He is talking about liquor, that was never in question. However
the song is not about encouraging drinking it is about seeing alcohol abuse every where around him. It is a catchy song with a message. If he beat people over the head by preaching it would be a turn off for most. The other poster suggested that Kendrick was pro alcohol on the song but he is playing an observation role as in write what I see not tell u to drink.
Look at how the verses break down
First verse he says he grew up around people living their lives in bottles aka alcoholic. Then gives u examples using his grandpa and reasons why people might do it "drown their sorrows".
Hook comes in and it is about peer pressure "why are u baby sitting your drink" etc something a homie might say to u.
Second verse is about his own conscious struggling with alcohol thus the weird voice and referring himself in third person . this is personal reflection.
Just take in the words again on the surface it might be a party record but not really. I believe most rappers who write like this often fail to balance social commentary with entertainment. Like Lupe and his terribly executed bytch bad song