For decades, alcohol sales have provided restaurants with high-margin income, often accounting for up to 30% of total revenue in fine dining.
Unlike perishable food items, alcohol offers a longer shelf life and lower labor costs, making it a financial cornerstone for eateries.
However, US Surgeon General Vivek Murthy’s latest warning about alcohol as a preventable cause of cancer could amplify a growing shift in drinking habits, particularly among younger demographics.
This has left restaurant owners grappling with the prospect of dwindling alcohol sales and exploring alternative strategies to stay afloat, according to a report by The New York Times.
Gen Z and the ‘sober curious’ movement
The younger generation has already begun reshaping the beverage industry.
Terms like “sober curious” and “California sober” highlight Gen Z’s inclination toward moderation or replacing alcohol with alternatives like cannabis.
According to a September 2024 survey by Datassential, 32% of consumers who drink have cut back on alcohol consumption since the pandemic.
This cultural shift compounds challenges for restaurants that rely heavily on alcohol sales.
At Houston’s Hugo Ortega restaurants, alcohol’s contribution to revenue has dropped from 31.5% in 2015 to 27.5% last year, owner Tracy Vaught reported.
“It doesn’t seem like much, but it really makes a difference,” she said.
Nonalcoholic options step into the spotlight
To counter declining alcohol consumption, many restaurants are diversifying their beverage menus.
At the Amway Grand Plaza Hotel in Michigan, nonalcoholic drinks now account for 15% of total beverage sales.
High-quality mocktails, such as the $15 copa verde, have emerged as a profitable alternative.
“Margins for food have decreased so significantly over the last four years that without a solid beverage program, restaurants can’t make it,” said Kevin Gillespie, who owns Gunshow and the tasting menu restaurant Nàdair.
“But there are creative paths out of this,” he said.
Gillespie said customers might not opt for alcohol but may still fancy a cocktail, and if a non-alcoholic cocktail can be done right, it can be priced almost at par with its alcoholic counterpart.
A year ago, Ryan Schmied, director of food and beverage at the Amway Grand Plaza Hotel in Grand Rapids, Mich., made some changes after noticing a dip in sales of alcoholic beverages.
No and low-alcoholic beer and wines were added and these cocktails without liquor have made a significant contribution to his profits.
Drinks without alcohol now account for about 15% of all beverage sales at the restaurants and bars in the hotel.
“It sounds like a small number, but 10 or 15 percent can make or break a place,” he said.
Alcohol helps restaurants deal with inflationary woes
Restaurants are also battling broader economic pressures.
Rising costs for rent, labor, and ingredients have forced businesses to raise prices, but only to a limited extent.
According to the National Restaurant Association, sales dipped 1.7% between November 2023 and November 2024, as inflation-weary consumers cut back on dining out.
In New York City, Chase Sinzer, co-owner of Claud and Penny restaurants, described alcohol as essential to financial survival as it can act as buffer against rising food prices.
The idea is that customers are more flexible in their choice to spend on alcohol, as compared to food.
“They’ll say, ‘I’m paying this much for a piece of chicken?’” Sinzer said.
“When chicken costs 75% more than it used to and we can only raise the price 25%, you’d better sell some booze. No one spends more on chicken than the next table, but people make different choices about alcohol.”
A long-term change or a minor blip in consumption?
Not all restaurants are experiencing a decline though.
Union Square Hospitality Group’s fine dining venues report steady alcohol sales, with a growing interest in lower-alcohol wines.
John Ragan, president of the hospitality group recalls how when “60 Minutes” aired a segment in 1991 suggesting red wine was the reason the French had a low incidence of heart disease despite their high consumption of fat, sales of red wine jumped.
Similarly, he said, the surgeon general’s warning may cause some minor changes, but it is unlikely it will change the drinking habits of customers significantly. He said,
There might be some ebbs and flows, but I think whatever your favorite pairing is at the table I don’t perceive changing in a big way.
While some restaurants brace for change, others are finding opportunities to adapt.
Specialty cocktails featuring rare and premium liquors, such as Beyoncé’s SirDavis American Whisky, remain in demand, as noted by Deborah VanTrece of Atlanta’s Twisted Soul Cookhouse & Pours.
Still, restaurant owners acknowledge the risks.
If the surgeon general’s warnings gain traction and Gen Z’s drinking habits persist, alcohol’s role in restaurant profitability could diminish further.
“For the most part, right now we feel steady,” she said, “but people will at some point generally jump on a bandwagon, so I’m not saying it’s not coming,” VanTrece says.
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