Why This Matters to Distributors: Beverage alcohol demand remains soft, but Southern Glazer’s Wine & Spirits sees growth concentrating in ready-to-drink cocktails, smaller packages, tequila, premium whiskey, and nonalcoholic beverages. The shift is forcing distributors and suppliers to rethink assortment, inventory and how they reach younger consumers.
The U.S. beverage alcohol market remains under pressure, but Southern Glazer’s Wine & Spirits says the downturn is beginning to stabilize as consumers shift spending toward a narrower range of products, package sizes, and price points.
The beverage distributor expects declines to moderate in the second half of 2026, according to its August “Raise the Bar” report. Southern Glazer’s characterized the market as undergoing both a cyclical and structural reset as consumers change how, when and what they drink.
The shift is producing stark differences within categories.
Ready-to-drink beverages, or RTDs, account for 94% of total spirits volume growth and have gained about three percentage points of category share. Cocktails are generating 92% of total wine dollar growth, while 98% of tequila volume growth is concentrated in products priced from $20 to $34.99. American whiskey priced at $100 or more, meanwhile, accounts for 94% of that category’s volume growth.
The findings point to a market in which growth is increasingly concentrated rather than spread broadly across categories. Southern Glazer’s said RTDs, wine cocktails, nonalcoholic beverages, tequila, smaller packages, and premium products are among the areas showing momentum.
Consumers Shift to Smaller Packages
Package size is becoming a bigger factor in purchasing decisions as consumers look for convenience, affordability, and less expensive ways to try products.
Portable wine and spirits packages of 500 milliliters or less are growing 28%. Within Southern Glazer’s business, 50-milliliter spirits generate 76% of core spirits volume growth, while 200-milliliter and 500-milliliter wine products account for 58% of core wine volume growth.
Beer is experiencing a similar shift. About 66% of beer volume growth is coming from 16-ounce 12-packs, 32-ounce packages and 19.2-ounce singles.
Smaller packages are not solely a response to financial pressure. High-income households contributed 40.1% of the sales growth for small-size spirits and represent 43.2% of buyers in the segment, suggesting consumers also are using smaller bottles for convenience and trying higher-priced products.
Southern Glazer’s describes the trend as a “barbell” market in which consumers are gravitating toward both affordable options and products they consider worth paying a premium for.
The split is particularly visible in spirits. Tequila priced from $20 to $34.99 accounts for 98% of tequila volume growth, while American whiskey priced at $100 or more generates 94% of its category’s volume growth.
For distributors, that increases the importance of inventory mix. Carrying more products does not necessarily capture the growth if demand is moving toward particular package sizes and price tiers.
Younger Consumers Reshape the Market
The industry’s demographic transition is adding another challenge.
Generation Z and millennial consumers now represent 35.6% of households, up from 29% in 2021, and are projected to become the two largest beverage alcohol spending generations by 2035.
But their spending has yet to replace that of older consumers.
Gen Z households increased from 4% of households in 2021 to 7%, but their beverage alcohol spending remains about one-third of baby boomer levels. Wine is particularly dependent on older consumers, with two-thirds of wine drinkers aged 45 or older.
That leaves the industry trying to recruit younger legal-age drinkers while retaining the older consumers who still account for a substantial portion of sales.
RTDs are emerging as an important entry point. Gen Z consumers over-index in the category, and variety packs outperform single-flavor packages across RTD cocktails and hard seltzers. Younger consumers also show stronger preferences for flavored beer and beer cocktails.
Wine presents a more complicated picture. Gen Z wine spending has increased 8% from 2020, with fruit wine, blush and sparkling products showing stronger appeal among younger consumers.
Southern Glazer’s also sees an opportunity to make wine easier to buy. One in four wine drinkers reports experiencing a mismatch between the flavor expected and the product purchased. About 90% of wine drinkers surveyed said flavor scales on labels would help them choose, while two-thirds of infrequent wine drinkers said clearer labels could encourage them to buy more often.
Bars and Restaurants Remain Key to Brand Discovery
The report also shows the continued importance of bars and restaurants in building demand that eventually reaches retail.
Forty-six percent of consumers said bars and restaurants are the best places to try a new brand. Among consumers who discover a brand in those venues, 69% subsequently look for it at retail and 70% continue drinking it during future restaurant or bar visits.
Drinking occasions are shifting, however. Southern Glazer’s said activity-based gatherings and major cultural events are becoming more important, while some on-premises visits are moving into midday and midafternoon. Early evening remains the highest-volume drinking period.
Tequila continues to benefit from social and out-of-home consumption. Household penetration has reached 31.4%, up six percentage points from 2019, while reposado generates 43% of core spirits volume growth when cocktails are excluded.
Nonalcoholic Sales Top $1 Billion
Moderation represents another significant shift in the market, but Southern Glazer’s does not see it simply as consumers abandoning alcohol.
Sales of nonalcoholic beer, wine and spirits exceeded $1 billion in 2025 and are approaching 1% of total beverage alcohol dollar sales. Nonalcoholic beer sales are up 12%, making it the fastest-growing segment within beer and malt beverages.
More importantly for distributors and retailers, consumers are frequently buying alcoholic and nonalcoholic products together.
Southern Glazer’s found 98% of consumers buying nonalcoholic beverage alcohol products and “social tonics,” including THC and CBD beverages, also purchase traditional beverage alcohol. Seventy-three percent of their shopping trips include both types of products, adding $13 to spending per trip.
Distribution is expanding with demand. Nonalcoholic products now account for 3% of menu share and are offered by 53% of national accounts, up 20 percentage points from a year earlier. Southern Glazer’s nonalcoholic spirits are present in 15% of spirits chain accounts, while its nonalcoholic wine is available in 31% of wine chains.
Nonalcoholic spirits remain small, representing 0.3% of total spirits dollars, but the segment has recorded a 54% compound annual growth rate over three years. Nonalcoholic wine sales are up 18%, led by sparkling products.
Southern Glazer’s Adjusts Its Own Sales Model
The changing market is also affecting how Southern Glazer’s operates.
In July, the distributor changed its commercial service model for some independent customers, expanding a hybrid approach that combines field sales, inside sales and digital commerce. The change resulted in an additional 1% of independent customers being assigned to the company’s redesigned Customer Solutions Team and Proof Commerce platform.
The realignment is expected to result in a net reduction of about 1% of Southern Glazer’s U.S. workforce. President and CEO Wayne Chaplin said at the time that the company was redirecting resources toward areas of growth and using artificial intelligence to help adapt its sales model to changing market conditions.
That followed a February workforce reduction, affecting slightly more than 1% of employees, primarily in corporate and back-office positions. The company said the move was intended to streamline operations while preserving investment in strategic initiatives.
The combination of those operating changes and Southern Glazer’s latest market research illustrates the pressure facing beverage distributors. The issue is no longer simply whether overall alcohol consumption is rising or falling. Demand is fragmenting by generation, drinking occasion, package size, and price.
Southern Glazer’s identifies five areas for growth during the second half of 2026: recruiting younger consumers, emphasizing growing formats and drink types, targeting changing consumption occasions, serving both value and premium buyers, and expanding products aimed at moderation.
The distributor expects the market to stabilize. But its data suggest that a recovery will not lift every category equally.
For beverage distributors, the next phase of growth will depend increasingly on identifying which products are growing, which consumers are buying them and where those purchases are taking place.
Do not miss any content from Distribution Strategy Group. Join our list.
Share this article:
