An analysis of the no- and low-alcohol market

According to a study published by IWSR Drinks Market Analysis, no- and low-alcohol beer/cider, wine, spirits, and ready-to-drink (RTD) products grew by more than 7% in volume across 10 key global markets in 2022. The pace of growth in the no/low alcohol category is expected to surpass that of the last four years, with forecast volume compound annual growth rate (CAGR) of 7% in 2022–26, compared to 5% in 2018–22. This will be spearheaded by growth in the no-alcohol category, expected to account for over 90% of the forecast total category volume growth.

The ‘IWSR No- and Low- Alcohol Strategic Study’ examined 10 focus markets: Australia, Brazil, Canada, France, Germany, Japan, South Africa, Spain, the United Kingdom and the United States. It found that in these markets, the value of no/low alcohol products in 2022 surpassed $11 billion, up from $8 billion in 2018.

“The dynamic no/low-alcohol category presents opportunities for incremental sales growth as consumers are recruited from drinks categories such as soft drinks and water. Brand owners have an opportunity to recruit non-drinkers of alcohol,” said Susie Goldspink, Head of No- and Low-Alcohol, IWSR Drinks Market Analysis. “As more people opt to avoid alcohol on certain occasions — or abstain from it altogether — no-alcohol is steadily increasing its share of the no/low category.”

No-alcohol drinks dominate

In 2022, no-alcohol volumes grew 9%, increasing its share of the overall no/low-alcohol space in the analysed markets to 70%, up from 65% in 2018.

“No-alcohol is growing faster than low-alcohol in most markets,” Goldspink said. “The countries where this does not apply, such as Japan and Brazil, are early-stage low-alcohol markets with a small volume base.”

No-alcohol’s dominance over low-alcohol in many markets is being driven by improved taste, production techniques and a diversification of consumption occasions. IWSR expects no-alcohol volumes to grow at a CAGR of 9% between 2022 and 2026.

Largest market and expected growth

The most valuable no/low-alcohol markets in the world are Germany, Japan, Spain, the US and UK, with growth in the no/low-alcohol category varying in each market depending on market maturity.

Germany is the world’s largest and most mature no/low-alcohol market, but growth is expected to be relatively slow in this market. In contrast, markets including Australia, Canada and the US are forecasted to see double-digit volume CAGR in 2022–26.

Nearly 70% of the overall no/low-alcohol growth between 2022 and 2026 is expected to be in the no-alcohol beer/cider category. The majority of this will come from the US and Japan, whereas no-alcohol wine growth is expected to be more fragmented, but positive, across markets. No-alcohol spirits will also see some dynamic growth.

Low-alcohol is expected to grow at a 2% volume CAGR in 2022–26, driven by the low-alcohol beer and wine categories. The dominant driver of low-alcohol wine is the US.

Consumer base

Millennials are consuming the most no/low alcohol beverages.

It is common for consumers to switch between alcohol and no/low, with 78% of no/low consumers saying they also drink full-strength alcohol; of which 41% are classified as ‘substituters’ who choose no/low products when avoiding alcohol on certain occasions.

The ‘abstainers’ group, who refrain from alcohol altogether, account for 18% of no/low consumers. This number is rising in nine out of 10 markets, with younger legal drinking age consumers at the fore.

Newer recruits to no/low are increasing their frequency of consumption as the products permeate a wider variety of occasions, such as low-key social settings, no-alcohol alone or unwinding with a partner at home.

With people motivated to drink no/low by lifestyle, rather than necessity, growth is now being driven both by recruitment of new consumers and by greater participation. Daytime consumption of both no- and low-alcohol has increased, signalling potential for the category to expand beyond alcohol-replacement occasions.

“This pattern of avoiding alcohol on certain occasions or altogether is driving no- over low-alcohol growth,” Goldspink said. “Pair this with the rise of functional beverages — often containing ‘mood-enhancing’ adaptogens or nootropics — and the result is a strong outlook for no-alcohol.”

Key challenges

The biggest challenge in the no/low category is one of availability. No/low products lack visibility in mainstream trade and there is often confusion about where they should be displayed among retailers, whether it be with soft drinks or on their own. In both channels, the choice of products is often limited.

Cost has become less of a barrier for the category, 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 do consume no/low drinks. Where no/low is established, prices are similar to equivalent full-strength alcohol categories.

Product innovation

While many approaches so far involve modification of alcohol by volume, some no/low producers are focusing on innovation in packaging, functional benefits and flavour to allow brands to keep consumers within their portfolios.

Examples of these include sliding ABV scales and multipacks, the use of botanicals to create more intense flavour and the introduction of spirit alternatives across a wider range of categories, such as aperitifs, dark spirits and agave.

Some product messaging has shifted from the absence of alcohol to flavour and other functional benefits such as added nootropics, vitamins and adaptogens. Some mixer brands are also broadening their range to offer products that can be enjoyed without a spirit or spirit alternative.

Image credit: iStock.com/LauriPatterson