Non-alcoholic (Non-Alc) beverages and spirits are evolving from a niche market into a fast-moving segment with products ranging across different use occasions and need states, according to spirits accelerator a new report from Distill Ventures.
The Diageo-backed spirits accelerator has long held an interest in the emerging non-alcoholic and “zero-proof” market, having been an early investor in trailblazer brand Seedlip and helped steer its exit into the Diageo portfolio in 2019. Its latest mini whitepaper, titled “One For Every Occasion,” the low/non-alcoholic movement is showing no signs of slowing. What started as a category trend geared toward sober or abstaining drinkers has seen the most momentum among people who want to reduce their alcohol intake while also maintaining a social life that revolves around drinking occasions.
According to data provided for the study, 97% of Non-Alc drinkers had consumed an alcoholic beverage in the past 90 days. Additionally, 83% of consumers were choosing to go between Non-Alc and alcohol-based drinks depending on the occasion
Distill Ventures found that the $10 billion global business is not only continuing to expand but the category is projected to have 8.0% volume CAGR from 2021 to 2025. This will amount to 126.4 million more cases produced globally, according to data from IWSR’s 2022 No- and Low-Alcohol Strategic Study.
As the category has matured, it has segmented and is specializing to meet different use occasions. Designed to create unique non-alcoholic cocktail experiences, distilled botanical “spirits” likeSeedlip were among the earliest entrants and continue to grow, while clear spirit replacements – including zero-proof products from brands like Tanqueray and Gordon’s – is the fastest growing non-alcoholic spirit segment within the U.S. This group, which also includes brands like Lyre’s and Ritual Zero Proof, is designed to help consumers into the category with products that can be swapped in as a one-to-one replacement for traditional spirits.
On the other side of the coin, a set of dark spirit alternatives is catering to whiskey and rum drinkers, but not necessarily as a direct alternative. According to the report, innovative brands in this space are offering drinks that “integrate a range of oak, spice and smoke elements” that can be enjoyed straight or mixed.
Often carrying a lower price relative to other formats, ready-to-drink products are also allowing more brands to experiment in the non-alcoholic market. Brands like Lyre’s, Ghia, Crisp & Crude and Kin have jumped into RTDs to provide a more accessible and portable format for all types of drinking occasions. Aperitif and digestif alternatives have also risen to prominence within the non-alcoholic set, with products that give consumers the ability to create complex flavors when mixed with tonic or soda.
Finally, consumer interest in functional and wellness benefits have helped drive innovation within the non-alcoholic movement. Brands like Trip and De Soi are incorporating better-for-you ingredients like vitamins, electrolytes, CBD or prebiotics into their products and moving the category away from just the absence of alcohol, according to the Distill Ventures study.
Distill Ventures highlighted that Non-Alc’s move towards the functional beverage category has shown promise among new consumers. According to a January consumer survey conducted by Non-Alc distiller Ritual Beverage Company, 92% of Non-Alc consumers surveyed in California are open to functional ingredients. Brands like Three Spirit Social Elixir or Aplos were built on the idea of bridging semi-sober beverages with the zootropic properties and the positioning appears to be paying off.
Retailers are building out Non-Alc adult beverage sets as demand grows for Non-Alc spirits to also address stress-relief, energy benefits and calming ingredients.
Non-Alc brands are focusing on the wellness benefits of vitamins, electrolytes, CBD or prebiotics and moving the category away from just the absence of alcohol, said the Distill Ventures study.
“We’re entering a new chapter in Non-Alc’s journey,” managing director of Distill Ventures Gareth Bath said. “Far from being a one-dimensional category offering just straight spirit replacements, we’re seeing a new wave of brands, products, and innovation that ensure those opting to abstain from alcohol have a wide array of choices suitable for any occasion.”