No and low alcohol products are attracting a lot of attention lately. Attitudes towards non-consumption of alcohol are becoming much more positive and accepting, as evidenced by the numerous ‘dry month’-type initiatives and the ‘sober curious’ movement with its accompanying celebrity supporters.
Less alcohol, More growth
In the scheme of things, the no and low alcohol segment of the drinks market is small. No and low alcohol wines accounted for just 9.3 million cases globally in 2020, which is less than 0.5% of total consumption. However, the growth rate for this category has been well above that of the total wine market. Between 2015–20, the average annual growth rate was 25%. The forecast growth rate for the next five years (2021–25) is 15% per annum on average, compared with less than 1% cent per annum for total wine volume.
While 2020 was a challenging year for beverage alcohol, consumer demand for no- and low alcohol beer, wine, spirits, and ready-to-drink (RTD) products continues to increase. The buoyant no/low category gained share within the total beverage alcohol market last year to 3%, and total volume is forecasted to grow by +31% by 2024.
What we’re seeing is a moderation trend that’s sweeping across key global markets, and that’s bringing with it increased demand for reduced alcohol, or alcohol-free drinks.
Mark Meek, CEO of IWSR Drinks Market Analysis
Low or no – is there a difference?
While no and low alcohol products are often combined in reports and articles as a single category, there are in fact some significant differences between the two that should be considered when evaluating the opportunity for a particular product.
There is strict definition of ‘no-alcohol’ products where as ‘low-alcohol’ beverages are considered when having between 0.5% and 7.5% alcohol by volume – ABV.
Broadly, no-alcohol products are outperforming low-alcohol beverages: in 2019-2020, the ‘no-alcohol’ sub-category increased volume by +4.5%, while ‘low-alcohol’ decreased by -5.5%. The decline was driven by the poor performance of traditional low-alcohol beer brands. However, newer low-alcohol products like spirits and RTDs are particularly resonating with consumers in markets such as the US who are becoming more mindful of what and how much they consume.
Beer Dominates No/Low Alcohol, Spirits Post Largest Volume Increases
Driven by early innovation and investment in quality, the no/low beer and cider category dominates the overall no/low market, commanding a 92% share of the total no/low alcohol segment. Thanks to the investment in the category from the major brewers, consumers are becoming more familiar and accepting of no/low beer as a quality product. While several key beer players continue to steer the category, the market is fragmented with a number of smaller brands vying to establish themselves as market leaders in this space. The segment is likely to become even more of a focus for smaller craft producers who are able to bring a diverse range of products to the market in future.
No/low beer registered a flat performance for the 2019-2020 period, at +0.5%. In contrast, the no/low spirits category – which has only 0.6% share of the no/low market – increased volume sales by +32.7%, largely thanks to new interest in home experimentation among consumers. New product development and increasing consumer demand for no/low spirits will see the category experience the largest volume CAGR rate, 2020 to 2024, at approximately +14%.
The most popular occasion to consume no/low products is when relaxing at home (64%), and the category’s suitability to low-tempo occasions is a key reason why it has been so resilient during the pandemic.
Growth in the US
No/low alcohol beverages overall are on the rise globally, but some markets proved more resilient than others over the last year. Meanwhile, the US, as the next largest market after Germany, is currently the most dynamic, with the no/low segment registering over +30% increase in 2020 despite the enormity of the challenges faced by the industry.
In the US, low-alcohol wine takes a much larger market share than no-alcohol, largely because of the strength of the health and wellness trend. However, in most other markets globally, no-alcohol wines are seen as higher in quality and better value.
Opportunities for lower and no-alcohol wine?
There is an unmet consumer need. There is a clear pattern: people around the world, across multiple cultures, are thinking along similar lines when it comes to lifestyle. These needs can be summarized in three words: health, control and taste.
Consumers want to drink stuff that is better for us, be it in fewer calories, more ‘natural’ ingredients and fewer headaches. We want to drink things that won’t cause us to lose control, whether it is because we value this control for its own sake. And, not surprisingly, consumers want drinks that taste pleasant and interesting, and genuine to what they are. Beer without alcohol still needs to taste like beer.
Low and no alcohol wine product struggles to meet the benchmark of what wine should taste like. Individual winemakers have come close, but it seems clear from the data that the category as a whole suffers from a version of the tragedy of the commons: when a sufficient proportion of products in market fail the consumer taste test, it tarnishes the whole category.
Moderating alcohol consumption is a clear lifestyle goal of those in the Generation Z and Millennial cohorts, and clearly not of interest to those over 55.
Availability also appears to be a problem, with retailers perhaps reluctant to invest heavily in promoting a product that requires a very specific need, and most likely a hand-selling effort.
Brand owners will have an important role to play in the future development of no- and low alcohol, as increasing the breadth of products available to consumers and their price points will support category growth and broaden its appeal.
Mark Meek, CEO of IWSR Drinks Market Analysis
The final inertia factor for the lower and no-alcohol wine category appears to be the evident success that other alcoholic beverage categories are having in terms of convincing consumers that their low / no alcohol product is more in tune with a moderating, healthier lifestyle. Chief among these are the successful low and no-alcohol beer brands, such as Heineken 0.0, which has taken the bold step of aligning its core premium brand image with a no-alcohol product.
Other categories are also rising to meet the need. One could argue that some of the recent success of the hard seltzer category in the US (and Canada) is down to the category’s positioning as ‘low calorie, low carb’. Hard seltzer drinkers see the product as a light, low alcohol alternative to other drinks.
The challenge for Wine producers is to make a no or low alcohol wine that tastes as good as a standard wine.