The Changing Face of Drinking
I remember in one of my economics courses in college the professor saying something like, “Even if you had a billion dollars, you couldn’t create something that would be able to compete with Coca Cola.” The line was about competitive moats, and how many of the best companies in the world operate in industries or product lines that are so complex or have such significant start-up expenses or switching costs that it is very difficult for an upstart company to make any inroads. Warren Buffett, widely considered to be the most successful investor of all time, has often said that a strong economic moat is one of the key things he looks for when investing in a company.
Coca Cola has always had a strong moat. First and foremost, it is because Coke essentially created the product line from scratch, so they have had a decades-long headstart. But it is also due in part to the way Coke structures its empire of bottling and distribution, not to mention the fact that Coke has steadily gobbled up other brands to add to its portfolio over the course of time. People generally know Sprite is a Coke product, as is Fanta. But Coke also owns Dasani, Smartwater, Powerade, Body Armor, Vitamin Water, Minute Maid, Fuze Tea, and close to 200 other brands and products. Coke also has a large equity stake in Monster Beverage, which is the leader in one of the fastest growing drink segments: energy drinks.
There really is no other Coca Cola company (although Pepsi is close and uses a lot of the same principles and techniques), so it’s not really fair to compare here. But something I have been struck by lately is how much drinking habits appear to be changing. In fact, that is the primary reason why Coke has diversified into so many different areas of the drinking world. Rather than be undercut by bottled water, for example, Coke has scooped up some of the top brands in that category and made them their own.
Americans (and, indeed, people around the world) still drink a great deal of soda, but consumers have become more conscious of sugar, calories, ingredients, and overall health, which has gradually reduced the dominance of traditional full-sugar soft drinks. GLP drugs that are changing tastes and drinking habits are having an impact too. At the same time, people have many more alternatives than they once did, including bottled and sparkling water, energy drinks, sports drinks, flavored seltzers, protein drinks, bottled smoothies, and all the rest. My favorite beverages of late have been Bai drinks (owned by Dr. Pepper/Snapple) and Poppi sodas (owned by Pepsi).
The Changing Face of Alcohol
What the world of sodas and sugary drinks has demonstrated is that drink choices have become much more fragmented (see last week’s article about changing habits around TV consumption, by the way, for a similar cross-industry comparative case). Nowhere is this more evident than in the universe of alcoholic beverages, however.
Before diving into the fragmentation question, however, it’s worth noting that in what feels like an increasingly unhealthy world where successful public health stories are few and far between, Americans are actually drinking less alcohol than they have in previous times, which is unequivocally a good thing. I’m not trying to cast judgment on drinkers here (I am one!), but alcohol consumption is tied to virtually every major healthcare issue, as well as so many decidedly negative social habits like domestic violence, problematic gambling, and child neglect. If Americans could collectively drink less, we’d all be better off.
And there is good news on that front. Gallup has been asking Americans about their drinking habits for nearly 90 years, and in its 2025 survey just 54% of American adults said they drink alcohol, which was the lowest percentage Gallup has ever recorded. It’s not just that there are more people abstaining entirely, either. Among those who do drink, Gallup also found people are drinking less frequently and consuming fewer drinks when they do.
The industry data tell much the same story. According to IWSR, the total volume of alcoholic beverages consumed in the United States fell about 5% in 2025. Beer and wine volumes were each down about 6%, while other types of mixed drinks dropped by 4%. One notable exception? Non-alcoholic beer volume increased by 15%!
There are probably a bunch of reasons for all of this. Health consciousness is certainly one of them. For decades, conventional wisdom even held that a modest amount of alcohol (particularly a glass of red wine) might actually be good for you. That belief has changed dramatically. In 2018, only 28% of Americans told Gallup that moderate drinking was bad for your health. By 2025, that figure had risen to 53%, the first time a majority of Americans had taken that view. Only 6% now say moderate drinking is actually good for your health.
As a quick aside, a few years ago I listened to a podcast episode from the series Maintenance Phase that traced much of the misperception that red wine is good for you to a 1991 episode of 60 Minutes called “The French Paradox,” which purported that one reason why the French were so healthy is that the wine and cheeses they eat are actually beneficial to them. In reality, this was really just some extraordinarily good marketing, as most doctors now believe that to obtain the purported benefits of the antioxidants in red wine, you would have to drink so much of it that it would overwhelm your liver and other organs, thus, of course, negating the benefits. You can find that podcast episode here, but fair warning, it may undermine a part of your joy of a glass of red wine after work.
A second quick aside: the New York Times had an article last weekend about how sales of red wine have dropped so much that some California winemakers are burning their crops. There is an interesting story there about how interest in Pinot Noir grew substantially after the moving Sideways came out, but have been dropping in recent years as consumers look to other types of drinks.
Red wine or not, younger generations appear to have a different relationship with alcohol than their parents and grandparents did. Drinking is not necessarily disappearing from social life, but abstaining or having one drink instead of three no longer seems quite as unusual. Terms like “sober curious” have entered the lexicon. Dry January has become a genuine cultural phenomenon (I have done it the past three years and have basically enjoyed it every time, or at least have recognized the importance and benefits of it). Ordering a nonalcoholic beer at a bar no longer carries quite the same stigma it might have 20 years ago.
I think at least a part of this is that drinking can be expensive, too, especially if you go out to drink. A lot of younger people are living so close to the line right now, that they may be drinking less alcohol simply as a way to save money. And I suppose this economic reality is hitting people of all ages, which is maybe part of why people are drinking less.
But the choices and the quality of products have gotten a lot better, too. It used to be that not drinking meant having a Diet Coke while everyone else had a beer. Today, virtually every grocery store has nonalcoholic beers, mocktails, sparkling drinks, botanical concoctions and other products specifically designed to give people the ritual and social experience of having a drink without the alcohol. I will actually order a non-alcoholic Athletic Brewing beer from time to time when I’m out, and it actually tastes just like a normal beer and gives me the positive sensation of drinking one even if I don’t feel like consuming alcohol that particular night. I heard a new term to me recently called “striping,” where young people will go out and they will rotate a non-alcoholic beer between each alcoholic drink, basically as a way to slow themselves down and not get too drunk or feel too hungover the next day.
There is also considerably less cultural awkwardness surrounding not drinking. A growing number of celebrities have spoken publicly about sobriety or have actually gone into business selling alcohol-free products. Spider-Man star Tom Holland has been sober for several years and founded Bero, a line of nonalcoholic beers. Elton John recently marked 36 years of sobriety while promoting his own alcohol-free sparkling wine. Rihanna announced that she went the entirety of 2024 without drinking. Even President Donald Trump doesn’t drink, a noble and worthy effort that can be acknowledged even if you’re not a fan of the guy.
None of this means America is about to become a nation of teetotalers. In fact, most buyers of nonalcoholic beer, wine and spirits still drink alcohol themselves (like me). Consumers increasingly seem less interested in identifying themselves as exclusively one kind of drinker. You might have a beer at the barbecue on Saturday, drink sparkling water at dinner on Sunday, have a Celsius on Monday morning, a protein shake after working out on Tuesday, order a mocktail at a restaurant on Wednesday and have a glass of red wine (public health studies be damned!) on Friday night.
This is basically the same phenomenon that has occurred in the soda aisle. For decades, beverage companies could count on enormous numbers of consumers repeatedly purchasing basically the same handful of drinks. Coke competed with Pepsi. Budweiser competed with Miller. Coffee competed with tea. The categories were comparatively simple and the loyalties were strong.
But today, a bottle of Coke isn’t merely competing with a bottle of Pepsi anymore. It might be competing with a flavored water, a Poppi, a Celsius, an iced coffee, a kombucha, or something that hasn’t even been invented yet. A Bud Light is competing not only with Coors Light but with a White Claw, a canned cocktail, an Athletic Brewing nonalcoholic beer, or simply the decision not to drink anything alcoholic at all. And so the beverage industry is responding exactly as you would expect it to: by fragmenting right along with the consumer.
More Choices, Smaller Kingdoms
I don’t think Coca-Cola’s economic moat is disappearing anytime soon. It still sells roughly 2.2 billion servings of its beverages around the world every day, which is an almost incomprehensible number. But the nature of that moat is changing. As discussed at the outset, the long-term success of Coca-Cola in the future may depend a little less on convincing everyone to drink Coke, Diet Coke, Coke Zero, or Sprite, and a lot more on making sure that, whatever you decide to drink instead, the Coca-Cola corporation owns that too.
Pepsi is doing the same thing. So is Keurig-Dr Pepper. And beer and liquor companies are increasingly moving in that direction as well. Rather than betting that consumer tastes will swing back to where they were 20 or 30 years ago, they are trying to build portfolios broad enough to benefit wherever tastes go next. I have friends who own a great brewery here in Maine, and in recent years they have continued to brew great bear, but have also expanded to hard seltzers, which have been wildly popular, especially with younger consumers, and great for these people’s growing company.
For consumers, more choices are a good thing. The products are getting better, and more varied. If people want less sugar, somebody will make a lower-sugar drink. If they want more protein, someone will put protein in it. If they want the taste of an IPA without the alcohol, breweries will figure out how to make one.
The economics lesson about economic moats is actually that the widest competitive moats don’t necessarily protect companies from changing consumer behavior, but they do give the best companies more resources with which to adapt to it. That may seem unsettling in that the big corporations continue to win by gobbling up the little guys, and certainly it remains hard to scale up if you’re a small producer. But on the other hand, fragmented tastes and the willingness to buy up good products even if they exist on only a small scale does provide great opportunities for upstart beverage companies who have drinks that meet certain niches. Sometimes those smaller companies actually better anticipate and react to changing drinking habits before the big corporations see what is happening. Maybe it’s possible to compete with Coke after all.
Ben Sprague lives and works in Bangor, Maine as a Senior V.P./Commercial Lending Officer for Damariscotta-based First National Bank. He previously worked as an investment advisor and graduated from Harvard University in 2006. Ben can be reached at ben.sprague@thefirst.com or bsprague1@gmail.com. Thoughts and opinions here do not represent First National Bank.