Ups and Downs of Alcohol and Coffee

by Jake Leonti

Alcohol and coffee are two of the world's oldest beverages and have shared many parallels over the ages. Both have been outlawed at various times in various nations. Despite some of these similarities, they have both existed at opposite ends of the spectrum. Coffee lives in the daytime since its primary function is to wake you up and make you more alert, referred to as an upper. Alcohol lives in the evening and nighttime since its popularity is born from making you less alert and uninhibited, referred to as a downer. Nighttime has its bar tenders, and daytime has its baristas, and never the two shall meet- until now.

That could be a bit dramatic; people have been mixing coffee and booze for some time. Irish coffee, to name one. They have not coexisted on such a large scale as the current trend saturating all the major booze brands. We all expect to see Kahlua and coffee though it was a slight surprise when the new Irish coffee was a Guinness cold brew shandy. Rum Chata put out a cold brew boozy product recently. Even Pabst Blue Ribbon, the least innovative alcohol brand on the market, put out a hard-coffee can at 5% ABV with the flavor of a coffee milkshake.

The alcoholic beverage industry has been a juggernaut for decades and the companies in this space grow incredibly wealthy beyond the realm of what most coffee brands will ever hope to achieve. So, why is the booze biz suddenly doubling down on coffee? The hard truth is that the adult beverage industry is in the middle of a steep decline. Alcohol is currently more than just a downer in the physiological sense. According to the Morning Consult reports, statistics show a decrease in spending on alcohol between 2021 and 2022, down over 30% in most categories, including craft and non-craft beer and hard seltzer. The declines over the same period for liquor and wine were down 26 and 27%, respectively. (May 9, 2022, Emily Moquin)

The pandemic has played a large part in this decline; however, it was a long trend that started well before the pandemic. In 2020 CNN reported on a study conducted between 2002 - 2018 that revealed that younger adults between 18-22 abstained from drinking by an increase of 6% from the previous ten years. Alcohol abuse amongst this age group decreased by roughly half. (CNN, Oct. 2020, Hunt)

The recent steep decline in alcohol consumption is cited as three main reasons. One is that alcohol is not seen as a daily necessity, and the rise in the cost-of-living over the last two years has driven sales down. Another reason is that more people, specifically millennials and Gen Z are more health and wellness-focused. Lastly, there are fewer social occasions for drinking. In an article from the BBC, they have explained the mentality of Gen Zers becoming "sober curious", where they experiment with going out to the night club sober as a conscious choice.

The data is in, and it is clear that as our society becomes more health and wellness-focused, they are choosing alcohol less. By the same token, when money is tight, people continue to see coffee as a daily necessity, and alcohol does not fit that description.

Coffee, by contrast, has been on the rise for the last two decades and shows no indication of decline. Specialty coffee, in particular, has steadily grown over the last twenty years and finally achieved the majority of coffee consumption in the US.

The National Coffee Association reported in September 2022, "overall past-day coffee consumption (66% of Americans over 18) remains at the two-decade high first reached in January 2022. Coffee is more popular than any other beverage, including tap water and is most popular in the Northeast, where 72% of adults have had a coffee in the past day."

With a clear upward trajectory in the coffee market, it is no mystery why adult beverage is getting on board the train. The margins and overall revenue potential in coffee are still lower; however, if alcohol can pick up a piece of the coffee industry's market share, then it is a boost to them.

This strategy hit a saturation point with the Smirnoff signing up as a global sponsor for Allegra Events, which is responsible for the London Coffee Festival and all the additional cities under the same name. In addition, Smirnoff will sponsor the Martini bar and make craft espresso martinis at all the shows in 2023. This is a significant investment in the coffee industry and marks a milestone as Smirnoff promotes their involvement as much as Allegra.

This overlapping engagement is not a one-way street. As adult beverage declines, there is an opportunity to capture new customers moving into the sober space of coffee. One way to leverage this shift is by creating a cross-over product on the coffee side. In 2019 La Colombe was ahead of this trend when it introduced its hard-cold-brew-coffee. Last year Fire Department Coffee launched a line of "spirit-infused" RTD coffee drinks, including a bourbon-infused Vanilla Bean Bourbon and, of course, a whiskey-infused Irish Coffee.

There is a clear shift in the market, and there are various ways to capitalize on this trend. As we just passed the Equinox, the trend is moving toward longer days and shorter nights, which is always positive for coffee but may come at the cost of alcohol.