Anyone
equating the adult nonalcoholic beverage category to what was on
offer in the 1990s is in for a shock. Today’s crop far surpasses
earlier versions in quality and craft with a focus for the past five
years or so on artisanal offerings.
“It’s
a redefining of adult beverages,” said Marcos Salazar, CEO of the
Adult Non-Alcoholic Beverage Association,
which focuses on nonalcoholic beer, wine, spirits, and cocktails.
Founded in fall 2021 to provide structure and resources to the
burgeoning category, ANBA has grown to 150 producer and industry
service provider members.
“In 2019 to
2020, there was an emergence of innovative entrepreneurs,”
explained Salazar. “Before, not much was new in [nonalcoholic]
beer, a lot of [nonalcoholic] wine was high in sugar, mocktails were
mostly juice. Now the category is growing rapidly even though it’s
relatively small.”
Nonalcoholic
beverages are a $3 billion subset of the total $260 billion U.S.
alcoholic beverage segment. Recent and potential growth is
staggering. IWSR,
a global market researcher for the alcoholic beverage industry,
forecasts sales
will hit $4 billion by 2027. Retail, or off-premise, sales alone of
nonalcoholic wines, beer, and spirits
hit $740 million in the 52 weeks ending July 20, 2024,
reports
market researcher NielsenIQ
(NIQ),
a 31% increase over the year prior. NIQ predicts sales will double in
five years.
Overall, core
brands from large companies account for the most sales, and those
companies are upping resources into the category, Salazar said. “But
innovation is coming from the smaller companies,” he continued.
Nonalcoholic
spirits, the smallest segment in the category, is exploding with 86%
growth in the same 52-week period.
“Beer
is the category driver with 85% of sales, but spirits—including
ready-to-drink [RTD] cocktail alternatives—are the fastest growing
and where innovation is prevalent,” Salazar said. NIQ data shows
the nonalcoholic RTD spirits segment grew a whopping 171% in the past
year. Edna’s,
Smashd
(formerly Mixoloshe), Big Hat,
and Craftwell Cocktails
are just some canned RTD cocktail alternatives recently to hit the
market.
Pandemic-era
stay-at-home mandates advanced sales, as nonalcoholic beverages
easily could be ordered online and shipped as opposed to alcohol.
“People were shopping in-store less and couldn’t find everything
they wanted on the shelves,” said Shelley Elkovich, CEO and Taste Maven for For Bitter or Worse,
a line of adult beverage alternatives. “It
accelerated
openness to engage with small growing brands selling direct to
consumer.”
Alcohol-free
beverages are a growing choice in food service and hospitality as
well. ANBA has been working to educate restaurants and bars on the
importance of offering several alcohol-free options, versus losing
out on revenue when customers turn to water or soda, said Salazar.
“The opportunity [in food service and hospitality] is huge,” he
added. “Nonalcoholic options should exist at every stadium, venue,
awards ceremony, networking event, etc.”
[Read more: Demand for Restaurant-Style Meals at Home Drives Grocery Opportunities]
Wellness, mindfulness, choice
drive nonalcoholic beverage market
The
health and wellness halo, and its associated mindfulness about
consumption, catapulted the category. “Consumers are making more
purposeful choices, including whether to eliminate or moderate
alcohol intake,” said Adrienne Stillman Krausz, Co-owner of the Dry Goods Beverage Company,
an online retailer of nonalcoholic beverages.
Beverages are following trends in
food related to choice, with diets like paleo, flexitarian,
gluten-free, and so on increasingly informing meal options. “A
cohort of consumers who look for premiumization, customization in
their diets, who individualize experiences, are also interested in
nonalcoholic beverages,” noted For Bitter or Worse’s Elkovich.
“Optionality
is a big part [of the category’s growth],” said Marcus Sakey,
Co-founder and Chief Creative Officer of Ritual Zero Proof.
“Just as you can’t go to a restaurant and not find vegetarian or
vegan options, there is a feeling that you should be able
to enjoy beverages however you choose.”
Launched in 2019, Ritual Zero Proof,
a line of tequila, rum, whiskey, gin, and aperitif alternatives, is a
category leader in alcohol-free spirits. Like
many producers, Ritual’s owners saw opportunity in the dearth of
adult alcohol-free beverages. “It used to be that Coke was the
alternative and that’s sad as an adult,” Sakey said.
“Five years
ago, on menus you had water, or juice, and that doesn’t scratch the
itch for an adult beverage,” Krausz agreed. “If you’re out
celebrating and everyone is having
wine, or drinking margaritas, it doesn’t feel very good.”
Like
many retailers and producers in the category, Krausz and husband Jake
had backgrounds in alcoholic beverages: He was in winemaking, and she
authored books like “Spirited: Cocktails From Around the World.”
When they wanted to lower their alcohol consumption, they found the
market lacking and sought to create a hub that amplifies newer
brands.
A cohort of consumers who look for premiumization, customization in their diets, who individualize experiences, are also interested in nonalcoholic beverages.
Shelley Elkovich, CEO and Taste Maven of For Bitter or Worse
The nonalcoholic beverage
consumer
Wellness and customization desires
help nonalcoholic beverages appeal across generations. Most of these
consumers—93%—also purchase wine, beer, and spirits that contain
alcohol, using both but for different occasions, switching out
alcoholic drinks with non each round, mixing half and half for
lower-proof beverages, or opting for nonalcoholic alternatives on
weekdays. “The nonalcoholic alternative consumer wants to
accentuate an occasion and enjoy but not at the expense of their
sleep or rest or workout,” says Ritual’s Sakey. “They want to
mark a moment without it impacting tomorrow.”
Generation
Z’s dropping alcohol consumption versus previous generations has
been well documented. According to a 2023 Gallup poll,
62% of adults
under 35 drink alcohol, a 10% drop over the past two decades. Yet,
that does not translate to this group leading purchases in the
category.
Price point is
a big reason. “The perception is that alcohol-free would be
cheaper, but it is more expensive,” said Dry Goods Beverage’s
Krausz. It often requires more resources, more premium ingredients,
and a more intensive process. In wine, for example, you are still
paying for the winemaking process and then there is an additional
process of removing the alcohol. The price can be prohibitive. “The
average price for a bottle of wine is shockingly low,” she
continued. “Many people will not pay $20 for wine and won’t pay
that much for nonalcoholic wine.”
[Read more: Remote Work Presents Opportunities (and Challenges) for Suburban Restaurant Growth]
Designer
beverage opportunities
The adult
alcohol-free beverage category has two segments: direct alternatives
that mimic as closely as possible the taste of traditional wines,
beer, and spirits, and designer alternatives
that offer similar taste notes without exactly replicating them,
explained Salazar.
Direct
alternatives steer sales, according the NIQ data, with
well-established brands like Athletic Brewing
craft beer, Fre wines,
Ritual Zero Proof, and Seedlip
spirits.
It
is in the designer alternative segment where younger companies are
experimenting with herbs, botanicals, and other ingredients. For
Bitter
of Worse, for example, offers The Saskatoon,
reminiscent of a red wine and made with rhubarb root, dried chamomile
flowers, foraged Douglas fir needles, and other ingredients, and
Smoky No. 5856,
which evokes warm whiskey notes but is made with maple syrup, apple
cider vinegar, black tea, dandelion root, and orange peel among other
ingredients. “When I think of recipes I think in terms of occasion
and flavor,” said Elkovich. “Is it for day drinking, red wine,
[evoking a] smoky spirit?”
The goal is to capture an experience
of drinking alcohol, but in a different way. Sparkling
teas, for example, are creating a niche in the nonalcoholic beverage
category. “Tea is a natural choice as a wine alternative,” said
Krausz. “It can be fruity, floral, earthy, it has tannins. You can
drink it in much the same way as wine, pair it with the same foods,
have a sparking tea instead of Champagne.”
Tennyson produces Black Ginger,
like a digestif or aperitif and made with ingredients like ginger,
bergamot, and yerba matte. “It’s aromatic like gin, but warm like
whiskey,” said Krausz. “It’s a refined, nuanced flavor profile.
If you like that in a whiskey, you would find some of the same
complexity.”
Though not
limited to them, younger consumers could drive opportunities in
complex, taste-forward designer alternatives. The number of Gen Zers
hitting age 21-plus is set to double over the next five years,
creating a large consumer pool with no preconceived alcohol
preferences, many not having tasted alcohol previously, Krausz said.
“Younger people are
not necessarily looking for alcohol-free wine,” he said. “They
would just choose something else entirely.”
The future of nonalcoholic
beverages: ‘A complete mainstreaming of the category’
What’s next for adult nonalcoholic
beverages? “A complete mainstreaming of the category,” said
Sakey, who likens it to the ascent of dairy alternatives. “They
were first created for diet intolerances and now they are available
everywhere. It’s odd if you can’t find them,” he continued.
“We’ll see the same thing with nonalcoholic alternatives.”
“People want great-tasting drink
alternatives” Salazar agreed. “This is going to become
permanent.”
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Published
Denise Purcell
