Once considered a novelty in the U.S. beer market, alcohol-free beer is experiencing mainstream attention. With consumer media outlets like NPR reporting on the improved taste profiles of non-alcohol beer or Food & Wine Magazine ranking its Top 10 best non-alcohol beers, consumers have more information to direct them to this emerging beer segment.
This attention is producing measurable results as the non-alcohol beer segment saw dollar sales increase 24% for the 52 weeks ending Dec. 26, 2021, in total U.S. multi-outlets, according to Chicago-based Information Resources Inc. (IRI). Even with this growth, though, the segment’s total sales were $236.5 million. By comparison the next closest beer segment, in terms of dollar sales, was hard cider, which recorded $489.6 million during the same timeframe.
Although the non-alcohol beer market remains niche, its growth illustrates the potential the segment has seized in recent years. In a January press release, IWSR Drinks Market Analysis reported that the global beverage alcohol market saw a 6% increase in the volume of the no- and low-alcohol categories (beer, cider, wine, spirits and ready-to-drink) in 10 key global focus markets in 2021. Beer/cider commands the lion’s share of this volume representing 75% of the market. The market research firm projects that alcohol-free beer will continue to drive growth and forecasts an 11% compound annual growth rate (CAGR) for the forecast period of 2021-2025.
ResearchAndMarkets.com also is prognosticating growth for the global alcohol-free beer market in its “Non-Alcoholic Beer Global Market Report 2021: COVID-19 Growth and Change” report. It forecasts the market to reach $23.27 billion in 2025 at a CAGR of 8.7%. The market continues its upward trajectory as evidenced by the $15.09 billion it posted in 2020 to $16.65 billion in 2021 at a double-digit CAGR of 10.3%.
As the non-alcohol beer market continues to grow, market research analysts attribute this performance to consumers’ focus on health and wellness.
“Shoppers no longer take their health for granted and have shifted their habits and lifestyles to align with their pandemic-related values, with 61% of Americans saying physical and mental wellness will become more of a priority over the next 12 months, according to NielsenIQ’s recent 2022 Consumer Outlook report,” says Kaleigh Theriault, beverage alcohol thought leadership manager for Chicago-based NielsenIQ. “We see consumers interested in healthier (better, not best) options, wanting nutrition but also convenience and indulgences, with 29% of consumers actively seeking healthier options when browsing.”
Grace Wood, industry analyst for Los Angeles-based IBISWorld, echoes similar sentiments. “Rising health-consciousness among consumers of all ages has fueled demand for non-alcoholic beer,” she says. “Additionally, technological advancements have improved the flavor of non-alcoholic beer, further benefiting the market since many consumers of the beverage are alcohol drinkers, and are looking for non-alcoholic alternatives with comparable flavor profiles.”
ResearchAndMarkets.com also highlights health and wellness as well as consumers’ willingness to pay a premium for these products.
“Non-alcoholic beer manufacturers are introducing innovative products into the market owing to a significant rise in awareness of health-consciousness among consumers,” the market research firm states in a release. “Consumers are more concerned about their health and are accepting paying more for food that is specifically good for health.”
IWSR’s data also highlights that many no- and low-alcohol consumers are turning to the segment for moderation versus fully abstaining from alcohol.
“According to the new IWSR research, 43% of adults across the focus markets who have purchased no- and low-alcohol beverages say they are substituting those products in place of full-strength alcohol for certain occasions, rather than abstaining from alcohol overall,” it states. “The majority of no/low drinkers also enjoy standard strength alcohol too ― only 17% of people report they are drinking no/low to avoid alcohol completely. The country with the largest proportion of alcohol abstainers is the U.S., with 23% of no/low drinkers avoiding alcohol completely.”
Brian Sudano, managing partner with New York-based Beverage Marketing Corporation (BMC), adds that having a “greater number of recognizable brands, Heineken 0.0, Budweiser, etc., and greater variety of styles such as IPAs from Athletic Brewing Co. and a trend to remain sober when out with friends” also is fueling the non-alcohol beer market.
Supporting this notion, Stella Artois, a brand of St. Louis-based Anheuser-Busch, introduced Stella Artois Liberté, a new 0.0% non-alcohol beer option, in select markets in late 2021.
“We’re very excited to be able to offer fans our classic Stella Artois lager as a non-alcoholic version of the brew. It’s the perfect addition to round out our Stella portfolio. With this new innovation, we want to provide people the liberty to enjoy more of life’s special moments with those that matter most,” said Peter Van Overstraeten, vice president of premium and super premium USA at Anheuser-Busch, in a statement at the time of the release. “Liberté will give you the confidence to say yes to happy hour and make new memories over an ice-cold beer.”
Dogfish Head Craft Brewery, Milton, Del., also entered the non-alcohol beer market in 2021 when it released Lemon Quest, which is brewed with real lemon puree, blueberry juice, acai berries, monk fruit, sea salt and special Hopsteiner Polyphenol-Rich Hop Pellets. The release also coincided with “Mother Nature, Let’s Do This!,” an initiative developed in partnership with The Nature Conservancy (TNC), that challenges beer and nature lovers alike to get outside and enjoy the splendor of the great outdoors.
“Because of its wholesome, all-natural ingredients and its connection to TNC, we’ve lovingly nicknamed Lemon Quest, ‘the brew that gives back,’” said Dogfish Head Founder and Brewer Sam Calagione in a statement at the time of the release. “As a proud supporter of TNC, Dogfish Head will showcase the organization’s logo on every package of Lemon Quest and will contribute more than $50,000 to TNC to celebrate our new product launch and the awesome collaborative work we’ve been doing to bring our ‘Mother Nature, Let’s Do This!’ program to life.”
Although alcohol-free beer’s future looks bullish, some remain cautious about its long-term performance.
“Non-alcoholic beer continues to operate off of a small base of less than 1% of total beer,” BMC’s Sudano explains. “Despite expanding distribution, overall growth has been strong but not explosive. With the high level of innovation in the non-alcoholic market and consumers overall moderate receptiveness to strong branded entries into the non-alcoholic beer space, there will likely be pressure on volumes within the next few years. As a result, I don’t believe this level of growth is sustainable over time.”
Additionally, Sudano notes that competition from other alcohol-free categories, broader consumer acceptance of beer without alcohol and distribution challenges could stall the segment’s growth potential.
Given the novelty of alcohol-free beverage alcohol market, only time will tell where this will lead, but the opportunities are there, experts note.
“Growth in the non-alcohol space signals an opportunity for manufacturers, yet successfully launching in this space presents a unique challenge. Manufacturers are tasked with a tall order ― they're shaping use cases for their non-alcohol beverages and creating a special liquid,” NielsenIQ’s Theriault explains. “Nailing the messaging, package design, and liquid are critical, as they all touch on important parts of the purchase journey.”