Scrap what you heard about people drinking more during the pandemic. Left confined to home, many alcohol drinkers started cutting the booze, reaching instead for a dram from the ever-growing no-alcohol category.
NielsenIQ’s SVP of Account Development Kim Cox finds demand for no- and low-alcoholic beverages skyrocketed over the last year. “In fact, in just the last 52 weeks, off-premise sales reached $3.1 billion across low-alcoholic and non-alcoholic wines, beer and spirit categories (up from $291 million last year).” The market is still small—less than 5% of household penetration, “but an interesting area to watch—non-alcoholic beverages are outpacing the growth of low-alcohol beverages.”
Some advocates for the category aren’t surprised. “If the alcohol industry is a $1 billion industry, why can’t the non-alcoholic industry be a $1 billion industry?’ says Drew Davis, the founder of the booze-free bar Gem.
The confines of Covid-19 became the perfect incubator for the budding category. “The NA trends have already been globally increasing for seven years,” says Dave Deuser, CEO of Sales and Marketing, Radeberger Gruppe USA. “Non-alcs used to be all about situations where you can’t drink—designated drivers, pregnancy, recovering alcoholics, etc. Today’s consumer is saying that they can drink alcohol, but they just don’t want to.”
He finds, “the category is driven by younger consumers, most with families, who are more conscious of the choices they’re making and what they’re putting into their bodies. It’s become trendy and cool amongst peers. Fueling that further is the plethora of new choices on the market, with shelf space opening up.”
“I live in NYC and, in my neighborhood alone, two non-alcoholic spirit shops have opened this year” says Elizabeth Staino, Director of Strategy & Innovation at importer-distributor Hotaling & Co.
“When we opened SIPPLE, the first non-alcoholic bottle shop in Texas, we thought it would take time to take off,” says owner Danny Frounfelkner. “We had no idea the demand we would see from people in their early 20s to mid-70s. Our opening weekend was packed and people are so grateful that a shop like ours exists.”
According to Nielsen, NA sales totaled $331 million (up +33.2%) in the last year, while low-alcohol sales rose 8.1% to $2.77 billion. Brands saw a 315% increase in low- and no-alc beverage dollar sales.
By category, NA beer and cider grew 31.7%, wine increased 39.4% while zero-ABV spirits saw sales grow 113.4% over the last year.
Who’s Drinking Non-Alcs?
Interestingly, 78% of non-alcoholic beverage buyers are also purchasing alcoholic beer, wine or spirits—moderation is a driving force (Nielsen).
“The foundation of the movement is rooted in younger Americans’ desire to live a healthier lifestyle,” says Bill Meissner, President and CMO of Splash Beverage Group. “This is a macro-trend we don’t see fading.”
“The way people choose to consume alcoholic and non-alcoholic beverages is changing so fast and that hard line in the sand between the drinkers and non-drinkers is quickly eroding,” explains Mitch Cobb, co-founder of Upstreet Craft Brewing and Libra, a no-ABV beer. “We see this a lot in our taprooms and retail stores. People will come in to have a beer after work followed by two NA beers or will drink NA beer during the week and traditional craft beer on the weekend, or buy both four-packs of IPAs and NA beer for their party.”
New Wave Soda CEO Nat Noone found that the majority of the brand’s customers are drinkers between 24 and 35—folks taking a night off booze. “The new generations are a lot smarter than I was at that age, which is encouraging.”
Lynnette Marrero, who crafted the flavors of hemp-infused NA spirit Aplos, noted that their core customers are “35 to 55-year-old women—highly educated, high disposable income for whom Aplos is replacing their nightly wine ritual.”
Mortal Kombucha’s Becca Schepps notes she’s seen a huge uptick in people choosing her kombucha over wine, with drinkers pouring it into a wine glass or pilsner glass, “so they can have that drinking experience.” In that vein, Canadian company Silver Swallow recently released a non-alcoholic kombucha that mimics Champagne, cork-closed bottle and all.
“I have always carried non-alcoholic beer at my bars, and there has always been a demand for it,” says Julia Momose, co-owner of Kumiko in Chicago, who prefers Japanese-born All-Free by Suntory. “Now, people who are choosing low-proof and zero-proof extend from industry folks like bartenders and chefs to the younger generation of up and coming drinkers. My friends are drinking these beers as an afternoon treat.”
“We’re even seeing historically dry venues promoting this segment to their customers for incremental revenue,” says Meissner. “Non-alc alternatives are expanding the size of the pie, not just dividing it.”
Bursting Open the Category
One of the largest drivers of the category? Increased innovation. “While non-alcoholic beer has been available to consumers for many years, there are now more options available than ever before,” says Neilsen’s Cox. “These new innovations better meet health and wellness desires of certain consumers such as lower ABV, lower sugar, lower calorie or sustainable sourcing practices.”
There’s also the technical aspects. “Canning machinery is much smaller and less expensive than it was 10 years ago,” says Matt Vincent, the owner of Ska Brewing Co., and Ska Fabricating. “This opens up many options for beverage startups to get their product into the hands of consumers at a much lower cost to determine market viability.” Meissner figures it’s these startups, not the major beverage players, that are pushing the category forward. “The big brands are jumping in with mass offerings, but the innovation we’re seeing is around developing small-batch, craft and flavored non-alc options.”
“We’ve been noticing a large wave of non-alcoholic spirit innovations entering the space specifically in the premium price-point,” says Hotaling & Co’s Staino. “What’s surprising me is the sophistication of flavors. You are finding artisanal products made with high-quality ingredients that are resulting in full bold flavors very similar to artisanal spirits.”
Jonathan Lambrianidis, the founder of non-alcoholic podcast TippleZero, even credits innovations in materials. “Beer brewers now regularly use kombucha yeast and specific yeast from companies such as NEER that innovate yeast strains to suit brewing zero alcohol beer.”
With consumers reaching more and more for non-alc, bartenders and on-premise employees have had to do the same. “Non-alcoholic cocktails have been around for a while, but bars and restaurants are taking them a lot more seriously,” says Stacey Swensen, bar director at Lodi, Estela and Altro Paradiso. “They are now a core part of our beverage program. Guests who aren’t imbibing appreciate that we are putting more thought and creativity into our non-alcoholic offerings.”
But not every on-premise is keen on adding non-alcs to menus. “We are still surprised that some retailers and foodservice operators are reluctant to add high-quality, non-alcoholic drinks to their alcoholic offerings,” says Michael ZonFrilli, CEO of Bambucha Kombucha. “Obviously the costs are higher than that of a soda or iced tea, but consumers are starting to expect and demand drinks that they are excited to consume, even when abstaining from alcohol. Beverage companies like Coke, Pepsi and Molson Coors
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Where is the category headed? Meissner notes that as the pandemic became the norm in 2020, “several of our brands anchored in non-alc with existing distribution started to see triple-digit growth,” though as consumers settle into somewhat-normal life, “we’re seeing this settle down a little bit.”
“People are literally thirsty (no pun intended) for better-for-you non-alcoholic options,” he continues. “By removing the unnecessary archaic stigma surrounding not drinking alcohol, we’ve seen that the interest, support and demand grows greater by the day. At Sipple and across this industry, we are changing the conversation from why aren’t you drinking? to what are you drinking?“