Sober October is just around the corner and observers anticipate that the non-alcoholic adult beverage category will continue to grow as more retailers adopt a zero proof category.
The alcohol-free beverage category is still dominated by NA beer making up 85.3% of sales, according to NielsenIQ data from last year. Overall, sales in the non-alcoholic drink category in the U.S. grew at 20.6% to $395 million between August 2021 and August 2022.
Capitalizing on this growth are brick-and-mortar dry bottle shops and a number of ecommerce non-alc retailers like The Zero Proof – which started in 2019. It began as a blog by co-founders Trevor Wolfe and Sean Goldsmith but has bloomed into a venture capital-backed startup servicing the alcohol-free community by selling NA wines, spirits, RTD cocktails and bar accessories.
Using a background in financial data analysis, Goldsmith has led The Zero Proof’s expansion and widened the business into wholesale bringing new NA brands to market and helping retailers understand how to take advantage of consumers’ growing demand for alcohol-free adult beverages. Goldsmith talked with BevNET about his company’s growth and what he sees in the future for the non-alc set.
Is there a ceiling to the non-alcoholic category? Where is there untapped opportunity in the non-alcoholic category? What’s holding it back from reaching more consumers?
When I started The Zero Proof I wasn’t thinking about ceilings. I just saw this new category, thought it was exciting and wanted to learn more.
But I think about ceilings these days. And we are not anywhere close to the ceiling! In fact, I think the Adult Non-Alcoholic category is still in its infancy. Large retailers and distributors are just now figuring out how to work with these drinks (i.e. who is the buyer, how do we take delivery and where do we put them on the shelf). As those channels continue to open, and people see more Adult NA on the shelves where they shop, it will drive more awareness and demand.
Most people still don’t have any idea of the offerings available to them.
I think the biggest opportunity is in really understanding how distribution for this category works. What is the best way to get products to customers. Then you’ve got to persuade distributors to work with you – which isn’t easy!
How does the NA movement move beyond Dry January, Sober October and into more mainstream widespread adoption?
You hear a lot of talk about Gen Z not drinking booze. And they don’t. But currently, our largest customer segment is Millennials and Boomers. It’s the drinkers that are wanting to drink less, while still enjoying that alcohol experience.
As to how the movement moves beyond the big “holidays,” it’s simply time and continuing to increase awareness. Get these drinks into more accounts around the country, get more people to try them (and realize how great they are) and drive them to buy again.
And we’re moving in the right direction. August 2023 was just as big a revenue month for us as Dry January 2023. And [October, November, December and January ] “OND-J” as we call it is going to be even bigger.
What categories of non-alcoholic beverages are growing the quickest? What are some categories that are still maturing in terms of variety, product mix, style type and/or consumer appeal?
We’re seeing huge growth in wine and canned cocktails – hundreds of percent year-on-year. And that’s where we’re investing a lot of our time and attention in terms of sales.
I think there are good options in the alcoholic analog space (i.e. traditional NA spirits and wines). But we will continue to see improvements in taste and profile as the category matures and technology improves. In particular, in wine, I think we’ll see folks pushing the envelope with natural NA wines and working closer with winemakers to make interesting wines with terroir.
I’m also excited to see continued innovation in the ‘New” Adult NA beverage category – drinks that don’t have a 1:1 alcoholic equivalent – like Gnista or Ghia. There’s a lot more flavor and functionality exploration to be done there.
It’s an interesting thing to think about – what does someone who has never drunk alcohol want in an adult beverage?
How do you strategize scaling your business as a retailer to stay ahead of the trends? Where is the most opportunity?
Our website is still the majority of our revenue, but that will change soon. And while I know there’s tremendous room for growth in e-commerce, our main focus is wholesale. We are continuing to build national distribution and work with national chains to get these drinks to the people that want them.
We’re in a fortunate spot as one of the larger players in the space where people are pitching us products on nearly a daily basis. So we’re always aware when something new is coming to market.
Also, we are solely focused on the Adult NA space. As such, we’ll be way out in front of larger retailers in terms of the trend and innovation in the category.
Is pricing holding back NA brands from scaling? How do you combat higher pricing as a retailer and distributor?
The category is definitely premium today. But pricing hasn’t slowed down growth. In fact, there are new and drastically more expensive NA products in the works right now.
I think buyers (both retail and individuals) that are new to the category may not understand why NA wine or spirits cost as much as their alcoholic analogs. But they’re made using the same, if not more premium, ingredients. And there’s a huge focus on flavor, as there’s no alcohol for effect.
Lastly, it’s not like alcohol costs any extra. It’s just a byproduct of fermentation. In the case of de-alcoholized wine, you start with alcoholic wine, then you have to pay to remove the alcohol so it’s an expensive process. But I think customers appreciate the effort that is going into creating excellent products in this category and they’re willing to pay for quality.
Diageo bought Seedlip and recently launched a zero-proof Captain Morgan’s, Stoli recently invested in Pathfinder NA amaro and many of the major beer brands are releasing NA versions of popular brews. What is your opinion on how the non-alc category will consolidate around the larger players? How does this relate to retailer adoption and distribution?
I think it’s great. Having those marketing dollars behind the category will be a boon for everyone. Touching on my earlier responses about distribution and aligning chains – those big companies have the budget and power to do that more quickly.
The category is still pretty small (about 1% the size of alcohol), so on the surface, it doesn’t seem like there’s much financial incentive to dedicate a ton of time and shelf/truck space to Adult NA. But almost every wholesale account and distributor we work with is blown away by how well this category has performed for them. Not to mention, there’s a huge intangible benefit to a business in delighting this growing category of consumer.
In short, better distribution and universal best practices of how to work with Adult NA (who buys it, where does it go in the store, etc.) in terms of retailers is the key.