“It’s a real thing. It’s here to stay,” Nick Firestone, the CEO of US brewer Firestone Walker, says. “Personally, I’m glad it’s here to stay.”
Eyeing the increasing demand for non-alcoholic beer, the Californian business, backed by traditional Belgian brewer Duvel Moortgat, is among the latest conventional beer makers to have entered the growing market for non-alcoholic beer – and its chief executive believes the still-small category will continue to grow.
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“This is not a fringe style,” Firestone says. “It’s small but growing is the headline. It’s becoming crowded very quickly. Brewers are great innovators and, as soon as they see a category or a style that’s growing, you see a lot of people jumping in. It’s great for non-alcoholic beer because it really legitimises the category.”
According to figures from GlobalData, Just Drinks’ parent, the global market for 0% non-alcoholic beer jumped by more than 40% in volume terms (or at a CAGR of more than 7%) from 2018 to 2023, when the data and analytics group estimates 2.39bn litres were sold worldwide.
Improvements in product quality, the rise in the number of drinkers looking to reduce their alcohol consumption and the greater availability of alcohol-free brews are all factors in the growth of the non-alcoholic beer market. And, compared to just a few years ago, drinking alcohol-free beer is being seen as a socially acceptable choice.
And, with overall global beer consumption flat, it’s no wonder more brewers are eyeing up the non-alcoholic category.
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By GlobalDataAccording to Jules Macken, global innovation director at Heineken, the Dutch brewer estimates non-alcoholic options account for around 1.7% of total beer consumption globally. “Region by region, that differs a little bit,” she says, citing Germany, Japan, Spain and Poland as among the principal markets.
“We’re also seeing really considerable growth now in some of the emerging markets – the UK, the US, Brazil – and starting to see it in Asia also,” she tells Just Drinks.
GlobalData figures show Germany is the largest market by volume and value (when measured in US dollars). The company’s estimates suggest the non-alcoholic category accounted for more than 14% of beer sales in Germany last year. That share data can vary even among the major markets for non-alcoholic beer; looking at the top nine countries for the products by volume, Germany leads the way by market share, followed by Czechia at 8.5%, with alcohol-free beer accounting for just over 7% of sales in Spain and 6% in Japan, down to the UK and the US with a little more than 1%.
To some, that underlines the opportunity for brewers to capture. “For us, 0.0 and Heineken 0.0, in particular, is a big part of our overall Evergreen strategy,” Macken says, referring to the company’s growth plan. “We continue to focus on it and get rewarded with growth.”
The “barriers” to further growth
Nevertheless, competition is intensifying, there are still drags on the category’s expansion and there is debate about just how far the market can grow.
Heineken believes there are three “barriers” to the continued growth of the category, Macken says. “Taste perception – and I say perception quite specifically because it’s not so much about taste; we see that post trial and post sampling,” she explains. “Availability is a big, big one and we look at social stigma.”
There’s little question product quality has improved. The success of Guinness 0.0., especially in the UK, is an obvious example. In Japan, Asahi says its Asahi Zero product, launched in April with “a taste akin to traditional beer” ended up selling two-and-a-half times more in volume terms (over 217,000 hectolitres) by the end of the year than it had initially forecast.
There remains work ahead, however, to tackle Heineken’s two other barriers. Research conducted by Ipsos, the University of Oxford and the Birra Moretti Zero brewer says four in five consumers believe it is more acceptable to buy no- and low-alcohol products than five years ago but peer pressure is holding back sales.
However, according to the study, more than a third of Gen Z drinkers have felt pressure to consume alcohol in certain social situations, a level that was the highest of the generations surveyed.
Given the progress made here in recent years, however, one would think the peer pressure or stigma would recede further, leaving availability as the highest barrier to the category’s growth. In the off-trade, the major grocers stock more non-alcoholic beer than just a couple of years ago but, smaller brands argue, they can favour the major players.
Rob Fink, co-founder and CEO of UK alcohol-free beer specialist Big Drop, argues the retailers’ early support of smaller brands has waned amid concerns about the rate of sales. Supermarket shelves in the UK, Fink says, have become dominated by brands from the major brewers.
“That is good in so far as there’s a recognition that there’s a market now amongst consumers for these beverages but, when I started Big Drop, the issue that I had was not necessarily getting hold of the decent, alcohol-free lager that existed. What I didn’t have was access to independent, alcohol-free, craft beer and that was the problem that we were trying to solve,” he says. “There is scope for the supermarkets to help smaller brands more than they’re doing at the moment.”
However, the off-trade is awash with options compared to the on-premise. In the main, even in major cities like London, non-alcoholic beer remains mostly available in bottles.
Fink has long been a big advocate for operators putting non-alcoholic beer on draught. More landlords are opening up taps but it’s slow going, he says, arguing some are fearful to try out the products.
“The difficult thing to do is to say ‘right, let’s put some alcohol-free beer on draught across 100 pubs.’,” Fink says. “It is coming and it’s getting better. A couple of people just need to put their head above the parapet.”
Macken says Heineken – which owns the Star Pubs & Bars group in the UK – has worked to make its 0.0 products available on draught. “We’ve more than doubled our draught installations, so more than 2,000 draught installations in the UK, something similar in Ireland,” she says. “We see big opportunities in Spain and the Netherlands, markets where there is a big role for the on-premise.”
Enticing Gen Z
Amid the debates around supermarket appetite for indie brands and the reticence of the on-trade to stock more products on-draught, there are broader questions about the long-term outlook for the non-alcoholic beer market.
While the growth rate of the category varies depending on its development in each country, Kevin Baker, head of beer and cider research at GlobalData, says the research group is predicting a slowdown in growth across all markets.
“This is due to our belief that there is finite demand for non-alcoholic beer and that these products essentially only really appeal to existing beer drinkers,” Baker argues. “Consumers who abstain from alcohol altogether are less likely to choose non-alcoholic beers and will probably look at non-alcoholic beverages such as adult-focused soft drinks.”
At Heineken, Macken declines to estimate how big a share of the overall beer market could be taken by non-alcoholic brews, instead saying the company believes there is “an enormous headroom for growth”.
She adds: “I don’t know that I’d look so much as a category projection but rather what the opportunity looks like. We’re looking at a really nice opportunity for the future to continue to grow in this space.”
As overall alcohol consumption stagnates, a lot of attention has been placed on the drinking habits of younger cohorts like Gen Z, seen as a key driver of the growing interest in moderation.
Fink says Gen Z is less likely to drink alcohol-free beer if, simply put, they’re not drinking as much conventional beer as their forebears, preferring other beverage types like CBD-infused drinks.
“They don’t want to drink an alcohol-free IPA because they’re probably not drinking alcoholic IPA,” he says. “In terms of the bigger alcohol-free beer sector, the people who are buying into it are the people who drink alcoholic beer they’re subbing out. It’s a substitution.”
Nevertheless, Fink suggests that, as Gen Z ages, they may want to try out alcohol-free beers as their palates evolve. “Their taste buds will gradually develop in that direction and then here we are waiting for them at that particular point in their journey,” he adds.
Can smaller brands prosper in non-alcoholic beer?
The inroads independents like Lucky Saint in the UK and Athletic in the US have caught the eye but not all major non-alc beer markets have seen the emergence of similar brands.
“We are aware that independent brands are also working on non-alcoholic beer,” a spokesperson for Kirin Brewery in Japan says, “but, at the moment, we don’t think there are any independent brands that have achieved significant success.”
And, with Heineken talking up its prospects – and rivals like Asahi setting out their stall for growth in the category – might the non-alcoholic beer market become even more dominated by the bigger brewers?
Macken doesn’t think so, although perhaps one wouldn’t expect an executive at the world’s second-largest brewer to say otherwise.
“It’s a growing category and consumers have a growing set of needs within that. I don’t think the broader growth is going to be at the expense of smaller players,” she says.
Brewers like Heineken will be better able to manage the expense of promotions and marketing, however. “It’s a competitive category. We have significant growth ambitions within the space,” Macken replies. “Having been the pioneer of 0.0 – not the first in the market but certainly best when we launched in 2017 with real technological advancements that allowed us to deliver at high quality – we’re not going to sit back and say ‘well, that was lovely then and that’s that.’ We do see a big opportunity to grow in the future and, of course, that’s something that we’re keen to pursue.”
At GlobalData, Baker paints a nuanced picture of how the make-up of category could evolve.
“Leading brands and companies are likely to continue to dominate the market, with Heineken 0.0 and Guinness 0.0 being trailblazers in many markets,” he says. “The fact that companies such as Heineken are willing to attach their flagship brands to non-alcoholic variants confirms the massive increase in product quality, but it should be borne in mind that using a parent brand is likely to predominantly favour existing consumers of those brands, leading to brand substitution rather than incremental sales.”
He adds: “There is a place for independents, with Lucky Saint and Brewdog being the fifth- and seventh-largest non-alcoholic beer brands in the UK – and Athletic being the fourth-largest non-alcoholic beer brand in the USA. Private labels are important in Germany, accounting for around a third of all non-alcoholic beer sales.”
Specialists have optimism
Fink believes customers will look to stock a wider variety of products as the category grows further. “As the sector continues to grow, which I think it will do, it will become more sophisticated,” he says. Supermarkets will want “the mass-produced lager 0.0s” and provide drinkers with “smaller, independent, bigger-flavour profile, craft beer, alcohol-free alternatives”.
The notion of ‘craft’ beer was central to Fink setting up Big Drop, a business which is looking to build its presence in the US with a new licensing deal. He is certain we will see a ‘craft’ segment developing in non-alc as we have in conventional beer.
“The person who drinks Heineken 0.0 probably does so because they drink Heineken, or they drink lager, and they just want a zero version of that style of beer that they normally drink. My view is that there is another consumer who wants to drink a pale ale or an IPA or a or a coconut stout,” he says. “We want to go and own that section.”
And there are other fledgling firms looking to carve out their own niches. One is Impossibrew, a UK business selling alcohol-free beer containing adaptogens and nootropics.
The London-based firm, set up in 2021, sells its beer, which includes a lager and a pale ale, in the UK and principally online.
Impossibrew’s products are made from a “patent-pending” process using a blend of adaptogens and nootropics including L-theanine and ashwagandha. The company says its recipes “deliver the unwinding experience that drinkers seek, without alcohol”.
Founder and CEO Mark Wong says Impossibrew has found it challenging to describe its products to more mainstream drinkers who are not aware of adaptogens nor nootropics but he believes the business can offer something different. As the category develops, drinkers will start to search for a range of options, he says.
“We’re still at the very beginning stages of it, where a lot of people are still experimenting with the category.”
