Non-alcoholic drinks are making plenty of noise in the biggest cities and trendiest bars. They’re making their way into Michelin restaurants and craft brewpubs. In big cities, consumers have high salaries, disposable income, and they’re willing and eager to try something new.
But getting out to the average consumer is another challenge. Many people are still skeptical of the category: help back by preconceptions from decades ago. They’re less likely to be exposed to good, non-alcoholic creations: even less likely to seek them out.
How well are non-alcohol brands doing at going beyond their cosmopolitan comfort zones?
California trendsetting
In beverage alcohol, there are key must-win states for any brand.
New York, Texas, California and Florida are all important states which drive large volumes of alcohol sales down to their size, but also have populations with high levels of disposable income. That makes them a key focus for brands and distributors.
And alcohol-free brands are seeing a similar pattern.
In fact, five states - California, Texas, Florida, Colorado and Massachusetts - account for 37% of all non-alcohol dollars.
California, in particular, is a ‘must win’ state for non-alcohol brands. It is by far the biggest market: worth $128m in off-premise sales and growing 20% from the prior year.
“California is known as being more of a wellness state, where people might be opting for moderation more often,” explained Kaleigh Theriault, beverage alcohol thought leadership, at NIQ.
“They also still very much consume alcohol. But it’s such a large state with a big population: and that makes it a key state for non-alc for sure.”
Consequently, many non-alcohol brands are born in California (Hiyo, De Soi, Best Day Brewing, Ghia, Optimist Drinks, The Free Spirits Company, to name a few) or target the Californian consumer (although it’s important to note that many other successful brands are headquartered outside of California as well).
There’s also the rise of the ‘cali-sober’ movement that’s attached to California: which refers to consumers who don’t drink but do turn to marijuana.
That opens up opportunities for non-alcoholic beverage brands in general: but also brands that include hemp, CBD or cannabis as a functional ingredient for a ‘social tonic’.
Texas is the second largest state for non-alcohol drinks, worth $70m. Florida’s market is around $63m, Colorado is at $39m and Massachusetts at around $37m.
And all are growing double digit.
Beyond the key states
But what about the rest of the US? How can brands reach across the nation and find success everywhere?
The good news is that non-alcoholic free products can reach audiences across the country. “Non-alcoholic products are for everyone, everywhere,” said Theriault.
“They don’t have as much of a demographic skew or regional skew, so I think you can find success in any state.”
However, she does emphasise a beverage brand-building essential: start small, in a market you know, rather than trying to build up too much too fast (That’s advice that’s also critical for David Gimpelson, CEO of non-alcohol spirit Lyre’s, which is currently focusing its efforts on US market expansion).
But for those brands who are ready to expand between their home market, one of the key tools is D2C sales.
Here, non-alcohol drinks have an important edge over alcohol. In the US, all alcohol must be distributed via the US’ three-tier system: a set-up that is the bedrock of the regulatory structure with a strict layering of producers, distributors and retailers. Under this structure, alcohol products simply cannot sell their products direct to consumers.
Non-alcohol drinks, however, are not included in this regulation. That means they can sell products direct to consumer and in many more places than alcohol drinks.
And this is a huge opportunity.
Online non-alcohol sales have grown 208% (year on year), showing the potential of this channel.
That’s a key way to get out to people all around the country.
And, as with any beverage category, strong D2C sales help create proof of concept to take to retailers.
“Non-alcohol brands can prove their success through B2C, then translate that to retail or other directions,” said Theriault.
Shipping beverages is not cheap - glass bottles and liquids being heavy goods to transport - and that does hold brands back from embracing online sales fully. But, equally, brands may find it’s worth taking a hit on margins in order to drive trial and build up a loyal following of consumers.
