Citing Nielsen data, the no- and low-ABV sector has grown an impressive 506% since 2015, with further data anticipating the non-alcoholic sector (including soft drinks) will reach $280 million in revenue this year. Annual growth for the category is expected to hit 7.1% by 2025.
A record high of 12 new non-alcoholic spirits brands launched in the US while 11 new brands launched in the U.K. market. That makes a total of 29 and 42 brands in each market, respectively. Thanks to the expanded selection, non-partakers can pick from booze-free tequilas, rums, whiskeys, and even amaro, plus an army of booze-free beers.
But new insights have noted that while the category is expanding at a speedy clip, brands need to learn to create meaningful connections with house-bound drinkers to truly find success.
A study by the Diageo-backed Distill Ventures found there are three huge challenges the no-ABV category faces: “Liquid excellence, education, and the drinking experience.” Insight for the study is based on research from the IWSR and CGA.
While more drinkers are choosing to abstain (over 6.5 million people are expected to take part in Dry January in 2021), these numbers are not directly translating into sales for the non-alcoholic sector, particularly in the pandemic environment.
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On-premise is a critical tool for brand discovery, with bartenders acting as gatekeepers for the category. Bars are, for the most part, shut and without bartenders to showcase non-alcoholic spirits in various forms, home drinkers aren’t quite understanding the appeal. Distill Ventures notes that “developing delicious, elevated cocktail experiences through zero-proof offerings is both challenging and costly.”
Without the educational teachings of bars and events, the sober-curious are not being indoctrinated into the non-alcoholic spirits world as quickly as in the pre-pandemic times.
Think of it this way. No-ABV spirits and beers thrived as an alternative beverage to sip on at parties and at bars. With parties cancelled and bars shut, they’re losing a bit of their relevance. While I’ve always been keen on cracking open a non-alcoholic beer when deadlines loom (Brooklyn Brewery, Partake, and Suntory’s All-Free are particular favorites), my tee-totaling partner doesn’t see the point at home—additional calories without the effects of alcohol? No thank you. Picking one up at a bar or a party, perhaps, but the draw isn’t there for him at home.
These are relatively minor hurdles for the NA industry—growing pains, if you may.
Driven by an increased interest in wellness and the expanding category of no-ABV, 58% of consumers are drinking more no- and low-ABV drinks than last year, while 61% of consumers want better choices when it comes to non-alcoholic drinks. The majority of these drinkers aren’t abstainers: they’re average drinkers just looking to break up their alcohol consumption, whether it’s taking a night off or pacing yourself between drinks. (I’m a martini fan but more than one or two in a sitting will leave me spinning, so I break up my martinis with something low- or no-ABV.)
E-commerce is a big beacon of success for the category: e-commerce via Amazon, grocery outlets, and brand shopping sites has ‘buoyed the segment’ this year, according to Distill Ventures.
Investors are taking notice and non-alcoholic spirits brands are landing top dollar funding. Canadian-owned non-alcoholic brewery Partake drummed up $4 million in funding while Clean Liquor Co secured $12 million. Diageo recently acquired a minority stake in Ritual Zero Proof.
The U.K. is currently ‘the most mature’ market for the NA category, according to the study. (Unsurprising, as it’s the home base for Seedlip, arguably the most popular alcohol substitute available.)
This year, the U.K. has seen established spirits brands enter the space, launching no-proof options to match their regular ABV bottlings.
We have yet to see this in the US, but I expect that is imminent.
With that in mind, I’m curious as to how this year will unfold for the category. On one hand, after over-drinking through 2020, I’m sure people are looking for a reprieve. According to Alcohol Change U.K., nearly one-third (29%) of adults surveyed said they drank more in 2020 than previously. People reported drinking earlier in the day (26%) and drinking more often (31%). Nielsen noted sales of low- and no-alcohol alternatives soared 30% in lockdown in the U.K. Nonalcoholic beer sales went up 44% in the U.S. in May compared to last year.
On the other hand, the way 2021 is going so far, we may need a collective strong drink.
Regardless, Dry January will set the pace for year—it’s the non-alcohol world’s Christmas. Drinkers are looking to give their body a break after the holiday season and start the year off fresh.
Search results for ‘Dry January’ are up 25% in the US, and 10% globally between 2019 and 2020, according to Google
As I mentioned earlier, Alcohol Change U.K. noted that 6.5 million people are expected to take part in Dry January 2021, up from an estimated 3.9 million in 2020. These are impressive numbers considering that when the movement launched in 2013, only 4,000 people signed up to abstain.
As the Distill Ventures study has revealed, non-alcoholic brands need to leverage at-home experiences. If that’s the case, Dry January will be the time to implement measures to woo new consumer, be it via social media or other channels for discovery.
Our options for Dry January are pretty appealing. Mediterranean-influenced no-ABV aperitivo Ghia is fantastic: bright and bitter from the combination of Riesling grape juice, gentian root and ginger. A worthy substitute for an apres-dinner amaro.
I recently cracked open a bottle of Aplos, a hemp-infused, non-alcoholic spirit. It relies on mood-altering benefits rather than alcohol, and it’s quickly become one of the only NA options I’d actually sip neat though it’s really refreshing spiked with soda and citrus. Seedlip helps with a low-ABV Negroni, while I sip Gruvi prosecco with vermouth for the same reason. I’m eager to try both Curious Elixirs and Proteau.
A few years back, quality and variety was the biggest hurdle for non-alcohol brands. Liquid excellence is still a key challenge but now, with drinkers stuck at home, brands need to focus on creating relevant brand connections and experiences without the aid of bartenders.