3 reasons no and low alcohol drinks are here to stay

12 August 2022

3 reasons no and low alcohol drinks are here to stay

‘Small beer’ has taken various forms since the Middle Ages. It was first commercialised during the US Prohibition in 1919, when idle breweries sought to produce a legal alternative to alcoholic beer. Following the end of Prohibition, most non-alcoholic beer production came to an end and no or low alcohol drinks remained largely ignored by the broader population until recently.

In November 2021, Endeavour Group’s Managing Director, Steve Donohue announced their no and low alcohol beverage segment had grown fivefold in the prior 12 months. This growth is indicative of a wider phenomenon. Australian independent brewer, Brick Lane, recently conducted market research and found 45 percent of Australians say they consume no or low alcohol beverages “at least occasionally”. Additionally, 78 percent of those questioned anticipate their consumption to increase in the coming years.

Why are no and low alcohol beverages so popular?

  1. Consumers are increasingly health conscious. Smoking rates are sharply declining, people are eating more balanced diets and drinking less alcohol1. Consumers are continuing to educate themselves and are seeking healthier alternatives.

  2. Greater marketing spends by beverage giants. Shaking and stirring the category, we saw James Bond opting or a Heineken Zero instead of his typical Martini prior to the release of No Time to Die in 2019. Campaigns such as this have exposed countless consumers to the growing sector.

  3. More options for consumers. Low or no alcohol beer is no longer the only beverage on the shelf for the mindful drinker. The range and quality of non-alcoholic spirts have sharply increased, driving a 136  percent uplift in sales over 20212. Non-alcoholic wines are now also being stocked by major retailers and supermarkets, fuelling 800% growth in sales over 2021.

The alcoholic beverage M&A market has been very active in recent years and the low or no alcohol segment is showing signs of following a similar trajectory. Industry giant Diageo entered the non-alcoholic spirit space with a majority stake investment in Seedlip in 2019. Similarly, independent players, Lyre’s spirits and Heaps Normal raised $37 million and $8.5 million respectively to fund aggressive growth targets3 in late 2021.

As the trend continues, brands, manufacturers and suppliers will need to review their product portfolios and consider how they intend to meet the market.

[1] https://www.ibisworld.com/au/bed/health-consciousness/64/

[2] https://drinksdigest.com/2021/06/29/non-alcoholic-drinks-sales-skyrocket-australia/

[3] https://www.afr.com/companies/retail/zero-alcohol-brewer-heaps-normal-raises-8-5m-to-fuel-growth-20211125-p59c9y