Food Grade Alcohol Market Is Driven By Increasing Usage In Beverages

The food grade alcohol market consists of various types of alcohols such as ethanol, isopropanol, and methanol that meet food chemical standards. Ethanol is the major and widely used type of food grade alcohol which is primarily produced from grains such as corn, wheat, barley, or sugars extracted from sugarcane or sugar beets. Food grade alcohol finds extensive applications in beverages such as beer, wine, spirits as well as flavorings, extracts, and food preservatives. Growing health awareness has augmented the demand for low-calorie, low-sugar beverages that utilize alcohol for taste. This, in turn, has boosted the market.

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The Global Food Grade Alcohol Market is estimated to be valued at US$ 2.56 Bn in 2024 and is expected to exhibit a CAGR of 5.5% over the forecast period from 2024 to 2031.

Key Takeaways

Key players operating in the food grade alcohol are MGP, Cargill Incorporated, ADM, Cristalco, Grain Processing Corporation, Wilmar International Ltd., Extractohol, Pure Alcohol Solutions, Nedstar, Sasma B.V., Roquette Frères , Essentica, AVANSCHEM, Fairly Traded Organics, and Ethimex Ltd. Key players focus on strengthening their market presence through strategic acquisitions and new product launches. For instance, in 2021, ADM acquired Tianjin Angel Yeast to expand its yeast portfolio and offerings.

The growing demand for alcoholic beverages from the millennial population and increasing preference for high-quality craft beverages are fueling the food grade alcohol market. Moreover, the rising demand for low-calorie beverages made with alcohol is also propelling the market growth.

Globally, North America dominates the Food Grade Alcohol Market Size due to increasing consumption of spirits and craft beers. However, Asia Pacific is expected to witness the fastest growth owing to rising disposable incomes, increasing preference for Western drinking culture, and growing urbanization. Furthermore, increasing focus of key players on tapping opportunities in emerging economies is also expected to drive the market in the region.

Market Drivers

The increasing usage of alcohol in beverages is the major driver augmenting the food grade alcohol market growth. Food grade alcohol acts as a perfect solution for manufacturers seeking to develop low-calorie, low-sugar alcoholic beverages with natural flavors. It allows producing light beers with fewer carbs and low-calorie wines and spirits made without compromising the taste. Thus, the rising demand for healthier alcohol options is propelling the market.

The current geopolitical situation is impacting the growth of the food grade alcohol market. Supply chain disruptions due to the Russia-Ukraine conflict and sanctions on Russia have led to increased prices of grains and other key raw materials globally. This is negatively impacting the production volumes and margins of food grade alcohol manufacturers. Moreover, uncertainty around economic growth in Europe and other key markets is dampening demand growth prospects in the short term. Additionally, lingering effects of the COVID-19 pandemic such as worker shortages and raw material bottlenecks continue to pose operational challenges.

To navigate these challenges, manufacturers need to focus on diversifying their supply chain networks and sourcing raw materials from multiple regions. They also need to consider expanding production capacities in other low-cost emerging markets to reduce over-reliance on Europe and minimize disruptions. Adopting advanced technologies for improving productivity and yield can help optimize costs as well. Partnerships with distributors and retailers assume more importance for sustainably catering to demand pockets. Overall, strategizing innovations, building resilient operations, and exploring new markets will be vital for achieving long-term goals amid geopolitical volatility.

The food grade alcohol market in terms of value is currently concentrated in Europe, with countries like Germany, France, UK among the top consumers. This is attributed to robust demand from the beverage, food processing, and pharmaceutical industries in the region. However, Asia Pacific is emerging as the fastest growing regional market owing to rising health consciousness, growing disposable incomes, and expanding applications in personal care and cosmetic products sectors across countries like China, India, Japan and South Korea. Demand from Asia Pacific is expected to outpace others over the coming years.

The food grade alcohol market in Asia Pacific is witnessing strong growth currently, driven by increasing health awareness among consumers and a booming beverages industry. China dominates the regional market and will continue exhibiting high growth. However, India is poised to be the fastest growing market during the forecast period, supported by a burgeoning middle class, rising alcohol consumption, and augmenting demand for hand sanitizers and disinfectants post COVID-19. Furthermore, expanding food processing, personal care, and pharmaceutical sectors will further support market prospects across other high-potential Asian countries.

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