Solving the riddle of Generation Z, the next wave of legal-age drinkers

They’re tethered to their phones. They’re budget-conscious. They’re pragmatic and mature. They hustle. And, most disconcertingly, very few of them drink beer.

Meet the legal-drinking-age cohort of the yet-to-be-named generation that comes after the millennials, a critically important demographic for the beer industry. As beer companies fight to retain drinkers amid a shift to cheaper wine and spirits, this new generation of legal-drinking-age consumers is emerging as the linchpin in the long-term success of the industry.

After all, research shows, consumers who drink beer at age 21 are two times more likely to stick with beer throughout than those who do not.

But data show it’s going to be an uphill battle. Some 40 percent of beer’s volume losses are occurring among drinkers aged 21 to 24, according to data collected on behalf of MillerCoors.

Beer consumption among these consumers has declined at an annualized rate of 3 percent over the last 15 years. And if that trend continues unabated, the industry could lose another 33.8 million barrels of volume by 2040, according to consumption patterns modeled with U.S. Census data. And the biggest concern? Just 14 percent of 22- to 24-year-old alcohol consumers say that beer is “meant for them.” Among women of the same age, the figure is even worse, dropping to just 9 percent, per Mintel data.

“Why? Because beer has a relevance problem. They don’t feel like the beer industry has been talking to them,” says Justine Stauffer, brand manager for MillerCoors. She is overseeing the launch of Two Hats, a line of light beers brewed with a hint of natural fruit flavor that’s rolling out nationwide next month.

Targeted at 21- to 24-year-olds, the 4.2 percent alcohol-by-volume beer will debut with two flavors that perform well among this group — lime and pineapple — and will be sold at an affordable price point.

“There haven’t been any new mainstream beer launches for this group at this price point … so it’s no surprise they think of beer as dusty and old and migrate to wine and spirits,” Stauffer says.

Reaching this new generation of consumers — who differ in many ways from their millennial predecessors — is an imperative for brewers and a sizable opportunity that smart marketers can unlock.

Here’s a closer look at this new generation of legal-age drinkers.

This generation was in grade school when the iPhone was invented, and its members literally go to bed and wake up with their devices. A whopping 91 percent of them go to bed with their phones, and they interact with social-media channels the first thing in the morning and immediately before falling asleep.

They watch 44 percent less television per week than millennials, and when they do watch TV, the vast majority (87 percent) are on a digital device. But they watch far more streaming video; about 70 percent of them watch YouTube every day.

More than three-quarters of them say social media is their main source of inspiration for purchases, a medium where they spend more than two hours a day. Their preferred social media: Instagram and Snapchat, the latter of which they use three times more than millennials. Many have multiple social accounts in each medium, usually one private and one public, to control which version of themselves they’re showing the world. For their private accounts, they’re freewheeling and unafraid, posting the ephemera of their daily lives. Their public accounts, in contrast, are carefully crafted personas reflecting who they aspire to be.

Raised during a pair of recessions (the economic fallout after 9/11 and the financial meltdown of 2008,) they don’t expect anything to be handed to them. And they’re willing to work for it. They’re doers. They’re entrepreneurial and scrappy.

Diverse, lively and optimistic, this group is inclusive, values self-expression and appreciates and embraces diversity. They want to make a dent and do something good for the world, such as further the causes they believe define their generation: human equality and protecting the environment. And they believe people who take responsibility for their own success will be rewarded.

They seek new products and experiences, but they don’t want to break the bank, in part because they don’t make very much money. They are willing to pay more if they perceive they’re getting more for the money. They’re also discerning shoppers who aren’t just buying products, they’re buying products that they perceive do good in the world. They react more positively to brands that stand for the same values that they do, and 60 percent say they’re more likely to support those brands.

Gen Z’ers want to have fun, but they want to network harder. Because of that, they value sessionability. Still, familiarity and bold flavors are important.

They tend to hang out with close friends in small social gatherings they call “kick-backs.” These social outings, often held at someone’s apartment or home, are more casual, frequent and tend to be the types of occasions where they drink alcohol most often.