While 2020 was a challenging year for beverage alcohol, consumer demand for no- and low-alcohol beer, wine, spirits, and ready-to-drink (RTD) products continues to increase. New IWSR research shows that the buoyant no/low category gained share within the total beverage alcohol market in 2020 to 3% across 10 key countries that represent 75%+ of global no- and low-alcohol consumption (Australia, Brazil, Canada, France, Germany, Japan, South Africa, Spain, the UK and the US).
Germany, Spain and the US drive growth
While the traditional alcohol market’s greater exposure to bars and restaurants saw it struggle in the wake of mass venue closures across the world, no/low categories have seen largely positive, although muted, growth, with a volume consumption increase in the 10 focus markets of approximately +1% in 2020. Total volume consumption of no/low products is forecast to grow by +31% by 2024 across the 10 countries.
Germany, the largest no/low alcohol market by volume, experienced a decline in consumption in 2020, due to reliance of the no/low beer segment in the on-trade at bars and restaurants. Meanwhile, the US, as the next largest market, is currently the most dynamic, with the no/low segment registering over +30% increase in volume consumption in 2020 despite the enormity of the challenges faced by the industry.
Looking ahead, all 10 focus markets are projected to continue on their growth path through to 2024, with much of the absolute volume growth driven by the US, Germany and Spain. Of the 10 countries, South Africa is expected to experience the highest CAGR volume rate (2020 to 2024), at approximately +16%, albeit from a low base.
No/low beer dominates the market
Driven by early innovation and investment in quality, the no/low beer and cider category dominates the overall no/low market, commanding a 92% share of the total no/low alcohol segment. Thanks to the investment in the category from the major brewers, consumers are becoming more familiar and accepting of no/low beer as a quality product. While several key beer players continue to steer the category, the market is fragmented with a number of smaller brands vying to establish themselves as market leaders in this space. The segment is likely to become even more of a focus for smaller craft producers who are able to bring a diverse range of products to the market in future.
No/low beer registered a flat performance for the 2019-2020 period, at +0.5%. In contrast, the no/low spirits category – which has only 0.6% share of the no/low market – increased volume consumption largely thanks to new interest in home experimentation among consumers. New product development and increasing consumer demand for no/low spirits will see the category experience the largest volume CAGR rate, 2020 to 2024.
Meanwhile, no/low RTD volumes grew in 2020, largely driven by a trend for functional alcohol-free RTDs in Japan. No/low wine also made strong gains in the US and the UK. Both categories will continue on their growth trajectory through to 2024.
‘Low’ versus ‘no’
Broadly, no-alcohol products are outperforming low-alcohol beverages: in 2019-2020, the ‘no-alcohol’ sub-category increased volume by +4.5%, while ‘low-alcohol’ decreased by -5.5%. The decline was driven by the poor performance of traditional low-alcohol beer brands in the high-volume markets of Germany and Spain. However, newer low-alcohol products like spirits and RTDs are particularly resonating with consumers in markets such as the US who are becoming more mindful of what and how much they consume.
“Low-alcohol spirits is smaller than no-alcohol, but extremely strong growth is expected to continue as companies launch low alcohol by volume (ABV) versions of established brands, and consumers show less concern about 0.0% ABV in this category,” explains Sophia Shaw-Brown, Senior Insights Manager at IWSR.
Consumers show a preference for moderation over abstention
Examining the consumer drivers and occasions for drinking no- and low-alcohol beverages, IWSR research shows that people are mainly choosing to drink no/low beverages to ‘avoid the effects of drinking alcohol,’ but also highlights a marked preference for moderation over abstention: more than half (58%) of no/low consumers report that they choose to switch between no/low and full-strength alcohol products on the same occasion, while only 14% state they do not drink alcohol at all.
The most popular occasion to consume no/low products is when relaxing at home (64%), and the category’s suitability to low-tempo occasions is a key reason why it has been so resilient during the pandemic.
IWSR research also indicates that consumers are consistently pointing towards taste as key to drinking no/low alcohol. The perception that no/low products are a necessary compromise is being replaced with increased expectations in terms of quality and experience underscored by the finding that consumers are generally willing to pay a similar price for a low/no beverage as an alcoholic one.
Brand owners will have an important role to play in the future development of no and low, as increasing the breadth of products available to consumers and their price points will support category growth and broaden its appeal.
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