19/08/2022

Sources of innovation in dynamic no-alcohol markets

Germany dominates no-alcohol volumes, but the greatest innovation in the no-alcohol space is to be found in smaller dynamic markets

Over the next few years, no-alcohol volume growth is set to be shaped by a handful of dynamic markets – and innovative trends such as cross-category brand mobility, “better for you” products and specialist retail channels.

IWSR data shows that Germany dominates no-alcohol volumes, but the greatest innovation in the no-alcohol space is to be found in smaller dynamic markets, such as the US, UK, France and Australia. These markets all recorded double-digit no-alcohol volume growth in 2020-2021, compared to a flat performance in the more mature German market. All four are also expected to grow in the years ahead.

A number of key trends and developments are set to shape this dynamic growth in no-alcohol consumption.

Reinventing no-alcohol

In France – and, to a lesser extent, in Australia – there is a clear dichotomy between the established, historic no-alcohol category, dominated by inexpensive brands and private label products, and emergent new-generation products at significantly higher price points.

“In France, there are signs that new-generation no-alcohol spirits are recruiting new consumers and doing so on the products’ own merits,” says Jason Holway, market analyst at IWSR. “Younger legal-drinking aged consumers in particular are choosing primarily new-generation no-alcohol brands not because they lack alcohol, but because of what they represent: quality ingredients, new sensory experiences and good taste.”

In Australia, non-alcoholic “whisky-like” product Claytons was popular in the 1980s – and now this latent trend is re-emerging. “Demand for non-alcoholic spirits is strong with consumers who want to be part of the social drinking ritual without the alcoholic element,” says Sarah Campbell, research director at IWSR.

Cross-category brand mobility

“Successful no-alcohol brands are moving between no-alcohol categories in a way that is not always possible for regular alcohol,” observes Susie Goldspink, head of no- and low-alcohol at IWSR, highlighting a number of examples of no-alcohol portfolios including Lyre’s – spanning spirits, RTDs and sparkling wine – and US-based Grüvi with their range of no-alcohol beer and wine.

In France, Le Petit Béret uses a patented method to produce “true” no-alcoholic products, in that no alcohol is removed from them because none is created in the first place. The brand initially launched a range of wines, before moving into no-alcohol beer. Le Petit Béret also has plans to launch a selection of no-alcohol spirits including whisky, Bourbon, gin and rum alternatives.

Aperitivo hour

“The rising importance of the aperitivo occasion is driving demand for non-alcoholic substitutes,” says Goldspink. The global spirit & wine aperitif category, for example, grew 23% in 2021, and is expected to grow at a 5% volume CAGR, 2021-2026. “Taking advantage of the success of the Aperol Spritz, multiple brands have launched no-alcohol versions across both the core spirit and RTD variants.”

In the UK, these products span established brand spin-offs, such as Martini Floreale and Vibrante, Seedlip’s aperitivo sister brand, Aecorn, and specialist aperitif range Everleaf, which has secured retail and on-premise listings.

Meanwhile, a similar dynamic can be observed in Australia, where no-alcohol specialist Lyre’s launched its Italian Spritz variant in 2020, followed by an Amalfi Spritz RTD in mid-2021.

Better for you

No-alcohol products with the perception of being ‘better for you’ are innovating through the use of adaptogens, probiotics, antioxidants, nootropics and other naturally sourced ingredients.

In the US, hemp and adaptogen-infused beverage marketer Recess recently launched a limited edition Zero Proof ‘Margarita’ – the first time the brand has directly marketed a product as an alternative to alcohol. One hemp-infused non-alcoholic brand, Aplos, directly targets the alcohol occasion by claiming to be a “natural way to unwind, without the negative effects of alcohol”.

In Australia, hemp-infused sparkling water Beyond Hemp, launched in February 2021, claims it will “restore, balance [and] hydrate” – while UpFlow Brewing Co has created a range of rehydrating sports ‘beers’ with added electrolytes for use on hot or active days.

Dedicated routes to market

“In the US, an increasing number of no-alcohol-specific retailers are launching,” says Adam Rogers, research director for North America at IWSR. “These include ecommerce platforms, as well alcohol-free bars and retail stores in major cities. No-alcohol products can be sold anywhere with no restrictions, including online through major retailers like Amazon. By contrast, the sale of traditional-strength spirits remains largely limited in major online retailers.”

As well as sales, ecommerce platforms such as Better Rhodes, No & Low, Sèchey, Zero Proof and Boisson also focus on education and awareness, offering monthly subscriptions, cocktail recipes and information-led blogs.

A similar trend can be seen in Australia, prompted by the fast-growing momentum of no-alcohol products across all channels. Established retailer Woolworths, for example, embarked on a significant expansion of its range in July 2021 to exploit the growing “sober-curious” trend, and in March 2022, Dan Murphy’s opened a zero-alcohol bar, signalling its intentions to lead in that space.

“The no-alcohol market is still very much in its early growth stage in many categories and geographies, as the sector continues to define itself,” notes Goldspink. “However, consumer interest and demand for no-alcohol offerings continue to grow, propelling brands to continue investing and innovating in the sector.”

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