Alcoholic Drinks in Germany - 2024 Market Summary
Alcoholic drinks in 2023: The big picture
Following the upheavals witnessed in previous years linked to the pandemic, and a major rebound for on-trade sales due to the full reopening of foodservice outlets in 2022, thereby boosting overall volume sales growth of alcoholic drinks in Germany, total volume sales in 2023 continued to normalise with a marginal decline. As in previous years, growth was undermined by the shift towards more moderate alcohol consumption among young adults, with the longer-term trend of a decline in beer sales remaining apparent. Domestic premium lager - highly mature in Germany with strong penetration - continued to experience declining volume sales, highlighting limited potential for recruiting a new generation of consumers.
RTDs continued to record a solid performance, driven by spirit-based options and fuelled by greater product diversity, continuous product innovation and promotional offers. Most notably, RTDs using flavours other than cola, such as lemonade and fruits, to replicate cocktail recipes helped increase consumption occasions, for both on the go and at home, thereby attracting a wider target audience.
Value sales growth was undermined by low consumer confidence in 2023, as the German economy contracted and inflation remained at a historically high level, making consumers highly sensitive to prices. This led to a rise in the share of discounters as a distribution channel at the expense of drinks specialists and supermarkets.
2023 key trends
Non alcoholic beer, spirits and wine continued to see a rise in popularity, driven by the growing demand from consumers seeking to reduce their alcohol intake. The rapid growth of non alcoholic spirits continued to be supported by growing awareness of these drinks among consumers and through greater visibility in grocery retailers, notably supported by promotional activities for the two leading gin brand extensions; Diageo-owned Gordon’s 0.0 and Tanqueray 0.0. Non alcoholic wine also continued to record solid growth in 2023 and to emerge as a distinct segment. Following the successful launch of Doppio Passo as a non alcoholic red wine, Rotkäppchen-Mumm Sektkellereien launched an extension of the range with a white wine option in early 2024. Brands of non alcoholic beer continued to be supported by new product activity, including the launch of flavoured beer, Krombacher NaturRadler 0.0%.
RTDs continued to record strong volume sales growth in 2023, with the category’s performance mainly driven by the rising popularity of spirit-based options. Their convenience makes them particularly suitable not only for on-the-go consumption but also for drinking occasions at home. New products continued to generate interest in spirit-based RTDs among retailers and consumers, notably with recipes that replicated well-known cocktails.
Although higher prices often encouraged consumers to purchase alcoholic drinks less frequently or in lower quantities, the ongoing trend towards premiumisation continued to support value sales growth, notably due to the rising demand for craft spirits and limited editions.
Competitive landscape
The competitive landscape of alcoholic drinks in Germany remained fragmented in 2023, reflecting the dominant presence of local and regional brands in beer. For instance, the total volume share of overall industry leader Radeberger Gruppe remained below 10%, built through the ownership of around 60 regional, national and international brands.
Within spirits, Diageo Deutschland overtook both Campari Deutschland and Pernod Ricard Deutschland to claim category leadership, due to its strong position in the growing Scotch whisky space and by strengthening its leadership of cream-based liqueurs with the Baileys brand.
Private label regained some lost share, notably in wine, in 2023, with the two largest chained discounters Aldi and Lidl strengthening their positions.
Retailing developments
As Germany entered a recession in 2023, while inflation remained at a historically high level, consumers were highly sensitive to price increases, which led to a higher proportion of sales through promotions and a rise in the share of discounters as a distribution channel across major alcoholic drinks categories. This was to the detriment of drinks specialists and supermarkets, which focused on a more premium assortment.
The steady growth of e-commerce as a distribution channel for alcoholic drinks, which accelerated in 2020 and 2021 in the first two years of the pandemic, was marginally reversed in 2022 and 2023 as consumers switched to channels offering the lowest prices and immediate purchase opportunities.
On-trade vs off-trade split
Following the strong post-pandemic resumption of on-trade sales in 2022 when foodservice establishments fully reopened, growth in 2023 continued to be boosted by the further recovery of the channel, albeit at a more moderate pace. However, on-trade growth was largely supported by a favourable year-on-year comparison effect, as the first three months of 2022 were still impacted by the closure of nightclubs under legislation to contain COVID-19.
Despite the positive performance, on-trade volume sales of alcoholic drinks remained below 2019 levels due to the longer-term trend towards more moderate alcohol consumption among young adults than older generations, in addition to the at-home entertainment trend (“hometainment”) and preparing cocktails at home, thereby supporting the dominance of off-trade.
What next for alcoholic drinks?
Amid predicted declines for total volume sales, alcoholic drinks players will be encouraged to focus on a premium positioning combining innovation and authenticity to boost value growth. As raw material and ingredient costs are expected to remain at a historically high level, players may face low profit margins, thereby encouraging them to shift towards premium products.
Non alcoholic wine and spirits are set to offer further growth potential and may continue to be supported by the moderation trend and by new product launches driving a greater product segmentation, including through the launch of new flavours.
Alcoholic drinks brands may attempt to promote via e-commerce platforms, which will allow them to leverage social media activities including personalised offers to boost consumer loyalty. The intense price pressures from grocery retailers, including discounters, also gives a further incentive for alcoholic drinks producers to explore other distribution channels.
Social media campaigns and partnerships with celebrities or social media influencers are also expected to become more widely utilised by alcoholic drinks players to build brand awareness and communicate with consumers directly, while also gathering valuable market insights. Flavour innovation through co-branding partnerships with soft drinks companies is a strategy that could be favoured by alcoholic drinks players as it enables them to leverage the brand equity from soft drink partners.
MARKET BACKGROUND
Legislation
Legal purchasing age and legal drinking age
The legal drinking age in Germany differs marginally depending on the alcohol content of the beverage. Beer, wine and some other low alcohol drinks, can be purchased and consumed at a minimum age of 16 years, or under the supervision of a parent or guardian at the age of 14 years. All drinks with higher alcohol content, such as spirits, and many RTDs and premixes, may only be purchased and consumed at a minimum age of 18 years.
Despite these rules, along with increasing awareness, not only within society in general, but also very much by distributors, alcohol suppliers and manufacturers, (with most campaigning strongly against underage drinking), there remains a high number of teenagers between the ages of 12 and 17 years who consume alcohol on a regular basis.
However, according to a study by the German Bundeszentrale für gesundheitliche Aufklärung (Federal Centre for Health Education) conducted in 2022, the proportion of 12-17-year-olds who have drunk alcohol at least once in their lives has fallen significantly over the last 20 years from 87% in 2001 to 57.5% in 2021. Of the 18- to 25-year-old group, almost all of them (95.4% in 2021) said they had consumed alcohol at least once. In the long term, regular alcohol consumption, defined as weekly consumption, among 12-17-year-olds has declined from 10.8% in 2016 to 8.7% in 2021, following a recent peak at 20% reached in 2007, although the general trend seen since the 1970s, when the survey began, has been of a steady decline.
Although no changes to legislation in respect to the legal drinking age were introduced in 2023, the debate about making it more restrictive continues. The health minister Karl Lauterbach repeated in 2024 his recommendation that alcohol consumption should only be legal from the age of 16 years without exceptions, a view also shared by health authorities in several states including Bavaria, Bremen and Lower Saxony.
However, changes to legislation in respect to the legal drinking age may not necessarily be introduced over the forecast period, as some experts also acknowledged that it may not be the most effective tool to resolve the issues linked to minors purchasing and consuming alcohol illegally. This is seen as an educational and societal issue that needs to be tackled by distributors as much as by parents and guardians.
Drink driving
Driving a motor vehicle with at least 0.25 mg/l alcohol in the breath or 0.5mg/l in the blood is an administrative offence according to paragraph 24a of the Road Traffic Act adopted in 1998.
Road users with a blood alcohol content of less than 0.5 mg/l may be classified as being under the influence of alcohol if they have become conspicuous in traffic or involved in a traffic accident. Starting at a blood alcohol level of 0.3mg/ml, drivers who are involved in an accident or display erroneous driving face fines, the loss of their driving licence, points on the driving offender's record or even a custodial sentence.
Starting at a blood alcohol level of 0.5mg/ml, offenders face even stricter punishments, which, depending on the actual blood alcohol level, involve fines of EUR500-1,500, four points on the driving offender's record and withdrawal of their driving licence, between one and three months. These punishments are implemented regardless of erroneous driving or involvement in an accident. Driving with certain blood alcohol levels (1.1mg/ml or above) is already considered and punished as a crime, possibly even leading to a prison sentence.
Drivers in possession of their driving licence for less than two years, or who are under the age of 21 years, are not allowed to consume any alcohol while, or before driving; their blood alcohol level must be 0.0mg/ml.
The introduction of a 0.0mg/ml drink-drive limit continues to be publicly debated but is unlikely to be introduced over the forecast period, due to widespread opposition among the population.
In 2023, the police registered 37,172 in alcohol-related traffic accidents, compared to 38,771 in 2022. The number of alcohol-related accidents thus fell by 4.1% in 2023 compared to the previous year, but was above the level of 2014 to 2021.
Advertising
Legislation concerning the advertising of alcoholic drinks did not change towards the end of the review period in Germany and remains simple and rather open compared with legislation in other markets. The existing regulations, rules and requirements are mostly voluntary, and are based on self-censorship by players within the industry. However, they all follow a strict code of conduct, which includes not addressing or showing young people, drivers or athletes directly in advertisements, and not targeting young or susceptible people.
Health warnings, such as those for medication or on cigarette packaging, are not required, and there are very few limitations as to where and how to advertise alcoholic drinks in the media; the main one being a ban on tobacco and alcohol advertising in cinemas before 18.00hrs.
Under the European Commission’s review of its advertising policy for alcoholic beverages, it proposed introducing mandatory health warnings for alcoholic drinks by the end of 2023, as part of its Beating Cancer plan. This involves labelling alcoholic beverages with mandatory indications of their ingredients and nutritional contents since the end of 2022, although this can be through the display of QR codes on the label.
Smoking ban
A smoking ban in restaurants, bars and pubs in Germany has been in place since 2008, but where it actually came into force depended on the region. There remain several venues in which smoking is permitted, such as smoking clubs, but in general, the smoking ban has now been fully adopted.
Opening hours
In most cities and regions of Germany, there is no general rule or law regulating off-trade sales of alcoholic drinks in terms of specific times.
The opening hours of retailers differ across Germany, with federal states being permitted to create their own rules and regulations. Overall, opening hours have become increasingly flexible, and are very often extended to 22.00hrs for supermarkets, hypermarkets and discounters, or even allow 24-hour opening for certain stores Monday-Saturday, with limited permission for opening on Sundays. Studies show, however, that the impact on grocery sales is marginal.
In some regions, mostly within Bavaria, new and more restrictive regulations have been introduced for forecourt retailers, only allowing them to sell alcoholic drinks after 22.00hrs to people driving there – pedestrians or people on bikes are not allowed to purchase alcohol from forecourt retailers after this time.
In other regions, forecourt retailers, kiosks and specific convenience stores, usually in highly frequented areas, benefit from extended opening hours and permission to even open on Sundays.
On-trade establishments
The number of restaurants, cafés and bars notably improved in 2023, marking a turnaround after the crisis of the previous years due to the pandemic. The legal restrictions on foodservice outlets opening as a result of the pandemic, including the temporary closures of some types of on-trade establishments, for example, implemented for nightclubs until March 2022, also created additional challenges and led to some permanent outlet closures.
Despite the industry’s marked improvement in 2023, sales remained below the level of 2019, and it came too late for some of the most vulnerable foodservice outlets, especially among small independent operators, forcing them to close permanently, with bars/pubs and full-service restaurants most impacted by closures. Changing consumer behaviour accelerated during the pandemic, such as the shift towards home entertainment and remote working, resulting in a lower number of transactions for foodservice outlets.
The higher costs of preparing food and drinks, linked to increased energy costs and higher prices for ingredients, undermined the profitability of a significant proportion of foodservice operators or forced them to raise prices and risk alienating some of their customers.
In terms of opening hours, restrictions differ across Germany; usually, however, there are no explicit regulations with respect to opening hours, unless the outlet is in a residential area or outdoors. Restrictions on the opening of on-trade outlets for on-premises consumption has, however, led to a stronger focus on takeaway services.
TAXATION AND DUTY LEVIES
Following a temporary reduction of the VAT rate from 19% to 16% in the second half of 2020, the VAT rate reverted to 19% on 1 January 2021.
OPERATING ENVIRONMENT
Contraband/parallel trade
Contraband sales and parallel trade continue to play a negligible role in alcoholic drinks in Germany. Due to the low prices and margins on alcoholic drinks in the country, these sales are of low relevance. Local consumers are also highly concerned about the quality and potential health hazards of contraband alcoholic drinks, especially considering recurring media reports regarding lethal incidents related to badly-distilled spirits.
Grey market imports, especially of beer from Poland, usually conducted by small, privately-owned retailers such as kiosks, certain convenience stores and independent forecourt retailers, have been made easier since the easing of cross-border travel following the legal restrictions implemented during the pandemic.
Duty free
Duty free sales also play a minor role in alcoholic drinks in Germany. Airports offer relatively low-priced alcoholic drinks for international travellers to maintain and increase volume sales; however, these are not available for travellers within Germany or the EU to regulate competition within and across EU member states. Strict regulation limiting the amount of duty free alcohol that can be imported into Germany is another reason duty free sales remain marginal in Germany. At the end of the review period, international travellers arriving in Germany were only allowed to import one litre of spirits with an alcohol content above 22%, or two litres of spirits with an alcohol content below 22%. In addition, the import of four litres of still light grape wine and 16 litres of beer was duty free.
After the historically low inbound and outbound traffic to and from Germany recorded in 2020 and 2021 due to restrictions linked to the pandemic, the travel industry and duty free sales continued to recover in 2023, as passenger numbers at German airports recorded a 18.5% increase compared to 2022 to reach 196.9 million. However, this number remained below the peak reached in 2019 with 227 million passengers.
Cross-border/private imports
Cross-border trading has a limited impact on the German market, although it is significant in areas close to the border with the Czech Republic and Poland where processes for alcoholic drinks tend to be lower. While grey imports were slowly increasing in the years prior to the outbreak of COVID-19, this mostly affected border regions, as the price difference is not high enough to justify long-distance transportation.
Following a strong decline in 2020 and 2021 due to restrictions on cross-border travel, they recovered strongly in 2022. Private imports of alcoholic drinks from Germany are mainly conducted by countries with much higher prices for these products, such as Austria, Switzerland and Denmark. In particular, beer is often bought in large quantities by shopping tourists.
KEY NEW PRODUCT LAUNCHES
Non alcoholic products remained a particularly active area for new products across most alcoholic drinks categories in 2023, including in beer with the introduction of the flavoured lager Krombacher NaturRadler 0.0% and in wine with the launch of the red Doppio Passo as a non alcoholic red wine. In the emerging nascent non alcoholic RTDs, a significant new brand entry in 2023 was Tanqueray 0.0% & Tonic.
New products featuring flavours with a refreshing taste geared towards summer consumption are becoming increasingly prominent within RTDs, for example, with Bacardi introducing Limon & Lemonade and Piña Colada to meet this demand in spring 2023.
Outlook
As sustainability is expected to be increasingly at the forefront of consumers’ concerns, it is expected to take on a more prominent role in shaping ingredients and packaging, especially among premium brands. In early 2024, the wine brand Cleebronn & Güglingen launched The Bottle and the organic wine specialist Riegel introduced Pfandtastico, with both using returnable glass bottles.
The offer of non-alcoholic spirits is expected to become increasingly varied beyond gin alternatives to encompass products positioned as non alcoholic liqueurs, rum and other spirits, as illustrated by the early 2024 launch of the non alcoholic cachaça Pitú 0.0 by Semper idem Underberg.
Premium RTDs remains a niche with untapped growth opportunities, which manufacturers are likely to explore through new product launches over the forecast period. Wine-based RTDs will potentially benefit from the growing popularity of apéritif drinks to focus on natural ingredients and sustainable sourcing.