Anyone equating the adult nonalcoholic beverage category to what was on offer in the 1990s is in for a shock. Today’s crop far surpasses earlier versions in quality and craft with a focus for the past five years or so on artisanal offerings.
“It’s a redefining of adult beverages,” said Marcos Salazar, CEO of the Adult Non-Alcoholic Beverage Association, which focuses on nonalcoholic beer, wine, spirits, and cocktails. Founded in fall 2021 to provide structure and resources to the burgeoning category, ANBA has grown to 150 producer and industry service provider members.
“In 2019 to 2020, there was an emergence of innovative entrepreneurs,” explained Salazar. “Before, not much was new in [nonalcoholic] beer, a lot of [nonalcoholic] wine was high in sugar, mocktails were mostly juice. Now the category is growing rapidly even though it’s relatively small.”
Nonalcoholic beverages are a $3 billion subset of the total $260 billion U.S. alcoholic beverage segment. Recent and potential growth is staggering. IWSR, a global market researcher for the alcoholic beverage industry, forecasts sales will hit $4 billion by 2027. Retail, or off-premise, sales alone of nonalcoholic wines, beer, and spirits hit $740 million in the 52 weeks ending July 20, 2024, reports market researcher NielsenIQ (NIQ), a 31% increase over the year prior. NIQ predicts sales will double in five years.
Overall, core brands from large companies account for the most sales, and those companies are upping resources into the category, Salazar said. “But innovation is coming from the smaller companies,” he continued.
Nonalcoholic spirits, the smallest segment in the category, is exploding with 86% growth in the same 52-week period.
“Beer is the category driver with 85% of sales, but spirits—including ready-to-drink [RTD] cocktail alternatives—are the fastest growing and where innovation is prevalent,” Salazar said. NIQ data shows the nonalcoholic RTD spirits segment grew a whopping 171% in the past year. Edna’s, Smashd (formerly Mixoloshe), Big Hat, and Craftwell Cocktails are just some canned RTD cocktail alternatives recently to hit the market.
Pandemic-era stay-at-home mandates advanced sales, as nonalcoholic beverages easily could be ordered online and shipped as opposed to alcohol. “People were shopping in-store less and couldn’t find everything they wanted on the shelves,” said Shelley Elkovich, CEO and Taste Maven for For Bitter For Worse, a line of adult beverage alternatives. “It accelerated openness to engage with small growing brands selling direct to consumer.”
Alcohol-free
beverages are a growing choice in food service and hospitality as
well. ANBA has been working to educate restaurants and bars on the
importance of offering several alcohol-free options, versus losing
out on revenue when customers turn to water or soda, said Salazar.
“The opportunity [in food service and hospitality] is huge,” he
added. “Nonalcoholic options should exist at every stadium, venue,
awards ceremony, networking event, etc.”
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Wellness, mindfulness, choice drive nonalcoholic beverage market
The health and wellness halo, and its associated mindfulness about consumption, catapulted the category. “Consumers are making more purposeful choices, including whether to eliminate or moderate alcohol intake,” said Adrienne Stillman Krausz, Co-owner of the Dry Goods Beverage Company, an online retailer of nonalcoholic beverages.
Beverages are following trends in food related to choice, with diets like paleo, flexitarian, gluten-free, and so on increasingly informing meal options. "A cohort of consumers who look for premiumization, customization in their diets, who individualize experiences, are also interested in nonalcoholic beverages,” noted For Bitter For Worse’s Elkovich.
“Optionality is a big part [of the category’s growth],” said Marcus Sakey, Co-founder and Chief Creative Officer of Ritual Zero Proof. “Just as you can’t go to a restaurant and not find vegetarian or vegan options, there is a feeling that you should be able to enjoy beverages however you choose.”
Launched in 2019, Ritual Zero Proof, a line of tequila, rum, whiskey, gin, and aperitif alternatives, is a category leader in alcohol-free spirits. Like many producers, Ritual’s owners saw opportunity in the dearth of adult alcohol-free beverages. “It used to be that Coke was the alternative and that’s sad as an adult,” Sakey said.
“Five years ago, on menus you had water, or juice, and that doesn’t scratch the itch for an adult beverage,” Krausz agreed. “If you’re out celebrating and everyone is having wine, or drinking margaritas, it doesn’t feel very good.”
Like many retailers and producers in the category, Krausz and husband Jake had backgrounds in alcoholic beverages: He was in winemaking, and she authored books like “Spirited: Cocktails From Around the World.” When they wanted to lower their alcohol consumption, they found the market lacking and sought to create a hub that amplifies newer brands.
A cohort of consumers who look for premiumization, customization in their diets, who individualize experiences, are also interested in nonalcoholic beverages.
Shelley Elkovich, CEO and Taste Maven of For Bitter For Worse
The nonalcoholic beverage consumer
Wellness and customization desires help nonalcoholic beverages appeal across generations. Most of these consumers—93%—also purchase wine, beer, and spirits that contain alcohol, using both but for different occasions, switching out alcoholic drinks with non each round, mixing half and half for lower-proof beverages, or opting for nonalcoholic alternatives on weekdays. “The nonalcoholic alternative consumer wants to accentuate an occasion and enjoy but not at the expense of their sleep or rest or workout,” says Ritual’s Sakey. “They want to mark a moment without it impacting tomorrow.”
Generation Z’s dropping alcohol consumption versus previous generations has been well documented. According to a 2023 Gallup poll, 62% of adults under 35 drink alcohol, a 10% drop over the past two decades. Yet, that does not translate to this group leading purchases in the category.
Price point is
a big reason. “The perception is that alcohol-free would be
cheaper, but it is more expensive,” said Dry Goods Beverage’s
Krausz. It often requires more resources, more premium ingredients,
and a more intensive process. In wine, for example, you are still
paying for the winemaking process and then there is an additional
process of removing the alcohol. The price can be prohibitive. “The
average price for a bottle of wine is shockingly low,” she
continued. “Many people will not pay $20 for wine and won’t pay
that much for nonalcoholic wine.”
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Designer beverage opportunities
The adult alcohol-free beverage category has two segments: direct alternatives that mimic as closely as possible the taste of traditional wines, beer, and spirits, and designer alternatives that offer similar taste notes without exactly replicating them, explained Salazar.
Direct alternatives steer sales, according the NIQ data, with well-established brands like Athletic Brewing craft beer, Fre wines, Ritual Zero Proof, and Seedlip spirits.
It is in the designer alternative segment where younger companies are experimenting with herbs, botanicals, and other ingredients. For Bitter For Worse, for example, offers The Saskatoon, reminiscent of a red wine and made with rhubarb root, dried chamomile flowers, foraged Douglas fir needles, and other ingredients, and Smoky No. 5856, which evokes warm whiskey notes but is made with maple syrup, apple cider vinegar, black tea, dandelion root, and orange peel among other ingredients. “When I think of recipes I think in terms of occasion and flavor,” said Elkovich. “Is it for day drinking, red wine, [evoking a] smoky spirit?”
The goal is to capture an experience of drinking alcohol, but in a different way. Sparkling teas, for example, are creating a niche in the nonalcoholic beverage category. “Tea is a natural choice as a wine alternative,” said Krausz. “It can be fruity, floral, earthy, it has tannins. You can drink it in much the same way as wine, pair it with the same foods, have a sparking tea instead of Champagne.”
Tennyson produces Black Ginger, like a digestif or aperitif and made with ingredients like ginger, bergamot, and yerba matte. “It’s aromatic like gin, but warm like whiskey,” said Krausz. “It’s a refined, nuanced flavor profile. If you like that in a whiskey, you would find some of the same complexity.”
Though not limited to them, younger consumers could drive opportunities in complex, taste-forward designer alternatives. The number of Gen Zers hitting age 21-plus is set to double over the next five years, creating a large consumer pool with no preconceived alcohol preferences, many not having tasted alcohol previously, Krausz said. “Younger people are not necessarily looking for alcohol-free wine,” he said. “They would just choose something else entirely.”
The future of nonalcoholic beverages: ‘A complete mainstreaming of the category’
What’s next for adult nonalcoholic beverages? “A complete mainstreaming of the category,” said Sakey, who likens it to the ascent of dairy alternatives. “They were first created for diet intolerances and now they are available everywhere. It’s odd if you can’t find them,” he continued. “We’ll see the same thing with nonalcoholic alternatives.”
“People want great-tasting drink alternatives” Salazar agreed. “This is going to become permanent.”
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