Stein of the times
The market for low/no alcohol drinks has started to show real growth.
Driven by a desire for healthier lifestyles, more and more brands are entering this market, including well-known breweries such as Heineken and Budweiser and craft ale brands such as Brewdog and Nirvana.
An estimated 14% of Brits already drink alcohol free beer, wine or cider. This has resulted in significant growth in the market within the last year, with spending on low/no alcohol beer increasing by 28% to £43m (21% volume increase). Heineken and Budweiser's products had combined sales of over £6.5m in the year to 2018.
Why have these drinks suddenly become popular?
The dangers of binge drinking (and even moderate drinking) have recently been the subject of high-profile government campaigns. A study by Nielsen noted that over a quarter of people are looking to cut down their drinking for health reasons. Consumers are also increasingly participating in temporary tee-totalism such as "Dry January" (3.1m Britons took part in this in 2018) or by setting aside a few alcohol free days each week.
A considerable proportion of these people are seeking low/no alcohol alternatives to ensure they still participate in social occasions. In 2016, 57% of people said they had drunk alcohol in the previous week, vs. 64% in 2005, highlighting a clear shift towards drinking less.
Tee-totalism is also increasing. This trend is more apparent in younger people: more than a quarter of young adults aged 16-24 do not drink.
Tax has also made purchasing alcohol more expensive in the UK. The UK takes a particularly hard stance on alcohol duties compared to our European neighbours; in the UK duty due on alcohol rises with inflation and Scotland have introduced a minimum pricing policy of at least 50p a unit. However, price will only affect the decision of those who would not seek non-alcoholic alternatives – low/no alcohol products such as 0% beer are in fact often a higher price than a mainstream lager.
What does this mean for the market?
While we expect this to remain a niche area of the beverage market, we do consider that there is a meaningful opportunity to capitalise in the low/no alcohol space.
The beer market is already quite saturated with low/no alcohol options and with recent improvements in innovation it will be harder for new entrants to stand up to established brands. We believe there is more opportunity for new entrants in the spirits market. This is largely due to the nature of the market – enthusiasts are often not as brand loyal and seek small-batch, unusual distillations.
Seedlip and Ceder are two such brands already capitalising on the popularity of gin and the trend for low/no alcohol products. Seedlip, the first in the market and with Diageo as a minority stakeholder, has already been received with some success: it was initially stocked by Selfridges, Fortnum and Mason and Ocado, but is now listed in Tesco and other supermarkets.
The number of those seeking low/no alcohol options is likely to increase with rising awareness of the health implications of alcohol drinking. We expect a boost in adoption of low/no alcoholic drinks will also be supported by further innovation in the market, improving the taste and number of options available, as this is a current barrier for many consumers.
Early movers into non-alcoholic spirits who manage to create a customer focussed, flavour orientated lifestyle product, are likely to be rewarded.