29/04/2021

Do consumers prefer no-alcohol over low-alcohol products?

IWSR assesses the performance of the no- and low-alcohol segments, and the different consumer drivers at play.

The no-alcohol and low-alcohol sub-categories are both rooted in the overarching health and wellness trend. However, consumption is driven by distinct consumer behaviours, and no-alcohol products appear to be outperforming low-alcohol offerings.

IWSR data shows that in 10 key no/low markets (Australia, Brazil, Canada, France, Germany, Japan, South Africa, Spain, UK and US), the no-alcohol segment increased volume by +4.5% in 2019-20, while low-alcohol declined by -5.5% primarily due to the poor performance of low-alcohol beer in Western Europe. In terms of market share, in the 10 key markets, no-alcohol’s share was 66% in 2019-20 and low-alcohol’s share was 34%.

Consumption drivers

No-alcohol beverages are predominantly consumed by people seeking to moderate their alcohol consumption. According to IWSR consumer research, more than half (58%) of no/low consumers report that they choose to switch between no/low and full-strength alcohol products on the same occasion.

Since the general quality of no-alcohol offerings has vastly improved over time, consumers who want to moderate their alcohol consumption are no longer having to compromise on taste. “Consumers are able to moderate their alcohol intake by enjoying sophisticated products while still having the occasional full-strength drink. Moreover, consumers who choose to abstain from alcohol, or moderate their alcohol consumption, are still able to remain part of the drinking occasion,” remarks Sophia Shaw-Brown, senior insights manager at IWSR.

For consumers who want to moderate their alcohol intake, low-alcohol propositions can sometimes be confusing. “Consumers don’t necessarily know that an alcoholic spirit brand normally sits at 30-40% ABV, so they don’t always know what a 20% ABV spirit means for a gin brand, or how a 20% ABV spirit might relate to a 5% ABV wine or a 1% ABV beer,” says Shaw-Brown. Furthermore, it is often unclear to consumers how many low-alcohol beverages they can consume and still be within the legal drink-drive limit. No-alcohol brands, however, are explicit about their 0% credentials, making it easier for consumers to be confident about their alcohol intake.

Low-alcohol beverages, while aligned with the moderation trend, generally tend to be more popular among consumers looking to explore specific health and wellness traits – such as low-calorie, low-sugar, and natural ingredients. “Brands in the low-alcohol space tend to have a healthier, ‘better for you’ premise, rather than being completely about moderation,” explains Shaw-Brown.

In some markets however, consumers continue to perceive low-alcohol products as being of lower quality, particularly when it comes to wine. Furthermore, while no-alcohol products are usually positioned as completely new, innovative propositions, low-alcohol beverages run a greater risk of being unfavourably compared to full-strength iterations.

However, consumers appear to be developing a more favourable view of low-alcohol spirits and RTDs as lower-ABV line extensions of established brands hit the market. Smirnoff and Beefeater are just two examples of brands that have launched low-alcohol innovations. Aged spirits makers are also increasingly looking to cater to health-conscious audiences – for instance, earlier this year, Chivas Brothers launched a 20% ABV iteration of Ballantine’s in Spain.

Low-alcohol RTDs are small compared to no-alcohol offerings, but the segment is growing fast. Of the 10 key markets studied, the US is the low-alcohol RTD market leader, with low-alcohol RTDs making up approximately 70% of the country’s no/low RTD segment.

In beer, while low-calorie or light beers have been around for a while, consumers are getting more interested in this as part of a wider shift towards health & wellness cues. Much of the low-alcohol beer growth is expected to come from independent and craft producers that are focusing on taste over 0.0% ABV.

Mixed market performance

Consumption may be broadly shifting from ‘low’ to ‘no’, however, this is not a consistent picture across the globe. In the US, for example, low-alcohol wine takes a far bigger market share (86.8%) than its no-alcohol counterpart due to exalted quality perceptions in the market, which are largely at odds with other parts of the world. The health and wellness trend, which is heavily aligned with low-alcohol, is also deeply rooted in the US, spurring the success of lower-alcohol ‘clean’ wines.

In other markets, no-alcohol sparkling wines are largely seen to be higher quality and better value than low-alcohol still or sparkling wines, and are frequently consumed during celebratory occasions. Industry focus in the UK has largely shifted to no-alcohol wines as lower duty costs mean they can offer more competitive price points.

Across the 10 key markets, no-alcohol makes up 66% of the low/no beer category, with strong growth in Spain, Japan and Australia. In Australia, low-alcohol beer dominates low/no market share, but sales have been in decline for many years, and this downward trend is expected to continue. Spain also has an established low/no beer market, and has seen ‘no’ players take share from ‘low’ players as consumers view new 0.0% brands as more modern. The market share of low-alcohol beer remains small in the US, though strong growth is forecast for the future.

The US market’s preference for ‘low’ over ‘no’ is also reflected in its spirits consumption, with low-alcohol taking a majority share of the low/no spirits market. Market share of low/no spirits in Australia and Germany is quite evenly split, while the UK heavily favours no-alcohol spirits.

According to Shaw-Brown, while growth of the no-alcohol segment is outpacing that of low-alcohol across the 10 key markets, there remains a strong opportunity for low-alcohol products, particularly as the health and wellness trend gains pace across the globe. “As these brands become more visible and well established and the quality improves, there is a real opportunity for growth in low-alcohol.”

You may also be interested in reading:

The Middle East – an untapped market for beverage alcohol innovators?
What does Dry January look like during a pandemic?
5 key trends that will shape the global beverage alcohol market in 2021