Deschutes Brewery is betting big on non-alcoholic (NA) beer.
The Bend, Oregon-headquartered craft brewery announced today the national launch of Fresh Squeezed NA IPA, an offshoot of its flagship alcoholic IPA offering.
The launch follows five years of research and development, the investment of more than $5 million into NA production and the installation of Sustainable Beverage Technologies’ (SBT) BrewVo equipment and a 65,000-pound tunnel pasteurizer at the company’s production brewery in Bend.
“When we started R&D, this market was not very robust,” Deschutes CEO Peter Skrbek said. “And so for us, it was how do we really get the full-fidelity experience of a craft beer into an NA version. So that means no sacrifice on aroma, flavor, mouthfeel, body, appearance, head retention, all the things that make a great craft beer, great craft beer. It just simply took us that long to get there.
“From a technical brewing standpoint, that was the challenge: How do we make a non-alcoholic version of Fresh Squeezed?” he asked. “That was always the goal, starting five years ago.”
Skrbek believes Deschutes has finally nailed the combination for an NA version of Fresh Squeezed, which features Citra and Mosaic hops, similar to the original, and is rolling out now in 6-pack cans nationwide via distribution and e-commerce sales.
Fresh Squeezed is the second widely released packaged NA beer in Deschutes’ portfolio, following the release of Black Butte NA in 2020. Skrbek said it was important to start with darker beers in Deschutes’ portfolio to dial in the processes before moving to hoppy offerings.
Deschutes is leveraging the brand equity of its two most-recognized brands to build its beer portfolio, something Skrbek believes may be a first for a legacy craft brewery of scale in the NA space.
“For us not having a huge budget for marketing, it was pretty key that we draft off existing equities,” he said.
Skrbek believes there is still an opportunity for a brand with scale such as Deschutes to resonate in the market as consumers and retailers have validated the segment, and attitudes toward NA beer and alcoholic beverages in general have shifted.
“The time is spot on because consumers and fans are into this category to do what we do so well, which is take a category that is well-represented and then up the sensory experience, up the flavor, up the aroma,” he said.
Deschutes’ entry into the NA market comes as off-premise dollar sales of the segment are up +29.9%, to nearly $62.5 million, year-to-date through February 25, according to market research firm Circana. Volume (measured in case sales) is up +25.1% through the first two months of 2024. The segment ended 2023 with nearly $361 million in off-premise sales and a 0.79% share of beer category dollar sales, the firm reported.
Skrbek complimented the existing NA beers on the market for both quality and building demand, but he added, “I think we’ve done it better from a standpoint of the actual beer drinking experience. And that has always been our aim.”
If Deschutes is successful, the company will have the ability to scale its NA brands with around 115,000 barrels of runroom, Skrbek said. He expects the brewery to “make a very reasonable dent” in that capacity over the next two years.
“Long-term, we’ve got the runway to truly take this thing national,” he said. “And that is the objective.”
Deschutes is still in early innings with NA, as the segment only accounts for around 1% of its portfolio. Still, it’s the No. 2 priority behind Fresh Squeezed IPA, Skrbek said.
As part of the effort to go national, Deschutes is in the process of completing its distribution map with an expectation of finishing it by mid-April. Skrbek admitted the move marks “a dramatic” shift “from where our geographic strategy was just a couple years ago.” The company is in negotiations with distributors to close its gaps in the northeastern and southeastern U.S. NA beer will be the top priority going into new markets.
“The focal point here is not a broad portfolio; it’s NA,” he explained. “And it’s being able to go NA to all 50 states and offer fans of craft beer an outstanding aroma and flavor experience.”
Entering the spring shelfs resets, Deschutes has picked up 2,200 new points of distribution in the grocery channel for its NA offerings, which Skrbek called a “significant start” due to not yet having samples of Fresh Squeezed NA ready to sample retail buyers.
Also going nationwide with the NA offerings will be their alcoholic counterparts, Fresh Squeezed IPA and Black Butte Porter.
“That’s an IPA that can fight, but we have to focus,” he added. “So that’s No. 1, and No. 2 is Black Butte Porter. When we were only in 39 states, it was the No. 1 craft porter in America. By being in all 50, we can properly say that.”
Skrbek said this is part of a focused distribution effort across the country as craft has suffered from a loss of distribution at chain retail
“It’s counterintuitive that at this moment of contraction in the sector, we’re expanding, but I actually think this is the perfect opportunity because we’ve got the size of a brewery that can support it,” Skrbek said. “We have the sales team, national accounts, relationships and team that can truly support being a national brand, but we’re going to do so in an extraordinarily focused way.
“I think it would be absolutely the wrong strategy to try and expand geography with a broad book of offerings,” he continued.“So, priority one is NA in the new geography.”