formats as particularly resonant. “We recently hosted a Sip & Potter event, where guests enjoyed pottery making alongside our 6Percent red and white mid-strength wines. The event completely sold out, and is a great example of how people seek moments centered on mindfulness, creativity, and connection while enjoying a glass of wine and staying present.”

Across the wider luxury landscape, alcohol brands are leaning on cultural credibility. “We are seeing younger consumers wanting to engage with brands that are culturally credible. This creates a more accessible luxury for them, through limited-edition collaborations and cultural partnerships,” says Julie Bramham, global managing director of Diageo’s Luxury Group, which includes Tanqueray, Ciroc, Don Julio, and more.

She points to initiatives such as the Johnnie Walker Vault, an exclusive experience that reframes heritage through contemporary creative access. “The Johnnie Walker Vault — hidden deep beneath the Johnnie Walker Experience in Edinburgh — holds, at any given time, a selection of 500 whiskies from our rare, aged, and ghost casks, personally curated and rotated,” Bramham explains. “From here, [master blender] Dr. Emma Walker blends bespoke whiskies that encapsulate special stories of people, places, and moments in time.”