Low and no-alcohol looks to be a star category of the future
We’ve just had the wettest February since records began, but perhaps of more immediate importance for the drinks trade, it was preceded by the driest Dry January in UK history.
More than a quarter of UK drinkers reduced or completely stopped drinking in January, according to Drinkaware research.
The study found that 72% of those who said they drank less plan to continue to do so in the long term, while 12% of this group intend to stop drinking completely.
Another finding from the study is that taking drink-free days is the most popular technique to cut down. This ties in with Drinkaware’s Drink Free Days campaign, which encouraged midlife drinkers in particular – those aged 45-64 – to incorporate more alcohol-free days into each week.
But it’s not just about older drinkers, as research carried out for Franklin & Sons shows. The premium soft
drink brand’s report shows younger generations are also cutting down on alcohol, with the key reasons being that they are going out less often (43%), have a desire to get fit (30%), and are trying to save money (27%).
For retailers who rely on sales of BWS – and also producers of these drinks – this consumer trend across all age groups is a concern.
It has been well documented that the low and no-alcohol category, along with premium soft drinks, is attracting waves of NPD and innovation. But how much should retailers focus on alcohol-free drinks and is there a danger that a seller of alcohol could veer too far from their raison d’etre?
Research by Kam Media highlights low and no-alcohol as providing “a huge opportunity for the off-trade”, with more than a third of UK adults having consumed a low or no-alcohol drink at home, a statistic that doubles among the generation Z and millennial sectors.
Its research shows that these consumers are choosing a low or no-alcohol drink for either “a quiet night watching TV”, “to drink with their evening meal at home” or with lunch.
Kam Media marketing director Katie Jenkins says this trend doesn’t just impact the alcoholic drink sector but also soft drinks.
She says: “Traditional soft drinks brands would do well to sit up and take notice. The high proportion of consumers who are now drinking low and no variants at home are moving into consumption occasions traditionally dominated by soft drinks. These companies now have serious new competitors, in the out-of-home space at least, in the shape of the big brewers.”
Another point for the off-trade, she notes, is that consumers can find shops less intimidating than pubs or restaurants, making them good places to encourage trial of new products.
And when it comes to new products, one of the most successful areas for alcohol-free has been beer.
Jonathan Rons, from the Retail Data Partnership, says unit sales of non- alcoholic beer in UK convenience stores doubled in the past six months, while distribution trebled, albeit from a very low base. However, he adds, the top five SKUs accounted for more than 80% of non- alcoholic beer sales.
He also highlights the “huge opportunity to improve display and visibility” in stores to grow the category because, he says, the research shows only one in five shoppers have even noticed the low and no-alcohol variants in a convenience store.
Research by IWSR shows the low and no-alcohol beer sector currently accounts for 2% of the total UK beer market and its analysts forecast this will grow 6% a year by 2023. In Spain, alcohol-free beers now account for more than 15% of the entire beer sector, proving there is still potential for more growth in the UK.
Emily Neill, chief operations officer at IWSR, says: “The forecast growth in this sector [in the UK] is in marked contrast to the total beer market, which we forecast to be flat or even slightly declining across the same period.”
Looking ahead, product innovation is likely to be driven by drinks that position themselves as healthier alternatives to alcohol, such as products that curtail their carbohydrate, calorie, artificial ingredients and/or sugar content. Gluten-free and vegan alternatives are likely to drive further category interest, according to IWSR.
Neill adds: “In North America a plant-based theme is trending, with agave-based spirits, cannabis or CBD-infused products and botanical ranges doing particularly well. Consumers also want more transparency, which is why natural products are sure to be a hit in the European market, which is seeing growth in more selective and mindful drinking.”
IWSR says the most interesting market is likely to be the wine segment, which could see a different reaction to this trend.
Dan Mettyear, IWSR’s head of wine, says: “The concept of non-alcoholic wine is an interesting source of tension within the industry.
“Many traditional wine producers shun dealcoholised wine from even being associated with the wine category. Others, looking at the commercial opportunity, are keen for alcohol-free wine to be considered equal to its counterpart, with some even eager for it to be subject to the same regulations and controls.
“As we begin seeing more wine producers investing in low and no-alcohol, their main challenge will be in producing a wine alternative that delivers on taste. This has been a key barrier in non-alcoholic wine becoming a mainstream alternative to date.”
Another point of ongoing discussion with this sector in the UK is about ensuring the industry can operate positively as a collective force Laura Willoughby, co-founder of Club Soda, says: “Spain has a buoyant alcohol- free industry because lots of people put their weight behind it and lots of groups worked together.”
She notes that many UK producers are doing a good job of establishing a premium tier in alcohol-free drinks, but this also needs some focus.
“It’s true there isn’t any alcohol tax for these drinks so pricing needs to be thought out carefully, but in many cases [for example in alcohol-free spirits], the producer has worked really hard to create these flavours, using expensive ingredients and difficult processes.
“We need to collectively work together to grow this category or we will be stunting growth in this space.”
Paul Mathew, founder of Everleaf alcohol-free drinks and owner of Bermondsey bar The Hide, confirms this.
He says: “We use Madagascan vanilla and Spanish saffron to make Everleaf, which are two of the most expensive ingredients in the world. Alcohol tax is a bit misleading because it wouldn’t add much to the price of the bottle. If Everleaf was the alcoholic strength of, say, Aperol it would add just £1.30 to each bottle.
“I think there should be a spectrum of pricing in alcohol-free drinks and this is something retailers can consider doing. For example, Prosecco to Champagne has a big price jump and it could be the same in alcohol-free.”
Daniel I’Anson, advocacy manager at Pernod Ricard, says: “When Seedlip first came on to the market people’s jaws hit the floor when they saw the price. But the rules of economics mean that the more products that enter this market the more people’s expectations will change. There will be a premium and a value end when it becomes a proper category.
“I don’t think we have even got started yet with this category. The opportunities are so big and we are in the early days. We have lots more we can do and I think there will be myriad NPD over the next few years.”