Richard Horwell of marketing agency Brand Relations on the opportunity for innovation and investment in the nascent zero-alcohol spirits sector
As consumers adopt more health-conscious eating habits and FMCGs like Coca-Cola and PepsiCo focus their efforts on innovating and growing their zero-calorie product suites, the appetite for zero-alcohol alternatives is heating up.
The sector has been growing in recent years, fuelled by some great low-alcohol beer and wine options (although technically these are not alcohol-free). These independent breweries have done an impressive job in helped to grow awareness of alcohol-free options, particularly within national retailers.
Despite reasonable growth in the sector, the market is by no means saturated or mature. It is still early days and right now the novelty value means many small brands are swiftly jumping on the bandwagon. But over time 90% of these will vanish through consolidation as the bigger players take charge of the category.
The market for non-alcoholic drinks is still new so apart from the noteworthy purchase of Seedlip by the beverage giant Diageo, we have not yet seen other significant deals. It’s likely investors are sitting back and waiting to see how the sector develops before sourcing any many deal opportunities.
However, the sector has yet to establish a price point which consumers feel provides them with good value. Almost half of consumers view alcohol-free spirits as ‘premium’ soft drinks, with some already sceptical of their health benefits.
Unsurprisingly, major alcohol brands have caught on to the trend early with Gordon’s and Hendrick’s producing their own alcohol-free gin alternatives. Other independent brands have developed heavily-flavoured versions or cordial-style syrups for the G&T lovers out there.
Alcohol-free rums are also gaining traction with Clean Co’s Clean R, Xachoh No.7, Strykk’s Not R*M, Crossip and Ritual all storming the market. The 0% whisky sector has few players with Free Spirits Bourbon, Celtic Soul, Ritual, Feragaia, and Fluere all priced at over £20 per bottle.
Almost all drinks currently available in the category are mimicking well-loved spirits like gin, vodka and whisky, although what we need is real innovation to appeal to those that do not drink or enjoy the taste of alcohol. The opportunities are there, but to grasp them the right entrepreneur needs to create a new experience for drinkers that meets their desire for a premium drinking experience, without the hangover.
Where do the opportunities lie?
According to research by alcohol packaging regulator Portman Group, the sector is likely to grow by 34% by 2024. As mentioned, many players will disappear in that time, leaving space for market leaders to take charge, just as we saw in the coconut water market a few years ago.
While alcohol-free beer and wine is likely to be dominated by already-established breweries and wineries, the real opportunity for new players is within the spirits sector. I believe one of the biggest opportunities is in creating zero-alcohol spirits that are healthy while also offering a unique taste, as we know health is one of the main drivers for those abstaining from alcohol. Consumers today want fewer artificial additives, less sugar and cleaner ingredients.
Those that continue to drink alcohol in moderation are likely to still drink on occasion but want a healthy and tasty alternative for the days they choose to cut back – and this is unlikely to be a drink ‘pretending’ to be a spirit. Rather, it will be an offering that is genuinely healthy while still being functional.
One potentially interesting avenue may be the use of natural, plant-based nootropics ─ substances that gently alter brain chemistry. Imagine an alcohol-free spirit that tastes great and helps you feel more relaxed or cognitively sharper. Each drink could have its own unique character and health benefit. I believe we will see some really interesting entrants into this market in the coming months as it ticks a lot of boxes for today’s consumers.
Overall, there are opportunities for the shrewd investor looking to jump on the next hot consumer trend. So far, very few manufacturers are capitalising on this opportunity, leaving a huge open space for new players to dominate and investors to get in at the ground floor.
About the author
Richard Horwell is the owner of Brand Relations, a specialist food and drink marketing and branding company based in London. Over the last 13 years, Brand Relations has been behind the launch and development of over 100 brands in the UK. Richard has also built up and sold companies of his own in the food and beverage sector, including wine cocktail business Ibiza Ice. He has over 30 years’ experience in marketing FMCG brands around the world, having lived and worked in the UK, USA, Australia and the Middle East.
Date published: 17 August 2021