Don't buy into the Gen Z drinking myth, says leading investment bank; good news for Diageo
Last updated: 10:00 12 Mar 2025 EDT, First published: 09:56 12 Mar 2025 EDT
Barclays is pushing back against the idea that Gen Z has turned its back on alcohol. The investment bank says fears of a structural decline in drinking, particularly in the US, are overblown.
It believes long-term consumption trends will reassert themselves, with spirits leading the way. That underpins its 'overweight' rating on Diageo PLC (LSE:DGE), the owner of brands like Johnnie Walker, Guinness and Tanqueray, which has significant exposure to the US market.
Demand intact
The market has latched onto the idea that younger generations are drinking less, particularly in America.
Barclays argues that while underage consumption has been falling for decades, the percentage of 21-to-30-year-olds drinking alcohol has remained steady since the 1990s. Heavy drinking episodes have declined slightly, but overall demand has not changed significantly.
Alcohol consumption in the US grew for nearly 30 years until 2022. The recent dip, according to Barclays, has more to do with inflation and rising interest rates squeezing disposable incomes than any generational shift. It sees no structural reason why alcohol consumption will not revert to its long-term growth rate.
Ozempic fears overdone
Spirits have been gaining market share for years, taking share from beer. Barclays expects that trend to continue, forecasting 5% annual growth. It dismisses concerns that the rise of weight-loss drugs like Ozempic will dent alcohol sales, citing research that suggests any impact will be minimal.
For Diageo, that’s good news. Barclays believes the company is well positioned to benefit as spirits regain momentum. The bank remains positive on the stock, seeing long-term value despite recent weakness.
