Although occupying only a small sector of the industry, low and no (“nolo”) alcohol beverages nonetheless represent an exciting market segment that is ripe for innovation and something our EFMP partners have noticed as a growing trend in each of our respective markets. Non and low-alcoholic beers make up the majority of this industry and represent roughly 3.4% of the total market share of the beer industry, meaning this is still technically a niche market. Growth, however, is rapid and widespread globally but with particular hotspots in the UK, Germany and Spain. As we see the non-alcoholic beer industry gaining market share, we can also observe fascinating new trends in other alcoholic beverage sectors, notably wine and spirits.
In this article, we’ll get into the detail about what is driving the “nolo” alcohol trend and where it is heading.
What does the low and no alcohol trend look like across Europe?
The market is significantly more developed in Western Europe than in Eastern Europe, with the alcohol-free market in Western Europe accounting for 81% of the total European market. Euromonitor has found that sale volumes of “nolo” alcoholic beverages increased by 18% in the past five years in Western Europe and are expected to increase by another 12% by the end of 2022. Growing markets for non-alcoholic and low-alcohol beverages across Europe are directly proportional to the decrease in consumption of alcohol.
Recently, the alcohol-free trend is moving away from being the exclusive reserve of those who are recovering from addiction and instead towards a widely accepted lifestyle choice. In Germany, a country with one of the highest global alcohol consumptions, the use of alcohol has been decreasing for the past three decades, particularly among the population’s notoriously health-conscious younger generations. Other countries leading this trend are Spain, the UK, France and Italy.
In Eastern Europe, despite the market share being low, it is looking promising in terms of growth, with a volume share increasing by 3% in 2018. Russia is pioneering the alcohol-free trend in Eastern Europe, representing 7% of the total European market share. Alcohol-free beer monopolises the market, making up 98.5% of the industry. Since 2011, Russia has been adopting policies recommended by the WHO’s plan to reduce alcohol consumption, resulting in a 43% decline. Alcohol-free marketing in Russia has been traditionally focused on drivers but recently big brands have begun to introduce the idea of limiting your alcohol use as a healthy lifestyle choice.
The key market for the “nolo” alcoholic beverages is strongly predicted to remain in the West of Europe, due to a general openness to health and wellness trends, which is the focus of most marketing campaigns.
While in Western Europe signs point to a general decrease in alcohol consumption across all age groups, research unquestionably posits Millennials and Generation Z as the driving forces behind the low and no alcohol trend. A study by BMC Public Health found that in the UK a third of those aged 16 to 24 say they don’t drink at all, a number which has risen from less than 9% in 2005.
Compared to the 1990s, when alcohol consumption was high among the 18-35s and there was a huge growth in the trend of ‘binge drinking’, Millenials and Gen Z are increasingly conscious of their health and wellness. These generations are much more aware of the benefits of abstaining from drinking alcohol and Gen Z in particular are currently showing themselves to be using the least amount of alcohol for their age in history. The reduced alcohol intake ties into a whole host of other behavioural differences of both Gen Z and Millenials. With these generations using technology to stay connected, friends and family are instantly and easily accessible via social media, a factor that has noticeably lessened the importance of bars and pubs as integral meeting places within communities.
Cultural shifts motivating the no and low alcohol trend
Indubitably, then, the principal motivation for reducing alcohol intake is health and wellness. However, Millennials have cited other motivations for choosing a more sober lifestyle. A study by Mintel found that almost half of over 18 years olds in the UK who have reduced their alcohol intake cited their overall health as the main reason, followed by wanting to save money (34%), the desire to lose weight (28%), reducing the risk of illness (25%) and avoiding a hangover (23%).
Individual motivations and personal choices are also being mirrored and boosted by collective cultural movements. The Dry January campaign, for example, has been a huge trend in the UK, prompting many to abstain from drinking for the month of January. In addition, movements such as “sober curious” - a hashtag receiving considerable engagement on social media - are working to remove the stigma previously attached to a sober lifestyle. Across several social groups - notably high socio-economic, white and often male - choosing to reduce or completely eliminate alcohol intake is becoming increasingly socially acceptable and is even seen as a coveted social position. As the sober movement grows, it is becoming easier to live a sober lifestyle thanks to the rise in alcohol-free events, day raves and even alcohol-free bars. Nowhere, however, is the trend reflected more clearly than in the growth of the “nolo” alcoholic beverage industry.
Growth in the low and no alcohol market
As we have already seen, the European “nolo” alcoholic beverage industry is looking to experience some serious growth. The countries in which the industry is expected to undergo the most significant growth are Germany, the UK and Spain. Across all three countries and, in fact, in the global non and low alcoholic beverage market, beer is the dominating product. However, it is within other types of alcoholic beverages that the most interesting growth is predicted.
By 2022 in Germany, for example, the market for no or low alcohol spirits is expected to increase by 14.4%, while the ‘ready-to-drink’ category is predicted to grow by 13.3%, cider by 11.4%, wine by 4% and beer by a comparatively tiny 1.6%, according to the International Wine and Spirits Report (IWSR).
In the UK, low and non-alcoholic beer makes up only 2% of the total beer market however, according to the IWSR, it is expected to experience an average of 6% annual growth by 2023 while the total beer market is expected to flatline or slightly decline. While the UK is one of the European countries leading the trend in reducing alcohol consumption, with 65% of U.K alcohol consumers between 25 and 34 trying to cut back on drinking, 61% of consumers admitted to not having considered drinking low or non-alcoholic beverages. The report illuminates both the huge potential for converting drinkers to “nolo” alcoholic beverages and the hitherto lack of any strong marketing voice promoting them. Evidence for the potential success of expanding low and no alcohol offerings can be found in the success of non-alcoholic beer. Unheard of in the UK ten years ago, this market segment is gaining serious traction both in pubs and supermarkets with the opening of the world’s first alcohol-free pub, Brewdog AF, taking place in the UK in January 2020. The low and non-alcoholic category in the UK is expected to grow massively by 2022, specifically by 81.1% in the spirits section, 44.3% in ready-to-drink, 13% in cider, 6.6% in wine and 4.9% in beer.
In Spain, the IWSR found that 95% of consumers are trying to reduce their alcohol consumption, with 80% having already tried or indicating a desire to try low/no-alcohol products and 50% of bars and 60% of restaurants in the country offering them. The principal motivations for the reduced intake of alcohol can be attributed to both health reasons and stricter drink-driving laws. The report predicts growth across the low and non-alcoholic sector in Spain to be 36.8% in spirits, 19.8% in wine (interestingly, in one of Europe’s biggest wine-producing countries) and 6.7% in beer by 2022.
While the non-alcoholic beer market is receiving consistent consolidation and investment, clearly the other low/nonalcoholic categories are ripe for innovation and development.
Innovation and development in the low and no alcohol industry
Big beer brands have been quick to seize the opportunities that have arisen from the sobriety trend, with Carlsberg and Heineken reporting significant success across their 0% ABV ranges. It seems that having an established brand has hitherto been paramount in the likelihood of consumers initially buying into the non-alcoholic beer industry. Now, however, as the trend becomes more widely accepted, consumers are more willing to try products from new or emerging brands, particularly those who specialise in “nolo” alcoholic brews. The craft beer industry is fertile ground for innovation in this sector, with an increase in technology making brewers able to produce interesting flavour profiles that are virtually indistinguishable from their alcoholic counterparts. London-based craft beer brewer Big Drop is experiencing serious success across its range of lagers, pale ales and IPAs - all at less than 0.5% ABV. However, as ISWR’s COO of Research Emily Neill indicates, the real growth potential in the non-alcoholic beer industry lies in on-premise development. In February 2020, Big Drop launched a £1m crowdfunded aimed at increasing their presence in UK pubs, with the idea being that the presence of a non-alcoholic beer on tap right next to an alcoholic one will be a driving factor in normalising and thus skyrocketing the “nolo” industry. Currently, Scottish beer brewer Brewdog is leading this movement, with the aforementioned first-ever alcohol-free pub.
In the no and low alcohol spirits and wine category, innovation is slower due to the stronger flavour presence of alcohol, the replication of which is proving to be a more complex issue. The no/low alcohol spirits industry is advancing reasonably well with Seedlip being the first to launch alcohol-free spirits made using herbal remedies and distillation techniques dating from the 16th century. Big brands such as Pernod Ricard and William Grant & Sons have also launched alcohol-free spirit equivalents: the former with the non-alcoholic “gin” ‘Ceder’ and the latter with low-alcohol ‘Atopia’ gin, which contains 75% less alcohol than regular gin. Pernod Ricard have also launched a non-alcoholic ‘dark spirit’ that contains a highly similar flavour profile to whiskey. The challenge in the “nolo” alcoholic spirits industry is how to market these products as on a par with their alcoholic equivalents. Growth potential lies in the ability to establish them as cocktail-making ingredients in their own right, allowing for the ability to charge similar prices as their alcoholic counterparts.
It is hardly surprising that the European wine industry, notoriously resistant to change and innovation, is behind other alcohol categories when it comes to low alcohol innovations. Development in this sector has been largely hindered by the disappointing taste of low-alcohol wine, due to the fact that alcohol plays such an integral role in the wine-making process. Nonetheless, with the sobriety trend looking like it’s here to stay, winemakers cannot avoid the trend for much longer. Indeed, a report by Wine Intelligence Global found that the strongest opportunities for growth in this sector are in New Zealand (43.2) and Australia (37.6) with Germany and Sweden scoring 25.9 and 25.7 respectively. In New Zealand, a wine called The Doctors’ Sauvignon Blanc has received high praise for producing a 9.5% ABV wine that is virtually indistinguishable from its full-alcohol equivalent. Innovators in the wine industry are currently focusing on altering how the grapes are grown and when they are harvested to produce lower alcohol varieties. Several German vineyards are managing to use traditional winemaking processes to produce bottles with less than 8% ABV that taste as good as their more alcoholic counterparts.
The sobriety trend, strongly driven by a mounting concern for health and wellness, particularly among young people, is gaining traction across Europe. As a result, the low and no alcoholic beverage industry is flourishing, with brewers, spirit makers and wine makers across the country and indeed, the world, innovating and developing in this sector to produce drinks that taste boozy, but won’t leave you with a hangover the next day.
If you have a no or low alcohol beverage that you are thinking about launching into Europe get in touch with us to discuss how we can help you.