Sober October is nearly behind us and Dry January is on the way, but younger drinkers don’t need incentives to put down the booze.
Understanding Adult Non-Alc (ANA) trends, the discovery process, and Gen Z’s consumption habits were the highlights in Non-Alcoholic By The Numbers, a panel hosted Tuesday by Distill Ventures with mindful drinking author and cocktail expert Derek Brown; Victoria Watters, founder of non-alc media company Dry Atlas and New York-based ANA shop Spirited Away; Brandy Rand, founder and CEO Thirstwell; and Erica Duecy, founder of The Business of Drinks Podcast.
Globally, ANA volumes are predicted to grow 7% between 2023 and 2027 CAGR, in contrast to bev-alc volumes at +1% according to the IWSR. The size of the ANA market in the U.S. is still under 2% of total alcohol, but mature markets forecast larger possibilities: in France and Spain ANA makes up around 10% of total alcohol volumes, according to Rand.
In Brown’s words, “We are at the beginning of the beginning.”
Structural Or Cyclical?
Rand believes tempo drinking or zebra striping– when consumers drink slower over longer periods of time or switch between ABV levels – is a new socialization standard and part of how larger wellness trends will impact bev-alc consumption over the long term. Half of people moderating their consumption are driven by well-being, nearly a third by economic reasons, and 20% have health concerns according to the IWSR.
“I believe moderation is 100% structural, meaning it’s a fixed change that’s going to impact how we drink in the future,” said Rand.
ANA is now recruiting from across the industry: 17% of consumers were new to ANA products in 2023, 44% switched to ANA from traditional non-alc like soft drinks and water, and 29% replaced full-strength with ANA products, according to NIQ and the IWSR.
As the data has shown, younger consumers who haven’t experienced nightlife in the same ways as older drinkers also aren’t onboarding to alcohol: 77% of Gen Z believe that non-alc won’t stop them from having fun.
Gen Z: Flavor, Accessibility More Important Than Pricing
Fewer young millennials and Gen Zs (18-34 in 2023) are drinking alcohol, dipping to a 10% decline over two decades, a trend Duecy partially attributes to “the health halo” on moderate alcohol consumption disappearing in public discussion.
Recent studies, articles, and country-specific nutritional guidelines flagging the dangers of even moderate drinking are influencing sales among younger consumers, she said. More than half of young adults now see even moderation – defined as one to two drinks per day – as unhealthy, according to Gallup.
So what are the kids drinking when reaching for ANA products? In a survey Duecy and a market research firm conducted of 1,300 millennial and Gen Zs in all 50 states, Gen Z over indexed in non-alc cocktails compared to millennials, with nearly one-in-five respondents stating that they drink NA cocktails at least two times a month. Gen Zers also slightly over index for NA beer and NA wine.
Flavor and good variety, ease of purchase, value and versatility in that order were important factors in choosing products.
“Younger audiences have grown up with virtually limitless flavor options,” said Duecy.
But if they can’t find what they’re looking for on the shelf, they’re more likely to pick up something over hunting for obscure bottles like prior generations may do. The attribute of “easy to find and buy” rated even higher for Gen Z respondents than price, she said.
Still, there’s an opportunity to educate younger consumers about how products are made and why they’re more expensive– Gen Z were more likely to say that ANA products were expensive compared to millennials. As for format, both convenience and wellness needs dovetail into single-serve as especially popular among younger consumers who are attracted to the consistency of a pre-made product.
Where Are Non-Alc Drinkers Discovering?
Beyond Gen Z, ANA consumers are discovering new products through word of mouth and specialty stores, but price and taste remain barriers to entry.
Recommendations from friends are the top reason (36%) for trying a new product, according to Atlas Media surveys of ANA drinkers. On the bottom of the list is celebrity involvement; 48% of respondents said it actually made them want to try a product less.
“We’ve been tracking the view of celebrity endorsed brands, and that’s worsening over time among our audience,” said Watters, who believes her respondents might view a star-backed brand as a cash grab or making up for poor formulation.
Where are ANA consumers taking chances on new products? Specialty stores are the most popular choice (45%). Restaurants and bars are tied with grocery stores at 20%, highlighting a different discovery process than for many bev-alc products.
In ready-to-drink (RTD) mocktails, price outweighed taste as the top deterrent: 60% of respondents said they don’t think that RTD mocktails are good value. When it comes to NA spirits, direct replacements are failing to appease younger drinkers who never developed a taste for alcohol, as well as drinkers who complain that NA spirits can’t match the traditional full-proof flavors.
“I think a key opportunity going forward is in both novel beverages and novel formats on the beverage side,” said Watters. “Novel doesn’t have to mean something completely out there in terms of formulation, I typically mean formulations that aren’t trying to replicate a traditional alcoholic beverage, but that are appropriate for that sophisticated alcohol drinking occasion.”
As an example, premium tea based sparkling beverages have shown stronger velocities at Spirited Away, she added. Novel also doesn’t necessarily mean adaptogens or nootropics, which respondents view with skepticism in terms of efficacy or “purely an excuse to hike the price.”
“I would say in terms of functional ingredients, THC-infused beverages are an area to watch despite regulatory challenges,” she said.
But Rand cautioned that THC-based products represent a learning curve, and in addition to regulation impacting availability, it will take some time for “people to understand what they are and what they do to you physically.”
Despite wellness talk, Watters added that ANA drinkers are not necessarily picture-perfect healthy consumers: only 16% of surveyed consumers prefer beverages that are sugar free, 64% prefer low-sugar options and 20% don’t mind sugar.
“This wellness oriented group can view the removal of alcohol as their primary goal, but then maybe have a bit more margin to play with on the health profile of the beverages they’re consuming,” she said.