'The alcohol industry needs to make a distinction between life stage and generational change' - Rabobank VP of beverage research Bourcard Nesin speaks to Global Drinks Intel - Part I

In late April, Rabobank published a research note into today’s younger LDA consumers and their relationship with alcohol. The report, ‘The Real Reasons Generation Z is Drinking Less Alcohol’, was deemed so important by the research group to be made available free of charge. Shortly afterwards, the note’s author, VP of beverage research Bourcard Nesin, sat down with Global Drinks Intel editor Olly Wehring to share more about his findings.

I wanted to start by thanking you for your recent research note, which challenged some of the very negative perceptions about the future for beverage alcohol.

I love that people are finding optimism in my research, but I don’t see it as an optimistic report. A lot of the industry fear has been based on not understanding why young people are drinking less and being unsatisfied with the explanations that were available to them. The encouraging element of what I wrote is that these seem like better explanations – at least we know what we’re dealing with.

There’s reasonable concern about the impact that current trends will have on beverage alcohol volume sales and categories, but at least a brand can identify its challenges.

What was the methodology you used to come to your conclusions?

I come from an academic background, and I don’t consider all surveys to be created equal – A lot of private survey and research institutions don’t ask good questions. When I look at government survey research, there’s a bunch of PhD scientists working tirelessly to create valid survey instruments, in which the questions they’re asking are getting well-calibrated answers.

I used mostly US government data from the National Survey of Drug Use & Health, which has been running for many decades. I also used Bureau of Labor Statistics data on spending to figure out not just whether young people are drinking less, but which young people and why.

Any good industry observer needs to ask a lot more questions before they start creating complex models. That’s one of the big errors in our industry. You need to ask a lot more questions and spend a lot less time sorting through numbers that aren’t actually answering those questions.

The general perception about younger LDA consumers is around their prioritisation of health & wellness and the environment.

I think young people earnestly care about the environment, but that’s on a relative basis; more than half of America voted for Donald Trump, and they included a fairly large share of young people. We can’t say all young people care about any one issue because it doesn’t apply to the totality of that group.

There’s probably a pretty significant gender gap on how much they care about sustainability, the same as there’s a racial or ethnic gap.

On health & wellness, one of the things that inspired this report was that, as young people are so healthy and resilient, it never made sense to me that they would say they care about health. When I was 25, I didn’t think about my health at all! You can drink a bunch of alcohol at 25 and feel fine the next day. Why are these people caring about health? It never made sense to me as the sole explanation for what’s happening.

And it’s not social media; people have always been under pressure to be beautiful. It doesn’t make sense that it would be so astronomically different than it was a few years ago.

At the same time, you can say you care about sustainability, but nobody buys sustainable products that cost more. There’s so much emphasis on these trends that we have inevitably gone way too far down that road.

That plays out in the way young people drink. We think that young people are sober curious, but in reality they tend to drink one or two times a week and they drink because they’re partying. As people age and they have money to spend on alcohol, not as an intoxicant but as a way to relax at the end of the day or as a pairing with a meal, they drink more times per week, but they drink less in each sitting.

The health thing is greatly exaggerated and can strategically confuse companies as to what actual products young people want.

As an economist, I feel you need to think about the difference between stated preference and revealed preference – what they tell a survey person and what they actually buy in the store.

Today, young people, in the US, at least, are far more likely to be obese than they were 20 years ago. So, when they say they care about health, is it because they’re healthier or because they have a health problem that they’re trying to address? I’ve increasingly leaned towards the latter. But their behaviour doesn’t reflect that because they’re young people and their brains aren’t fully formed yet, nor do they have the money to get the support they need.

Could the headline to your research note have been ‘Young people are young people’?

The industry needs to make a distinction between life stage and generational change. On life stage, young people have always been poor, they’ve always drunk alcohol to party and they’ve never really liked the taste of alcohol. These are things that I think the industry easily forgets.

Most of the people building brands and marketing to this group are in their 50s – they forget what it was like to be young.

That said, young people are behaving differently to how young people behaved 25 years ago. We can’t say age is the problem, because they’re drinking less than previous generations did at the same age. A lot of that has to do with fundamental changes in what it means to be a kid. Underage drinking, for example, is no longer a part of culture, not because of a rejection of alcohol as a dangerous thing, but because of the loss of privacy during childhood.

There’s also a demographic change that’s taking place where women are more likely to be college graduates. Having a college degree is the most important driver of alcohol consumption from a demographic perspective, so women are becoming a larger share of the drinking population. Then there’s ethnicity – In the US, Baby Boomers were 72% white, while Gen Z is 50% white. Fundamentally, white people drink more than any other group and they’re a smaller share of the population. Therefore, that’s a big part of the change that’s driven by demographics.

For a beverage alcohol company, when they say they need to do a better job of marketing to young people, they first need to understand what a young person is today.