Bebo agua en lugar de café.

In Spanish, when you talk about uncountable or general substances (like water or coffee), you usually omit the article—just as in English you say “I drink water,” not “I drink the water.” If you wanted to specify a particular water or coffee, you could add the article:

• Bebo el agua de la nevera. (I drink the water from the fridge.)
• Bebo el café de esta tienda. (I drink the coffee from this shop.)

Spanish spelling rules say:

• Words ending in a vowel, n, or s are naturally stressed on the next-to-last syllable.
• Café ends in a vowel but is stressed on the last syllable (ca-FÉ).
  To mark that exception, you need an accent on the final é. Without it, you would mispronounce it as CA-fe instead of ca-FÉ.

Literally, en lugar de is “in place of.” Lugar means “place,” and the preposition de links it to whatever you’re replacing. English has one compound word, “instead,” but Spanish splits it into three words and always keeps the de:

• en lugar de café → “in place of coffee” → “instead of coffee.”

They’re near-synonyms meaning “instead of,” but with slight nuance:

• En vez de is more colloquial and very common in everyday speech.
• En lugar de sounds a bit more formal or emphatic, and you might see it more in writing.
  You can choose either in most contexts without changing the meaning.

This is a phonetic rule: feminine nouns that begin with a stressed a- sound take el (the masculine article) in the singular to avoid the awkward double “a” sound (la agua). The noun remains feminine, so adjectives agree in the feminine:

• el agua fría (not “el agua frío”)
  In the plural you go back to *las aguas because there’s no awkward vowel cluster.

Yes! Swapping en lugar de for en vez de is perfectly natural and common:

• Bebo agua en vez de café.
  Both versions convey exactly the same idea: “I drink water instead of coffee.”