June 14, 2024 – The world of beverages is changing, and it’s not just about the latest craft beer or trendy kombucha. A new wave of consumers are seeking alternatives to traditional alcoholic drinks, driving a surge in the low and no alcohol beverage market. Here we will explore the US market of low and no alcohol beverages, exploring the key trends shaping this dynamic space. We will examine the macro-level influences impacting consumer attitudes and behaviors, analyze product-level trends, consumer habits and preferences, category drivers, and discuss the future of this category.
Macro Trends Impacting the Low and No Alcohol Beverage Market
Three in five US consumers say that they are making lifestyle changes due to global issues of concern. Many are investing in living healthier lives – health and wellbeing is the top spending priority for consumers after living essentials. Conscious living is also rising, with consumers taking actions that benefit the environment and social systems, motivated by financial and environmental reasons and health. Socializing is also changing, with occasions being shaped by more flexible lifestyles and new ways to socialize and entertain. Finally, many are adapting their treat and reward systems, as consumers are tending to prefer everyday moments and happiness, over big-ticket items, events, or experiences.
Consumer Consumption Habits
Low and no alcohol product consumption is growing, but still lags behind alcoholic options. While 39% of consumers have purchased alcoholic beverages in the past year, 13% have purchased low and no alcohol alternatives. However, consumption frequency between low and no alcohol drinkers and alcohol drinkers are very similar. Around 64% of both beer drinkers, and low and no alcohol drinkers consume these products weekly, showcasing strong potential for repeat purchases in the low and no alcohol beverage market.
Millennials and Gen Z consumers are driving the low and no alcohol beverage market forward. These generations are more likely to seek healthier options and are driving the increased consumption of low and no alcohol beverages.
Influencers of Low and No Alcohol Beverage Consumption
US consumers cite a variety of reasons for choosing low and no alcohol drinks, including taste, health, convenience, and social reasons. Taste, happiness, and winding down are all top reasons consumers drink low and no alcohol beverages that are unique to the US. Controlling alcohol consumption is also a significant driver for one-third of consumers. Consumers cite product awareness and health attributes as top reasons for increasing consumption of low and no alcohol drinks. Top claims influencing purchases include premium quality, product safety, and local sourcing.
Companies and Brands in the Low and No Alcohol Beverage Market
Innova’s research reveals substantial fragmentation in the low and no alcohol beverage market, with a significant shift in the market share of product launches within the last five years. While the top 12 companies accounted for 41% of low and no alcohol launches in 2019, their share dropped to 20% in 2023, indicating a rise in smaller players and increased competition.
Heineken, the third-largest brewer globally, has made significant strides in the low and no alcohol beverage market with its Heineken 0.0 line and its commitment to responsible consumption. The company’s focus on regional development and offering zero-alcohol choices has contributed to its success.
Gallo, a global leader in the wine industry, has expanded its portfolio to include spirits and low-alcohol options. The company’s acquisition of premium producers like Hahn Family Wines and its partnership with Lotte Chilsung Beverage Co. for distributing soju in the US demonstrate its commitment to diversifying its offerings.
Molson Coors, the fourth-largest global brewer, has also been active in the low and no alcohol beverage market. Its strategy focuses on growing its core brands, “premiumizing” its offerings, and expanding its beer portfolio. The company’s acquisition of premium wine producers and its launch of low and no alcohol options like Blue Moon Non-Alcoholic Belgian White Brew showcase its commitment to this growing category.
New Product Launch Trends
Low and no alcohol product launches in the US grew by 11% in the past five years, increasing at a faster rate than the overall alcoholic beverage market. This growth is partly driven by a rising consumer interest in healthier options and a growing awareness of the benefits of reducing alcohol consumption.
Flavored alcoholic beverages played a significant role in low and no alcohol growth, accounting for 34% of launches in the past year. This category, including hard seltzers, has seen a rapid expansion, driven by its appeal to younger consumers seeking refreshing and flavorful options. Wine launches also expanded significantly, rising from representing 11% of category launches to 18% over a five-year period. US wineries such as Prima Pavé and Sovi’s have entered the low and no alcohol beverage market with new offerings such as Sovi’s Sparkling Rosé. Spirits also saw modest gains in low and no alcohol launches, representing 12% of the categories’ launches.
Non-alcoholic products drove category growth more than low alcohol products, with a 37% increase in launches in the past five years. No alcohol products now represent over half of all launches in the category. Flavored alcoholic beverages make up most of no alcohol product launches, with wines also expanding in the no alcohol space.
Wines also grew fastest within the low alcohol subcategory and is more prevalent in low alcohol launches compared to no alcohol launches. Spirits additionally grew in low alcohol launches, rising from 16% to 19% in the past five years.
New Product Claims, Flavors, and Ingredients
Low and no alcohol beverage launches in the US are increasingly focused on health and wellness claims, with low-calorie, low sugar, and no added sugars claims leading the way. Low calorie claims have almost tripled in the last five years, while low sugar and no added sugar both emerged within the market, indicating a growing consumer preference for healthier options. Botanical ingredients are also gaining traction, with fruits, botanicals, and functional ingredients like L-theanine and hemp/CBD becoming increasingly popular.
Spices and seeds are the fastest-growing flavor category, with ginger and chili flavors leading the charge. Fruit cocktail flavors remain dominant in flavored alcoholic beverages, with peach, citrus, orange, and berry fruits driving growth. Tea is often used as a base for low and no alcohol beverages, with hibiscus flower tea being a popular choice. The rise of functional ingredients like adaptogens and cannabis is also creating new opportunities for innovation in the low and no alcohol space.
What’s Next in the Low and No Alcohol Beverage Market?
Innova’s low and no alcohol trend research highlights key opportunities for innovation in the market.
Firstly, specific consumer segments can be targeted with tailored messaging and products. Generation Z, seeking alternative highs, and millennials, looking for attention-grabbing flavors, are key demographics. Boomers, increasingly health-conscious and willing to pay a premium, are another important target. Secondly, the brands can capitalize on the shift in drinking occasions. Low and no alcohol beverages are increasingly consumed during daytime hours, presenting an opportunity to create options designed for these occasions.
Thirdly, the growing importance of functional ingredients in low and no alcohol beverages should not be understated. These products can leverage the health benefits of botanicals, vitamins, minerals, CBD, adaptogens, and nootropics to appeal to health-conscious consumers. Finally, premium quality and transparency are important for low and no alcohol consumers. Consumers are increasingly seeking craft quality, local production, and natural ingredients. Building trust through transparency about ingredients and brand origins is crucial for success in this market.
This article is based on our report, “Entertaining Opportunity: US Growth in Low and No Alcohol Beverages.” If you are interested in reading this report, feel free to request a demo.
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