After launching as New Zealand’s first non-alcoholic (NA) canned RTD in 2020, Free AF began testing the U.S. market at the beginning of 2023. What was intended to be a slow build quickly evolved in the last year and a half into over 2,000 retail doors including partnerships with Walmart, Target, Sprouts Farmers Market and Safeway.
Starting with four varieties, Free AF has expanded to six flavors in the U.S. (the brand has 11 in New Zealand). All the RTDs come in 8.4 oz. cans and feature the brand’s signature proprietary ingredient Afterglow, which provides a warming sensation when consumed. The brand is readying to launch a new variety in Sprouts and is currently testing a multiserve format.
Founder Lisa King talked to BevNET about her first 15 months operating a business on two continents, the geographical challenges of entering a much bigger market and lessons she has brought with her after trailblazing the alcohol-free in New Zealand.
How is operating as a non-alcoholic alternative brand in the U.S. different than New Zealand?
I think what I didn’t appreciate before we started is just the scale of the market. When you talk to anyone from New Zealand we think the biggest retailer in the U.S. is Whole Foods and that’s the golden ticket for any New Zealand brand breaking into the U.S.
Our plan initially was to go slowly because you’ve got 50 states that are like 50 different countries. We had a plan to launch in 50 Sprouts [Farmers Market locations] in California and test it out, but we got a national distribution deal straight off the bat into almost 400 Sprouts stores. That was really massive for us because in New Zealand, we have less than 600 grocery stores in the whole country.
We don’t have Amazon in New Zealand either and everyone had told us how hard it would be to make money on Amazon. We really had no idea what to expect, but we were really surprised that the consumer demand [for NA products] was already there. They just weren’t available in physical stores and so a lot of people were going online.
Along with growing a footprint faster than expected, what has challenged Free AF’s launch strategy within its first year?
Manufacturing has been a huge challenge. Most startups working with co-packers will understand that just meeting minimum order quantities and finding good partners to work with is hard. We’ve already moved onto our second co-packer going across the country from Las Vegas to New York.
These probably aren’t uncommon challenges for any startup. But, particularly for us not being from this market, not having those local connections and trying to manage that from New Zealand has added another layer of complexity.
How has consumer understanding of the alcohol-free, ready-to-drink category impacted your business?
Consumer behavior is very different in the U.S. Sampling was always one of our key focuses and still is because a lot of people have had a bad experience with a non-alc product. So there’s a barrier to the category and sampling has been really important to convincing them that there actually are products that taste good.
We are trying to tell stories that we know have worked really well around the category, like why are teens drinking less? What’s driving category trends? We’ve contributed to a few articles recently about liquor laws in different states and how that affects non-alc.
After finding unexpected success getting into mass, what have you learned that representatives from chains like Walmart and Target are looking for in the NA category?
The liquid is probably the most important thing. Having spoken to the Walmart buyers in Bentonville, you can have the best story ever but the liquid is what’s going to convince them.
They’re also looking for brands that are investing in the category. Last year, we spent 30% of our revenue on marketing. We’re really investing, not just on our own brand, but educating consumers on the category and bringing awareness to it.
Wide appeal, obviously for the Target and Walmart shopper is huge. There are a lot of very niche products. There are a lot of very expensive non-alc products and so having that wide accessibility from a price point is important.
Free AF has operated for years back at home, including opening the country’s first NA bottle shop. What insights and experiential lessons have you brought to conversations with U.S. distributors and retailers about growing the category here?
In New Zealand, we have 40% market share. We’ve gone through all of the early challenges and years of establishing the category with our retail partners. In speaking early on with the Sprouts team about placement, we knew [Free AF] needs to sit with alcohol.
We’ve seen a lot of products just put on the shelf, but it’s hard to find them in a lot of stores in the States. What we’ve seen do really well is when there’s an actual clear call-out of the segment or the category in the store or they’re all placed in the same part of the store with clear signage and visibility.
We see this as an adult drink. It is a gin and tonic or an Aperol Spritz just without the alcohol. While it’s not required by law to ID, we absolutely recommend and encourage retailers to ask for ID. Even when we do sampling, we don’t sample anyone under age. We are very clear that these are alcohol alternatives.