19/01/2023

Moderation trend drives demand for no-alcohol products in the UK

The UK stands out as one of the world’s most dynamic markets for no/low-alcohol

Half of the UK adult population say they have bought a no/low-alcohol product in the past. This consumer momentum has helped to boost no/low-alcohol volume consumption by 9% in 2022 vs 2021. The no/low-alcohol category now commands a volume share of nearly 3% of the UK’s total beverage alcohol market. The UK’s no/low-alcohol market is expected to see volume growth at a CAGR of 7%, 2022-2026.

Latest findings from IWSR show that growth is being fuelled both by smaller start-ups – the source of much recent innovation – and by line extensions of popular full-strength brands, which are helping to normalise the category.

“The UK is one of the most dynamic no/low markets, with new product launches continuing apace and growth forecasts outstripping many other countries,” says Susie Goldspink, Head of No- and Low-Alcohol, IWSR Drinks Market Analysis. “While most no/low innovation continues to come from smaller players, no-alcohol variants from established brands are helping to build sector credibility.”

The fast-moving nature of the market is epitomised by the vibrant no-alcohol spirits/aperitifs segment and an emerging niche of zero-abv agave products tapping into demand for full-strength tequila and mezcal.

Demand for no-alcohol products overtakes that of low-alcohol

No-alcohol overtook low-alcohol in 2022 with a volume share of 51%, thanks to impressive recent growth: no-alcohol volumes rose by 23% between 2018 and 2021, and by 16% in 2022 alone. By contrast, low-alcohol volumes were essentially flat between 2018 and 2021, but saw slight growth in 2022.

The IWSR expects this trend to continue in the coming years, forecasting no-alcohol volume growth of 10% between 2022 and 2026, versus low-alcohol at 3%.

“Low-alcohol products have more of a historical legacy presence in the UK,” notes Goldspink. “Overall volumes have changed little in recent years, and only modest growth is expected in this segment during the forecast period. This is compounded by the tendency of consumers to abstain from alcohol on certain occasions or altogether, with 54% of consumers taking this approach.

“No-alcohol products – particularly those with a more premium positioning – have almost single-handedly driven market expansion over the past five years, finally overtaking low-alcohol in 2022. With the bulk of product innovation and consumer demand focused in this area, further healthy growth is predicted in the years ahead.”

No/low beer dominates the market, but other segments, especially agave alternatives, see rapid growth

Beer continues to dominate the UK no/low market, and commands majority share of the no/low space in both volume and value terms. No/low-beer volumes grew 8% in 2022, and are forecast to grow at 7% volume CAGR, 2022-2026. As no/low-products continue to see momentum in the UK, other segments are rapidly growing as well. For example, no-alcohol spirits and alcohol adjacents are increasingly entering the market landscape, the latter often boasting claimed functional benefits, such as mood enhancement, relaxation, or mindfulness.

The dynamism of the no-alcohol segment is epitomised by the spirits/aperitifs category, which is entirely populated by new-generation brands launched over the past five years or so, with innovation continuing. Volumes grew by 38% in 2022 alone.

Meanwhile, no-alcohol versions of agave spirits are another emerging niche, says Goldspink. “Full-strength tequila/agave sales have been riding the crest of a wave, and no-alcohol interpretations are appearing as an antidote to the crowded no-alcohol gin and botanical spirits segment. No-alcohol agave volumes in the UK have more than doubled in the last year,” she adds.

The no/low-alcohol consumer

UK no/low consumption is fairly evenly distributed among different age groups above the age of 24, with ‘substituters’ – those who switch between full-strength and no/low products on different occasions – the most significant consumption group.

While soft drinks are still the preferred choice of consumers to moderate their alcohol intake, almost a third choose a no-alcohol beverage, presenting an opportunity for further development of the category.

No/low products have proved popular with younger consumers of legal drinking age at festivals and outdoor events; some prominent brands have established successful tie-ins with fitness-focused lifestyle activities such as cycling.

Barriers to further growth include a stated preference for full-strength products – prevalent across existing no/low consumers and non-consumers alike – as well as cost and a lack of availability. These latter two factors have become more significant over the past year.

Ecommerce becomes critical path for growth

Brick-and-mortar retail remains a vital channel for the no- and low-alcohol segments in the UK, accounting for 85% and 73% of volumes respectively in 2022 – but ecommerce is also crucial, with a share figure hovering around the 10% mark.

“The brick-and-mortar off-trade dominates UK no- and low-alcohol sales, but with facings at a premium, securing and maintaining product listings can be challenging, even for the big players,” says Goldspink. “Ecommerce will therefore remain a growth channel, both in omnichannel and no/low specialists.”

The route-to-market picture, however, is changing fast, with the focus shifting to the on-trade and the emergence of draught versions of leading no-alcohol beer brands. Alcohol-free cocktails and specialist no-alcohol bars are also increasingly influential in the market.

Meanwhile, no/low fixtures are becoming more and more common in larger supermarkets, and pop-up dedicated retail stores are helping to increase category awareness, alongside the educational role played by no/low ecommerce sites.