The market value of such products exceeded $11 billion (€10.4 billion) in 2022, up from $8 billion in 2018, the alcohol data and analytics provider said. She looked at markets in Australia, Brazil, Canada, France, Germany, Japan, South Africa, Spain, UK and USA.
The category’s growth rate is expected to exceed that of the past four years, the IWSR said. It forecasts volumes to grow at a compound annual growth rate (CAGR) of +7% in 2022-26, from +5% in 2018-22.
“The dynamic no-alcohol/low-alcohol category presents additional sales growth opportunities as consumers are recruited into beverage categories such as soft drinks and water. Brand owners have the opportunity to recruit non-alcohol drinkers,”said Susie Goldspink, head of alcohol-free and low-alcohol beverage market analysis at IWSR.
Germany remains the largest market
The maturity of the no/low alcohol category varies widely across markets, the analysis reveals. The most valuable no-alcohol/low-alcohol markets in the world are Germany, Japan, Spain, the United States and the United Kingdom. Germany is the largest market in the world. But the country will experience relatively slow growth due to a lack of innovation, the report warns. More dynamic growth will come from Australia, Canada and the United States, all of which will see double-digit annual growth rates in volume in 2022-26.
Alcohol-free increases faster than low-alcohol
The non-alcoholic category will spearhead the growth of the category. The IWSR expects non-alcoholic beverages to account for more than 90% of the category’s projected total volume growth. Alcohol-free beer/cider will contribute nearly 70% of overall alcohol-free/low-alcohol growth between 2022 and 2026.
Alcohol-free volumes grew 9% in 2022, increasing their share of the overall alcohol-free/low-alcohol space to 70% across the 10 markets surveyed, from 65% in 2018, and the IWSR expects non-alcoholic volumes are growing at a steady pace. CAGR of +9% in 2022-2026 compared to only 2% in the low alcohol category.
Soft drinks are growing faster than low-alcohol drinks in most markets, Goldspink said, as “more people are choosing to avoid alcohol on certain occasions – or abstain altogether”.She added that improved taste, production techniques and diversification of consumption occasions are behind the dominance of alcohol-free over low alcohol in many markets.
Product innovation focuses on packaging, flavor and functional benefits
For example, while many NPD approaches to date have involved altering the ABV (alcohol by volume), some producers are focusing on innovation in packaging, functional benefits, and using botanicals to create a more intense flavor to expand the options available to consumers.
Examples of these include sliding ABV scales and multipacks, and the introduction of spirits alternatives across a wider range of categories, such as aperitifs, dark spirits and agave. The use of nootropics, vitamins, and adaptogens, meanwhile, sees the product messaging shift from being alcohol-free to flavor and other benefits. Some brands of mixers are also expanding their range to offer products that can be enjoyed without spirits or as an alternative to spirits.
The clientele is also maturing
Millennials born between 1981 and 1996 are the largest age group of consumers of low-alcohol or non-alcoholic beverages. Some 78% of these consumers also drink pure alcohol. However, the group of “abstainers”, who completely abstain from drinking alcohol, has changed in size the most over the past year, with nine out of 10 markets seeing an increase. This group now represents 18% of non-drinkers/low drinkers, led by younger drinkers of legal drinking age.
Consumers are also more often opting for zero/low products, according to the IWSR. With people motivated not to drink/drink low out of lifestyle rather than necessity, growth is now being driven by both the recruitment of new consumers and greater participation, he said. Daytime consumption of non-alcoholic and low-alcohol beverages has increased this year, signaling the potential for the category to expand beyond alcohol replacement occasions.
“This pattern of alcohol avoidance on some or all occasions does not lead to growth in low alcohol consumption,”said Goldspink. “Couple that with the rise of functional drinks — often containing adaptogens or “mood-enhancing” nootropics — and the result is a solid prospect for alcohol-free.
But product availability is a major hurdle
Cost has become less of a barrier for non-drinkers of low and no alcohol, dropping from 14% in 2021 to 7% in 2022. Despite the cost of living crisis, cost as a barrier to purchase currently remains unchanged among those who consume little or no beverages, the IWSR report found. Where none/low is set, prices are similar to equivalent full-strength alcohol categories, he said.
However, the biggest challenge facing the no/weak category is that of availability. In many markets, bad/weak products lack visibility among the general foodservice audience; among retailers there is often confusion as to where they should be displayed – in the beer/wine/spirits aisle, among soft drinks, or on their own. In both channels, the choice of products is often limited, notes the IWSR.