The Total Addressable Market (TAM) for alcohol ingredients was valued at USD 1.8 billion in 2022. It is projected to reach USD 3.6 billion by 2031, growing at a CAGR of 8% during the forecast period (2023-2031).
Alcohol is made by fermenting components, including yeast, enzymes, color, flavor, and salt, with grains, fruits, or vegetables. Many different components can be used to flavor various alcoholic drinks, resulting in multiple tastes and flavors. This implies that there is a greater demand for alcoholic ingredients, which in turn drives the global market for alcohol infusion ingredients. Due to the substantial increase in demand and consumption of these alcoholic beverages, yeast is now more widely needed.
Growing Popularity of Craft Beer
The craft brewing and distilling demand has increased significantly over the past few years. Worldwide consumer demand for distinctive and tasty beers is driving the market for alcoholic additives in the beer industry. The five main components used in brewing are malt extract, adjuncts/grains, hops, beer yeast, and beer additives. A mixture of starch sources and a secondary saccharide, such as maize (corn), rice, or sugar, maybe a less expensive substitute for malted barley and are frequently referred to as adjuncts. There are also less popular starch sources, such as agave in Mexico, potato in Brazil, millet, sorghum, and cassava root in Africa.
The best brewing malts are used to create brewing-grade malt extracts, which also benefit from specialty malts' additional colors and flavors. This gives the particular style of beer the distinctive character and flavor that are wanted. In order to add richness and complexity to the finished beer, these malts are frequently baked at higher temperatures for a more extended period or roasted. The growth of craft beer production and the creation of microbreweries contributed to the rise in demand for specialty malts.
Rising Volatility in the Supply Chain and Prices
One of the primary reasons impeding the growth of the alcohol ingredients market globally is fluctuating pricing and uneven raw material supply. Mass-produced beer is frequently made with less expensive alternative ingredients to keep the finished product reasonable. For instance, several well-known beers now substitute rice or corn for traditional hops to save money. Unprecedented increases in the cost of transportation, services, and raw materials for alcoholic beverages significantly negatively influence the ability of ingredient producers to remain profitable.
Additionally, a group of scientists from China, the United Kingdom, and the United States found that the production of malted barley, a vital component of alcoholic beverages like beer, whiskey, and scotch, could be significantly impacted by the changing climate. They made this discovery by predicting future trends in heat and drought.
Development of New Flavors
Due to fierce brand and ingredient competition brought on by the rise in alcoholic beverage consumption, new flavors have been developed. Beers are becoming increasingly popular since they come in various tastes in addition to the standard ones that large breweries offer. In addition, craft beers that combine salty, fruity, and tart qualities with new ingredients and inventive flavors are becoming increasingly popular among millennials worldwide. Some large-scale and specialty brewers are also taking action in response to the shifting market expectations. Various fruits, including berries, pineapple, mango, and others, as well as different herbs and spices, can be included with these ingredients. As a result, it is projected that companies in the market for alcohol ingredients will have plenty of opportunities.
Additionally, the market is driven primarily by the preferences of young consumers. These customers look for authenticity in the quality and production methods used to make alcoholic beverages like spirits. Consumer demand for novel tastes and sensations has fueled more incredible innovation and product line diversification, which now encompasses a wide range of intriguing new infusions.
The global alcohol ingredients market is segmented by ingredient and beverage types.
Based on ingredient type, the global alcohol ingredients market is bifurcated into yeast, enzymes, colorants, flavors and salts, malt ingredients, and other ingredients.
The malt ingredients segment is the highest contributor to the market and is estimated to grow at a CAGR of 1.65% during the forecast period. Malt is a crucial ingredient in the alcoholic beverage business as it delivers the sugar and carbs essential for giving the beer its characteristic flavor and high alcohol level. The sector has a sizable market share because it consumes large quantities of products like beer and spirits. For instance, Australian Single Malt Whisky was also introduced in the US by the Australian whiskey company Starward.
A single-celled fungus called yeast is used to ferment or leaven most alcoholic beverages, including beer, wine, and whiskey. Ale yeast and lager yeast are the two primary forms of yeast used in manufacturing alcoholic drinks. These two types are further divided into groups of certain strains. Ale and lager yeasts come in a wide variety of strains. There have always been conventional ways to consume alcohol, such as feni in India or rice wine in Vietnam, but over the past few years, the Asia-Pacific region has rapidly become more urbanized and westernized, increasing the desire for commercially produced alcoholic beverages.
Enzymes are widely used in alcohol production because of their ability to optimize, accelerate, and catalyze the fermentation process, resulting in a higher product yield and lower production costs. Additionally, the brewer can use locally accessible, less expensive raw materials thanks to industrial alcohol enzymes. Brewing's capacity to mature more quickly because of the addition of appropriate enzymes at each stage of the process makes it more desirable to manufacturers.
Customers throughout the world seek beverages that appear delicious and enticing. As a result, beverage color is among the most significant organoleptic characteristics affecting consumer beverage choice. Alcoholic beverages frequently contain caramel syrups and powders because they improve the tan hues of distilled spirits. Additionally, liquid caramel syrup provides color while preserving the product's brightness. Manufacturers have needed help creating paints that are vivid and stable across a range of applications and have a long shelf life.
Based on beverage type, the global alcohol ingredients market is bifurcated into beer, spirits, wine, and other beverage types.
The beer segment owns the highest market share and is estimated to grow at a CAGR of 1.95% during the forecast period. The need for ingredients has been driven by the rising output of beer worldwide. High beer production regions like Asia-Pacific and Europe are primarily responsible for the need for alcoholic components in beer. Additionally, as demand for craft beer rises, the industry will become more premium in terms of quality, consumer flavors, and revenue potential for brewers. This is adding to the demand for the ingredients. Governments in many nations, including Australia, New Zealand, Belgium, Mexico, China, and the United Kingdom, are encouraging the production of craft beer and the establishment of new breweries due to the industry's positive impact on economic growth and the creation of jobs, as well as consumer willingness to pay more for better-tasting brews.
Since whiskey is sometimes associated with a desire to exude elegance and refinement, customers search for inventive and distinctive drinking experiences. The demand for whisky is also being influenced by changing consumer lifestyles and the rising trend of socializing among working professionals, which is increasing the industry. There is a rising demand for premium and super-premium whiskeys in industrialized and developing nations, including India, China, South Korea, Australia, the United States, France, and Germany. For instance, the scotch whisky market is anticipated to experience rapid expansion as a result of customers' growing taste for high-end goods. Malted barley and unmalted grains like maize or wheat are used to produce Scotch whisky.
Rum is a spirit made from sugar. The sugar can be molasses, syrup, or pure cane sugar. Blackstrap molasses is adaptable and can make rum, increase the color of fermented malt beverages, and add flavor. The last byproduct created after pure sugar cane refinement is blackstrap molasses. Caramelized sugar, fruit extracts, and spices are additional components that provide a more extensive range of flavors. Modern, mass-produced rums combine different rum ages to achieve a more constant flavor, and caramel is added at the end to provide a consistent color from batch to batch. Consumers also prefer craft rum over commercial rum because of its smooth flavor, premium quality, and authentic flavor.
It is anticipated that brandy's popularity will continue to rise as a replacement for whiskey and vodka due to the inclusion of antibacterial, antioxidant, and polyphenolic compounds. It can increase immunity, enhance heart health, postpone aging, reduce the risk of developing cancer, and ease cold and cough symptoms when used sparingly. It is commonly used in culinary arts to flavor soups, de-glaze pans, flambe desserts, and entrees, and prepare sauces, cakes, puddings, and butter. It is also widely drunk as a digestive and base spirit in cocktails. one of the key elements fueling the expansion of the global brandy market is the expanding popularity of cocktail culture and the rising trend of young people socializing in restaurants and bars.
The global alcohol ingredients market is divided into four regions: North America, Europe, Asia-Pacific, and LAMEA.
Europe Dominates the Global Market
Europe is the most significant revenue contributor and is expected to grow at a CAGR of 2.05% during the forecast period. The demand for alcohol in the UK is rising as more people are willing to try out unique flavors and eye-catching hues. As a result, there is a rise in the market for alcohol-related components such as colorants, flavors, and salts to produce novel alcoholic beverages nationwide. Other ingredients used in alcohol production include malt, primarily made in the UK from malting barley, a higher quality crop, and is sourced from domestic farmers, many of whom are concentrated in the eastern part of the country. Barley malt is the most popular all-malt product for brewing in the nation.
Asia-Pacific is expected to grow at a CAGR of 1.2% during the forecast period. The potential of China's alcoholic beverage business was enhanced by shifting social and cultural variables. As China's bar scene grew, there were more places for people to drink. Additionally, the demand for alcoholic components has increased recently in China due to the fact that 251 brewing businesses already run 550 breweries there. Chinese traditional alcohol is a grain-based alcoholic beverage used in spirits. For instance, baijiu, an alcoholic liquor commonly manufactured from sorghum, rice, wheat, and barley, is most frequently served during formal occasions and holidays. Baijiu makes up practically all of the global spirits market because it is the national beverage of China.
Europe is expected to grow significantly over the forecast period. Michigan is one of the critical states in the US for producing alcoholic substances like malt. Due to this, efforts have been undertaken by the nation's agricultural producers and the US government to quickly increase the number of acres used for growing malting barley, hops, and high-quality barley. one of the key elements fueling the expansion of the market for alcohol components is the more significant proportion of heavy drinkers in Canada. Additionally, the nation has seen an increase in new artisan distilleries that are creating a variety of liqueurs and spirits, including vodka and gin.
The increased consumption of alcohol among young adults is the primary driver of the alcoholic beverage market's expansion in the Middle East and Africa. This has allowed producers of alcohol ingredients to expand their production capacity to keep up with the market's rising demand. Regarding alcoholic beverage consumption, South Africa holds the most significant percentage. This is mainly because the colonial rule in the past impacted how interested people became in drinking more. The low cost of advertising, lax laws, and colossal beer consumption in these markets provide the perfect setting for international businesses.
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