13/05/2024

What’s driving the growth of no-alcohol in the US?

IWSR data shows strong growth for the US no-alcohol segment, driven by a relatively underdeveloped market and high levels of moderation intent among consumers

The buoyant no-alcohol category in the US is poised for continued strong growth in the years ahead, fuelled by a combination of moderation trends, a well-established but expanding no-alcohol beer segment, recruitment of new consumers, and dynamic growth for zero-alcohol spirits, RTDs and alcohol adjacents. 

No-alcohol enjoyed a strong year in the US in 2023, with overall volumes rising by +29% versus 2022, according to IWSR Drinks Market Analysis data, well ahead of low-alcohol (+7%). 

This growth was driven by no-alcohol beer/cider, which accounts for 81% of servings and rose in volume terms by +30% in the year. Meanwhile, no-alcohol wine volumes increased by +18%, with the smaller spirits and RTD segments showing dynamic growth, up +32% and +36% respectively. The emerging alcohol adjacents sub-category was up +15% on the year. 

“An increasing consumer focus on moderation, health and wellness is having a positive impact on all no-alcohol sub-categories, with growth rates higher than their full-strength equivalents,” says Susie Goldspink, Head of No- and Low-Alcohol Insights, IWSR. 

No-alcohol beer remains notably larger than other sub-categories, thanks to the relative maturity of the segment, availability of good tasting quality products, and the ongoing introduction of new brands from large and small breweries. 

Meanwhile, alcohol-free RTDs have the smallest volumes, giving them the highest growth rates, primarily propelled by the demand for pre-mixed no-alcohol cocktails and the launch of new no-alcohol “hard” seltzers from some brands.  

“Leading spirits brands are becoming more involved in no-alcohol, suggesting the segment is reaching an increasing level of maturity. New brands have also entered the segment, providing more options for consumers,” comments Marten Lodewijks, Head of US Operations, IWSR. 

“Alcohol adjacent products have not yet become mainstream, but are gaining awareness slowly, especially among younger LDA age cohorts, through consumer education,” he notes.  

The buoyancy of the no-alcohol category in the US is reflected in IWSR forecasts showing double-digit volume CAGRs covering the 2023-27 period for every sub-category. Notably, no-alcohol growth in the US is largely driven by higher price bands: premium-plus products accounted for 75% of no-alcohol beer volumes in 2023, and an even larger share of no-alcohol wine (87%) and spirits (93%). 

Millennials, Gen Z key 

Demand for no-alcohol products in the US is particularly strong among younger legal age cohorts, with Millennials accounting for 45% of no-alcohol consumers in 2023; however, this figure is down on the 2022 figure of 51%, thanks to an increase in the share of LDA Gen Z consumers (17% in 2023, up from 11% in 2022). 

This in turn is driving an increase in the number of Substituters among no-alcohol consumers – those who replace full-strength with no-alcohol on a specific occasion.  

“Legal aged Gen Zs are more likely to fall into the Substituters group than Abstainers. This means that increasingly, the new younger LDA recruits to no/low are not “all or nothing” – they switch between alcohol and other products, rather than avoiding alcohol altogether,” comments Goldspink. 

“This presents different kinds of opportunities for brand extensions, and we will likely see more blurring between products, such as hard seltzer brands increasingly offering no-alcohol versions of their full-strength ABV products.

Consumers are becoming increasingly occasion focused – rather than category focused – and are looking for a drink that can fit into a traditional alcohol occasion.” 

Core categories: maturity beckons 

No-alcohol is a bright spot for the overall beer segment in the US as this increasingly well-established sub-category is supplemented by the launch of new brands from brewers of all sizes. An increased focus on draught in the on-trade will drive future volumes. 

Meanwhile, no-alcohol wine and spirits will continue to grow by double digits. “The spirits segment will gain increased awareness through new products, particularly from mainstream brands,” says Goldspink. “Wine will increase through its core consumer base, as it is a more mature segment.” 

The rise of alcohol adjacents 

The still small sub-category of alcohol adjacents – including cannabis (THC) beverages and cognitive enhancers – is rapidly growing in significance in the US: some 31% of no/low consumers have bought these products at some point, according to IWSR consumer data, ahead of every other no-alcohol sub-category, including beer. 

“These brands will resonate strongly with younger LDA consumers who are seeking mood-altering alternatives to alcoholic products,” says Goldspink. “The cannabis beverage space is brimming, with a huge number of brands and products that cater to a wide variety of consumer needs.”

Barriers: availability a persistent issue 

While product availability remains a significant barrier to increased no-alcohol consumption, perceptions of good taste and excitement around the category are improving in the US, according to IWSR consumer research. 

Availability is cited as the biggest barrier to increased consumption, with 47% of no/low buyers in 2023 mentioning it as a factor preventing more frequent consumption – up from 36% in 2021. 

“Although there are no major shifts in barriers to consumption since last year, concerns over availability have been a long-term trend and are being cited by more no/low consumers,” says Goldspink. 

Growth opportunities: key takeaways 

The US is poised for strong growth in no-alcohol consumption in the years ahead, with a relatively underdeveloped market and high levels of moderation intent among consumers. 

This cultural shift is being increasingly embraced by the rise of sober bars and mainstream on-trade venues adding non-alcoholic sections to cocktail lists, as well as specialist retailers offering innovative products – while brand owners are aiming to improve routes to market by investing in retail channels.

“For brand owners, the on-trade and direct-to-consumer channels present relatively untapped opportunities,” says Lodewijks. “Brands can focus on expanding their presence in these to reach a wider audience. 

“Opportunities for brands also exist in boosting awareness through strategic marketing and educational campaigns that increase participation to widen the rapidly expanding consumer base for no-alcohol products.” 

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