Champagne is typically the alcohol of choice for New Year's Eve festivities but this year, it has some competition, according to one expert.
"Something interesting happening this year is that in the month of December when we compare year-over-year, we're actually seeing that prosecco is experiencing quite significant growth, about a 20% increase, while champagne is seeing a 4% decrease," Drizly Head of Consumer Insights Liz Paquette told Yahoo Finance (video above). "So while we're still anticipating that champagne is going to likely take that top spot for New Year's Eve, we expect some consumers to be turning to prosecco and some other alternative sparkling wines this year."
Sales of high-priced drinks like champagne has been slowing. High inflation has changed consumer behavior as customers either trade down or opt for alternatives. Additionally, last year's supply chain crisis caused a champagne shortage, which drove up prices of bottles.
The average price of champagne this year is $55.85 but it can cost up to $73 in some states, whereas prosecco costs an average of $14-$20.
Since 2020, a 750-milliliter bottle of champagne has seen a 25% increase in the average unit price. Over the past year, it's grown by roughly 6%. Meanwhile, Paquette noted, growth is "a little bit on the softer side" for prosecco, which is why many consumers are turning to it as an alternative.
Don't count out spirits
Despite growing demand for cheaper sparkling wine alternatives to champagne, Paquette said that other liquors like spirits shouldn't be counted out either.
"Consumers do definitely purchase spirits and spirit accompaniments to make cocktails on this holiday," she said. "We see pretty significant increases in liqueurs, cordials, schnapps [along with] pretty significant growth in tequila, in particular."
According to the Distilled Spirits Council, tequila saw record growth in its market share in 2022, dominating the distilled spirits industry with $1.2 billion revenue,
Low-alcohol and flavored ready-to-drink (RTD) cocktails are equally becoming popular. Between 2020 and 2021, that market segment grew by $16 million.
RTDs provide variety in taste with minimal to no preparation, and manufacturers can alter the products based on consumer demands. The average price of an RTD tequila margarita can cost about $5, and tequila-based RTDs are the fastest-growing category, according to Paquette. This is essential for manufacturers as alcohol expenditure has decreased, according to data from Morning Consult.
"Ready-to-drink cocktails are experiencing a moment just like hard seltzer did a couple of years ago," Paquette said, adding: "I would expect to see lots of consumers buying up ready-to-drink cocktails as well for the holiday. So if someone's looking for something a little bit easier and not wanting to mix up those cocktails themselves, that's going to be another option for folks as well."
Non-alcoholic spirits, wine, and beer are also becoming increasingly popular, according to Paquette, with millennials and Gen Zers leading the way. Data from the Drizly platform indicates that non-alcoholic wines have seen a 500% increase in the share of sales on its site.
"We're anticipating this is a trend that's here to stay for quite some time," Paquette said. "This category is really just getting started. The sky is kind of the limit there."
Tanya is a data reporter for Yahoo Finance. Follow her on Twitter @tanyakaushal00.
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