Low and No alcohol

Low and no alcohol beverages are a growing trend, worldwide. In a short space of time the value of the ‘low & no’ category has grown rapidly. In the off-trade, in the past year, £43 million was spent on low and no alcohol beer. Sales of low and no alcohol beer in the on-trade are up around 28%, with no alcohol spirits up 400%+.

It’s one of the few trends where the UK is actually spearheading growth; it now makes up 1.3% of the UK ‘total beverage alcohol market’, compared with just 0.5% in the US. Although many do predict that future volume growth will come from the US.

Low and No – driven by changing consumer trends

The ‘Dry January’ and ‘Sober October’ movement is growing, mainly due to changing health and wellness trends. Future generations are unquestionably reducing their alcohol intake. KAM research shows that 39% of Generation Z (18-24 year olds) say they are tee-total – more than twice the number of UK adults in general. We’re also seeing a growth in ‘mindful drinking’, a growing proportion of UK adults who are actively ‘cutting down’ on alcohol intake.

A key driver for this is health and wellness. A clear secondary driver is the desire for a higher quality ‘drinking’ experience. So, rather than drinking lots of cheaper booze, many are choosing to drink less of a more premium option. Check out our vlog on this very subject.

The growth in tee-totalism and ‘mindful drinking’ could be seen as a threat to the global alcohol industry, but actually many are embracing it as an exciting new opportunity. The ‘big boys’ have invested in new low and no alcohol brands to attract new and younger customers. And of course, many totally new companies have successfully launched low and no alcohol alternatives. These alternatives include new ‘health drinks’ such as Kombucha and DA-SH flavoured sparkling water, which are normally not classified as ‘soft drinks’ by the industry (although consumers may well have a different perspective.)

So, what’s happening in UK Convenience

We know ‘low and no’ is growing in the on-trade. Sales data suggests it is growing in UK Convenience too, but at a much slower pace. This is not a huge shock as trends in the on-trade tend to hit retail a few years later. 

Recent research, by The Retail Data Partnership, found that 29% of convenience retailers say low and no alcohol is now an important sub-category to them, a fairly high amount considering. The 71% who said it wasn’t important, indicated that there was “no demand at all” or that it was currently a “very small percentage of sales.”

Non-alcoholic beer is currently the biggest low and no category in Convenience. Unit sales of non-alcoholic beer doubled in the first 6 months of 2019 compared with the same period in 2018. The best distributed SKU (Heineken 0.0%) saw a fourfold increase in distribution. The top 3 SKUs, tracked by The Retail Data Partnership, account for 74% of sales. So, the big brands are doing pretty well in pushing distribution.

“We are selling slightly more than we have done in previous years. ‘Non-alcoholic’ has 3 SKUs now.” Spar Retailer

However, the EPOS data also shows that of the 87% of convenience stores that did sell non-alcoholic beer during April – Sept 2019, they were selling less than 2 packs on average per month (single or multi). Volume, for most, is still very low. Despite huge growth, there’s a long way to go before ‘low and no’ becomes a dominant category. We are confident however, that based on consumer trends, low and no alcohol is not going anywhere fast.

“EPOS data evidences an increase in no alcohol beer distribution, and sales, year on year, but I still think advice and support is required for retailers to better understand the opportunity” Jon Rons, The Retail Data Partnership.

The customer perspective on Low and No alcohol

You may ask, if consumers don’t want alcohol, then why not simply buy a soft drink? The simple answer is that a large proportion of the time they want the taste of beer, wine and spirits. But obviously the decision making process differs HUGELY by consumer occasion.

As always at KAM, we obsess about the customer and consumer perspective. We are excited to be carrying out some new ‘low and no’ research next month, to really dig into the consumer perspective on the Low and No category.

Do they view it as a different category? If they walk into a shop or pub and want a non-alcoholic drink, do they default straight to soft drinks? When and why would they consider a Coke vs a non-alcoholic beer? Is ‘low and no’ a bigger threat for soft drink sales, rather than alcohol? Is it more relevant for certain consumer groups or regions? Where does price come in? Where should the category sit in-store? What should it look like on a menu? So many questions!

“We’re seeing a slow increase in demand in our area. We’re rural based, I would assume the low alcohol department as a more professional, consumer demographic which is commonly found in cities rather than rural areas.” Nisa Retailer

“We currently stock low and no with alcohol, but we’re going to trial a small, separate ‘no / low alcohol section” Nisa Retailer

Understanding these different consumer and customer decisions – and how they differ by channel and drinking occasion – will be absolutely key to driving category sales in both the on-trade and off-trade.

How are the big brands reacting to Low and No alcohol?

AB InBev already has no alcohol varieties of it’s global brands and said it wants 20% of it’s global beer volumes to come from low and no alcohol by 2025. Heineken has launched a no-alcohol variety in Europe. Asda launched a non-alcoholic Prosecco for summer 2019 called ‘Nosecco’. Everyone, who is anyone, is jumping on board!

Hospitality brands, such as, All Bar One have enhanced their ‘low and no’ offer to embrace the ‘mindful drinking’ trend. All Bar One has already introduced four new cocktails using lower-ABV spirits, three lower ABV wines and expanded their soft drinks range. Both All Bar One and Greene King have added Kombucha (a fermented tea that typically comes in under 0.5%) to their range. It now comes on draft, complete with a beer-like foamy head!

CBD-infused drinks

Cannabis­-based beverages – usually infused with CBD (cannabinoids), the non-psychoactive compound found in the cannabis plant – are also becoming increasingly common. We’d expect, as cannabis becomes part of the social norm, availability and demand for these drinks to grow. Analysts predict CBD-infused beverages to approach $1bn in the US in 2020, with water accounting for two thirds of the market.

The future of Low and No alcohol drinks

According to a report by IWSR, two thirds of 25-34 year olds are “trying to cut back on their alcohol intake”. But a similar percentage “have not yet considered drinking ‘low and no’ alcohol products”. This suggests a HUGE opportunity for the category to continue to grow.

Despite the considerable growth, the relatively new category is still barely understood from a consumer perspective. Retailers and brands who really want to maximise this growing category will need to first understand consumer needs and behaviour. Learning exactly what the customer wants, in each retail environment, across different occasions, will be the key to success.

Keep an eye on our blog page, new invaluable insight will be coming very soon, or find out more about our latest low and no customer research.

There’s an interesting guide on spreading the awareness of better drinking habits here: https://www.sunnyside.co/blog/mindful-drinking-101

Blake Gladman

Hi, I'm Blake, Strategy & Insight Director at KAM. I look after all our research products and manage the collection and delivery of insight throughout KAM. I love long runs and good food (the perfect life balance).