Despite congratulatory headlines, new products, and renewed marketing pushes for non-alcoholic beer, 2019 saw only small gains in the category.
Non-alcoholic beer represents a minuscule sliver of the overall American beer market, and holds just .37% of total beer dollar sales in grocery, convenience, liquor, and other chain stores tracked by market research company IRI. Almost all in-store growth for non-alcoholic beer this past year came from just one brand: Heineken 0.0, which had $50 million of marketing support in 2019, its first year in the U.S. market, and is literally giving away its product for free as part of a “Dry January” marketing effort. Heineken 0.0’s 2019 sales are on pace to total about $23.4 million by year’s end, equivalent to the Abita Brewing family of beers.
However, beyond the traditional retail channels that IRI tracks, the category has continued to diversify, thanks to startups like the Connecticut-based non-alcoholic brewery Athletic Brewing Company. Athletic hopes to expand its brewing capacity tenfold, to 100,000 barrels of production, in 2020, which would make it roughly the size of Anheuser-Busch InBev-owned 10 Barrel Brewing Company. That figure would also put Athletic’s total production on par with Busch NA’s sales in the U.S. (Small breweries producing non-alcoholic beer are quick to point out that most of their sales are not IRI-tracked and come from natural grocery, ecommerce, and direct-to-consumer sales.)
IRI-tracked dollar sales for longstanding NA brands—O’Doul’s (-7.5%), Coors Non-Alcoholic (-5.8%), and Old Milwaukee NA (-9%)—fell in 2019, after posting losses in 2018 as well. Category leaders Busch and O’Doul’s are on pace to sell about 1,200 and 9,400 fewer BBLs’ worth of beer in stores, respectively, in 2019 compared to last year. For scale: O’Doul’s’ dollar sales in 2018 put it at the same size as Longmont, Colorado’s Oskar Blues Brewery. Among the top five largest brands, only newcomer Heineken 0.0 showed positive sales growth following its nationwide launch in January.
New brands are the category’s life force—but will they drive growth, or cannibalize an already-small slice of the market?
The way smaller non-alcoholic beer breweries see it, legacy brands’ lagging sales aren’t much cause for concern. Nor is slowing growth for craft breweries. And 2019’s numbers mostly bear that out: Athletic saw exponential volume growth in IRI-tracked stores since launching distribution in June 2018. Its cofounder Bill Shufelt says 2019 was “proof of concept” for the brewery, which will produce roughly 12,000 BBLs of beer this year. Shufelt says a combination of expanding its own facilities and contract brewing in 2020 would give Athletic capacity to produce over 100,000 BBLs of beer. That figure would put Athletic’s total production on par with Busch’s non-alcoholic sales in the U.S.
“We're just going to expand at our own pace, build deep relationships with our distribution partners and community, and expand thoughtfully. That capacity is intended to let us grow for the next three to five years,” Shufelt says.
Endcap and register displays for non-alcoholic beers might seem a logical fit for natural grocery stores catering to customers’ Dry January resolutions, something 20% of Americans plan to participate in. (In the U.K., a reported 4.2 million people participated in Alcohol Change UK’s official Dry January initiative last year.) But non-alcoholic beer displays at major alcohol retailer BevMo? During peak holiday booze season in the U.S.?
“I am running some NAs right now up at the register; that’ll repeat all the way through [the] Super Bowl, and I’m also running a whole endcap for all NA—if I can keep them in stock,” says Amy Gutierrez, BevMo’s category manager for beer. Those displays have rolled out across all BevMo’s 145 California locations.
Gutierrez laughs a little, acknowledging the contradiction in an alcohol warehouse pushing non-alcoholic options. But BevMo customers don’t appear fazed; the chain has doubled the number of non-alcoholic beer brands in stores since the beginning of its fiscal year in February. Much of the growth in non-alcoholic sales at BevMo has come from Heineken 0.0, which, as the category leader for BevMo, sells twice as much as the next-highest brand. But it’s the smaller craft breweries that are attracting new customers and fueling excitement in the NA category, Gutierrez says. She points to breweries like Surreal Brewing, WellBeing Brewing, Bravus Brewing Company, and Two Roots Brewing Company—whose alcoholic beer the chain doesn’t carry—as having some of the most in-demand NA brands. She says she’s struggled to keep enough of those products in stock, and because most BevMos shelve non-alcoholic beers with gluten-free beers and ciders, she’s reduced some of those slower-moving SKUs to make room.
“It definitely is our goal to grow that space,” she says. “We’ve never opened up on that category before, so it’s exciting to redo the shelves. I think we’re definitely ahead of the curve. We carry more than grocery [stores].”
One of the brands Gutierrez was eager to carry was non-alcoholic brewery WellBeing, which launched two years ago. WellBeing saw its IRI-tracked sales double from 2018 to 2019, to roughly 600 BBLs. That puts it on par with the annual production size of an average Brewers Association-defined craft brewery. Its cofounder Jeff Stevens declined to give overall production numbers, but said November and December 2019 should be the company’s best sales months yet.
“We were growing at a nice clip when we had some production issue in July and August, that put us back a bit. We’re just trying to keep place with the growth of the market this year,” says Stevens, who contract brews his beers at O’Fallon Brewery in Maryland Heights, Missouri. (That brewery produces its Pumpkin Ale, a popular seasonal, in the summer, at the same time WellBeing was trying to push production. That competition for brewing time, combined with a small mechanical issue, caused the summertime blip in production.) “I think where the real growth is is people who drink but after two drinks, they still want to have another drink and they realize they can have an NA drink. Being everyone’s third beer or Tuesday night beer or Saturday afternoon beer … you’re reaching an audience that’s bigger. It’s everybody, not just people who have stopped drinking.”
Of course, any product would like to count “everyone” among its audience. But there’s a ways to go before most bars begin carrying NA beer on tap, for example, or friends show up with 0% alcohol six-packs to tailgates, or restaurants offer it alongside standard beer and wine.
Surreal Brewing was launched in 2018 by husband-and-wife team Tammer Zein-El-Abedein and Donna Hockey after Hockey was diagnosed with breast cancer and stopped drinking alcohol. The brewery struggled to keep up with demand for its beers last year, with the pair calling 2019 an “epic” year for their company. “We went from just this sort of wide-eyed expectation of, ‘Gee, I hope people like it’ in 2018 to literally having to pump the brakes quite a number of times throughout 2019,” Zein-El-Abedein says. He and Hockey estimate Surreal could “easily” produce 10,000 BBLs of beer in 2020.
Certainly, 2019 proved growth is possible for non-alcoholic breweries who started small. BevMo’s Gutierrez says younger customers who came of legal drinking age alongside a kaleidoscopic craft beer market have especially been excited about non-alcoholic options like Bravus’ raspberry Gose, Oatmeal Stout, and IPA.
“It’s not just St. Pauli Girl or Beck’s. These are truly crafted beers with new flavors and I think that’s really what [customers] love,” Gutierrez says. “They are purchasers who don’t just buy one six-pack or one 12-pack. They buy entire cases.”
The question is how far non-alcoholic breweries’ optimism should extend. Asahi and AB InBev have bet big on global markets for their non-alcoholic brands, with the latter estimating that low- and non-alcoholic offerings will make up 20% of its worldwide volume by the close of 2025. Heineken’s investment in 0.0 has, at least in the short term, paid off.
Non-alcoholic beer has some advantages in its corner, the “wellness movement” being one of them. A Gallup poll shows 65% of Americans say they have occasion to drink alcohol, a percentage that’s remained largely steady for years. However, the same poll shows that over the past decade, a growing number of Americans report that alcohol has been a “cause of trouble” in their families. Taken together, these figures could be seen as support for the so-called “sober curious” trend, in which people who generally drink alcohol consciously abstain from it for periods of time.
But are these advantages enough for non-alcoholic beer to overcome decades of stigma? Bullish NA beer brewers—Shufelt among them—like to point to Germany and Spain, where NA beers make up 6.5% and 12% of the beer market, respectively. Others are cautious about the European analogy, citing different regulatory, taxation, and cultural considerations that have made European countries’ drinking habits dramatically different from those in the U.S. for generations.
“Is that [percentage of market share] going to happen in the U.S.? That would be mind-boggling,” WellBeing’s Stevens says. “I can’t imagine it being that kind of percentage of the overall U.S. market, but it’s so small right now that if it got to 2%, that’s still significant.”
Non-alcoholic beer also has looser regulations compared to its alcoholic counterpart. Brewers and retailers of non-alcoholic beer can sell those products directly to consumers online; Athletic estimates it sells 35-50% of its beer online, and WellBeing has its own Amazon store. Not only do direct sales keep all profits in a brewery’s hands, they give breweries crucial customer data that can help guide distribution decisions.
“We have such a strong ecommerce data set, so when we do move into distribution we can provide good, confident information,” Athletic’s Bill Shufelt says. “We’re really building [sales] where people are excited about Athletic and where our ecommerce data is strong.”
This question hints at a larger issue: how to predict NA beer’s growth. It’s currently unclear whether the American NA beer market could one day be equal to its European counterpart, or equal to American craft beer a few years ago—or follow some other path entirely. Furthermore, would significant growth in NA beers come at the expense of craft beer, macro beer, soda, or other non-alcoholic beverages like kombucha and seltzer?
Shufelt prefers to think outside the world of beverages entirely.
“Something that’s a really easy parallel would almost be like a Beyond Meat,” he says. “People know eating plant-based probably makes you feel better. And there are great occasions for eating meat, but people also love to not eat meat. As people looked at sugary sodas, they’re like, ‘I don’t like to drink that anymore but this coconut water makes me feel really good,’ or ‘This seltzer is so light and tasty.’ Any of those seem like clear parallels [to NA beer].”
It’s not certain that non-alcoholic beers are drinkers’ only “better-for-you” options, though. The extraordinary rise of hard seltzers, Michelob Ultra, and the recent proliferation of 100-calorie beers capitalize by straddling the line: they contain alcohol, but are perceived as more virtuous choices.
And despite non-alcoholic beverages’ moment in the zeitgeist, higher-alcohol craft beers are growing at a stronger pace than lower-alcohol craft beers. Craft beers with less than 5% alcohol by volume actually saw a sales decline at IRI-tracked stores over a 30-week period ending in June, whereas craft beers with ABVs above 7% grew by 10.5% during the same time period. Shufelt brushes those concerns aside.
“Honestly the beer world does an incredible job reaching those occasions [when you’d want to drink alcohol] … I just think we’re just not pulling from the same crowds even. Our growth is going to come from non-beer occasions so that doesn’t much bother me,” he says. “I know how much growth there is in the low end of the segment.”
That growth is attributable either to strong, previously unaddressed consumer demand for better non-alcoholic beer—or to the fact that the segment is so relatively small that modest growth seems magnified. Or a combination of both. Whatever the prospects for NA beer in America, the curtain is closing on a year that was, to many, a bellwether. Established brands largely struggled to gain traction despite plenty of attention for the category. Brewers of traditional beer like Heineken now have horses in the race. Smaller breweries who got in early had nowhere to go but up—and fast. But whether the category will see the explosive growth that so many headlines predict remains an open question.
Words by Kate Bernot