Price sensitive: is depremiumisation the future?
Having spent years promoting premiumisation, the global spirits industry now finds itself pushing more affordable options.
Has the decades-long trend of premiumisation in spirits come to an end? While it has clearly slowed – and in some categories is reversing – some analysts have suggested it is evolving rather than disappearing altogether. In the past year there has been much discussion about a movement towards downtrading in the wider alcohol industry, which has been attributed to consumers cutting their budgets due to persistent inflation. In its 2025 preliminary data findings, IWSR noted there were “clear signs that premiumisation is taking a back seat, as TBA [total beverage alcohol] value fell for the first time since 2020, with spirits especially impacted”.
Spiros Malandrakis, Euromonitor International’s global insight manager of alcoholic drinks, believes premiumisation has reached its limits, stating that the industry is facing structural changes, rather than cyclical ones.
The reversal of premiumisation has also been cited by Wine & Spirits Wholesalers of America (WSWA)’s SipSource analysts in the US. Wholesaler depletion data from SipSource in the US revealed that core spirits sales (excluding ready-to-drink) have fallen by 5.7% in value in the 12 months ending 31 March 2026. SipSource attributed the drop to spirits depremiumising across price tiers and key categories, such as Tequila, which faces pressure in the US$50-plus range. In spirits, the US$50-US$99.99 tier declined by 8.8% over the 12 months, while products priced over US$100 fell by 9.3%.
Meanwhile, Marten Lodewijks, IWSR managing director and president, notes that the industry’s biggest players are “shifting tack” after their strategies primarily focused on premiumisation. “Recent restructuring and leadership changes indicate a greater focus on volume, relevance, and more evenly weighted portfolios across price tiers, rather than margin expansion,” he says.
Some companies have chosen to target affordability, including Diageo, as directed by its new CEO, former Tesco boss Dave Lewis, who was given the nickname ‘Drastic Dave’ during his time leading Unilever, where he implemented major cost cuts, including job losses. He appears to be taking a similar stance at Diageo, prioritising what he calls a redesign of the company’s operating framework. In February, just two months into the job, Lewis said in a pre-recorded webcast that the business was “significantly underrepresented” in the mass market, pointing to Nielsen data for the year to 28 June 2025 in the US. “This is both a challenge and indeed an opportunity,” he said. The growing ready-to-drink (RTD) category has been pinpointed as a “significant and profitable opportunity” by the CEO, with the London-headquartered group’s share of the category at around 10%, down “from a high of more than 25%”, he said in the webinar.
In the US in March, Lawson Whiting, CEO of competitor Brown-Forman, told investors that the business would focus on its premium-plus brands and RTD portfolio, and “streamline” the company’s workforce. During the group’s full-year results presentation in June, when asked about whether price levels are a barrier to spirits consumption in the US, Whiting responded: “I think spirits has underpriced over the last decade, not overpriced.” He added that the challenge for pricing is in the on-premise, where spirits prices have been hiked up by businesses to support rent and higher wages.
Staying the course
Brown-Forman has reiterated its plan to focus on premium-plus brands rather than chasing the mass market. As Whiting told analysts in the full-year call: “You still have super-, ultra-premium price brands that are doing well, and that’s [for] a consumer that isn’t so price-sensitive. We’re not very exposed to the lower-end products, and that’s kind of been a debate over the last year, really. Should we have more exposure in that space? I don’t expect that we’re really going to chase that kind of volume.”
There is still a market for high-end products, however, as noted by both Malandrakis and SipSource analyst Dale Stratton. “It’s not like 100% of the consumers are de-premiumising,” Stratton says. “There are still consumers out there, they’ve tried these products, they like these products, and they’re buying them, and they continue to buy them.”
For Stratton, the category that has seen the biggest change in premiumisation is Tequila, talking specifically about the US market. To paint the picture, he says that the category saw huge growth rates during the Covid era, at a time when “consumers saw no negative impact to their income” and they were subject to restrictions on travel and eating out. This disposable income benefitted luxury Tequila, Stratton says, adding: “If you look at the last 15 years, the amount of premiumisation that occurred in the Tequila category is phenomenal.”
The Tequila sector has been in a particularly strong position, where it has taken share from other sipping spirits such as whisky, rum and Cognac, while also benefitting from its popularity in cocktails. Stratton points out that the Tequila-based Margarita is the biggest-selling cocktail in the US, while Palomas are also gaining traction.
The latest SipSource figures showed that the US$50-US$59.99 Tequila segment was down by 8.9% in volume and by 9.6% in value in the 12 months to March 2025. The US$100-plus tier plunged by 16.5% in volume and by 14.9% in value. He says a lot of consumers have moved from the US$30-US$50 tier to US$20-US$30 segment because “current economic conditions are pretty uncertain in this country”.
In turn, there have been some pricing shifts among Tequila players, who have turned to discounting to shift inventory alongside the cost of agave dropping.
Categories like vodka have been more resilient, with Stratton saying the opposite is happening. “We’re not seeing a whole lot of depremiumisation in the vodka category. It’s pretty stable, and sometimes we’re actually seeing a little uptick,” he says, adding that there is some premiumisation taking place in vodka.
Demand for smaller bottle sizes has also been led by the “cash-flow-budget-driven consumer”, says Stratton, rather than historically the larger 1.75-litre (1,750ml) bottle. Diageo’s CEO also noted the momentum behind small formats in his February webinar. “As economic pressure has found its way into the US category, we see a downtrading to smaller pack sizes,” Lewis said. “And if you look at US spirits, 9% of the market is now in those pack sizes. But Diageo’s portfolio is only contributing 5% from that particular segment. Again, an opportunity for Diageo.”
Weighing in on the structural versus cyclical debate, Stratton is in the structural camp. “Having seen many, many downturns, the thing that is different here is really that this is a consumer-driven downturn,” he says.
He also highlights that people of his generation and previous ones in the US made up “a very robust drinking society. We’re ageing out of the category. We are not replacing the same amount of volume with people who are entering the category.”
The demographic changes identified by Stratton are reflected in IWSR’s long-term forecasts. Global annual per capita litres of pure alcohol is expected to drop by half a litre by 2035 – equal to two bottles of spirits or a case of wine per person on a yearly basis, according to IWSR.
By 2035, IWSR forecasts global consumption of spirits will fall by 2%, with wine to see a bigger drop (14%), and beer dipping by 1%.
Stratton is optimistic about the future of the alcohol industry: “It’s really important that we all realise that we’re going to be a healthy category, a good category again. That’s beer, wine and spirits. We’re here forever. It’s just going to be a little bit smaller.”
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