Zero-ABV sector must leverage at-home experiences

Diageo-backed Distill Ventures said the non-alcoholic drinks sector must focus on creating ‘relevant’ connections and at-home experiences to tap into e-commerce sales opportunities.

The category is starting to see Tequila, rum and whiskey alternatives, including Ritual Zero Proof

Following a year of research, Distill Ventures has highlighted key data to show the growth of the non-alcoholic drinks sector. The company said despite the pandemic and the closure of the on-trade, interest in the zero-ABV drinks category continues to grow.

According to Nielsen 2020 data cited by Distill Ventures, the no- and low-sector has grown by 506% since 2015. In the UK alone, sales of non-alcoholic ‘spirits’ grew by 30% in 2019.

Distill Ventures said the UK remains the ‘most mature’ market for the category, while the US continues to grow at a steady pace. In the UK, there are currently 42 non-alcoholic ‘spirits’, including 11 new brands launched this year. There are currently 29 US-based non-alcoholic ‘spirits’, with 12 new brands released in 2020.

The company also highlighted that a number of spirits brands are entering the space, including UK producer Warner’s, Salcombe Distilling Co and Old Curiosity, and Germany’s Rheinland Distillers.

In the US, non-alcoholic ‘spirits’ are gaining market share among other alcohol-free categories. A survey by Distill Ventures found 8% of people said they drink more non-alcoholic ‘spirits’ than zero-ABV beer – a segment that has typically been more mature than spirits for some time.

Furthermore, there continues to be investment in the category with firms like the UK’s Clean Liquor Company receiving US$8.9 million, while Australian brand Lyre’s secured US$11.5m.

Distill Ventures said that the category is starting to see Tequila, rum and whiskey alternatives, including Ritual Zero Proof and Caleño Dark & Spicy.

According to Amazon search data, the US shows no segment preference within non-alcoholic ‘spirits’ due to having fewer brands in the market, while the UK continues to favour ‘gin’ alternatives.

Consumers of non-alcoholic ‘spirits’ are prone to shopping online more than beer drinkers, Distill Ventures said. The digital space is an opportunity for category growth as drinkers who are more tech-savvy tend to shop more online.

Distill Ventures said the rise of at-home occasions and a ‘heavier reliance’ on e-commerce though Amazon, specialty websites, dedicated brand shopping sites, and grocery has ‘buoyed the segment’.

2021 opportunities and challenges

Looking to 2021, Distill Ventures noted Dry January as a ‘strong sales opportunity’ as it remains the most popular time of the year for the category. Google trends data showed search results for ‘Dry January’ grew by 25% in the US from 2019 to 2020, and by 10% globally. The term ‘Dry January’ saw a 17% increase in the news in 2020 compared with 2019.

On Twitter, there was a 42% increase in activity this year surrounding Dry January compared with 2019, according to Distill Ventures’ media study.

Participation in Dry January also remains strong, Distill Ventures said. Research from Nielsen found 21% of US consumers participated in Dry January this year, while 10% of UK consumers had planned to take part in Dry January in 2020 (YouGov poll).

Distill Ventures said the category faces three challenges: liquid excellence, education and the drinks experience. The creation of ‘elevated’ cocktail experiences using zero-ABV drinks is ‘both challenging and costly’, while the on-trade, an important channel for discovery, remains closed. As such, Distill Ventures said brands must focus on creating relevant brand connections and at-home experiences.

Bacardi expects the retail sales value of the no- and low-alcohol ‘spirits’ category in Western Europe to reach US$500m over the next four years.