Non-Alcoholic Beverages

Part
01
of two
Part
01

Non-Alcoholic Spirits - Growth

The last few years have seen tremendous growth in the low-alcohol and non-alcoholic drinks category, fueled perhaps by an increase in health-consciousness around drinks, as well as an increase in the desire to drink a variety of alcoholic or non-alcoholic distilled beverages. In fact, the global low-alcohol beverages market is projected to have a CAGR of 8.21%, during the period from 2017-2021, far more than the 2% growth rate for the global alcoholic beverages market as a whole.

Unfortunately, low and non-alcoholic spirits make up just 3.99% of this already small sub-section of the alcoholic beverage market, and so there is very little existing research or data which deals specifically with non-alcoholic spirits in the US. However, there is enough data about other segments of the market for us to calculate a that the global non- and low-alcoholic spirits market has a CAGR of about 29.72%. The US-specific non- and low-alcoholic spirits market has a CAGR of approximately 35.66%. In this report, I'll go through how those figures were estimated and provide a general picture of growth in both the US and global non- and low-alcohol beverage markets.

cagr for us nonalcoholic spirits

Unfortunately, data on the non-alcoholic spirits category alone is simply non-existent. There are a handful of brands, all of which are either privately owned or held by large companies which do not disclose the sales or revenue information for specific brands among their holdings. However, nonalcoholic spirits are included within the low-alcoholic spirits category, and can be assumed to have fairly similar growth rates to this category as a whole, given that the appeal (drinking a spirit without the alcohol) is the same for both groups.

As was already noted, spirits make up a very small portion of the low-alcohol beverages market; just 3.99% in fact. However, we can use this information to help calculate their growth rate. We know that globally, the low-alcohol beverages market is growing at about 8.21%. TechNavio breaks the low-alcohol beverages market down into five categories - beer, wine, RTDs (ready to drink mixes), cider, and spirits. The growth for the first three categories is provided by TechNavio - it is 7.88%, 5.42%, and 8.15% respectively. Note that these three account for 89.07% of the total market between them, and they are all solidly below the overall growth rate of 8.21%, meaning that at least one of the remaining categories (spirits or cider) must have extremely high growth rates to make up for the remaining portion. The regular cider market has a growth rate of 3.5%.

We can compare this with the beer market, as beer is the drink most similar to cider within this category. The regular beer market has a growth rate of 6%, but as we've seen the low-alcohol beer market has a growth rate of 7.88%, meaning it's growing about 1.31 times faster than the fully alcoholic beer market. If this same figure holds true for the similar cider market, then low-alcohol cider is probably growing at about 4.6%.

We can now estimate the CAGR of the global low-alcoholic spirits market. In order to do this, we multiplied the growth rate of each of the other four categories by their market share. This allowed us to see how much of the total growth was in each category, considering both growth rate for that category and its market share. Bear in mind that a category with a large market share (like beer) will have a much bigger effect on the overall growth rate than one with a small market share (like spirits), so it is necessary that both market share and growth rate play a role in our calculations.

This is easier to understand if one considers simple numbers rather than percentages. The overall growth rate can be represented as 821 - 8.21% multiplied by a 100% market share. This combined figure for all of the categories except for spirits, calculated by multiplying their growth rate by their market share, is 702.41. This means that the same figure for spirits must be 118.59, since we know the overall figure is 821. Now we simply divide 118.59 by the market share for spirits (3.99) and find that the global growth rate for this sector is 29.72%. All of these calculations are shown in this spreadsheet, which represents the figures in a clearer way. The final figure seems high, but remember that while low-alcohol beer and wine has been around for decades, low-alcohol spirits are relatively recent, and still only occupy a tiny portion of the overall market, making it easier for them to grow quickly.

Now, the last step is to estimate the CAGR for the non-alcoholic spirits market in the United States specifically, since that figure is for the whole world. This can be done by comparing the growth rates of the overall spirits markets between the US and the globe. The global spirits market has a CAGR of 3.32%, while the US-specific spirits market has a CAGR of 4% - or 1.2x more. Hence, if the same relationship holds true in the low-alcohol segment, we can expect that the market for low and non-alcoholic spirits in the US is growing at about 35.66%.

Assumptions

It is important to bear in mind that a number of assumptions have been made in reaching this approximate estimate of the CAGR for the US non-alcoholic spirits market. Firstly, we have assumed that the non-alcoholic spirits market and the low-alcohol spirits market (which include non-alcoholic spirits) are growing at roughly the same rate, because they have a similar appeal to consumers - being able to drink spirits without the high alcohol content they normally have.

We have also assumed that the relationship between the growth rates for cider and beer is roughly the same in the alcoholic and low-alcohol categories. This assumption has been made because of the drinks about which data is available (beer, wine, and mixes) beer is the most similar to cider. Finally, we have assumed that the relationship between the global spirits market and the US spirits market is fairly similar in both the full and low-alcohol categories. This assumption has been made because there is no data on US-specific low-alcohol drink growth rates broken down by type of drink, as there is for the global data. Therefore, it was necessary to first estimate the CAGR for the global low-alcohol spirits market, and then attempt to estimate the US number from that figure.

Conclusion

While there is not data available on the US non-alcoholic spirits market directly, using a range of other pieces of data, it is possible to estimate the CAGR of the US non-alcoholic spirits market to be approximately 35.66%. This figure is based on calculating a global CAGR for non-alcoholic spirits of 29.72%, as laid out in this spreadsheet, and then multiplying it by 1.2, to account for the faster growth of the spirits market as a whole in the US.

Part
02
of two
Part
02

Non-Alcoholic Spirits - Key Players

Seedlip and Borrago #47 Paloma Blend are the only two non-alcoholic spirit products that are currently available in the US. The market is still very new, with Seedlip launching the world's first non-alcoholic spirit into the US market in 2017, after it first launched in the UK in 2015. The US market looks set to grow over the coming years, driven by the trend of millennials and generation Z avoiding alcohol consumption.

FINDINGS

SEEDLIP

Seedlip is, without doubt, the top non-alcoholic spirit brand in the US. In researching this topic, Seedlip has easily been the brand that has been mentioned the most in articles and news stories on the topic. Seedlip was the world's first non-alcoholic spirit, launching in the UK in 2015.

The product then launched in the US in 2017, making it the first alcohol-free spirit to launch in this region. Within a few months of launching in the US, it had gained 75 accounts and had taken on brand ambassadors. Also in 2017, the brand was awarded the Drinks Business Launch of the Year Award. It also had to quadruple its production within a month of launching in the US. The company has generated £1 million (roughly $1.38 million) in revenue since the launch.

This shows that the entire US market is very new, given that the world's first product has only been around for 3 years, and just 1 year in the US.

BORRAGO #47 PALOMA BLEND

The only other non-alcoholic spirit product that I found to be currently available in the US market is Borrago #47 Paloma Blend. The product was launched this year in the US and is a non-alcoholic spirit that is capable of replacing vodka or gin. It claims to have a "complex flavor profile that tastes unlike anything else on the market".

OTHER NON-ALCOHOLIC SPIRITS

After finding that only two non-alcoholic spirits are currently available in the US, I have conducted research as to what is available in the global market, and how this looks to impact on the US market in the coming years.

In 2017, a Danish drinks company launched Herbie Virgin, the world’s first non-alcoholic gin. It is currently only available in Denmark. However, the brand is preparing to export the product globally. So we may see it available in the US shortly.

Real Remedies' Botanical Spirits is a non-alcoholic spirits range that has recently launched in the UK but is not currently available in the US.

Surendran & Bownes alcohol-free gin launched in 2018, and is currently only available in the UK.

The market currently seems larger in Europe, however, some of these brands that are available in Europe are planning to expand globally (e.g. Herbie Gin). In addition to this, below I have investigated to opportunity there is for non-alcoholic spirits in the US.

FUTURE OF THE MARKET

This source tells us that the non-alcoholic category in the drinks market presents an exciting and potentially very lucrative segment for the future. It has been found that none drinkers now have a “greater curiosity around different flavors” and are looking for better choices than the "soft, sweet, fruit-driven or fizzy drink" options that they are currently given. This shows that there is a great opportunity for any new non-alcoholic spirit brands to enter the market in the US, as they present a solution to consumers seeking alternatives that are not sugary and fruity as is discussed above. For this reason, we can expect many brands follow in the footsteps of Seedlip to take advantage of this opportunity. Perhaps in the next few years, we will see the expansion of the number of key players operating in this market.

Globally, the low-alcohol and no-alcohol drinking trend is rising. Today's consumers are focused on following holistic well-being and leading a balanced lifestyle. From now on, consumers "won’t be using alcohol as a main driver for socializing". The trend is being driven further by the rise of Generation Z (16-25 year-olds), who are "more concerned about their personal and career advancement than with socializing and going to parties".

The non-alcoholic category currently presents the biggest opportunity in the drinks industry. In addition to this, non-alcoholic spirits have been identified as an emerging trend within this segment.

These trends aren't just limited to the global market. In the US, millennials are opting out of drinking alcohol to socialize. Millennials are also focused on things like productivity and caring for their bodies, which is leading them to decide not to drink alcohol. This leaves the market open to interesting non-alcoholic alternatives. In addition to this, research has also found that only 1 in 10 millennials perceive being drunk as "cool". Showing that drinking alcohol is being perceived differently by the younger generation, suggesting that the trend in sobriety and controlled drinking is here to stay. Finally, this article tells us how millennials are ditching alcohol, and seeking alternative exciting alcohol-free experiences. This also hints that this generation of non-drinkers will not be satisfied by the current sugary, childlike non-alcoholic beverages that are currently available. Showing that there is a great opportunity in the US market for non-alcoholic spirits brands.

POSSIBLE CONTINUED RESEARCH

As it was not possible to create a list of the top 10–25 non-alcoholic spirits brands in the US, as there are only two that currently exist in the US market, I have suggested some alternative avenues of research in this field that you may wish to pursue.

For example, you may want to know more information about what is driving the non-alcoholic drinks trend in the US. Above I have briefly discussed how the younger generation has different perceptions of alcohol, and goals that they want to pursue that aren't in line with drinking alcohol. You may want to pursue a more in-depth analysis of these trend drivers.

CONCLUSION

To sum up, the non-alcoholic spirit industry in the US is very new. The first non-alcoholic spirit ever made in the world (Seedlip) was launched in the UK in 2015, and it only made its way into the US market last year. After a thorough search, I have found that there are currently only a handful of non-alcoholic spirits available globally: Seedlip, Herbie Virgin, Borrago #47 Paloma Blend, Real Remedies' Botanical Spirits and Surendran & Bownes alcohol-free gin. Currently, only two of these are available in the US, Seedlip and Borrago #47 Paloma Blend.
Sources
Sources

From Part 01