Growth of Non-Alcoholic spirits category - US

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Revenue growth of non-alcoholic spirits category - US

Non-alcoholic spirits entered the United States market in 2017 through the "world's first non-alcoholic spirit", Seedlip — a startup brand that first launched in the U.K. in November 2015. The CAGR of non-alcoholic spirits brands for the 2016-2017 timeframe was estimated to be 196.55%. Below, you will find detailed methodologies, assumptions, and calculations of how this growth rate was derived.

METHODOLOGY AND ASSUMPTIONS

Referencing from the first part of this research (Top Non-alcoholic Spirits Brands), Seedlip and Borrago are the only two non-alcoholic spirits brands currently with products available in the United States. Seedlip, the world's first non-alcoholic spirit, which originally launched in the UK in November 2015, entered the United States market in early to mid-2017. Borrago, the second company that has launched its product in the U.S., gives very limited information in the public domain, except it has said that it first launched its brand in the UK (and possibly in the US) in 2017.

Based on the above information and in order to estimate growth rate of non-alcoholic spirits' revenue in the US, the following assumptions were made: 1) Growth rate was solely based on Seedlip's revenue; 2) Since non-alcoholic spirits just recently entered the U.S. market in mid-2017, growth rate is not possible to calculate as yet, thus, global revenue (UK and US combined) for 2016 and 2017 was used and we assumed that the US market would carry similar trend for 2017 and onwards; and 3) Seedlip is a privately-held company and annual reports were not published publicly, thus, its revenue was derived using an estimated figure based on its production volume.

NON-ALCOHOLIC SPIRITS REVENUE AND GROWTH RATE

According to a report by Food 52, when Seedlip released its first 1,000 bottles through Selfridge in the UK, the brand's first major retailer, the first batches sold out within three weeks and the succeeding batches were sold-out faster than the first. The report stated that the second batch was sold out in three days and the third batch sold out in 30 minutes. The whole distillation process of producing a Seedlip bottle would take a total of 6 weeks for each batch of spirit. This would mean that the total production time for every batch would run for about six weeks. According to Market Watch, the average price per bottle of Seedlip is $40.

If for each batch, we assumed that the company produced 1,000 bottles throughout its first 12 months (Nov. 2015 to Nov. 2016), then Seedlip's estimated revenue for 2016 was $348,000. See the calculations below.

Total weeks in a year = 52 weeks
Total production time per batch = 6 weeks
Total number of production batch in a year = 52 weeks/6 weeks = 8.7
Total bottles per production batch (first year assumption) = 1,000
Average price per bottle = $40

Estimated revenue for its first year (2016)
= Total number of production batches in a year * total bottles per production batch * average price per bottle
= 8.7 * 1,000 * $40
= $348,000

A report released in 2017 by The Drinks Business stated that Seedlip's turnover reached £1 million (about US$1.38 million) since the company was launched. To determine 2017 revenue, we deducted the estimated 2016 revenue from its total accumulated revenue as per report above.

2017 revenue
= total accumulated revenue - 2016 estimated revenue
= $1,380,000 - $348,000
= $1.032 million (this estimated figure includes revenue in the U.S.)

By using the CAGR formula (or a CAGR calculator) to determine growth rate from 2016 to 2017;

Growth rate from 2016 to 2017
= [(Future_Value/Present_Value)^ (1/number of years) - 1]
= [($1.38/$0.348)^(1/1)-1]
= 196.55%

The staggering growth rate of 196.55% should not come as a surprise as the company has set to "scale-up the operation after its first batch sold out in three weeks, increasing production from 1,000 – 2,000 bottles per batch to 10,000." Founder Ben Branson also revealed that the company's target revenue in five years period is £10 million (about $13.8 million). This target revenue would translate to about 67.97% annual growth rate from 2017 to 2022 (five years time frame).

CAGR based on the target revenue, 2017-2022
= [($13.8/$1.032)^(1/5)-1] = 67.97%

CONCLUSION

While the non-alcoholic spirits market is considered new, more than two years globally and less than a year in the United States, its global revenue has already recorded an estimated 196% jump from 2016 to 2017. Its revenue is also expected to carry a 67.97% CAGR until 2022 based on Seedlip's target revenue of £10 million.
Sources
Sources