An analysis of the no- and low-alcohol market

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According to a study published by IWSR Drinks Market Analysis, non-alcoholic and low-alcohol beer/cider, wine, spirits and ready-to-drink (RTD) products grew by more than 7% in volume in 10 major global markets by 2022. No/low alcohol consumption category is expected to surpass that of the past four years, with a predicted annual volume growth rate (CAGR) of 7% in 2022-2026, compared to 5% in 2018-2022. This will be led by growth in the non-alcoholic category, which is expected to account for more than 90% of the predicted total volume growth in the category.

The ‘IWSR No- and Low-Alcohol Strategic Study’ examined 10 focus markets: Australia, Brazil, Canada, France, Germany, Japan, South Africa, Spain, the United Kingdom and the United States. It found that in these markets, the value of non-alcoholic products will exceed $11 billion by 2022, compared to $8 billion in 2018.

“The dynamic non-alcoholic/low alcohol category offers opportunities for incremental sales growth as consumers are recruited from beverage categories such as soft drinks and water. Brand owners have the opportunity to recruit alcohol non-drinkers,” said Susie Goldspink, Head of No- and Low-Alcohol, IWSR Drinks Market Analysis. “As more people choose to avoid – or forego – alcohol on certain occasions – the proportion of no/low alcohol is steadily increasing.”

Non-alcoholic drinks dominate

In 2022, the volume of non-alcoholic beverages grew by 9%, increasing the share of the total non-alcoholic/low-alcohol segment in the analyzed markets to 70%, compared to 65% in 2018.

“No alcohol is growing faster than low alcohol in most markets,” said Goldspink. “The countries where this does not apply, such as Japan and Brazil, are low-volume, low-alcohol emerging markets.”

The dominance of non-alcoholic beverages over low-alcohol beverages in many markets is driven by improved taste, production techniques and a diversification of consumption times. IWSR expects non-alcohol volumes to grow at a CAGR of 9% between 2022 and 2026.

Largest market and expected growth

The world’s most valuable alcohol-free/low-alcohol markets are Germany, Japan, Spain, the US and the UK, with growth in the alcohol-free/low-alcohol category varying in each market depending on market maturity.

Germany is the world’s largest and most mature no/low alcohol market, but growth in this market is expected to be relatively slow. In contrast, markets such as Australia, Canada and the US are expected to see double-digit volume CAGR in 2022-2026.

Nearly 70% of the total alcohol-free/low-alcohol growth between 2022 and 2026 is expected to be in the non-alcoholic beer/cider category. The bulk of this will come from the US and Japan, while non-alcoholic wine growth is expected to be more fragmented, but positive in all markets. Non-alcoholic spirits will also experience some dynamic growth.

Low alcohol is expected to grow at a volume CAGR of 2% in 2022-2026, driven by the low alcohol beer and wine categories. The dominant driver of low alcohol wine is the US.

Consumer base

Millennials consume the most alcohol-free/low-fat drinks.

It is common for consumers to switch between alcohol and no/little, with 78% of none/little consumers saying they also drink full-fat alcohol; of which 41% are classified as ‘substitutes’ who choose no/few products for certain occasions when avoiding alcohol.

The group of ‘non-drinkers’, who do not drink alcohol at all, accounts for 18% of the few/no consumers. This number is rising in nine out of ten markets, with younger consumers of legal drinking age leading the way.

Newer recruits to no/low are increasing their frequency of consumption as the products permeate a wider variety of occasions, such as quiet social settings, no alcohol alone, or relaxing at home with a partner.

With people motivated to drink less or less by lifestyle rather than necessity, growth is now being driven both by new consumer acquisition and increased participation. Daytime consumption of both no- and low-alcohol beverages has increased, suggesting that the category may expand beyond alcohol substitution occasions.

“This pattern of avoiding alcohol on certain occasions or altogether creates a non-excessive growth in alcohol poverty,” Goldspink said. “Couple this with the rise of functional beverages — often containing ‘mood-boosting’ adaptogens or nootropics — and the result is a strong take on alcohol-free.”

Key Challenges

The biggest challenge in the no/low category is availability. No/low products lack visibility in mainstream retail and there is often confusion among retailers about where to display them, whether with soft drinks or on their own. In both channels, the choice of products is often limited.

Cost has become less of a barrier for the category, dropping from 14% in 2021 to 7% in 2022. Despite the cost of living crisis, cost as a purchase threshold currently remains unchanged among those who drink little/no. Where no/low is set, prices are comparable to equivalent full strength alcohol categories.

Product innovation

While many approaches to date involve a change from alcohol by volume, some no/low producers are focusing on innovation in packaging, functional benefits and flavor to enable brands to keep consumers within their portfolios.

Examples include sliding ABV scales and multipacks, the use of botanicals to create a more intense flavor, and the introduction of distilled alternatives across a wider range of categories, such as aperitifs, dark drinks, and agave.

Some product messages have shifted from the absence of alcohol to taste and other functional benefits such as added nootropics, vitamins and adaptogens. Some mixer brands are also expanding their range to offer products that can be enjoyed without liquor or an alternative to liquor.

Image credit: iStock.com/LauriPatterson

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