Despite non-alc’s momentum, only 26% of the U.S. consumers moderating their alcohol say they are drinking no-alcohol alternatives to their favorite full-strength drinks, citing barriers around taste and lack of availability, according to a recent report from bev-alc data firm IWSR.
So how are non-alc brands addressing those obstacles?
The study, conducted by IWSR in April and released last month, found that one-third of legal drinking age adults in the U.S. (37%) say they have not consumed alcohol in the past six months, and the abstention rate is even higher among younger consumers, with over half (54%) of Gen Z adults claiming not to have had an alcoholic drink over the same period.
Although non-alc’s market value now exceeds half a billion dollars in off-premise channels, moderation isn’t always translating into purchases of no- and low-alcohol drinks. Why?
Improving Taste Conceptions
A dislike of no- and low-alc products that are on the market ranked high under reasons drinkers are instead reaching for water, coffee, tea or soft drinks. That could be due to most non-alc analogs aren’t meant to be sipped on their own. Lauren Chitwood, co-founder and CEO of Spiritless, says that’s one of the challenges as a company with 85% of its business flowing through retail.
“The risk that you’re taking when you’re just in retail and you don’t have somebody standing there explaining the product and holding their hand and making them something delicious, is that they open and they sip it out of the bottle and go what the hell is this?” she said.
A line of ready-to-drink mocktails rolled out last year has helped to showcase spirits in a more accessible way: It makes sampling — the main marketing spend for the company — more convenient. Plus, it has become a larger part of the business faster than expected.
“We thought it would take 24 months for it to be 50% of our business, and those cans have become 50% of our business within six months,” she said.
Margins in the spirits versus mocktails are healthier, but Chitwood is confident that it’s a rising tide lifts all boats scenario. She says she’s seen the cans support the spirits business as well.
Chitwood has used a different method to pull in consumers who are looking to lower their alcohol intake but don’t want to miss out on the flavors of a full-proof spirit. The company has trademarked the term “halfsies” referring to a cocktail that features a mixed pour of non-alc and alcoholic spirits, which helps provide the sensory notes a drinker may want from a full-proof spirit and gives the brand a complimentary edge on-premise.
Scaling Availability In The Right Places
Lack of availability was cited as another challenge for drinkers looking for no- and low-products, according to the survey. That barrier echoes recent calls at Expo East from brands and the Adult Non-Alcoholic Beverage Association (ANBA), who argue the category deserves more attention from grocery retailers and distributors.
Spiritless, which launched in 2019, has pursued the masses by going after large retail chains, which now make up 70% of its retail footprint. The brand is getting traction at larger grocery chains, including Kroger, Albertsons, H-E-B in Texas, as well as CVS drug stores, which Chitwood says is making an aggressive play into non-alc. She just locked in placements for two cocktails on the menu at TGI Fridays.
Part of the sale to larger channels is data that backs up the non-alc customer as an overall good customer, she said. Over 94% of non-alc buyers are also purchasing alcoholic drinks, meaning these buyers are providing more value to total alcohol, according to NIQ. The majority of the Spiritless marketing budget going to engagement with the customer at the point of retail to drive those sales has also helped develop those partnerships.
For new entrants, before scaling distribution it’s important to understand where to find the moderation-focused consumer, argue the founders of Improv Booze Free Cocktails. The San Diego-based mocktail brand launched in July 2022 and worked on penetrating its home market before pushing north through the state and into Oregon and Washington. The founders spent eight months getting consumer feedback through sampling at around 12 in-person events per week in retail stores, fitness classes, and community events.
“A lot of our validation was people that are health and wellness focused and the obvious demographic of pregnant people have really been a powerful source of volume for us,” said co-founder and CEO Alex Brooks.
They also found that the mocktail has done well in on-premise channels, specifically at breweries and beer- and wine-licensed locations, where non-drinkers may look for a substitute and bartenders can use the canned liquid as a mixer for soju or other wine cocktails. Not standing out on the menu as a higher-priced item than its beer or wine counterpoints may help: at $9 for a four-pack, the founders say they selected a price point to drive trial.
That number comes in several dollars lower than most brands on the market, addressing another reason consumers opt for a standard carbonated beverage over a no-alc product: cost.